B-1 STATEMENT OF ADDITIONAL INFORMATION Dated May 1 ...

commitments with respect to such contracts. As an alternative to segregating assets, a Portfolio maybuy call options permitting such Portfolio to buy the amount of foreign currency being hedged by aforward sale contract or a Portfolio may buy put options permitting it to sell the amount of foreigncurrency subject to a forward buy contract.While forward contracts are not currently regulated by the CFTC, the CFTC may in the futureassert authority to regulate forward contacts. In such event, the Portfolios’ ability to utilize forwardcontracts may be restricted. In addition, a Portfolio may not always be able to enter into forwardcontracts at attractive prices and may be limited in its ability to use these contracts to hedge Portfolioassets.Eurodollar Futures Contracts Or Options Thereon. A Portfolio may make investments inEurodollar futures contracts or options thereon. Eurodollar futures contracts or options thereon areU.S. dollar denominated futures contracts or options thereon which are linked to the LondonInterbank Offered Rate (“LIBOR”), although foreign currency denominated instruments are availablefrom time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lendingof funds and sellers to obtain a fixed rate for borrowings. A Portfolio might use Eurodollar futurescontracts and options thereon to hedge against changes in LIBOR, to which many interest rate swapsand fixed income instruments are linked.Federal Income Tax Treatment Regarding Futures Contracts. For Federal income tax purposes,each Portfolio is required to recognize as income for each taxable year its net unrealized gains andlosses on futures contracts as of the end of the year as well as those actually realized during the year.Any gain or loss recognized with respect to a futures contract, whether realized or unrealized, isconsidered to be 60% long-term and 40% short-term, without regard to the holding period of thecontract. In the case of a futures transaction classified as a “mixed straddle”, the recognition of lossesmay be deferred to a later taxable year.In order for each Portfolio to continue to qualify for Federal income tax treatment as a regulatedinvestment company, at least 90% of its gross income for a taxable year must be derived fromqualifying income, (i.e., dividends, interest, income derived from loans of securities, and gains fromthe sale of securities). Any net gain realized from the closing out of futures contracts, for purposes ofthe 90% requirement, is expected to be treated as gain from the sale of securities and therefore isqualifying income.Options on Securities and Foreign CurrenciesIn an effort to increase current income and to reduce fluctuations in net asset value, the Portfoliosmay write covered put and call options and buy put and call options on securities that are traded onUnited States and foreign securities exchanges and over-the-counter. The Portfolios may write andbuy options on the same types of securities that the Portfolios may purchase directly, and on security,commodity or other indexes.A put option written by a Portfolio is “covered” if that Portfolio (i) segregates cash not availablefor investment or other liquid assets with a value equal to the exercise price of the put with thePortfolios’ custodian or (ii) holds a put on the same security and in the same principal amount as theput written and the exercise price of the put held is equal to or greater than the exercise price of theput written. The premium paid by the buyer of an option will reflect, among other things, therelationship of the exercise price to the market price and the volatility of the underlying security, theremaining term of the option, supply and demand and interest rates.A call option written by a Portfolio is “covered” if that Portfolio owns the underlying securitycovered by the call or has an absolute and immediate right to acquire that security without additionalcash consideration (or for additional cash consideration held in a segregated account by thePortfolios’ custodian) upon conversion or exchange of other securities held in its portfolio. A calloption is also deemed to be covered if a Portfolio holds a call on the same security and in the sameB-18