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PROSPECTUS MARCH 1, 1997
DREYFUS S&P 500 INDEX FUND
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DREYFUS S&P 500 INDEX FUND (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS AN INDEX FUND. 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, A DIVISION OF THE MCGRAW-HILL COMPANIES,
INC.
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 REFERRED
TO COLLECTIVELY AS THE "ADVISERS."
IN SOME CASES, SHAREHOLDERS WHO REDEEM SHARES WITHIN SIX MONTHS OF
THE OPENING OF THEIR ACCOUNT WILL BE CHARGED A 1% REDEMPTION FEE WHICH WILL
BE DEDUCTED FROM REDEMPTION PROCEEDS.
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 MARCH 1, 1997, 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. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, 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.
TABLE OF CONTENTS
PAGE
FEE TABLE......................................... 3
CONDENSED FINANCIAL INFORMATION................... 4
DESCRIPTION OF THE FUND........................... 4
MANAGEMENT OF THE FUND............................ 6
HOW TO BUY SHARES................................. 8
HOW TO REDEEM SHARES.............................. 10
SHAREHOLDER SERVICES.............................. 12
SHAREHOLDER SERVICES PLAN......................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 13
PERFORMANCE INFORMATION........................... 14
GENERAL INFORMATION............................... 15
APPENDIX.......................................... 17
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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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PAGE 2
<TABLE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Redemption Fees (as percentage of amount redeemed)........................................ 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after fee waiver)........................................................ .23%
Other Expenses............................................................................ .27%
Total Fund Operating Expenses (after fee waiver).......................................... .50%
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $5 $16 $28 $63
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSESMAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER,WHILE THE EXAMPLES ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in
understanding the costs and expenses borne by the Fund and investors, the
payment of which will reduce investors' annual return. The redemption fee is
charged upon certain redemptions of Fund shares occurring within six months
of the opening of an account and is retained by the Fund. Annual Fund
Operating Expenses noted above have been restated to reflect an undertaking
by Dreyfus that, until at least the fiscal year ending October 31, 1998, if
Fund expenses, including the management fee, exceed .50 of 1% of the value of
the Fund's average net assets for the fiscal year, the Fund may deduct from
the management fee payable to Dreyfus to the extent of such excess. The
expenses noted above, without reimbursement, would be: Management Fees --
.30% and Total Fund Operating Expenses -- .57%. Certain Service Agents (as
defined below) may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Shares," How to Redeem
Shares" and "Shareholder Services Plan."
PAGE 3
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
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 year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year......... $12.50 $10.86 $14.16 $15.16 $16.88 $16.41 $18.38
------- ------- ------- ------- ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net .................... .17 .34 .41 .30 .39 .36 .33
Net realized and unrealized gain (loss) on investments (1.81) 3.18 .97 1.86 .11 3.36 3.89
------- ------- ------- ------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS......... (1.64) 3.52 1.38 2.16 .50 3.72 (4.22)
------- ------- ------- ------- ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income--net...... .-- (.22) (.38) (.40) (.31) (.42) (.32)
Dividends from net realized gain on investments -- -- -- (.04) (.66) (1.33) (.22)
------- ------- ------- ------- ------ ------ ------
TOTAL DISTRIBUTIONS...................... .-- (.22) (.38) (.44) (.97) (1.75) (.54)
------- ------- ------- ------- ----- ------ ------
Net asset value, end of year............... $10.86 $14.16 $15.16 $16.88 $16.41 $18.38 $22.06
========= ======= ======= ======= ======= ====== ======
TOTAL INVESTMENT RETURN........................ (13.12%)(2) 32.85% 9.90% 14.49% 3.14% 25.68% 23.41%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... .-- .-- .-- .39% .61% .55% .57%
Ratio of net investment income to average net assets 3.46%(2) 3.45% 3.04% 2.36% 2.26% 2.75% 1.90%
Decrease reflected in above expense ratios
.due to undertakings 1.42%(2) .78% .65% .14% .03% -- --
Decrease reflected in above expense ratios due to
redemption fee .08%(2) .10% -- . -- .-- . -- --
Portfolio Turnover Rate.................... 1.21%(2) .69% 3.10% 3.77% 18.81% 3.66% 5.22%
Average Commission Rate Paid(3)............ -- -- -- -- -- -- $.0297
Net Assets, end of year (000's omitted).... $29,266 $69,211 $92,598 $281,403 $245,202 .$336,147 $591,631
___________________
(1) From January 2, 1990 (commencement of operations) to October 31, 1990.
