-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iwz0SlRWH5FOWXLX16vBYvsQKNqzXO7SEeuTNB/3kl6a+4LfRcLilfmuu+7dYJKN Mebg7H3PZLoJzhUQYAUjJg== 0000898432-02-000783.txt : 20021112 0000898432-02-000783.hdr.sgml : 20021111 20021112172445 ACCESSION NUMBER: 0000898432-02-000783 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021112 EFFECTIVENESS DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPAM FUNDS TRUST CENTRAL INDEX KEY: 0001111565 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-87640 FILM NUMBER: 02817995 BUSINESS ADDRESS: STREET 1: 200 PARK AVENUE STREET 2: THE DREYFUS CORPORATION CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 2129226787 MAIL ADDRESS: STREET 1: THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 485BPOS 1 mpam-n14.txt As filed with the Securities and Exchange Commission on November 12, 2002 1933 Act Registration No. 333-87640 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. ___ [X] Post-Effective Amendment No. 1 --- (Check Appropriate Box or Boxes) - -------------------------------------------------------------------------------- MPAM FUNDS TRUST - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) (212) 922-6000 - -------------------------------------------------------------------------------- (Area Code and Telephone Number) c/o The Dreyfus Corporation 200 Park Avenue, New York, New York 10166 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) Jeff Prusnofsky, Esq. 200 Park Avenue New York, New York 10166 (Name and Address of Agent for Service) Copy to: Benjamin J. Haskin, Esq. Jennifer R. Gonzalez, Esq. Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W., Second Floor Washington, D.C. 20036-1800 Telephone: (202) 778-9000 ------------------------------------------------------------------------------ It is proposed that this filing will become effective immediately upon filing pursuant to Rule 485(b). Title of securities being registered: MPAM class, Investor class and Dreyfus Premier class shares of beneficial interest in the series of the Registrant designated as MPAM Mid Cap Stock Fund. An indefinite number of Registrant's shares of beneficial interest, par value $0.001 per share, have been registered pursuant to Rule 24(f) under the Investment Company Act of 1940. Accordingly, no filing fee is being paid at this time. MPAM FUNDS TRUST CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following papers and documents: Cover Sheet Contents of Registration Statement o Part A - Prospectus/Proxy Statement: Incorporated by reference to Registrant's Registration Statement on Form N-14, SEC File No. 333-87640, filed May 6, 2002. o Part B - Statement of Additional Information: Incorporated by reference to Registrant's Registration Statement on Form N-14, SEC File No. 333-87640, filed May 6, 2002. o Part C - Other Information Signature Page Exhibits This post-effective amendment is being filed solely for the purpose of including in the Registration Statement the definitive Agreement and Plan of Reorganization (Exhibit 4) and the Opinion and Consent of Counsel on Tax Matters (Exhibit 12). MPAM FUNDS TRUST PART C OTHER INFORMATION Item 15. Indemnification (a) The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including, but not limited to, amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer, except with respect to any matter as to which such Covered Person shall have been finally adjudicated in a decision on the merits in any such action, suit or other proceeding not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust and except that no Covered Person shall be indemnified against any liability to the Trust or its shareholders to which such Covered Person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), may be paid from time to time by the Trust in advance of the final disposition or any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under Article 10 of the Registrant's By-Laws, PROVIDED THAT (i) such Covered Person shall provide security for his or her undertaking, (ii) the Trust shall be insured against losses arising by reason of such Covered Person's failure to fulfill his or her undertaking, or (iii) a majority of the Trustees who are disinterested persons and who are not Interested Persons (as that term is defined in the Investment Company Act of 1940) (provided that a majority of such Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (but not a full trial-type inquiry), that there is reason to believe such Covered Person ultimately will be entitled to indemnification. (b) As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication in a decision on the merits by a court, or by any other body before which the proceeding was brought, that such Covered Person either (i) did not act in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or (ii) is liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office, indemnification shall be provided if (i) approved as in the best interest of the Trust, after notice that it involves such indemnification, by at least a majority of the Trustees who are disinterested persons and are not Interested Persons (as that term is defined in the Investment Company Act of 1940) (provided that a majority of such Trustees then in office act on the matter), upon a determination, based upon a review of readily available facts (but not a full trial-type inquiry) that such Covered Person acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust and is not liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office, or (ii) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (but not a full trial-type inquiry) to the effect that such Covered Person appears to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust and that such C-1 indemnification would not protect such Covered Person against any liability to the Trust to which such Covered Person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or to have been liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. (c) The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any such Covered Person may be entitled. As used Article 10 of the Registrant's By-Laws, the term "Covered Person" shall include such person's heirs, executors and administrators, and a "disinterested person" is a person against whom none of the actions, suits or other proceedings in question or another action, suit, or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in Article 10 of the Registrant's By-Laws shall affect any rights to indemnification to which personnel of the Trust, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of such person. (d) Notwithstanding any provisions in the Registrant's Amended and Restated Agreement and Declaration of Trust and By-Laws pertaining to indemnification, all such provisions are limited by the following undertaking set forth in the rules promulgated by the Securities and Exchange Commission: In the event that a claim for indemnification is asserted by a Trustee, officer or controlling person of the Trust in connection with the registered securities of the Trust, the Trust will not make such indemnification unless (i) the Trust has submitted, before a court or other body, the question of whether the person to be indemnified was liable by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of duties, and has obtained a final decision on the merits that such person was not liable by reason of such conduct or (ii) in the absence of such decision, the Trust shall have obtained a reasonable determination, based upon review of the facts, that such person was not liable by virtue of such conduct, by (a) the vote of a majority of Trustees who are neither Interested Persons as such term is defined in the Investment Company Act of 1940, nor parties to the proceeding or (b) an independent legal counsel in a written opinion. Item 16. Exhibits (1) Amended and Restated Agreement and Declaration of Trust dated June 5, 2000, is incorporated herein by reference to Exhibit (a) of Pre-effective Amendment No. 1 to the Registration Statement, SEC File No. 333-34844, filed on July 7, 2000. (2) By-Laws dated June 5, 2000, are incorporated herein by reference to Exhibit (b) of Pre-effective Amendment No. 1 to the Registration Statement, SEC File No. 333-34844, filed on July 7, 2000. (3) Not Applicable. (4) Agreement and Plan of Reorganization (filed herewith). C-2 (5) Instruments defining the rights of holders of Registrant's securities are incorporated herein by reference to Articles III, IV, V, VI, VIII and IX of the Registrant's Amended and Restated Agreement and Declaration of Trust and Articles 9 and 11 of the Registrant's By-Laws. (6) Investment Advisory Agreement between MPAM Funds Trust and MPAM Advisers dated June 14, 2000, amended effective May 15, 2002, is incorporated herein by reference to Exhibit (d) of Post-effective Amendment No. 5 to the Registration Statement, SEC File No. 333-34844, filed on May 21, 2002. (7) Distribution Agreement between MPAM Funds Trust and Dreyfus Service Corporation dated June 14, 2000, revised May 15, 2002 is incorporated herein by reference to Exhibit (e) of Post-effective Amendment No. 5 to the Registration Statement, SEC File No. 333-34844, filed on May 21, 2002. (8) Not Applicable. (9) Form of Mutual Fund Custody and Services Agreement between MPAM Funds Trust and Boston Safe Deposit and Trust Company and Mellon Bank, N.A. is incorporated herein by reference to Exhibit (g)(1) of Post Effective Amendment No. 3 to the Registration Statement, SEC File No. 333-34844, filed on December 20, 2001. (10) (a) Distribution Plan dated as of March 5, 2002, effective as of May 15, 2002, is incorporated herein by reference to Exhibit (n) of Post-effective Amendment No. 4 to the Registration Statement, SEC File No. 333-34844, filed on March 8, 2002. (b) Amended and Restated Rule 18f-3 Plan dated March 5, 2002, is incorporated herein by reference to Exhibit (o) of Post-effective Amendment No. 4 to the Registration Statement, SEC File No. 333-34844, filed on March 8, 2002. (11) Opinion and Consent of Kirkpatrick & Lockhart LLP is incorporated herein by reference to Exhibit (11) to the Registration Statement on Form N-14, SEC File No. 333-87640, filed on May 6, 2002. (12) Tax Opinion and Consent of Kirkpatrick & Lockhart LLP (filed herewith). (13) (a) Transfer Agent Agreement dated as of June 14, 2000, is incorporated herein by reference to Exhibit 13(a) to the Registration Statement on Form N-14, SEC File No. 333-63652, filed on June 22, 2001. (b) Amendment to Transfer Agent Agreement effective March 6, 2001, is incorporated herein by reference to Exhibit 13(b) of the Registration Statement on Form N-14, SEC File No. 333-63652, filed on June 22, 2001. (c) Administration Agreement dated June 14, 2000, Amended and Restated effective as of May 15, 2002, is incorporated herein by reference to Exhibit (h)(3) of Post-Effective Amendment No. 5 to the Registration Statement, SEC File No. 333-34844, filed on May 21, 2002. C-3 (d) Amended and Restated Fee Waiver Agreement dated May 22, 2002, is incorporated herein by reference to Exhibit (h)(4) of Post-effective Amendment No. 5 to the Registration Statement, SEC File No. 333-34844, filed on May 21, 2002. (e) Shareholder Services Plan dated May 9, 2001, revised as of May 15, 2002, is incorporated herein by reference to Exhibit (i)(7) of Post-effective Amendment No. 4 to the Registration Statement, SEC File No. 333-34844, filed on March 8, 2002. (14) Consent of KPMG LLP is incorporated herein by reference to Exhibit (14) to the Registration Statement on Form N-14, SEC File No. 333-87640, filed on May 6, 2002. (15) Not Applicable. (16) (a) Power of Attorney for Officers dated March 5, 2002, is incorporated herein by reference to Exhibit 16(a) of the Registration Statement on Form N-14, SEC File No. 333-87602, filed on May 6, 2002. (b) Power of Attorney for Trustees dated March 5, 2002, is incorporated herein by reference to Exhibit 16(b) of the Registration Statement on Form N-14, SEC File No. 333-87602, filed on May 6, 2002. (17) Not Applicable. Item 17. Undertakings. (1) The undersigned Registrant agrees that prior to any public re-offering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the re-offering prospectus will contain the information called for by the applicable registration form for re-offerings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new Registration Statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial BONA FIDE offering of them. C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all the requirements for effectiveness of this Post-Effective Amendment to its Registration Statement on Form N-14 pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to be signed on its behalf, duly authorized, in the City of New York, and State of New York, on the 8th day of November 2002. MPAM FUNDS TRUST (Registrant) By: /s/ David F. Lamere -------------------------- David F. Lamere*, President As required by the Securities Act of 1933, this Post-Effective Amendment has been signed by the following persons in the capacities and on the dates indicated. Signatures Title Date ---------- ----- ---- /s/ David F. Lamere President November 8, 2002 - ------------------------------- David F. Lamere* /s/ James Windels Treasurer November 8, 2002 - ------------------------------- James Windels* /s/ Ronald Ross Davenport Trustee November 8, 2002 - -------------------------- Ronald Ross Davenport* /s/ John L. Diederich Trustee November 8, 2002 - ------------------------------- John L. Diederich* /s/ Maureen D. McFalls Trustee November 8, 2002 - ------------------------------- Maureen D. McFalls* /s/ Patrick J. O'Connor Trustee November 8, 2002 - ------------------------------- Patrick J. O'Connor* /s/ Kevin C. Phelan Trustee November 8, 2002 - ------------------------------- Kevin C. Phelan* /s/ Patrick J. Purcell Trustee November 8, 2002 - ------------------------------- Patrick J. Purcell* /s/ Thomas F. Ryan, Jr. Trustee November 8, 2002 - ------------------------------- Thomas F. Ryan, Jr.