As filed with the Securities and Exchange Commission on July 29, 1999.
1933 Act File No. 2-57953
1940 Act File No. 811-2474
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 56
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 47
DOLLAR RESERVES, INC.
(Exact Name of Registrant as Specified in Charter)
11 Hanover Square
New York, New York 10005
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 1-212-785-0900
Copies to:
DEBORAH A. SULLIVAN, ESQ. RICHARD HOROWITZ, ESQ
Midas Management Corporation Stroock & Stroock & Lavan LLP
11 Hanover Square 180 Maiden Lane
New York, New York 10005 New York, New York 10038
(Name and Address of
Agent for Service)
It is proposed that this filing will become effective on July 25, 1999
pursuant to paragraph (b) of rule 485.
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Registrant's most recent Rule 24f-2 Notice was filed on March 26, 1999.
<PAGE>
DOLLAR RESERVES, INC.
Contents of Registration Statement
This registration statement consists of the following papers and
documents.
Cover Sheet
Table of Contents
Cross Reference Sheet
Part A - Combined Prospectus
- Stand Alone Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
DOLLAR RESERVES, INC.
CROSS REFERENCE SHEET
Part A. Item No. Prospectus Caption
1 Cover Page
2 Expense Tables
3 Financial Highlights
Yield Information
4 General
The Fund's Investment Program
Capital Stock
Cover Page
5 Investment Manager
Custodian and Transfer Agent
6 Cover Page
General
Investment Manager
Distributions and Taxes
Determination of Net Asset Value
Shareholder Services
Capital Stock
Back Cover Page
7 How to Purchase Shares
Shareholder Services
Determination of Net Asset Value
Distribution of Shares
Back Cover Page
8 How to Redeem Shares
Determination of Net Asset Value
9 Not Applicable
<PAGE>
DOLLAR RESERVES, INC.
CROSS REFERENCE SHEET
Statement of Additional
Part B. Item No. Information Caption
10 Cover Page
11 Table of Contents
12 Cover Page
13 The Fund's Investment Program
Investment Restrictions
Appendix
14 Officers and Directors
15 Officers and Directors
Investment Manager
16 Officers and Directors
Investment Manager
Investment Management Agreement
Distribution of Shares
Custodian, Transfer and Dividend
Disbursing Agent
Auditors
17 Allocation of Brokerage
18 Not Applicable
19 Purchase of Shares
Determination of Net Asset Value
20 Dividends and Taxes
21 Distribution of Shares
22 Performance Information
23 Financial Statements
<PAGE>
[Logo Omitted]
MIDAS FUND, INC.
MIDAS INVESTORS LTD.
MIDAS MAGIC, INC. MIDAS SPECIAL EQUITIES FUND, INC.
MIDAS U.S. AND OVERSEAS FUND LTD.
DOLLAR RESERVES, INC.
Prospectus dated June 30, 1999
Newspaper Listing The Funds' net asset values are shown daily in the mutual fund
section of newspapers nationwide under the heading "Midas Funds."
This prospectus contains information you should know about the Funds before you
invest. Please keep it for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................................2
PAST PERFORMANCE...............................................................3
FEES AND EXPENSES OF THE FUNDS.................................................7
PRINCIPAL INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RISKS...............8
PORTFOLIO MANAGEMENT..........................................................12
MANAGEMENT FEES...............................................................13
DISTRIBUTION AND SHAREHOLDER SERVICES.........................................13
PURCHASING SHARES.............................................................13
REDEEMING SHARES..............................................................15
ACCOUNT AND TRANSACTION POLICIES..............................................15
DISTRIBUTIONS AND TAXES.......................................................16
FINANCIAL HIGHLIGHTS..........................................................16
<PAGE>
RISK/RETURN SUMMARY
What are the principal investment objectives of the Midas Funds?
- --------------------------------------------------------------------------------
MIDAS FUND seeks primarily capital appreciation and protection against inflation
and secondarily, current income.
MIDAS INVESTORS seeks long term capital appreciation in investments with the
potential to provide a hedge against inflation and preserve the purchasing power
of the dollar. Income is a second objective.
MIDAS MAGIC seeks long term capital appreciation.
MIDAS SPECIAL EQUITIES FUND seeks capital appreciation.
MIDAS U.S. AND OVERSEAS FUND seeks to obtain the highest possible total return
on its assets from long term growth of capital and from income.
DOLLAR RESERVES is a money market fund seeking maximum current income consistent
with preservation of capital and maintenance of liquidity.
================================================================================
What are the principal investment strategies of the Midas Funds?
- --------------------------------------------------------------------------------
MIDAS FUND invests at least 65% of its total assets in (i) securities of
companies primarily involved, directly or indirectly, in the business of mining,
processing, fabricating, distributing or otherwise dealing in gold, silver,
platinum or other natural resources and (ii) gold, silver and platinum bullion.
Up to 35% of the Fund's assets may be invested in securities of selected growth
companies, and in U.S. Government securities. The Fund will emphasize the
potential for growth when choosing investments. A stock is typically sold when
its potential to meet the Fund's investment objective is limited, or exceeded by
another potential investment.
MIDAS INVESTORS invests at least 65% of the Fund's total assets in (i) equity
securities (including common stocks, convertible securities and warrants) of
companies involved, directly or indirectly, in mining, processing or dealing in
gold or other precious metals, (ii) gold, platinum and silver bullion, and (iii)
gold coins. Up to 35% of the Fund's assets may be invested in securities of
selected growth companies, and in U.S. Government securities. The Fund will
invest in companies whose earnings are expected to grow faster than the rate of
inflation. A stock is typically sold when its potential to meet the Fund's
investment objective is limited, or exceeded by another potential investment.
MIDAS MAGIC invests primarily in equity securities of companies whose earnings
or revenue prospects are improving as a result of management, technology,
regulation, financial structure, or other special situations (e.g. liquidations
and reorganizations) and in companies whose shares have good relative upward
price momentum. The Fund will invest in companies whose improving prospects are
getting increased market recognition and whose shares are experiencing upward
price momentum. The Fund will normally sell investments whose share price either
has risen to a valuation that unduly increases risk levels or, conversely, no
longer has good relative upward price momentum.
MIDAS SPECIAL EQUITIES FUND invests aggressively primarily in equity securities,
often involving special situations (e.g. liquidations and reorganizations) and
emerging growth companies. The Fund will normally sell investments when the
value or growth potential of the investment appears limited or exceeded by other
investment oppertunities.
MIDAS U.S. AND OVERSEAS FUND invests principally in a portfolio of securities of
U.S. and overseas issuers with growth in earnings and reasonable valuations in
terms of price/earnings, price/cash flow, price/sales and similar ratios. The
Fund will normally sell investments when the value or growth potential of the
investment appears limited or exceeded by other investment opportunities.
DOLLAR RESERVES invests exclusively in money market obligations of the U.S.
Government, its agencies and instrumentalities.
================================================================================
What are the principal risks of investing in the Midas Funds?
Midas Fund and Midas Investors are subject to the risks associated with:
- --------------------------------------------------------------------------------
PRECIOUS METALS PRICE. The prices of gold, silver, platinum and other natural
resources can be influenced by a variety of global economic, financial and
political factors and may fluctuate substantially over short periods of time and
be more volatile than other types of investments.
<PAGE>
MINING. Resource mining by its nature involves significant risks and hazards to
which these Funds are exposed. Even when a resource mineralization is
discovered, there is no guarantee that the actual reserves of a mine will
increase. Exploratory mining can last over a number of years, incur substantial
costs, and not lead to any new commercial mining.
================================================================================
All of the Funds (except Dollar Reserves) are subject to the risks associated
with:
- --------------------------------------------------------------------------------
Market. The market risks associated with investing in a Fund are those related
to fluctuations in the value of the Fund's portfolio. A risk of investing in
stocks is that their value will go up and down reflecting stock market movements
and you could lose money.
Small Capitalization. A Fund may invest in companies that are small or thinly
capitalized, and may have a limited operating history. Small-cap stocks is that
small-cap stocks are likely more vulnerable than larger companies to adverse
business or economic developments. During broad market downturns, Fund values
may fall further than that of funds investing in larger companies.
Foreign Investment. A Fund can be exposed to the unique risks of foreign
investing. Political turmoil and economic instability in the countries in which
some of the Funds invest could adversely affect the value of your investment.
Also, if the value of any foreign currency in which a Fund's investments are
denominated declines relative to the U.S. dollar, the value and total return of
your investment in the Fund may decline as well.
Non-Diversification. The Funds are non-diversified which means that more than 5%
of a Fund's assets may be invested in the securities of one issuer. As a result,
each Fund may hold a smaller number of issuers than if it were diversified. If
this situation occurs, investing in a Fund could involve more risk than
investing in a fund that holds a broader range of securities because changes in
the financial condition of a single issuer could cause greater fluctuation in
the Fund's total returns.
================================================================================
Dollar Reserves is subject to investment risk:
- --------------------------------------------------------------------------------
The Fund's yield will vary in response to changes in interest rates. An
investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
================================================================================
PAST PERFORMANCE
The bar charts provide some indication of the risks of investing in the Funds by
showing changes in each Fund's performance from year to year. The tables compare
the Funds' average annual returns for the 1, 5 and 10 year periods with
appropriate broad-based securities market indexes (except in the case of Dollar
Reserves) and in so doing, also reflects the risks of investing in the Funds.
The Standard & Poor's 500 Stock Index ("S&P 500") is an index that is unmanaged
and fully invested in common stocks. The Morningstar Precious Metals Fund
Average ("PMFA") is an equally weighted average of the 22 managed precious
metals funds tracked by Morningstar. The Morgan Stanley Capital International
("MSCI") World Index is an unmanaged index which is derived from equities of
Europe, Australasia and Far East countries and equities from Canada and the U.S.
The Russell 2000 Index is an index that is unmanaged and fully invested in
common stocks of small companies. The Lipper Analytical Money Market Index
("LAMMI") is an index that is unmanaged and invested principally in financial
instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, with dollar-weighted average maturities of less than 90 days
and which intends to keep a constant net asset value. Both the bar charts and
the tables assume reinvestment of dividends and distributions. As with all
mutual funds, past performance is not necessarily an indication of future
performance.
<PAGE>
MIDAS FUND
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph Omitted]
Best Quarter:
4/93-6/93
36.64%
Worst Quarter:
10/97-12/97
(40.90)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
-------------------------------------------------------------------
Midas Fund (28.44)% (16.62)% (2.82)%
S&P 500 28.58% 24.05% 19.20%
PMFA (11.35)% (12.91)% (3.27)%
MIDAS INVESTORS
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph Omitted]
Best Quarter:
4/93-6/93
34.87%
Worst Quarter:
10/97-12/97
(32.99)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
-------------------------------------------------------------
Midas Investors (32.21)% (23.90)% (9.61)%
S&P 500 28.58% 24.05% 19.20%
PMFA (11.35)% (12.91)% (3.27)%
<PAGE>
MIDAS MAGIC
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph Omitted]
Best Quarter:
1/96-3/96
24.77%
Worst Quarter:
7/90-9/90
(19.47)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
---------------------------------------------------------
Midas Magic (13.82)% 7.40% 6.10%
Russell 2000 Index (2.57)% 11.87% 12.92%
MIDAS SPECIAL EQUITIES FUND
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph omitted]
Best Quarter:
10/92-12/92
24.29%
Worst Quarter:
7/90-9/90
(43.75)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
--------------------------------------------------
Midas Special Equities Fund (5.00)% 3.44% 8.42%
Russell 2000 Index (2.57)% 11.87% 12.92%
<PAGE>
MIDAS U.S. AND OVERSEAS FUND
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph Omitted]
Best Quarter:
10/98-12/98
18.99%
Worst Quarter:
7/98-9/98
(24.43)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
---------------- --------------- --------------
Midas U.S. and Overseas Fund 1.18% 4.12% 6.94%
MSCI World Index 24.34% 15.68% 10.66%
DOLLAR RESERVES
________________________________________________________________________________
Year-by-year total return as of 12/31 each year
[Graph Omitted]
Best Quarter:
1/89-3/89
2.08%
Worst Quarter:
4/93-6/93
0.58%
For information on the Fund's 7-day yield, call toll-free 1-800-400-MIDAS(6432).
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
----------------------------------------------------------------
Dollar Reserves 4.69% 4.55% 4.95%
LAMMI 4.95% 4.79% 5.19%
<PAGE>
FEES AND EXPENSES OF THE FUNDS
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the following tables. Shareholder fees are paid out of
your account. Annual Fund operating expenses are paid out of Fund assets, so
their effect is included in the share price.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases..........................NONE
Maximum Deferred Sales Charge (Load)......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends...............NONE
Redemption Fee within 30 days of purchase
(all Funds except Dollar Reserves)........................................1.00%
Annual Fund Operating Expenses
(expenses as % of average daily net assets that are deducted from Fund assets)
<TABLE>
<CAPTION>
Total Fee Waiver
Distribution annual and
and Fund Expense
Manage- service Other operating Reimburse- Net
ment fees (12b-1) fees expenses* expenses ment Expenses
--------------- --------------- -------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Midas Fund, Inc. 1.00% 0.25% 1.08% 2.33% N/A N/A
Midas Investors Ltd. 1.00% 0.25%** 2.32% 3.57%** N/A N/A
Midas Magic, Inc. 1.00% 0.25% 8.02% 9.27% 7.29% 1.98%***
Midas Special Equities Fund, Inc. 0.87% 1.00% 1.55% 3.42% N/A N/A
Midas U.S. and Overseas Fund Ltd. 1.00% 0.25%** 1.33% 2.58%** N/A N/A
Dollar Reserves, Inc. 0.50% 0.25% 0.55% 1.30% N/A N/A
<FN>
* Includes the reimbursement by each Fund to Midas Management Corporation for
accounting and other administrative services which are authorized by the
Board of Directors. These services may vary over time, therefore, the
amount of the reimbursement may fluctuate.
