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PROSPECTUS MAY 1, 1996
DREYFUS STOCK INDEX FUND
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DREYFUS STOCK INDEX FUND (THE "FUND") IS AN OPEN-END, NON-DIVERSIFIED,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND, THAT IS INTENDED TO BE
A FUNDING VEHICLE FOR VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES TO BE OFFERED BY THE SEPARATE ACCOUNTS OF LIFE INSURANCE COMPANIES
(THE "PARTICIPATING INSURANCE COMPANIES").
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE INVESTMENT RESULTS THAT
CORRESPOND TO THE PRICE AND YIELD PERFORMANCE OF PUBLICLY TRADED COMMON
STOCKS IN THE AGGREGATE, AS REPRESENTED BY THE STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX. IN ANTICIPATION OF TAKING A MARKET POSITION, THE
FUND IS PERMITTED TO PURCHASE AND SELL STOCK INDEX FUTURES. THE FUND IS
NEITHER SPONSORED BY NOR AFFILIATED WITH STANDARD & POOR'S.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S MANAGER.
DREYFUS HAS ENGAGED ITS AFFILIATE, MELLON EQUITY ASSOCIATES ("MELLON
EQUITY"), TO SERVE AS THE FUND'S INDEX FUND MANAGER AND PROVIDE DAY-TO-DAY
MANAGEMENT OF THE FUND'S INVESTMENTS. DREYFUS AND MELLON EQUITY ARE
COLLECTIVELY REFERRED TO AS THE "ADVISERS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996, WHICH MAY
BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS
IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
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TABLE OF CONTENTS
Page
Condensed Financial Information.......................... 2
Description of the Fund................................. 2
Management of the Fund.................................. 5
How to Buy Fund Shares.................................. 6
How to Redeem Fund Shares............................... 6
Shareholder Services Plan............................... 7
Dividends, Distributions and Taxes...................... 7
Performance Information................................. 8
General Information..................................... 8
Appendix................................................ 10
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
covering the periods ending 1991 to 1995 appears in the Statement of
Additional Information. Further financial data and related notes are included
in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements. The Fund's
total investment return shown below does not include expenses charged a
separate account or related insurance policy by a Participating Insurance
Company, inclusion of which would reduce the Fund's total investment return
for each period indicated.
<TABLE>
FOUR MONTHS
ENDED YEAR ENDED
YEAR ENDED AUGUST 31, DECEMBER 31, DECEMBER 31,
------------------------------- -------------- -------------------------
PER SHARE DATA: 1990(1) 1991 1992 1992(2) 1993 1994 1995
------- ------- ------- ------------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $12.50 $11.62 $14.20 $14.87 $15.32 $13.20 $12.94
------- ------ ------ ------ ------ ----- ------
INVESTMENT OPERATIONS:
Investment income-net.... .38 .39 .37 .13 .37 .32 .33
Net realized and unrealized gain (loss)
on investments..... (.95) 2.60 .68 .77 1.04 (.21) 4.39
------- ------ ------ ------ ------ ----- ------
TOTAL FROM INVESTMENT OPERATIONS (.57) 2.99 1.05 .90 1.41 .11 4.72
------- ------ ------ ------ ------ ----- ------
DISTRIBUTIONS:
Dividends from
investment income-net........ (.31) (.39) (.38) (.21) (.34) (.31) (.33)
Dividends in excess of
investment income-net........ -- -- -- -- (.03) -- --
Dividends from net realized
gain on investments........... -_ (.02) -_ (.24) (3.00) -- (.13)
Dividends in excess of net
realized gain on investments... -_ -_ -_ -_ (.16) (.06) --
------- ------ ------ ------ ------ ----- ------
TOTAL DISTRIBUTIONS (.31) (.41) (.38) (.45) (3.53) (.37) (.46)
------- ------ ------ ------ ------ ----- ------
Net asset value, end of year $11.62 $14.20 $14.87 $15.32 $13.20 $12.94 $17.20
------- ------ ------ ------ ------ ----- ------
TOTAL INVESTMENT RETURN... (4.73%)(3) 26.26% 7.49% 6.05%(3) 9.33% .88% 36.78%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets....... .37%(3) .40% .40% .13%(3) .40% .40% .39%
Ratio of net investment
income to average net assets... 3.12%(3) 3.05% 2.63% .85%(3) 2.38% 2.56% 2.38%
Decrease reflected in above expense
ratios due to undertakings.... .17%(3) .11% .13% .03%(3) .27% .16% .03%
Portfolio Turnover Rate.. .99%(3) 1.02% 7.66% 6.94%(3) 71.71% 2.82% 11.95%
Net Assets, end of year
(000's omitted)...... $48,184 $62,400 $74,446 $70,072 $61,319 $96,806 $312,686
- -----------------------------
(1) From September 29, 1989 (commencement of operations) to
August 31, 1990.
(2) Effective September 1, 1992, the Fund changed its fiscal year-end
from August 31 to December 31. The figures provided are from
September 1, 1992 to December 31, 1992.
(3) Not annualized.
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
DESCRIPTION OF THE FUND
GENERAL
The Fund is intended to be a funding vehicle for variable annuity contracts
("VA contracts") and variable life insurance policies ("VLI policies") to be
offered by the Participating Insurance Companies. The Fund currently does not
foresee any disadvantages to the holders of VA contracts and VLI policies
arising from the fact
Page 2
that the interests of the holders of such contracts and policies may differ.
Nevertheless, the Fund's Board intends to monitor events in order to identify
any material conflicts which may arise and to determine what action, if any,
should be taken in response thereto. The VA contracts and the VLI policies
are described in the separate prospectuses issued by the Participating
Insurance Companies over which the Fund assumes no responsibility.
Individual VA contract holders and VLI policy holders are not the
"shareholders" of the Fund. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders (the "shareholders"), although
such companies may pass through voting rights to their VA contract holders
and VLI policy holders.
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide investment results that
correspond to the price and yield performance of publicly traded common
stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index* (the "Index"). It cannot be changed without
approval by the holders of a majority (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) of the Fund's outstanding voting
shares. There can be no assurance that the Fund's investment objective will
be achieved.