* *By: /s/ Jeff Prusnofsky ------------------------------ Jeff Prusnofsky, Attorney-in-Fact C-5 EXHIBIT INDEX (4) Agreement and Plan of Reorganization (12) Tax Opinion and Consent of Kirkpatrick & Lockhart LLP EX-99.4 3 mpam495094.txt EXHIBIT 99.4 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION dated as of April 30, 2002 (the "Agreement"), between THE DREYFUS/LAUREL FUNDS, INC., a Maryland corporation (the "Company"), on behalf of DREYFUS PREMIER SMALL COMPANY STOCK FUND, a segregated portfolio of assets ("series") thereof (the "Acquired Fund"), and MPAM FUNDS TRUST, an unincorporated Massachusetts business trust (the "MPAM Trust"), on behalf of MPAM MID CAP STOCK FUND, a series thereof (the "Acquiring Fund"). (The Acquired Fund and the Acquiring Fund are sometimes referred to herein individually as a "Fund" and collectively as the "Funds.") All agreements, representations, actions and obligations described herein made or to be taken or undertaken by either Fund are made and shall be taken or undertaken by the Company on behalf of the Acquired Fund and by the MPAM Trust on behalf of the Acquiring Fund. The parties wish to effect a reorganization described in Section 368(a)(1)(C) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is intended to be and is adopted as a "plan of reorganization" within the meaning of the regulations under the Code (the "Regulations"). The reorganization will consist of the transfer of all of the assets of the Acquired Fund in exchange for shares of beneficial interest, par value $0.001 per share, in the Acquiring Fund designated MPAM shares, Investor shares and Dreyfus Premier shares (collectively, the "Acquiring Fund Shares"), and the assumption by the Acquiring Fund of stated liabilities of the Acquired Fund and the distribution, after the Closing Date (as defined in paragraph 3.1), of such Acquiring Fund Shares to the holders of the Acquired Fund's Class A, Class B, Class C, Class R and Class T shares of common stock, each with par value $0.001 (collectively, the "Acquired Fund Shares"), in liquidation of the Acquired Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement (all such transactions herein collectively referred to as the "Reorganization"). In the Reorganization, holders of Class A, Class C and Class T shares of the Acquired Fund would receive Investor shares of the Acquiring Fund, holders of Class B shares of the Acquired Fund would receive Dreyfus Premier shares of the Acquiring Fund, and holders of Class R shares of the Acquired Fund would receive MPAM shares of the Acquiring Fund. Each Acquired Fund Shareholder (as defined in paragraph 1.6) would receive Acquiring Fund Shares of the corresponding class with an aggregate net asset value equal to the aggregate net asset value of its investment in the Acquired Fund at the time of the Reorganization. WHEREAS, the Acquired Fund is a diversified series of the Company, a registered open-end management investment company, and the Acquiring Fund is a diversified series of the MPAM Trust, a registered open-end management investment company, and the Acquired Fund owns securities that are assets of the character in which the Acquiring Fund is permitted to invest; WHEREAS, the Acquired Fund is authorized to issue Class A, Class B, Class C, Class R and Class T shares of common stock, and the Acquiring Fund is authorized to issue MPAM shares, Investor shares and Dreyfus Premier shares of beneficial interest; WHEREAS, the MPAM Trust's Board of Trustees (the "MPAM Board") has determined that the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and the Acquiring Fund's assumption of stated liabilities of the Acquired Fund is in the best interests of the Acquiring Fund and that the interests of the Acquiring Fund's existing shareholders would not be diluted as a result of the Reorganization; and WHEREAS, the Company's Board of Directors (the "Dreyfus Board") has determined that the exchange of all of the assets of the Acquired Fund for A-2 Acquiring Fund Shares and the Acquiring Fund's assumption of stated liabilities of the Acquired Fund is in the best interests of the Acquired Fund and that the interests of the Acquired Fund's existing shareholders would not be diluted as a result of the Reorganization. NOW THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties agree as follows: 1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND THE ACQUIRING FUND'S ASSUMPTION OF ACQUIRED FUND LIABILITIES AND LIQUIDATION OF THE ACQUIRED FUND. 1.1 Subject to the requisite approval of the shareholders of the Acquired Fund and to the other terms and conditions contained herein: (a) The Acquired Fund shall assign, transfer and convey to the Acquiring Fund at the Closing (as defined in paragraph 3.1) all of the Assets of the Acquired Fund (as defined in paragraph 1.2). (b) The Acquiring Fund agrees in exchange therefor at the Closing (i) to issue and deliver to the Acquired Fund the number and classes of full and fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3, and (ii) to assume the Liabilities of the Acquired Fund (as defined in paragraph 1.3). In lieu of delivering certificates for the Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account on the books of the Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund. 1.2 (a) The assets of the Acquired Fund to be acquired by the Acquiring Fund (the "Assets") shall consist of all property, including all cash, cash equivalents, securities, commodities and futures interests, dividend and interest receivables, claims and rights of action that are owned by the Acquired A-3 Fund, and any deferred or prepaid expenses shown as assets on the books of the Acquired Fund, on the Closing Date. The Assets shall be invested at all times through the Closing in a manner that ensures compliance with paragraph 4.1(j). (b) The Acquired Fund has provided the Acquiring Fund with a list of all of its property as of the date of execution of this Agreement. The Acquired Fund reserves the right to sell any of such property in the ordinary course of its business. The Acquiring Fund will, within a reasonable time prior to the Closing Date, furnish the Acquired Fund with a list of any property on such list that does not conform to the Acquiring Fund's investment objective, policies and restrictions or that the Acquiring Fund otherwise does not desire to hold. The Acquired Fund will dispose of such property prior to the Closing Date to the extent practicable and to the extent the Acquired Fund would not be affected adversely by such disposition. In addition, if it is determined that the portfolios of the Funds, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested to do so by the Acquiring Fund, will dispose of and/or reinvest a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. 1.3 The Acquired Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. At the Closing, the Acquiring Fund shall assume all liabilities, debts, obligations, expenses, costs, charges and reserves reflected on an unaudited statement of assets and liabilities of the Acquired Fund prepared by The Dreyfus Corporation ("Dreyfus") as of the Valuation Date (as defined in paragraph 2.1) (collectively, the "Liabilities"). 1.4 The Assets shall be delivered on the Closing Date to Mellon Bank, N.A., the Acquiring Fund's custodian (the "Custodian"), for the account of the Acquiring Fund, with all securities not in bearer or book-entry form duly A-4 endorsed, or accompanied by duly executed separate assignments or stock powers, in proper form for transfer, with signatures guaranteed, and with all necessary stock transfer stamps, sufficient to transfer good and marketable title thereto (including all accrued interest and dividends and rights pertaining thereto) to the Custodian for the account of the Acquiring Fund free and clear of all liens, encumbrances, rights, restrictions and claims. All cash delivered shall be in the form of immediately available funds payable to the order of the Custodian for the account of the Acquiring Fund. 1.5 The Acquired Fund will pay or cause to be paid to the Acquiring Fund any interest received on or after the Closing Date with respect to Assets transferred to the Acquiring Fund hereunder. The Acquired Fund will transfer to the Acquiring Fund any distributions, rights or other assets received by the Acquired Fund after the Closing Date as distributions on or with respect to the Assets transferred. Such assets shall be deemed included in Assets transferred to the Acquiring Fund on the Closing Date and shall not be separately valued. 1.6 As soon after the Closing Date as is conveniently practicable, the Acquired Fund will liquidate and distribute PRO RATA in accordance with this paragraph to the Acquired Fund's shareholders of record - some of which hold Acquired Fund Shares in omnibus accounts (the "Nominee Shareholders") - determined as of the close of business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares of the corresponding class received by the Acquired Fund pursuant to paragraph 1.1. For purposes of this Agreement, the MPAM shares of the Acquiring Fund shall be the "corresponding class" to the Class R shares of the Acquired Fund, the Investor shares of the Acquiring Fund shall be the "corresponding class" to the Class A, Class C and Class T shares of the Acquired Fund and the Dreyfus Premier shares of the Acquiring Fund shall be A-5 the "corresponding class" to the Class B shares of the Acquired Fund. Such liquidation and distribution will be accomplished by transferring the Acquiring Fund Shares of each class then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open individual and omnibus accounts on such books for the benefit of (a) the Acquired Fund Shareholders other than Nominee Shareholders and (b) the indirect holders of Acquired Fund Shares through Nominee Shareholders of the corresponding class (collectively, the "Beneficial Shareholders") and representing the respective PRO RATA number of full and fractional Acquiring Fund Shares of such class to which each such Beneficial Shareholder is entitled. For these purposes, an Acquired Fund Shareholder shall be entitled to receive, with respect to each full and fractional Acquired Fund Share of a class held by such shareholder, that number of full and fractional Acquiring Fund Shares of the corresponding class equal to the net asset value of such Acquired Fund Share as of the Valuation Date (determined in accordance with paragraph 2.1) divided by the net asset value of one Acquiring Fund Share of the corresponding class, as of the Valuation Date (determined in accordance with paragraph 2.2). All issued and outstanding shares of the Acquired Fund will be canceled on the books of the Acquired Fund simultaneously with the distribution of Acquiring Fund Shares to the Acquired Fund Shareholders. 1.7 Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in the manner described in the Acquiring Fund's current prospectuses and statement of additional information. 1.8 Any transfer taxes payable upon issuance of the Acquiring Fund Shares in a name other than the registered holder of the Acquiring Fund Shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred. A-6 1.9 Any reporting responsibility of the Acquired Fund is and shall remain the responsibility of the Acquired Fund up to and including the Closing Date and such later date on which the Acquired Fund's existence is terminated. 2. VALUATION. 2.1 The value of the Assets and the amount of the Liabilities, the amount thereof attributable to each class of Acquired Fund Shares, and the net asset value of a share of each such class all shall be computed as of the close of trading on the floor of the New York Stock Exchange ("NYSE") (usually, 4:00 p.m., Eastern time), except that certain options and futures contracts may be valued 15 minutes after the close of trading on the floor of the NYSE, on the Closing Date (such time and date being hereinafter called the "Valuation Date"), using the valuation procedures set forth in the Acquired Fund's then-current prospectus and statement of additional information. 2.2 The net asset value of a share of each class of Acquiring Fund Shares shall be computed as of the Valuation Date, using the valuation procedures set forth in the Acquiring Fund's then-current prospectuses and statement of additional information. 2.3 The number of MPAM shares, Investor shares and Dreyfus Premier shares of the Acquiring Fund (including fractional shares, if any), respectively, to be issued in exchange for the Acquired Fund's net assets shall be determined by dividing the value of the Assets, less the amount of the Liabilities, attributable to the corresponding class of the Acquired Fund, using the valuation procedures referred to in paragraph 2.1, by the net asset value of one MPAM share, Investor share and Dreyfus Premier share, respectively, determined in accordance with paragraph 2.2. A-7 2.4 All computations and calculations of value shall be made by Dreyfus in accordance with its regular practices as fund accountant for each Fund. 3. CLOSING AND CLOSING DATE. 3.1 Consummation of the Reorganization and related acts (the "Closing") shall occur on August 29, 2002 or such other date as to which the parties may mutually agree (the "Closing Date"). All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the Closing Date unless otherwise provided. The Closing shall be held at 4:30 p.m., Eastern time, at the offices of Dreyfus, 200 Park Avenue, New York, New York, or such other time and/or place as the parties may mutually agree. 