SUPPLEMENT DATED AUGUST 11, 1995 TO
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 1, 1995
The following discussion supplements the information provided
under the caption "Investment Objective and Management
Policies."
Options, Futures and Currency Strategies. The Fund may use
forward currency contracts and certain options and futures
strategies to attempt to hedge its portfolio, i.e., reduce the
overall level of investment risk normally associated with the
Fund. There can be no assurance that such efforts will succeed.
In order to assure that the Fund will not be deemed to be a
"commodity pool" for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission ("CFTC")
require that the Fund enter into transactions in futures
contracts and options on futures only (i) for bona fide hedging
purposes (as defined in CFTC regulations), or (ii) for non-
hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions doe not exceed 5% of the
liquidation value of the Fund's assets. The Fund, however, does
not intend to use such instruments for non-hedging purposes. To
attempt to hedge against adverse movements in exchange rates
between currencies, the Fund may enter into forward currency
contracts for the purchase or sale of a specified currency at a
specified future date. Such contracts may involve the purpose or
sale of a foreign currency against the U.S. dollar or may involve
two foreign currencies. The Fund may enter into forward currency
contracts either with respect to specific transactions or with
respect to its portfolio positions. For example, when the
portfolio anticipates making a purchase or sale of a security, it
may enter a forward currency contract in order to set the rate
(either relative to the U.S. dollar or another currency) at which
currency exchange transaction related to the purchase or sale
will be made ("transaction hedging"). Further, when the
investment manager believes that a particular currency may
decline compared to the U.S. dollar or another currency, the Fund
may enter into a forward contract to sell the currency the
investment manager expects to decline in an amount approximating
the value of some or all of the Fund's securities denominated in
that currency, or when the investment manager believes that one
currency may decline against a currency in which some or all of
the portfolio securities held by the Fund are denominated, it may
enter into a forward contract to buy the currency expected to
decline for a fixed amount ("position hedging"). In this
situation, the Fund may, in the alternative, enter into a forward
contract to sell a different currency for a fixed amount of the
currency expected to decline where the investment manager
believes that the value of the currency to be sold pursuant to
the forward contract will fall whenever there is a decline in the
value of the currency in which portfolio securities of the Fund
are denominated ("cross hedging"). The Fund's custodian places a
cash or U.S. Government securities or other high-quality debt
securities denominated in certain currencies in a separate
account of the Fund having a value equal to the aggregate amount
of the Fund's commitments under forward contract entered into
with respect to position hedges and cross-hedges. If the value
of the securities placed in a separate account declines,
additional cash or securities are placed in the account on a
daily basis so that the value of the amount will equal the amount
of the Fund's commitments with respect to such contracts.
For hedging purposes, the Fund may write covered call options and
purchase put and call options on currencies to hedge against
movements in exchange rates and on debt securities to hedge
against the risk of fluctuations in the prices of securities held
by the Fund or which the investment manager intend to include in
its portfolio. The Fund also may use interest rates futures
contracts and options thereon to hedge against changes in the
general level in interest rates.
The Fund may write call options on securities and currencies only
if they are covered, and such options must remain covered so long
as the Fund's is obligated as a writer. A call option written
by the Fund is "covered" if the Fund owns the securities or
currency underlying the option or has an absolute and immediate
right to acquire that security or currency without additional
cash consideration (or for additional cash consideration held in
a segregated account by its custodian) upon conversion or
exchange of other securities or currencies held in its portfolio.
A call option is also covered if the Fund hold on a share-for-
share basis a call on the same security or holds a call on the
same currency as the call written where the exercise price of the
call held is equal to less than the exercise price of the call
written or greater than the exercise price of the call written if
the difference is maintained by the Fund in cash, Treasury
bills or to the high-grade, short-term obligations in a serrated
account with its custodian.
Although the portfolio might not employ the use of forward
currency contracts, options and futures, the use of any of these
strategies would involve certain investment risks and transaction
costs to which it might not otherwise be subject. These risks
include: dependence on the investment manager's ability to
predict movements in the prices of individual debt securities,
fluctuations in the general fixed-income markets and movements in
interest rates and currency markets, imperfect correlation
between movements in the price of currency, options, futures
contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; the fact that
skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are
different from those needed to select the securities in which the
Fund invests; lack of assurance that a liquid market will exist
for any particular option, futures contract or options thereon at
any particular time and possible need to defer or accelerate
closing out certain options, futures contracts and options
thereon in order to continue to qualify for the beneficial tax
treatment afforded "regulated investment companies" under the
Internal Revenue Code of 1986, as amended (the "Code"). See
"Dividends, Distributions and Taxes."
