February 28, 1995
PEOPLES S&P MIDCAP INDEX FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 28, 1995
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION OF THE FUND'S PROSPECTUS ENTITLED "MANAGEMENT OF THE FUND _
INDEX FUND MANAGER."
A special meeting of the Fund's shareholders to consider the new Index
Management Agreement between the Fund and World Asset Management is currently
scheduled to be held on March 31, 1995. A proxy statement in connection
therewith was mailed to Fund shareholders of record as of February 1, 1995.
If the new Index Management Agreement is not approved by shareholders at
the meeting, the Fund's Board of Directors would consider what action would
be appropriate to take in the best interests of the Fund's shareholders.
113/s022895
FOR USE BY BANKS ONLY
February 28, 1995
PEOPLES S&P MIDCAP INDEX FUND, INC.
Supplement to Prospectus Dated February 28, 1995
All mutual fund shares involve certain investment risks, including
the possible loss of principal.
113/s022895IST
- -------------------------------------------------------------------------------
PROSPECTUS FEBRUARY 28, 1995
PEOPLES S&P MIDCAP INDEX FUND, INC.
- -------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC. (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS AN INDEX FUND. ITS
GOAL IS TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND TO THE PRICE AND YIELD
PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS OF MEDIUM-SIZE DOMESTIC
COMPANIES IN THE AGGREGATE, AS REPRESENTED BY THE STANDARD & POOR'S MIDCAP
400 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 CORPORATION.
WORLD ASSET MANAGEMENT ("WORLD") SERVES AS THE FUND'S INDEX FUND
MANAGER.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S
ADMINISTRATOR.
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. HOWEVER, THE REDEMPTION FEE WILL NOT BE APPLICABLE TO
SHARES HELD IN OMNIBUS ACCOUNTS.
-------------
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 FEBRUARY 28, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO
THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR
CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
-------------
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................... 3
DESCRIPTION OF THE FUND........................... 4
MANAGEMENT OF THE FUND............................ 7
HOW TO BUY FUND SHARES............................ 8
HOW TO REDEEM FUND SHARES......................... 10
SHAREHOLDER SERVICES.............................. 12
SHAREHOLDER SERVICES PLAN......................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 13
PERFORMANCE INFORMATION........................... 14
GENERAL INFORMATION............................... 15
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
[This Page Intentionally Left Blank]
(Page 2)
<TABLE>
<CAPTION>
Fee Table
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Redemption Fees (as a percentage of amount redeemed)......................................... 1.00%
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Management Fee .............................................................................. .10%
Other Expenses............................................................................... .73%
Total Fund Operating Expenses................................................................ .83%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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: $8 $26 $46 $103
</TABLE>
- -------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY
AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. The information in the foregoing table does not reflect any
fee waivers or expense reimbursement arrangements that may be in effect. You
can purchase Fund shares without charge directly from the Fund's distributor;
you may be charged a nominal fee if you effect transactions in Fund shares
through a securities dealer, bank or other financial institution. See
"Management of the Fund" and "Shareholder Services Plan."
Condensed Financial Information
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Fund's 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>
<CAPTION>
Year Ended October 31,
---------------------------------------------
PER SHARE DATA: 1991(1) 1992 1993 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of year............................. $12.50 $13.69 $15.02 $17.63
------ ------ ------ ------
Investment Operations:
Investment income_net.......................................... .11 .17 .30 .26
Net realized and unrealized gain on investments................ 1.08 1.29 2.83 .08
------ ------ ------ ------
Total from Investment Operations............................. 1.19 1.46 3.13 .34
------ ------ ------ ------
Distributions:
Dividends from investment income_net........................... -- (.08) (.27) (.27)
Dividends from net realized gain on investments................ -- (.05) (.25) (.56)
------ ------ ------ ------
TOTAL DISTRIBUTIONS.......................................... -- (.13) (.52) (.83)
------ ------ ------ ------
Net asset value, end of year................................... $13.69 $15.02 $17.63 $17.14
====== ====== ====== ======
TOTAL INVESTMENT RETURN............................................ 9.52%(2) 10.69% 21.22% 1.89%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........................ -- -- .09% .40%
Ratio of net investment income to average net assets........... .87%(2) 2.22% 1.97% 1.68%
Decrease reflected in above expense ratios due to undertakings
by World and Dreyfus ........................................ 1.19%(2) 1.17% .77% .43%
Portfolio Turnover Rate........................................ 2.18%(2) 16.31% 16.80% 19.81%
Net Assets, end of year (000's omitted)........................ $5,436 $45,989 $65,690 $75,404
</TABLE>
- -----------------
(1) From June 19, 1991 (commencement of operations) to October 31, 1991.
(2) Not annualized.
#
(Page 3)
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 of medium-size domestic companies in the
aggregate, as represented by the Standard & Poor's MidCap 400 Index* (the
"Index"). The Fund's investment objective cannot be changed without approval
by the holders of a majority (as defined in the Investment Company Act of
1940) 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 400 selected common stocks of medium-size
domestic companies, which may include some Canadian issuers, with market
capitalizations ranging generally between $56 million and $9.6 billion. The
median market capitalization of the stocks in the Index is approximately $1.1
billion. Standard & Poor's Corporation ("S&P") chooses the stocks to be
included in the Index on the basis of market size, liquidity and industry grou
p representation. 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. An investment in the Fund involves risks
similar to those of investing in common stocks.
The weightings of stocks in the Index are based on each stock's
relative total market capitalization; that is, its market price per share
times the number of shares outstanding. Because of this weighting, as of
December 15, 1994, 34.2% of the Index was composed of the 50 largest
companies. The Index is comprised of the following broad sectors in
approximate proportions: Industrials _ 59.3%; Utilities _ 16.9%; Financial _
16.6%; and Transportation and Services _ 7.2%. Of the companies,
approximately 69% are listed on the New York Stock Exchange, 28% are quoted
on the National Association of Securities Dealers Automated Quotation System
and 3% are listed on the American Stock Exchange. World 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 will be approximately the same as the percentage it
represents in the Index. Since some of the stocks that comprise the Index may
be thinly traded, comparatively small investments could cause relatively
volatile price fluctuations.
No attempt is made to manage the Fund's portfolio in the
traditional sense using economic, financial and market analysis. The Fund is
managed using a computer program to determine which securities 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.
The Fund believes that the indexing approach described above is an
effective method of substantially duplicating percentage changes in the
Index. It is a reasonable expectation that there will be a close correlation
between the Fund's performance and that of the Index in both rising and
falling markets. The Fund will attempt to achieve a correlation between the
performance of its portfolio and that of the Index of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Fund's net asset value,
including the value of its dividends and capital gains distributions,
increases or decreases in exact proportion to changes in the Index. The
Fund's ability to correlate its performance with the Index, however, may be
affected by, among other things,
- ---------------------
*"S&PRegistration Mark" and "Standard & Poor's MidCap 400 Index" are trademarks
of Standard & Poor's Corporation and have been
licensed for use by the Fund. The Fund is not sponsored, endorsed, sold or
promoted by S&P.
(Page 4)
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 Board of Directors, 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 the common stocks of
medium-size companies.
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 to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions.
Such loans may not exceed 30% of the value of the Fund's total assets. In
connection with such loans, the Fund receives collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit. Such collateral
is maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Fund can increase its income
through the investment of such collateral. The Fund continues to be entitled
to payments in amounts equal to the dividends or other distri-
butions payable on the loaned security and receives interest on the
amount of the loan. Such loans are terminable 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.
When the Fund has cash reserves, the Fund may invest in U.S.
Government securities, repurchase agreements, time deposits, certificates of
deposit, bankers' acceptances and high-grade commercial paper. See the Fund's
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 World, 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. Futures transactions involve
so-called "derivative securities."
STOCK INDEX FUTURES -- A stock index future obligates the seller to deliver
(and the purchaser to take) an 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 liquid
ity.
Initially, when purchasing or selling futures contracts, the Fund
is required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and
is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures position,
assuming all contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more
or less valuable, a process known as "marking-to-market." At any time prior
to the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position at the then prevailing price, which
will operate to terminate the Fund's existing position in the contract.
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
(Page 5)
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.
The Fund is not a commodity pool. The Fund's commodity transactions
must constitute bona fide hedging or other permissible transactions pursuant
to regulations promulgated by the Commodity Futures Trading Commission. In
addition, the Fund may not engage in such transactions if the amount of
initial margin deposits, other than for bona fide hedging transactions, would
exceed 5% of the liquidation value of the Fund's assets, after taking into
account unrealized profits and losses on such contracts it has entered into.
In connection with its futures transactions, the Fund may be required to
establish and maintain at its custodian bank a segregated account consisting
of cash or high quality money market instruments in an amount equal to the
market value of the underlying commodity less any amount deposited as margin.