MANAGEMENT POLICIES
The Fund attempts to duplicate the investment results of the Index, which is
composed of 500 selected common stocks, most of which are listed on the New
York Stock Exchange. Standard & Poor's ("S&P"). chooses the stocks to be
included in the Index solely on a statistical basis. The Fund attempts to be
fully invested at all times in the stocks that comprise the Index and stock
index futures as described below and, in any event, at least 80% of the
Fund's net assets will be so invested. Inclusion of a stock in the Index in
no way implies an opinion by S&P as to its attractiveness as an investment.
The Fund uses the Index as the standard performance comparison because it
represents approximately 70% of the total market value of all common stocks
and is well known to investors. An investment in the Fund involves risks
similar to those of investing in common stocks.
The weightings of stocks in the Index are based on each stock's
relative total market capitalization; that is, its market price per share
times the number of shares outstanding. Because of this weighting, as of
December 31, 1995, approximately 46% of the Index was composed of the 50
largest companies. The Advisers generally select stocks for the Fund's
portfolio in the order of their weightings in the Index beginning with the
heaviest weighted stocks. With respect to the Fund's assets invested in the
stocks in the Index, the percentage of such assets invested in each stock is
approximately the same as the percentage it represents in the Index.
No attempt is made to manage the portfolio in the traditional sense
using economic, financial and market analysis. The Fund is managed using a
computer program to determine which stocks are to be purchased or sold to
replicate the Index to the extent feasible. From time to time, administrative
adjustments may be made in the Fund's portfolio because of changes in the
composition of the Index, but such changes should be infrequent.
The Fund believes that the indexing approach described above is an
effective method of substantially duplicating percentage changes in the
Index. It is a reasonable expectation that there will be a close correlation
between the Fund's performance and that of the Index in both rising and
falling markets. The Fund will attempt to achieve a correlation between the
performance of its portfolio and that of the Index of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Fund's net asset value,
including the value of its dividends and capital gains distributions,
increases or decreases in exact proportion to changes in the Index. The
Fund's ability to correlate its performance with the Index, however, may be
affected by, among other things, changes in securities markets, the manner in
which the Index is calculated by S&P and the timing of purchases and
redemptions. In the future, the Fund's Board, subject to the approval of
shareholders, may select another index if such a standard of comparison is
deemed to be more representative of the performance of common stocks.
The Fund's ability to duplicate the performance of the Index also
depends to some extent on the size of the Fund's portfolio and the size of
cash flows into and out of the Fund. Investment changes to accommodate these
cash flows are made to maintain the similarity of the Fund's portfolio to the
Index to the maximum practicable extent.
*"Standard & Poor's 500," "S&P 500Registration Mark" are trademarks of
The McGraw-Hill Companies and have been licensed for use. The Fund is not
sponsored, endorsed, sold or promoted by S&P or The McGraw-Hill Companies.
Page 3
From time to time to increase its income, the Fund may lend
securities from its portfolio. See "Appendix _ Investment Techniques." When
the Fund has cash reserves, the Fund may invest in money market instruments
consisting of U.S. Government securities, time deposits, certificates of
deposit, bankers' acceptances, high-grade commercial paper, and repurchase
agreements. See the Statement of Additional Information for a description of
these instruments. The Fund also may purchase stock index futures in
anticipation of taking a market position when, in the opinion of the Advisers,
available cash balances do not permit an economically efficient trade in the
cash market. The Fund also may sell stock index futures to terminate existing
positions it may have as a result of its purchases of stock index futures.
See also "Investment Considerations and Risks" and "Appendix _ Investment
Techniques" below, and "Investment Objective and Management Policies" in the
Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
FOREIGN SECURITIES -- Since the stocks of some foreign issuers are included
in the Index, the Fund's portfolio may contain securities of such foreign
issuers which may subject the Fund to additional investment risks with
respect to those securities that are different in some respects from those
incurred by a fund which invests only in securities of domestic issuers. Such
risks include possible: adverse political and economic developments, seizure
or nationalization of foreign deposits or adoption of governmental restriction
s which might adversely affect the payment of principle and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset or index. The Derivatives the Fund may use include stock index futures.
While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _Investment Techniques _ Use of Derivatives" below
and " Investment Objective and Management Policies _ Management Policies _
Derivatives" in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. A "diversified" investment company is required by
the 1940 Act generally, with respect to 75% of its total assets, to invest
not more than 5% of such assets in the securities of a single issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, some of which may be within the
same economic sector, the Fund's portfolio may be more sensitive to the
changes in market value of a single issuer or industry. However, to meet
Federal tax requirements, at the close of each quarter the Fund may not have
more than 25% of its total assets invested in any one issuer and, with
respect to 50% of total assets, not more than 5% of its total assets invested
in any one issuer. These limitations do not apply to U.S. Government
securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies or accounts
advised by Dreyfus or Mellon Equity. If, however, such other investment
companies or accounts desire to invest in, or dispose of, the same securities
as the Fund, available investments or opportunities for sales will be
allocated equitably to each. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by the Fund or
the price paid or received by the Fund.
Page 4
MANAGEMENT OF THE FUND
ADVISERS -- Dreyfus, located at 200 Park Avenue, New York, New York 10166,
was formed in 1947 and serves as the Fund's manager. Dreyfus is a
wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"). As of March 29, 1996,
Dreyfus managed or administered approximately $82 billion in assets for more
than 1.7 million investor accounts nationwide.
Dreyfus supervises and assists in the overall management of the
Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Maryland law.
Dreyfus has engaged Mellon Equity, located at 500 Grant Street,
Pittsburgh, Pennsylvania 15258, to serve as the Fund's index fund manager.
Mellon Equity, a registered investment adviser formed in 1957, is an indirect
wholly-owned subsidiary of Mellon and, thus, an affiliate of Dreyfus. As of
December 31, 1995, Mellon Equity and its employees managed approximately $8.8
billion in assets and served as the investment adviser of 62 other investment
companies.