** Reflects a contractual distribution fee waiver that will continue through
May 1, 2000. Without such waiver, distribution and service fee and total
annual Fund operating expenses would have been 1.00% and 4.32%,
respectively, for Midas Investors Ltd and 1.00% and 3.33%, respectively,
for Midas U.S. and Overseas Fund.
*** Reflects a contractual obligation by Midas Management Corporation to waive
and/or reimburse the Fund through December 31, 1999 to the extent total
annual Fund operating expenses exceed 1.90% of average daily net assets,
excluding certain expenses which totaled 0.08% in 1998.
</FN>
</TABLE>
EXAMPLE:
This example assumes that you invest $10,000 in each of the Funds for the time
periods indicated and then redeem all of your shares at the end of those
periods. This Example also assumes that your investment has a 5% return each
year and that the Funds' operating expenses remain the same (except in the cases
footnoted below). Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Midas Fund, Inc. $236 $727 $1,245 $2,666
Midas Investors Ltd.* $360 $1,242 $2,136 $4,426
Midas Magic, Inc.* $201 $2,030 $3,707 $7,310
Midas Special Equities Fund, Inc. $345 $1,051 $1,779 $3,703
Midas U.S. and Overseas Fund Ltd.* $261 $955 $1,672 $3,571
Dollar Reserves, Inc. $132 $412 $713 $1,568
<FN>
* The first year expenses in each of the time periods indicated are based on
a contractual agreement.
</FN>
</TABLE>
<PAGE>
PRINCIPAL INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RISKS
MIDASFUND seeks primarily capital appreciation and protection against inflation
and, secondarily, current income. The Fund pursues its objective by
investing primarily in domestic or foreign companies involved with gold,
silver, platinum or other natural resources and gold, silver and platinum
bullion. The Fund will invest at least 65% of its total assets in (i)
securities of companies involved, directly or indirectly, in the business
of mining, processing, fabricating, distributing or otherwise dealing in
gold, silver, platinum or other natural resources and (ii) gold, silver and
platinum bullion. Additionally, up to 35% of the Fund's total assets may be
invested in securities of companies that derive a portion of their gross
revenues, directly or indirectly, from the business of mining, processing,
fabricating, distributing or otherwise dealing in gold, silver, platinum or
other natural resources, in securities of selected growth companies, and in
securities issued by the U.S. Government, its agencies or
instrumentalities.
In making investments for the Fund, the investment manager may consider,
among other things, the ore quality of metals mined by a company, a
company's mining, processing and fabricating costs and techniques, the
quantity of a company's unmined reserves, quality of management, and
marketability of a company's equity or debt securities. Management will
emphasize the potential for growth of the proposed investment, although it
also may consider an investment's income generating capacity as well. A
stock is typically sold when, in the opinion of the portfolio management
team, its potential to meet the Fund's investment objective is limited, or
exceeded by another potential investment.
The Fund may invest in certain derivatives such as options, futures and
forward currency contracts. Derivatives are financial instruments that
derive their values from other securities or commodities or that are based
on indices. The Fund may engage in leverage by borrowing money for
investment purposes. The Fund also may lend portfolio securities to other
parties and may engage in short selling. Additionally, the Fund may invest
in special situations such as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund's investments are linked to the prices of gold, silver, platinum
and other natural resources. These prices can be influenced by a variety of
global economic, financial and political factors and may fluctuate
substantially over short periods of time and be more volatile than other
types of investments. Economic, political, or other conditions affecting
one or more of the major sources of gold, silver, platinum and other
natural resources could have a substantial effect on supply and demand in
countries throughout the world.
Resource mining by its nature involves significant risks and hazards. Even
when a resource mineralization is discovered, there is no guarantee that
the actual reserves of a mine will increase. Exploratory mining can last
over a number of years, incur substantial costs, and not lead to any new
commercial mining. Resource mining runs the risk of increased
environmental, labor or other costs in mining due to environmental hazards,
industrial accidents, labor disputes, discharge of toxic chemicals, fire,
drought, flooding and other natural acts. Changes in laws relating to
mining or resource production or sales could also substantially affect
resource values.
The Fund may invest up to 35% of its assets in fixed income securities
rated below investment grade, although it has no current intention of
investing more than 5% of its assets in such securities during the coming
year. These securities may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed income securities.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS INVESTORS seeks long term capital appreciation in investments with the
potential to provide a hedge against inflation and preserve the
purchasing power of the dollar. Income is a secondary objective.
The Fund pursues its objective by investing primarily in gold, platinum
and silver bullion and a global portfolio of securities of companies
involved directly or indirectly in mining, processing or dealing in gold
or other precious metals. Generally, at least 65% of the Fund's total
assets will be invested in (i) equity securities (including common
stocks, convertible securities and warrants) of companies involved
directly or indirectly in mining, processing or dealing in gold or other
precious metals, (ii) gold, platinum and silver bullion, and (iii) gold
coins. Additionally, the Fund may invest up to 35% of its total assets
in securities of companies that own or develop natural resources and
other basic commodities, securities of selected growth companies, and
securities issued by the U.S. Government, its agencies or
instrumentalities.
Natural resources include ferrous and non-ferrous metals (such as iron,
aluminum and copper), strategic metals (such as uranium and titanium),
<PAGE>
hydrocarbons (such as coal, oil and natural gases), chemicals, forest
products, real estate, food products and other basic commodities,
which historically have been produced and marketed profitably during
periods of rising inflation. Selected growth companies in which the
Fund may invest typically have earnings or tangible assets which are
expected to grow faster than the rate of inflation over time. When
seeking to achieve its secondary objective of income, the Fund will
normally invest in investment grade fixed income securities (junk
bonds).
The Fund may invest in certain derivatives such as options, futures
and forward currency contracts. Derivatives are financial instruments
that derive their values from other securities or commodities or that
are based on indices. The Fund may engage in leverage by borrowing
money for investment purposes. The Fund also may lend portfolio
securities to other parties and may engage in short selling.
Additionally, the Fund may invest in special situations such as
liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in
cash and cash equivalents, money market securities of U.S. and foreign
issuers, short-term bonds, repurchase agreements, and convertible bonds.
When the Fund takes such a temporary defensive position, it may not
achieve its investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund's investments are linked to the prices of gold, silver,
platinum and other natural resources. These prices can be influenced by
a variety of global economic, financial and political factors and may
fluctuate substantially over short periods of time and be more volatile
than other types of investments. Economic, political, or other
conditions affecting one or more of the major sources of gold, silver,
platinum and other natural resources could have a substantial effect on
supply and demand in countries throughout the world.
Resource mining by its nature involves significant risks and hazards.
Even when a resource mineralization is discovered, there is no guarantee
that the actual reserves of a mine will increase. Exploratory mining can
last over a number of years, incur substantial costs, and not lead to
any new commercial mining. Resource mining runs the risk of increased
environmental, labor or other costs in mining due to environmental
hazards, industrial accidents, labor disputes, discharge of toxic
chemicals, fire, drought, flooding and other natural acts. Changes in
laws relating to mining or resource production or sales could also
substantially affect resource values.
The Fund may invest up to 35% of its assets in fixed income securities
rated below investment grade, although it has no current intention of
investing more than 5% of its assets in such securities during the
coming year. These securities may be subject to certain risks with
respect to the issuing entity and to the greater market fluctuations
and certain lower yielding, higher rated fixed income securities.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDASMAGIC seeks long term capital appreciation. The Fund seeks to achieve
this objective by investing primarily in equity securities. The Fund
will purchase primarily common stocks, which will be selected
generally for their potential for long term capital appreciation.
Generally, the Fund will invest in companies expected to achieve
above-average growth, which have small, medium or large
capitalizations and whose earnings or revenue prospects are improving
as a result of management, technology, regulation, financial
structure, or other special situations. The Fund will invest in
companies whose improving prospects are getting increased market
recognition and whose shares have good relative upward price momentum.
The Fund will normally sell it's investments in a company whose
prospects fall short or whose share price either has risen to a
valuation that unduly increases risk levels or, conversely, no longer
has good relative upward price momentum.
In attempting to achieve capital appreciation, the Fund employs
aggressive and speculative investment strategies. The Fund may invest
in certain derivatives such as options, futures and forward currency
contracts. Derivatives are financial instruments that derive their
values from other securities or commodities or that are based on
indices. The Fund may engage in leverage by borrowing money for
investment purposes. The Fund also may lend portfolio securities to
other parties and may engage in short selling. Additionally, the Fund
may invest in special situations such as liquidations and
reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in
cash and cash equivalents, money market securities of U.S. and foreign
issuers, short-term bonds, repurchase agreements, and convertible bonds.
When the Fund takes such a temporary defensive position, it may not
achieve its investment objective.
<PAGE>
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value
of the Fund's portfolio. A risk of investing in stocks is that their
value will go up and down reflecting stock market movements and you
could lose money. However, you also have the potential to make money.
Also, investing in stocks involves a greater risk of loss of income than
bonds because stocks need not pay dividends.
The Fund may engage in short-selling and options and futures
transactions to increase returns. There is a risk that these
transactions sometimes may reduce returns or increase volatility. In
addition, derivatives, such as options and futures can be liquid and
highly sensitive to changes in their underlying securities, interest
rate or index, and as a result may be highly volatile. A small
investment in certain derivatives could have a potentially large
impact on the Fund's performance.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS SPECIAL EQUITIES FUND seeks capital appreciation. The Fund invests
primarily in equity securities, often involving special situations and
emerging growth companies. The Fund seeks to invest in equity securities
of companies with optimal combinations of growth in earnings and other
fundamental factors, while also offering reasonable valuations in terms
of price/earnings, price/cash flow, price/sales and similar ratios. The
Fund may invest in domestic or foreign companies which have small,
medium or large capitalizations.
In attempting to achieve capital appreciation, the Fund employs
aggressive and speculative investment strategies. The Fund may invest
in certain derivatives such as options, futures and forward currency
contracts. Derivatives are financial instruments that derive their
values from other securities or commodities or that are based on
indices. The Fund may engage in leverage by borrowing money for
investment purposes. The Fund also may lend portfolio securities to
other parties and may engage in short selling. Additionally, the Fund
may invest in special situations such as liquidations and
reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in
cash and cash equivalents, money market securities of U.S. and foreign
issuers, short-term bonds, repurchase agreements, and convertible bonds.
When the Fund takes such a temporary defensive position, it may not
achieve its investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value
of the Fund's portfolio. A risk of investing in stocks is that their
value will go up and down reflecting stock market movements and you
could lose money. However, you also have the potential to make money.
Also, investing in stocks involves a greater risk of loss of income than
bonds because stocks need not pay dividends.
The Fund may engage in short-selling and options and futures
transactions to increase returns. There is a risk that these
transactions sometimes may reduce returns or increase volatility. In
addition, derivatives, such as options and futures, can be illiquid
and highly sensitive to changes in their underlying security, interest
rate or index, and as a result can be highly volatile. A small
investment in certain derivatives could have a potentially large
impact on the Fund's performance.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS U.S. AND OVERSEAS FUND seeks to obtain the highest possible total return
on its assets from long term growth of capital and from income. The Fund
may invest substantially all of its assets in equity securities of
issuers located in foreign countries with developed and/or emerging
markets. The Fund may invest a portion of its assets in debt securities
and in a combination of countries which include the U.S. and foreign
markets. Generally, the Fund pays dividends annually to its
shareholders.
The Fund seeks to invest in equity securities of companies with optimal
combinations of growth in earnings and other fundamental factors, while
also offering reasonable valuations in terms of price/earnings,
price/cash flow, price/sales and similar ratios. The Fund may sell an
investment when the value or growth potential of the investment appears
limited or exceeded by other investment opportunities, when the issuer's
investment no longer appears to meet the Fund's investment objective, or
when the Fund must meet redemptions.
The Fund may invest in companies which have small, medium or large
capitalizations. The Fund may invest in certain derivatives such as
options, futures and forward currency contracts. Derivatives are
financial instruments that derive their values from other securities
or commodities or that are based on indices. The Fund may engage in
leverage by borrowing money for investment purposes. The Fund also may
lend portfolio securities to other parties and may engage in short
selling. Additionally, the Fund may invest in special situations such
as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in
cash and cash equivalents, money market securities of U.S. and foreign
issuers, short-term bonds, repurchase agreements, and convertible bonds.
When the Fund takes such a temporary defensive position, it may not
achieve its investment objective.
<PAGE>
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value
of the Fund's portfolio. A risk of investing in stocks is that their
value will go up and down reflecting stock market movements and you
could lose money. However, you also have the potential to make money.
Also, investing in stocks involves a greater risk of loss of income than
bonds because stocks need not pay dividends.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
DOLLAR RESERVES seeks maximum current income consistent with preservation of
capital and maintenance of liquidity. The Fund invests exclusively in
obligations of the U.S. Government, its agencies and instrumentalities
("U.S. Government Securities"). The U.S. Government Securities in which
the Fund may invest include U.S. Treasury notes and bills and certain
agency securities that are backed by the full faith and credit of the
U.S. Government. The Fund also may invest without limit in securities
issued by U.S. Government agencies and instrumentalities that may have
different degrees of government backing as to principal or interest but
which are not backed by the full faith and credit of the U.S.
Government.
The Fund is a money market fund and as such is subject to certain
specific SEC rule requirements. Among other things, the Fund is limited
to investing in U.S. dollar-denominated instruments with a remaining
maturity of 397 days or less (as calculated pursuant to Rule 2a-7 under
the Investment Company Act of 1940).