CERTAIN FUNDAMENTAL POLICIES -- The Fund may: (i) invest up to 5% of its
assets in securities of any company having less than three years' continuous
operation (including operations of any predecessors); (ii) borrow money from
banks, but only 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) 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; (iii) pledge, hypothecate, mortgage or otherwise
encumber its 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;
(iv) invest up to 25% of its assets in the securities of issuers in a single
industry (or more to the extent the Index also is so concentrated); and (v)
invest up to 10% of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and in securities that are
illiquid. This paragraph describes fundamental policies that cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting shares. See
"Investment Objective and Management Policies _ Investment Restrictions" in
the Fund's Statement of Additional Information.
INVESTMENT CONSIDERATIONS -- The Fund's classification 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 Investment Company Act of 1940. A "diversified" investment
company is required by the Investment Company Act of 1940 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 and to hold not more than 10% of the
outstanding voting securities of a single issuer. However, the Fund intends
to conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"), which requires that, at the end of each quarter of its taxable year,
(i) at least 50% of the market value of the Fund's total assets be invested
in cash, U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies). 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 industry or economic sector, the Fund's
portfolio securities may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company.
(Page 6)
Investment decisions for the Fund are made independently from those
of the other accounts and investment companies advised by World. However, if
such other accounts or investment companies are prepared to invest in, or
desire to dispose of, securities in which the Fund invests at the same time
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
INDEX FUND MANAGER -- World serves as the Fund's index fund manager pursuant
to an Index Management Agreement with the Fund. Under the Index Management
Agreement, World, subject to the supervision of the Fund's Board of Directors
and in conformity with Maryland law and the stated policies of the Fund,
manages the investment of the Fund's assets. World is responsible for placing
purchase and sale orders and providing continuous supervision of the
investment portfolio.
World is a newly-formed registered investment adviser providing
investment management services to individuals, corporations and foundations,
and, as of January 3, 1995, was responsible for managing or providing
investment advice for assets aggregating approximately $6 billion. World is a
Delaware general partnership with principal offices at 480 Pierce Street,
Birmingham, Michigan 48009. The majority general partner (with a 99%
interest) of World is Munder Capital Management (the "Munder Partnership"), a
Delaware general partnership the general partners of which are WAM Holdings,
Inc. and Woodbridge Capital Management, Inc. (together, the "Comerica
Partners") and Munder Capital Management, Inc. and Munder Group, L.L.C.
(together, the "MCM Partners"). The Comerica Partners have offices at 100
Renaissance Center, Detroit, Michigan 48243 and are wholly-owned subsidiaries
of Comerica Bank-Ann Arbor, N.A., which, in turn, is a wholly-owned
subsidiary of Comerica Incorporated, a publicly-held bank holding company.
Mr. Lee P. Munder, the Munder Partnership's chief executive officer, owns a
controlling interest in each of the MCMPartners, which also have offices at
480 Pierce Street, Birmingham, Michigan 48009. The MCMPartners currently hold
more than 50% of the partnership interests in the Munder Partnership, as
represented by the partners' capital accounts. Accordingly, through the
MCMPartners, Mr. Munder has a majority stake in, and operational control of,
the Munder Partnership. However, certain activities of the Munder
Partnership, including acquisitions, diverstitutes, succession planning, and
significant changes from initial compensation formulas, would require the
approval of the Comerica Partners.
From February 24, 1994 to December 31, 1994, World Asset Management,
Inc. ("World Asset") served as the Fund's index fund manager. As a result of
the formation of a joint venture pursuant to an agreement among Comerica
Incorporated, Woodbridge Capital Management, Inc., World Asset and Munder
Capital Management, Inc., World Asset's assets and business relevant to its
performance as the Fund's index fund manager were transferred to World.
Woodbridge Capital Management, Inc. served as the Fund's index fund manager
from June 18, 1992 to February 24, 1994. On June 18, 1992, Manufacturers
National Corporation, the parent corporation of Manufacturers Bank, N.A.
("MB"), the predecessor index manager of the Fund, merged with Comerica
Incorporated, the parent corporation of Comerica Bank. As a result of the
merger, the assets and business of MB relevant to its performance as index
fund manager were transferred to Woodbridge Capital Management, Inc.
Pursuant to the terms of the Index Management Agreement, the Fund
has agreed to pay World 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 year ended
October 31, 1994, no index management fee was paid due to an undertaking in
effect (see "Expenses" below).
ADMINISTRATOR -- Dreyfus, located at 200 Park Avenue, New York, New York
10166, serves as the Fund's administrator pursuant to an Administration
Agreement with the Fund. Dreyfus is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank
(Page 7)
Corporation
("Mellon"). Under the Administration Agreement, Dreyfus generally assists in
all aspects of the Fund's operations, other than providing index management
or investment advice, subject to the overall authority of the Fund's Board of
Directors in accordance with Maryland law. Dreyfus was organized in 1947 and,
as of November 30, 1994, managed or administered approximately $71 billion in
assets for more than 1.9 million investor accounts nationwide.
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 $201 billion in
assets as of September 30, 1994, including approximately $76 billion in
mutual fund assets. As of September 30, 1994, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for approximately $659 billion in assets, including
approximately $108 billion in mutual fund assets.
Pursuant to the terms of the Administration Agreement, the Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of .30 of 1% of the
value of the Fund's average daily net assets. For the fiscal year ended
October 31, 1994, no administration fee was paid due to an undertaking in
effect (see "Expenses" below).
CUSTODIAN AND TRANSFER AGENT AND DIVIDEND DISBURSING AGENT -- Comerica Bank,
411 West Lafayette, Detroit, Michigan 48226, is the custodian of the Fund's
investments. The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent").
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor is a wholly-owned subsidiary of Institutional
Administration Services, Inc., a provider of mutual fund administration
services, the parent company of which is Boston Institutional Group, Inc.
EXPENSES -- The imposition of the Fund's index management and administration
fees, 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, World and/or Dreyfus or one of their affiliates
may waive receipt of their fees and/or voluntarily assume certain expenses of
the Fund, which would have the effect of lowering the overall expense ratio
of the Fund and increasing yield to investors at the time such amounts are
waived or assumed, as the case may be. The Fund will not pay World and/or
Dreyfus or their affiliates at a later time for any amounts which may be
waived, nor will the Fund reimburse World and/or Dreyfus or their affiliates
for any amounts which may be assumed.
Dreyfus may pay the Distributor for shareholder services from its own
assets, including past profits but not including the administration fee paid
by the Fund. The Distributor may use part or all of such payments to pay
securities dealers or others in respect of these services.
HOW TO BUY FUND SHARES
You can purchase Fund shares without a sales charge if you purchase
them directly from the Distributor; you may be charged a nominal fee if you
effect transactions in Fund shares through a securities dealer, bank or other
financial institution. 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 securities dealer, bank or other financial institution which 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 Fund's Account Application. For full-time or part-time
employees of Dreyfus or any of its affiliates or
(Page 8)
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 vary further the initial
and subsequent investment minimum requirements at any time. The Fund's shares
are available for purchase by pension and profit-sharing plans.
You may purchase Fund shares by check or wire. Checks should be
made payable to "Peoples S&P MidCap Index Fund, Inc.," or, if for Dreyfus
retirement plan accounts, to "The Dreyfus Trust Company, Custodian." For
subsequent investments, your Fund account number also should appear on the
check. Payments which are mailed should be sent to Peoples S&P MidCap Index
Fund, Inc., P.O. Box 6647, Providence, Rhode Island 02940-6647, together with
your investment slip or, when opening a new account, your Account Application.
For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 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 #8900052732/Peoples S&P
MidCap Index Fund, Inc., 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 registratio
n 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 Fund's 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 instructions 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."
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 one million dollars. All
present holdings of shares of funds in the Dreyfus Family of Funds by such
employee benefit plans or programs will be aggregated to determine the fee
payable with respect to each such purchase of Fund shares. 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.
Fund shares are sold on a continuous basis at the net asset value
per share next determined after your
(Page 9)
order is received in proper form 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 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.
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
outstanding. The Fund's investments are valued based on market value, or
where market quotations are not readily available, based on fair value as
determined in good faith by the Board of Directors. For further information
regarding the methods employed in valuing Fund investments, see
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's 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 FUND 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, which may be more or less than their
original cost. To maximize the Fund's ability to track the Index, you are
urged to transmit your redemption request so that it 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.
You will be charged a 1% redemption fee for only those redemptions
which occur within the initial six-month period following the opening of your
account. This redemption fee will be deducted from your redemption proceeds
and retained by the Fund. It is expected that, as a result of this fee, the
Fund will be able to track the Index more closely. However, the redemption
fee will not be charged upon the redemption of shares purchased through
omnibus accounts, nor will it be used to pay fees imposed for various Fund
services. The redemption fee may be waived, modified or discontinued and
reintroduced at any time or from time to time. In addition, securities
dealers, banks and other financial institutions may charge a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request.
