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PROSPECTUS MARCH 1, 1996
DREYFUS MIDCAP INDEX FUND
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DREYFUS MIDCAP INDEX FUND (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS AN INDEX FUND. THE
FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND
TO THE PRICE AND YIELD PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS 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, A
DIVISION OF THE MCGRAW-HILL COMPANIES, INC.
THE DREYFUS CORPORATION ("DREYFUS") SERVES AS THE FUND'S MANAGER.
DREYFUS HAS ENGAGED ITS AFFILIATE, MELLON EQUITY ASSOCIATES ("MELLON
EQUITY"), TO SERVE AS THE FUND'S INDEX FUND MANAGER AND PROVIDE DAY-TO-DAY
MANAGEMENT OF THE FUND'S INVESTMENTS. DREYFUS AND MELLON EQUITY ARE REFERRED
TO COLLECTIVELY AS THE "ADVISERS."
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 MARCH 1, 1996, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM
TIME TO TIME.
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TABLE OF CONTENTS
Page
Fee Table......................................... 3
Condensed Financial Information................... 3
Description of the Fund........................... 4
Management of the Fund............................ 6
How to Buy Fund Shares............................ 7
How to Redeem Fund Shares......................... 9
Shareholder Services.............................. 11
Shareholder Services Plan......................... 11
Dividends, Distributions and Taxes................ 12
Performance Information........................... 13
General Information............................... 13
Appendix.......................................... 15
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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[This Page Intentionally Left Blank]
Page 2
<TABLE>
FEE TABLE
<S>
SHAREHOLDER TRANSACTION EXPENSES: <C> <C>
Redemption Fees (as a percentage of amount redeemed)......................................... 1.00%
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Management Fee .............................................................................. .40%
Other Expenses............................................................................... .45%
Total Fund Operating Expenses................................................................ .85%
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $5 $16 $28 $63
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRE-
SENTATIVE 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%.
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The purpose of the foregoing table is to assist you in
understanding the costs and expenses borne by the Fund and investors, the
payment of which will reduce investors' annual return. The 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," "How to Buy Fund
Shares," "How to Redeem Fund Shares" 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 Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
PER SHARE DATA: 1991(1) 1992 1993 1994 1995
------------ -------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $12.50 $13.69 $15.02 $17.63 $17.14
------------ -------- --------- -------- ------
INVESTMENT OPERATIONS:
Investment income--net................................. .11 .17 .30 .26 .29
Net realized and unrealized gain on investments........ 1.08 1.29 2.83 .08 3.00
------------ -------- --------- -------- ------
TOTAL FROM INVESTMENT OPERATIONS..................... 1.19 1.46 3.13 .34 3.29
------------ -------- --------- -------- ------
DISTRIBUTIONS:
Dividends from investment income--net.................. -- (.08) (.27) (.27) (.28)
Dividends from net realized gain on investments........ -- (.05) (.25) (.56) (.75)
------------ -------- --------- -------- ------
TOTAL DISTRIBUTIONS.................................. -- (.13) (.52) (.83) (1.03)
------------ -------- --------- -------- ------
Net asset value, end of year........................... $13.69 $15.02 $17.63 $17.14 $19.40
============ ======== ========= ======== ======
TOTAL INVESTMENT RETURN.................................... 9.52%(2) 10.69% 21.22% 1.89% 20.78%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................ -- -- .09% .40% .50%
Ratio of net investment income to average net assets... .87%(2) 2.22% 1.97% 1.68% 1.80%
Decrease reflected in above expense ratios due to undertakings 1.19%(2) 1.17% .77% .43% .35%
Portfolio Turnover Rate................................ 2.18%(2) 16.31% 16.80% 19.81% 20.46%
Net Assets, end of year (000's omitted)................ $5,436 $45,989 $65,690 $75,404 $122,982
(1) From June 19, 1991 (commencement of operations) to October 31, 1991.
(2) Not annualized.
</TABLE>
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"). It cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment objective
will be achieved.
MANAGEMENT POLICIES
The Fund attempts to duplicate the investment results of the Index,
which is composed of 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, a division of The McGraw-Hill Companies, Inc.
("S&P"), chooses the stocks to be included in the Index on the basis of market
size, liquidity and industry group 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
November 30, 1995, 46.3% of the Index was composed of the 50 largest
companies. 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. Mellon Equity will select stocks for the Fund's portfolio in the
order of their weightings in the Index beginning with the heaviest weighted
stocks. With respect to the Fund's assets invested in the stocks in the
Index, the percentage of such assets invested in each stock 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
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*"S&P Registration Mark" and "Standard & Poor's MidCap 400 Index" are
trademarks of Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and have been licensed for use by the Fund. The Fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's.
Page 4
ability to correlate its performance with the Index, however, may be
affected by, among other things, changes in securities markets, the manner in
which the Index is calculated by S&P and the timing of purchases and
redemptions. In the future, the Fund's Board, subject to the approval of
shareholders, may select another index if such a standard of comparison is
deemed to be more representative of the performance of 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. See "Appendix_Investment Techniques." When the
Fund has cash reserves, the Fund may invest in money market instruments
consisting of U.S. Government securities, time deposits, certificates of
deposit, bankers' acceptances, high-grade commercial paper, and repurchase
agreements. See the Statement of Additional Information for a description of
these instruments. The Fund also may purchase stock index futures in anti-
cion of taking a market position when, in the opinion of the Mellon Equity
Advisers, available cash balances do not permit an economically efficient
trade in the cash market. The Fund also may sell stock index futures to
terminate existing positions it may have as a result of its purchases of
stock index futures. See also "Investment Considerations and Risks" and
"Appendix_Investment Techniques" below, and "Investment Objective and
Management Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
General _ The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
The securities of the smaller companies in which the Fund may
invest may be subject to more abrupt or erratic market movements than larger,
more established companies, because these securities typically are traded in
lower volume and the issuers typically are subject to a greater degree to
changes in earnings and prospects.
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments, which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include stock
index futures. While Derivatives can be used effectively in furtherance of
the Fund's investment objective, under certain market conditions, they can
increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's investments and make more difficult the accurate
pricing of the Fund's portfolio. See "Appendix_Investment Techniques_Use of
Derivatives" below and "Investment Objective and Management
Policies_Management Policies_Derivatives" in the Statement of Additional
Information.
NON-DIVERSIFIED STATUS -- The 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 1940 Act.
A "diversified" investment company is required by the 1940 Act generally,
with respect to 75% of its total assets, to invest not more than 5% of such
assets in the securities of a single issuer. Since a relatively high
percentage of the Fund's assets may be invested in the securities of a
limited number of issuers, some of which may be within the same industry, the
Fund's portfolio may be more sensitive to changes in the market value of a
single issuer or industry. However, to meet Federal tax require-
Page 5
ments, at the close of each quarter the Fund may not have more than 25% of
its total assets invested in any one issuer and, with respect to 50% of total
assets, not more than 5% of its total assets invested in any one issuer. The
Fund may not invest more than 25% of its assets in any one industry. These
limitations do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS _ Investment decisions for the Fund are made
independently from those of the other accounts and investment companies
advised by Dreyfus or Mellon Equity. However, if such other accounts or
investment companies are prepared to invest in, or desire to dispose of,
securities in which the Fund invests, available investments or opportunities
for sales will be allocated equitably to each. In some cases, this procedure
may adversely affect the size of the position obtained for or disposed of by
the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
ADVISERS -- Dreyfus, located at 200 Park Avenue, New York, New York 10166,
was formed in 1947 and serves as the Fund's manager. Dreyfus is a
wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"). As of January 31, 1996,
Dreyfus managed or administered approximately $82 billion in assets for
approximately 1.7 million investor accounts nationwide.
Dreyfus supervises and assists in the overall management of the
Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Maryland law.
Dreyfus has engaged Mellon Equity, located at 500 Grant Street,
Pittsburgh, Pennsylvania 15258, to serve as the Fund's index Fund manager.
