<PAGE>
Dreyfus
Third Century
Fund, Inc.
Annual Report
May 31, 1998
<PAGE>
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%.
<PAGE>
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,
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments May 31, 1998
<TABLE>
<CAPTION>
Common Stocks--97.6% Shares Value
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
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
------------
</TABLE>
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) May 31, 1998
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
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
------------
</TABLE>
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) May 31, 1998
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
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
======= =============
<FN>
Notes to Statement of Investments:
- -----------------------------------------------------------------------------------------------------------------
(a) Non-income producing.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities May 31, 1998
<TABLE>
<CAPTION>
Cost Value
------------- -------------
<S> <C> <C> <C>
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
======
</TABLE>
See notes to financial statements.
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations Year Ended May 31, 1998
INVESTMENT INCOME
<TABLE>
<S> <C> <C> <C>
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
============
</TABLE>
See notes to financial statements.
<PAGE>
The Dreyfus Third Century Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1998 May 31, 1997
--------------- ---------------
<S> <C> <C>
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
--------------- ---------------
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------------
PER SHARE DATA: 1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
See notes to financial statements.
<PAGE>
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%.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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