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 BUILDER 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-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-
(Page 10)
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, 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.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's 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 Peoples S&P MidCap Index Fund, Inc., 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 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
(Page 11)
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.
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. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You 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 1-800-221-4060 or, if you are
calling from overseas, call 1-401-455-3306. The Fund reserves the right to
refuse any redemption request, including requests made shortly after a change
of address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Fund's Statement of Additional Information sets forth
instructions for transmitting redemption requests by wire. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE -- You may redeem Fund shares (maximum
$150,000 per day) by telephone if you have checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of telephone redemption requests. This Privilege may
be modified or terminated at any time by the Transfer Agent or the Fund.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares for
which certificates have been issued, are not eligible for this Privilege.
SHAREHOLDER SERVICES
DREYFUS-AUTOMATIC ASSET BUILDER -- 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 bank 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. Only an account maintained
at a domestic financial institution which is an Automated Clearing House
member may be so designated. 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 Peoples S&P MidCap Index Fund,
Inc., 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.
(Page 12)
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; 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 reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, an amount not to exceed an annual rate of .25 of 1% of the value of
the Fund's average daily net assets for certain allocated expenses of
providing personal services and/or maintaining shareholder accounts. 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from net investment
income and distributes net realized securities gains, if any, once a year,
but the Fund may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the Investment Company Act of 1940. 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. If applicable, the 1% redemption fee, described
under "How to Redeem Fund Shares," will be charged upon certain redemptions
of Fund 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 shareholders as ordinary income whether received in cash or
reinvested in additional Fund shares. 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 corporate shareholders. Distributions from net realized long-term
securities gains of the Fund will be taxable to U.S. shareholders as
long-term capital gains for Federal income tax purposes, regardless of how
long shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. 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 t
he 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
will be 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 of the Fund and the pro-
(Page 13)
ceeds 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, 1994, 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. Advertisements also may include
performance calculated on the basis of total return.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to the
reinvestment of dividends and distributions during the period. The return is
expressed as a percentage rate which, if applied on a compounded annual
basis, would result in the redeemable value of the investment at the end of
the period. Advertisements of the Fund's performance will include the Fund's
average annual total return for one, five and ten year periods, or for
shorter time periods depending upon the length of time during which the Fund
has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. Performance information, such
as that described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
Comparative performance information may be used from time to time
in advertising or marketing the Fund's shares, including data from Standard &
Poor's MidCap 400 Index, Standard & Poor's 500 Composite Stock Price Index,
Lipper Analytical Services, Inc., the Dow Jones Industrial Average, MONEY Maga
zine, 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. In its
advertisements, the Fund also may cite the aggregate amount of assets
committed to index investing by pension funds and/or other institutional
investors, which currently exceeds $300 billion, and may refer to or discuss
then-current or past economic or financial conditions, developments or
events.
(Page 14)
GENERAL INFORMATION
The Fund was incorporated under Maryland law on June 6, 1991, and
commenced operations on June 19, l991. 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 Investment Company Act of 1940,
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 Directors or the appointment of auditors. However, pursuant to
the Fund's By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Director from office and for any
other purpose. Fund shareholders may remove a Director by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Board of Directors will call a meeting of shareholders for the purpose of
electing Directors if, at any time, less than a majority of the Directors
then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free 1-800-645-6561. In New York City, call
1-718-895-1206; on Long Island, call 794-5452.
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.
The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the S&P
MidCap 400 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 MidCap 400 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 MidCap 400 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 MIDCAP 400 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 MIDCAP 400 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 MIDCAP 400 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 15)
#
#
#
#
#
#
#
#
#
#
#
#
#
PEOPLES S&P
MIDCAP INDEX
FUND, INC.
PROSPECTUS
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
113p5022895
__________________________________________________________________________
PEOPLES S&P MIDCAP INDEX FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 28, 1995
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Peoples S&P MidCap Index Fund, Inc. (the "Fund"), dated February 28,
1995, 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
On Long Island -- Call 794-5452
World Asset Management ("World") serves as the Fund's index fund
manager.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's
administrator.
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-5
Index Management and Administration Agreements . . . . . . . . . . B-8
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . . . B-11
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . B-11
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . B-11
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . B-13
Determination of Net Asset Value . . . . . . . . . . . . . . . . . B-14
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . B-14
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . B-16
Performance Information. . . . . . . . . . . . . . . . . . . . . . B-16
Information About the Fund . . . . . . . . . . . . . . . . . . . . B-17
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-17
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . B-20
Report of Independent Auditors . . . . . . . . . . . . . . . . . . B-32
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Other Portfolio Securities
Securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance.
Treasury Bills have initial maturities of one year or less; Treasury Notes
have initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities,
for example, Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the Treasury; others, such as those
issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the
agency or instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates
of interest. Principal and interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will
always do so, since it is not so obligated by law. The Fund will invest
in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price,
usually not more than one week after its purchase. The Fund's custodian
or sub-custodian will have custody of, and will hold in a segregated
account, securities acquired by the Fund under a repurchase agreement.
Repurchase agreements are considered by the staff of the Securities and
Exchange Commission to be loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter
into repurchase agreements only with domestic banks with total assets in
excess of one billion dollars or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Fund may invest, and will require that
additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. World will monitor on an
ongoing basis the value of the collateral to assure that it always equals
or exceeds the repurchase price. Certain costs may be incurred by the
Fund in connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or
limited. The Fund will consider on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Time deposits which may be held by the Fund will not benefit from
insurance from the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the Federal Deposit Insurance Corporation.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
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 of the drawer to pay the full
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
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. or A-1 by Standard & Poor's Corporation, (b) issued by
companies having an outstanding unsecured debt issue currently rated not
lower than Aa3 by Moody's Investors Service, Inc. or AA- by Standard &
Poor's Corporation, or (c) if unrated, determined by World to be of
comparable quality to those rated obligations which may be purchased by
the Fund.
Management Policies
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. For the purposes of this policy, the Fund
considers collateral consisting of U.S. Government securities or
irrevocable letters of credit issued by banks whose securities meet the
standards for investment by the Fund to be the equivalent of cash. By
lending its portfolio securities, the Fund can increase its income through
the investment of the cash collateral. Such loans may not exceed 30% of
the value of the Fund's total assets. From time to time, 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 of Directors must
terminate the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs. These
conditions may be subject to future modification.
Investment Restrictions
The Fund has adopted the following investment restrictions as
fundamental policies. These restrictions cannot be changed without
approval by the holders of a majority (as defined in the Investment
Company Act of 1940 (the "Act")) of the Fund's outstanding voting shares.
The Fund may not:
1. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
2. Purchase securities of closed-end investment companies except (a)
in the open market where no commission other than the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of
the total outstanding voting stock of any one closed-end investment
company, (ii) 5% of the Fund's net assets with respect to the securities
issued by any one closed-end investment company and (iii) 10% of the
Fund's net assets in the aggregate, or (b) those received as part of a
merger or consolidation. The Fund may not purchase the securities of
open-end investment companies other than itself.
3. Invest in commodities, except that the Fund may invest in futures
contracts as described in the Fund's Prospectus and this Statement of
Additional Information.
4. Purchase, hold or deal in real estate, real estate investment
trust securities, real estate limited partnership interests, or oil, gas
or other mineral leases or exploration or development programs, but the
Fund may purchase and sell securities that are secured by real estate or
issued by companies that invest or deal in real estate.
5. Borrow money, except from banks 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.
6. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except 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.
7. Lend any funds or other assets except through the purchase of
debt securities, bankers' acceptances and commercial paper of corporations
and other entities. However, the Fund may lend its portfolio securities
in an amount not to exceed 30% of the value of its total assets. Any
loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Fund's Board
of Directors.
8. Act as an underwriter of securities of other issuers. The Fund
may not enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase illiquid securities, if, in the
aggregate, more than 10% of the value of the Fund's net assets would be so
invested.
9. 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.
10. Purchase, sell or write puts, calls or combinations thereof.
11. 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 MidCap 400 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),
or (iii) sell securities short, but the Fund 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).
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
interest 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
Directors 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 Director who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Directors of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in
the Dreyfus Family of Funds. For more than five years prior thereto,
he was President, a director and, until August 1994, Chief Operating
Officer of Dreyfus and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus
and, until August 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. Mr.
DiMartino is a director and former Treasurer of the Muscular
Dystrophy Association; a trustee of Bucknell University; and a
director of the Noel Group, Inc. Mr. DiMartino is also a Board
member of other funds in the Dreyfus Family of Funds. His address is
200 Park Avenue, New York, New York 10166.
*DAVID P. FELDMAN, Director. Corporate Vice President-Investment
Management of AT&T. He is also a trustee of Corporate Property
Investors, a real estate investment company. His address is One Oak
Way, Berkeley Heights, New Jersey 07922.