(2) Not annualized.
(3) For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate to be paid per Share for purchases
and sales of investment securities.
</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
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, a divi-
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*"Standard & Poor's 500," "S&PRegistration Mark" and "S&P 500Registration
Mark" are trademarks of Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., and have been licensed for use by the Fund. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's.
PAGE 4
sion of The McGraw-Hill Companies, Inc. ("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
November 29, 1996, 46.3% of the Index was composed of the 50 largest
companies. Mellon Equity will 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 dividend 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.
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.
PAGE 5
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 and adoption of governmental restrictio
ns which might adversely affect an investment in these securities.
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, index or interest rate. 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 changes
in the 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 and 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.
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 January 31, 1997,
Dreyfus
PAGE 6
managed or administered approximately $85 billion in assets for approximately
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, 1996, Mellon Equity and its employees managed approximately
$11.3 billion in assets and served as the investment adviser of 14 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, 1996, including approximately $86 billion in
proprietary mutual fund assets. As of December 31, 1996, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1,046 billion in assets, including
approximately $57 billion in mutual fund assets.
Pursuant to the terms of the Management Agreement, as amended January
1, 1997, the Fund has agreed to pay Dreyfus a monthly fee at the annual rate
of .25 of 1% of the value of the Fund's average daily net assets. Under the
Index Management Agreement, as amended January 1, 1997, Dreyfus has agreed to
pay Mellon Equity a monthly fee at the annual rate of .05 of 1% of the value
of the Fund's average daily net assets until such assets exceed $1 billion
and .075 of 1% of the value of such assets at any time thereafter. Mellon
Equity has agreed to pay for the provision of custody services to the Fund by
Boston Safe Deposit and Trust Company. For the period prior to January 1,
1997, including for the fiscal year ended October 31, 1996, the Fund paid
Dreyfus a monthly management fee at the annual rate of .295 of 1% of the
value of the Fund's average daily net assets, and Dreyfus paid Mellon Equity
a monthly index management fee at the annual rate of .095 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. 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 expense
ratio of the Fund and increasing yield to investors. The Fund will not pay
Dreyfus at a later time for any amounts it may waive, nor will the Fund reimbu
rse Dreyfus for any amounts it may assume.
Dreyfus has agreed, effective November 1, 1996, that, until at least
the fiscal year ending October 31, 1998, if the Fund's aggregate expenses
(exclusive of taxes, brokerage, interest on borrowings, and extraordinary
expenses), including the management fee, exceed .50 of 1% of the value of the
Fund's
PAGE 7
average net assets for the fiscal year, the Fund may deduct from the
management fee payable to Dreyfus to the extent of such excess.