The Fund may invest in securities which have variable or floating rates
of interest. These securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to
an interest rate index or market interest rate. Variable and floating
rate securities are subject to changes in value based on changes in
market interest rates or changes in the issuer's or guarantor's
creditworthiness.
The Fund may borrow money from banks for temporary or emergency purposes
(not for leveraging or investment) up to one-third of the Fund's total
assets.
Pursuant to an agency arrangement with an affiliate of its Custodian,
the Fund may lend portfolio securities or other assets through such
affiliate for a fee to other parties. The Fund's agreement requires that
the loans be continuously secured by cash, securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, or
any combination of cash and such securities, as collateral equal at all
times to at least the market value of the assets lent. Loans of
portfolio securities may not exceed one-third of the Fund's total
assets. Loans will be made only to borrowers deemed to be creditworthy.
Any loan made by the Fund will provide that it may be terminated by
either party upon reasonable notice to the other party.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
Some additional principal risks that apply to all of the Funds (except Dollar
Reserves) are:
SMALL CAPITALIZATION. Each Fund may invest in companies that are small
or thinly capitalized, and may have a limited operating history. A
potential risk in investing in small-cap stocks is that small-cap stocks
are likely more vulnerable than larger companies to adverse business or
economic developments. During broad market downturns, Fund values may
fall further than that of funds investing in larger companies. Full
development of small-cap companies takes time, and for this reason each
Fund should be considered a long term investment and not a vehicle for
seeking short term profit.
FOREIGN INVESTMENT. Each Fund can be exposed to the unique risks of
foreign investing. Political turmoil and economic instability in the
<PAGE>
countries in which a Fund invests could adversely affect the value of
your investment. Also, if the value of any foreign currency in which a
Fund's investment is denominated declines relative to the U.S. dollar,
the value and total return of your investment in the Fund may decline as
well. Foreign investments, particularly investments in emerging markets,
carry added risks due to the potential for inadequate or inaccurate
financial information about companies, political disturbances, and
wider fluctuations in currency exchange rates.
NON-DIVERSIFICATION. Each Fund is non-diversified which means that the
proportion of the Fund's assets that may be invested in the securities of a
single issuer is not limited by the 40 Act. A "diversified" investment
company is required by the 40 Act, generally, with respect to 75% of its
total assets, to invest not more than 5% of its assets in the securities of
a single issuer. As a result, a Fund may hold a smaller number of issuers
than if it were diversified. If this situation occurs, investing in the
Fund could involve more risk than investing in a fund that holds a broader
range of securities because changes in the financial condition of a single
issuer could cause greater fluctuation in the Fund's total return.
SHORT-SELLING AND OPTIONS AND FUTURES TRANSACTIONS. Each Fund may engage in
short-selling and options and futures transactions to increase returns.
There is a risk that these transactions sometimes may reduce returns or
increase volatility. In addition, derivatives, such as options and futures,
can be illiquid and highly sensitive to changes in their underlying
security, interest rate or index, and as a result can be highly volatile. A
small investment in certain derivatives could have a potentially large
impact on the Fund's performance.
LEVERAGE. Leveraging (buying securities using borrowed money) exaggerates
the effect on net asset value of any increase or decrease in the market
value of a Fund's investment. Money borrowed for leveraging is limited to
33 1/3% of the value of each Fund's total assets. These borrowings would be
subject to interest costs which may or may not be recovered by
appreciation of the securities purchased.
ACTIVE TRADING. Each Fund may trade securities actively. This strategy
could increase transaction costs, reduce performance and may result in
taxable distributions.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of their assets in
illiquid securities. A potential risk from investing in illiquid
securities is that illiquid securities cannot be disposed of quickly in
the normal course of business. Also, illiquid securities can be more
difficult to value than more widely traded securities and the prices
realized from their sale may be less than if such securities were more
widely traded.
All of the Funds are subject to the principal risks associated with:
Interest Rates. Fixed-income investments are affected by interest rates
to which each of the Funds is exposed. When interest rates rise, the
prices of bonds typically fall in proportion to their maturities.
Lending. All of the Funds may lend portfolio securities to borrowers for
a fee. Securities may only be lent if the Funds received collateral
equal to the market value of the assets lent. Some risk is involved if a
borrower suffers financial problems and is unable to return the assets
lent.
Portfolio Management. The portfolio manager's skill in choosing
appropriate investments for the Funds will determine in large part
whether the Funds achieve their investment objectives.
Year 2000. Each Fund could be adversely affected if computer systems
used by Midas Management Corporation and the Fund's other service
providers do not properly process and calculate date-related information
on and after January 1, 2000. Midas Management Corporation is working to
avoid these problems and to obtain assurances from other service
providers that they are taking similar steps. There could be a negative
impact on the Funds. While the Funds cannot, at this time, predict the
degree of impact, it is possible that foreign markets will be less
prepared than U.S. markets.
PORTFOLIO MANAGEMENT
Midas Management Corporation is the investment manager of each of the Funds. It
provides day-to-day advice regarding portfolio transactions for each Fund except
Midas Fund. The investment manager also furnishes or obtains on behalf of the
Fund all services necessary for the proper conduct of the Fund's business and
administration. It is located at 11 Hanover Square, New York, New York 10005.
Steven A. Landis is the portfolio manager of Dollar Reserves. He is also
a Senior Vice President of the investment manager and
the Fund. He has served as portfolio manager of the
Fund since April 1995. From 1993 to 1995, he was an
Associate Director of Proprietary Trading at Barclays
de Zoete Wedd Securities Inc.
<PAGE>
Kjeld Thygesen is the portfolio manager of Midas Fund together with
the investment manager's Investment Policy Committee.
The investment manager has retained Lion Resource
Management Limited ("Lion") to serve as subadviser and
provide day-to-day advice regarding portfolio
transactions for Midas Fund. Mr. Thygesen has served as
a Managing Director of Lion since 1989. The
subadviser's principal business address is 7 - 8
Kendrick Mews, London, U.K. SW7 3HG.
Bassett S. Winmill is the portfolio manager of Midas Magic. He is the
Chief Investment Officer of the investment manager and
a director of the Fund. He has served as the portfolio
manager of the Fund since February 2, 1999. He is a
member of the New York Society of Security Analysts,
the Association for Investment Management and Research
and the International Society of Financial Analysts.
Thomas B. Winmill is the portfolio manager of Midas Investors, Midas
Special Equities Fund, and Midas U.S. and Overseas
Fund. He is the President and Chief Executive Officer
of the investment manager and the Funds. He has served
as a member of the investment manager's Investment
Policy Committee since 1990. As a member of the
Investment Policy Committee, he helps establish general
investment guidelines. He has served as portfolio
manager of the Funds since May 1, 1998.
MANAGEMENT FEES
Each Fund pays a management fee to the investment manager of the Fund at an
annual rate based on its average daily net assets. Midas Fund and Midas Magic
pay 1.00% on the first $200 million of average daily net assets, declining
thereafter. Midas Investors, Midas Special Equities Fund, and Midas U.S. and
Overseas Fund pay 1.00% on the first $10 million of average daily net assets,
declining thereafter. Dollar Reserves pays 0.50% on the first $250 million of
average daily net assets, declining thereafter. For the fiscal year ended
December 31, 1998, Midas Fund, Midas Magic, Midas Investors, Midas Special
Equities Fund, Midas U.S. and Overseas Fund and Dollar Reserves paid the
investment manager a fee of 1.00%, 1.00%, 1.00%, 0.87%, 1.00% and 0.38%,
respectively, of the Fund's average daily net assets.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. provides the Funds distribution and shareholder
services. Each of the Funds has adopted a plan under Rule 12b-1 and pays the
distributor a 12b-1 fee as compensation for distribution and shareholder
services based on the Fund's average daily net assets, as shown below. These
fees are paid out of the Fund's assets on an ongoing-basis. Over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Dollar Reserves, Midas Fund and Midas Magic each pays a 12b-1 fee equal to 0.25%
per annum of the Fund's average daily net assets. Based on a one year
contractual agreement which may be renewed, Midas Investors and Midas U.S. and
Overseas Fund each pays a 12b-1 fee equal to 0.25% per annum of the Fund's
average daily net assets. Without the agreement, each of these Funds would pay a
12b-1 fee equal to 1.00% per annum of the Fund's average daily net assets. Midas
Special Equities Fund pays a 12b-1 fee equal to 1.00% per annum of the Fund's
average daily net assets.
PURCHASING SHARES
Your price for Fund shares (except Dollar Reserves) is the Fund's next
calculation, after the order is placed, of net asset value (NAV) per share which
is determined as of the close of regular trading on the New York Stock Exchange
(currently, 4 p.m. eastern time) each day the exchange is open. With respect to
Dollar Reserves, orders are executed at the Fund's next calculation, after the
order is placed, of net asset value (NAV) per share which is determined as of 11
a.m. eastern time and as of the close of regular trading on the New York Stock
Exchange (currently, 4 p.m. eastern time) each day the exchange is open.
Purchase orders submitted in proper form along with payment in Federal funds
available to the Fund for investment by 11 a.m. eastern time on any Fund
business day will be of record at the close of business that day and entitled to
receive that day's dividends. The Fund's shares will not be priced on the days
on which the exchange is closed for trading. The Fund's investments are valued
based on market value, or where market quotations are not readily available,
based on fair value as determined in good faith by or under the direction of the
Fund's board.
Opening Your Account
- --------------------------------------------------------------------------------
By check. Complete and sign the Account Application that accompanies this
prospectus and mail it, along with your check drawn to the order of the Fund, to
Investor Service Center, P.O. Box 219789, Kansas City, MO 64121-9789 (see
Minimum Investments below). Checks must be payable to the Fund in U.S. dollars.
Third party checks cannot be accepted. You will be charged a fee for any check
that does not clear.
<PAGE>
By wire. To give the name(s) under which the account is to be registered, tax
identification number, the name of the bank sending the wire, and to be assigned
a Fund account number, call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on
business days,to speak with an Investor Service Representative. You may then
purchase shares by requesting your bank to transmit immediately available funds
("Federal funds") by wire to: United Missouri Bank NA, ABA #10-10-00695; for
Account 98-7052-724-3; name of Fund. Your account number and name(s) must be
specified in the wire as they are to appear on the account registration. You
should then enter your account number on your completed Account Application and
promptly forward it to Investor Service Center, P.O. Box 219789, Kansas City, MO
64121-9789. This service is not available on days when the Federal Reserve wire
system is closed (see Minimum Investments below). For automated 24 hour service,
call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Minimum Investments
Account Type Initial Subsequent
============================= ======================== =======================
Regular $1,000 $100
- ----------------------------- ------------------------ -----------------------
UGMA/UTMA $1,000 $100
- ----------------------------- ------------------------ -----------------------
403(b) plan $1,000 $100
- ----------------------------- ------------------------ -----------------------
Automatic Investment
Program $100 $100
- ----------------------------- ------------------------ -----------------------
IRA Accounts Initial Subsequent
============================= ======================== =======================
Traditional, Roth IRA $1,000 $100
- ----------------------------- ------------------------ -----------------------
Spousal, Rollover IRA $1,000 $100
- ----------------------------- ------------------------ -----------------------
Education $500 N/A
- ----------------------------- ------------------------ -----------------------
IRA SEP/SAR-SEP IRA,
SIMPLE IRA $1,000 $100
- ----------------------------- ------------------------ -----------------------
IRAs and retirement accounts. For more information about IRAs and 403(b)
accounts, please call 1-800-400-MIDAS (6432). For automated 24 hour service,
call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Midas Funds Automatic Investment Program. With the Midas Funds Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the plans explained below. Minimum
investments above are waived for each plan since they are designed to facilitate
an automatic monthly investment of $100 or more into your Fund account.
Midas Funds Automatic Investment Program
Plan Description
- ------------------------------------ -------------------------------------------
Midas Funds Bank Transfer Plan For making automatic investments from a
designated bank account.
- ------------------------------------ -------------------------------------------
Midas Funds Salary Investing Plan For making automatic investments through
a payroll deduction.
- ------------------------------------ -------------------------------------------
Midas Funds Government Direct For making automatic investments from
Deposit Plan your federal employment, Social Security
or other regular federal government
check.
- ------------------------------------ -------------------------------------------
Each of the Funds reserves the right to redeem any account if participation in
the program ends and the account's value is less than $1,000 due to redemptions.
For more information, or to request the necessary authorization form, call
1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business days,to speak with
an Investor Service Representative. You may modify or terminate the Midas Funds
Bank Transfer Plan at any time by written notice received 10 days prior to the
scheduled investment date. To modify or terminate the Midas Funds Salary
Investing Plan or Midas Funds Government Direct Deposit Plan, you should contact
your employer or the appropriate U.S.
Government agency, respectively.
Adding to Your Account
- --------------------------------------------------------------------------------
By check. Complete a Midas Funds FastDeposit form and mail it, along with your
check, drawn to the order of the Fund, to Investor Service Center, P.O. Box
219789, Kansas City, MO 64121-9789 (see Minimum Investments above). If you do
not use that form, include a letter indicating the account number to which the
subsequent investment is to be credited, the name of the Fund and the name of
the registered owner.
By Electronic Funds Transfer (EFT). The bank you designate on your Account
Application or Authorization Form will be contacted to arrange for the EFT,
which is done through the Automated Clearing House system, to your Fund account.
Requests received by 4 p.m., eastern time, will ordinarily be credited to your
Fund account on the next business day. Your designated bank must be an Automated
Clearing House member and any subsequent changes in bank account information
must be submitted in writing with a voided check (see Minimum Investments
above). To speak with an Investor Service Representative between 9 a.m. and 5
p.m. on business days, call 1-800-400-MIDAS (6432).
<PAGE>
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures under "Opening Your
Account" (see Minimum Investments above).
