-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QeCZBNK655ZMh0c+jtdkfVnClBVz2Exx3qfUytdCPwznsn9edc/CGAFLycFEo0tZ P24mc7jCy8aqxMcxEBRdXg== 0000030167-98-000008.txt : 19980810 0000030167-98-000008.hdr.sgml : 19980810 ACCESSION NUMBER: 0000030167-98-000008 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980401 FILED AS OF DATE: 19980807 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS THIRD CENTURY FUND INC CENTRAL INDEX KEY: 0000030167 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132691318 STATE OF INCORPORATION: MD FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02192 FILM NUMBER: 98679124 BUSINESS ADDRESS: STREET 1: 144 GLENN CURTISS BLVD CITY: UNIONDALE STATE: NY ZIP: 11556-0144 BUSINESS PHONE: 2129226792 MAIL ADDRESS: STREET 1: C/O DREYFUS CORP STREET 2: 200 PARK AVENUE, 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10166 N-30D 1 ANNUAL REPORT Dreyfus Third Century Fund, Inc. Annual Report May 31, 1998 The Dreyfus Third Century Fund, Inc. - ------------------------------------------------------------------------------- Letter to Shareholders Dear Shareholder: We are pleased to provide you with this annual report for The Dreyfus Third Century Fund, Inc. for the 12-month period ended May 31, 1998. Over this period, your Fund produced a total return of 27.76%,* which compares with a total return of 30.66% for the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") and 23.50% for the Dow Jones Industrial Average.** The market environment during the fiscal year that ended May 31, 1998 was ideal for investors. With a strong economy, little threat of higher inflation, low interest rates and strong consumer confidence, equity investors continued to plow money into the market. The result was another profitable year for our investors. During the period, our strategy of seeking to purchase reasonably priced growth stocks with consistent earnings paid off as investors decided that large, liquid and stable growing companies were the best stocks to own in an uncertain global market. While there were some earnings disappointments due to the slowing demand in Asia, investors frequently overlooked the shortfalls and appeared to focus on the prospects of improved earnings over the long term. Economic Review The Federal Reserve Board remains torn between concern over accelerating wage inflation and worries over Asia's severe economic downturn. Although rising wages have not fueled higher prices, they have begun to squeeze profit margins. Margins may prove additionally vulnerable to a slower economy. Somewhat slower overall economic growth has been apparent this spring, ending nearly two years of above-trend growth. Meanwhile, unchanged Fed policy has left market interest rates in a fairly narrow trading range. Turmoil in Asia has meant several lost opportunities for Fed tightening, instead allowing the U.S. economy to run without restraint by the Fed. This spring, the tight labor market has pulled down the unemployment rate towards 4%, and acceleration in wage inflation has developed across a spectrum of industries. The weak sector has been manufacturing, hurt by slower exports and weak profits. Although the manufacturing slowdown has not featured many layoffs, the manufacturing work week has been cut sharply since year-end. The resulting loss of income for manufacturing workers has helped to slow the rate of overall wage acceleration this spring. Meanwhile, a resumption of rapid import growth in recent months has curbed price inflation. The virtual absence of pricing power alongside rapid wage growth threatens to erode profit margins in many sectors this year. The low price - high wage mix has become apparent in many service sector industries. A shift to slower economic growth might further compromise their margins. Manufacturers' profits are under pressure from weak prices and weakening demand. Incoming evidence supports a slowdown in real Gross Domestic Product (GDP) growth this spring. The slowdown is likely to be manifest in deteriorating net exports that offset much of the rise in demand. Moreover, inventories were built at a rapid pace earlier this year, implying some drag as they are worked off. Although growth in demand has remained robust, some of the props have begun to weaken. Notably, the cutbacks in the length of the work week in the manufacturing sector have damped the rise in aggregate wages this spring. The above backdrop has left interest rates in a benign trading range that should persist unless the economy slows more rapidly, or unless price inflation accelerates. Market Overview The stock market, which had been setting records for months, finally stumbled once again in May. By the time the month ended, the supposedly merry month of May turned out to be the worst for market prices since the attack of Asian flu last October. For the month, the Dow Jones Industrial Average lost 1.67% and the S& P 500 Index was down 1.72%. Yet there was a cushion of gains still remaining from the bull