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 managed, advised or administered 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 or all
of such payments to pay Service Agents in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AGENT 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 02109, is the custodian of the Fund's investments.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
fee if you effect transactions in Fund shares through a securities dealer,
bank or other financial institution (collectively, "Service Agents"). Stock
certificates are issued only upon your written request. No certificates are
issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and
has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. The initial investment must be
accompanied by the Account Application. For full-time or part-time employees
of Dreyfus or any of its affiliates or subsidiaries, directors of Dreyfus,
Board members of a fund advised by Dreyfus, members of the Fund's Board, or
the spouse or minor child of any of the foregoing, the minimum initial
investment is $1,000. For full-time or part-time employees of Dreyfus or any
of its affiliates or subsidiaries who elect to have a portion of their pay
directly deposited into their Fund account, the minimum initial investment
is $50. The Fund reserves the right to offer Fund shares without regard to
minimum purchase requirements to employees participating in certain qualified
or non-qualified employee benefit plans or other programs where contributions
or account information can be transmitted in a manner and form acceptable to
the Fund. The Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
You may purchase Fund shares by check or wire. Checks should be
made payable to "The Dreyfus Family of Funds" or, if for Dreyfus retirement
plan accounts, to "The Dreyfus Trust Company, Custodian." Payments which are
mailed should be sent to Dreyfus S&P 500 Index Fund, P.O. Box 6647,
Providence, Rhode Island 02940-6647. If you are opening a new account, please
enclose your Account Application. For subsequent investments, your Fund
account number should appear on the check and an investment slip should be
enclosed. For Dreyfus retirement plan accounts, payments which are mailed
should be sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island
PAGE 8
02940-6427. Neither initial nor subsequent investments should be made by third
party check. Purchase orders may be delivered in person only to a Dreyfus
Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE
PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest Dreyfus
Financial Center, please call one of the telephone numbers listed under
"General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900119527/Dreyfus S&P 500
Index Fund, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase instruct
ions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Management understands that some Service Agents and other
institutions may charge their clients fees in connection with purchases for
the accounts of their clients. These fees would be in addition to any amounts
which might be received under the Shareholder Services Plan. Investors should
consult their Service Agents in this regard.
Fund shares are sold on a continuous basis at the net asset value
per share next determined after your order is received by the Transfer Agent
or other agent. If an order is received in proper form by the Transfer 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 given day, Fund shares will be
purchased at the net asset value determined as of such close of trading on
that day. 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. To permit the Fund to invest your money as
promptly as possible after receipt, thereby maximizing the Fund's ability to
track the Index, you are urged to transmit your purchase order in proper form
so that it may be received by the Transfer Agent prior to 12:00 noon, New
York time, on the day you want your purchase order to be effective.Upon
request, proceeds from the redemption of shares of other funds in the Dreyfus
Family of Funds by an employee benefit plan will be applied to purchase Fund
shares on the date of redemption, if the plan's recordkeeper has entered into
an appropriate agency agreement with the Fund and such other funds.
The Fund's 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 per share, 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
outstand-
PAGE 9
ing. 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 Fund investments, see
"Determination of Net Asset Value" in the Statement of Additional
Information.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by Eligible
Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value. To maximize the Fund's ability to track the
Index, you are urged to transmit your redemption requests so that they may be
received by the Transfer Agent prior to 12:00 noon, New York time, on the day
you want your redemption request to be effective.
The Fund will deduct a redemption fee equal to 1% of the net asset
value of Fund shares redeemed where the redemption occurs within the initial
six-month period following the opening of a Fund account. The fee will be
retained by the Fund and used primarily to offset portfolio transaction
costs. It is expected that, as a result of this fee, the Fund will be able to
track the Index more closely. No redemption fee will be charged upon the
redemption of shares purchased through accounts that are reflected on the
records of the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation or through accounts established by Service Agents approved by
Dreyfus Service Corporation that utilize the National Securities Clearing
Corporation's networking system. The redemption fee may be waived, modified
or discontinued and reintroduced at any time or from time to time. Service
Agents may charge their clients a fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. 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.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request
in accordance with the procedures described below, except as provided by the
rules of the Securities and Exchange Commission. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK OR THROUGH DREYFUS-AUTOMATIC ASSET
BUILDERRegistration Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST
TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU
PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS
PAGE 10
- -AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER
AGENT OF THE PURCHASE CHECK OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY
IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS
OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option
upon not less than 45 days' written notice if your account's net asset value
is $500 or less and remains so during the notice period.