Mellon Equity, a registered investment adviser formed in 1957, is an indirect
wholly-owned subsidiary of Mellon and thus, an affiliate of Dreyfus. As of
December 31, 1995, Mellon Equity and its employees managed approximately $8.8
billion in assets and served as the investment adviser of 62 other investment
companies.
Mellon Equity, subject to the supervision and approval of Dreyfus,
provides the day-to-day management of the Fund's investments, as well as
statistical information, under an Index Management Agreement with Dreyfus,
subject to the overall authority of the Fund's Board in accordance with
Maryland law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including Dreyfus and Mellon Equity, Mellon managed more
than $209 billion in assets as of September 30, 1995, including approximately
$80 billion in proprietary mutual fund assets. As of September 30, 1995,
Mellon, through various subsidiaries, provided non-investment services, such
as custodial or administration services, for more than $717 billion in
assets, including approximately $55 billion in mutual fund assets.
Pursuant to the terms of the Management Agreement, the Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of .395 of 1% of the
value of the Fund's average daily net assets. Under the Fund's Index
Management Agreement, Dreyfus has agreed to pay Mellon Equity a monthly fee
at the annual rate of .095 of 1% of the Fund's average daily net assets,
which fee includes payment for the provision of custody services to the Fund
by Boston Safe Deposit and Trust Company.
Prior to November 13, 1995, World Asset Management served as the
Fund's index fund manager pursuant to an Index Management Agreement with the
Fund and Dreyfus served as the Fund's administrator pursuant to an
Administration Agreement with the Fund. Pursuant to such agreements, the Fund
agreed to
Page 6
pay World Asset Management and Dreyfus .10% and .30%, respectively, of the
value of the Fund's average daily net assets. For the fiscal year ended
October 31, 1995, no index management fee or administration fee was paid by
the Fund pursuant to undertakings then in effect.
The imposition of the Fund's management 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,
Dreyfus and/or Mellon Equity 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 Dreyfus and/or Mellon Equity or
their affiliates at a later time for any amounts which may be waived, nor
will the Fund reimburse Dreyfus and/or Mellon Equity or their affiliates for
any amounts which may be assumed.
Dreyfus may pay the Fund's distributor for shareholder services from
its own assets, including past profits but not including the management fee
paid by the Fund. The Fund's distributor may use part or all of such payments
to pay securities dealers or others in respect of these services.
CUSTODIAN AND TRANSFER AGENT AND DIVIDEND DISBURSING AGENT -- Boston Safe
Deposit and Trust Company, One Boston Place, Boston, Massachusetts 02108
("Boston Safe"), is the custodian of the Fund's investments. Boston Safe is
an indirect subsidiary of Mellon. Dreyfus Transfer, Inc., a wholly-owned
subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode Island 02903, 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's ultimate parent is Boston Institutional Group, Inc.
HOW TO BUY FUND SHARES
Fund shares are sold without a sales charge. 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 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 "Dreyfus MidCap Index Fund.," 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 Dreyfus MidCap Index Fund, 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
Page 7
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/Dreyfus MidCap
Index Fund, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the 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 $1,000,000. Shares of funds in
the Dreyfus Family of Funds then held by such employee benefit plans or
programs will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Fund shares are sold on a continuous basis at the net asset value
per share next determined after your 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
Page 8
value of the Fund's net assets (i.e., the value of its assets less
liabilities) by the total number of shares outstanding. The Fund's investments
are valued based on market value, or where market quotations are
not readily available, based on fair value as determined in good faith by the
Fund's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
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 upon the redemption of Fund
shares where the redemption occurs 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. No redemption fee will be charged upon the redemption of shares
purchased through omnibus accounts, nor will the redemption fee 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 their clients 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-
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.
page 9
PROCEDURES
You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege or the Telephone Redemption Privilege. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. The Fund reserves the
right to refuse any request made by wire or telephone, including requests
made shortly after a change of address, and may limit the amount involved or
the number of such requests. The Fund may modify or terminate any redemption
Privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated.
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 Dreyfus MidCap Index Fund, P.O. Box 6647,
Providence, Rhode Island 02940-6647, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. 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. Before you make such a request, you must obtain and should review a
copy of the current prospectus of the fund being purchased; your redemption
proceeds will be invested in shares of such other fund on the next business
day. Upon request, proceeds from the redemption of shares of other funds in
the Dreyfus Family of 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
Page 10
directly in connection with this procedure, although the Fund reserves the
right, upon not less than 60 days' written notice, to charge shareholders a
nominal fee in accordance with rules promulgated by the Securities and
Exchange Commission. This procedure may be modified or terminated at any
time upon not less than 60 days' notice to shareholders.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire. 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 request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. 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 BUILDERRegistration Mark -- Dreyfus-Automatic Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the 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. This privilege may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market. To establish a
Dreyfus-Automatic Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege
or change the amount of purchase at any time by mailing written notification
to Dreyfus MidCap Index Fund, P.O. Box 6647, Providence, Rhode Island
02940-6647, or, if for Dreyfus retirement plan accounts, to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427, and
the notification will be effective three business days following receipt. The
Fund may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
RETIREMENT PLANS -- The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; 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
Page 11
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 Internal Revenue Code of 1986, as
amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will automatically reinvest dividends
and distributions from securities gains, if any, in additional Fund shares at
net asset value or, at your option, pay them in cash. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. 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 proceeds of any
redemption, regardless of the extent to which gain or loss may be realized,
paid to a shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
Page 12
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, 1995, as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interest of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. The Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For the purpose of advertising, performance is calculated on the
basis of average annual total return and/or total return.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to the
reinvestment of dividends and distributions during the period. The return is
expressed as a percentage rate which, if applied on a 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
Magazine, Morningstar, Inc. and other industry publications. The Fund may cite
in its advertisements or in reports or other communications to shareholders,
historical performance of unmanaged indices as reported in Ibbotson, Roger G.
and Rex A. Sinquefield, STOCKS, BONDS, BILLS AND INFLATION (SBBI), 1982,
updated annually in the SBBI YEARBOOK, Ibbotson Associates, Chicago. In its
advertisements, the Fund also may cite the aggregate amount of assets
committed to index investing by pension funds and/or other institutional
investors, and may refer to or discuss then-current or past economic or
financial conditions, developments or events.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on June 6, 1991, and
commenced operations on June 19, l991. On November 13, 1995, the Fund, which
is incorporated under the name People's S&P MidCap Index Fund, Inc., began
operating under the name Dreyfus MidCap Index Fund. The Fund is authorized to
issue 200 million shares of Common Stock, par value $.001 per share. Each
share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not
be necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
Page 13
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 Fund's Board 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; outside the U.S. and Canada, call 516-794-5452.
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 14
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow money only for temporary
or emergency (not leveraging) purposes, in an amount up to 15% of the value
of its total assets (including the amount borrowed) valued at the lesser of
cost or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments.
USE OF DERIVATIVES _ Although the Fund will not be a commodity pool,
Derivatives subject the Fund to the rules of the Commodity Futures Trading
Commission which limit the extent to which the Fund can invest in certain
Derivatives. The Fund may invest in stock index futures contracts for hedging
purposes without limit. However, the Fund may not invest in such contracts
for other purposes if the sum of the amount of initial margin deposits, other
than for bona fide hedging purposes, exceed 5% of the liquidation value of
the Fund's assets, after taking into account unrealized profits and
unrealized losses on such contracts.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. In connection with such
loans, the Fund continues to be entitled to payments in amounts equal to the
interest, dividends or other distributions payable on the loaned securities.
Loans of portfolio securities afford the Fund an opportunity to earn
interest on the amount of the loan and at the same time to earn income on the
loaned securities' collateral. Loans of portfolio securities may not exceed
30% of the value of the Fund's total assets. In connection with such loans,
the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution
with which it has engaged in a portfolio loan transaction breaches its
agreement with the Fund.
Page 15
Page 15
Dreyfus
MidCap Index
Fund
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
113p03196
DREYFUS MIDCAP INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus MidCap Index Fund (the "Fund"), dated March 1, 1996, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's manager.