market that had begun after the October relapse and continued until the first few days of May. For the 12 months ended May 31, 1998, the DJIA was still ahead by 23.50% and the S&P 500 by 30.66%. The latest relapse could have been worse and, in fact, the month of June started off just that way--worse. As was to be expected, predictions that the sky is falling could be found. However, the prevailing view seemed to be that a market correction was normal and that it didn't necessarily mean the end of the long boom that has been lifting equity prices. Previous star performers, such as the technology stocks, were being hit from two directions: continued fallout from the Asia crisis, and disappointing company earnings. In other sectors, the market was also very sensitive to any earnings disappointments, but this was offset for some companies by a continuing wave of spectacular corporate mergers. The economic background for the stock market was still very favorable, yet the market still worried about such things as earnings weakness in Japan and elsewhere in Asia, the exceedingly strong U.S. dollar, and the continuing travails of the embattled Clinton presidency. Even so, no rush for the exits in Wall Street was visible, and investors were still pouring billions of dollars into the equity markets each month via their retirement plans and direct investing. Portfolio Focus Our decision to overweight the technology, consumer staples and financial sectors in the previous two years helped the portfolio gain strong performance relative to the market. Because of the negative effects of the Asia crisis, that strategy did not work well during the May 31, 1998 fiscal year. As a result, the Fund's performance lagged the S&P 500 Index performance by 2.90%. The technology sector, which had been a stellar performer in the first half of the fiscal year, underperformed late in 1997 and lagged the market by 9% for the reporting period. The computer software group had strong performance, but this was mitigated by the very weak performance of the hardware group. The portfolio software stocks including Computer Associates International , Microsoft and BMC Software performed well, while disk drive maker Seagate Technology performed poorly, declining 42.4%. The financial sector came under pressure in the fourth quarter of 1997 because of fears that the Fed would raise interest rates to contain the economy's torrid growth pace. The sector's performance did not improve appreciably during the first quarter of 1998, despite the improvement in the outlook for the Asian economies. However, there were some bright spots in the portfolio because of increased merger activities in the banking sector. Three of the portfolio's holdings, BankAmerica, Citicorp and Ahmanson (H.F.) & Co., which were involved in merger activities, saw their stocks perform well. BankAmerica was up 47.3%, Citicorp rose 37.4% and Ahmanson appreciated by 22% over a four-month period. The consumer staples sector, which was the other stellar performer in early 1997, lost momentum later because of the view that the strengthening dollar would impact the profits of the multinational companies in the group. Coca-Cola underperformed the market by 15% while Procter & Gamble was down 7% for the reporting period. Our concern for the short-term impact of the strong dollar led us to reduce our exposure to the two stocks in the third quarter of 1997. However, given our long-term favorable view on the companies because of their superior products and management, we bought additional shares after the stocks had declined to what we considered to be reasonable valuations. The Fund's performance was helped by overweighting in the consumer cyclical sector, which was the best performing sector for the period. This sector benefitted from investors seeking companies with large domestic operations. With unemployment low and personal income levels high, companies that benefit from consumer spending performed very well during the period. Two of the Fund's holdings, Home Depot and Wal-Mart Stores, were up strongly because of strong growth in their domestic business. The worst performing sectors for the period were the transportation and energy groups, which were underweighted in the portfolio. Seitel and Global Marine were two stocks in the portfolio's energy sector that performed poorly over the period. Market Outlook As we enter the second half of 1998, we believe that all the economic forces prevalent in the first half of the year remain in force. We are in the midst of the eighth year of the current economic expansion and there are few signs that the economy will overheat or slide into recession. The lack of inflation pressure has been the key factor sustaining this trend as it has helped to prevent the Fed from aggressively raising short-term interest rates. Through May, the Consumer Price Index was up only 1.7% year-over-year and the Producer Price Index was down 1.2%. We believe that the market has been able to