3.2 The Acquired Fund shall deliver to the Acquiring Fund at the Closing a statement of assets and liabilities, including a schedule of the Assets setting forth for all portfolio securities thereon their adjusted tax basis and holding period by lot, as of the Closing, certified by the Company's Treasurer or Assistant Treasurer. The Custodian shall deliver at the Closing a certificate of an authorized officer stating that the Assets have been presented for examination to the Acquiring Fund prior to the Closing Date and have been delivered in proper form to the Acquiring Fund. 3.3 If on the Valuation Date (a) the NYSE or another primary trading market for portfolio securities of either Fund is closed to trading or trading thereon is restricted or (b) trading or the reporting of trading on the NYSE or elsewhere is disrupted so that accurate appraisal of the value of the net assets of either Fund or determination of the net asset value of any class of their shares is impracticable, the Closing Date shall be postponed until the first business day after the day when trading has been fully resumed and reporting has been restored. A-8 3.4 The transfer agent for the Acquired Fund shall deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund Shares owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired Fund on the Closing Date to the Secretary of the Company or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund's account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, receipts or other documents as such other party or its counsel may reasonably request. 4. REPRESENTATIONS AND WARRANTIES. 4.1 The Company, on behalf of the Acquired Fund, represents and warrants to the MPAM Trust as follows: (a) The Acquired Fund is a duly established and designated series of the Company, a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and has power to carry on its business as it is now being conducted and to carry out this Agreement. (b) The Company is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. (c) The current prospectus and statement of additional information of the Acquired Fund and any supplements thereto conform in all material respects to the applicable requirements of the Securities Act of 1933, A-9 as amended (the "1933 Act"), and the 1940 Act and the rules and regulations of the Securities and Exchange Commission (the "Commission") thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. (d) The Acquired Fund is not, and the execution, delivery and performance of this Agreement will not result, in material violation of the Company's Articles of Incorporation dated July 31, 1987, as amended from time to time (the "Articles"), or its By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquired Fund is a party or by which it is bound. (e) The Acquired Fund has no material contracts or other commitments outstanding (other than this Agreement) which will be terminated with liability to it on or prior to the Closing Date. (f) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Acquired Fund or any of its properties that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions herein contemplated. (g) The Statements of Assets and Liabilities of the Acquired Fund as of October 31, 2001, October 31, 2000 and October 31, 1999 have been audited by KPMG LLP, independent auditors, and are in accordance with generally A-10 accepted accounting principles, consistently applied, and such statements (copies of which have been furnished to the MPAM Trust) fairly reflect the financial condition of the Acquired Fund as of such dates, and there are no known contingent liabilities of the Acquired Fund as of such dates not disclosed therein. (h) Since October 31, 2001, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as disclosed on the unaudited statement of assets and liabilities referred to in paragraph 1.3. (i) At the Closing Date, all Federal and other tax returns and reports of the Acquired Fund required by law then to have been filed shall have been filed, and all Federal and other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Company's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns. (j) The Acquired Fund is a "fund" as defined in section 851(g)(2) of the Code; for each taxable year of its operation, the Acquired Fund met all the requirements of Subchapter M of the Code ("Subchapter M") for qualification and treatment as a "regulated investment company"; it will continue to meet all such requirements for its taxable year that includes the Closing Date; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it. (k) The Liabilities were incurred by the Acquired Fund in the ordinary course of its business. (l) The Acquired Fund is not under the jurisdiction of a court in a "title 11 or similar case" (within the meaning of section 368(a)(3)(A) of the Code). A-11 (m) Not more than 25% of the value of the Acquired Fund's total assets (excluding cash, cash items and U.S. government securities) is invested in the stock and securities of any one issuer, and not more than 50% of the value of such assets is invested in the stock and securities of five or fewer issuers. (n) The Acquired Fund will be terminated as soon as reasonably practicable after the Reorganization, but in all events within six months after the Closing Date. (o) All issued and outstanding shares of the Acquired Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid upon receipt of full payment in accordance with the terms contemplated by the Acquired Fund's then-current prospectus and statement of additional information, and non-assessable by the Acquired Fund. All of the issued and outstanding shares of the Acquired Fund will, on the Closing Date, be held by the persons and in the amounts set forth in the records of the transfer agent, as certified in paragraph 3.4. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquired Fund Shares, nor is there outstanding any security convertible into any Acquired Fund Shares. (p) On the Closing Date, the Acquired Fund will have full right, power and authority to sell, assign, transfer and deliver the Assets. (q) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of the Dreyfus Board, and, subject to the approval of the Acquired Fund's shareholders, this Agreement will constitute the valid and legally binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, A-12 moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and to general principles of equity and the discretion of the court (regardless of whether the enforceability is considered in a proceeding in equity or at law). (r) The proxy statement of the Acquired Fund (the "Proxy Statement") included in the Registration Statement referred to in paragraph 5.5 (other than information therein that has been furnished by the Acquiring Fund) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 4.2 The MPAM Trust, on behalf of the Acquiring Fund, represents and warrants to the Company as follows: (a) The Acquiring Fund is a duly established and designated series of the MPAM Trust, an unincorporated business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts, and has power to carry on its business as it is now being conducted and to carry out this Agreement. (b) The MPAM Trust is registered under the 1940 Act as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. (c) The current prospectuses and statement of additional information of the Acquiring Fund and any supplements thereto conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not A-13 include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. (d) The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in material violation of the MPAM Trust's Amended and Restated Agreement and Declaration of Trust dated June 5, 2000 (the "Declaration of Trust") or its Bylaws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Fund is a party or by which it is bound. (e) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Acquiring Fund or any of its properties that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated hereby. (f) The Statements of Assets and Liabilities of the Acquiring Fund as of August 31, 2001 and as of September 1, 2000 have been audited by KPMG LLP, independent auditors, and are in accordance with generally accepted accounting principles, consistently applied, and such statements (copies of which have been furnished to the Company) fairly reflect the financial condition of the Acquiring Fund as of such dates. (g) Since August 31, 2001, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as disclosed in writing to the Company. (h) At the Closing Date, all Federal and other tax returns and reports of the Acquiring Fund required by law then to have been filed shall have been filed, and all Federal and other taxes shall have been paid so far as due, A-14 or provision shall have been made for the payment thereof, and to the best of the MPAM Trust's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns. (i) The Acquiring Fund is a "fund" as defined in section 851(g)(2) of the Code; for each taxable year of its operation, the Acquiring Fund met all the requirements of Subchapter M for qualification and treatment as a regulated investment company; it will continue to meet all such requirements for its taxable year that includes the Closing Date; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it. (j) No consideration other than the Acquiring Fund Shares (and the Acquiring Fund's assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization. (k) The Acquiring Fund has no plan or intention to issue additional Acquiring Fund Shares following the Reorganization except for shares issued in the ordinary course of its business as a series of an open-end investment company; nor does the Acquiring Fund, or any person "related" (within the meaning of section 1.368-1(e)(3) of the Regulations) to the Acquiring Fund, have any plan or intention to redeem or otherwise reacquire - during the five-year period beginning at the Closing Date, either directly or through any A-15 transaction, agreement or arrangement with any other person - with consideration other than Acquiring Fund Shares, any Acquiring Fund Shares issued to the Acquired Fund Shareholders pursuant to the Reorganization, other than through redemptions arising in the ordinary course of that business as required by section 22(e) of the 1940 Act. (l) The Acquiring Fund will, after the Reorganization, (i) continue the "historic business" (within the meaning of section 1.368-1(d)(2) of the Regulations) that the Acquired Fund conducted before the Reorganization and (ii) use a significant portion of the Acquired Fund's "historic business assets" (within the meaning of section 1.368-1(d)(3) of the Regulations) in that business. (m) There is no plan or intention for the Acquiring Fund to be dissolved or merged into another business trust or corporation or any "fund" thereof (within the meaning of section 851(g)(2) of the Code) following the Reorganization. (n) Immediately after the Reorganization (i) not more than 25% of the value of the Acquiring Fund's total assets (excluding cash, cash items, and U.S. government securities) will be invested in the stock and securities of any one issuer and (ii) not more than 50% of the value of such assets will be invested in the stock and securities of five or fewer issuers. (o) The Acquiring Fund does not directly or indirectly own, nor on the Closing Date will it directly or indirectly own, nor has it directly or indirectly owned at any time during the past five years, any shares of the Acquired Fund. (p) All Acquiring Fund Shares, when issued pursuant to the Reorganization, will be duly and validly issued and outstanding, fully paid and non-assessable by the Acquiring Fund. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares. A-16 (q) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of the MPAM Board and, if required, the Acquiring Fund shareholders, and this Agreement will constitute the valid and legally binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and to general principles of equity and the discretion of the court (regardless of whether the enforceability is considered in a proceeding in equity or at law). (r) The Proxy Statement included in the Registration Statement referred to in paragraph 5.5 (only insofar as it relates to the Acquiring Fund and is based on information furnished by the Acquiring Fund) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 5. COVENANTS OF THE FUNDS. 5.1 Each Fund will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include payment of customary dividends and other distributions. 5.2 The Company will call a meeting of the Acquired Fund's shareholders to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby. A-17 5.3 Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. 5.4 As promptly as practicable, but in any case within sixty days after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in form reasonably satisfactory to the Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for Federal income tax purposes that will be carried over to the Acquiring Fund under Section 381 of the Code, which statement shall be certified by the Company's President or Vice President and its Treasurer. 