REDEEMING SHARES
Generally, you may redeem shares of the Funds by any of the methods explained
below. Requests for redemption should include the following information:
o name(s) of the registered owner(s) of the account
o account number
o Fund name
o amount you want to sell (number of shares or dollar amount)
o name and address or wire information of person to receive proceeds
In some instances, a signature guarantee may be required. Signature guarantees
protect against unauthorized account transfers by assuring that a signature is
genuine. You can obtain one from most banks or securities dealers, but not from
a notary public. For joint accounts, each signature must be guaranteed. Please
call us to ensure that your signature guarantee will be processed correctly. To
speak with an Investor Service Representative between 9 a.m. and 5 p.m. on
business days, call 1-800-400-MIDAS (6432).
By mail. Write to Investor Service Center, P.O. Box 219789, Kansas City, MO
64121-9789, and request the specific amount to be redeemed. The request must be
signed by the registered owner(s) and additional documentation may be required.
By telephone. To speak with an Investor Service Representative between 9 a.m.
and 5 p.m. on business days, call 1-800-400-MIDAS (6432) to expedite the
redemption of Fund shares. For automated 24 hour service, call toll-free
1-888-503-VOICE (8642) or visit www.midasfunds.com.
By EFT. You may redeem as little as $250 worth of shares by requesting EFT
service. EFT proceeds are ordinarily available in your bank account within two
business days. To request the specific amount to be redeemed through EFT, call
1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business days,to speak with
an Investor Service Representative. For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
By wire. To request the specific amount to be redeemed by wire, call
1-800-400-MIDAS (6432) to speak with an Investor Service Representative between
9 a.m. and 5 p.m. on business days. For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Systematic Withdrawal Plan. If your shares have a value of at least $20,000 you
may elect automatic withdrawals from your Fund account, subject to a minimum
withdrawal of $100. All dividends and distributions are reinvested in the Fund.
Check Writing Privilege for Easy Access. Upon request, you may establish free,
unlimited check writing privileges with only a $250 minimum per check, by
exchanging a minimum of $500 into Dollar Reserves. In addition to providing easy
access to your account, it enables you to continue receiving dividends until
your check is presented for payment. You will be subject to a $20 charge for
refused checks, which may change without notice. To speak with an Investor
Service Representative between 9 a.m. and 5 p.m. on business days, call
1-800-400-MIDAS (6432). For automated 24 hour service, call toll-free
1-888-503-VOICE (8642) or visit www.midasfunds.com.
ACCOUNT AND TRANSACTION POLICIES
Order execution. Orders to buy and sell shares are executed at the next NAV
calculated after the order has been received in proper form. With respect to all
the Funds except Dollar Reserves, orders received on Fund business days by 4
p.m., eastern time, will be executed that day. Orders received after 4 p.m.,
eastern time, will be executed on the next Fund business day. With respect to
Dollar Reserves, orders are executed at the Fund's next calculation, after the
order is placed, of net asset value (NAV) per share which is determined as of 11
a.m. eastern time and as of the close of regular trading on the New York Stock
Exchange (currently, 4 p.m. eastern time) each day the exchange is open.
Purchase orders submitted in proper form along with payment in Federal funds
available to the Fund for investment by 11 a.m. eastern time on any Fund
business day will be of record at the close of business that day and entitled to
receive that day's dividends.
Redemption fee. The Fund is designed as a long term investment, and short term
trading is discouraged. If shares of the Fund held for 30 days or less are
redeemed or exchanged, the Fund will deduct a redemption fee equal to one
percent of the NAV of shares redeemed or exchanged. Redemption fees are retained
by the Fund.
<PAGE>
Redemption payment. Payment for shares redeemed will ordinarily be made within
three business days after receipt of the redemption request in proper form.
Redemption proceeds from shares purchased by check or EFT transfer may be
delayed 15 business days to allow the check or transfer to clear.
Accounts with below-minimum balances. You will be charged a $2.00 account fee if
your monthly balance is less than $500, unless you participate in the Midas
Funds Automatic Investment Program. If your account balance falls below $500 as
a result of selling shares and not because of market action, the Fund reserves
the right, upon 45 days' notice, to close your account or request that you buy
more shares. The Fund reserves the right to close your account if you terminate
your participation in the Midas Funds Automatic Investment Program and your
account value is less than $1,000.
Telephone privileges. The Fund accepts telephone orders from all shareholders
and guards against fraud by following reasonable precautions such as requiring
personal identification before carrying out shareholder requests. You could be
responsible for any loss caused by an order which later proves to be fraudulent
if the Fund followed reasonable procedures.
Assignment. You may transfer your Fund shares to another owner. For
instructions, call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business
days to speak with an Investor Service Representative.
DISTRIBUTIONS AND TAXES
Distributions. The Fund pays its shareholders dividends from any net investment
income and distributes net capital gains that it has realized, if any. Income
dividends are normally declared and paid annually for each of the Funds except
Dollar Reserves. Dollar Reserves declares income dividends daily and pays them
monthly. Each of these distributions, if any, is normally paid out once a year,
except in the case of Dollar Reserves, which is paid out monthly. Your
distributions will be reinvested in the Fund unless you instruct the Fund
otherwise. To speak with an Investor Service Representative between 9 a.m. and 5
p.m. on business days, call 1-800-400- MIDAS (6432). For automated 24 hour
service, call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Taxes. Generally, you will be taxed when you sell shares, exchange shares and
receive distributions (whether reinvested or taken in cash). Typically, your tax
treatment will be as follows:
Transaction Tax treatment
- ------------------------------------------ -------------------------------------
Income dividends Ordinary income
- ------------------------------------------ -------------------------------------
Short-term capital gains distributions Ordinary income
- ------------------------------------------ -------------------------------------
Long-term capital gains distributions Capital gains
- ------------------------------------------ -------------------------------------
Sales or exchanges of shares held for Capital gains or losses
more than one year
- ------------------------------------------ -------------------------------------
Sales or exchanges of shares held for Gains are treated as ordinary income;
one year or less losses are subject to special rules
Because income and capital gains distributions are taxable, you may want to
avoid making a substantial investment in a taxable account when the Fund is
about to declare a distribution which normally takes place in December. Each
January, the Fund issues tax information on its distributions for the previous
year. Any investor for whom the Fund does not have a valid taxpayer
identification number will be subject to backup withholding for taxes. The tax
considerations described in this section do not apply to tax-deferred accounts
or other non-taxable entities. Because everyone's tax situation is unique,
please consult your tax professional about your investment.
FINANCIAL HIGHLIGHTS
The following tables describe the Funds' performances for the past five years.
Each Fund's fiscal year end is December 31. The fiscal year end for Dollar
Reserves, Midas Investors, and Midas Magic was changed to December 31 during
1998. Previously, the fiscal year end for Dollar Reserves, Midas Investors, and
Midas Magic was June 30, June 30 and October 31, respectively. Certain
information reflects financial results for a single Fund share. Total return
shows how much your investment in the Fund would have increased (or decreased)
during each period, assuming you had reinvested all dividends and distributions.
The figures for the periods shown, with the exception of 1994 for Midas Fund,
Inc., and 1996 through 1998 for Midas Magic, Inc., were audited by Tait, Weller
& Baker, the Funds' independent accountants, whose report, along with the Funds'
financial statements, are included in the Annual Reports, which are available
upon request.
<PAGE>
<TABLE>
<CAPTION>
MIDAS FUND
______________________________________________________________________________________________________________________________
Years Ended December 31,
1998* 1997* 1996* 1995* 1994
----- ----- ----- ----- ----
PER SHARE DATA
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.................... $2.11 $5.15 $4.25 $3.32 $4.16
----- ----- ----- ----- -----
Income from investment operations:
Net investment loss.................................... - (0.03) (0.05) (0.06) (0.05)
Net realized and unrealized gain (loss) (0.60) (3.01) 0.95 1.28 (0.67)
------ ------ ---- ---- ------
Total from investment operations.................. (0.60) (3.04) 0.90 1.22 (0.72)
------ ------ ---- ---- ------
Less distributions:
Distributions from net realized gains.................. - - - (0.29) (0.12)
------ ------
Total distributions............................... - - - (0.29) (0.12)
------ ------
Net asset value at end of period.......................... $1.51 $2.11 $5.15 $4.25 $3.32
===== ===== ===== ===== =====
TOTAL RETURN.............................................. (28.44)% (59.03)% 21.22% 36.73% (17.27)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)............... $87,841 $100,793 $200,457 $15,753 $7,052
Ratio of expenses to average net assets(a)(b)............. 2.33% 1.90% 1.63% 2.26% 2.15%
Ratio of net investment loss to average net assets(c)..... (0.02)% (0.72)% (0.92)% (1.47)% (1.26)%
Portfolio turnover rate .................................. 27% 50% 23% 48% 53%
<FN>
*Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share. (a) Expense ratio
prior to reimbursement by the investment manager was 2.15%, 1.83%, and 2.52% for
the years ended December 31, 1997, 1996, and 1995. (b) Expense ratio after
transfer agent and custodian credits was 2.30%, 1.88%, 1.61% and 2.25% for the
years ended December 31, 1998, 1997, 1996 and 1995. Prior to 1995, such credits
were reflected in the expense ratio. (c) Ratio prior to reimbursement by the
investment manager was (0.97)%, (1.12)%, and (1.73)% for the years ended
December 31, 1997, 1996, and 1995.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MIDAS INVESTORS
___________________________________________________________________________________________________________________________________
Six Months Ended
December 31,* Years Ended June 30,
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
PER SHARE DATA*
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period.............. $3.67 $7.14 $14.02 $13.13 $15.71 $16.98
----- ----- ------ ------ ------ ------
Income from investment operations:
Net investment loss.............................. (.04) (.12) (.25) (.22) -- (.11)
Net realized and unrealized gain (loss).......... (.81) (2.94) (4.36) 2.72 (1.13) (1.05)
----- ------ ------ ---- ------ ------
Total from investment operations.............. (.85) (3.06) (4.61) 2.50 (1.13) (1.16)
----- ------ ------ ---- ------ ------
Less distributions:
Distributions from net realized gains............ -- (.41) (2.27) (1.61) (1.45) (.11)
Total distributions........................... -- (.41) (2.27) (1.61) (1.45) (.11)
----- ------ ------ ------ -----
Net asset value at end of period.................... $2.82 $3.67 $7.14 $14.02 $13.13 $15.71
===== ===== ===== ====== ====== ======
TOTAL RETURN........................................ (23.16)% (43.45)% (37.81)% 21.01% (8.01)% (6.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)......... $6,293 $8,324 $15,217 $27,485 $29,007 $36,603
Ratio of expenses to average net assets(a)(b)....... 4.32%** 3.88% 2.94% 3.05% 2.93% 2.57%
Ratio of net investment income (loss) to
average net assets............................... (2.50)%** (2.40)% (2.06)% (1.61)% 0.01% (.68)%
Portfolio turnover rate............................. 36% 136% 37% 61% 158% 129%
<FN>
* Per share net investment loss and unrealized gain (loss) on investment have
been computed using the average number of shares outstanding. These computations
had no effect on net asset value per share. ** Annualized. (a) Ratios excluding
interest expense were 3.96%**, 3.57%, 2.77%, 2.93%, 2.82%, and 2.54%, for the
six months ended December 31, 1998 and the years ended June 30, 1998, 1997,
1996, 1995, and 1994, respectively. (b) Ratio after custodian credits was
4.30%** and 3.82% for the six months ended December 31, 1998 and the year ended
June 30, 1998, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDAS MAGIC
____________________________________________________________________________________________________________________________________
Two Months Ended
December 31, Years Ended October 31,
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
PER SHARE DATA*
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period............ $15.67 $24.92 $24.24 $18.73 $16.61 $16.32
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss............................ (.04) (.25) (.59) (.56) (.31) (.22)
Net realized and unrealized gain (loss)........ .98 (7.20) 6.17 6.07 2.43 .51
--- ------ ---- ---- ---- ---
Total from investment operations......... .94 (7.45) 5.58 5.51 2.12 .29
--- ------ ---- ---- ---- ----
Less distributions:
Distributions from net realized gains.......... (2.04) (1.80) (4.90) .00 .00 .00
------ ------ ------ --- --- ---
Total distributions......................... (2.04) (1.80) (4.90) .00 .00 .00
------ ------ ------ --- --- ---
Net asset value at end of period.................. $14.57 $15.67 $24.92 $24.24 $18.73 $16.61
====== ====== ====== ====== ====== ======
TOTAL RETURN...................................... 6.48% (31.29)% 27.55% 29.42% 12.76% 1.78%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)....... $548 $613 $1,771 $1,200 $774 $714
Ratio of expenses to average net assets(a)(b)..... 2.85%** 2.09% 2.81% 2.55% 2.30% 2.00%
Ratio of net investment loss to average net
assets(c)...................................... (1.54)** (1.38)% (2.65%) (2.23)% (1.77)% (1.38)%
Portfolio turnover rate........................... 0% 207% 44% 42% 30% 18%
<FN>
*Per share net investment loss and net realized and unrealized gain on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share. **Annualized. (a)
Ratio prior to reimbursement by the investment manager was 18.84%**, 9.27%,
10.47%, 4.44%, 3.00%, and 2.82%, for the two months ended December 31, 1998 and
the years ended October 31, 1998, 1997, 1996, 1995, and 1994, respectively. (b)
Ratio after custodian fee credits was 1.97% for the year ended October 31, 1998.