Mellon Equity, subject to the supervision and approval of Dreyfus,
provides the day-to-day management of the Fund's investments, as well as
statistical information, under an Index Management Agreement with Dreyfus,
subject to the overall authority of the Fund's Board in accordance with
Maryland law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including Dreyfus, Mellon managed more than $233 billion in
assets as of December 31, 1995, including approximately $81 billion in
proprietary mutual fund assets. As of December 31, 1995, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $786 billion in assets, including
approximately $60 billion in mutual fund assets.
For the period November 13, 1995 (effective date of the Management
Agreement and Index Management Agreement) through December 31, 1995, the end
of the Fund's fiscal year, the Fund paid Dreyfus a monthly management fee at
the effective annual rate of .245 of 1% of the value of the Fund's average
daily net assets, and Dreyfus paid Mellon Equity an index management fee at
the effective annual rate of .095 of 1% of the value of the Fund's average
daily net assets. Under the Index Management Agreement, Mellon Equity has
agreed to pay for the provision of custody services to the Fund by Boston
Safe Deposit and Trust Company.
Prior to November 13, 1995, Wells Fargo Nikko Investment Advisors
("WFNIA") served as the Fund's index fund manager pursuant to an Index
Management Agreement with the Fund and Dreyfus served as the Fund's
administrator pursuant to an Administration Agreement with the Fund. Pursuant
to such agreements, the Fund agreed to pay WFNIA and Dreyfus each at an
annual rate of .15 of 1% of the value of the Fund's average daily net assets.
For the period January 1, 1995 through November 12, 1995 (termination date of
such agreements), the Fund paid each of WFNIA and Dreyfus at the effective
annual rate of .10 of 1% of the value of the Fund's average daily net assets.
The imposition of the Fund's management fee, as well as other
operating expenses, will have the effect of reducing investors' return and
will affect the Fund's ability to track the Index exactly. Dreyfus has
undertaken that, until such time as it gives shareholders at least 180 days
notice to the contrary, if in any fiscal year the aggregate expenses of the
Fund (excluding brokerage commissions, transaction fees and extraordinary
expenses) exceed .40 of 1% of the value of the Fund's average net assets for
the fiscal year, the Fund may deduct from the payment to be made to Dreyfus,
or Dreyfus will bear, such excess expense. In addition, from time to time,
Dreyfus may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors. The Fund will not
Page 5
pay Dreyfus at a later time for any amounts Dreyfus may waive, nor will
the Fund reimburse Dreyfus for any amounts Dreyfus may assume.
In allocating brokerage transactions for the Fund, the Advisers seek
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, the Advisers may consider, among other things,
the receipt of research services and/or the sale of shares of the Fund or
other funds advised by Dreyfus or Mellon Equity as factors in the selection
of broker-dealers to execute portfolio transactions for the Fund. See
"Portfolio Transactions" in the Statement of Additional Information.
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The Fund's distributor may use part of all of such
payments to pay securities dealers, banks or other financial institutions in
respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's Transfer and Dividend Disbursing Agent (the
"Transfer Agent"). Boston Safe Deposit and Trust Company, an indirect
subsidiary of Mellon, One Boston Place, Boston, Massachusetts 02108, is the
Custodian of the Fund's investments.
HOW TO BUY SHARES
Separate accounts of the Participating Insurance Companies place
orders based on, among other things, the amount of premium payments to be
invested pursuant to VA contracts and VLI policies. Individuals may not place
orders directly with the Fund. See the prospectus of the separate account of
the applicable Participating Insurance Company for more information on the
purchase of Fund shares.
If an order is received by the Fund or its agent by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m., New
York time) on a business day, Fund shares will be purchased at the net asset
value determined as of such close of trading on the day the order is
received. Otherwise, Fund shares will be purchased at the net asset value
determined as of the close of trading on the floor of the New York Stock
Exchange on the next business day.
Fund shares are sold on a continuous basis. Net asset value per share
is determined as of the close of trading on the floor of the New York Stock
Exchange on each day the New York Stock Exchange is open for business. For
purposes of determining net asset value, futures contracts will be valued 15
minutes after the close of trading on the floor of the New York Stock
Exchange. Net asset value per share is computed by dividing the value of the
Fund's net assets (i.e., the value of its assets less liabilities) by the
total number of shares outstanding. The Fund's investments are valued based
on market value, or where market quotations are not readily available, based
on fair value as determined in good faith by the Fund's Board. For further
information regarding the methods employed in valuing the Fund's investments,
see "Determination of Net Asset Value" in the Statement of Additional
Information.
HOW TO REDEEM SHARES
Fund shares may be redeemed at any time by the separate accounts of
the Participating Insurance Companies. Individuals may not place redemption
orders directly with the Fund. When the Fund or its agent receives a request
in proper form by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the Fund will redeem the
shares at the net asset value determined as of the close of such trading on
the day the request is received. To maximize the Fund's ability to track the
Index, shareholders are urged to transmit redemption requests so that they
may be received by the Fund or its agent prior to 12:00 noon, New York time,
on the day upon which shareholders want their redemption requests to be
effective. The value of the shares redeemed may be more or less than their
original cost, depending on the Fund's then-current net asset value. No
charges are imposed by the Fund when shares are redeemed.
Page 6
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission.
Should any conflict between VA contract holders and VLI policy
holders arise which would require that a substantial amount of net assets be
withdrawn, orderly portfolio management could be disrupted to the potential
detriment of such contract and policy holders.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, an amount not to exceed an annual rate of .25 of 1% of the value of
the Fund's average daily net assets for certain allocated expenses with
respect to servicing and/or maintaining shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from net investment
income quarterly, and automatically reinvests them in additional Fund shares
at net asset value or, at the shareholder's option, pays them in cash. The
Fund makes distributions from net realized securities gains, if any, once a
year, but may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), in all events in a manner consistent with the provisions of the
1940 Act. The Fund will not make distributions from net realized securities
gains unless capital loss carryovers, if any, have been utilized or have
expired. If all shares in an account are redeemed at any time, all dividends
to which the shareholder is entitled will be paid along with the proceeds of
the redemption. An omnibus accountholder may indicate in a partial redemption
request that a portion of any accrued dividends to which such account is
entitled belongs to an underlying accountholder who has redeemed all shares
in his or her account, and such portion of the accrued dividends will be paid
to the accountholder along with the proceeds of the redemption. All expenses
are accrued daily and deducted before declaration of dividends to investors.