5.5 The MPAM Trust shall prepare a prospectus that, together with the Proxy Statement, shall be included in a registration statement on Form N-14 of the MPAM Trust relating to the Acquiring Fund Shares issuable hereunder (the "Registration Statement") to be filed in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act and the rules thereunder. 5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1934 Act, the 1940 Act and such of the state Blue Sky or securities laws as it may deem appropriate in order to continue its operations after the Closing Date. 5.7 The Funds shall cooperate in the preparation and filing as promptly as practicable with the Commission of an application, in form and substance reasonably satisfactory to their counsel, for exemptive relief from the provisions of Section 17 of the 1940 Act, and from any other provision of A-18 the 1940 Act deemed necessary or advisable by such counsel, to permit consummation of the Reorganization as contemplated hereby (the "Exemptive Application"). The Funds shall use all reasonable efforts to obtain the relief requested by the Exemptive Application. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND. The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 6.1 All representations and warranties of the Company on behalf of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 6.2 The Acquired Fund shall have delivered to the Acquiring Fund the statement of the Acquired Fund's assets and liabilities referred to in paragraph 1.3 and the schedule of Assets referred to in paragraph 3.2. 6.3 The Company shall have delivered to the MPAM Trust on the Closing Date a certificate executed in its name by the Company's President or Vice President and its Treasurer, in form and substance reasonably satisfactory to the MPAM Trust, to the effect that the representations and warranties of the Company made in this Agreement on behalf of the Acquired Fund are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the MPAM Trust reasonably requests. A-19 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND. The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 7.1 All representations and warranties of the MPAM Trust on behalf of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 7.2 The MPAM Trust shall have delivered to the Company on the Closing Date a certificate executed in its name by the MPAM Trust's President or Vice President and its Treasurer, in form and substance reasonably satisfactory to the Company, to the effect that the representations and warranties of the MPAM Trust made in this Agreement on behalf of the Acquiring Fund are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Company reasonably requests. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUNDS. If any of the conditions set forth below does not exist on or before the Closing Date with respect to either Fund, the other Fund shall, at its option, not be required to consummate the transactions contemplated by this Agreement. A-20 8.1 This Agreement and the transactions contemplated hereby shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with the provisions of the Articles. 8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated hereby. 8.3 All consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities) deemed necessary by either Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either Fund, provided that either party hereto may for itself waive any of such conditions. 8.4 The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act. 8.5 The relief requested by the Exemptive Application shall have been granted in form and substance reasonably satisfactory to the counsel for each Fund. 8.6 The Acquired Fund shall have declared a dividend or dividends that, together with all previous dividends, shall have the effect of distributing to the Acquired Fund's shareholders all of (a) the Acquired Fund's A-21 investment company taxable income (computed without regard to any deduction for dividends paid) for all taxable years or periods ending on or prior to the Closing Date and (b) its net capital gain realized in all such years or periods (after reduction for any capital loss carry forward). 8.7 The parties shall have received an opinion ("Tax Opinion") of Kirkpatrick & Lockhart LLP ("Counsel") substantially to the effect that, based on the facts and assumptions stated therein and conditioned on consummation of the Reorganization in accordance with this Agreement, for Federal income tax purposes: (a) The Acquiring Fund's acquisition of the Assets in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of the Liabilities, followed by the Acquired Fund's distribution of those shares PRO RATA to the Acquired Fund Shareholders constructively in exchange for their Acquired Fund Shares, will qualify as a "reorganization" within the meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a party to a reorganization" within the meaning of section 368(b) of the Code; (b) The Acquired Fund will recognize no gain or loss on the transfer of the Assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and the Acquiring Fund's assumption of the Liabilities or on the subsequent distribution (whether actual or constructive) of those shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares; (c) The Acquiring Fund will recognize no gain or loss on its receipt of the Assets in exchange solely for Acquiring Fund Shares and its assumption of the Liabilities; (d) The Acquiring Fund's tax basis in the Assets will be the same as the Acquired Fund's tax basis therein immediately before the Reorganization, and the Acquiring Fund's holding period for the Assets will include the Acquired Fund's holding period therefor; A-22 (e) A Beneficial Shareholder will recognize no gain or loss on the actual or constructive exchange of all its Acquired Fund Shares solely for Acquiring Fund Shares pursuant to the Reorganization; and (f) A Beneficial Shareholder's aggregate tax basis in the Acquiring Fund Shares it receives pursuant to the Reorganization will be the same as the aggregate tax basis in its Acquired Fund Shares it surrenders in exchange for those Acquiring Fund Shares, and its holding period for those Acquiring Fund Shares will include its holding period for those Acquired Fund Shares (provided the shareholder held them as capital assets on the Closing Date). In rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Agreement, which Counsel may treat as representations and warranties made to it, and in separate letters addressed to Counsel and the certificates delivered pursuant to paragraphs 6.3 and 7.2. Notwithstanding the foregoing, the Tax Opinion will state that no opinion is expressed as to the effect of the Reorganization on the Funds or any Beneficial Shareholder with respect to any Asset as to which any unrealized gain or loss is required to be recognized for Federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. 9. TERMINATION OF AGREEMENT; EXPENSES. 9.1 This Agreement and the transactions contemplated hereby may be terminated and abandoned by resolution of the Dreyfus Board or of the MPAM Board, as the case may be, at any time prior to the Closing Date (and notwithstanding any vote of the Acquired Fund's shareholders) if circumstances develop that, in the opinion of either such Board, make proceeding with the Reorganization inadvisable. A-23 9.2 If this Agreement is terminated and the transactions contemplated hereby are abandoned pursuant to the provisions of paragraph 9.1, this Agreement shall become void and have no effect, without any liability in respect of this Agreement on the part of either party hereto, the Trustees, officers or shareholders of the MPAM Trust or the Directors, officers or shareholders of the Company, other than as provided in paragraph 9.3. 9.3 The expenses of the Reorganization shall be borne by each Fund PRO RATA based on its aggregate net assets as of the Valuation Date (or, if this Agreement is terminated for any reason, as of the date of such termination). 10. WAIVER. At any time prior to the Closing Date, any of the conditions described in Sections 6, 7 and 8 may be waived by the MPAM Board or the Dreyfus Board if, in the judgment of either, such waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of the Acquiring Fund or of the Acquired Fund, as the case may be. 11. MISCELLANEOUS. 11.1 None of the representations and warranties included or provided for herein shall survive consummation of the transactions contemplated hereby. 11.2 This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them relating to the subject matter hereof. Neither party shall be bound by any condition, definition, warranty or representation, other than as set forth or provided in this Agreement or as may be, on or subsequent to the date hereof, set forth in a writing signed by the party to be bound thereby. A-24 11.3 This Agreement shall be governed and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflict of laws; provided, however, that the due authorization, execution and delivery of this Agreement by either Fund shall be governed and construed in accordance with the internal laws of the Commonwealth of Massachusetts (in the case of the Acquiring Fund) and the State of Maryland (in the case of the Acquired Fund), in each case without giving effect to principles of conflict of laws; provided that, in the case of any conflict between such laws and the Federal securities laws, the latter shall govern. 11.4 This Agreement may be executed in counterparts, each of which, when executed and delivered, shall be deemed to be an original. 11.5 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 11.6 (a) References herein to the "MPAM Funds Trust" (or the "MPAM Trust") or its Trustees refer to them, respectively, not individually or personally, but as acting from time to time under the Declaration of Trust, a copy of which is on file at the office of the Secretary of the Commonwealth of Massachusetts and at the principal office of the MPAM Trust. The obligations of the MPAM Trust entered into in the name or on behalf of the Acquiring Fund, its representatives or agents, are made not individually, but in such capacities, and are not binding upon any of the other series of the MPAM Trust or on the shareholders or representatives of the Acquiring Fund personally, but bind only A-25 the Acquiring Fund's property; and all persons dealing with the Acquiring Fund must look solely to the Acquiring Fund's property for the enforcement of any claims against the Acquiring Fund. (b) The obligations of the Company entered into in the name or on behalf of the Acquired Fund, its representatives or agents, are made not individually, but in such capacities, and are not binding upon any of the other series of the Company or on the shareholders or representatives of the Acquired Fund personally, but bind only the Acquired Fund's property; and all persons dealing with the Acquired Fund must look solely to the Acquired Fund's property for the enforcement of any claims against the Acquired Fund. 11.7 Any references in this Agreement to actions taken, deliveries by or to, representations and warranties made by or to, or obligations of, the Acquired Fund shall be deemed references to actions taken, deliveries by or to, representations and warranties made by or to, or obligations of, the Company on behalf of the Acquired Fund. 11.8 Any references in this Agreement to actions taken, deliveries by or to, representations and warranties made by or to, or obligations of, the Acquiring Fund shall be deemed references to actions taken, deliveries by or to, representations and warranties made by or to, or obligations of, the MPAM Trust on behalf of the Acquiring Fund. A-26 IN WITNESS WHEREOF, the MPAM Trust and the Company have each caused this Agreement to be executed and attested on its behalf by its duly authorized representatives as of the date first above written. THE DREYFUS / LAUREL FUNDS, INC., on behalf of Dreyfus Premier Small Company Stock Fund By: /s/ Stephen E. Canter ------------------------------------- Stephen E. Canter, President ATTEST: /s/ Steven F. Newman --------------------------------- Steven F. Newman, Secretary MPAM FUNDS TRUST, on behalf of MPAM Mid Cap Stock Fund By: /s/ David F. Lamere ------------------------------------- David F. Lamere, President ATTEST: /s/ Jeff S. Prusnofsky --------------------------------- Jeff S. Prusnofsky, Secretary A-27 EX-99.12 4 mpam-543932.txt EXHIBIT 99.12 KIRKPATRICK & LOCKHART LLP 1800 Massachusetts Avenue, NW Second Floor Washington, DC 20036-1800 202.778-9000 www.kl.com October 28, 2002 The Dreyfus/Laurel Funds, Inc. 200 Park Avenue New York, New York 10166 MPAM Funds Trust 144 Glenn Curtiss Boulevard Uniondale, New York 11566-0144 Re: Reorganization to Combine Series of a Maryland Corporation and -------------------------------------------------------------- a Massachusetts Business Trust ------------------------------ Ladies and Gentleman: The Dreyfus/Laurel Funds, Inc., a Maryland corporation ("Corporation"), on behalf of Dreyfus Premier Small Company Stock Fund, a segregated portfolio of assets ("series") thereof ("Target"), and MPAM Funds Trust, a Massachusetts business trust ("Trust"), on behalf of MPAM Mid Cap Stock Fund, a series thereof ("Acquiring Fund"), have requested our opinion as to certain federal income tax consequences of Acquiring Fund's proposed acquisition of Target pursuant to an Agreement and Plan of Reorganization between them dated as of April 30, 2002 ("Plan")./1 Specifically, each Investment Company has requested our