SEC Division of Investment Management staff letter: Dreyfus Asset Allocation Fund, Inc.

Pl.L:jLIC
RESPONSE OF THE OFFICE OF
Our Ref. No. 96-8-ICR

INVESTMNT COMPAN REGULATION Dreyfus Asset Allocation

DIVISION OF INVESTMNT Fund, Inc. (File No.

MAAGEMENT 812 - 9980)
On April 30, 1996, Dreyfus Asset Allocation Fu~, Inc.

("DAAF"), et al. 1 received an order of the Commission under
section 17 (b) of the Investment Company Act of 1940 ("Actll) exempting applicants from the provisions of section 17 (a) of the
Act ("Order"). i The Order permits applicants to transfer all of the assets of two portfolios of DAAF, the Growth Series .and the Income Series ("Acquired Portfolios"), to two corresponding

portfolios of Dreyfus LifeTime Portfolios, Inc. ("DLPI"), the

Growth Portfolio and the Income Portfolio ("Acquiring

Portfolios" ~, in exchange for Investor Class shares of the

Acquiring Portfolios ("Exchange").

Your letter of May 16, 1996 requests our assurance that we

will not recommend that the Commission take any enforcement

action if shareholders of the Acquired Portfolios receive shares

of the Class R shares of the Acquiring Portfolios, rather than

the Investor Class shares. You state that Investor Class and

Class R shares are identical in all material respects, except

that Investor Class shares are subj ect to a shareholder services

plan under which such shares incur an annual fee of .25% of net

assets. Class R shares previously were available only to certain

institutional investors. Since the Order was issued, DLPI's

board of directors determined to offer Class R shares to

shareholders of the Acquired Portfolio in connection with the

Exchange.
You also state that the board of directors of DAAF and DLPI

has approved this modification in the terms of the Exchange. In

a telephone conversation with the undersigned on June 14, 1996,

Mr. David Stephens stated that the directors, including the

directors who are not "interested persons" of DAAF or DLPI as

defined in the Act, found that the Exèhange was in the best

interests of DAAF' sand DLPI' s shareholders and that the

interests of existing shareholders of DAAF and DLPI would not be diluted. You contend that proposed modification in the terms of the

Exchange does not impair the rights of shareholders of the

Acqui.red Portfolios, and that .such shareholders will benefit from

the Exchange because Class R shares are expected to have a lower

expense ratio than Investor Class shares.

Based on the facts and representations in your letter and in

yqur conversation with the undersigned, we would not recommend

that the Commission take any enforcement action against

Investment Company Act Release Nos. 21873 (Apr. 4, 1996)

(notice) and 21928 (Apr. 30, 1996) (order).

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  applicants if applicants effect the Exchange in reliance on the Order, notwithstanding the modification described above. This response expresses the Division's position on enforcement only,

and does not purport to express any legal conclusio~ concerning

the issues presented. Different facts or representations might require a different conclusion. __ Mercer E. Bullard

Staff Attorney

Office of Investment

Company Regulation

June 14, 1996

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2128054 Dire~'Oial:
Fax: 212 B0 60
Telex: mOO3 STROOCK NY
1940 Act; Section 17 (a)

Division of Investment Management

Securities and Exchange Commission

450 Fifth Avenue, N. W.

Washington, D.C. 20549

Re: Dreyfus Asset Allocation Fund, Inc.
Dreyfus LifeTime Portfolios, Inc.

The Dreyfus Corporation
Release Nos. 21873 and 21928

Ladies and Gentlemen:

This is a request for assurance that the Staff of the Division

of Investment Management (the "Staff") will not recommend

enforcement action if Dreyfus Asset Allocation Fund, Inc.

( "DAA" ), Dreyfus LifeTime Portfolios, Inc. (" DLPI ") and The

Dreyfus Corporation ("Dreyfus" and, together with DAA and DLPI,

the "Applicants") modify in the manner described in this letter

certain facts upon which an exemptive order of the Commission

was issued to Applicants regârding the proposed reorganization

of two series of DAA into two corresponding series of DLPI.