sustain a high valuation in the current environment because of the favorable economic picture in the U.S. While we do not see any real problems on the horizon that will precipitate a severe market decline, we are concerned about the unrealistic expectations built into the market by investors. In the five months ended May 31, 1998, the market appreciated by more than most strategists had predicted for the entire year. We believe the economy will slow from its torrid pace in the second half of the year and corporate earnings will slow down as a variety of factors including the strong dollar and cheap products from Asia squeeze profit margins. As a result of these concerns, we believe the market will experience increased volatility but trade in a narrow band for the rest of the year. Given our cautious outlook on the market for the near term, we currently intend to continue to emphasize high quality stocks in the portfolio. As stocks reach our price targets, we will replace them with stocks that we believe offer greater potential for appreciation. By staying true to our discipline and process, we hope to add value to the portfolio over the long term. Social Investment Review Social screening is a challenging process requiring the use of a wide variety of research tools and methodologies. Fund management employs a disciplined investigative process to ensure that the Fund purchases and continues to hold only companies that conduct their business in a manner that contributes to the enhancement of the quality of life in America. We not only speak with companies, but scrutinize information from respected social investment research providers like the Council on Economic Priorities, Kinder Lydenberg and Domini, and Environmental Information Services. Government databases, on-line media searches and the Internet help to provide insight into a company's behavior and reputation, as do discussions with community and watchdog organizations. More information on the social screening process can be obtained by contacting Dreyfus and requesting our Third Century Fund Guide to Socially Responsible Investing. Thank you for your confidence in Dreyfus. It is a privilege to serve your investment needs. Sincerely, /s/ Maceo K. Sloan /s/ Eric Steedman Maceo K. Sloan Eric Steedman Portfolio Manager Portfolio Manager NCM Capital Management Group, Inc. The Dreyfus Corporation June 18, 1998 New York, N.Y. * Total return includes reinvestment of dividends and any capital gains paid. ** SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of income dividends and, where applicable, capital gain distributions. Both the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial Average are widely accepted unmanaged indices of U.S. stock market performance, which are composed only of equity securities. The Dreyfus Third Century Fund, Inc. May 31, 1998 - ------------------------------------------------------------------------------- - - COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE DREYFUS THIRD CENTURY FUND, INC. AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX $274,257 Standard & Poor's 500 Composite Stock Price Index* Dollars $263,121 The Dreyfus Third Century Fund, Inc. *Source: Lipper Analytical Services, Inc. Average Annual Total Returns - ------------------------------------------------------------------------------ One Year Ended Five Years Ended Ten Years Ended From Inception (3/29/72) May 31, 1998 May 31, 1998 May 31, 1998 to May 31, 1998 - -------------- ---------------- --------------- ------------------------ 27.76% 18.98% 16.27% 13.31% - -------------- Past performance is not predictive of future performance. The above graph compares a $10,000 investment made in The Dreyfus Third Century Fund, Inc. on 3/29/72 (Inception Date) to a $10,000 investment made in the Standard & Poor's 500 Composite Stock Price Index on that date. For comparative purposes, the value of the Index on 3/31/72 is used as the beginning value on 3/29/72. All dividends and capital gain distributions are reinvested. The Dreyfus Third Century Fund primarily seeks capital growth through investment in common stocks of companies that, in the opinion of the Fund's management, not only meet traditional investment standards, but which also show evidence that they conduct their business in a manner that contributes to the enhancement of the quality of life in America. Current income is a secondary goal. The Fund's performance shown in the line graph takes into account all applicable fees and expenses. The Standard & Poor's 500 Composite Stock Price Index is a widely accepted, unmanaged index of overall stock market performance which does not take into account charges, fees and other expenses and is not subject to the same socially responsible investment criteria as The Dreyfus Third Century Fund. Further information relating to Fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the Prospectus and elsewhere in this report. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Investments May 31, 1998