Dreyfus has engaged its affiliate, Mellon Equity Associates ("Mellon
Equity"), to serve as the Fund's index fund manager and provide day-to-day
management of the Fund's investments. Dreyfus and Mellon Equity are
referred to collectively as the "Advisers."
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . B-6
Management Arrangements . . . . . . . . . . . . . . . . . . . . . . B-9
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . B-12
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . B-12
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . B-13
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . B-14
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . B-15
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . B-16
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . B-17
Performance Information . . . . . . . . . . . . . . . . . . . . . . B-17
Information About the Fund. . . . . . . . . . . . . . . . . . . . . B-18
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . . . . . B-19
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . B-21
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . B-33
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."
Money Market Instruments. The Fund may invest, in the circumstances
described under "Description of the Fund - Management Policies" in the
Fund's Prospectus, in the following types of money market instruments.
U.S. Government Securities. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others, by the right of the issuer to borrow from the Treasury;
others, by discretionary authority of the U.S. Government to purchase
certain obligations from the agency or instrumentality; and others, only by
the credit of the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. While the U.S. Government provides
financial support for such U.S. Government-sponsored agencies and
instrumentalities, no assurance can be given that it will always do so since
it is not so obligated by law.
Repurchase Agreements. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. The Fund's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff of
the Securities and Exchange Commission to be loans by the Fund. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement,
the Fund will enter into repurchase agreements only with domestic banks with
total assets in excess of one billion dollars or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Repurchase
agreements could involve risks in the event of a default or insolvency of
the other party to the agreement, including possible delays or restrictions
upon the Fund's ability to dispose of the underlying securities.
Bank Obligations. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such
securities issued by foreign subsidiaries or foreign branches of domestic
banks, and domestic and foreign branches of foreign banks, the Fund may be
subject to additional investment risks that are different in some respects
from those incurred by a fund which invests only in debt obligations of U.S.
domestic issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and the drawer to pay the face
amount of the instruments upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Commercial Paper. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which,
at the time of their purchase, are (a) rated at least Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's Ratings
Group, a division of The McGraw Hill Companies, Inc. ("S&P"), (b) issued by
companies having an outstanding unsecured debt issue currently rated not
lower than Aa3 by Moody's or AA- by S&P, or (c) if unrated, determined by
the Advisers to be of comparable quality to those rated obligations which
may be purchased by the Fund.
Management Policies
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may pass
to the borrower, the Fund's Board must terminate the loan and regain the
right to vote the securities if a material event adversely affecting the
investment occurs. These conditions may be subject to future modification.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) in anticipation of taking a market position when, in the
opinion of the Advisers, available cash balances do not permit an
economically efficient trade in the cash market. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase, decrease
or change the level of risk to which its portfolio is exposed in much the
same way as the Fund can increase, decrease or change the risk of its
portfolio by making investments in specific securities.
In addition, Derivatives may entail investment exposures that are
greater than their cost would suggest, meaning that a small investment in
Derivatives could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its
Derivatives were poorly correlated with its other investments, or if the
Fund were unable to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
Stock Index Futures - A stock index future obligates the seller to
deliver (and the purchaser to take) and amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock
index at the close of the last trading day of the contract and the price at
which the agreement is made. No physical delivery of the underlying stocks
in the index is made. The Fund purchases and sells futures contracts on the
stock index for which it can obtain the best price with consideration also
given to liquidity.
Using futures in anticipation of market transactions involves certain
risks. Although the Fund intends to purchase or sell futures contracts only
if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any
particular time. In addition, the price of stock index futures may not
correlate perfectly with the movement in the stock index due to certain
market distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the index and futures markets. Secondly, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market also
may cause temporary price distortions. Because of the possibility of price
distortions in the futures market and the imperfect correlation between
movements in the stock index and movements in the price of stock index
futures, a correct forecast of general market trends still may not result in
a successful hedging transaction.
In connection with its futures transactions, the Fund may be required
to establish and maintain at its custodian bank a segregated account
consisting of cash or high quality money market instruments in an amount
equal to the market value of the underlying commodity less any amount
deposited as margin.
Investment Restrictions
The Fund has adopted the following investment restrictions as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund's outstanding voting shares. The Fund
may not:
1. Purchase securities of 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 1940 Act, is indicated by an asterisk.
Directors of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For more
than five years prior thereto, he was President, a director and, until
August 1994, Chief Operating Officer of Dreyfus and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus and, until August 1994, the Fund's distributor.
From August 24, 1994 to December 31, 1994, he was a director of Mellon
Bank Corporation. He is Chairman of the Board of Directors of Noel
Group, Inc., a venture capital company; a trustee of Bucknell
University; and a director of the Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway, Inc., a manufacturer
and marketer of industrial threads, specialty yarns and home
furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware, Simmons Outdoor Corporation and Staffing Resources, Inc. He
is 52 years old and 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. He is 56 years old and 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. He is 50 years
old and his address is 600 Atlantic Avenue, Boston, Massachusetts
02210.
JOHN SZARKOWSKI, Director. Director Emeritus of Photography at The Museum
of Modern Art. Consultant in Photography. He is 70 years old and his
address is Bristol Road Box 221, East Chatham, New York 12060.
ANNE WEXLER, Director. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She is also a
director of Alumax, Comcast Corporation and The New England Electric
System, Nova Corporation, and a member of the Board of the Carter
Center of Emory University, the Council of Foreign Relations, the
National Park Foundation, Visiting Committee of the John F. Kennedy
School of Government at Harvard University and the Board of Visitors of
the University of Maryland School of Public Affairs. She is 65 years
old and her address is c/o The Wexler Group, 1317 F Street, N.W., Suite
600, Washington, D.C. 20004.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Directors of the Fund who
are not "interested persons" of the Fund, as defined in the 1940 Act, will
be selected and nominated by the Directors who are not "interested persons"
of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Director by the Fund for the fiscal year ended
October 31, 1995, and by all other funds in the Dreyfus Family of Funds for
which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1995, were as follows:
<TABLE>
(3) (4) (5)
(2) Pension or Estimated Total Compensation
(1) Aggregate Retirement Benefits Annual From Fund and
Name of Board Compensation From Accrued as Part of Benefits Upon Fund Complex
Member Fund* Fund's Expenses Retirement Paid to Board Member
- -------------- -------- --------------- ---------- ---------------------
<S> <C> <C> <C> <C>
Joseph S. DiMartino $4,153 none none $445,000 (93)
David P. Feldman $4,000 none none $ 85,631 (27)
Jack R. Meyer $4,500 none none $ 21,875 (4)
John Szarkowski $4,500 none none $ 21,875 (4)
Anne Wexler $4,500 none none $ 26,329 (16)
____________________________
* Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $602 for all Directors as a group.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
Officer and a Director of the Distributor and an officer of other
investment companies advised or administered by Dreyfus. From December
1991 to July 1994, she was President and Chief Compliance Officer of
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of the Distributor and an officer
of other investment companies advised or administered by Dreyfus. From
February 1992 to July 1994, he served as Counsel for The Boston Company
Advisors, Inc. From August 1990 to February 1992, he was employed as
an associate at Ropes & Gray. He is 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate General
Counsel of the Distributor and an officer of other investment companies
advised or administered by Dreyfus. From September 1992 to August
1994, he was an attorney with the Board of Governors of the Federal
Reserve System. He is 31 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. She is 26 years old.
JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President, Treasurer
and Chief Financial Officer of the Distributor and an officer of other
investment companies advised or administered by Dreyfus. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the Distributor
and an officer of other investment companies advised or administered by
Dreyfus. From 1984 to July 1994, he was Assistant Vice President in
the Mutual Fund Accounting Department of Dreyfus. He is 60 years old.
MARGARET PARDO, Assistant Secretary. Legal Assistant with the Distributor
and an officer of other investment companies advised or administered by
Dreyfus. From June 1992 to April 1995, she was a Medical Coordination
Officer at ORBIS International. Prior to June 1992, she worked as
Program Coordinator at Physicians World Communications Group. She is
27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of Common Stock outstanding on December 22, 1995.