There were no custodian fee credits for prior years. (c) Ratio prior to
reimbursement by the manager was (17.53)%**, (8.56)%, (10.31)%, (4.12)%,
(2.47)%, and (2.20)% for the two months ended December 31, 1998 and the years
ended October 31, 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MIDAS SPECIAL EQUITIES FUND
____________________________________________________________________________________________________________________________________
Years Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
PER SHARE DATA*
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.................... $23.38 $22.96 $25.42 $19.11 $23.13
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss.................................... (.61) (.38) (.73) (.81) (.55)
Net realized and unrealized gain (loss)................ (.65) 1.55 0.99 8.51 (3.28)
----- ---- ---- ---- ------
Total from investment operations................. (1.26) 1.17 0.26 7.70 (3.83)
------ ---- ---- ---- ------
Less distributions:
Distributions from net realized gains.................. (1.78) (.75) (2.72) (1.39) (.19)
------ ----- ------ ------ -----
Net increase (decrease) in net asset value............. (3.04) .42 (2.46) 6.31 (4.02)
Net asset value at end of period.......................... $20.34 $23.38 $22.96 $25.42 $19.11
====== ====== ====== ====== ======
TOTAL RETURN.............................................. (5.00)% 5.23% 1.05% 40.47% (16.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)............... $36,807 $44,773 $49,840 $56,340 $45,614
Ratio of expenses to average net assets(a)(b)............. 3.42% 2.81% 2.92% 3.67% 2.92%
Ratio of net investment loss to average net assets........ (2.57)% (1.48)% (2.81)% (2.70)% (2.43)%
Portfolio turnover rate................................... 97% 260% 311% 319% 309%
<FN>
*Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share. (a) Expense ratio
excluding interest expense was 2.63%, 2.53%, 2.45% and 2.88% for the years ended
December 31, 1998, 1997, 1996 and 1995. (b) Expense ratio after custodian fee
credits was 3.41% and 2.79% for the years ended December 31, 1998 and 1997.
Prior to 1995, such credits were reflected in the expense ratio. There were no
custodian fee credits for 1996 and 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIDAS U.S. AND OVERSEAS FUND
____________________________________________________________________________________________________________________________________
Years Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
PER SHARE DATA*
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period..................... $7.35 $7.91 $8.36 $7.08 $8.71
----- ----- ----- ----- -----
Income from investment operations:
Net investment loss..................................... (.10) (0.05) (0.24) (0.23) (0.13)
Net realized and unrealized gain (loss)................. .18 0.46 0.68 2.00 (1.01)
--- ---- ---- ---- ------
Total from investment operations........................ .08 0.41 0.44 1.77 (1.14)
--- ---- ---- ---- ------
Less distributions:
Distributions from net realized gains................... (.26) (0.97) (0.89) (0.49) (0.49)
----- ------ ------ ------ ------
Net asset value at end of period........................... $7.17 $7.35 $7.91 $8.36 $7.08
===== ===== ===== ===== =====
TOTAL RETURN............................................... 1.18% 5.64% 5.34% 25.11% (13.12)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)................ $7,340 $8,446 $9,836 $9,808 $8,454
Ratio of expenses to average net assets(a)(b).............. 3.33% 3.28% 3.20% 3.55% 3.53%
Ratio of net investment loss to average net assets(c)...... (1.38)% (0.63)% (2.74)% (2.85)% (1.65)%
Portfolio turnover rate.................................... 69% 205% 255% 214% 212%
<FN>
* Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share. (a) Expense ratio
prior to reimbursement by the investment manager was 3.84% and 3.59% for the
years ended December 31, 1995 and 1994. (b) Expense ratio after the custodian
fee credits was 3.22% and 3.49% for 1997 and 1995. Prior to 1995, such
reductions were reflected in the expense ratios. There were no custodian fee
credits for 1998 and 1996. (c) Ratio prior to reimbursement by the investment
manager was (3.14)% and (1.71)% for the years ended December 31, 1995 and 1994.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLAR RESERVES
____________________________________________________________________________________________________________________________________
Six Months Ended
December 31, Years Ended June 30,
1998 1998 1997 1996 1995 1994
---- ---- ---- ------ ------ -----
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period.............. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment operations:
Net investment income............................ .022 .048 .047 .047 .044 .026
Less distributions:
Distributions from net investment income......... (.022) (.047) (.047) .047 (.044) (.026)
Distributions from paid-in capital -- ($.001) -- -- -- --
-------
Net asset value at end of period.................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
TOTAL RETURN........................................ 4.46%** 4.88% 4.83% 4.81% 4.53% 2.59%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)......... $65,535 $61,602 $62,908 $62,467 $65,278 $76,351
Ratio of expenses to average net assets (a)......... .93%** .86% .71% .90% .89% .89%
Ratio of net investment income to average net 4.43%** 4.71% 4.73% 4.70% 4.41% 2.56%
assets (b).......................................
<FN>
** Annualized. (a) Ratio prior to waiver by the Investment Manager and
Distributor was 1.30%**, 1.20%, 1.21%, 1.40%, 1.39%, and 1.39% for the six
months ended December 31, 1998 and the years ended June 30, 1998, 1997, 1996,
1995, 1994, respectively. (b) Ratio prior to waiver by the Investment Manager
and Distributor was 4.06%**, 4.37%, 4.23%, 4.20%, 3.91%, and 2.06% for the six
months ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
<PAGE>
FOR MORE INFORMATION
For investors who want more information on the Midas Funds, the following
documents are available free upon request:
o Annual/Semi-annual reports. Contains performance data, lists portfolio
holdings and contains a letter from the Funds' managers discussing recent
market conditions, economic trends and Fund strategies that significantly
affected the Funds' performance during the last fiscal year.
o Statement of Additional Information (SAI). Provides a fuller technical and
legal description of the Funds' policies, investment restrictions, and
business structure. A current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is legally considered part
of this prospectus).
To Obtain Information
- --------------------------------------------------------------------------------
o By telephone, call
1-800-400-MIDAS (6432) to speak to an Investor Service Representative, 9:00
a.m. to 5:00 p.m. on business days, eastern time or
1-888-503-VOICE (8642) for 24 hour, 7 day a week automated shareholder
services.
o By mail, write to:
Midas Funds
P.O. Box 219789
Kansas City, MO 64121-9789
o By e-mail, write to:
[email protected]
o On the Internet, Fund documents
can be viewed online or downloaded from:
SEC at http://www.sec.gov, or
Midas Funds at http://www.midasfunds.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009. The Funds' Investment Company Act file numbers are as follows:
811-04316 (Midas Fund); 811-00835 (Midas Investors); 811-04534 (Midas Magic);
811-04625 (Midas Special Equities Fund); 811-04741 (Midas U.S. and Overseas
Fund) and 811-02474 (Dollar Reserves).
<PAGE>
Prospectus dated June 30, 1999
Dollar Reserves, Inc. is a high quality no-load money market fund investing
exclusively in obligations of the U.S. Government, its agencies and
instrumentalities. The Fund's objective is to provide its shareholders maximum
current income consistent with preservation of capital and maintenance of
liquidity. There is no assurance that the Fund will achieve its investment
objective.
This prospectus contains information you should know about the Fund before you
invest. Please keep it for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND STRATEGY.............................................2
MAIN RISKS ..................................................................2
PAST PERFORMANCE..............................................................3
FEES AND EXPENSES OF THE FUND.................................................3
PORTFOLIO MANAGEMENT..........................................................4
DISTRIBUTION AND SHAREHOLDER SERVICES.........................................4
FINANCIAL HIGHLIGHTS..........................................................4
PURCHASING SHARES.............................................................5
REDEEMING SHARES..............................................................6
ACCOUNT AND TRANSACTION POLICIES..............................................7
DISTRIBUTIONS AND TAXES.......................................................7
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
Dollar Reserves seeks maximum current income consistent with preservation of
capital and maintenance of liquidity.
The Fund invests exclusively in obligations of the U.S. Government, its agencies
and instrumentalities ("U.S. Government Securities"). The U.S. Government
Securities in which the Fund may invest include U.S. Treasury notes and bills
and certain agency securities that are backed by the full faith and credit of
the U.S. Government. The Fund also may invest without limit in securities issued
by U.S. Government agencies and instrumentalities that may have different
degrees of government backing as to principal or interest but which are not
backed by the full faith and credit of the U.S. Government.
The Fund is a money market fund and as such is subject to certain specific SEC
rule requirements. Among other things, the Fund is limited to investing in U.S.
dollar-denominated instruments with a remaining maturity of 397 days or less (as
calculated pursuant to Rule 2a-7 under the Investment Company Act of 1940).
The Fund may invest in securities which have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to an interest rate
index or market interest rate. Variable and floating rate securities are subject
to changes in value based on changes in market interest rates or changes in the
issuer's or guarantor's creditworthiness.
The Fund may borrow money from banks for temporary or emergency purposes (not
for leveraging or investment) up to one third of the Fund's total assets.
Pursuant to an agency arrangement with an affiliate of its Custodian, the Fund
may lend portfolio securities or other assets through such affiliate for a fee
to other parties. The Fund's agreement requires that the loans be continuously
secured by cash, securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or any combination of cash and such securities,
as collateral equal at all times to at least the market value of the assets
lent. Loans of portfolio securities may not exceed one-third of the Fund's total
assets. Loans will be made only to borrowers deemed to be creditworthy. Any loan
made by the Fund will provide that it may be terminated by either party upon
reasonable notice to the other party.
MAIN RISKS
Money Market Fund Risk. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Interest Rates. The Fund's yield will vary in response to changes in interest
rates. Fixed-income investments are affected by interest rates to which the Fund
is exposed. When interest rates rise, the prices of bonds typically fall in
proportion to their maturities.
Lending. The Fund may lend portfolio securities to borrowers for a fee.
Securities may only be lent if the Fund received collateral equal to the market
value of the assets lent. Some risk is involved if a borrower suffers financial
problems and is unable to return the assets lent.
Portfolio Management. The portfolio manager's skill in choosing appropriate
investments for the Fund will determine in large part whether the Fund achieves
its investment objectives.
Year 2000. The Fund could be adversely affected if computer systems used by
Midas Management Corporation and the Fund's other service providers do not
properly process and calculate date-related information on and after January 1,
2000. Midas Management Corporation is working to avoid these problems and to
obtain assurances from other service providers that they are taking similar
steps. There could be a negative impact on the Fund. While the Fund cannot, at
this time, predict the degree of impact, it is possible that foreign markets
will be less prepared than U.S. markets.
<PAGE>
PAST PERFORMANCE
The bar chart provides some indication of the risks of investing in the Fund by
showing changes in the Fund's performance from year to year. The bar chart
assumes reinvestment of dividends and distributions. As with all mutual funds,
past performance is not necessarily an indication of future performance. The
Lipper Analytical Money Market Index ("LAMMI") is an index that is unmanaged and
invested principally in financial instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, with dollar-weighted average
maturities of less than 90 days and which intends to keep a constant net asset
value.
Year-by-year total return as of 12/31 each year
[Gaphic Omitted]
Best Quarter: 1/89-3/89 = 2.08%, Worst Quarter: 4/93-6/93 = 0.58%
For information on the Fund's 7-day yield, call toll-free 1-800-400-MIDAS
(6432).
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
---------------------------------------------------------
Dollar Reserves 4.69% 4.55% 4.95%
LAMMI 4.95% 4.79% 5.19%
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the following tables. Shareholder fees are paid out of
your account. Annual Fund operating expenses are paid out of Fund assets, so
their effect is included in the share price.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases............................NONE
Maximum Deferred Sales Charge (Load)........................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................NONE
Redemption Fee within 30 days of purchase...................................NONE
Annual Fund Operating Expenses
(expenses as % of average daily net assets that are deducted from Fund assets)
Management fees..........................................................0.50%
Distribution and service (12b-1) fees....................................0.25%
Other expenses...........................................................0.55%
Total annual Fund operating expenses.....................................1.30%
<TABLE>
<CAPTION>
EXAMPLE:
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
The example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these
assumptions your costs would
be:............................................................. $132 $412 $713 $1,568
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO MANAGEMENT
Midas Management Corporation is the investment manager of the Fund. The
investment manager provides day-to-day advice regarding portfolio transactions
and furnishes or obtains on behalf of the Fund all services necessary for the
proper conduct of the Fund's business and administration. The investment manager
is located at 11 Hanover Square, New York, New York 10005.
Steven A. Landis is the portfolio manager of the Fund. He is also a Senior Vice
President of the investment manager and the Fund. He has served as the portfolio
manager of the Fund since April 1995. From 1993 to 1995, he was an Associate
Director of Proprietary Trading at Barclays de Zoete Wedd Securities Inc.
MANAGEMENT FEES
Generally, the Fund pays the investment manager a management fee based on the
average daily net assets of the Fund, at the annual rate of 0.50% on the first
$250 million and declining thereafter as a percentage of average daily net
assets. For the fiscal year ended December 31, 1998, the Fund paid a fee of
0.38% of the Fund's average daily net assets.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. provides the Fund's distribution and shareholder
services. The Fund has adopted a plan under Rule 12b-1 and pays the distributor
a 12b-1 fee as compensation for distribution and shareholder services based on
the Fund's average daily net assets, as shown below. These fees are paid out of
the Fund's assets on an ongoing-basis. Over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges. Dollar Reserves pays a 12b-1 fee equal to 0.25% per annum of the Fund's
average daily net assets.
