This past October, Dreyfus floated several proposals to shareholders asking approval to alter investment restrictions on three Dreyfus' funds. While shareholders of the Dreyfus Worldwide Dollar Money Market Fund with $1.6 billion under management, voted approval of many portfolio changes, they blocked the fund adviser's proposal to add a $12 small account fee.
Although the fee proposal received more than twice as many yes' votes as no' votes, it failed to muster enough support to pass. The fee that was to take effect this past November was to be used to defray the costs of maintaining accounts whose balances fall and remain below $2,000.
The proposed fee imposition is part of Dreyfus' plans to offset the cost of maintaining low-balance accounts, an increasing expense for fund advisers. Dreyfus has been obtaining approval from shareholders to impose this service fee on its other funds.
"There's been a number of companies increasing fees on small accounts," said Pete Crane, managing editor at IBC Financial Data in Ashland, Mass. "Smaller accounts are costly and fund groups are losing money on them."
Many fund advisers, especially money fund managers, are taking advantage of the proxy process to ask investors to approve small account maintenance fees at the same time that they ask approval to change a fund's investment parameters.
In defense of its proposed maintenance fee, Dreyfus said that several other fund complexes had recently imposed such fees. This past June, Vanguard began charging a $10 annual maintenance fee on accounts of less than $2,500. In September, T. Rowe Price also began charging an annual $10 service fee on accounts which fall below $2,000. In October, Scudder Kemper added a $10 low balance fee for accounts of less than $2,500. And in November, Fidelity began imposing a $12 yearly fee.
Dreyfus' difficulties in getting the fee proposal approved arises in part from a problem a number of proxy votes, regardless of the issue involved, have faced recently- that is, obtaining a quorom. Though this Dreyfus joint proxy vote took place on October 9, 1998, it had twice been postponed from its originally intended date of August 4 due to a lack of enough votes to constitute a quorum. But Dreyfus is working to head off that problem in the future. One of the proxy proposals which was approved by shareholders of the group's Dreyfus Fund asked shareholders to decrease the requirement for a shareholder quorum from the current majority of outstanding shares to one-third of the fund's shares.