JACK R. MEYER, Director. 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. His address
is 600 Atlantic Avenue, Boston, Massachusetts 02210.
JOHN SZARKOWSKI, Director. Director Emeritus of the Department of
Photography at The Museum of Modern Art. Consultant in photography.
His address is Bristol Road Box 221, East Chatham, New York 12060.
ANNE WEXLER, Director. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She is also
a director of American Cyanamid Company, Alumax, The Continental
Corporation, Comcast Corporation and The New England Electric System,
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. Her address is c/o The Wexler
Group, 1317 F Street, N.W., Washington, D.C. 20004.
Each Director is also a director of Dreyfus Stock Index Fund, Peoples
Index Fund, Inc., Dreyfus Edison Electric Index Fund, Inc. and Dreyfus-
Wilshire Target Funds, Inc. Mr. Feldman and Ms. Wexler are also directors
of Dreyfus New Jersey Municipal Bond Fund, Inc. and Premier Global
Investing, managing general partners of Dreyfus Strategic Growth, L.P. and
Dreyfus Global Growth, L.P., and trustees of Dreyfus Florida Intermediate
Municipal Bond Fund, Dreyfus Florida Municipal Money Market Fund, Dreyfus
Investors GNMA Fund, Dreyfus New York Insured Tax Exempt Bond Fund,
Dreyfus 100% U.S. Treasury Intermediate Term Fund, Dreyfus 100% U.S.
Treasury Long Term Fund, Dreyfus 100% U.S. Treasury Money Market Fund and
Dreyfus 100% U.S. Treasury Short Term Fund. Mr. Feldman is also a
director of Dreyfus Strategic Governments Income, Inc. and Dreyfus BASIC
Money Market Fund, Inc. and a trustee of Dreyfus BASIC U.S. Government
Money Market Fund, Dreyfus California Intermediate Municipal Bond Fund,
Dreyfus Connecticut Intermediate Municipal Bond Fund, Dreyfus
Massachusetts Intermediate Municipal Bond Fund, Dreyfus New Jersey
Intermediate Municipal Bond Fund, Dreyfus Pennsylvania Intermediate
Municipal Bond Fund, Dreyfus Strategic Income and Dreyfus Strategic
Investing.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Directors of the Fund
who are not "interested persons"
of the Fund, as defined in the Act, will be selected and nominated by the
Directors who are not "interested persons" of the Fund.
The Fund does not pay any remuneration to its officers and Directors
other than fees and expenses to those Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of World or Dreyfus, which totalled $17,607 for the fiscal year
ended October 31, 1994 for such Directors as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
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., a wholly-owned subsidiary of The
Boston Company, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President -
General Counsel 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, and prior to August 1990, he was employed as an
Associate at Sidley & Austin.
JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by
Dreyfus. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From 1988 to August
1994, he was manager of the High Performance Fabric Division of
Springs Industries Inc.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From January 1992 to July 1994, he was a
Senior Legal Product Manager, and, from January 1990 to January 1992,
he was a mutual fund accountant, for The Boston Company Advisors,
Inc.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From September 1992 to
August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of Common Stock outstanding on December 5, 1994.
The following persons are known by the Fund to own of record 5% or
more of the Fund's voting securities outstanding on December 5, 1994:
Charles Schwab & Company, Inc., 101 Montgomery Street, San Francisco,
California 94104--8.2%; Cornell College, 600 1st Street West, Mount
Vernon, Iowa 52314--5.9%; Mercy Medical Center, 701 10th Street Southeast,
Cedar Rapids, Iowa 52403--5.6%.
INDEX MANAGEMENT AND ADMINISTRATION AGREEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Index Management Agreement. World provides management services
pursuant to the Index Management Agreement (the "Management Agreement")
dated January 1, 1995 with the Fund, which is subject to annual approval
by (i) the Fund's Board of Directors or (ii) vote of a majority (as
defined in the Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a
majority of the Directors who are not "interested persons" (as defined in
the Act) of the Fund or World, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Management Agreement was
approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of any party to the Management
Agreement, at a meeting held on November 9, 1994. The Management
Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board of Directors or by vote of the holders of a majority of the Fund's
shares, or, upon not less than 90 days' notice, by World. The Management
Agreement will terminate automatically in the event of its assignment (as
defined in the Act).
The Fund has agreed that neither World nor Dreyfus will be liable for
any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which World's or Dreyfus'
respective agreement with the Fund relates, except for a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of
World or Dreyfus, as the case may be, in the performance of its
obligations or from reckless disregard by it of its obligations and duties
under its respective agreement with the Fund.
As compensation for World's services, the Fund has agreed to pay
World a monthly management fee at the annual rate of .10 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 investors.
For the period November 1, 1991 through June 21, 1992, the index
management fee payable to the Fund's predecessor index manager,
Manufacturers Bank, N.A. ("MB"), was $16,115. For the period June 22,
1992 through October 31, 1992, the index management fee payable to
Woodbridge Capital Management, Inc. ("WCM"), another predecessor index
manager of the Fund, was $14,203. The index management fee for the fiscal
year ended October 31, 1992, in the aggregate, amounted to $30,318. For
the fiscal year ended October 31, 1994, the index management fee payable
to WCM was $54,913. For the fiscal year ended October 31, 1994, the
aggregate index management fee payable to World Asset Management, Inc.,
World's predecessor, and WCM was $72,970. However, no index management
fees were paid pursuant to undertakings.
Administration Agreement. Pursuant to the Administration Agreement
(the "Administration Agreement") dated August 24, 1994, as revised January
1, 1995, with the Fund, Dreyfus, together with World, furnishes the Fund
clerical help and accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services required by the
Fund, prepares reports to the Fund's shareholders, tax returns, reports to
and filings with the Securities and Exchange Commission and state Blue Sky
authorities, and generally assists in all aspects of the Fund's
operations, other than providing investment advice. Dreyfus bears all
expenses in connection with the performance of its services and pays the
salaries of all officers and employees who are employed by both it and its
affiliates and the Fund.
The Administration Agreement will continue in effect until May 14,
1995, and thereafter is subject to annual approval by (i) the Fund's Board
of Directors or (ii) vote of a majority (as defined in the Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Directors who are not
"interested persons" (as defined in the Act) of the Fund or Dreyfus, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Administration Agreement was last approved by the Fund's
Board of Directors, including a majority of the Directors who are not
"interested persons" (as defined in the Act) of any party to the
Administration Agreement, at a meeting held on November 9, 1994. After
May 14, 1995, the Administration Agreement is terminable without penalty,
on 60 days' notice, by the Fund's Board of Directors or by vote of the
holders of a majority of the Fund's shares. The Administration Agreement
is terminable upon not less than 90 days' notice by Dreyfus and will
terminate automatically in the event of its assignment (as defined in the
Act).
As compensation for its services, the Fund has agreed to pay Dreyfus
a monthly administration fee at the annual rate of .30 of 1% of the value
of the Fund's average daily net assets. For the fiscal years ended
October 31, 1992, 1993 and 1994, the administration fees payable to
Dreyfus were $90,955, $164,739 and $218,911, respectively. However, no
administration fees were paid pursuant to undertakings by Dreyfus.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; Julian M.
Smerling, Vice Chairman of the Board of Directors; Joseph S. DiMartino,
President and a director; W. Keith Smith, Chief Operating Officer and a
director; Paul H. Snyder, Vice President--Finance and Chief Financial
Officer; Daniel C. Maclean III, General Counsel and Vice President;
Robert F. Dubuss, Vice President; Elie M. Genadry, Vice President--
Institutional Sales; Henry D. Gottmann, Vice President--Retail Sales and
Service; Jeffrey N. Nachman, Vice President--Fund Administration; Philip
L. Toia, Vice Chairman--Operations and Administration; Lawrence S. Kash,
Vice Chairman--Distribution; Jay R. DeMartine, Vice President--Retail
Marketing; Barbara E. Casey, Vice President--Retirement Services; Diane M.
Coffey, Vice President--Corporate Communications; Katherine C. Wickham,
Vice President--Human Resources; Maurice Bendrihem--Controller; Mark N.
Jacobs, Vice President--Legal and Secretary; and Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and David B. Truman,
directors.
Expenses and Expense Information. All expenses incurred in the
operation of the Fund are borne by the Fund, except to the extent
specifically assumed by World and/or Dreyfus. The expenses borne by the
Fund include the following: organizational costs, taxes, interest,
brokerage fees and commissions, if any, fees of Directors who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of World or Dreyfus or their affiliates, Securities and
Exchange Commission fees, state Blue Sky qualification fees, index
management and administration fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
maintaining corporate existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
corporate meetings, costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses.