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the past five years. In 1998,
the Fund's fiscal year end was changed to December 31. Previously, the fiscal
year end was June 30. Certain information reflects financial results for a
single Fund share. Total return shows how much your investment in the Fund would
have increased during each period, assuming you had reinvested all dividends and
distributions. The figures for the periods shown were audited by Tait, Weller &
Baker, the Fund's independent accountants, whose report, along with the Fund's
financial statements, are included in the Annual Report, which is available upon
request.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Years Ended June 30,
1998 1998 1997 1996 1995 1994
---- ---- ---- ------ ------ -----
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment operations:
Net investment income................................. .022 .048 .047 .047 .044 .026
Less distributions:
Distributions from net investment income.............. (.022) (.047) (.047) .047 (.044) (.026)
Distributions from paid-in capital.................... -- ($.001) -- -- -- --
-------
Net asset value at end of period......................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
TOTAL RETURN............................................. 4.46%** 4.88% 4.83% 4.81% 4.53% 2.59%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted).............. $65,535 $61,602 $62,908 $62,467 $65,278 $76,351
Ratio of expenses to average net assets (a).............. .93%** .86% .71% .90% .89% .89%
Ratio of net investment income to average
net assets (b)........................................ 4.43%** 4.71% 4.73% 4.70% 4.41% 2.56%
<FN>
** Annualized.
(a) Ratio prior to waiver by the Investment Manager and Distributor was
1.30%**, 1.20%, 1.21%, 1.40%, 1.39%, and 1.39% for the six months ended
December 31, 1998 and the years ended June 30, 1998, 1997, 1996, 1995,
1994, respectively.
(b) Ratio prior to waiver by the Investment Manager and Distributor was
4.06%**, 4.37%, 4.23%, 4.20%, 3.91%, and 2.06% for the six months ended
December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
<PAGE>
PURCHASING SHARES
Your price for Fund shares is the Fund's next calculation, after the order is
placed, of net asset value (NAV) per share which is determined as of 11 a.m.
eastern time and as of the close of regular trading on the New York Stock
Exchange (currently, 4 p.m. eastern time) each day the exchange is open.
Purchase orders submitted in proper form along with payment in Federal funds
available to the Fund for investment by 11 a.m. eastern time on any Fund
business day will be of record at the close of business that day and entitled to
receive that day's dividends. The Fund's shares will not be priced on the days
on which the exchange is closed for trading. The Fund's investments are valued
based on market value, or where market quotations are not readily available,
based on fair value as determined in good faith by or under the direction of the
Fund's board.
Opening Your Account
- --------------------------------------------------------------------------------
By check. Complete and sign the Account Application that accompanies this
prospectus and mail it, along with your check drawn to the order of Dollar
Reserves, to Investor Service Center, P.O. Box 219789, Kansas City, MO
64121-9789 (see Minimum Investments below). Checks must be payable to the Fund
in U.S. dollars. Third party checks cannot be accepted. You will be charged a
fee for any check that does not clear.
By wire. To give the name(s) under which the account is to be registered, tax
identification number, the name of the bank sending the wire, and to be assigned
a Fund account number, call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on
business days,to speak with an Investor Service Representative. You may then
purchase shares by requesting your bank to transmit immediately available funds
("Federal funds") by wire to: United Missouri Bank NA, ABA #10-10-00695; for
Account 98-7052-724-3; Dollar Reserves. Your account number and name(s) must be
specified in the wire as they are to appear on the account registration. You
should then enter your account number on your completed Account Application and
promptly forward it to Investor Service Center, P.O. Box 219789, Kansas City, MO
64121-9789. This service is not available on days when the Federal Reserve wire
system is closed (see Minimum Investments below). For automated 24 hour service,
call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Minimum Investments
Account Type Initial Subsequent
============================ ========================= =========================
Regular $1,000 $100
- ---------------------------- ------------------------ ------------------------
UGMA/UTMA $1,000 $100
- ---------------------------- ------------------------ ------------------------
403(b) plan $1,000 $100
- ---------------------------- ------------------------ ------------------------
Automatic Investment
Program $100 $100
- ---------------------------- ------------------------ ------------------------
IRA Accounts Initial Subsequent
============================ ======================== ========================
Traditional, Roth IRA $1,000 $100
- ---------------------------- ------------------------ ------------------------
Spousal, Rollover IRA $1,000 $100
- ---------------------------- ------------------------ ------------------------
Education $500 N/A
- ---------------------------- ------------------------ ------------------------
IRA SEP/SAR-SEP IRA,
SIMPLE IRA $1,000 $100
- ---------------------------- ------------------------ ------------------------
IRAs and retirement accounts. For more information about IRAs and 403(b)
accounts, please call 1-800-400-MIDAS (6432). For automated 24 hour service,
call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Midas Funds Automatic Investment Program. With the Midas Funds Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the plans explained below. Minimum
investments above are waived for each plan since they are designed to facilitate
an automatic monthly investment of $100 or more into your Fund account.
Midas Funds Automatic Investment Program
Plan Description
- -------------------------------------- -----------------------------------------
Midas Funds Bank Transfer Plan For making automatic investments from
a designated bank account.
- -------------------------------------- -----------------------------------------
Midas Funds Salary Investing Plan For making automatic investments
through a payroll deduction.
- -------------------------------------- -----------------------------------------
Midas Funds Government Direct For making automatic investments from
Deposit Plan your federal employment, Social
Security or other regular federal
government check
- -------------------------------------- -----------------------------------------
The Fund reserves the right to redeem any account if participation in the
program ends and the account's value is less than $1,000 due to redemptions.
For more information, or to request the necessary authorization form, call
1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business days,to speak with
an Investor Service Representative. You may modify or terminate the Midas Funds
Bank Transfer Plan
<PAGE>
at any time by written notice received 10 days prior to the scheduled investment
date. To modify or terminate the Midas Funds Salary Investing Plan or Midas
Funds Government Direct Deposit Plan, you should contact your employer or the
appropriate U.S. Government agency, respectively.
Adding to Your Account
- --------------------------------------------------------------------------------
By check. Complete a Midas Funds FastDeposit form and mail it, along with your
check, drawn to the order of the Fund, to Investor Service Center, P.O. Box
219789, Kansas City, MO 64121-9789 (see Minimum Investments above). If you do
not use that form, include a letter indicating the account number to which the
subsequent investment is to be credited, the name of the Fund, and the name of
the registered owner.
By Electronic Funds Transfer (EFT). The bank you designate on your Account
Application or Authorization Form will be contacted to arrange for the EFT,
which is done through the Automated Clearing House system, to your Fund account.
Requests received by 4 p.m., eastern time, will ordinarily be credited to your
Fund account on the next business day. Your designated bank must be an Automated
Clearing House member and any subsequent changes in bank account information
must be submitted in writing with a voided check (see Minimum Investments
above). To speak with an Investor Service Representative between 9 a.m. and 5
p.m. on business days, call 1-800-400-MIDAS (6432).
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures under "Opening Your
Account" (see Minimum Investments above).
REDEEMING SHARES
Generally, you may redeem shares of the Fund by any of the methods explained
below. Requests for redemption should include the following information:
o name(s) of the registered owner(s) of the account
o account number
o Fund name
o amount you want to sell (number of shares or dollar amount)
o name and address or wire information of person to receive proceeds
In some instances, a signature guarantee may be required. Signature guarantees
protect against unauthorized account transfers by assuring that a signature is
genuine. You can obtain one from most banks or securities dealers, but not from
a notary public. For joint accounts, each signature must be guaranteed. Please
call us to ensure that your signature guarantee will be processed correctly. To
speak with an Investor Service Representative between 9 a.m. and 5 p.m. on
business days, call 1-800-400-MIDAS (6432).
By mail. Write to Investor Service Center, P.O. Box 219789, Kansas City, MO
64121-9789, and request the specific amount to be redeemed. The request must be
signed by the registered owner(s) and additional documentation may be required.
By telephone. To speak with an Investor Service Representative between 9 a.m.
and 5 p.m. on business days, call 1-800-400-MIDAS (6432) to expedite the
redemption of Fund shares. For automated 24 hour service, call 1-888-503-VOICE
(8642) or visit www.midasfunds.com.
By EFT. You may redeem as little as $250 worth of shares by requesting EFT
service. EFT proceeds are ordinarily available in your bank account within two
business days. To request the specific amount to be redeemed through EFT, call
1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business days,to speak with
an Investor Service Representative. For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
By wire. To request the specific amount to be redeemed by wire, call
1-800-400-MIDAS (6432) to speak with an Investor Service Representative between
9 a.m. and 5 p.m. on business days. For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Systematic Withdrawal Plan. If your shares have a value of at least $20,000 you
may elect automatic withdrawals from your Fund account, subject to a minimum
withdrawal of $100. All dividends and distributions are reinvested in the Fund.
<PAGE>
Check Writing Privilege for Easy Access. Upon request, you may establish free,
unlimited check writing privileges with only a $250 minimum per check. In
addition to providing easy access to your account, it enables you to continue
receiving dividends until your check is presented for payment. You will be
subject to a $20 charge for refused checks, which may change without notice. To
speak with an Investor Service Representative between 9 a.m. and 5 p.m. on
business days, call 1-800-400-MIDAS (6432). For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
ACCOUNT AND TRANSACTION POLICIES
Order execution. Orders to buy and sell shares are executed at the Fund's next
calculation, after the order is placed, of net asset value (NAV) per share which
is determined as of 11 a.m. eastern time and as of the close of regular trading
on the New York Stock Exchange (currently, 4 p.m. eastern time) each day the
exchange is open. Purchase orders submitted in proper form along with payment in
Federal funds available to the Fund for investment by 11 a.m. eastern time on
any Fund business day will be of record at the close of business that day and
entitled to receive that day's dividends. The Fund's shares will not be priced
on the days on which the exchange is closed for trading. The Fund's investments
are valued based on market value, or where market quotations are not readily
available, based on fair value as determined in good faith by or under the
direction of the Fund's board.
Redemption payment. Payment for shares redeemed will ordinarily be made within
three business days after receipt of the redemption request in proper form.
Redemption proceeds from shares purchased by check or EFT transfer may be
delayed 15 business days to allow the check or transfer to clear.
Accounts with below-minimum balances. You will be charged a $2.00 account fee if
your monthly balance is less than $500, unless you participate in the Midas
Funds Automatic Investment Program. If your account balance falls below $500 as
a result of selling shares and not because of market action, the Fund reserves
the right, upon 45 days' notice, to close your account or request that you buy
more shares. The Fund reserves the right to close your account if you terminate
your participation in the Midas Funds Automatic Investment Program and your
account value is less than $1,000.
Telephone privileges. The Fund accepts telephone orders from all shareholders
and guards against fraud by following reasonable precautions such as requiring
personal identification before carrying out shareholder requests. You could be
responsible for any loss caused by an order which later proves to be fraudulent.
The Fund is not liable as long as the Fund follows reasonable procedures.
Assignment. You may transfer your Fund shares to another owner. For
instructions, call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m. on business
days, to speak with an Investor Service Representative.
DISTRIBUTIONS AND TAXES
Distributions. The Fund pays its shareholders dividends from any net investment
income and distributes net capital gains that it has realized, if any. The Fund
declares income dividends daily and pays them monthly. Distributions from net
capital gains, if any, normally are paid monthly. Your distributions will be
reinvested in the Fund unless you instruct the Fund otherwise. To speak with an
Investor Service Representative between 9 a.m. and 5 p.m. on business days, call
1-800-400-MIDAS (6432). For automated 24 hour service, call toll-free
1-888-503-VOICE (8642) or visit www.midasfunds.com.
Taxes. Generally, you will be taxed when you sell shares, exchange shares and
receive distributions (whether reinvested or taken in cash). Typically, your tax
treatment will be as follows:
Transaction Tax treatment
- ----------------------------------------- --------------------------------------
Income dividends Ordinary income
- ----------------------------------------- --------------------------------------
Short-term capital gains distributions Ordinary income
- ----------------------------------------- --------------------------------------
Long-term capital gains distributions Capital gains
- ----------------------------------------- --------------------------------------
Sales or exchanges of shares Capital gains or losses
held for more than one year
- ----------------------------------------- --------------------------------------
Sales or exchanges of shares Gains are treated as ordinary income;
held for one year or less losses are subject to special rules
Each January, the Fund issues tax information on its distributions for the
previous year. Any investor for whom the Fund does not have a valid taxpayer
identification number will be subject to backup withholding for taxes. The tax
considerations described in this section do not apply to tax-deferred accounts
or other non-taxable entities. Because everyone's tax situation is unique,
please consult your tax professional about your investment.
<PAGE>
FOR MORE INFORMATION
MIDAS FUND, INC. MIDAS SPECIAL EQUITIES FUND, INC.
MIDAS INVESTORS LTD. MIDAS U.S. AND OVERSEAS FUND LTD.
MIDAS MAGIC, INC. DOLLAR RESERVES, INC.
For investors who want more information on Dollar Reserves or any of the other
Midas Funds, the following documents are available free upon request:
o Annual/Semi-annual reports. Contains performance data, lists portfolio
holdings and contains a letter from the Fund's managers discussing recent
market conditions, economic trends and Fund strategies that significantly
affected the Fund's performance during the last fiscal year.
o Statement of Additional Information (SAI). Provides a fuller technical and
legal description of the Fund's policies, investment restrictions, and
business structure. A current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is legally considered part
of this prospectus).
To Obtain Information
- --------------------------------------------------------------------------------
o By telephone, call
1-800-400-MIDAS (6432) to speak to an Investor Service Representative, 9:00
a.m. to 5:00 p.m. on business days, eastern time or
1-888-503-VOICE (8642) for 24 hour, 7 day a week automated shareholder
services.
o By mail, write to:
Dollar Reserves
P.O. Box 219789
Kansas City, MO 64121-9789
o By e-mail, write to:
[email protected]
o On the Internet, Fund documents
can be viewed online or downloaded from:
SEC at http://www.sec.gov, or
Midas Funds at http://www.midasfunds.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009. The Fund's Investment Company Act file number is 811-02474.
<PAGE>
Statement of Additional Information June 30, 1999
DOLLAR RESERVES, INC.