The following persons are known by the Fund to own of record 5% or more
of the Fund's voting securities outstanding on December 22, 1995: Charles
Schwab & Company, Inc., 101 Montgomery Street, San Francisco, California
94104--13.3%; Mellon Bank, N.A., P.O. Box 3198, Pittsburgh, Pennsylvania
15230-3198--6.8%.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus provides management services pursuant to
the Management Agreement (the "Management Agreement") dated November 13,
1995 with the Fund, which is subject (after May 14, 1997) to annual approval
by (i) the Fund's Board or (ii) vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Fund, provided that in
either event the continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund or Dreyfus, by vote cast in person at a meeting called for the purpose
of voting on such approval. The Management Agreement was approved by
shareholders on November 3, 1995, and by the Fund's Board, including a
majority of the Board members who are not "interested persons" of any party
to the Management Agreement, at a meeting held on August 9, 1995. The
Management Agreement is terminable without penalty, on 60 days' notice, by
the Fund's Board or by vote of the holders of a majority of the Fund's
shares, or, upon not less than 90 days' notice, by Dreyfus. The Management
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
The following persons are officers and/or directors of Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith,
Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; Barbara E. Casey, Vice President-Dreyfus
Retirement Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional Sales; William
F. Glavin, Jr., Vice President-Corporate Development; Henry D. Gottmann,
Vice President-Retail Sales and Service; Mark N. Jacobs, Vice President-
Legal and Secretary; Daniel C. Maclean, Vice President and General Counsel;
Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew S. Wasser,
Vice President-Information Services; Katherine C. Wickham, Vice President-
Human Resources; Maurice Bendrihem, Controller; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian M. Smerling and David B. Truman, directors.
Dreyfus maintains office facilities on behalf of the Fund, and
furnishes the Fund statistical and research data, clerical help, accounting,
data processing, bookkeeping and internal auditing and certain other
required services to the Fund. Dreyfus also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
Index Management Agreement. Mellon Equity provides investment advisory
assistance and day-to-day management of the Fund's investments pursuant to
the Index Management Agreement (the "Index Management Agreement") dated
November 13, 1995 between Mellon Equity and Dreyfus. The Index Management
Agreement is subject (after May 14, 1997) to annual approval by (i) the
Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Fund's Board members who
are not "interested persons" (as defined in the 1940 Act) of the Fund or
Mellon Equity, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Index Management Agreement was approved by
shareholders on November 3, 1995, and was approved by the Fund's Board,
including a majority of Board members who are not "interested persons" of
any party to the Index Management Agreement, at a meeting held on August 9,
1995. The Index Management Agreement is terminable without penalty (i) by
Dreyfus on 60 days' notice, (ii) by the Fund's Board or by vote of the
holders of a majority of the Fund's shares on 60 days' notice, or (iii) by
Mellon Equity on not less than 90 days' notice. The Index Management
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act) or upon the termination of the Management Agreement
for any reason.
The following persons are executive officers and/or directors of Mellon
Equity: Phillip R. Roberts, Chairman of the Board; William P. Rydell,
President and Chief Executive Officer; and W. Keith Smith, Director.
Mellon Equity provides day-to-day management of the Fund's investments
in accordance with the stated policies of the Fund, subject to the
supervision of Dreyfus and approval of the Fund's Board. All purchases and
sales are reported for the Board's review at the meeting subsequent to such
transactions. Mellon Equity has agreed to pay for the custody services
provided to the Fund by Boston Safe Deposit and Trust Company.
Expenses. All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by Dreyfus and/or
Mellon Equity. The expenses borne by the Fund include: organizational
costs, taxes, interest, loan commitment fees, interest and distributions
paid on securities sold short, brokerage fees and commissions, if any, fees
of Board members who are not officers, directors, employees or holders of 5%
or more of the outstanding voting securities of Dreyfus or Mellon Equity or
any of their affiliates, Securities and Exchange Commission fees, state Blue
Sky qualification fees, advisory fees, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing services, costs of
maintaining the Fund's existence, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders, costs
of shareholder's reports and meetings, and any extraordinary expenses.
As compensation for Dreyfus' services, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .395 of 1% of the value of the
Fund's average daily net assets. As compensation for Mellon Equity's
services, Dreyfus has agreed to pay Mellon Equity a monthly fee at the
annual rate of .095 of 1% of the value of the Fund's average daily net
assets. All fees and expenses are accrued daily and deducted before
declaration of dividends to shareholders.
From January 3, 1995 to November 13, 1995, World Asset Management
("World") served as the Fund's index fund manager; from February 24, 1994 to
January 3, 1995, World Asset Management, Inc. ("WAM") served as the Fund's
index fund manager; from June 18, 1992 to February 24, 1994, Woodbridge
Capital Management, Inc. ("Woodbridge") served as the Fund's index fund
manager; and prior to June 18, 1992, Manufacturers Bank, N.A. (together with
World, WAM and Woodbridge, the "prior index fund managers") served as the
Fund's index fund manager. Pursuant to prior index management agreements
with the prior index fund managers, the Fund agreed to pay a monthly fee at
the annual rate of .10 of 1% of the value of the Fund's average daily net
assets. For the fiscal years ended October 31, 1993, 1994 and 1995, the
index management fees payable to the prior index fund managers amounted to
$54,913, $72,970 and $98,063, respectively. However, no index management
fees were paid to the prior index fund managers for the fiscal years ending
October 31, 1993 and 1994 pursuant to undertakings in effect, and for the
fiscal year ended October 31, 1995 the fee was reduced by $39,687.
Prior to November 13, 1995, Dreyfus served as the Fund's administrator
pursuant to an administration agreement with the Fund. As compensation for
its administrative services, the Fund agreed to pay Dreyfus a monthly fee at
the annual rate of .30 of 1% of the value of the Fund's average daily net
assets. For the fiscal years ended October 31, 1993, 1994 and 1995, the
administrative fees payable to Dreyfus amounted to $164,739, $218,911 and
$294,190, respectively. However, no administrative fees were paid to
Dreyfus pursuant to undertakings in effect.
Dreyfus (and to a limited extent, Mellon Equity) have agreed that if in
any fiscal year the aggregate expenses of the Fund (including fees pursuant
to the Management Agreement, but excluding taxes, brokerage, interest on
borrowings and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may
deduct from the fees to be paid to Dreyfus, and Dreyfus may deduct from the
fees paid to Mellon Equity, or Dreyfus and Mellon Equity each will bear,
such excess expense in proportion to their management fee and Index
Management fee, to the extent required by state law. Such deduction or
payment, if any, will be estimated daily and reconciled and effected or
paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to Dreyfus and Mellon Equity is not
subject to reduction as the value of the Fund's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses 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
Fund's Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board, and by Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund
and have no direct or indirect financial interest in the operation of the
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by such
vote cast in person at a meeting called for the purpose of voting on the
Plan, and was last approved by the Board at a meeting held on May 3, 1995.
The Plan is terminable at any time by vote of a majority of Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund
and have no direct or indirect financial interest in the operation of the
Plan.
For the fiscal year ended October 31, 1995, $134,490 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 on a
best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
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 Dreyfus Transfer, Inc. (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 ($1,000 minimum) will be transferred by Federal Reserve wire only
to the commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or to a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and 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 Fund's Board. Expenses and fees, including the index
management and administration fees (reduced by the expense limitation, if
any), are accrued daily and taken into account for the purpose of
determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Taxation of the Fund. Management of the Fund believes that the Fund
qualified for the fiscal year ended October 31, 1995 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. 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 the Fund were treated as entering into straddles by
reason of its futures transactions, such straddles could be characterized as
"mixed straddles" if the futures transactions comprising such straddles were
governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." Depending upon which election
is made, if any, the results to the Fund may differ. If no election is
made, to the extent the straddle and conversion 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
The Advisers assume general supervision over placing orders on behalf
of the Fund for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in the best
judgment of the Advisers and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders at
the most favorable net price. Brokers also are selected because of their
ability to handle special executions such as are involved in large block
trades or broad distributions, provided the primary consideration is met.