World and Dreyfus have agreed that if in any fiscal year the
aggregate expenses of the Fund (including fees pursuant to the Management
Agreement and the Administration 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 each of World and Dreyfus, or
World and Dreyfus each will bear, such excess expense in proportion to
their management fee and administration fee, to the extent required by
state law. Such deduction or payment, if any, will be estimated daily and
reconciled and effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to World and 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 reimburses Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, for certain allocated expenses of
providing personal services and/or maintaining shareholder accounts. The
services provided may include personal services relating to shareholder
accounts, such an answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board of Directors, and by
the Directors who are not "interested persons" (as defined in the 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 Directors cast in person at a meeting called
for the purpose of voting on the Plan. The Plan is terminable at any time
by vote of a majority of the Directors who are not "interested persons"
(as defined in the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan.
For the fiscal year ended October 31, 1994, $65,400 was charged to
the Fund under the Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
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.
Transactions through Securities Dealers. In some states, banks or
other financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer 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
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. Redemption proceeds, if wired, must be in the
amount of $1,000 or more and will be wired to the investor's account at
the bank of record designated in the investor's file at the Transfer
Agent, if the investor's bank is a member of the Federal Reserve System,
or to a correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are 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 transmissions:
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 of Directors 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; 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
Fund 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 Board of Directors. Expenses and fees,
including the index management and administration fees (reduced by the
expense limitation, if any), are accrued daily and taken into account for
the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Taxation of the Fund. Management of the Fund believes that the Fund
qualified for the fiscal year ended October 31, 1994 as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"). The Fund intends to continue to so qualify as long as such
qualification is in the best interests of its shareholders. Among the
requirements for such qualification is that less than 30% of the Fund's
gross income must be derived from the gain on the sale or other
disposition of securities held for less than three months. Accordingly,
the Fund may be restricted in the sale or other disposition of securities
held for less than three months, and in the utilization of certain
investment techniques described in the Prospectus under "Description of
the Fund." The Code, however, allows the Fund to net certain offsetting
positions, making it easier for the Fund to satisfy the 30% test. 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 transactions will be treated as 60% long-
term capital gain or loss and 40% short-term capital gain or loss. Gain
or loss will arise upon the exercise 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 of the Code.
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 a Fund were treated as entering into straddles by
reason of its futures transactions, such straddles could be characterized
as "mixed straddles" if the futures transactions comprising such straddles
were governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results to the Fund may differ. If no
election is made, to the extent the straddle and conversion transaction
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 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 dividend or 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
World assumes 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 World and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders at
the most favorable net price. Brokers also are selected because of their
ability to handle special executions such as are involved in large block
trades or broad distributions, provided the primary consideration is met.
Portfolio turnover may vary from year to year, as well as within a year.
High turnover rates are likely to result in comparatively greater
brokerage expenses. The overall reasonableness of brokerage commissions
paid is evaluated by World based upon its 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, 1992, 1993 and 1994, the Fund paid total brokerage commissions
of $44,411, $24,477 and $24,979, respectively, none of which was paid to
the Distributor. There were no spreads or concessions on principal
transactions in fiscal 1992, 1993 and 1994.
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 and 3.370 year
periods ended October 31, 1994 was 1.89% and 12.73%, 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 June 19, 1991 (commencement of
operations) to October 31, 1994 was 49.73%. 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 (the "S&P Index"), Lipper Analytical Services,
Inc., the Dow Jones Industrial Average and other industry publications.
The Fund's share price and yield fluctuate, and its investment return will
reflect applicable expenses. The Fund also 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, which currently exceeds $300 billion.
The Standard & Poor's MidCap 400 Index and the S&P Index together
represent approximately 86% 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 of Common Stock are of one class and have equal
rights as to dividends and in liquidation. Shares have no preemptive,
subscription or conversion rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Comerica Bank, 411 West Lafayette, Detroit, Michigan 48226, acts as
custodian of the Fund's investments. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, P.O. Box 9671, Providence,
Rhode Island 02940-9671, acts as transfer and dividend disbursing agent.
Neither Comerica Bank nor The Shareholder Services Group, Inc. has any
part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares of Common Stock being sold pursuant to the Fund's
Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of Standard & Poor's Corporation ("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 Investors Service, Inc. ("Moody's) Prime-1
Commercial Paper Rating :
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.
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
STATEMENT OF INVESTMENTS OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES COMMON STOCKS -- 94.3% VALUE
- ---------- -----------
<C> <S> <C>
BASIC MATERIALS-7.7%
4,561 Albany International, Cl.
A.......................... $ 90,080
9,100 Albemarle.................... 138,775
12,115 Battle Mountain Gold......... 134,779
4,204 Betz Laboratories............ 209,674
5,510 Bowater...................... 148,770
2,429 Brush Wellman................ 40,686
5,700 Cabot........................ 162,450
2,316 Carlisle Cos................. 75,559
1,222 Carpenter Technology......... 69,043
3,691 Chesapeake................... 114,421
1,868 Cleveland-Cliffs............. 71,217
6,621 Consolidated Papers.......... 297,117
7,776 Crompton & Knowles........... 109,836
3,643 Dexter....................... 75,137
17,900 Ethyl........................ 203,613
4,453 Ferro........................ 114,108
3,308 First Brands................. 110,818
21,336 Freeport McMoRan............. 392,049
6,179(a) Georgia Gulf................. 239,436
2,424 Gibson Greetings............. 36,057
6,600 Glatfelter (P.H.)............ 104,775
5,368 Hanna (M.A.)................. 137,555
3,773 Harsco....................... 163,182
4,461(a) IMC Global................... 189,593
6,746 Lawter International......... 85,168
5,318 Loctite...................... 237,316
7,836 Longview Fibre............... 131,253
10,088 Lubrizol..................... 325,338
2,228 Lukens....................... 70,461
2,968 Oregon Steel Mills........... 50,827
2,770 Pentair...................... 116,340
5,625 Schulman (A.)................ 160,313
2,956(a) Sealed Air................... 100,874
13,224 Sonoco Products.............. 290,928
8,383(a) Sterling Chemicals........... 101,644
4,038 Wausau Paper Mills........... 92,874
8,324 Willamette Industries........ 387,066
8,416 Witco........................ 235,648
-----------
5,814,780
-----------
CAPITAL GOODS/CONSTRUCTION-5.8%
11,196(a) AES.......................... 221,121
10,736 Allegheny Ludlum............. 213,378
5,711 CBI Industries............... 132,067
3,533 CalMat....................... 73,310
6,189 Calgon Carbon................ 69,626
9,038(a) Clayton Homes................ 163,814
4,301 Danaher...................... 211,287
2,419(a) Datascope.................... 42,332
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
CAPITAL GOODS/CONSTRUCTION (CONTINUED)
4,104 Donaldson.................... $ 94,392
2,815 Duriron...................... 50,670
2,525(a) Enterra...................... 57,759
5,117 Federal-Mogul................ 116,412
4,751 GenCorp...................... 57,012
3,194 Goulds Pumps................. 69,869
1,800 Granite Construction......... 39,375
4,700 Hubbell, CL.B................ 272,012
2,544 Kaydon....................... 59,466
3,900 Kennametal................... 109,687
5,279 Keystone International....... 104,260
41,900 Laidlaw, Cl. B.