Common Stocks--97.6% Shares Value - -------------------------------------------------------------------------------- ------------ ------------ Commercial Services--1.3% Cognizant.................................... 226,000 $ 12,034,500 ------------ Consumer Durables--1.7% Newell....................................... 320,000 15,440,000 ------------ Consumer Non-Durables--11.2% Clorox....................................... 203,300 16,975,550 Coca-Cola.................................... 234,100 18,347,588 Gillette..................................... 75,300 8,819,513 Hershey Foods................................ 125,100 8,663,175 Jones Apparel Group.......................(a) 210,600 13,346,775 PepsiCo...................................... 485,000 19,794,063 Procter & Gamble............................. 195,500 16,409,781 ------------ 102,356,445 ------------ Consumer Services--3.9% Disney (Walt)................................ 171,000 19,344,375 New York Times, Cl. A........................ 77,400 5,456,700 Service Corp. International.................. 259,600 10,611,150 ------------ 35,412,225 ------------ Electronic Technology 13.0% Applied Materials.........................(a) 435,000 13,920,000 Cisco Systems.............................(a) 193,500 14,633,438 Compaq Computer.............................. 599,900 16,384,769 Ericsson (LM) Telephone, Cl. B, A.D.R........ 724,000 20,181,500 Intel........................................ 89,900 6,422,231 Linear Technology............................ 196,500 13,742,719 Sun Microsystems..........................(a) 363,800 14,574,738 Tellabs...................................(a) 273,500 18,794,578 ------------ 118,653,973 ------------ Finance--18.6% Ahmanson (H.F.) & Co......................... 132,000 10,065,000 Allstate..................................... 246,100 23,164,163 American International Group................. 129,500 16,033,719 BankAmerica.................................. 210,900 17,438,794 BANKBOSTON................................... 113,500 11,960,063 Citicorp..................................... 56,600 8,440,475 Conseco...................................... 340,000 15,852,500 Federal National Mortgage Association........ 339,400 20,321,575 Nationwide Financial Services, Cl. A......... 251,500 10,924,531 Summit Bancorp............................... 178,600 8,952,325 SunAmerica................................... 534,100 25,970,613 ------------ 169,123,758 ------------
The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Investments (continued) May 31, 1998
Common Stocks (continued) Shares Value - -------------------------------------------------------------------------------- ------------ ------------ Health Services--4.1% Cardinal Health.............................. 162,100 $ 14,447,163 HBO & Co..................................... 197,200 11,382,138 HEALTHSOUTH...............................(a) 405,600 11,508,900 ------------ 37,338,201 ------------ Health Technology--12.3% Bristol-Myers Squibb......................... 239,200 25,714,000 Guidant...................................... 248,800 16,032,050 Lilly (Eli).................................. 119,800 7,360,213 Medtronic.................................... 507,400 28,224,117 Merck & Co................................... 213,400 24,981,138 Schering-Plough.............................. 118,000 9,875,125 ------------ 112,186,643 ------------ Industrial Services--1.2% Schlumberger................................. 141,300 11,030,231 ------------ Process Industries--3.6% Avery Dennison............................... 216,300 11,207,044 Bemis ....................................... 216,100 9,116,719 Fort James................................... 163,000 7,793,438 Sealed Air................................... 96,000 5,136,000 ------------ 33,253,201 ------------ Producer Manufacturing--5.3% Honeywell.................................... 213,200 17,895,475 Illinois Tool Works.......................... 261,500 17,259,000 Pitney Bowes................................. 129,200 6,072,400 Tyco International........................... 130,800 7,243,050 ------------ 48,469,925 ------------ Retail Trade--7.1% Home Depot................................... 330,500 25,964,906 OfficeMax.................................(a) 421,600 6,930,050 Safeway...................................(a) 480,200 17,497,288 Wal-Mart Stores.............................. 254,500 14,045,219 ------------ 64,437,463 ------------ Technology Services--7.7% Automatic Data Processing.................... 153,600 9,772,800 BMC Software..............................(a) 180,400 8,309,675 Cadence Design System.....................(a) 135,000 4,758,750 Computer Associates International............ 321,550 16,881,375 Microsoft.................................(a) 103,700 8,795,056 Oracle....................................(a) 507,400 11,987,325 Parametric Technology.....................(a) 318,000 9,748,688 ------------ 70,253,669 ------------