Portfolio turnover may vary from year to year, as well as within a year.
High turnover rates are likely to result in comparatively greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is
evaluated by the Advisers based upon their knowledge of available
information as to the general level of commissions paid by other
institutional investors for comparable services.
For its portfolio securities transactions for the fiscal years ended
October 31, 1993, 1994 and 1995, the Fund paid total brokerage commissions
of $24,477, $24,979 and $58,043, respectively, none of which was paid to the
Distributor. There were no spreads or concessions on principal transactions
in fiscal 1993, 1994 and 1995.
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 4.370 year periods
ended October 31, 1995 was 20.78% and 14.52%, 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, 1995 was 32.95%. 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.
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.
On November 13, 1995, the Fund, which is incorporated under the name
Peoples S&P MidCap Index Fund, Inc., began operating under the name Dreyfus
MidCap Index Fund.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02903, serves as the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses.
Boston Safe Deposit and Trust Company (the "Custodian"), an indirect
wholly-owned subsidiary of Mellon Bank Corporation, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as the custodian of the Fund.
Under its Custody Agreement with the Fund, the Custodian holds the Fund's
portfolio securities and keeps all necessary accounts and records. The
Custodian's fees for its services to the Fund are paid by Mellon Equity.
Neither the Transfer Agent nor the Custodian has any part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares of
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 S&P A-1 Commercial Paper Ratings:
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the number 1, 2 or 3 to indicate
the relative degree of safety. Paper rated A-1 indicates that the degree of
safety regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign designation.
Description of Moody's Prime-1 Commercial Paper 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.
<TABLE>
<CAPTION>
Peoples S&P MidCap Index Fund, Inc.
- ------------------------------------------------------------------------
Statement of Investments October 31, 1995
<S> <C> <C>
Shares Common Stocks--90.4% Value
-------- ------------
Basic Materials--5.9%
5,861 Albany International, Cl. A ....... $ 121,616
13,300 Albemarle ......................... 247,713
16,215 Battle Mountain Gold .............. 123,639
5,404 Betz Laboratories ................. 217,511
7,810 Bowater ........................... 345,592
3,129 Brush Wellman ..................... 52,411
7,700 Cabot ............................. 365,750
3,116 Carlisle Companies ................ 128,146
3,244 Carpenter Technology .............. 122,866
4,791 Chesapeake ........................ 146,724
2,268 Cleveland-Cliffs .................. 84,767
8,921 Consolidated Papers ............... 510,727
9,776 Crompton & Knowles ................ 123,422
4,943 Dexter ............................ 118,014
23,800 Ethyl ............................. 264,775
5,453 Ferro ............................. 126,101
4,108 First Brands ...................... 187,941
7,779 Georgia Gulf ...................... 257,679
3,324 Gibson Greetings .................. 46,120
8,900 Glatfelter (P.H.) ................. 164,650
7,168 Hanna (M.A.) ...................... 183,680
5,073 Harsco ............................ 267,601
5,761 IMC Global ........................ 403,270
9,046 Lawter International .............. 96,114
6,918 Loctite ........................... 326,875
10,436 Longview Fibre .................... 151,322
12,888 Lubrizol .......................... 370,530
2,928 Lukens ............................ 90,036
3,868 Oregon Steel Mills ................ 55,119
3,670 Pentair ........................... 185,335
7,325 Schulman (A.) ..................... 137,344
8,112(a) Sealed Air ........................ 213,954
18,430 Sonoco Products ................... 456,142
11,183(a) Sterling Chemicals ................ 89,464
5,751 Wausau Paper Mills ................ 140,900
11,316 Witco ............................. 319,677
------------
7,243,527
------------
Capital Goods/Construction--5.6%
14,996(a) AES ............................... 296,171
14,136 Allegheny Ludlum .................. 238,545
7,411 CBI Industries .................... 230,667
4,533 CalMat ............................ 76,494
7,889 Calgon Carbon ..................... 89,737
15,147 Clayton Homes ..................... 397,609
11,702 Danaher ........................... 362,762
3,119(a) Datascope ......................... 74,076
5,304 Donaldson ......................... 129,285
3,815 Duriron ........................... 102,051
6,817 Federal-Mogul ..................... 121,854
6,451 GenCorp ........................... 67,736
4,294 Goulds Pumps ...................... 101,983
2,400 Granite Construction .............. 68,100
Capital Goods/Construction (continued)
6,440 Hubbell, Cl. B .................... $ 388,010
3,244 Kaydon ............................ 93,671
5,200 Kennametal ........................ 161,850
6,879 Keystone International ............ 153,058
4,826(a) MagneTek .......................... 47,657
12,018 Mark IV Industries ................ 234,351
2,955 Measurex .......................... 90,866
3,568 Nordson ........................... 206,052
4,088 OEA ............................... 111,398
12,484(a) Parametric Technology ............. 834,868
12,009 RPM ............................... 232,674
3,649(a) Rohr Industries ................... 54,279
3,341(a) Southdown ......................... 54,291
6,426 Stewart & Stevenson Services ...... 146,192
6,213 Sundstrand ........................ 380,546
4,300 Tecumseh Products, Cl. A .......... 202,100
3,671 Thiokol ........................... 127,108
7,000 Vulcan Materials .................. 389,375
10,041(a) Weatherford Enterra ............... 242,239
8,550 York International ................ 374,062
------------
6,881,717
------------
Consumer Cyclicals--12.3%
1,832 Angelica .......................... 41,220
4,600(a) Ann Taylor Stores ................. 50,600
4,368 Arvin Industries .................. 77,532
7,732 Belo (A.H.), Cl. A ................ 267,721
8,500(a) Best Buy .......................... 176,375
15,071(a) Brinker International ............. 182,736
6,200(a) Buffets ........................... 77,500
13,000(a) Burlington Industries ............. 144,625
10,050 CML Group ......................... 57,787
2,715 CPI ............................... 49,549
13,600 Callaway Golf ..................... 222,700
8,428 Cardinal Health ................... 432,989
5,866(a) Chris-Craft Industries ............ 233,907
9,410 Cintas ............................ 395,220
21,073(a) Circus Circus Enterprises ......... 561,069
4,190 Claire's Stores ................... 82,229
26,036 Coca Cola Enterprises ............. 693,209
12,025 Cracker Barrel Old Country
Store ........................... 204,425
3,200 Cross (A.T.), Cl. A ............... 45,600
821(a) Dave & Buster's ................... 12,315
11,943 Dole Food ......................... 449,355
13,418 Dollar General .................... 328,741
5,312 Duty Free International ........... 75,696
4,405 Edison Brothers Stores ............ 15,968
11,390 Family Dollar Stores .............. 173,697
9,200 Fingerhut Companies ............... 125,350
5,200(a) Fred Meyer ........................ 96,850
9,900(a) HFS ............................... 606,375
4,219 Hancock Fabrics ................... 36,916
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
-------- ------------
Consumer Cyclicals (continued)
15,012 Harley-Davidson ................... $ 401,571
9,770 Heilig-Meyers ..................... 179,524
18,240(a) Home Shopping Network ............. 148,200
2,903 Houghton Mifflin .................. 119,023
6,984 Intelligent Electronics ........... 53,253
4,683(a) International Dairy
Queen, Cl. A .................... 99,514
26,076 International Game
Technology ...................... 303,133
3,477 International Multifoods .......... 71,278
5,200(a) Jones Apparel Group ............... 178,100
7,200(a) Kohls ............................. 326,700
5,833 Lancaster Colony .................. 193,947
6,748(a) Lands' End ........................ 101,220
4,700 Lee Enterprises ................... 187,412
16,796 Leggett & Platt ................... 403,104