(non-voting)............... 329,962
3,626(a) MagneTek..................... 53,937
6,446 Mark IV Industries........... 136,978
2,755 Measurex..................... 59,577
2,868 Nordson...................... 160,608
3,088 OEA.......................... 76,042
8,384(a) Parametric Technology........ 301,824
8,509 RPM.......................... 159,544
2,749(a) Rohr Industries.............. 25,085
2,541(a) Southdown.................... 44,150
5,026 Stewart & Stevenson
Services................... 193,501
5,013 Sundstrand................... 228,092
2,600 Tecumseh Products, Cl. A..... 126,100
2,871 Thiokol...................... 70,698
5,600 York International........... 218,400
-----------
4,342,347
-----------
CONSUMER CYCLICALS-13.3%
1,332 Angelica..................... 35,298
3,268 Arvin Industries............. 79,657
3,066 Belo (A.H.), Cl. A........... 167,863
10,471(a) Brinker International........ 242,142
4,600(a) Buffets...................... 47,725
7,650 CML Group.................... 75,544
2,215 CPI.......................... 48,176
3,737(a) Caesars World................ 163,961
5,200 Callaway Golf................ 198,900
5,828 Cardinal Health.............. 272,459
4,216(a) Chris-Craft Industries....... 159,154
7,110 Cintas....................... 252,405
12,973(a) Circus Circus Enterprises.... 288,649
3,090 Claire's Stores.............. 35,921
19,536 Coca Cola Enterprises........ 380,952
9,025 Cracker Barrel Old Country
Store...................... 198,550
2,600 Cross (A.T.), Cl. A.......... 39,325
8,943 Dole Food.................... 240,343
7,935 Dollar General............... 230,115
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
CONSUMER CYCLICALS (CONTINUED)
4,112 Duty Free International...... $ 54,998
3,305 Edison Brothers Stores....... 78,494
8,590 Family Dollar Stores......... 99,859
7,000 Fingerhut Cos................ 113,750
11,400(a) Fruit of the Loom, Cl. A..... 326,325
3,219 Hancock Fabrics.............. 24,545
11,612(a) Harley-Davidson.............. 325,136
7,270 Heilig-Meyers................ 217,191
14,240(a) Home Shopping Network........ 149,520
2,203 Houghton Mifflin............. 101,338
5,284 Intelligent Electronics...... 81,902
3,683(a) International Dairy Queen,
Cl. A...................... 62,611
19,376 International Game
Technology................. 358,456
2,977 International Multifoods..... 53,586
5,600(a) Kohls........................ 236,600
4,533 Lancaster Colony............. 157,522
5,348 Lands' End................... 98,938
3,500 Lee Enterprises.............. 117,687
6,098 Leggett & Platt.............. 227,150
4,445(a) MacFrugal's Bargains
Closeouts.................. 91,678
4,000 Media General, Cl. A......... 113,500
2,971 Michael Foods................ 29,339
3,765 Miller (Herman).............. 99,773
13,725(a) Mirage Resorts............... 284,794
4,420 Modine Manufacturing......... 129,285
5,348 Morrison Restaurants......... 156,429
5,592(a) Multimedia................... 165,663
4,520(a) Network Systems.............. 31,358
21,618(a) Office Depot................. 535,046
4,000 Phillips-Van Heusen.......... 57,500
3,000 Sbarro....................... 74,625
15,044(a) Service Merchandise.......... 90,264
21,732 Shaw Industries.............. 317,831
4,500 Superior Industries
International . 132,750
2,319 Tiffany & Co................. 90,441
22,344 Tyson Foods, Cl. A........... 519,498
10,637 Unifi........................ 275,232
6,942 United States Shoe........... 124,088
5,007(a) Waban........................ 88,874
3,407 Wallace Computer Services.... 94,544
1,769 Washington Post, Cl. B....... 433,405
3,197(a) Western Publishing Group..... 40,762
-----------
10,019,426
-----------
CONSUMER STAPLES-8.7%
4,295(a) Acuson....................... 78,921
1,934(a) Advanced Technology
Laboratories............... 30,944
4,212(a) Applied Bioscience
International.............. 23,166
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
CONSUMER STAPLES (CONTINUED)
5,525 Bergen Brunswig, Cl. A....... $ 91,162
4,926(a) Biogen....................... 241,374
6,344 Bob Evans Farms.............. 129,259
6,951 Carter-Wallace............... 97,314
7,697(a) Centocor..................... 136,141
4,952(a) Chiron....................... 333,641
2,988 Church & Dwight.............. 67,230
5,670(a) Continental Medical
Systems.................... 40,399
3,860 Coram Healthcare............. 63,690
2,395(a) Cordis....................... 138,012
5,977 Dean Foods................... 172,586
3,600(a) Diagnostek................... 56,700
1,971 Diagnostic Products.......... 47,304
2,000 Dibrell Brothers............. 43,500
2,214 Dreyer's Grand Ice Cream..... 56,457
4,854(a) FHP International............ 140,766
5,678 Flowers Industries........... 103,624
6,600(a) Forest Laboratories.......... 303,600
3,679(a) Genzyme...................... 120,487
4,413(a) HEALTHSOUTH Rehabilitation... 167,694
6,200 Hannaford Brothers........... 153,450
7,200 IBP.......................... 245,700
13,000(a) IVAX......................... 248,625
4,645 Lance........................ 83,610
12,336 McCormick & Co............... 243,636
11,932 Mylan Laboratories........... 334,096
1,217 NCH.......................... 81,083
3,797(a) NPC International, Cl. A..... 25,630
12,800 National Health
Laboratories............... 184,000
9,648(a) NovaCare..................... 96,480
4,161(a) PacifiCare Health Systems,
Cl. A...................... 309,994
12,000(a) Perrigo...................... 162,000
1,864 Puritan-Bennett.............. 48,697
3,500 Ruddick...................... 68,250
3,981 Savannah Foods &
Industries................. 49,762
2,308(a) Sci-Med Life Systems......... 110,207
4,322 Sizzler International........ 25,932
4,420 Smucker (J.M.), Cl. A........ 104,975
2,978 Stanhome..................... 100,135
7,275 Stryker...................... 249,169
5,869 Surgical Care Affiliates..... 115,179
3,882(a) Synergen..................... 21,351
5,791 Tambrands.................... 237,431
5,266 Universal.................... 118,485
3,964 Universal Foods.............. 119,415
5,700(a) Value Health................. 220,875
6,515(a) Vons Cos..................... 127,043
3,289(a) XOMA......................... 9,867
-----------
6,579,048
-----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
DIVERSIFIED-4.0%
4,800(a) Air & Water Technologies, Cl.
A.......................... $ 33,600
3,076(a) Altera....................... 121,310
6,700 Alumax....................... 199,325
4,520(a) American Waste Services, Cl.
A.......................... 7,910
4,214(a) Cirrus Logic................. 121,152
3,184(a) Exabyte...................... 70,048
2,142 Fuller (H.B.)................ 71,221
3,721(a) Jacobs Engineering Group..... 79,536
6,496 Kansas City Southern
Industries................. 219,240
2,093 Lawson Products.............. 54,941
6,900 Litton Industries............ 253,575
1,300(a) MAXXAM....................... 43,712
3,626(a) Magma Power.................. 135,522
3,775(a) Mid-American Waste Systems... 20,762
3,540(a) Octel Communications......... 76,553
3,170 Olin......................... 173,954
5,099 Omnicom Group................ 271,522
4,500 Rayonier..................... 132,750
1,436(a) Sequa, Cl. A................. 35,182
8,775(a) Staples...................... 201,825
2,600 Teleflex..................... 100,750
7,297(a) Thermo Electron.............. 332,926
7,073 Topps........................ 41,554
3,603(a) VeriFone..................... 81,068
4,961 Wellman...................... 163,093
-----------
3,043,031
-----------
ENERGY-4.8%
8,881 Anadarko Petroleum........... 434,059
9,236 Apache....................... 259,762
2,385(a) BJ Services.................. 48,594
4,348 Diamond Shamrock............. 126,092
5,600 El Paso Natural Gas.......... 174,300
24,600(a) Global Marine................ 116,850
12,138 Lyondell Petrochemical....... 332,278
4,530 MAPCO........................ 247,451
4,440 MCN.......................... 168,720
6,782 Murphy Oil................... 322,993
10,900(a) Nabors Industries............ 80,388
7,527 Noble Affiliates............. 225,810
4,600 Parker & Parsley Petroleum... 115,000
8,337(a) Parker Drilling.............. 51,064
4,086 Quaker State................. 55,672
6,048 Questar...................... 173,880
14,882 Ranger Oil................... 96,733
5,420(a) Seagull Energy............... 140,920
5,910(a) Smith International.......... 98,993
4,923 Tosco........................ 156,305
6,576 Valero Energy................ 142,206
5,065(a) Varco International.......... 35,455
-----------
3,603,525
-----------
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
FINANCIAL-14.7%
15,623 AFLAC........................ $ 533,135
15,339 Aon.......................... 477,426
6,485 Bancorp Hawaii............... 179,148
28,274 Bank of New York............. 897,699
18,021 Bear Stearns Cos............. 292,841
5,859 Central Fidelity Banks....... 169,179
6,757 City National................ 74,327
5,806 Comdisco..................... 116,120
17,710 Comerica..................... 489,239
5,745 Crestar Financial............ 236,981