opinion -- (1) that Acquiring Fund's acquisition of Target's assets in exchange solely for voting shares of beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and Acquiring Fund's assumption of certain of Target's liabilities, followed by Target's distribution of those shares PRO RATA to its shareholders of record determined as of the close of business on the Closing Date (as herein defined) ("Shareholders") constructively in exchange for their shares of common stock of Target ("Target Shares") (such transactions sometimes being referred to herein collectively as the "Reorganization"), will qualify - --------- /1 Target and Acquiring Fund are sometimes referred to herein individually as a "Fund" and collectively as the "Funds," and Corporation and Trust are sometimes referred to herein individually as an "Investment Company" and collectively as the "Investment Companies." The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 2 as a "reorganization" as defined in section 368(a)(1)(C),/2 and each Fund will be "a party to a reorganization" within the meaning of section 368(b); (2) that neither the Funds nor the Shareholders will recognize any gain or loss on the Reorganization; and (3) regarding the basis and holding period after the Reorganization of the transferred assets and the Acquiring Fund Shares issued pursuant thereto. In rendering this opinion, we have examined (1) the Plan, (2) the Prospectus/Proxy Statement dated June 17, 2002, that was furnished in connection with the solicitation of proxies by Corporation's board of directors ("Board") for use at a special meeting of Target's shareholders held on August 22, 2002 ("Proxy Statement"), and (3) other documents we have deemed necessary or appropriate for the purposes hereof. As to various matters of fact material to this opinion, we have relied, exclusively and without independent verification, on statements of responsible officers of each Investment Company and the representations described below and made in the Plan (as contemplated in paragraph 8.7 thereof) and in letters from the Investment Companies dated October 18, 2002 (collectively, "Representations"). Our opinion is based on, and is conditioned on the continued applicability of, the provisions of the Code and the Regulations, judicial decisions, and rulings and other pronouncements of the Internal Revenue Service ("Service") in existence on the Closing Date. All the foregoing authorities are subject to change or modification that can be applied retroactively and thus also could affect our opinion; we assume no responsibility to update our opinion with respect to any such change or modification. Our opinion also is based on the facts as of the Closing Date,/3 and we assume no responsibility to ascertain any facts after that date. Furthermore, our opinion applies only to the extent each Fund is solvent, and we express no opinion about the tax treatment of the transactions described herein if either Fund is insolvent. Finally, our opinion is solely for - --------- /2 All "section" references are to the Internal Revenue Code of 1986, as amended ("Code"), unless otherwise noted, and all "Treas. Reg. Section" references are to the regulations under the Code ("Regulations"). /3 This letter speaks as of the Closing Date, except for reference to the "Closing" of the Reorganization and certain representations in the letters referred to in the accompanying text that were made both as of the Closing Date and the date thereof. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 3 the addressees' information and use and may not be relied on for any purpose by any other person without our express written consent. FACTS ----- Corporation is a Maryland corporation, and Target is a series thereof. Trust is a Massachusetts business trust, and Acquiring Fund is a series thereof. Each Investment Company is registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended ("1940 Act"). The Target Shares are divided into five classes, designated Class A, Class B, Class C, Class R, and Class T shares. The Acquiring Fund Shares are designated Investor shares, Dreyfus Premier shares, and MPAM shares. Such Class A, Class C, and Class T shares are substantially similar to such Investor shares, such Class B shares are substantially similar to such Dreyfus Premier shares, and such Class R shares are substantially similar to such MPAM shares. The Reorganization, together with related acts necessary to consummate it ("Closing"), occurred on September 6, 2002 ("Closing Date"). All acts taking place at the Closing were deemed to take place simultaneously as of the close of business on the Closing Date unless otherwise provided. The Funds have similar investment goals. Each Fund seeks investment returns (consisting of capital appreciation and income) consistently superior to those of its benchmark stock index -- the Russell 2500(TM) Stock Index in Target's case and the Standard & Poor's MidCap 400(R) Index in Acquiring Fund's case. Target normally invests at least 80% of its assets in stocks of small U.S. companies (I.E., companies with market capitalizations ("market caps") ranging between $500 million and $5 billion at the time of purchase), while Acquiring Fund normally invests at least 80% of its assets in stocks of midsize domestic companies (I.E., companies that have market caps ranging between $1 billion and $8 billion at the time of purchase). The range of market caps for each Fund may fluctuate depending on changes in the value of the stock market as a whole. Each Fund also may purchase securities of companies in initial public offerings or shortly thereafter, seeks to manage risk by broadly diversifying among industries, invests in a mix of growth and value companies, and may invest in securities of foreign issuers and in derivatives. One of Target's co-portfolio managers is Acquiring Fund's primary portfolio manager. For the reasons, and after consideration of the factors, described in the Proxy Statement, the Board, including its members who are not "interested persons" (as that term is defined in the 1940 Act), unanimously approved the Plan, subject to approval of Target's shareholders. In doing so, the Board The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 4 unanimously concluded that the Reorganization would be in the best interests of Target and its shareholders and that their interests would not be diluted as a result of the transactions contemplated thereby. The Plan, which specifies that it is intended to be, and is adopted as, a "plan of reorganization" within the meaning of the Regulations, provides in relevant part for the following: (1) Acquiring Fund's acquisition of all property, including all cash, cash equivalents, securities, commodities and future interests, dividend and interest receivables, claims and rights of action owned by Target, and any deferred or prepaid expenses shown as assets on its books, on the Closing Date (collectively "Assets"), which shall be invested at all times through the Closing in a manner that ensures compliance with Corporation's Representation numbered (3), in exchange solely for the following: (a) the number of full and fractional Acquiring Fund Investor shares, Dreyfus Premier shares, and MPAM shares, respectively, determined by dividing the value of the Assets, less the amount of the Liabilities (as defined below), attributable to the corresponding class of Target Shares (I.E., Class A , Class C, and Class T shares, Class B shares, and Class R shares, respectively), using the valuation procedures referred to in paragraph 2.1 of the Plan, by the net asset value of one Investor share, one Dreyfus Premier share, and one MPAM share, respectively, determined in accordance with paragraph 2.2 of the Plan, and (b) Acquiring Fund's assumption of all of Target's liabilities, debts, obligations, expenses, costs, charges, and reserves reflected on an unaudited statement of Target's assets and liabilities prepared by The Dreyfus Corporation as of the Valuation Date (as defined in paragraph 2.1 of the Plan) (collectively "Liabilities"), and (2) The distribution of those Acquiring Fund Shares to the Shareholders, by opening accounts on Acquiring Fund's books in the The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 5 Shareholders' names/4 and crediting each Shareholder's account with the respective PRO RATA number of full and fractional Acquiring Fund Shares due that Shareholder, by class (whereupon all outstanding Target Shares simultaneously will be canceled on Target's share transfer books)./5 REPRESENTATIONS/6 - --------------- CORPORATION has represented and warranted to us as follows: (1) Target is a duly established and designated series of Corporation, a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland, and has power to carry on its business as it is now being conducted and to carry out the Plan; (2) Corporation is registered under the 1940 Act as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect; (3) Target is a "fund" as defined in section 851(g)(2); for each taxable year of its operation, Target met all the requirements of Subchapter M of the Code ("Subchapter M") for qualification and treatment as a regulated investment company ("RIC"); it will continue - --------- /4 Some of the Shareholders held Target Shares in omnibus accounts ("Nominee Shareholders"). Accordingly, the accounts referred to in the accompanying text include both individual and omnibus accounts for the benefit of (1) the Shareholders other than Nominee Shareholders and (2) the indirect holders of Target Shares through Nominee Shareholders. /5 The Plan provides that, at the time of the Reorganization, the Target Shares will, in effect, be exchanged for Acquiring Fund Shares, certificates for which will not be issued. Accordingly, Shareholders are not required to make physical delivery of their Target Shares, nor are they receiving certificates for Acquiring Fund Shares, pursuant to the Reorganization. Target Shares nevertheless will be treated as having been exchanged for Acquiring Fund Shares, and the tax consequences to the Shareholders will be unaffected by the absence of Acquiring Fund Share certificates. SEE discussion at V. under "Analysis," below. /6 Paragraph 8.7 of the Plan provides that we may treat the representations and warranties made in the Plan as representations and warranties made to us. Accordingly, although the Reorganization already has been consummated, the Representations that were made in the Plan (consisting of virtually all the Representations set forth below separately for each Investment Company) are stated in the present tense, to reflect the tense when they were given, rather than the past tense. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 6 to meet all such requirements for its taxable year that includes the Closing Date; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it; (4) The Liabilities were incurred by Target in the ordinary course of its business; (5) Target is not under the jurisdiction of a court in a "title 11 or similar case" (as defined in section 368(a)(3)(A)); (6) Not more than 25% of the value of Target's total assets (excluding cash, cash items, and U.S. government securities) is invested in the stock and securities of any one issuer, and not more than 50% of the value of such assets is invested in the stock and securities of five or fewer issuers; (7) Target will be terminated as soon as reasonably practicable after the Reorganization, but in all events within six months after the Closing Date; (8) From the date it commenced operations through the Closing Date, Target conducted its "historic business" (within the meaning of Treas. Reg. Section 1.368-1(d)(2)) in a substantially unchanged manner; and in anticipation of the Reorganization, Target did not dispose of assets that, in the aggregate, resulted in less than 50% of its "historic business assets" (within the meaning of Treas. Reg. Section 1.368-1(d)(3)) being transferred to Acquiring Fund; and (9) During the five-year period that ended on the Closing Date, (a) neither Target nor any person "related" (within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to it acquired any Target Shares, either directly or through any transaction, agreement, or arrangement with any other person, with consideration other than Acquiring Fund Shares or Target Shares, except for shares redeemed in the ordinary course of Target's business as a series of an open-end investment company as required by section 22(e) of the 1940 Act, and (b) no distributions were made with respect to Target Shares, except for normal, regular dividend distributions made pursuant to Target's historic dividend-paying practice and other distributions that qualify for the deduction for dividends paid (within the meaning of section 561) referred to in sections 852(a)(1) and 4982(c)(1)(A). The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 7 TRUST has represented and warranted to us as follows: (1) Acquiring Fund is a duly established and designated series of Trust, an unincorporated business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts, and has power to carry on its business as it is now being conducted and to carry out the Plan; (2) Trust is registered under the 1940 Act as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect; (3) Acquiring Fund is a "fund" as defined in section 851(g)(2); for each taxable year of its operation, Acquiring Fund met all the requirements of Subchapter M for qualification and treatment as a RIC; it will continue to meet all such requirements for its taxable