5,145(a) MacFrugal's Bargains
Closeouts ...................... 61,097
5,300 Media General, Cl. A .............. 147,075
3,871 Michael Foods ..................... 46,936
4,865 Miller (Herman) ................... 144,126
18,325(a) Mirage Resorts .................... 600,144
5,820 Modine Manufacturing .............. 160,050
6,748 Morrison Restaurants .............. 105,437
7,392(a) Multimedia ........................ 327,096
7,000(a) Nine West Group ................... 311,500
29,968(a) Office Depot ...................... 857,834
8,400(a) Outback Steakhouse ................ 263,550
10,342 Promus Hotel ...................... 227,524
13,400(a) Revco D.S. ........................ 318,250
4,100 Sbarro ............................ 85,588
20,044(a) Service Merchandise ............... 107,736
27,232 Shaw Industries ................... 347,208
5,800 Superior Industries
International.................... 163,125
3,119 Tiffany & Co. ..................... 136,066
28,944 Tyson Foods, Cl. A ................ 691,038
13,737 Unifi ............................. 309,082
6,507(a) Waban ............................. 101,672
4,407 Wallace Computer Services ......... 248,445
2,269 Washington Post, Cl. B ............ 658,010
4,197(a) Western Publishing Group .......... 34,363
------------
15,137,187
------------
Consumer Staples--9.5%
5,595(a) Acuson ............................ 65,042
2,634(a) Advanced Technology
Laboratories .................... 47,412
5,512(a) Applied Bioscience
International.................... 35,139
8,031 Bergen Brunswig, Cl. A ............ 166,643
6,526(a) Biogen ............................ 399,718
8,344 Bob Evans Farms ................... 150,192
Consumer Staples (continued)
9,251 Carter-Wallace .................... $ 97,135
11,697(a) Centocor........................... 131,591
8,220(a) Chiron............................. 748,020
3,888 Church & Dwight.................... 79,218
7,960(a) Coram Healthcare................... 31,840
3,295(a) Cordis............................. 364,098
7,777 Dean Foods......................... 216,784
2,571 Diagnostic Products................ 95,127
2,514 Dreyer's Grand Ice Cream........... 86,733
8,054(a) FHP International.................. 195,310
7,678 Flowers Industries................. 166,037
9,100(a) Forest Laboratories................ 376,512
11,400(a) Foundation Health.................. 483,075
5,779(a) Genzyme-General Division........... 336,627
18,626(a) HEALTHSOUTH........................ 486,604
8,500 Hannaford Brothers................. 222,062
6,200(a) Health Care & Retirement........... 182,125
6,830(a) HealthCare COMPARE................. 252,710
6,100(a) Healthsource....................... 323,300
10,115(a) Horizon/CMS Healthcare............. 204,829
9,500 IBP................................ 568,813
23,050 IVAX............................... 524,388
24,732 Laboratory Corporation of
America Holdings................. 210,222
2,543(a) Laboratory Corporation of America
Holdings (Warrants).............. 1,589
5,945 Lance.............................. 100,322
16,336 McCormick & Co. ................... 404,316
23,898 Mylan Laboratories................. 454,062
1,717 NCH................................ 93,362
13,148(a) NovaCare........................... 82,175
6,161(a) PacifiCare Health Systems,
Cl. A............................ 448,213
15,300(a) Perrigo............................ 187,425
9,200 Ruddick............................ 117,300
5,281 Savannah Foods & Industries........ 66,012
4,700(a) Scherer (R.P.)..................... 209,150
3,000(a) Scholastic......................... 185,250
5,422 Sizzler International.............. 18,977
5,720 Smucker (J.M.), Cl. A.............. 112,255
3,778 Stanhome........................... 115,229
9,675 Stryker............................ 436,584
7,869 Surgical Care Affiliates........... 233,119
7,391 Tambrands.......................... 330,747
7,066 Universal.......................... 148,386
5,264 Universal Foods.................... 180,292
10,438(a) Value Health....................... 238,769
8,715(a) Vons Companies..................... 221,143
------------
11,631,983
------------
Diversified--5.4%
6,400(a) Air & Water Technologies,
Cl. A............................ 32,000
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
-------- ------------
Diversified (continued)
8,452(a) Altera............................. $ 511,346
9,000(a) Alumax............................. 265,500
19,000(a) Atmel.............................. 593,750
12,028(a) Cirrus Logic....................... 506,680
5,400 DENTSPLY International............. 186,300
4,384(a) Exabyte............................ 56,718
2,742 Fuller (H.B.)...................... 86,373
4,921(a) Jacobs Engineering Group........... 107,647
8,496 Kansas City Southern
Industries....................... 396,126
2,293 Lawson Products.................... 55,032
9,000(a) Litton Industries.................. 356,625
1,800(a) MAXXAM............................. 66,600
8,600 McKesson........................... 410,650
4,640(a) Octel Communications............... 158,340
4,770 Olin............................... 305,280
7,299 Omnicom Group...................... 466,224
5,800 Rayonier........................... 217,500
1,936(a) Sequa, Cl. A....................... 49,852
20,562(a) Staples............................ 547,463
3,500 Teleflex........................... 148,312
16,195 Thermo Electron.................... 744,970
9,473 Topps.............................. 58,022
4,403(a) VeriFone........................... 118,881
6,661 Wellman............................ 156,533
------------
6,602,724
------------
Energy--4.0%
10,559 American Financial Group........... 295,652
11,881 Anadarko Petroleum................. 515,338
15,236 Apache............................. 388,518
5,385(a) BJ Services........................ 126,548
5,648 Diamond Shamrock................... 145,436
6,800 El Paso Natural Gas................ 183,600
33,100(a) Global Marine...................... 215,150
16,038 Lyondell Petrochemical............. 342,812
5,830 MAPCO.............................. 300,245
13,180 MCN................................ 286,665
8,982 Murphy Oil......................... 340,193
16,900(a) Nabors Industries.................. 145,762
10,077 Noble Affiliates................... 249,406
6,800 Parker & Parsley Petroleum......... 125,800
11,137(a) Parker Drilling.................... 58,469
6,286 Quaker State....................... 82,504
8,148 Questar............................ 245,459
19,782 Ranger Oil......................... 113,747
7,020(a) Seagull Energy..................... 120,218
7,710(a) Smith International................ 123,360
7,423 Tosco.............................. 256,093
8,776 Valero Energy...................... 207,333
6,065(a) Varco International................ 55,343
------------
4,923,651
------------
Financial--13.4%
19,823 AFLAC.............................. $ 807,787
21,739 Aon................................ 894,016
8,385 Bancorp Hawaii..................... 280,898
23,657 Bear Stearns Companies............. 470,183
7,659 Central Fidelity Banks............. 237,429
9,057 City National...................... 120,005
7,106 Comdisco........................... 216,733
23,710 Comerica........................... 797,249
7,645 Crestar Financial.................. 435,765
6,054 Dauphin Deposit.................... 175,566
12,383 Edwards (A.G.)..................... 315,766
13,090 Fifth Third Bancorp................ 880,302
10,006 First Security..................... 327,697
6,986 First Tennessee National........... 373,751
6,606 First Virginia Banks............... 270,020
12,610 First of America Bank.............. 537,501
16,208 Franklin Resources................. 822,556
27,400 Green Tree Financial............... 729,525
4,096 Hartford Steam Boiler
Inspection & Insurance........... 190,976
23,700 Hibernia, Cl.A..................... 234,037
6,976 Kemper............................. 338,336
18,591 Marshall & Ilsley.................. 450,832
11,031 Mercantile Bancorporation.......... 485,364
9,534 Mercantile Bankshares.............. 262,185
11,577 Meridian Bancorp................... 494,917
11,224 Northern Trust..................... 535,946
20,000 Paine Webber Group................. 440,000
14,387 Progressive........................ 597,061
9,164 Provident Life & Accident
Insurance Co. of America......... 245,137
9,214 Regions Financial.................. 367,408
34,348 Schwab (Charles)................... 785,711
11,218 Sotheby's Holdings, Cl. A.......... 155,650