Facts
Applicants filed an application for exemptive order on February

6, 1996, which was amended on March 29, 1996 and April 2, 1996

(the "Application"), to permit DAA and DLPI to engage in the

transactions necessary to consumate the proposed

reorganization, which transactions would be exempted from the'

prohibi tions of Section 17 ( a) of the Investment Company Act of

1940, as amended (the "1940 Act"), by virtue of.Rule 17a-8

thereundèr except for the fact that affiliates of Dreyfus

beneficially ,oWn more than 5% of the outstanding shares of the

relevant seri~s of DAA and DLPI. An order (the "Order") was

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Washington, D.C. 200362 Los Angeles, CA 90067-3086 Miami, FL 33131-2385 H-108 Budapest, Hungar 1150 Seventeenth Street N.W. 2029 Century Par East 200 South Biscayne Boulevard Rák6czi ut 1-3 202 452 9250 3105565800 305 358 9900 361 26 9520

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'\ granted by the Commission on April 30, 1996. See Dreyfus Asset

Allocation Fund, Inc., et al., Investment Company Act Release

Nos. 21873 (April 3, 1996) (Notice of Application) and 21928

(April 30, 1996) (Order).

DAA and DLPI are Maryland corporations registered under the 1940 Act as open-end, management investment companies. DAA currently offers three series of shares, including the Growth

Series (the "Growth Series") and the Income Series (the "Income

Series" and, together with the Growth Series, the "Series"). 1 Each Series offers one class of shares~ DLPI currently offers

three. series of shares, including the Growth Portfolio (the

"Growth Portfolio") and the Income Portfolio (the "Income

Portfolio" and, together with the Growth Portfolio, the "Portfolios" ) . 2 Each Portfolio offers two classes of. shares, thE,.investor Class and Class R...,.J:,n:V~S,t9~~\Ciaas.i:.liarea:¡,ançt;~Class :.R':~~,li.ai.~13 . are ide:r 'l~cë:Ü..!,~.~.(.~,rl,.l-~;t;a;çla;l;;;,:respects,. exc7Pt".th.a:t' Cl~i: s.R. shares . are:: n.()t,;Sl\ßj.~"q~¿J;'Q.~::,ê..Sha:tehplder. Servi.G~i:,;.J~Uan (.tli~ "Plan'!..).. and .¡."therefO:re"';';'ar.e:~:~~g§qt.~!Í.,tohave a lower e~p~:msa:ura:tio~i"than,":'Investê)r:,-~dClâs'§"!"shar'es.Under the.P lan, . DLPI.' 'payš;¡:~;Premlér!i'Mutual:;,ò'Fund¡;"se'r'ice~¡.:.'Iiic., the Fund's distributor, fór........thê.ddp:tdV.tSiÓI1.:tÒ£:'.êêrtâiih'~'services.',t0'" each. Portfolio.'.s,'

InV'eS-tor~ Cla.ss shares eiféê"'at..,.'the~"annual'rate of". 25%. of' the valiiê!:Ô:È'(th~"'âverage dailynet."a:sf?'~t.sSö,~:.',the.' Portfolio'.s

Invest~'~hÇ.lelssi:hê:ç.~s ..;)~:a~g.ij~~~t~ê:s"'~t~~sh'å:rês.are subjsqt"tó ca',;. .:, ShãrèhÒlder' 'Sèriiêèi: PlaÌi'wh.fêlí"'is" identical to the Plan.

The investment objective of. the Growth Series and Growth

Portfolio is capital appreciation. The investment objectives of

the Income Series and Income Portfolio are to maximize current

income and capital appreciation. The management policies of

each Series and its corresponding Portfolio are substantially

similar. Dreyfus, a wholly-owned subsidiary of Mellon Bank,

N .A., which is a wholly-owned subsidiary of Mellon Bank

Corporation ("Mellon ii), serves as the investment adviser to each

Series and Portfolio. Mellon Equity Associates, an indirect

DAA also .offers the Growth and Income Series.

'"

2 DLPI also offers the Growth and Income Portfolio.

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" wholly-owned subsidiary of Mellon, and, thus, an affiliate of

Dreyfus, serves as the sub-adviser to the Portfolios.