4,954 Dauphin Deposit.............. 113,942
9,083 Edwards (A.G.)............... 168,035
9,290 Fifth Third Bancorp.......... 485,402
17,304 First Bank System............ 644,574
7,206 First Security............... 189,157
4,586 First Tennessee National..... 215,542
4,906 First Virginia Banks......... 179,069
9,010 First of America Bank........ 305,214
12,408 Franklin Resources........... 507,177
3,096 Hartford Steam Boiler
Inspection & Insurance..... 131,967
4,976 Kemper....................... 259,996
14,691 Marshall & Ilsley............ 302,084
6,431 Mercantile Bancorporation.... 223,477
6,934 Mercantile Bankshares........ 145,614
8,677 Meridian Bancorp............. 251,091
11,236 Morgan Stanley Group......... 734,554
8,024 Northern Trust............... 291,372
10,887 Progressive.................. 413,706
6,864 Provident Life & Accident
Insurance Co. of
America,................... 172,458
6,214 Regions Financial............ 196,906
8,783 Schwab (Charles)............. 311,797
8,418 Sotheby's Holdings, Cl. A.... 102,068
11,895 SouthTrust................... 228,235
11,442 State Street Boston.......... 381,877
3,425 Transatlantic Holdings....... 174,247
7,842 UJB Financial................ 211,734
5,264 West One Bancorp............. 144,760
5,600 Wilmington Trust............. 140,000
-----------
11,092,150
-----------
TECHNOLOGY-15.7%
5,822 AMETEK....................... 105,524
4,827(a) AST Research................. 61,092
9,009 Adobe Systems................ 324,324
13,700(a) American Power Conversion.... 253,450
7,465(a) Analog Devices............... 266,874
1,865(a) Anthem Electronics........... 61,312
12,544(a) Applied Materials............ 652,288
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
TECHNOLOGY (CONTINUED)
4,700(a) Arrow Electronics............ $ 177,425
5,000(a) Atmel........................ 184,375
6,104 Avnet........................ 228,900
3,955(a) BMC Software................. 178,964
13,254(a) Bay Networks................. 335,497
4,312 Beckman Instruments.......... 126,665
4,011(a) Borland International........ 42,617
10,750(a) Cabletron Systems............ 540,187
6,525(a) Cadence Design System........ 130,500
7,708(a) Conner Peripherals........... 88,642
3,904(a) Convex Computer.............. 32,208
5,609(a) Cypress Semiconductor........ 117,088
5,687(a) Dell Computer................ 253,071
28,600(a) EMC.......................... 614,900
6,913 Federal Signal............... 133,075
9,239 First Financial Management... 517,384
5,900(a) Fiserv....................... 138,650
38,660 General Motors, Cl. E........ 1,415,922
4,761 HON Industries............... 126,166
3,796(a) Information Resources........ 56,940
9,800(a) Informix..................... 269,500
2,159(a) KnowledgeWare................ 8,636
7,498(a) LSI Logic.................... 318,665
5,470 Linear Technology............ 262,560
7,109(a) Mentor Graphics.............. 95,083
9,561 Molex........................ 425,464
1,104 National Presto Industries... 43,470
2,515(a) Nellcor...................... 77,965
14,000(a) NEXTEL Communications........ 293,125
2,923 Precision Castparts.......... 66,864
6,553(a) Quantum...................... 100,752
6,476 Reynolds & Reynolds, Cl.A.... 161,091
10,704(a) Seagate Technology........... 271,614
10,021 Sensormatic Electronics...... 377,040
4,582(a) Sequent Computer Systems..... 87,058
20,834(a) Silicon Graphics............. 632,833
4,307 Standard Register............ 77,526
6,521(a) Storage Technology........... 180,958
3,594(a) Stratus Computer............. 133,877
4,366(a) Structural Dynamics
Research................... 21,284
5,176(a) Symantec..................... 91,874
3,616(a) Symbol Technologies.......... 122,040
5,422(a) Teradyne..................... 178,248
5,238 Varian Associates............ 193,806
3,422(a) Xilinx....................... 198,904
-----------
11,854,277
-----------
TRANSPORT & SERVICES-5.6%
2,969 Airborne Freight............. 56,782
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
TRANSPORT & SERVICES (CONTINUED)
1,987(a) Alaska Air Group............. $ 34,772
7,057 Alexander & Baldwin.......... 164,075
4,012 American President Cos....... 97,291
4,000 Arnold Industries............ 93,250
5,180 Atlantic Southeast
Airlines................... 90,650
3,024 Banta........................ 93,744
16,966(a) CUC International............ 545,033
4,623 Diebold...................... 195,322
2,461 Ennis Business Forms......... 33,223
11,355 Equifax...................... 330,714
4,788 FlightSafety International... 193,315
2,973 GATX......................... 125,238
5,330(a) HealthCare COMPARE........... 148,574
5,800 Hunt (JB) Transport.......... 97,150
6,441 Illinois Central, Cl. A...... 206,917
5,062(a) International Technology..... 19,615
5,785 Kelly Services, Cl. A........ 172,104
5,199(a) LEGENT....................... 148,172
6,300 Olsten....................... 226,013
5,770 Overseas Shipholding Group... 136,316
2,640 PHH.......................... 99,000
4,475 Paychex...................... 167,813
3,377(a) Policy Management Systems.... 158,719
5,405 Rollins...................... 126,342
8,005 Tidewater.................... 183,114
5,951 Trinity Industries........... 203,822
4,382 Watts Industries, Cl. A...... 105,168
-----------
4,252,248
-----------
UTILITIES-14.0%
4,178(a) ADC Telecommunications....... 196,888
17,822 Allegheny Power System....... 369,806
6,959 American Premier
Underwriters............... 173,975
3,731 Atlanta Gas Light............ 121,257
8,054 Atlantic Energy.............. 135,911
2,195 Black Hills.................. 44,997
7,094 Brooklyn Union Gas........... 163,162
12,845 CMS Energy................... 295,435
3,420 Central Louisiana Electric... 73,957
4,915 Central Maine Power.......... 56,523
8,058 Century Telephone
Enterprises................ 241,740
7,036 Comsat....................... 151,274
8,934 Delmarva Power & Light....... 168,629
14,116 Florida Progress............. 412,893
4,229 Hawaiian Electric
Industries................. 137,442
5,734 IPALCO Enterprises........... 173,454
5,683 Idaho Power.................. 131,419
11,476 Illinova Corp................ 226,651
3,394 Indiana Energy............... 66,183
4,465 Iowa-Illinois Gas &
Electric................... 91,532
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
UTILITIES (CONTINUED)
9,380 Kansas City Power & Light.... $ 209,878
5,007 LG&E Energy.................. 189,640
18,278(a) LDDS Communications.......... 429,533
4,968 Lincoln Telecommunications... 80,730
4,737 Minnesota Power Light........ 123,754
8,015 Montana Power................ 184,345
9,948 NIPSCO Industries............ 277,301
5,637 National Fuel Gas............ 167,701
6,311 Nevada Power................. 124,642
9,816 New England Electric
System..................... 307,977
10,688 New York State Electric &
Gas........................ 203,072
18,860 Northeast Utilities.......... 436,138
6,073 Oklahoma Gas & Electric...... 204,964
13,236 Pinnacle West Capital........ 246,521
7,257(a) Portland General Electric.... 126,090
17,783 Potomac Electric Power....... 342,323
9,181 Public Service Co. of
Colorado................... 250,182
6,294(a) Public Service Co. of New
Mexico..................... 77,888
9,590 Puget Sound Power & Light.... 194,198
10,922 Rochester Telephone.......... 267,589
7,082 SCANA........................ 305,411
9,683 Southern New England
Telecommunications......... 342,536
6,182 Southwestern Public
Service.................... 161,505
3,748 TCA Cable TV................. 88,078
17,518 TECO Energy.................. 339,411
8,000 Telephone & Data Systems..... 396,000
6,400 UtiliCorp United............. 176,800
5,757(a) Vanguard Cellular Systems,
Cl. A...................... 167,673
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
- ---------- -----------
<C> <S> <C>
UTILITIES (CONTINUED)
4,579 WPL Holdings................. $ 129,357
3,180 Washington Gas Light......... 114,083
15,887 Wisconsin Energy............. 421,006
-----------
10,519,454
-----------
TOTAL COMMON STOCKS
(cost $66,293,270)......... $71,120,286
-----------
-----------
PRINCIPAL SHORT-TERM
AMOUNT INVESTMENTS-5.3% VALUE
-----------
- ----------
U.S. TREASURY BILLS-.2%
$ 200,000(b) 5%, 6/29/1995................ $ 192,600
-----------
REPURCHASE AGREEMENT-5.1%
3,826,000 Kidder, Peabody & Co. Inc.,
4.75% Dated 10/31/1994, Due
11/1/1994 in the amount of
$3,826,505 (fully
collateralized by
$5,135,000 U.S. Treasury
Strip, 8/15/98,
value $3,905,809).......... 3,826,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,018,600)............ $ 4,018,600
-----------
-----------
TOTAL INVESTMENTS
(cost $70,311,870)................... 99.6% $75,138,886
------ -----------
------ -----------
CASH AND RECEIVABLES (NET)........... .4% $ 265,467
------ -----------
------ -----------
NET ASSETS...........................100.0% $75,404,353
------ -----------
------ -----------
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(A) Non-income producing.
(B) Wholly held by custodian in a segregated account as collateral for open
financial futures positions.