PROCEDURES
You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege or the Telephone Redemption Privilege. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. The Fund reserves the
right to refuse any request made by wire or telephone, including requests
made shortly after a change of address, and may limit the amount involved or
the number of such requests. The Fund may modify or terminate any redemption
Privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans, and shares for which the certificates have been
issued, are not eligible for the Wire Redemption or Telephone Redemption
Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege, you authorize the Transfer Agent to act on telephone instructions
from any person representing himself or herself to be you, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the
Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption of Fund shares. In such cases, you should consider using
the other redemption procedures described herein. Use of these other
redemption procedures may result in your redemption request being processed
at a later time than it would have been if telephone redemption had been
used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
6647, Providence, Rhode Island 02940-6647, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests
PAGE 11
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program,
the Securities Transfer Agents Medallion Program ("STAMP") and the Stock
Exchanges Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone numbers listed under
"General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
Your written redemption request may direct that the redemption
proceeds be used to purchase shares of other funds advised or administered by
Dreyfus. The 1% redemption fee, described above, if applicable, may be
charged upon such redemption (depending upon how long your Fund account has
been open or the type of account from which shares are being redeemed) and
your redemption proceeds will be invested in shares of the other fund on the
next business day. Before you make such a request, you must obtain and should
review a copy of the current prospectus of the fund being purchased. Upon
request, proceeds from the redemption of shares of the Fund by an employee
benefit plan will applied to purchase shares of other funds in the Dreyfus
Family of Funds on the date of redemption, if the plan's recordkeeper has
entered into an appropriate agency agreement with the Fund and such other
funds. Prospectuses may be obtained by calling 1-800-645-6561. The prospectus
will contain information concerning minimum investment requirements and other
conditions that may apply to your purchase. No other fees currently are
charged shareholders directly in connection with this procedure, although the
Fund reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. This procedure may be modified or
terminated at any time upon not less than 60 days' notice to shareholders.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days.
PAGE 12
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. This Privilege may
provide you with a convenient way to invest for long-term financial goals. You
should be aware, however, that periodic investment plans do not guarantee a
profit and will not protect an investor against loss in a declining market.
To establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to Dreyfus S&P 500 Index Fund, P.O. Box 6647,
Providence, Rhode Island 02940-6647, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
RETIREMENT PLANS -- The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; or for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund pays the Distributor for the provision of certain services a fee at
the annual rate of .25 of 1% of the value of the Fund's average daily net
assets. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services related to the
maintenance of shareholder accounts. Under the Shareholder Services Plan, the
Distributor may make payments to Service Agents in respect of these services.
The Distributor determines the amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from net investment income and
distributes 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 automatically reinvest dividends and distributions from securities
gains, if any, in additional Fund shares at net asset value or, at your
option, pay them in cash. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest them in additional Fund shares at net asset value. If
applicable, the 1% redemption fee, described under "How to Redeem Shares,"
will be charged upon certain redemptions of shares received through the
automatic reinvestment of dividends or distributions. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends paid by the Fund derived from net investment income and
distributions from net realized short-term securities gains of the Fund will
be taxable to U.S. shareholders as ordinary income whether received in cash
or reinvested in Fund shares. Depending on the composition of the Fund's
income, a portion of the dividends from net investment income may qualify for
the dividends received deduction allowable to certain corporate shareholders.
Distributions from net realized long-term securities gains of
PAGE 13
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 Fund shares. The Code provides that the net long-term capital
gain of an individual generally will not be subject to Federal income tax at
a rate in excess of 28%. Dividends and distributions may be subject to state
and local taxes.
Dividends derived from net investment income and distributions from
net realized short-term securities gains paid by the Fund to a foreign
investor generally are subject to U.S. nonresident withholding taxes at the
rate of 30%, unless the foreign investor claims the benefit of a lower rate
specified in a tax treaty. Distributions from net realized long-term
securities gains paid by the Fund to a foreign investor as well as the
proceeds of any redemptions from a foreign investor's account, regardless of
the extent to which gain or loss may be realized, generally will not be
subject to U.S. nonresident withholding tax. However, such distributions may
be subject to backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and distributions is
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax withheld as
a result of backup withholding does not constitute an additional tax imposed
on the record owner of the account, and may be claimed as a credit on the
record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended October 31, 1996 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interest of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. 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.