year that includes the Closing Date; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it; (4) No consideration other than Acquiring Fund Shares (and Acquiring Fund's assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization; (5) Acquiring Fund has no plan or intention to issue additional Acquiring Fund Shares following the Reorganization except for shares issued in the ordinary course of its business as a series of an open-end investment company; nor does Acquiring Fund, or any person "related" (within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to Acquiring Fund, have any plan or intention to redeem or otherwise reacquire -- during the five-year period beginning on the Closing Date, either directly or through any transaction, agreement, or arrangement with any other person -- with consideration other than Acquiring Fund Shares, any Acquiring Fund Shares issued to the Shareholders pursuant to the Reorganization, other than through redemptions arising in the ordinary course of that business as required by section 22(e) of the 1940 Act; (6) Acquiring Fund will, after the Reorganization, (a) continue the "historic business" (within the meaning of Treas. Reg. Section 1.368-1(d)(2)) that Target conducted before the Reorganization and (b) use a significant portion of Target's "historic business assets" (within the meaning of Treas. Reg. Section 1.368-1(d)(3)) in that business; The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 8 (7) There is no plan or intention for Acquiring Fund to be dissolved or merged into another business trust or corporation or any "fund" thereof (as defined in section 851(g)(2)) following the Reorganization; (8) Immediately after the Reorganization, (a) not more than 25% of the value of Acquiring Fund's total assets (excluding cash, cash items, and U.S. government securities) will be invested in the stock and securities of any one issuer and (b) not more than 50% of the value of such assets will be invested in the stock and securities of five or fewer issuers; (9) Acquiring Fund does not directly or indirectly own, nor on the Closing Date will it directly or indirectly own, nor has it directly or indirectly owned at any time during the past five years, any shares of Target; and (10) During the five-year period that ended on the Closing Date, neither Acquiring Fund nor any person "related" (within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to it acquired any Target Shares with consideration other than Acquiring Fund Shares. EACH INVESTMENT COMPANY has represented and warranted to us as follows: (1) The fair market value of the Acquiring Fund Shares each Shareholder received was approximately equal to the fair market value of its Target Shares constructively surrendered in exchange therefor; (2) The Shareholders paid their own expenses, if any, incurred in connection with the Reorganization; (3) (a) Its management was and is unaware of any plan or intention of Shareholders to redeem, sell, or otherwise dispose of (i) any portion of their Target Shares before the Reorganization to any person "related" (within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to either Fund or (ii) any portion of the Acquiring Fund Shares they received in the Reorganization to any person related (within such meaning) to Acquiring Fund, (b) dispositions of those Acquiring Fund Shares at the time of or soon after the Reorganization did not exceed the usual rate and frequency of dispositions of shares of Target as a series of an open-end investment company, (c) its management expects that the percentage of Shareholder interests, if any, that was or will be disposed of as a result of or at the time of the Reorganization will be DE MINIMIS, and (d) there were no extraordinary redemptions of Acquiring Fund Shares immediately following the Reorganization; The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 9 (4) Pursuant to the Reorganization, Target transferred to Acquiring Fund, and Acquiring Fund acquired, at least 90% of the fair market value of the net assets, and at least 70% of the fair market value of the gross assets, Target held immediately before the Reorganization. For the purposes of this representation, any amounts Target used to pay its Reorganization expenses and to make redemptions and distributions immediately before the Reorganization (except (a) redemptions in the ordinary course of its business required by section 22(e) of the 1940 Act and (b) regular, normal dividend distributions made to conform to its policy of distributing all or substantially all of its income and gains to avoid the obligation to pay federal income tax and/or the excise tax under section 4982) are included as assets it held immediately before the Reorganization; (5) There was no intercompany indebtedness between Target and Acquiring Fund that was issued or acquired, or settled, at a discount; (6) The fair market value of the Assets on a going concern basis equaled or exceeded the Liabilities assumed by Acquiring Fund and those to which the Assets were subject; (7) Immediately after the Reorganization, the Shareholders did not own shares constituting "control" (as defined in section 304(c)) of Acquiring Fund; (8) None of the compensation received by any Shareholder who is or was an employee of or service provider to Target was separate consideration for, or allocable to, any Target Shares that Shareholder held; none of the Acquiring Fund Shares any such Shareholder received was separate consideration for, or allocable to, any employment agreement, investment advisory agreement, or other service agreement; and the consideration paid to any such Shareholder was and will be for services actually rendered and was or will be commensurate with amounts paid to third parties bargaining at arm's-length for similar services; (9) Neither Fund was or will be reimbursed for any expenses incurred by it or on its behalf in connection with the Reorganization unless those expenses were solely and directly related to the Reorganization (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187); and (10) The aggregate value of the acquisitions, redemptions, and distributions limited by Corporation's Representation numbered (9) and Trust's Representations numbered (5) and (10) did not exceed 50% of the value (without giving effect to those acquisitions, redemptions, and distributions) of the proprietary interest in Target on the Closing Date. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 10 OPINION ------- Based solely on the facts set forth above, and conditioned on the Representations having been true on the Closing Date and the Reorganization having been consummated in accordance with the Plan, our opinion (as explained more fully in the next section of this letter) is as follows: (1) Acquiring Fund's acquisition of the Assets in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities, followed by Target's distribution of those shares PRO RATA to the Shareholders constructively in exchange for their Target Shares, will qualify as a "reorganization" as defined in section 368(a)(1)(C), and each Fund will be "a party to a reorganization" within the meaning of section 368(b); (2) Target will recognize no gain or loss on the transfer of the Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities/7 or on the subsequent distribution of those shares to the Shareholders in constructive exchange for their Target Shares; (3) Acquiring Fund will recognize no gain or loss on its receipt of the Assets in exchange solely for Acquiring Fund Shares and its assumption of the Liabilities; (4) Acquiring Fund's basis in the Assets will be the same as Target's basis therein immediately before the Reorganization, and Acquiring Fund's holding period for the Assets will include Target's holding period therefor; (5) A Shareholder will recognize no gain or loss on the constructive exchange of all its Target Shares solely for Acquiring Fund Shares pursuant to the Reorganization; and (6) A Shareholder's aggregate basis in the Acquiring Fund Shares it received in the Reorganization will be the same as the aggregate basis in its - --------- /7 Notwithstanding anything herein to the contrary, we express no opinion as to the effect of the Reorganization on either Fund or any Shareholder with respect to any Asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 11 Target Shares it constructively surrendered in exchange for those Acquiring Fund Shares, and its holding period for those Acquiring Fund Shares will include its holding period for those Target Shares, provided the Shareholder held them as capital assets on the Closing Date. ANALYSIS I. The Reorganization Will Qualify as a C Reorganization, and Each Fund -------------------------------------------------------------------- Will Be a Party to a Reorganization. ----------------------------------- A. Each Fund Is a Separate Corporation. ----------------------------------- A reorganization under section 368(a)(1)(C) (a "C Reorganization") involves the acquisition by one corporation, in exchange solely for all or a part of its voting stock, of substantially all of the properties of another corporation. For a transaction to qualify under that section, therefore, both entities involved therein must be corporations (or associations taxable as corporations). Trust, however, is a business trust, not a corporation, and each Fund is a separate series of an Investment Company. Regulation section 301.7701-4(b) provides that certain arrangements known as trusts (because legal title is conveyed to trustees for the benefit of beneficiaries) will not be classified as trusts for purposes of the Code because they are not simply arrangements to protect or conserve the property for the beneficiaries. That section states that these "business or commercial trusts" generally are created by the beneficiaries simply as devices to carry on profit-making businesses that normally would have been carried on through business organizations classified as corporations or partnerships under the Code and concludes that the fact that any organization is technically cast in the trust form will not change its real character if it "is more properly classified as a business entity under [Treas. Reg.] ss. 301.7701-2."/8 Furthermore, pursuant to Treas. Reg. Section 301.7701-4(c), "[a]n `investment' trust will not be classified as a trust if there is a power under the trust agreement to vary - --------- /8 On December 10, 1996, the Service adopted Regulations for classifying business organizations (Treas. Reg. Sections 301.7701-1 through -3 and parts of - -4, the so-called "check-the-box" Regulations) to replace the provisions in the then-existing Regulations that "have become increasingly formalistic. [The check-the-box Regulations replace] those rules with a much simpler approach that generally is elective." T.D. 8697, 1997-1 C.B. 215. Regulation section 301.7701-2(a) provides that "a BUSINESS ENTITY is any entity recognized for federal tax purposes . . . that is not properly classified as a trust under [Treas. Reg.] Section 301.7701-4 or otherwise subject to special treatment under the . . . Code." Neither Investment Company is subject to any such special treatment. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 12 to vary the investment of the certificate holders. SEE COMMISSIONER V. NORTH AMERICAN BOND TRUST, 122 F.2d 545 (2d Cir. 1941), CERT. DENIED, 314 U.S. 701 (1942)." Based on these criteria, Trust does not qualify as a trust for federal tax purposes./9 Trust is not simply an arrangement to protect or conserve property for the beneficiaries but is designed to carry on a profit-making business. Furthermore, while Trust is an "investment trust," there is a power under its Agreement and Declaration of Trust to vary its shareholders' investment therein. Trust does not have a fixed pool of assets -- each series of Trust (including Acquiring Fund) is a managed portfolio of securities. Accordingly, we believe that Trust should not be classified as a trust, and instead should be classified as a business entity, for federal tax purposes. Regulation section 301.7701-2(a) provides that "[a] business entity with two or more members is classified for federal tax purposes as either a corporation or a partnership." The term "corporation" is defined for those purposes (in Treas. Reg. Section 301.7701-2(b)) to include corporations denominated as such under the federal or state statute pursuant to which they were organized and certain other entities. Any business entity that is not classified as a corporation under that section (an "eligible entity") and has at least two members can elect to be classified as either an association (and thus a corporation) or a partnership. Treas. Reg. Section 301.7701-3(a). The default classification for a multi-member domestic eligible entity is a partnership. SEE Treas. Reg. Section 301.7701-3(b)(1)(i) ("unless the entity elects otherwise, a domestic eligible entity is a partnership if it has two or more members"). Thus, unless Trust elects otherwise, it will be classified as a partnership for federal income tax purposes./10 Absent such election, Trust could nevertheless achieve the intended result because if it were classified initially as a partnership rather than as a corporation, then it would be a "publicly traded partnership" under section 7704, which is "treated as a corporation" for federal tax purposes and thus would be classified as a corporation under the check-the-box Regulations. SEE Treas. Reg. Section 301.7701-2(b)(7), which provides that for those purposes, the term "corporation" includes "[a] business entity - --------- /9 Because Acquiring Fund is considered separate from each other series of Trust for federal tax purposes (see the discussion in the last paragraph of I.A. below), the analysis in the accompanying text applies equally to Acquiring Fund. /10 It is interesting to note that under the law that existed before the check-the-box Regulations, the word "association" had been held to include a Massachusetts business trust (SEE HECHT V. MALLEY, 265 U.S. 144 (1924)). The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 13 that is taxable as a corporation under a provision of the . . . Code other than section 7701(a)(3) . . . ." Based on the reasoning stated in the preceding paragraphs, we believe that Trust will be classified as an association (and thus a corporation) for federal tax purposes. The Investment Companies as such, however, are not participating in the Reorganization, but rather separate series thereof (the Funds) are the participants. Ordinarily, a transaction involving segregated pools of assets such as the Funds could not qualify as a reorganization, because the pools would not be separate taxable entities that constitute corporations. Under section 851(g), however, each Fund is treated as a separate corporation for all purposes of the Code save the definitional requirement of section 851(a) (which is satisfied by the respective Investment Companies). Accordingly, we believe that each Fund is a separate corporation, and its shares are treated as shares of corporate stock, for purposes of section 368(a)(1)(C). B. Transfer of "Substantially All" of Target's Properties. ------------------------------------------------------ For an acquisition to qualify as a C Reorganization, the acquiring corporation must acquire "substantially all of the properties" of the transferor corporation in exchange solely for all or part of the acquiring corporation's stock. For purposes of issuing private letter rulings, the Service considers the transfer of at least 90% of the fair market value of the transferor's net assets, and at least 70% of the fair market value of its gross assets, held immediately before the reorganization to satisfy the "substantially all" requirement. Rev. Proc. 77-37, 1977-2 C.B. 568. The Reorganization involves such a transfer. Accordingly, we believe that the Reorganization involves the transfer to Acquiring Fund of substantially all of Target's properties. C. Qualifying Consideration. ------------------------ The acquiring corporation in an acquisition intended to qualify as a C Reorganization must acquire at least 80% (by fair market value) of the transferor's property solely for voting stock. Section 368(a)(2)(B)(iii). The assumption of liabilities by the acquiring corporation or its acquisition of property subject to liabilities normally is disregarded (section 368(a)(1)(C)), but the amount of any such liabilities will be treated as money paid for the transferor's property if the acquiring corporation exchanges any money or property (other than its voting stock) therefor. Section 368(a)(2)(B). Because Acquiring Fund is exchanging only Acquiring Fund Shares, and no money or other property, for the Assets, we believe that the Reorganization will satisfy the solely-for-voting-stock requirement to qualify as a C Reorganization. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 14 D. Distribution by Target. ---------------------- Section 368(a)(2)(G)(i) provides that a transaction will not qualify as a C Reorganization unless the corporation whose properties are acquired distributes the stock it receives and its other property in pursuance of the plan of reorganization. Under the Plan -- which we believe constitutes a "plan of reorganization" within the meaning of Treas. Reg. Section 1.368-2(g) -- Target is distributing all the Acquiring Fund Shares it receives to the Shareholders in constructive exchange for their Target Shares; as soon as is reasonably practicable thereafter, Target will be terminated. Accordingly, we believe that the requirements of section 368(a)(2)(G)(i) are satisfied. E. Requirements of Continuity. -------------------------- Regulation section 1.368-1(b) sets forth two prerequisites to a valid reorganization: (1) a continuity of the business enterprise through the issuing corporation ("IC") -- defined in that section as "the acquiring corporation (as that term is used in section 368(a))," with an exception not relevant here -- under the modified corporate form as described in Treas. Reg. Section 1.368-1(d) ("continuity of business enterprise") and (2) a continuity of interest as described in Treas. Reg. Section 1.368-1(e) ("continuity of interest"). 1. Continuity of Business Enterprise. --------------------------------- To satisfy the continuity of business enterprise requirement of Treas. Reg. Section 1.368-1(d)(1), IC must either (i) continue the target corporation's "historic business" ("business continuity") or (ii) use a significant portion of the target corporation's "historic business assets" in a business ("asset continuity"). While there is no authority that deals directly with the continuity of business enterprise requirement in the context of a transaction such as the Reorganization, Rev. Rul. 87-76, 1987-2 C.B. 84, deals with a somewhat similar situation. In that ruling, P was an "investment company" (as defined in section 368(a)(2)(F)(iii)) that invested exclusively in municipal bonds. P acquired the assets of T, another such investment company, in exchange for P common stock in a transaction that was intended to qualify as a C Reorganization. Prior to the exchange, T sold its entire portfolio of corporate stocks and bonds and purchased a portfolio of municipal bonds. The Service held that this transaction did not qualify as a reorganization for the following reasons: (1) because T had sold its historic assets prior to the exchange, there was no asset continuity; and (2) the failure of P to engage in the business of investing in corporate stocks and bonds after the exchange caused the transaction to lack business continuity as well. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 15 The Funds have similar investment goals. Each Fund seeks investment returns consistently superior to those of its benchmark stock index and normally invests at least 80% of its assets in stocks of small U.S. companies (Target) or midsize domestic companies (Acquiring Fund), the latter category subsuming almost 90% of the former by market cap (I.E., all but the lowest $500 million of market cap). The Funds' other investment policies are substantially similar, and their similarity is further evidenced by the fact that one of Target's co-portfolio managers is Acquiring Fund's primary portfolio manager. Moreover, after the Reorganization Acquiring Fund will continue the "historic business" (within the meaning of Treas. Reg. Section 1.368-1(d)(2)) that Target conducted before the Reorganization, which Target conducted in a substantially unchanged manner from the commencement of its operations through the Closing Date. Accordingly, there will be business continuity. In anticipation of the Reorganization, Target did not dispose of assets that, in the aggregate, resulted in less than 50% of its "historic business assets" (within the meaning of Treas. Reg. Section 1.368-1(d)(3)) being transferred to Acquiring Fund. Furthermore, Acquiring Fund will use a significant portion of those "historic business assets" in its business after the Reorganization. Accordingly, there will be asset continuity as well. For all the foregoing reasons, we believe that the Reorganization will satisfy the continuity of business enterprise requirement. 2. Continuity of Interest. ---------------------- Regulation section 1.368-1(e)(1)(i) provides that "[c]ontinuity of interest requires that in substance a substantial part of the value of the proprietary interests in the target corporation be preserved in the reorganization. A proprietary interest in the target corporation is preserved if, in a potential reorganization, it is exchanged for a proprietary interest in the issuing corporation . . . ." That section goes on to provide that "[h]owever, a proprietary interest in the target corporation is not preserved if, in connection with the potential reorganization, . . . stock of the issuing corporation furnished in exchange for a proprietary interest in the target corporation in the potential reorganization is redeemed. All facts and circumstances must be considered in determining whether, in substance, a proprietary interest in the target corporation is preserved." For purposes of issuing private letter rulings, the Service considers the continuity of interest requirement satisfied if ownership in an acquiring corporation on the part of a transferor corporation's former shareholders The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 16 is equal in value to at least 50% of the value of all the formerly outstanding shares of the transferor corporation./11 Although shares of both the target and acquiring corporations held by the target corporation's shareholders that are disposed of before or after the transaction will be considered in determining satisfaction of the 50% standard, the Service has issued private letter rulings that excepted from that determination "shares which are required to be redeemed at the demand of shareholders by . . . Target or Acquiring in the ordinary course of their businesses as open-end investment companies (or series thereof) pursuant to Section 22(e) of the 1940 Act." Priv. Ltr. Ruls. 9823018 (Mar. 5, 1998) and 9822053 (Mar. 3, 1998); CF. Priv. Ltr. Rul. 199941046 (July 16, 1999) (redemption of a target RIC shareholder's shares, amounting to 42% of the RIC's value, and other "shares redeemed in the ordinary course of Target's business as an open-end investment company pursuant to section 22(e)" excluded from determination of whether the target or a related person acquired its shares with consideration other than target or acquiring fund shares)./12 - --------- /11 Rev. Proc. 77-37, SUPRA; BUT SEE Rev. Rul. 56-345, 1956-2 C.B. 206 (continuity of interest was held to exist in a reorganization of two RICs where immediately after the reorganization 26% of the shares were redeemed to allow investment in a third RIC); SEE ALSO REEF CORP. V. COMMISSIONER, 368 F.2d 125 (5th Cir. 1966), CERT. DENIED, 386 U.S. 1018 (1967) (a redemption of 48% of a transferor corporation's stock was not a sufficient shift in proprietary interest to disqualify a transaction as a reorganization under section 368(a)(1)(F) ("F Reorganization"), even though only 52% of the transferor's shareholders would hold all the transferee's stock); AETNA CASUALTY AND SURETY CO. V. U.S., 568 F.2d 811, 822-23 (2d Cir. 1976) (redemption of a 38.39% minority interest did not prevent a transaction from qualifying as an F Reorganization); Rev. Rul. 61-156, 1961-2 C.B. 62 (a transaction qualified as an F Reorganization even though the transferor's shareholders acquired only 45% of the transferee's stock, while the remaining 55% of that stock was issued to new shareholders in a public underwriting immediately after the transfer). /12 Although, under section 6110(k)(3), a private letter ruling may not be cited as precedent, tax practitioners look to such rulings as generally indicative of the Service's views on the proper interpretation of the Code and the Regulations. CF. ROWAN COMPANIES, INC. V. COMMISSIONER, 452 U.S. 247 (1981); ALSO SEE Treas. Reg. Section 1.6662-4(d)(3)(iii) (providing that private letter rulings issued after October 31, 1976, are authority for purposes of determining whether there is or was substantial authority for the tax treatment of an item under section 6662(d)(2)(B)(i), in connection with the imposition of the accuracy-related penalty under section 6662 to a substantial understatement of income tax). The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 17 During the five-year period that ended on the Closing Date, (1) neither Target nor any person related /13 to it acquired any Target Shares, either directly or through any transaction, agreement, or arrangement with any other person, with consideration other than Acquiring Fund Shares or Target Shares, except for shares redeemed in the ordinary course of Target's business as a series of an open-end investment company as required by section 22(e) of the 1940 Act, and (2) no distributions were made with respect to any Target Shares, except for normal, regular dividend distributions made pursuant to Target's historic dividend-paying practice and other distributions that qualify for the deduction for dividends paid (within the meaning of section 561) referred to in sections 852(a)(1) and 4982(c)(1)(A). Nor is there any plan or intention for Acquiring Fund, or any person related thereto, to reacquire -- during the five-year period beginning on the Closing Date, either directly or through any transaction, agreement, or arrangement with any other person -- with consideration other than Acquiring Fund Shares, any Acquiring Fund Shares issued to the Shareholders pursuant to the Reorganization, other than through redemptions arising in the ordinary course of that business as required by section 22(e) of the 1940 Act. Furthermore, during the five-year period that ended on the Closing Date, neither Acquiring Fund nor any person related to it acquired any Target Shares with consideration other than Acquiring Fund Shares. The aggregate value of the acquisitions, redemptions, and distributions limited by the