Notice as to the tax status of dividends and distributions will be
mailed to shareholders annually. Dividends derived from net investment
income, together with distributions of net realized short-term securities
gains paid by the Fund will be taxable as ordinary income whether received in
cash or reinvested in additional Fund shares. Distributions from net realized
long-term securities gains of the Fund will be taxable to U.S. shareholders
as long-term capital gains for Federal income tax purposes, regardless of how
long shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Since the Fund's
shareholders are the Participating Insurance Companies and their separate
accounts, no discussion is included herein as to the Federal income tax
consequences to VA contract holders and VLI policy holders. Participating
Insurance Companies should consult their own tax advisers as to the
taxability of dividends and distributions paid to them.
Section 817(h) of the Code requires that the investments of a
segregated asset account of an insurance company be "adequately diversified''
as provided therein or in accordance with U.S. Treasury Regulations, in order
for the account to serve as the basis for VA contracts or VLI policies.
Section 817(h) and the U.S. Treasury Regulations issued thereunder provide
the manner in which a segregated asset account will treat investments in a
regulated investment company for purposes of the diversification requirements.
If the Fund satisfies certain conditions, a segregated asset account owning
shares of the Fund will be treated as owning multiple investments consisting
of the account's proportionate share of each of the assets of the Fund. The
Fund intends to satisfy these conditions so that the shares of the Fund owned
by a segregated asset account of a Participating Insurance Company will be
treated as multiple investments. Further, the Fund intends to satisfy the
diversification standards prescribed under Section 817(h) for segregated
accounts.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1995 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such quali-
Page 7
fication is in the best interest of its shareholders. Qualification as a
regulated investment company relieves the Fund of any liability for Federal
income taxes to the extent its earnings are distributed in accordance with
applicable provisions of the Code. In addition, the Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
Participating Insurance Companies should consult their tax advisers
regarding specific questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For the purpose of advertising, performance is calculated on the
basis of average annual total return and/or total return.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter time periods depending
upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. Performance information, such
as that described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
The Fund's average annual total return and total return should not be
compared with other funds that offer their shares directly to the public
since the figures provided do not reflect charges of Participating Insurance
Companies. In addition, the Fund's total return should be distinguished from
the rate of return of a separate account or investment division of a separate
account of a Participating Insurance Company, which rate will reflect the
deduction of additional charges, including mortality and expense risk
charges, and therefore will be lower. VA contract holders and VLI policy
holders should consult the prospectus for such contract or policy.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Standard &
Poor's 500 Composite Stock Price Index, Standard & Poor's MidCap 400 Index,
Lipper Analytical Services, Inc., the Dow Jones Industrial Average, Money
Magazine, Morningstar, Inc. and other industry publications. The Fund may
cite in its advertisements or in reports or other communications to
shareholders, historical performance of unmanaged indices as reported in
Ibbotson, Roger G. and Rex A. Sinquefield, Stocks, Bonds, Bills and Inflation
(SBBI), updated annually in the SBBI Yearbook, Ibbotson Associates, Chicago.
In its advertisements, the Fund also may cite the aggregate amount of assets
committed to index investing by pension funds and/or other institutional
investors, and may refer to or discuss then current or past economic or
financial conditions, developments or events.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on January 24, 1989, and
commenced operations on September 29, 1989. On May 1, 1994, the Fund, which
is incorporated under the name Dreyfus Life and Annuity Index Fund, Inc.,
began operating under the name Dreyfus Stock Index Fund. The Fund is
authorized to issue 200 million shares of Common Stock, par value $.001 per
share. Each share has one vote. In accordance with current law, the Fund
anticipates that a Participating Insurance Company issuing a VA contract or
VLI policy that participates in the Fund will request voting instructions
from contract and policy holders and
Page 8
will vote shares in proportion to the voting instructions received. For
further information on voting rights, see the applicable prospectus of the
Participating Insurance Company.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other purpose. Fund shareholders may remove a Board member by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of shareholder ownership and
sends confirmations and statements of account.
Owners of policies and contracts issued by a Participating Insurance
Company for which shares of the Fund are an investment vehicle will receive
from the Participating Insurance Company unaudited semi-annual financial
statements and audited year-end financial statements certified by the Fund's
independent public accountants. Each report will show the investments owned
by the Fund and the market values thereof and will provide other information
about the Fund and its operations.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11566-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship
to the Fund is the licensing of certain trademarks and trade names of S&P and
of the S&P 500 Index which is determined, composed and calculated by S&P
without regard to the Fund. S&P has no obligation to take the needs of the
Fund or the owners of the Fund into consideration in determining, composing
or calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the calculation of the Fund's net asset value, nor is S&P a
distributor of the Fund. S&P has no obligation or liability in connection
with the administration, marketing or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
page 9
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow money only for temporary
or emergency (not leveraging) purposes, in an amount up to 5% of the value of
its total assets (including the amount borrowed) valued at the lesser of cost
or market, less liabilities (not including the amount borrowed) at the time
the borrowing is made.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain derivatives. The Fund may
invest in stock index futures contracts for hedging purposes without limit.
However, the Fund may not invest in such contracts for other purposes if the
sum of the amount of initial margin deposits, other than for bona fide
hedging purposes, exceeds 5% of the liquidation value of the Fund's assets,
after taking into account unrealized profits and unrealized losses on such
contracts.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and income on the
loaned securities' collateral. Loans of portfolio securities may not exceed
30% of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities. Such
loans are terminable by the Fund at any time upon specified notice. The Fund
might experience risk of loss if the institution with which it has engaged in
a portfolio loan transaction breaches its agreement with the Fund.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
DREYFUS
Stock
Index Fund
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
763p050196
DREYFUS STOCK INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Stock Index Fund (the "Fund"), dated May 1, 1996, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City - Call 1-718-895-1206
Outside the U.S. or Canada - Call 516-794-5452
The Dreyfus Corporation (the "Dreyfus") serves as the Fund's manager.