You should consult your tax adviser 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 com-
PAGE 14
pounded 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.
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), 1982, updated annually in the SBBI YEARBOOK, Ibbotson Associates,
Chicago. The Fund also may cite in its advertisements 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 October 6, 1989,
and commenced operations on January 2, 1990. On November 13, 1995, the Fund,
which is incorporated under the name Peoples Index Fund, Inc., began
operating under the name Dreyfus S&P 500 Index Fund. The Fund is authorized
to issue 200 million shares of Common Stock, par value $.001 per share. Each
share has one vote.
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 accountants. 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 your ownership and sends
you confirmation statements of account.
Shareholder inquiries may be made by writing to the Fund at l44
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free l-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S.
Canada, call 516-794-5452.
PAGE 15
The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("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 16
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 15% 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. While borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments.
USE OF DERIVATIVES -- 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 amount of initial margin deposits with respect to
such contracts, 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 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.
PAGE 17
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PAGE 18
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PAGE 19
Dreyfus
S&P 500
Index Fund
Prospectus
Registration Mark
Copy Rights 1997 Dreyfus Service Corporation 078p030197
DREYFUS S&P 500 INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus S&P 500 Index Fund (the "Fund"), dated March 1, 1997, 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. and Canada -- Call 516-794-5452
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 referred
to collectively as the "Advisers."
Premier Mutual Fund Services, Inc. (the "Distributor") is 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-10
Shareholder Services Plan....................................B-13
Purchase of Shares...........................................B-14
Redemption of Shares.........................................B-14
Shareholder Services.........................................B-16
Determination of Net Asset Value.............................B-17
Dividends, Distributions and Taxes...........................B-17
Portfolio Transactions.......................................B-18
Performance Information......................................B-19
Information About the Fund...................................B-20
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Accountants........................B-20
Appendix.....................................................B-21
Financial Statements.........................................B-22
Report of Independent Accountants............................B-35
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 $1 billion, 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
("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.
In addition, 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 seller to deliver
(and the purchaser to take) and amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at
the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks in the
index is made. 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 permissible liquid assets 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 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. The Fund may not:
1. 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.
2. Invest in commodities, except that the Fund may invest in futures
contracts as described in the Prospectus and Statement of Additional
Information.
3. 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.
4. Borrow money, except from banks (which, if permitted by applicable
regulatory authority, may be from Mellon Bank, N.A. or Boston Safe Deposit
and Trust Company, affiliates of the Advisers) for temporary or emergency
(not leveraging) purposes in an amount up to 15% of the value of the Fund's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of the Fund's
total assets, the Fund will not make any additional investments.
Transactions in futures and options do not involve any borrowing for purposes
of this restriction.
5. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 15% of the value of its total assets, but only to
secure borrowings for temporary or emergency purposes. 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 Directors.
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.
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 Standard
& Poor's 500 Composite Stock Price 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, though not fundamental policies, the Fund may not
(i) engage in arbitrage transactions, (ii) purchase warrants (excluding 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 (a transaction in which the Fund enters into a short sale of a security
which the Fund owns) or (iv) 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.
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. He is
also Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway Company, Inc., a
manufacturer and marketer of industrial threads, specialty yarns, home
furnishings and fabrics, Curtis Industries, Inc., a national distributor
of security products, chemicals and automotive and other hardware, and
Staffing Resources, Inc. For more than five years prior to January
1995, 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 1994
until December 31, 1994, he was a director of Mellon Bank Corporation.
He is 53 years old and his address is 200 Park Avenue, New York, New
York 10016.
*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 57 years old and his
address is One Oak Way, Berkeley Heights, New Jersey 07922.
JOHN M. FRASER, JR., Board Member. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other events.