The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Investments (continued) May 31, 1998
Common Stocks (continued) Shares Value - -------------------------------------------------------------------------------- ------------ ------------ Transportation--1.4% FDX.......................................(a) 196,800 $ 12,619,800 ------------- Utilities--5.2% AES.......................................(a) 333,300 15,852,581 Ameritech.................................... 180,500 7,659,969 Bell Atlantic................................ 139,500 12,781,688 MCI Communications........................... 208,600 11,153,581 ------------- 47,447,819 ------------- TOTAL COMMON STOCKS (cost $658,590,830)....................... $890,057,853 ============= Principal Short-Term Investments--2.6% Amount - -------------------------------------------------------------------------------- ------------ U.S. Treasury Bills: 4.82%, 7/2/1998.............................. $ 3,400,000 $ 3,386,672 4.70%, 7/23/1998............................. 7,830,000 7,776,130 4.89%, 7/30/1998............................. 5,061,000 5,021,474 4.98%, 8/6/1998.............................. 3,611,000 3,579,079 5.07%, 8/20/1998............................. 130,000 128,589 4.92%, 8/27/1998............................. 3,529,000 3,487,287 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $23,376,737)........................ $ 23,379,231 ============= TOTAL INVESTMENTS (cost $681,967,567)......................................... 100.2% $913,437,084 ======= ============= LIABILITIES, LESS CASH AND RECEIVABLES........................................ (.2%) $ (1,749,374) ======= ============= NET ASSETS.................................................................... 100.0% $911,687,710 ======= ============= Notes to Statement of Investments: - ----------------------------------------------------------------------------------------------------------------- (a) Non-income producing.
See notes to financial statements. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Assets and Liabilities May 31, 1998
Cost Value ------------- ------------- ASSETS: Investments in securities--See Statement of Investments................................... $681,967,567 $913,437,084 Cash............................................. 115,413 Receivable for shares of Common Stock subscribed. 1,626,551 Dividends receivable............................. 483,256 Prepaid expenses................................. 63,120 ------------- 915,725,424 ------------- LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 594,331 Payable for shares of Common Stock redeemed...... 3,180,315 Accrued expenses................................. 263,068 ------------- 4,037,714 ------------- NET ASSETS..................................................................... $911,687,710 ============= REPRESENTED BY: Paid-in capital.................................. $586,335,246 Accumulated undistributed investment income--net. 85,006 Accumulated net realized gain (loss) on investments 93,797,941 Accumulated net unrealized appreciation (depreciation) on investments--Note 4......................... 231,469,517 ------------- NET ASSETS..................................................................... $911,687,710 ============= SHARES OUTSTANDING (150 million shares of $.33-1/3 par value Common Stock authorized)............. 77,385,225 NET ASSET VALUE, offering and redemption price per share....................... $11.78 ======
See notes to financial statements. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Operations Year Ended May 31, 1998 INVESTMENT INCOME INCOME: Cash dividends (net of $24,018 foreign taxes withheld at source)...................... $ 6,476,842 Interest................................... 1,787,047 ------------ Total Income.......................... $ 8,263,889 EXPENSES: Management fee--Note 3(a).................. 5,963,715 Shareholder servicing costs--Note 3(b)..... 1,403,151 Professional fees.......................... 99,313 Registration fees.......................... 82,252 Custodian fees--Note 3(b).................. 60,539 Prospectus and shareholders' reports....... 51,368 Directors' fees and expenses--Note 3(c).... 44,971 Loan commitment fees--Note 2............... 5,910 Interest expense--Note 2................... 5,098 Miscellaneous.............................. 20,122 ----------- Total Expenses........................ 7,736,439 ------------ INVESTMENT INCOME--NET................................................... 527,450 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4: Net realized gain (loss) on investments.... $127,135,626 Net unrealized appreciation (depreciation) on investments........................... 61,034,848 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 188,170,474 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $188,697,924 ============
See notes to financial statements. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Statement of Changes in Net Assets