Dreyfus has engaged its affiliate, Mellon Equity Associates ("Mellon
Equity"), to serve as the Fund's index fund manager and provide day-to-day
management of the Fund's investments. Dreyfus and Mellon Equity are
referred to collectively as the "Advisers."
Premier Mutual Fund Services, Inc. (the "Distributor") serves as the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . . .B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . . .B-6
Management Arrangements . . . . . . . . . . . . . . . . . . . . . . . .B-9
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . . .B-12
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .B-12
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .B-13
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . .B-13
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . .B-14
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . .B-16
Performance Information . . . . . . . . . . . . . . . . . . . . . . . .B-16
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . .B-16
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Accountants . . . . . . . . . . . B-17
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-18
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . .B-19
Report of Independent Accountants . . . . . . . . . . . . . . . . . . .B-33
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Other Portfolio Securities
Money Market Instruments. The Fund may invest, in the circumstances
described under "Description of the Fund - Management Policies" in the
Fund's Prospectus, in the following types of money market instruments.
U.S. Government Securities--Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and credit
of the U.S. Treasury; others by the right of the issuer to borrow from the
Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations from the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. While the U.S. Government
provides financial support for such U.S. Government-sponsored agencies and
instrumentalities, no assurance can be given that it will always do so
since it is not so obligated by law.
Repurchase Agreements--In a repurchase agreement, the Fund buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and
price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. The Fund's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff of
the Securities and Exchange Commission to be loans by the Fund. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement,
the Fund will enter into repurchase agreements only with domestic banks
with total assets in excess of one billion dollars or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Repurchase
agreements could involve risks in the event of a default or insolvency of
the other party to the agreement, including possible delays or restrictions
upon the Fund's ability to dispose of the underlying securities.
Bank Obligations--The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such
securities issued by foreign subsidiaries or foreign branches of domestic
banks, and domestic and foreign branches of foreign banks, the Fund may be
subject to additional investment risks that are different in some respects
from those incurred by a fund which invests only in debt obligations of
U.S. domestic issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and the drawer to pay the face
amount of the instruments upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Commercial Paper--Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which,
at the time of their purchase, are (a) rated at least Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), (b) issued by
companies having an outstanding unsecured debt issue currently rated at
least Aa by Moody's or at least AA- by S&P, or (c) if unrated, determined
by the Advisers to be of comparable quality to those rated obligations
which may be purchased by the Fund.
Management Policies
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board must terminate the
loan and regain the right to vote the securities if a material event
adversely affecting the investment occurs.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) in anticipation of taking a market position when, in the
opinion of the Advisers, available cash balances do not permit an
economically efficient trade in the cash market. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its
Derivatives were poorly correlated with its other investments, or if the
Fund were unable to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
Stock Index Futures--A stock index future obligates the Fund to pay or
receive an amount of cash equal to a fixed dollar amount specified in the
futures contract multiplied by the difference between the settlement price
of the contract on the contract's last trading day and the value of the
index based on the stock prices of the securities that comprise it at the
opening of trading in such securities on the next business day. The Fund
purchases and sells futures contracts on the stock index for which it can
obtain the best price with consideration also given to liquidity.
Using futures in anticipation of market transactions involves certain
risks. Although the Fund intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be
given that a liquid market will exist for any particular contract at any
particular time. In addition, the price of stock index futures may not
correlate perfectly with the movement in the stock index due to certain
market distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the index and futures markets. Secondly, from the
point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market
also may cause temporary price distortions. Because of the possibility of
price distortions in the futures market and the imperfect correlation
between movements in the stock index and movements in the price of stock
index futures, a correct forecast of general market trends still may not
result in a successful hedging transaction.
In connection with its futures transactions, the Fund may be required
to establish and maintain at its custodian bank a segregated account
consisting of cash or high quality money market instruments in an amount
equal to the market value of the underlying commodity less any amount
deposited as margin.
Investment Restrictions
The Fund has adopted the following investment restrictions as
fundamental policies, which cannot be changed without approval of the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund's outstanding voting shares. The
Fund may not:
1. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
2. Purchase securities of closed-end investment companies except (a)
in the open market where no commission other than the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of
the total outstanding voting stock of any one closed-end investment
company, (ii) 5% of the Fund's net assets with respect to the securities
issued by any one closed-end investment company and (iii) 10% of the Fund's
net assets in the aggregate, or (b) those received as part of a merger or
consolidation. The Fund may not purchase the securities of open-end
investment companies other than itself.
3. Invest in commodities, except that the Fund may invest in futures
contracts as described in the Prospectus and Statement of Additional
Information.
4. Purchase, hold or deal in real estate, or oil and gas interests,
but the Fund may purchase and sell securities that are secured by real
estate or issued by companies that invest or deal in real estate.
5. Borrow money or pledge, mortgage or hypothecate its assets,
except as described in the Fund's Prospectus and the Statement of
Additional Information and in connection with entering into futures
contracts. Collateral arrangements with respect to initial or variation
margin for futures contracts will not be deemed to be pledges of the Fund's
assets.
6. Lend any funds or other assets except through the purchase of
debt securities, bankers' acceptances and commercial paper of corporations
and other entities. However, the Fund may lend its portfolio securities in
an amount not to exceed 30% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established by
the Securities and Exchange Commission and the Fund's Board.
7. Act as an underwriter of securities of other issuers or purchase
securities subject to restrictions on disposition under the Securities Act
of 1933 (so-called "restricted securities"). The Fund may not enter into
repurchase agreements providing for settlement in more than seven days
after notice or purchase securities which are not readily marketable, if,
in the aggregate, more than 10% of the value of the Fund's net assets would
be so invested. The Fund will not enter into time deposits maturing in
more than seven days and time deposits maturing from two business through
seven calendar days will not exceed 10% of the Fund's total assets.
8. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
9. Purchase, sell or write puts, calls or combinations thereof.
10. Invest more than 25% of its assets in investments in any
particular industry or industries (including banking), except to the extent
the Index also is so concentrated, provided that, when the Fund has adopted
a temporary defensive posture, there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
In addition to the investment restrictions adopted as fundamental
policies set forth above, the Fund operates with certain non-fundamental
policies which may be changed by vote of a majority of the Board members at
any time. The Fund may not: (i) engage in arbitrage transactions,
(ii) purchase warrants (other than those acquired by the Fund in units or
attached to securities), (iii) sell securities short, but reserves the
right to sell securities short against the box, and (iv) invest more than
10% of its total assets in the securities of any single issuer or invest in
more than 10% of the voting securities of any single issuer. In addition,
the Fund intends to: (i) comply with the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) comply in all material respects with relevant insurance
laws and regulations applicable to investments of separate accounts of
Participating Insurance Companies.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus and, until August 24, 1994, the
Fund's distributor. From August 24, 1994 to December 31, 1994, he was
a director of Mellon Bank Corporation. He is Chairman of the Board of
Directors of Noel Group, Inc., a venture capital company; a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
a manufacturer and marketer of industrial threads, specialty yarns and
home furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware, and Staffing Resources, Inc. He is 52 years old and his
address is 200 Park Avenue, New York, New York 10166.
*DAVID P. FELDMAN, Board member. Corporate Vice President-Investment
Management of AT&T. He is also a trustee of Corporate Property
Investors, a real estate investment company. He is 56 years old and
his address is One Oak Way, Berkeley Heights, New Jersey 07922.
JACK R. MEYER, Board member. President and Chief Executive Officer of
Harvard Management Company, an investment management company, since
September 1990. For more than five years prior thereto, he was
Treasurer and Chief Investment Officer of The Rockefeller Foundation.
He is 50 years old and his address is 600 Atlantic Avenue, Boston,
Massachusetts 02210.
JOHN SZARKOWSKI, Board member. Director Emeritus of Photography at The
Museum of Modern Art. Consultant in Photography. He is 70 years old
and his address is Bristol Road Box 221, East Chatham, New York 12060.
ANNE WEXLER, Board member. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She is also
a director of Alumax, Comcast Corporation and The New England Electric
System, Nova Corporation, and a member of the Board of the Carter
Center of Emory University, the Council of Foreign Relations, the
National Park Foundation, Visiting Committee of the John F. Kennedy
School of Government at Harvard University and the Board of Visitors
of the University of Maryland School of Public Affairs. She is 66
years old and her address is c/o The Wexler Group, 1317 F Street,
N.W., Suite 600, Washington, D.C. 20004.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund and by all other funds
in the Dreyfus Family of Funds for which such person is a Board member (the
number of which is set forth in parenthesis next to each Board member's
total compensation) for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
(3) (5)
(2) Pension or (4) Total Compensation
(1) Aggregate Retirement Benefits Estimated Annual From Fund and
Name of Board Compensation From Accrued as Part of Benefits Upon Fund Complex
Member Fund* Fund's Expenses Retirement Paid to Board Member
<S> <C> <C> <C> <C>
Joseph S. DiMartino $5,925 none none $448,618 (93)
David P. Feldman $4,500 none none $113,783 (27)
Jack R. Meyer $4,500 none none $ 21,125 (4)
John Szarkowski $5,000 none none $ 21,625 (4)
Anne Wexler $4,500 none none $ 62,001 (16)
____________________________
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $451
for all Board members as a group.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
Officer and a Director of the Distributor and an officer of other
investment companies advised or administered by Dreyfus. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of the Distributor and an officer
of other investment companies advised or administered by Dreyfus.
From February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an associate at Ropes & Gray. He is 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From September 1992 to
August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 31 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. She is 26 years old.
JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by
Dreyfus. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From 1984 to July 1994, he was Assistant
Vice President in the Mutual Fund Accounting Department of Dreyfus.
He is 60 years old.
MARGARET PARDO, Assistant Secretary. Legal Assistant with the Distributor
and an officer of other investment companies advised or administered
by Dreyfus. From June 1992 to April 1995, she was a Medical
Coordination Officer at ORBIS International. Prior to June 1992, she
worked as Program Coordinator at Physicians World Communications
Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Board members and officers of the Fund, as a group, owned less than 1%
of the Fund's shares outstanding on February 8, 1996.
The following persons are known by the Fund to own of record 5% or
more of the Fund's voting securities outstanding on February 8, 1996:
Nationwide Variable Account II, P.O. Box 182029, Columbus, Ohio 43218--
45.9%; Travelers Fund U, One Tower Square, 12 NB-Roger Ferland, Hartford,
Connecticut 06183--22.7% Unum Life Insurance Company VNUM TSA Annuity, 2211
Congress Street, Portland, Maine 04122--13.52%; and Transamerica Occidental
Life Insurance Company Separate Account VA-2L, 1150 South Olive Street, Los
Angeles California 90015--7.14. A shareholder that owns, directly or
indirectly, 25% or more of the Fund's voting securities may be deemed to be
a "control person" (as defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus provides management services pursuant
to the Management Agreement (the "Management Agreement") dated November 13,
1995, with the Fund, which is subject (after May 14, 1997) to annual
approval by (i) the Fund's Board or (ii) vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund, provided
that in either event the continuance also is approved by a majority of the
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or Dreyfus by vote cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement was approved
by shareholders on November 3, 1995 and was last approved by the Fund's
Board, including a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of any party to the Management
Agreement, at a meeting held on August 9, 1995. The Management Agreement
is terminable without penalty, on 60 days' notice, by the Fund's Board or
by vote of the holders of a majority of the Fund's shares, or, upon not
less than 90 days' notice, by Dreyfus. The Management Agreement will
terminate automatically in the event of its assignment (as defined in the
1940 Act).
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; Barbara E. Casey, Vice President-
Dreyfus Retirement Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional Sales;
William F. Glavin, Jr., Vice President-Corporate Development; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Mary Beth Leibig,
Vice President-Human Resources; Jeffrey N. Nachman, Vice President-Mutual
Fund Accounting; Andrew S. Wasser, Vice President-Information Services;
Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
Dreyfus maintains office facilities on behalf of the Fund, and
furnishes the Fund statistical and research data, clerical help,
accounting, data processing, bookkeeping and internal auditing and certain
other required services to the Fund. Dreyfus also may make such
advertising and promotional expenditures, using its own resources, as it
from time to time deems appropriate.