From September 1975 to June 1978, he was Executive Vice President of
Flagship Cruises, Ltd. Prior thereto, he was Senior Vice President and
Resident Director of the Swedish-American Line for the United States and
Canada. He is 74 years old and his address is 133 East 64th Street, New
York, New York 10021.
EHUD HOUMINER, Board Member. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia
University. Since January 1996, principal of Lear, Yavitz and
Associates, a management consulting firm. He was President and Chief
Executive Officer of Philip Morris USA, manufacturers of consumer
products, from December 1988 to September 1990. He also is a Director
of Avnet Inc. He is 55 years old and his address is c/o Columbia
Business School, Columbia University, Uris Hall, Room 526, New York, New
York 10027.
DAVID J. MAHONEY, Board Member. President of David Mahoney Ventures since
1983. From 1968 to 1983, he was Chairman and Chief Executive Officer of
Norton Simon Inc., a producer of consumer products and services. Mr.
Mahoney is also a director of National Health Laboratories Inc.,
Bionaire Inc. and Good Samaritan Health Systems, Inc. He is 72 years
old and his address is 745 Fifth Avenue, Suite 700, New York, New York
10151.
GLORIA MESSINGER, Board Member. From 1981 to 1993, Managing Director and
Chief Executive Officer of ASCAP (American Society of Composers, Authors
and Publishers). She is a member of the Board of Directors of the Yale
Law School Fund and Theater for a New Audience, Inc., and was secretary
of the ASCAP Foundation and served as a Trustee of the Copyright Society
of the United States. She is also a member of numerous professional and
civic organizations. She is 66 years old and her address is 747 Third
Avenue, 11th Floor, New York, New York 10017.
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 51 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 71 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, The New England Electric
System, and 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 members by the Fund for the fiscal year ended
October 31, 1996, 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, 1996, were as follows:
Total Compensation
Aggregate From Fund and
Name of Board Compensation From Fund Complex
Member Fund* Paid to Board Member
Joseph S. DiMartino $6,250 $517,075 (94)
David P. Feldman $5,000 $122,257 (27)
John M. Fraser, Jr. $1,171 $ 73,563 (12)
Ehud Houminer $ 671 $ 48,769 (12)
David J. Mahoney $ 671 $ 40,312 (14)
Gloria Messinger $1,171 $ 11,444 (4)
Jack R. Meyer $4,500 $ 18,868 (4)
John Szarkowski $5,000 $ 21,377 (4)
Anne Wexler $4,500 $ 62,034 (16)
____________________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $1,339 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, 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 39 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 32 years old.
ELIZABETH A. 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 27 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by
Dreyfus. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank and Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston Company,
Inc. He is 27 years old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by Dreyfus. From March 1994 to November 1995,
he was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, he was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company, Inc.
He is 40 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by Dreyfus. Prior to August 1993, he was employed as an
Associate Examiner at the National Association of Securities Dealers,
Inc. He is 27 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by Dreyfus. From September 1989 to July 1994, she was an
Assistant Vice President and Client Manager for The Boston Company, Inc.
She is 32 years old.
JOSEPH F. TOWER, III, Vice President and 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 34 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an officer
of other investment companies advised or administered by Dreyfus. From
December 1989 through November 1996, he was employed with GE Investments
where he held various financial, business development and compliance
positions. He is 35 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares of Common Stock outstanding on December 22, 1996.
The following persons are known by the Fund to own of record 5% or more
of the Fund's voting securities outstanding on December 22, 1996: The
Dreyfus Trust Company, as Trustee for FDC Incentive Savings Plan, 1 Cabot
Road #028-0031, Medford, Massachusetts 02155-5141--11.8%; Charles Schwab &
Company, Inc., 101 Montgomery Street, Los Angeles, California 94104--15.4%;
Nationwide Qualified Plans, P.O. Box 182029, Columbus, Ohio 43218-2029--
17.7%.
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, amended as of January 1, 1997, 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 at a meeting held 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 November 6, 1996. 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: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, 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; William T. Sandalls, Jr., Senior
Vice President and Chief Financial Officer; William F. Glavin, Jr., Vice
President-Corporate Development; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Jeffrey N.