17,395 SouthTrust......................... 437,049
16,642 State Street Boston................ 646,958
4,625 Transatlantic Holdings............. 311,609
11,042 UJB Financial...................... 351,964
7,764 West One Bancorp................... 329,970
6,900 Wilmington Trust................... 203,550
------------
16,557,409
------------
Technology--15.6%
6,722 AMETEK............................. 118,475
8,882(a) AST Research....................... 78,828
14,309 Adobe Systems...................... 815,613
18,600(a) American Power Conversion.......... 190,650
15,147(a) Analog Devices..................... 547,185
9,331(a) Arrow Electronics.................. 473,548
8,604 Avnet.............................. 433,426
10,110(a) BMC Software....................... 360,169
22,954(a) Bay Networks....................... 1,520,702
5,812 Beckman Instruments................ 192,522
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
-------- ------------
Technology (continued)
5,611(a) Borland International.............. $ 76,450
11,138(a) Cadence Design System.............. 359,184
10,100(a) California Energy.................. 183,063
9,100(a) Compuware.......................... 207,025
10,508(a) Conner Peripherals................. 189,144
5,204(a) Convex Computer.................... 23,418
8,259(a) Cypress Semiconductor.............. 291,130
17,974(a) Dell Computer...................... 838,038
42,900(a) EMC................................ 664,950
10,200(a) Electronic Arts.................... 373,575
9,113 Federal Signal..................... 203,903
8,700(a) Fiserv............................. 224,025
6,161 HON Industries..................... 170,968
5,396(a) Information Resources.............. 58,682
26,500(a) Informix........................... 771,812
15,000(a) Integrated Device Technology....... 285,000
25,396(a) LSI Logic.......................... 1,196,787
14,340 Linear Technology.................. 627,375
10,509(a) Mentor Graphics.................... 220,689
6,200(a) Micro Warehouse.................... 275,900
20,313 Molex.............................. 670,329
38,400(a) NEXTEL Communications.............. 532,800
1,504 National Presto Industries......... 60,912
5,615(a) Nellcor............................ 322,862
4,023 Precision Castparts................ 143,822
10,253(a) Quantum............................ 178,146
8,276 Reynolds & Reynolds, Cl. A......... 294,833
14,204(a) Seagate Technology................. 635,629
14,621 Sensormatic Electronics............ 312,524
6,182(a) Sequent Computer Systems........... 107,412
9,000(a) Solectron.......................... 362,250
5,607 Standard Register.................. 126,158
10,513(a) Storage Technology................. 258,883
4,594(a) Stratus Computer................... 142,988
5,966(a) Structural Dynamics Research....... 108,880
7,676(a) Symantec........................... 186,623
5,216(a) Symbol Technologies................ 181,908
15,044(a) Teradyne........................... 502,093
8,000 U.S. Robotics...................... 740,000
6,738 Varian Associates.................. 346,165
11,500(a) Vishay Intertechnology............. 405,375
14,166(a) Xilinx............................. 651,636
------------
19,244,464
------------
Transport & Services--4.4%
4,269 Airborne Freight................... 112,061
2,587(a) Alaska Air Group................... 38,482
9,157 Alexander & Baldwin................ 210,611
6,312 American President
Companies........................ 153,066
5,200 Arnold Industries.................. 84,500
6,680 Atlantic Southeast Airlines........ 165,330
Transport & Services (continued)
4,024 Banta.............................. $ 174,038
5,923 Diebold............................ 313,919
3,261 Ennis Business Forms............... 46,469
15,255 Equifax............................ 594,945
6,088 FlightSafety International......... 290,702
3,973 GATX............................... 188,718
7,500 Hunt (JB) Transport................ 116,250
8,241 Illinois Central, Cl. A............ 315,218
7,385 Kelly Services, Cl. A.............. 185,548
15,100 Manpower........................... 409,587
8,400 Olsten............................. 323,400
7,070 Overseas Shipholding Group......... 120,190
3,340 PHH................................ 146,125
9,012 Paychex............................ 390,896
3,877(a) Policy Management Systems.......... 182,704
7,005 Rollins............................ 147,105
12,100(a) Rollins Environmental Services..... 40,837
10,705 Tidewater.......................... 282,344
8,251 Trinity Industries................. 244,436
5,782 Watts Industries, Cl. A............ 119,254
------------
5,396,735
------------
Utilities--14.3%
12,356(a) ADC Telecommunications............. 494,240
24,022 Allegheny Power System............. 633,580
5,531 Atlanta Gas Light.................. 213,635
10,854 Atlantic Energy.................... 210,296
2,895 Black Hills........................ 72,737
9,694 Brooklyn Union Gas................. 243,562
17,645 CMS Energy......................... 487,443
4,520 Central Louisiana Electric......... 121,475
6,315 Central Maine Power................ 87,621
11,758 Century Telephone
Enterprises...................... 340,982
9,436 Comsat............................. 187,541
12,034 Delmarva Power & Light............. 264,748
19,216 Florida Progress................... 636,530
32,022 Frontier........................... 864,594
5,829 Hawaiian Electric Industries....... 227,331
7,634 IPALCO Enterprises................. 281,504
7,583 Idaho Power........................ 210,428
15,176 Illinova........................... 430,619
4,494 Indiana Energy..................... 94,936
12,480 Kansas City Power & Light.......... 310,440
6,607 LG & E Energy...................... 274,191
7,368 Lincoln Telecommunications......... 127,098
20,733 MidAmerican Energy................. 331,737
6,137 Minnesota Power & Light............ 175,672
10,715 Montana Power...................... 243,766
12,848 NIPSCO Industries.................. 468,952
7,537 National Fuel Gas.................. 224,226
9,211 Nevada Power....................... 201,491
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
-------- ------------
Utilities (continued)
13,016 New England Electric System........ $ 507,624
14,388 New York State Electric & Gas...... 363,297
25,160 Northeast Utilities................ 622,710
7,873 Oklahoma Gas & Electric............ 314,920
17,536 Pinnacle West Capital.............. 482,240
10,157 Portland General Electric.......... 275,509
23,783 Potomac Electric Power............. 594,575
12,681 Public Service Co. of Colorado..... 432,739
8,394(a) Public Service Co. of
New Mexico....................... 140,600
12,790 Puget Sound Power & Light.......... 290,972
20,464 SCANA.............................. 519,274
12,983 Southern New England
Telecommunications............... 469,011
7,982 Southwestern Public Service........ 262,408
4,948 TCA Cable TV....................... 146,584
23,418 TECO Energy........................ 553,250
11,400 Telephone & Data Systems........... 456,000
9,000 UtiliCorp United................... 259,875
8,757(a) Vanguard Cellular Systems,
Cl. A............................ 195,938
5,979 WPL Holdings....................... 182,360
8,560 Washington Gas Light............... 163,710
21,987 Wisconsin Energy................... 648,616
37,978(a) WorldCom........................... 1,239,032
------------
17,582,619
------------
TOTAL COMMON STOCKS
(cost $94,059,436)............... $111,202,016
------------
------------
CONVERTIBLE PREFERRED
STOCKS--0.0%
Financial;
223(a,b) Everen, Series A, 13.50%
(cost $4,795).................... $ 4,823
------------
------------
Principal SHORT-TERM
Amount INVESTMENTS--10.0%
---------
U.S. Treasury Bills--.2%
$ 200,000(c) 5.99%, 4/4/96 ..................... $ 195,422
------------
Repurchase Agreements--9.8%
12,072,000 Paine Webber, Inc.
5.80% Dated 10/31/95,
Due 11/1/95 in the amount
of $12,073,945 (fully
collateralized by $11,995,000
U.S. Treasury Notes,
6.875%, 2/28/97,
value $12,322,494)............... 12,072,000
------------
TOTAL SHORT-TERM
INVESTMENTS
(cost $12,267,415)............... $ 12,267,422
------------
TOTAL INVESTMENTS
(cost $106,331,646).......................... 100.4% $123,474,261
------ ------------
------ ------------
LIABILITIES, LESS CASH
AND RECEIVABLES.............................. (.4%) $ (492,606)
------ ------------
------ ------------
NET ASSETS .................................... 100.0% $122,981,655
------ ------------
------ ------------
Notes to Statement of Investments:
(a) Non-income producing.