Year Ended Year Ended May 31, 1998 May 31, 1997 --------------- --------------- OPERATIONS: Investment income--net................................................. $ 527,450 $ 1,203,325 Net realized gain (loss) on investments................................ 127,135,626 62,677,975 Net unrealized appreciation (depreciation) on investments.............. 61,034,848 66,809,492 --------------- --------------- Net Increase (Decrease) in Net Assets Resulting from Operations.. 188,697,924 130,690,792 --------------- --------------- DIVIDENDS TO SHAREHOLDERS FROM: Investment income--net................................................. (1,359,845) (1,059,465) Net realized gain on investments....................................... (61,193,006) (73,897,734) --------------- --------------- Total Dividends.................................................. (62,552,851) (74,957,199) --------------- --------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from shares sold.......................................... 1,080,725,202 1,044,680,240 Dividends reinvested................................................... 60,535,061 72,507,283 Cost of shares redeemed................................................ (1,032,801,808) (969,289,077) --------------- --------------- Increase (Decrease) in Net Assets from Capital Stock Transactions 108,458,455 147,898,446 --------------- --------------- Total Increase (Decrease) in Net Assets....................... 234,603,528 203,632,039 NET ASSETS: Beginning of Period.................................................... 677,084,182 473,452,143 --------------- --------------- End of Period.......................................................... $ 911,687,710 $ 677,084,182 =============== =============== Undistributed investment income--net...................................... $ 85,006 $ 917,401 --------------- --------------- Shares Shares --------------- --------------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................ 97,261,223 109,951,947 Shares issued for dividends reinvested................................. 5,636,412 8,277,087 Shares redeemed........................................................ (93,123,816) (101,819,266) --------------- --------------- Net Increase (Decrease) in Shares Outstanding.................... 9,773,819 16,409,768 --------------- --------------- =============== ===============
See notes to financial statements. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Financial Highlights Contained below is per share operating performance data for a share of Common Stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from the Fund's financial statements.
Year Ended May 31, -------------------------------------------------- PER SHARE DATA: 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ Net asset value, beginning of period............. $10.01 $ 9.25 $ 7.45 $ 7.80 $ 8.48 ------ ------ ------ ------ ------ Investment Operations: Investment income--net........................... .01 .02 .03 .07 .05 Net realized and unrealized gain (loss) on investments................................ 2.68 2.16 2.39 .65 (.08) ------ ------ ------ ------ ------ Total from Investment Operations................. 2.69 2.18 2.42 .72 (.03) ------ ------ ------ ------ ------ Distributions: Dividends from investment income--net............ (.02) (.02) (.05) (.07) (.04) Dividends from net realized gain on investments.. (.90) (1.40) (.57) (1.00) (.61) ------ ------ ------ ------ ------ Total Distributions.............................. (.92) (1.42) (.62) (1.07) (.65) ------ ------ ------ ------ ------ Net asset value, end of period................... $11.78 $10.01 $ 9.25 $ 7.45 $ 7.80 ====== ====== ====== ====== ====== TOTAL INVESTMENT RETURN............................. 27.76% 25.70% 33.63% 11.81% (.63%) RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets.......... .97% 1.03% 1.11% 1.12% 1.17% Ratio of net investment income to average net assets.................................... .07% .22% .36% .93% .52% Portfolio Turnover Rate.......................... 70.41% 66.52% 92.08% 133.54% 71.70% Net assets, end of period (000's Omitted)........ $911,688 $677,084 $473,452 $368,833 $390,340
See notes to financial statements. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: The Dreyfus Third Century Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 ("Act") as a diversified open-end management investment company. The Fund's investment objective is to provide capital growth. The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). NCM Capital Management Group, Inc. ("NCM") serves as the Fund's sub-investment adviser. Premier Mutual Fund Services, Inc. is the distributor of the Fund's shares which are sold to the public without a sales charge. The Fund's financial statements are prepared in accordance with generally accepted accounting principles which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities 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. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Directors. (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. Under the terms of the custodian agreement, the Fund received net earnings credits of $8,614 during the period ended May 31, 1998 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (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--Bank Line of Credit: The Fund participates with other Dreyfus-managed funds in a $600 million redemption credit facility ("Facility") primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the Fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the Fund at rates based on prevailing market rates in effect at the time of borrowings. The average daily amount of borrowings outstanding during the period ended May 31, 1998, was approximately $86,300, with a related weighted average annualized interest rate of 5.91%. The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to the management agreement ("Agreement") with Dreyfus, the management fee is computed at an annual rate of .75 of 1% of the value of the Fund's average daily net assets and is payable monthly. The Agreement provides that if in any full fiscal year the aggregate expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings, commitment fees and extraordinary expenses, exceed 11 1/42% of the value of the Fund's average daily net assets, the Fund may deduct from the fees paid to Dreyfus, or Dreyfus will bear such excess expense. There was no expense reimbursement for the period ended May 31, 1998. Pursuant to a Sub-Investment Advisory Agreement with NCM, the sub-investment advisory fees are payable monthly by Dreyfus, and are based upon the value of the Fund's average daily net assets, computed at the following rates: AVERAGE NET ASSETS ------------------ 0 to $400 million.................................... .10 of 1% $400 to $500 million................................. .15 of 1% $500 to $750 million................................. .20 of 1% In excess of $750 million............................ .25 of 1% (B) Under the Shareholder Services Plan, the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus, an amount not to exceed an annual rate of .25 of 1% of the value of the Fund's average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the Fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended May 31, 1998, the Fund was charged $971,363 pursuant to the Shareholder Services Plan. The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. During the period ended May 31, 1998, the Fund was charged $281,191 pursuant to the transfer agency agreement. The Fund compensates Mellon under a custody agreement to provide custodial services for the Fund. During the period ended May 31, 1998, the Fund was charged $60,539 pursuant to the custody agreement. (C) Each director who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $10,000. The Chairman of the Board receives an additional 25% of such compensation. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended May 31, 1998 amounted to $631,976,784 and $532,168,267, respectively. At May 31, 1998, accumulated net unrealized appreciation on investments was $231,469,517, consisting of $240,701,077 gross unrealized appreciation and $9,231,560 gross unrealized depreciation. At May 31, 1998, 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). The Dreyfus Third Century Fund, Inc. - -------------------------------------------------------------------------------- Report of Ernst & Young LLP, Independent Auditors SHAREHOLDERS AND BOARD OF DIRECTORS THE DREYFUS THIRD CENTURY FUND, INC. We have audited the accompanying statement of assets and liabilities of The Dreyfus Third Century Fund, Inc., including the statement of investments, as of May 31, 1998, 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 and financial highlights. Our procedures included verification by examination of securities held as of May 31, 1998 and confirmation of securities not held by the custodian by correspondence with others. 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 The Dreyfus Third Century Fund, Inc. at May 31, 1998, 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. /s/ Ernst & Young LLP New York, New York July 1, 1998 Important Tax Information (Unaudited) For Federal tax purposes the Fund hereby designates $.6400 per share as a long-term capital gain distribution (of which 50.00% is subject to the 20% maximum Federal tax rate) of the $.9200 per share paid on December 8, 1997. The Fund also designates 27.26% of the ordinary dividends paid during the fiscal year ended May 31, 1998 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in January 1999 of the percentage applicable to the preparation of their 1998 income tax returns. The Dreyfus Third Century Fund, Inc. 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser NCM Capital Management Group, Inc. 103 West MainStreet Durham, North Carolina 27705 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 035AR985 -----END PRIVACY-ENHANCED MESSAGE-----