Nachman, Vice President-Mutual Fund Accounting; Andrew S. Wasser, Vice
President-Information Systems; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet, 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, amended as of January 1, 1997 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 November 6, 1996. 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 .25 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 .05 of 1% of the value of the Fund's average daily net assets until
such assets exceed $1 billion and .075 of 1% of the value of such assets at
any time thereafter. Prior to January 1, 1997, the Fund had agreed to pay
Dreyfus a monthly management fee at the annual rate of .295 of 1% of the
value of the Fund's average daily net assets, and Dreyfus had agreed to pay
Mellon Equity a monthly index management 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 from November 13, 1995 (effective date of
Management Agreement) through October 31, 1996, the management fee paid to
Dreyfus amounted to $1,329,105 for such period. For the period from November
13, 1995 (effective date of Index Management Agreement) through October 31,
1996, the index management fee paid to Mellon Equity by Dreyfus amounted to
$428,017 for such period.
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 .10 of 1% of the value of the Fund's
average daily net assets. For the fiscal years ended October 31, 1994 and
1995 and for the period November 1, 1995 through November 13, 1995
(termination date of the prior index management agreement), the index
management fees payable to WFNIA amounted to $274,298, $280,472 and $11,274,
respectively. The index management fee was reduced by $30,232 in the fiscal
year ended October 31, 1994, pursuant to an undertaking by WFNIA resulting in
a net fee paid to WNFIA of $244,066 for the 1994 fiscal year.
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 .20 of 1% of the value of the Fund's average daily net
assets. For the fiscal years ended October 31, 1994 and 1995 and for the
period November 1, 1995 through November 13, 1995 (termination date of the
administration agreement), the administrative fees payable to Dreyfus
amounted to $548,596, $560,944 and $22,547, respectively. The administration
fee was reduced by $60,463 in the fiscal year ended October 31, 1994,
pursuant to an undertaking by Dreyfus, resulting in a net administrative fee
paid to Dreyfus of $488,133 for the 1994 fiscal year.
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.
In addition, Dreyfus has agreed, effective November 1, 1996, that, until
at least the fiscal year ending October 31, 1998, if the Fund's aggregate
expenses (exclusive of taxes, brokerage, interest on borrowings, and
extraordinary expenses), including the management fee, exceed .50 of 1% of
the value of the Fund's average daily net assets for the fiscal year, the
Fund may deduct from the management fee payable to Dreyfus to the extent of
such excess.
The aggregate of the fees payable to Dreyfus 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 pays the Distributor for the provision of certain services
to Fund shareholders. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of such shareholder accounts. Under the
Shareholder Services Plan, the Distributor may make payments to certain
securities dealers, financial institutions and other financial industry
professionals (collectively, "Service Agents"), in respect of these services.
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 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 was last so approved at a meeting held on November 6,
1996. 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 or in any agreements entered into in connection with the Plan.
For the fiscal year ended October 31, 1996, $851,214 was charged to the
Fund under the prior Shareholder Services Plan (the "Prior Plan") which was
terminated as of December 31, 1996. Pursuant to the Prior Plan, the Fund
reimbursed Dreyfus Service Corporation for certain allocated expenses of
providing personal services relating to shareholder accounts.
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 effort 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. In some states,
certain financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
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."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes Dreyfus Transfer, Inc. (the "Transfer Agent"), the Fund's transfer
and dividend disbursing agent, to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds ($1,000
minimum) will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or
Shareholder Services Form, or to a correspondent bank if the investor's bank
is not a member of the Federal Reserve System. Fees ordinarily are imposed
by such bank and borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder
of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
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 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.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Corporate Pension, Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and profit-
sharing plans including a 401(k) Salary Reduction Plan. In addition,
the Fund makes available Keogh Plans, IRAs, including IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available. Investors
can obtain details on the various plans by calling the following numbers toll
free: for Keogh Plans, please call 1-800-358-5566; for IRAs and IRA "Rollover
Accounts," please call 1-800-645-6561; or for SEP-IRAs, 401(k) Salary
Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
A fee may be charged by the entity acting as custodian for Keogh Plans,
403(b)(7) Plans or IRAs, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity which acts as custodian. Purchases for these plans
may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans, and SEP-IRAs, with more than one participant, is
$2,500, with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans, with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum investment of $250.
The investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details as to
eligibility, service fees and tax implications, and should consult a tax
adviser.
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 management fee
(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 October 31, 1996 as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. 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 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 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 conversion transactions may be recharacterized to
ordinary income. If the 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 and conversion transactions 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 rules, short-term capital loss on
straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain on straddle positions may be recharacterized as
short-term capital gain or ordinary income.
Shareholder Taxation. Depending on the composition of the Fund's
income, all or a portion of the dividends paid by the Fund from net
investment income may qualify for the dividends received deduction allowable
to certain U.S. corporate shareholders ("dividends received deduction"). In
general, dividend income of the Fund distributed to qualifying corporate
shareholders will be eligible for the dividends received deduction only to
the extent that (i) the Fund's income consists of dividends paid by U.S.
corporations and (ii) the Fund would have been entitled to the dividends
received deduction with respect to such dividend income if the Fund were not
a regulated investment company. The dividends received deduction for
qualifying corporate shareholders may be further reduced if the shares of the
Fund held by them with respect to which dividends are received are treated as
debt-financed or deemed to have been held for less than 46 days. In
addition, the Code provides other limitations with respect to the ability of
a qualifying corporate shareholder to claim the dividends received deduction
in connection with holding Fund shares.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the
cost of his investment. Such a distribution would be a return on the
investment in an economic sense although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of the Fund
for six months or less and has received a capital gain distribution with
respect to such shares, any loss incurred on the sale of such shares will be
treated as a long-term capital loss to the extent of the capital gain
distribution received.
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 will be 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
October 31, 1994, 1995 and 1996, the Fund paid total brokerage commissions of
$111,012, $22,591 and $67,672, respectively, none of which was paid to the
Distributor. There were no spreads or concessions on principal transactions
in fiscal 1994, 1995 and 1996.
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 6.83 year
periods ended October 31, 1996 was 23.41%, 15.02% and 13.13%, 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 January 2, 1990 (commencement of
operations) to October 31, 1996 was 132.29%. 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.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index"), Lipper Analytical Services,
Inc., the Dow Jones Industrial Average and other industry publications. Past
performance of the S&P 500 Index is no guarantee of future success of the
Fund. The Fund's share price and yield fluctuate, and its investment return
will reflect applicable expenses. The Fund may cite in its advertisements or
reports or other communications to shareholders, historical performance of
unmanaged indexes as reported in Ibbotson, Roger G. and Rex A. Sinquefield,
Stocks, Bonds, Bills and Inflation (SBBI), 1982 updated annually in the SBBI
Yearbook, Ibbotson Associates, Chicago. The Fund also may cite in its
advertisements to the aggregate amount of assets committed to index investing
by pension funds and/or other institutional investors.
The S&P 500 Index and the Standard & Poor's MidCap 400 Index together
represent approximately 77% of the total market capitalization of stocks
traded in the United States. From time to time, advertising materials for
the Fund may refer to Morningstar ratings and related analysis supporting
such ratings.
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.
On November 13, 1995, the Fund, which is incorporated under the name
Peoples Index Fund, Inc., began operating under the name Dreyfus S&P 500
Index Fund.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
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. For the period December 1, 1995 (effective date of transfer
agency agreement) through October 31, 1996, the Fund paid the Transfer Agent
$70,303.
Boston Safe Deposit and Trust Company (the "Custodian"), an indirect
wholly-owned subsidiary of Mellon Bank Corporation, One Boston Place, Boston,
Massachusetts 02108, acts as the custodian of the Fund's investments. Under
a 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, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares 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.