(b) Convertible into Everen Capital bond, 13.50%, 9/15/2007.
(c) Wholly held by custodian in a segregated account as collateral for
open financial futures positions.
</TABLE>
Statement of Financial Futures October 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value Unrealized
Number of Covered (Depreciation)
Financial Futures Long Contracts by Contracts Expiration at 10/31/95
- -------------------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Standard & Poor's MidCap 400................. 113 $11,893,250 Dec. '95 $(421,685)
==========
</TABLE>
See notes to financial statements.
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- -------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities, at value--Note 1(b)
(cost $106,331,646)--see statement................................... $123,474,261
Cash.................................................................... 129,720
Dividends and interest receivable....................................... 109,090
Prepaid expenses........................................................ 12,826
Due from The Dreyfus Corporation........................................ 34,573
------------
123,760,470
LIABILITIES:
Due to World Asset Management........................................... $ 10,499
Payable for investment securities purchased............................. 339,758
Payable for Common Stock redeemed....................................... 244,069
Payable for futures variation margin--Note 3(a)......................... 53,675
Accrued expenses........................................................ 130,814 778,815
--------- ------------
NET ASSETS ................................................................ $122,981,655
------------
------------
REPRESENTED BY:
Paid-in capital......................................................... $ 99,269,656
Accumulated undistributed investment income--net........................ 1,487,878
Accumulated undistributed net realized gain on investments.............. 5,503,191
Accumulated net unrealized appreciation on investments [including
($421,685) net unrealized (depreciation) on financial futures]
--Note 3(b)........................................................... 16,720,930
------------
NET ASSETS at value applicable to 6,337,980 shares outstanding
(200 million shares of $.001 par value Common Stock authorized)......... $122,981,655
------------
------------
NET ASSET VALUE, per share
($122,981,655 / 6,337,980 shares)....................................... $19.40
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- -----------------------------------------------------------------
Statement of Operations year ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends (net of $399 foreign taxes withheld at source)......... $1,853,716
Interest.............................................................. 397,096
----------
Total Income.................................................... $2,250,812
Expenses:
Index management fee--Note 2(a)....................................... 98,063
Administration fee--Note 2(a)......................................... 294,190
Shareholder servicing costs--Note 2(b)................................ 188,998
Registration fees..................................................... 56,590
Legal fees............................................................ 41,695
Auditing fees......................................................... 41,364
Custodian fees--Note 2(a)............................................. 37,560
Prospectus and shareholders' reports.................................. 25,840
Directors' fees and expenses--Note 2(c)............................... 23,176
Miscellaneous......................................................... 23,844
----------
831,320
Less--reduction in management fee and administration fee from World and
Dreyfus due to undertakings and redemption fee--Note 2(a).......... 345,273
----------
Total Expenses.................................................. 486,047
-----------
INVESTMENT INCOME--NET........................................... 1,764,765
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments--Note 3(a)............................. $4,284,157
Net realized gain on financial futures--Note 3(a);
Long transactions..................................................... 1,364,616
----------
Net Realized Gain..................................................... 5,648,773
Net unrealized appreciation on investments [including ($436,655)
net unrealized (depreciation) on financial futures]................... 11,878,944
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 17,527,717
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $19,292,482
-----------
-----------
</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,
---------------------------------
1994 1995
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................ $ 1,227,409 $ 1,764,765
Net realized gain on investments.................................. 3,427,593 5,648,773
Net unrealized appreciation (depreciation) on investments for
the year........................................................ (3,340,443) 11,878,944
------------ ------------
Net Increase In Net Assets Resulting From Operations............ 1,314,559 19,292,482
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net............................................. (1,123,649) (1,274,372)
Net realized gain on investments.................................. (2,309,722) (3,413,496)
------------ ------------
Total Dividends................................................. (3,433,371) (4,687,868)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 61,712,647 44,222,299
Dividends reinvested.............................................. 3,142,822 4,181,647
Cost of shares redeemed........................................... (53,021,949) (15,431,258)
------------ ------------
Increase In Net Assets From Capital Stock Transactions.......... 11,833,520 32,972,688
------------ ------------
Total Increase In Net Assets.................................. 9,714,708 47,577,302
NET ASSETS:
Beginning of year................................................. 65,689,645 75,404,353
------------ ------------
End of year (including undistributed investment income-net:
$997,485 in 1994 and $1,487,878 in 1995)........................ $ 75,404,353 $122,981,655
------------ ------------
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 3,634,804 2,528,662
Shares issued for dividends reinvested............................ 182,828 270,132
Shares redeemed................................................... (3,144,607) (859,974)
------------ ------------
Net Increase In Shares Outstanding.............................. 673,025 1,938,820
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ----------------------------------------------------------------------
Financial Highlights
Reference is made to page 3 of the Fund's Prospectus dated March 1, 1996.
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 ("World"), a Delaware general partnership the majority general
partner of which is Munder Capital Management, serves as the Fund's index
manager. Prior to December 31, 1994, World Asset Management, Inc. served as
the Fund's index manager. Comerica Bank serves as the Fund's custodian. The
Dreyfus Corporation ("Dreyfus") serves as the Fund's administrator. Dreyfus
is a direct subsidiary of Mellon Bank, N.A. Premier Mutual Fund Services,
Inc. (the "Distributor") acts as the distributor of the Fund's shares, which
are sold without a sales charge. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
On April 24, 1995, a special meeting of the Fund's stockholders was held
for the purpose of approving a new index management agreement with World. A
total of 3,255,496 shares of common stock were represented at the meeting,
3,089,961 of such shares were voted in favor of the proposal, 28,644 shares
were voted against the proposal and 136,891 shares abstained from voting.
Effective November 13,1995, the Fund will operate under the name Dreyfus
MidCap Index Fund and Dreyfus will serve as the Fund's manager and Mellon
Equity Associates, an affiliate of Dreyfus ("Mellon Equity"), will serve as
the Fund's index manager. In addition, Boston Safe Deposit and Trust Company,
an affiliate of Dreyfus, will serve as the Fund's custodian.
(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.
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 index 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
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
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.
(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 (exclusive of certain expenses as described above) 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
had undertaken from November 1, 1994 through November 7, 1994, to waive the
index management fee and administration fee. World and Dreyfus had currently
undertaken from November 8, 1994 through June 4, 1995 with respect to World
and through October 31, 1996 with respect to Dreyfus, to reduce the
management fee and administration fee paid by the Fund (exclusive of certain
expenses as described above), and to assume all expenses in excess of an
annual rate of .50 of 1% of the average daily value of the Fund's net assets.
For the year ended October 31, 1995, pursuant to the undertakings, World
waived $39,687 of its index management fee and Dreyfus waived $301,166 of its
administration fee. In addition, Comerica Bank earned $37,560 for custodian
services provided to the Fund. For the year ended October 31, 1995, the Fund
received $4,421 in redemption fees.
(b) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, 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
<PAGE>
Peoples S&P MidCap Index Fund, Inc.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the year ended October 31, 1995,
the Fund was charged an aggregate of $134,490 pursuant to the Shareholder
Services Plan.
(c) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
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, 1995
amounted to $42,217,509 and $18,725,504, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. 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, 1995 and their related unrealized market (depreciation) are set forth in
the Statement of Financial Futures.
(b) At October 31, 1995, accumulated net unrealized appreciation on
investments was $16,720,930, consisting of $23,482,956 gross unrealized
appreciation and $6,762,026 gross unrealized depreciation.
At October 31, 1995, 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, 1995, 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 verification by
examination of securities held by the custodian as of October 31, 1995 and
confirmation of securities not held by the custodian by correspondence with
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 audits 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, 1995, 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, 1995