foregoing did not exceed 50% of the value (without giving effect to such acquisitions, redemptions, and distributions) of the proprietary interest in Target on the Closing Date. There was no plan or intention of Shareholders to redeem, sell, or otherwise dispose of (1) any portion of their Target Shares before the Reorganization to any person related to either Fund or (2) any portion of the Acquiring Fund Shares they received in the Reorganization to any person related to Acquiring Fund. Moreover, (a) dispositions of those Acquiring Fund Shares at the time of or soon after the Reorganization did not exceed the usual rate and frequency of dispositions of shares of Target as a series of an open-end investment company, (b) each Investment Company's management expects that the percentage of Shareholder interests, if any, that was or will be disposed of as a result of or at the time of the Reorganization will be DE MINIMIS, and (c) there were no extraordinary redemptions of Acquiring Fund Shares immediately following the Reorganization. - --------- /13 All references in this and the next paragraph to the word "related" are to that word within the meaning of Treas. Reg. Section 1.368-1(e)(3). The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 18 Although Acquiring Fund's shares will be offered for sale to the public on an ongoing basis after the Reorganization, sales of those shares will arise out of a public offering separate and unrelated to the Reorganization and not as a result thereof. SEE REEF CORP. V. COMMISSIONER, 368 F.2d at 134; Rev. Rul. 61-156, SUPRA. Similarly, although Shareholders may redeem Acquiring Fund Shares pursuant to their rights as shareholders of a series of an open-end investment company (SEE Priv. Ltr. Ruls. 9823018 and 9822053, SUPRA, and 8816064 (Jan. 28, 1988)), those redemptions will result from the exercise of those rights in the course of Acquiring Fund's business as such a series and not from the Reorganization as such. Accordingly, we believe that the Reorganization will satisfy the continuity of interest requirement. F. Business Purpose. ---------------- All reorganizations must meet the judicially imposed requirements of the "business purpose doctrine," which was established in GREGORY V. HELVERING, 293 U.S. 465 (1935), and is now set forth in Treas. Reg. Sections 1.368-1(b), - -1(c), and -2(g) (the last of which provides that, to qualify as a reorganization, a transaction must be "undertaken for reasons germane to the continuance of the business of a corporation a party to the reorganization"). Under that doctrine, a transaction must have a BONA FIDE business purpose (and not a purpose to avoid federal income tax) to qualify as a valid reorganization. The substantial business purposes of the Reorganization are described in the Proxy Statement. Accordingly, we believe that the Reorganization is being undertaken for BONA FIDE business purposes (and not a purpose to avoid federal income tax) and therefore meets the requirements of the business purpose doctrine. G. Satisfaction of Section 368(a)(2)(F). ------------------------------------ Under section 368(a)(2)(F), if two or more parties to a transaction described in section 368(a)(1) (with an exception not relevant here) were "investment companies" immediately before the transaction, then the transaction shall not be considered a reorganization with respect to any such investment company and its shareholders. But that section does not apply to a participating investment company if, among other things, it is a RIC or -- (1) not more than 25% of the value of its total assets is invested in the stock and securities of any one issuer and The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 19 (2) not more than 50% of the value of its total assets is invested in the stock and securities of five or fewer issuers. In determining total assets for these purposes, cash and cash items (including receivables) and U.S. government securities are excluded. Section 368(a)(2)(F)(iv). Each Fund meets or will meet the requirements to qualify for treatment as a RIC for its taxable year that includes the Closing Date and satisfied the foregoing percentage tests. Accordingly, we believe that section 368(a)(2)(F) will not cause the Reorganization to fail to qualify as a C Reorganization with respect to either Fund. For all the foregoing reasons, we believe that the Reorganization will qualify as a C Reorganization. H. Each Fund Will Be a Party to a Reorganization. --------------------------------------------- Section 368(b)(2) provides, in pertinent part, that in the case of a reorganization involving the acquisition by one corporation of properties of another -- and Treas. Reg. Section 1.368-2(f) further provides that if one corporation transfers substantially all its properties to a second corporation in exchange for all or a part of the latter's voting stock (I.E., a C Reorganization) -- the term "a party to a reorganization" includes each corporation. Pursuant to the Reorganization, Target is transferring all its properties to Acquiring Fund in exchange for Acquiring Fund Shares. Accordingly, we believe that each Fund will be "a party to a reorganization." II. Target Will Recognize No Gain or Loss. ------------------------------------- Under sections 361(a) and (c), no gain or loss shall be recognized to a corporation that is a party to a reorganization if, pursuant to the plan of reorganization, (1) it exchanges property solely for stock or securities in another corporate party to the reorganization and (2) distributes that stock or securities to its shareholders. (Such a distribution is required by section 368(a)(2)(G)(i) for a reorganization to qualify as a C Reorganization.) Section 361(c)(4) provides that sections 311 and 336 (which require recognition of gain on certain distributions of appreciated property) shall not apply to such a distribution. Section 357(a) provides in pertinent part that, except as provided in section 357(b), if a taxpayer receives property that would be permitted to be received under section 361 without recognition of gain if it were the sole consideration and, as part of the consideration, another party to the exchange assumes a liability of the taxpayer or acquires from the taxpayer property subject to a liability, then that assumption or acquisition shall not be treated as money or other property and shall not prevent the exchange from being within The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 20 section 361. Section 357(b) applies where the principal purpose of the assumption or acquisition was a tax avoidance purpose or not a BONA FIDE business purpose. As noted above, it is our opinion that the Reorganization will qualify as a C Reorganization, each Fund will be a party to a reorganization, and the Plan constitutes a plan of reorganization. Target is exchanging the Assets solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities and then will be terminated pursuant to the Plan, distributing those shares to the Shareholders in constructive exchange for their Target Shares. As also noted above, it is our opinion that the Reorganization is being undertaken for BONA FIDE business purposes (and not a purpose to avoid federal income tax); we also do not believe that the principal purpose of Acquiring Fund's assumption of the Liabilities is avoidance of federal income tax on the proposed transaction. Accordingly, we believe that Target will recognize no gain or loss on the Reorganization. /14 III. Acquiring Fund Will Recognize No Gain or Loss. --------------------------------------------- Section 1032(a) provides that no gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for its stock. Acquiring Fund is issuing Acquiring Fund Shares to Target in exchange for the Assets, which consist of money and securities. Accordingly, we believe that Acquiring Fund will recognize no gain or loss on the Reorganization. IV. Acquiring Fund's Basis in the Assets Will Be a Carryover Basis, and Its ----------------------------------------------------------------------- Holding Period Will Include Target's Holding Period. --------------------------------------------------- Section 362(b) provides, in pertinent part, that the basis of property acquired by a corporation in connection with a reorganization to which section 368 applies shall be the same as it would be in the hands of the transferor, increased by the amount of gain recognized to the transferor on the transfer (a "carryover basis"). As noted above, it is our opinion that the Reorganization will qualify as such a reorganization and that Target will recognize no gain on the Reorganization. Accordingly, we believe that Acquiring Fund's basis in the Assets will be the same as Target's basis therein immediately before the Reorganization. Section 1223(2) provides in general that the period for which a taxpayer has held acquired property that has a carryover basis shall include the period for which the transferor held the property. As noted above, it is our - --------- /14 See footnote 7. The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 21 opinion that Acquiring Fund's basis in the Assets will be a carryover basis. Accordingly, we believe that Acquiring Fund's holding period for the Assets will include Target's holding period therefor. V. A Shareholder Will Recognize No Gain or Loss. -------------------------------------------- Under section 354(a)(1), no gain or loss shall be recognized if stock in a corporation that is a party to a reorganization is exchanged pursuant to a plan of reorganization solely for stock in that corporation or another corporate party to the reorganization. Pursuant to the Plan, the Shareholders are receiving solely Acquiring Fund Shares for their Target Shares. As noted above, it is our opinion that the Reorganization will qualify as a C Reorganization, each Fund will be a party to a reorganization, and the Plan constitutes a plan of reorganization. Although section 354(a)(1) requires that the transferor corporation's shareholders exchange their shares therein for shares of the acquiring corporation, the courts and the Service have recognized that the Code does not require taxpayers to perform useless gestures to come within the statutory provisions. SEE, E.G., EASTERN COLOR PRINTING CO., 63 T.C. 27, 36 (1974); DAVANT V. COMMISSIONER, 366 F.2d 874 (5th Cir. 1966). Therefore, although Shareholders are not actually surrendering Target Share certificates in exchange for Acquiring Fund Shares, their Target Shares are being canceled on the issuance of Acquiring Fund Shares to them (all of which is being reflected on Acquiring Fund's share transfer books) and are treated as having been exchanged therefor. SEE Rev. Rul. 81-3, 1981-1 C.B. 125; Rev. Rul. 79-257, 1979-2 C.B. 136. Accordingly, we believe that a Shareholder will recognize no gain or loss on the constructive exchange of all its Target Shares solely for Acquiring Fund Shares pursuant to the Reorganization. VI. A Shareholder's Basis in Acquiring Fund Shares Will Be a Substituted ----------------------------------------------------------------------- Basis, and its Holding Period therefor Will Include its Holding Period ----------------------------------------------------------------------- for its Target Shares. --------------------- Section 358(a)(1) provides, in pertinent part, that in the case of an exchange to which section 354 applies, the basis of the property permitted to be received thereunder without the recognition of gain or loss shall be the same as the basis of the property exchanged therefor, decreased by, among other things, the fair market value of any other property and the amount of any money received in the exchange and increased by the amount of any gain recognized on the exchange by the shareholder (a "substituted basis"). As noted above, it is our opinion that the Reorganization will qualify as a C Reorganization and, under section 354, a Shareholder will recognize no gain or loss on the constructive exchange of all its Target Shares solely for Acquiring Fund Shares in the The Dreyfus/Laurel Funds, Inc. MPAM Funds Trust October 28, 2002 Page 21 Reorganization. No property is being distributed to the Shareholders other than Acquiring Fund Shares, and no money is being distributed to them pursuant to the Reorganization. Accordingly, we believe that a Shareholder's basis in the Acquiring Fund Shares it receives in the Reorganization will be the same as the basis in its Target Shares it constructively surrenders in exchange for those Acquiring Fund Shares. Section 1223(1) provides in general that the period for which a taxpayer has held property received in an exchange that has a substituted basis shall include the period for which the taxpayer held the property exchanged therefor if the latter property was a "capital asset" (as defined in section 1221) in the taxpayer's hands at the time of the exchange. SEE Treas. Reg. Section 1.1223-1(a). As noted above, it is our opinion that a Shareholder will have a substituted basis in the Acquiring Fund Shares it receives in the Reorganization. Accordingly, we believe that a Shareholder's holding period for the Acquiring Fund Shares it receives in the Reorganization will include its holding period for the Target Shares it constructively surrenders in exchange therefor, provided the Shareholder held those Target Shares as capital assets on the Closing Date. Very truly yours, KIRKPATRICK & LOCKHART LLP By: /s/ Theodore L. Press ------------------------------- Theodore L. 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