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August 27, 2001
Seasoned Fund Stays Innovative
by Mark Thomsen
The Dreyfus Premier Third Century Fund uses best-of-class screening to assess the environmental
performance of companies in certain industrial sectors.
SocialFunds.com --
Launched in 1972, the Dreyfus
Premier Third Century Fund (ticker: DRTHX) is one of the elders of social mutual funds. It is
a large-cap value fund that seeks capital growth, with current income as a secondary goal. While
the fund has not done well in the current market, with a year-to-date return of -16.79 percent as
of July 31, it has been a solid performer over the longer term. Its annualized return over the
last 10 years is 11.46 percent, and since inception its annualized return is 12.13 percent. Such
numbers have helped it become the third largest social mutual fund, with assets of approximately
$947 million as of July 31.
 With regard to the social and environmental objectives
of the fund, being an elder does not mean Premier Third Century is behind the times. Although the
exclusionary screens employed by Dreyfus have remained unchanged since 1972, in 1999 the fund
became one of a handful of U.S. social funds to employ best-in-class investing. That same year it
also started committing fund assets to community investing.
Typically, exclusionary
screening applies certain social and environmental criteria to prospective investments to screen
out those companies that do not meet the criteria are excluded from investment. Best-of-class, on
the other hand, evaluates companies based on certain criteria, and then selects the best overall
performers for investment. Up to now best-in-class investing has been more widely used in Canada
than the U.S.
Dreyfus uses best-in-class screening when evaluating certain sectors in the
heavy manufacturing industries such as automakers, paper and pulp manufacturers and fossil fuel
producers.
Lincoln Carnam, Portfolio Manager regarding Premier Third Century's areas of
social concern, believes best-in-class enables needed flexibility in stock choice. "We feel that
[our] current methodology, including the best-in-class approach, is in the best interest of
shareholders as it allows the fund greater exposure to more sectors," he explained. "This is very
important as performance remains the top priority of the fund."
Their best-in-class
approach compares environmental performance among companies in the same industry. To do this,
Dreyfus relies on research provided by Innovest and only invests in companies that have earned an
AAA rating from Innovest.
The Premier Third Century's exclusionary screens focus on four
areas: occupational safety and health, consumer protection and product safety, equal employment
opportunity, and the environment. Where best-of-class screening is employed regarding
environmental performance, exclusionary screens are applied to the three remaining criteria. The
only industry the fund completely excludes from investment is the tobacco industry.
In
addition to Innovest, Dreyfus also purchases social research from Kinder, Lydenberg, Domini & Company, Inc. (KLD) and Institutional Shareholder Services (ISS). But all investment
decisions are made in-house by Dreyfus.
The fund's commitment to community investing has
included Certificates of Deposit offered by the Self-Help Credit Union, a non-profit community
development financial institution in North Carolina. Self-Help activities include making housing
and small business loans to people that cannot qualify for a loan from a commercial bank.
"This program has had a significant impact on the community and on people who come from
disadvantage backgrounds, as well as earning an FDIC-insured return on investment for our
shareholders," said Carnam.
With regard to shareowner resolutions, the portfolio
management team is responsible for voting fund proxies, but the fund does not sponsor resolutions.
"We have in the past and continue to support shareholder resolutions that match the social concerns
of the fund," said Carnam. Carnam also said that as of yet the Premier Third Century Fund does not
publicize its proxy votes to shareowners.
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SRI World Group, Inc. All Rights Reserved.
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