Index Management Agreement. Mellon Equity provides investment
advisory assistance and day-to-day management of the Fund's investments
pursuant to the Index Management Agreement (the "Index Management
Agreement") dated November 13, 1995 between Mellon Equity and Dreyfus. The
Index Management Agreement is subject (after May 14, 1997) to annual
approval by (i) the Fund's Board or (ii) vote of a majority (as defined in
the 1940 Act) of the Fund's outstanding voting securities, provided that in
either event the continuance also is approved by a majority of the Fund's
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or Mellon Equity, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Index Management Agreement
was approved by shareholders on November 3, 1995, and was approved by the
Fund's Board, including a majority of Board members who are not "interested
persons" of any party to the Index Management Agreement, at a meeting held
on August 9, 1995. The Index Management Agreement is terminable without
penalty (i) by Dreyfus on 60 days' notice, (ii) by the Fund's Board or by
vote of the holders of a majority of the Fund's shares on 60 days' notice,
or (iii) by Mellon Equity on not less than 90 days' notice. The Index
Management Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement for any reason.
The following persons are executive officers and/or directors of
Mellon Equity: Phillip R. Roberts, Chairman of the Board; William P.
Rydell, President and Chief Executive Officer; and W. Keith Smith,
Director.
Mellon Equity provides day-to-day management of the Fund's investments
in accordance with the stated policies of the Fund, subject to the
supervision of Dreyfus and approval of the Fund's Board. All purchases and
sales are reported for the Board's review at the meeting subsequent to such
transactions. Mellon Equity has agreed to pay for the custody services
provided to the Fund by Boston Safe Deposit and Trust Company.
Expenses. All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by Dreyfus
and/or Mellon Equity. The expenses borne by the Fund include:
organizational costs, taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
Dreyfus or Mellon Equity or any of their affiliates, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Fund's existence,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of preparing and printing
prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, costs of
shareholder's reports and meetings, and any extraordinary expenses.
As compensation for Dreyfus' services, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .245 of 1% of the value of the
Fund's average daily net assets. As compensation for Mellon Equity's
services, Dreyfus has agreed to pay Mellon Equity a monthly fee at the
annual rate of .095 of 1% of the value of the Fund's average daily net
assets. All fees and expenses are accrued daily and deducted before
declaration of dividends to shareholders. For the period November 13, 1995
(effective date of the Management Agreement and Index Management Agreement)
through December 31, 1995, the Fund paid Dreyfus a management fee of
$94,372 and Dreyfus paid Mellon Equity an index management fee of $36,593.
From April 4, 1990 to November 13, 1995, Wells Fargo Nikko Investment
Advisers ("WFNIA") served as the Fund's index fund manager. Pursuant to
prior index management agreements with WFNIA, the Fund agreed to pay a
monthly fee at the annual rate of .15 of 1% of the value of the Fund's
average daily net assets. For the fiscal years ended December 31, 1993 and
1994 and for the period January 1, 1995 through November 12, 1995
(termination date of the prior index management agreement), the index
management fees payable to WFNIA amounted to $69,306, $116,361 and
$223,935, respectively, which fees were reduced by $62,783, $63,576 and
$28,973, respectively, pursuant to undertakings by WFNIA, resulting in net
fees being paid to WFNIA of $6,523 in fiscal 1993, $52,785 in fiscal 1994
and $194,962 in fiscal 1995.
Prior to November 13, 1995, Dreyfus served as the Fund's administrator
pursuant to an administration agreement with the Fund. As compensation for
its administrative services, the Fund agreed to pay Dreyfus a monthly fee
at the annual rate of .15 of 1% of the value of the Fund's average daily
net assets. For the fiscal years ended December 31, 1993 and 1994 and for
the period January 1, 1995 through November 12, 1995 (termination date of
the prior administration agreement), the administration fees payable to
Dreyfus amounted to $69,306, $116,361 and $223,934 respectively, which
amounts were reduced by $62,783, $63,577 and $28,972, respectively pursuant
to undertakings by Dreyfus, resulting in net fees being paid to Dreyfus of
$6,523 in fiscal 1993, $52,784 in fiscal 1994 and $194,962 in fiscal 1995.
Dreyfus (and to a limited extent, Mellon Equity) have agreed that if
in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to the Management Agreement, but excluding taxes, brokerage,
interest on borrowings and, with the prior written consent of the necessary
state securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may
deduct from the fees to be paid to Dreyfus, and Dreyfus may deduct from the
fees paid to Mellon Equity or Dreyfus and Mellon Equity will bear, such
excess expense in proportion to their management fee and index management
fee, to the extent required by state law. Such deduction or payment, if
any, will be estimated daily and reconciled and effected or paid, as the
case may be, on a monthly basis.
The aggregate fees payable to Dreyfus and Mellon Equity is not subject
to reduction as the value of the Fund's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses with respect to servicing and/or maintaining shareholder
accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board and by the Board
members who are not "interested persons" (as defined in the 1940 Act) of
the Fund and have no direct or indirect financial interest in the operation
of the Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by
such vote of the Board members cast in person at a meeting called for the
purpose of voting on the Plan. The Plan is terminable at any time by vote
of a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan.
For the fiscal year ended December 31, 1995, $9,048 was charged to the
Fund under the Plan.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Redemption Commitment. The Fund has committed to pay in cash all
redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or
part in securities or other assets of the Fund in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable or
(c) for such other periods as the Securities and Exchange Commission by
order may permit to protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. The Fund's portfolio securities
are valued at the last sale price on the securities exchange or national
securities market on which such securities are primarily traded.
Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average
of the most recent bid and asked prices. Bid price is used when no asked
price is available. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined
in good faith by the Fund's Board. Expenses and fees, including the index
management and administration fees (reduced by the expense limitation, if
any), are accrued daily and taken into account for the purpose of
determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Taxation of the Fund. Management of the Fund believes that the Fund
qualified for the fiscal year ended December 31, 1995 as a "regulated
investment company" under the Code. The Fund intends to continue to so
qualify so long as such qualification is in the best interests of its
shareholders. Qualification as a regulated investment company relieves the
Fund from any liability for Federal income taxes to the extent its earnings
are distributed in accordance with the applicable provisions of the Code.