Major Trading Corporation, a wholly-owned subsidiary of Mellon

and, thus, an affiliate of Dreyfus, owns in excess of 59% of the

outstanding shares of the Growth Series and in excess of 65% of

the outstanding shares of the Income 'Series. Allomon

Corporation, a wholly-owned subsidiary of Mellon and, thus, an

affiliate of Dreyfus, owns in excess of 98% of the outstanding

Investor Class shares and Class R shares of the Growth Portfolio

and in excess of 99% and 92%, respectively, of the outstanding

Investor Class shares and Class R shares of the Income Portfolio. The Boards of DAA and DLPI previously approved a plan of reorganization, subject to shareholder approval, providing for

the transfer of all of the assets of each Series to the

corresponding Portfolio, in exchan~e (the "Exchange") for the

Portfolio's Investor Class shares. In connection with the

Exchange, the Portfolios will assume the liabilities of the

respective Series. The numer of shares to be issued to each Portfolio will be determned on the basis of the relative net asset values per share and aggregate net assets of the Series

and the Portfolios. Each Series will liquidate and distribute

pro rata shares of the Portfolio to its shareholders at or as

soon as practicable after the closing, after which the Series

will be terminated as a series of DAA and its shares canceled.

3 On February 26, 1996, DLPI filed a registration statement on Form N-14 (the "Registration Statement") relating to the Exchange, which became effective on March 27, 1996. The Prospectus/Proxy Statement forming a part of the Registr~tion Statement has not been mailed to Series' shareholders. 40817493

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Proposed Modification To the Exchanqe

. Applicants' now,' prdp~~e,~",1:d,i;~ffect;~,tb~.."EX,gnang.s;py::;;traIls ferring

.the . Portfo~;.qs~t4'Ä,çlas,~!~¡,R?l:shares;í);:,;&nsteacl:;~'a~tit;nVT~~~S¡!Ögla.S,,~;:,.;,

sharesii':::irif"d'e~'clïange¡,;:for_ aii,. of.. .the.. corresp6iidliig:~'dS'er:tèS'.,:c:'''áš SèeSc~;:;

subj e'ct "'tt)"":i.t'S,:'.l.l.apJ..lities ."d""As, a.,.,consequence~,.ccurrent. halders ofèach"'Serl~'s' shares will. benefit .as describedbelów~ '. ~ '...7Ú.,.:.,:~ .';..:," . '¡he Boards of 'DAA andDLPI have approved this.,mddi.fLcation, and DLPI intends to file a post-effective amendment to the

Registration Statement to reflect such modification. In all

other respects, the Exchange will remain unchanged. Applicants

represent that, except as described herein, the Exchange will be

effected in conformity in all respects to the Order, including the conditions thereto. 4 , Discussion Until this time, the Portfolios' Class R shares were offered

only to insti tutionalinvestors acting for:theïnsé:lLy:aa#9r:~in a

fiduciary, advisory, agency, custodial or similar capacity, for

qualified or non-qualified employee benefit plans',',.;:,whi.le Investor Class shares were offered to any investo:r~ Since the

Order was granted, DLPI' s Board has determined to offer Class R

shares to Series' shareholders in connection with the Exchange.

Applicants believe that the proposed modification does not

change the legal analysis underlying the Application and the

Order. The proposed modification does not negatively affect or

in any way impair the rights of Series' shareholders. In fact,

Series' sharehqlders:.' will benefit from the proposed modification in that Class R shares are not subject to payments under the

Plan and, thus, are expected to have a lower expense ratio than Investor Class shares. 4 The Ordèr; as granted, stated that the Portfolios would transfer~ Investor Class shares in exchange for all of the

corresponding Series' assets, subject to its liabilities.

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Requested Relief

Applicants believe that the proposed modification as described

above is a minor operational change that can only benefit Series' shareholders. Therefore, Applicants request the Staff's concurrence that it would not recommend enforcement action if

the Applicants modify the terms of the Exchange as described in

this letter and consumate the Exchange in reliance on the

Order.
Please feel free to telephone Stuart H. Coleman at (212) 806 6049 or Richard Horowitz at (212) 806-5513 with any questions or

comments you may have.

JL cc: Office of Chief Counsel

Division of Investment Management

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