- --------------------------------------------------------------------------------
STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1994
<TABLE>
<S> <C> <C> <C> <C>
NUMBER MARKET VALUE UNREALIZED
OF COVERED APPRECIATION
FINANCIAL FUTURES LONG CONTRACTS BY CONTRACTS EXPIRATION AT 10/31/94
- -------------------------------- ---------- ------------- ------------ -----------
Standard & Poor's MidCap 400 13 $1,151,800 December '94 $14,970
-------
-------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value--Note 1(b)
(cost $70,311,870)--see statement....................................................... $75,138,886
Cash...................................................................................... 133,192
Receivable for investment securities sold................................................. 304,582
Dividends and interest receivable......................................................... 93,124
Prepaid expenses.......................................................................... 44,939
-----------
75,714,723
LIABILITIES:
Due to The Dreyfus Corporation............................................................ $ 8,000
Payable for investment securities purchased............................................... 202,744
Payable for futures variation margin--Note 3(a)........................................... 8,650
Accrued expenses and other liabilities.................................................... 90,976 310,370
--------- -----------
NET ASSETS.................................................................................. $75,404,353
-----------
-----------
REPRESENTED BY:
Paid-in capital........................................................................... $66,296,968
Accumulated undistributed investment income--net.......................................... 997,485
Accumulated undistributed net realized gain on investments................................ 3,267,914
Accumulated net unrealized appreciation on investments (including $14,970 net unrealized
appreciation on financial futures)--Note 3(b)........................................... 4,841,986
-----------
NET ASSETS at value applicable to 4,399,160 shares outstanding
(200 million shares of $.001 par value Common Stock authorized)........................... $75,404,353
-----------
-----------
NET ASSET VALUE, per share
(75,404,353 / 4,399,160 shares)........................................................... $17.14
------
------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Cash dividends (net of $1,144 foreign taxes withheld at source)......................... $1,509,772
Interest................................................................................ 11,776
----------
TOTAL INCOME........................................................................ $1,521,548
EXPENSES:
Index management fee--Note 2(a)......................................................... 72,970
Administration fee--Note 2(a)........................................................... 218,911
Shareholder servicing costs--Note 2(b).................................................. 115,890
Auditing fees........................................................................... 52,671
Registration fees....................................................................... 43,882
Custodian fees--Note 2(a)............................................................... 27,114
Legal fees.............................................................................. 18,672
Directors' fees and expenses--Note 2(c)................................................. 17,607
Prospectus and shareholders' reports.................................................... 15,423
Miscellaneous........................................................................... 26,347
----------
609,487
Less--expense reimbursement from World and Dreyfus
due to undertakings and redemption fee--Note 2(a)..................................... 315,348
----------
TOTAL EXPENSES...................................................................... 294,139
----------
INVESTMENT INCOME--NET.............................................................. 1,227,409
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments--Note 3(a)............................................... $3,430,703
Net realized (loss) on financial futures--Note 3(a);
Long transactions....................................................................... (3,110)
----------
NET REALIZED GAIN....................................................................... 3,427,593
Net unrealized (depreciation) on investments (including $14,970
net unrealized appreciation on financial futures)....................................... (3,340,443)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................................... 87,150
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................ $1,314,559
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------
1993 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net.............................................................. $ 1,081,564 $ 1,227,409
Net realized gain on investments.................................................... 2,353,437 3,427,593
Net unrealized appreciation (depreciation) on investments for the year.............. 6,695,691 (3,340,443)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................. 10,130,692 1,314,559
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net.............................................................. (815,333) (1,123,649)
Net realized gain on investments.................................................... (784,566) (2,309,722)
------------ ------------
TOTAL DIVIDENDS................................................................... (1,599,899) (3,433,371)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold....................................................... 57,396,624 61,712,647
Dividends reinvested................................................................ 1,544,124 3,142,822
Cost of shares redeemed............................................................. (47,770,399) (53,021,949)
------------ ------------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS............................ 11,170,349 11,833,520
------------ ------------
TOTAL INCREASE IN NET ASSETS.................................................... 19,701,142 9,714,708
NET ASSETS:
Beginning of year................................................................... 45,988,503 65,689,645
------------ ------------
End of year (including undistributed investment income-net:
$893,725 in 1993 and $997,485 in 1994)............................................ $ 65,689,645 $ 75,404,353
------------ ------------
------------ ------------
<CAPTION>
SHARES SHARES
<S> <C> <C>
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................................................... 3,469,387 3,634,804
Shares issued for dividends reinvested.............................................. 97,298 182,828
Shares redeemed..................................................................... (2,902,418) (3,144,607)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING................................................ 664,267 673,025
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Reference is page to page 3 of the Fund's Prospectus dated
February 28, 1995.
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act") as
a non-diversified open-end management investment company. World Asset
Management, Inc. ("World"), an indirect wholly owned subsidiary of Comerica Bank
("CB") (formerly Woodbridge Capital Management, Inc.), serves as the Fund's
index manager. CB serves as the Fund's custodian. The Dreyfus Corporation
("Dreyfus") serves as the Fund's administrator. Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, until August 24, 1994, acted as the
exclusive distributor of the Fund's shares, which are sold without a sales
charge. Effective August 24, 1994, Dreyfus became a direct subsidiary of Mellon
Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the "Distributor")
was engaged as the Fund's distributor. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for 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. Short-term investments are carried at
amortized cost, which approximates value. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis.
The Fund may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Fund's Manager, subject to the seller's
agreement to repurchase and the Fund's agreement to resell such securities at a
mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with the Fund's custodian and, pursuant to the terms of
the repurchase agreement, must have an aggregate market value greater than or
equal to the repurchase price plus accrued interest at all times. If the value
of the underlying securities falls below the value of the repurchase price plus
accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral is
not met, or the seller defaults on its repurchase obligation, the Fund maintains
the right to sell the underlying securities at market value and may claim any
resulting loss against the seller.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the policy
of the Fund not to distribute such gain.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2--MANAGEMENT FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES:
(A) Fees paid by the Fund pursuant to the provisions of an Index Management
Agreement with World and an Administration Agreement with Dreyfus are payable
monthly. World and Dreyfus receive annual fees of .10 of 1% and .30 of 1%,
respectively, of the average daily value of the Fund's net assets. The
agreements further provide that if the aggregate expenses of the Fund, exclusive
of interest, taxes, brokerage and 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 each of World and Dreyfus, or World and Dreyfus will
each bear, such excess expense in proportion to their respective fees. The most
stringent state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses exceed
2 1/2% of the first $30 million, 2% of the next $70 million and 1 1/2% of the
excess over $100 million of the average value of the Fund's net assets in
accordance with California "blue sky" regulations. However, World and Dreyfus
have undertaken from November 1, 1993 through November 7, 1994, or until such
time as the net assets of the Fund exceed $100 million, regardless of whether
they remain at that level, to waive the index management fee and administration
fee.
For the year ended October 31, 1994, pursuant to the undertakings, World
waived its index management fee of $72,970 and Dreyfus waived its administration
fee of $218,911. Dreyfus has undertaken from November 1, 1993 through January
12, 1994 to assume all other expenses in excess of an annual rate of .25 of 1%
of the average daily value of the Fund's assets, in the amount of $22,091. In
addition, CB earned $27,114 for custodian services provided to the Fund. For the
year ended October 31, 1994, the Fund received $1,375 in redemption fees.
World and Dreyfus have currently undertaken from November 8, 1994 through
December 31, 1994 to reduce the management fee and administration fee paid by
the Fund in the same proportion as their respective fees (excluding certain
expenses as described above), to assume all expenses in excess of an annual rate
of .50 of 1% of the average daily value of the Fund's assets.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation an amount not to exceed an annual rate of .25 of 1%
of the value of the Fund's average daily net assets for servicing shareholder
accounts. 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. During the year ended October 31, 1994, the
Fund was charged an aggregate of $65,400 pursuant to the Shareholder Services
Plan.
(C) Prior to August 24, 1994 certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of Dreyfus. Each director who
is not an "affiliated person" receives an annual fee of $2,500 and an attendance
fee of $500 per meeting.
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
NOTE 3 --SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
other than short-term securities, for the year ended October 31, 1994 amounted
to $19,742,690 and $14,322,966, respectively.
The Fund engages in trading financial futures contracts. The Fund is
exposed to market risk as a result of changes in the value of the underlying
financial instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis, which
reflects the change in the market value of the contract at the close of each
day's trading. Accordingly, variation margin payments are made or received to
reflect daily unrealized gains or losses. When the contracts are closed, the
Fund recognizes a realized gain or loss. These investments require initial
margin deposits with a custodian, which consist of cash or cash equivalents, up
to approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded and
is subject to change. Contracts open at October 31, 1994 and their related
unrealized market appreciation are set forth in the Statement of Financial
Futures.
(B) At October 31, 1994, accumulated net unrealized appreciation on
investments was $4,841,986, consisting of $10,344,836 gross unrealized
appreciation and $5,502,850 gross unrealized depreciation.
At October 31, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting purposes
(see the Statement of Investments).
<PAGE>
- --------------------------------------------------------------------------------
PEOPLES S&P MIDCAP INDEX FUND, INC.
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
PEOPLES S&P MIDCAP INDEX FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Peoples S&P MidCap Index Fund, Inc., including the statements of investments and
financial futures, as of October 31, 1994, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Peoples S&P MidCap Index Fund, Inc. at October 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
December 7, 1994