Among the requirements for such qualification is that less than 30% of the
Fund's gross income must be derived from the gain on the sale or other
disposition of securities held for less than three months. The term
"regulated investment company" does not imply the supervision of management
or investment practices or policies by any government agency.
If, however, the Fund does not qualify as a "regulated investment
company," it would be subject to the general rules governing the Federal
income taxation of corporations under the Code. As such, the Fund's
taxable income could be subject to a maximum tax rate of 35% thereby
reducing the amount of cash available for distribution to shareholders.
Moreover, distributions to shareholders would not be deductible in
computing the Fund's taxable income. Shareholders in receipt of
distributions from the Fund would be required to treat such amounts as
ordinary dividend income to the extent attributable to each such
shareholder's share of the Fund's current and accumulated earnings and
profits. Amounts received in excess of the Fund's current and accumulated
earnings and profits would constitute a return of capital to the extent of
the shareholder's basis in Fund shares. Any excess received over basis
would constitute capital gain. Certain corporate shareholders would be
entitled to a dividends received deduction under Section 243 of the Code to
the extent amounts distributed from the Fund constituted ordinary dividend
income.
Section 817(h) of the Code requires that the investments of a
segregated asset account of an insurance company be "adequately
diversified" as provided therein or in accordance with U.S. Treasury
Regulations in order for the account to serve as the basis for VA contracts
or VLI policies. The Fund intends to comply with the applicable
requirements so that the Fund's investments are "adequately diversified"
for this purpose. Upon satisfaction of these requirements, shares of the
Fund owned by a segregated asset account of a Participating Insurance
Company will be treated as multiple investments.
If, however, the Fund were not to satisfy these conditions, a
segregated asset account of a Participating Insurance Company owning
shares of the Fund would be required to treat such shares as a single
investment asset (and, accordingly, would not be able to treat its
proportionate interest in the Fund's assets as being directly owned) for
purposes of determining whether the segregated asset account is
"adequately diversified" within the meaning of Section 817(h) of the Code.
This, in turn, would make it more difficult for any such segregated asset
account to satisfy the diversification standards of the Code. If a
segregated asset account is not adequately diversified, it may not serve as
the basis for VA contracts or VLI policies.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and "straddle" transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury regulations
to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Fund from
certain financial futures transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon the exercise or lapse of such futures as well as from
closing transactions. In addition, any such futures remaining unexercised
at the end of the Fund's taxable year will be treated as sold for their
then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving futures may constitute
"straddles." Straddles are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of straddles is
governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Section 1256. As
such, all or a portion of any short-or long-term capital gain from certain
"straddle" and/or conversion transactions may be recharacterized to
ordinary income.
If a Fund were treated as entering into straddles by reason of its
futures transactions, such straddles could be characterized as "mixed
straddles" if the futures transactions comprising such straddles were
governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." Depending upon which election
is made, if any, the results to the Fund may differ. If no election is
made, to the extent the straddle rules apply to positions established by
the Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in any offsetting positions. Moreover, as a result of the
straddle and the conversion transaction rules, short-term capital loss on
straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain may be recharacterized as short-term capital gain or
ordinary income.
Shareholder Taxation. Since the shareholders of the Fund are the
separate accounts of Participating Insurance Companies, no discussion is
included herein as to the Federal income tax consequences at the level of
the holders of the VA contracts or VLI policies. For information
concerning the Federal income tax consequences to such holders, see the
prospectuses for such VA contracts or VLI policies.
PORTFOLIO TRANSACTIONS
The Advisers assume general supervision over placing orders on behalf
of the Fund for the purchase or sale of portfolio securities. Allocation
of brokerage transactions, including their frequency, is made in the best
judgment of the Advisers and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders at
the most favorable net price. Brokers also are selected because of their
ability to handle special executions such as are involved in large block
trades or broad distributions, provided the primary consideration is met.
Portfolio turnover may vary from year to year, as well as within a year.
High turnover rates are likely to result in comparatively greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is
evaluated by the Advisers based upon their knowledge of available
information as to the general level of commissions paid by other
institutional investors for comparable services.
For its portfolio securities transactions for the fiscal years ended
December 31, 1993, 1994 and 1995, the Fund paid total brokerage commissions
of $66,766, $36,780 and $43,661, respectively, none of which was paid to
the Distributor. No spreads or concessions were paid by the Fund for such
fiscal years.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's average annual total return for the 1, 5 and 6.258 year
periods ended December 31, 1995 was 36.78%, 15.94% and 12.31%,
respectively. Average annual total return is calculated by determining the
ending redeemable value of an investment purchased with a hypothetical
$1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
The Fund's total return for the period September 29, 1989
(commencement of operations) through December 31, 1995 was 106.88%. Total
return is calculated by subtracting the amount of the Fund's net asset
value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and
dividing the result by the net asset value per share at the beginning of
the period.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
Effective May 1, 1994, the Fund, which is incorporated under the name
Dreyfus Life and Annuity Index Fund, Inc., began operating under the name
Dreyfus Stock Index Fund.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT ACCOUNTANTS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Fund, the Transfer Agent arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund and the payment of dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses.
Boston Safe Deposit and Trust Company (the "Custodian"), an indirect
subsidiary of Mellon Bank Corporation, is located at One Boston Place,
Boston, Massachusetts 02108, and serves as the custodian of the Fund.
Under its Custody Agreement with the Fund, the Custodian holds the Fund's
portfolio securities and keeps all necessary accounts and records. The
Custodian's fees for its services to the Fund are paid by Mellon Equity.
Neither the Transfer Agent nor the Custodian has any part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of being sold pursuant to the Fund's Prospectus.
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New
York 10019-6013, independent accountants, have been selected as auditors of
the Fund.
APPENDIX
Description of S&P A-1 Commercial Paper Ratings:
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the number 1, 2 or 3 to
indicate the relative degree of safety. Paper rated A-1 indicates that the
degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
Description of Moody's Prime-1 Commercial Paper Ratings:
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