11 Hanover Square
New York, NY 10005
1-800-400-MIDAS (6432)
Dollar Reserves, Inc. ("Fund") is a diversified, open-end management
investment company organized as a Maryland corporation. This Statement of
Additional Information regarding the Fund is not a prospectus and should be read
in conjunction with the Fund's Prospectus dated June 30, 1999. The Prospectus is
available without charge upon request by calling toll-free at 1-800-400-MIDAS
(6432).
TABLE OF CONTENTS
THE FUND'S INVESTMENT PROGRAM..................................................2
INVESTMENT RESTRICTIONS........................................................2
THE INVESTMENT COMPANY COMPLEX.................................................3
OFFICERS AND DIRECTORS.........................................................4
INVESTMENT MANAGER.............................................................5
INVESTMENT MANAGEMENT AGREEMENT................................................5
YIELD AND PERFORMANCE INFORMATION .............................................6
DISTRIBUTION OF SHARES.........................................................8
DETERMINATION OF NET ASSET VALUE...............................................9
PURCHASE OF SHARES............................................................10
ALLOCATION OF BROKERAGE.......................................................10
DIVIDENDS AND TAXES...........................................................11
REPORTS TO SHAREHOLDERS.......................................................11
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT.............................11
AUDITORS......................................................................12
FINANCIAL STATEMENTS..........................................................12
1
<PAGE>
THE FUND'S INVESTMENT PROGRAM
The Fund's investment objective is to provide its shareholders maximum
current income consistent with preservation of capital and maintenance of
liquidity. The Fund seeks to achieve this objective by investing exclusively in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). Although the Fund's investment
policies also permit the Fund to invest in bank obligations and instruments
secured thereby, high quality commercial paper, high grade corporate
obligations, and repurchase agreements pertaining to these securities and U.S.
Government Securities, the Board of Directors has determined that the Fund shall
not do so until and after 60 days' notice to shareholders. There can be no
assurance that the Fund will achieve its investment objective.
The Fund is managed to maintain a net asset value of $1.00 per share,
although there can be no assurance that it will be able to do so. An investment
in the Fund is neither insured nor guaranteed by the U.S. Government.
Dividends from net investment income paid by the Fund to its shareholders
(except Massachusetts corporate shareholders) are exempt from state income taxes
to the extent such income is derived from holding debt securities of the U.S.
Government, its agencies or instrumentalities, the income from which is state
tax exempt by Federal law. The following states currently have no state
individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington,
and Wyoming. This information is current as of the date of this Statement of
Additional Information and is subject to change.
Borrowing. The Fund may borrow money from banks, but only for temporary or
emergency purposes, in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made while borrowings exceed 5% of the Fund's total assets, the Fund will not
make any additional investments. The Fund may incur overdrafts at its custodian
bank from time to time in connection with redemptions and/or the purchase of
portfolio securities. In lieu of paying interest to the custodian bank, the Fund
may maintain equivalent cash balances prior or subsequent to incurring such
overdrafts. If cash balances exceed such overdrafts, the custodian bank credits
interest thereon against fees.
Year 2000 Risks. Like other investment companies, financial and business
organizations around the world, the Fund will be adversely affected if the
computer systems used by Midas Management Corporation, (the "Investment
Manager"), and the Fund's other service providers do not properly process and
calculate date-related information and data from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem." The Fund is taking steps that it
believes are reasonably designed to address the Year 2000 Problem with respect
to the computer systems it uses and to obtain satisfactory assurances that
comparable steps are being taken by each of the Fund's major service providers.
The Fund does not expect to incur any significant costs in order to address the
Year 2000 Problem. However, at this time there can be no assurances that these
steps will be sufficient to avoid any adverse impact on the Fund. Additionally,
while the Fund cannot, at this time, predict the degree of impact, it is
possible that foreign markets will be less prepared than U.S. markets.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions may not be changed without the
approval of the lesser of (a) 67% or more of the Fund's voting securities
present at a meeting if the holders of more than 50% of the Fund's outstanding
voting securities are present or represented by proxy, or (b) more than 50% of
the Fund's outstanding voting securities. If a percentage restriction is adhered
to at the time an investment is made, a later change in percentage resulting
from a change in value or assets will not constitute a violation of that
restriction. The Fund may not:
(1) Purchase the securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in the securities of
such issuer, or the Fund would own or hold 10% or more of the
outstanding voting securities of that issuer, except that up to 25%
of the Fund's total assets may be invested without regard to these
limitations and provided that these limitations do not apply to
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities;
(2) Issue senior securities as defined in the Investment Company Act of
1940 ("1940 Act"). The following will not be deemed to be senior
securities for this purpose: (a) evidences of indebtedness that the
Fund is permitted to incur under the 1940 Act, (b) the issuance of
additional series or classes of securities that the Board of Directors
may establish, (c) the Fund's futures, options, and forward currency
transactions, and (d) to the extent consistent with the 1940 Act and
applicable rules and policies adopted by the Securities and Exchange
Commission ("SEC"), (i) the establishment or use of a margin account
with a broker for the purpose of effecting securities transactions on
margin and (ii) short sales;
(3) Lend its assets, provided however, that the following are not
prohibited: (a) the making of time or demand deposits with banks,
(b) the purchase of debt securities such as bonds, debentures,
commercial paper, repurchase agreements and short term obligations
in accordance with the Fund's investment objective and policies and
(c) engaging in securities and other asset loan transactions limited
to one third of the Fund's total assets;
(4) Underwrite the securities of other issuers, except to the extent
that the Fund may be deemed to be an underwriter under the Federal
securities laws in connection with the disposition of the Fund's
authorized investments;
(5) Borrow money, except to the extent permitted by the 1940 Act;
2
<PAGE>
(6) Purchase or sell commodities or commodity futures contracts,
although it may enter into (i) financial and foreign currency
futures contracts and options thereon, (ii) options on foreign
currencies, and (iii) forward contracts on foreign currencies;
(7) Purchase or sell real estate, provided that the Fund may invest in
securities (excluding limited partnership interests) secured by real
estate or interests therein or issued by companies which invest in
real estate or interests therein; or
(8) Purchase any securities, other than obligations of domestic branches
of U.S. or foreign banks, or the U.S. Government or its agencies or
instrumentalities, if, immediately after such purchase, more than
25% of the value of the Fund's total assets would be invested in the
securities of issuers in the same industry.
The Fund, notwithstanding any other investment policy or restrictions
(whether or not fundamental), may, as a matter of fundamental policy, invest all
of its assets in the securities or beneficial interests of a singled pooled
investment fund having substantially the same investment objective, policies and
restrictions as the Fund.
The Corporation's Board of Directors has established the following
non-fundamental investment limitations with respect to the Fund that may be
changed by the Board without shareholder approval:
(i) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets, which
amount may include warrants which are not listed on the New York
Stock Exchange or American Stock Exchange provided that such
warrants, valued at the lower of cost or market, do not exceed 2% of
the Fund's net assets;
(ii) The Fund may not purchase the securities of any one issuer if as a
result more than 5% of the Fund's total assets would be invested in
the securities of such issuer, provided that this limitation does
not apply to securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities;
(iii) The Fund may not invest in interests in oil, gas or other mineral
exploration or development programs or leases, although it may
invest in the securities of issuers which invest in or sponsor such
programs or such leases;
(iv) The Fund may not invest more than 5% of its total assets in
securities of companies having a record of less than three years
continuous operations (including operations of predecessors);
(v) The Fund may not purchase or otherwise acquire any security or
invest in a repurchase agreement if, as a result, more than 10% of
the Fund's net assets (taken at current value) would be invested in
illiquid assets, including repurchase agreements not entitling the
holder to payment of principal within seven days;
(vi) The Fund may not purchase or retain securities of any issuer if to
the knowledge of the Fund, those officers or Directors of the
Corporation or its investment manager who each own beneficially more
than 1/2 of 1% of the securities of an issuer, own beneficially
together more than 5% of the securities of that issuer;
(vii) The Fund may not purchase the securities of any investment company
except (a) by purchase in the open market where no commission or
profits to a sponsor or dealer results from such purchase provided
that immediately after such purchase no more than: 10% of the Fund's
total assets are invested in securities issued by investment
companies, 5% of the Fund's total assets are invested in securities
issued by any one investment company, or 3% of the voting securities
of any one such investment company are owned by the Fund, and (b)
when such purchase is part of a plan of merger, consolidation,
reorganization, or acquisition of assets;
(viii) The Fund may not borrow money, except from a bank for temporary or
emergency purposes (not for leveraging or investment), provided
however, that such borrowing does not exceed an amount equal to one
third of the total value of the Fund's assets taken at market value,
less liabilities other than the borrowing. The Fund may not purchase
securities for investment while any bank borrowing equaling 5% or
more of its total assets is outstanding. If at any time the Fund's
borrowing comes to exceed the limitation set forth in (5) above,
such borrowing will be promptly (within three days, not including
Sundays and holidays) reduced to the extent necessary to comply with
this limitation; and
(ix) The Fund may not purchase securities on margin except that the Fund
may obtain such short term credits as are necessary for the
clearance of transactions, and provided that margin payments and
other deposits made in connection with transactions in options,
futures contracts, forward currency contracts, and other derivative
instruments shall not be deemed to constitute purchasing securities
on margin.
THE INVESTMENT COMPANY COMPLEX
The investment companies advised by affiliates of Winmill & Co. Incorporated
(formerly Bull & Bear Group, Inc.) ("Winmill") ("Investment Company Complex")
are:
Bull & Bear U.S. Government Securities Fund, Inc.
Dollar Reserves, Inc.
Global Income Fund, Inc.
Midas Fund, Inc.
Midas Investors Ltd.
3
<PAGE>
Midas Magic, Inc.
Midas Special Equities Fund, Inc.
Midas U.S. and Overseas Fund Ltd.
Tuxis Corporation
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices, dates of
birth and principal occupations during the last five years are set forth below.
Unless otherwise noted, the address of each is 11 Hanover Square, New York, NY
10005.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of
three of the other investment companies advised by the Investment Manager and
its affiliates and the parent of the Investment Manager, Winmill. He is a member
of the New York Society of Security Analysts, the Association for Investment
Management and Research and the International Society of Financial Analysts. He
is the father of Thomas B. Winmill. He is 69 years old.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is Senior Consultant with The Berger Financial Winmill, LLC, specializing in
financial, estate and insurance matters. From March 1995 to December 1995, he
was President of Huber Hogan Knotts Consulting, Inc., financial consultants and
insurance planners. From 1988 to 1990, he was Chairman of Bruce Huber
Associates. He is also a Director of five other investment companies in the
Investment Company Complex. He is 69 years old.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Hunt & Howe Inc., executive recruiting consultants. He is also a
Director of five other investment companies in the Investment Company Complex.
He is 68 years old.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He is a Director of Wheelock, Inc., a manufacturer of signal products, and a
consultant for the National Executive Service Corps. He is also a Director of
five other investment companies in the Investment Company Complex. He is 76
years old.
THOMAS B. WINMILL* -- Chairman, Chief Executive Officer, President, and General
Counsel. He is President of the Investment Manager and the Distributor, and of
their affiliates. He is a member of the New York State Bar and the SEC Rules
Committee of the Investment Company Institute. He is a son of Bassett S.
Winmill. He is also a Director of eight other investment companies in the
Investment Company Complex. He is 40 years old.
ROBERT D. ANDERSON -- Vice Chairman. He is Vice Chairman and a Director of two
other investment companies in the Investment Company Complex and of the
Investment Manager and its affiliates. He is a former member of the District
#12, District Business Conduct and Investment Companies Committees of the NASD.
He is 69 years old.
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. From 1993 to 1995, he was
Associate Director -- Proprietary Trading at Barclays De Zoete Wedd Securities
Inc., and from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading
Company. He is 44 years old.
JOSEPH LEUNG, CPA -- Chief Accounting Officer, Chief Financial Officer and
Treasurer. He is Treasurer and Chief Accounting Officer of the Investment
Manager and its affiliates. From 1992 to 1995 he held various positions with
Coopers & Lybrand L.L.P., a public accounting firm. He is a member of the
American Institute of Certified Public Accountants. He is 33 years old.
DEBORAH ANN SULLIVAN, ESQ. -- Chief Compliance Officer, Secretary and Vice
President. She is Chief Compliance Officer, Secretary and Vice President of the
investment companies in the Investment Company Complex, and the Investment
Manager and its affiliates. From 1993 through 1994, she was the Blue Sky
Paralegal for SunAmerica Asset Management Corporation, and from 1992 through
1993, she was Compliance Administrator and Blue Sky Administrator with
Prudential Securities, Inc. and Prudential Mutual Fund Management, Inc. She is
member of the New York State Bar. He is 30 years old.
* Bassett S. Winmill and Thomas B. Winmill are "interested persons" of the Fund
as defined by the 1940 Act, because of their positions and other relationships
with the Investment Manager.
4
<PAGE>
Compensation Table
<TABLE>
<CAPTION>
Total Compensation From
Fund and Investment
Aggregate Pension or Retirement Company Complex Paid
Name of Person, Compensation From Benefits Accrued as Part of Estimated Annual Benefits To
Position Fund Fund Expenses Upon Retirement Directors
<S> <C> <C> <C> <C>
Bruce B. Huber, $13,500 from 6
Director $2,400 None None Investment Companies
James E. Hunt, $13,500 from 6
Director $2,400 None None Investment Companies
John B. Russell, $13,500 from 6
Director $2,400 None None Investment Companies
==================== ======================= ============================= ============================ ============================
</TABLE>
Information in the above table is based on fees paid during the fiscal year
ended December 31, 1998.
No officer, Director or employee of the Investment Manager receives any
compensation from the Fund for acting as an officer, Director or employee of the
Fund. As of April 24, 1999, officers and Directors of the Fund owned less than
1% of the outstanding shares of the Fund. As of April 24, 1999, the following
owners of record owned more than 5% of the outstanding shares of the Fund: U.S.
Clearing Corp., 26 Broadway, New York, NY 10004-1798 and Winmill & Co.
Incorporated, 11 Hanover Square, New York, NY 10005.
INVESTMENT MANAGER
The Investment Manager acts as general manager of the Fund, being
responsible for the various functions assumed by it, including regularly
furnishing advice with respect to portfolio transactions. Winmill's other
principal subsidiaries include Investor Service Center, Inc., the Fund's
Distributor and a registered broker/dealer, and CEF Advisers, Inc., a registered
investment adviser.
Winmill is a publicly owned company whose securities are listed on the
Nasdaq Stock Market ("Nasdaq") and traded in the OTC market. Bassett S. Winmill
may be deemed a controlling person of Winmill on the basis of his ownership of
100% of Winmill's voting stock and, therefore, of the Investment Manager. The
Fund and its affiliated investment companies had net assets in excess of $
254,000,000 as of April 26, 1999.
INVESTMENT MANAGEMENT AGREEMENT
Under the Investment Management Agreement, the Fund assumes and pays all
expenses required for the conduct of its business including, but not limited to,
custodian and transfer agency fees, accounting and legal fees, investment
management fees, fees of disinterested Directors, association fees, printing,
salaries of certain administrative and clerical personnel, necessary office
space, all expenses relating to the registration or qualification of the shares
of the Fund under Blue Sky laws and reasonable fees and expenses of counsel in
connection with such registration and qualification, miscellaneous expenses and
such non-recurring expenses as may arise, including actions, suits or
proceedings affecting the Fund and the legal obligation which the Corporation
may have to indemnify its officers and Directors with respect thereto.
The Investment Manager has agreed in the Investment Management Agreement
that it will waive all or part of its fee or reimburse the Fund monthly if, and
to the extent that, the Fund's aggregate operating expenses exceed the most
restrictive limit imposed by any state in which shares of the Fund are qualified
for sale. Currently, the Fund is not subject to any such state-imposed
limitations. Certain expenses, such as brokerage commissions, taxes, interest,
distribution fees, certain expenses attributable to investing outside the United
States and extraordinary items, are excluded from this limitation. For the
fiscal years ended June 30, 1996, 1997, 1998, and the six months ended December
31, 1999 the Investment Manager received $305,752, $319,712, $314,628, and
$157,444 respectively, in management fees from the Fund and waived $152,876,
$159,856, $53,911, and $36,743 respectively, of such fees to improve the Fund's
yield.
Pursuant to the Investment Management Agreement, if requested by the
Corporation's Board of Directors, the Investment Manager may provide other
services to the Fund such as, without limitation, the functions of billing,
accounting, certain shareholder communications and services, administering state
and Federal registrations, filings and controls and other administrative
services. Any services so requested and performed will be for the Fund's
account, and the Investment Manager's costs to render such services shall be
reimbursed by the Fund subject to examination by those Directors of the
Corporation who are not "interested persons" of the Investment Manager or any
affiliate thereof. For the fiscal years ended June 30, 1996, 1997, 1998, and the
six months ended December 31, 1998, the Fund reimbursed the Investment Manager
$24,625, $25,462, $27,357 and $17,039 respectively, for such services.
The Investment Management Agreement provides that the Investment Manager
will not be liable to the Fund or any Fund shareholder for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with the
matters to
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which the agreement relates. Nothing contained in the Investment Management
Agreement, however, may be construed to protect the Investment Manager against
any liability to the Fund by reason of the Investment Manager's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
Investment Management Agreement.
The Investment Management Agreement will continue in effect, unless sooner
terminated as described below, for successive periods of twelve months, provided
such continuance is specifically approved at least annually by (a) the Board of
Directors of the Corporation or by the holders of a majority of the outstanding
voting securities of the Fund as defined in the 1940 Act and (b) a vote of a
majority of the Directors of the Corporation who are not parties to the
Investment Management Agreement, or interested persons of any such party. The
Investment Management Agreement may be terminated without penalty at any time
either by a vote of the Board of Directors of the Corporation or the holders of
a majority of the outstanding voting securities of the Fund, as defined in the
1940 Act, on 60 days' written notice to the Investment Manager, or by the
Investment Manager on 60 days' written notice to the Fund, and shall immediately
terminate in the event of its assignment.
Winmill has granted the Fund a non-exclusive license to use various service
marks including "Performance Driven" under certain terms and conditions on a
royalty free basis. Such license will be withdrawn in the event the Fund's
investment manager shall not be the Investment Manager or another subsidiary of
Winmill. If the license is terminated, the Fund will eliminate all reference to
those marks in its corporate name and cease to use any of such service marks or
any similar service marks in its business.
YIELD AND PERFORMANCE INFORMATION
The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. Yield will fluctuate and, although the Fund is managed to maintain
a net asset value of $1.00 per share, there can be no assurance that it will be
able to do so. Consequently, quotations of yield should not be considered as
representative of what the Fund's yield may be for any specified period in the
future. Since performance will vary, these results are not necessarily
representative of future results. Performance is a function of the type and
quality of portfolio securities and will reflect general market conditions and
operating expenses. See "The Fund's Investment Program" in the prospectus. This
Statement of Additional Information may be in use for a full year and
performance results for periods subsequent to December 31, 1998 may vary
substantially from those shown below. An investment in the Fund is neither
insured nor guaranteed by the U.S. Government as is a bank account or
certificate of deposit.
The Fund's yield used in advertisements, sales material and shareholder
communications, may be calculated in two ways in order to show Current Yield and
Effective Yield, in each case to two decimal places. To obtain the Fund's yield,
please call Investor Service Center toll-free at 1-800-400-MIDAS (6432).
Current Yield refers to the income less expences generated by an investment
in the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized," that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
Effective Yield is the annualized current yield which is compounded by assuming
the current income to be reinvested.
Set forth below is the Fund's Current Yield and Effective Yield for the
seven calendar days ended December 31, 1998.
Current Yield 4.24%
Effective Yield 4.33%
Yield information is useful in reviewing the Fund's performance, but may not
provide a basis for comparison with bank deposits, which may be insured, since
an investment in the Fund is not insured and its yield is not guaranteed. Yield
for a prior period should not be considered a representation of future
performance, which will change in response to fluctuations in interest rates on
portfolio investments, the quality, type and maturity of such investments, the
Fund's expenses and by the investment of a net inflow of new money at interest
rates different than those being earned from the Fund's then current holdings.
The Investment Manager and certain of its affiliates serve as investment
managers to the Fund and other affiliated investment companies, which have
individual and institutional investors throughout the United States and in 37
foreign countries. The Fund may also provide performance information based on an
initial investment in the Fund and/or cumulative investments of varying amounts
over periods of time. Some or all of this information may be provided either
graphically or in tabular form.
Source Material
From time to time, in marketing pieces and other Fund literature, the Fund's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities. Evaluations of Fund
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for Fund performance information may include, but
are not limited to, the following:
Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.
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Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Bond Index (20 year), an index of municipal bonds provided
by a national periodical reporting on municipal securities.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other invest ment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.
Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.
IBC's Money Fund Report, a weekly publication of money market fund total net
assets, yield, and portfolio composition.
Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.
Investment Advisor, a monthly publication reviewing performance of mutual funds.
Investor's Business Daily, a nationally distributed newspaper which regularly
covers financial news.
Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.
Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.
Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.
Lehman Long Term Treasury Bond Index -- is comprised of all bonds covered by the
Lehman Treasury Bond Index with maturities of 10 years or greater.
Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.
Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morningstar Investor, Morningstar Mutual Funds and Morningstar Principia,
publications of Morningstar, Inc., periodically reviewing mutual funds
industry-wide by means of various methods of analysis and textual commentary.
Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.
Nasdaq Industrial Index -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.
7
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Personal Finance, a monthly magazine frequently reporting mutual fund data.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indices, and
portfolio holdings.
Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded stocks in the U.S.
Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
Smart Money, a monthly magazine frequently reporting mutual fund data.
Salomon Smith Barney GNMA Index -- includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government National
Mortgage Association.
Salomon Smith Barney High-Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a value-weighted,
total return index, including approximately 800 issues with maturities of 12
years or greater.
Salomon Smith Barney Broad Investment-Grade Bond Index -- is a market-weighted
index that contains approximately 4,700 individually priced investment-grade
corporate bonds rated BBB or better, U.S. Treasury/agency issues and mortgage
pass-through securities.
Salomon Smith Barney Market Performance tracks the Salomon Smith Barney bond
index.
Standard & Poor's 500 Composite Stock Price Index -- is an index of 500
companies representing the U.S. stock market.
Standard & Poor's 100 Composite Stock Price Index -- is an index of 100
companies representing the U.S. stock market.
Standard & Poor's Preferred Index is an index of preferred securities.
Success, a monthly magazine targeted to entrepreneurs and growing businesses,
often featuring mutual fund performance data.
USA Today, a national newspaper that periodically reports mutual fund
performance data.
U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.
The Wall Street Journal, a nationally distributed newspaper which regularly
covers financial news.
The Wall Street Transcript, a periodical reporting on financial markets and
securities.
Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard & Poor's 500 Index.
Indices prepared by the research departments of such financial organizations
as Salomon Smith Barney Holdings, Inc., Merrill Lynch, Pierce, Fenner & Smith,
Inc., Bear Stearns & Co., Inc., and Ibbotson Associates may be used, as well as
information provided by the Federal Reserve Board.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc. acts as
the principal Distributor of the Fund's shares. Under the Distribution
Agreement, the Distributor shall use its best efforts, consistent with its other
businesses, to sell shares of the Fund. Fund shares are offered continuously.
Pursuant to a Plan of Distribution ("Plan") adopted pursuant to Rule 12b-1 under
the 1940 Act, the Fund pays the Distributor monthly a fee in the amount of 0.25%
per annum of the Fund's average daily net assets as compensation for
distribution and service activities.
In performing distribution and service activities pursuant to the Plan, the
Distributor may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor
8
<PAGE>
and allocated by the Distributor to its efforts to distribute shares of the Fund
such as office rent and equipment, employee salaries, employee bonuses and other
overhead expenses.
Among other things, the Plan provides that (1) the Distributor will submit
to the Corporation's Board of Directors at least quarterly, and the Directors
will review, reports regarding all amounts expended under the Plan and the
purposes for which such expenditures were made, (2) the Plan will continue in
effect only so long as it is approved at least annually, and any material
amendment or agreement related thereto is approved, by the Corporation's Board
of Directors, including those Directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or any agreement related to the Plan ("Plan Directors"), acting in
person at a meeting called for that purpose, unless terminated by vote of a
majority of the Plan Directors, or by vote of a majority of the outstanding
voting securities of the Fund, (3) payments by the Fund under the Plan may not
be materially increased without the affirmative vote of the holders of a
majority of the outstanding voting securities of the Fund and (4) while the Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund will be committed to the discretion of the
Directors who are not "interested persons" of the Fund.
With the approval of a majority of the entire Board of Directors and of the
Plan Directors of the Fund, the Distributor has entered into a related agreement
with Hanover Direct Advertising Company, Inc. ("Hanover Direct"), a wholly owned
subsidiary of Winmill, in an attempt to obtain cost savings on the marketing of
the Fund's shares. Hanover Direct will provide services to the Distributor on
behalf of the Fund and the other Midas Funds at standard industry rates, which
includes commissions. The amount of Hanover Direct's commissions over its cost
of providing Fund marketing will be credited to the Fund's distribution expenses
and represent a saving on marketing, to the benefit of the Fund. To the extent
Hanover Direct's costs exceed such commissions, Hanover Direct will absorb any
of such costs.
It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. Offsetting redemptions
through sales efforts benefits shareholders by maintaining a fund's viability.
In periods of net sales, additional benefits may accrue relative to portfolio
management and increased shareholder servicing capability. In addition,
increased assets enable the establishment and maintenance of a better
shareholder servicing staff which can respond more effectively and promptly to
shareholder inquiries and needs. While net increases in total assets are
desirable, the primary goal of the Plan is to prevent a decline in assets
serious enough to cause disruption of portfolio management and impair the Fund's
ability to maintain a high level of quality shareholder services.
The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan) while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or "interested person" of the Fund had any direct or indirect financial
interest in the operation of the Plan or any related agreement.
During the fiscal year ended June 30, 1998, the Distributor waived the
entire fee it was entitled to receive under the Plan. During the six months
ended December 31, 1998, the Distributor waived the entire fee it was entitled
to receive under the Plan.
The Glass-Steagall Act prohibits certain banks from engaging in the business
of underwriting, selling, or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being paid for administrative and accounting services under the Plan.
If, because of changes in law or regulation, or because of new interpretations
of existing law, a bank or the Fund were prevented from continuing these
arrangements, it is expected that other arrangements for these services will be
made. In addition, state securities laws on this issue may differ from the
interpretation of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Distributor provides certain administrative and shareholder services to
the Fund pursuant to the Shareholder Services Agreement and is reimbursed by the
Fund for the actual costs incurred with respect thereto. For shareholder
services, the Fund paid the Distributor for the fiscal years ended June 30,
1996, 1997, 1998, and the six months ended December 31, 1998, approximately
$38,280, $25,921, $31,267, and $13,265 respectively.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of 11:00 a.m. eastern
time and as of the close of regular trading on the New York Stock Exchange
("NYSE") (currently 4:00 p.m. eastern time) on each Fund business day. The
following days are not Fund business days: New Year's Day, Washington's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Net asset value per share is determined
by dividing the value of the Fund's net assets by the total number of shares
outstanding.
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The Fund has adopted the amortized cost method of valuing portfolio
securities provided by Rule 2a-7 under the 1940 Act. To use amortized cost to
value its portfolio securities, the Fund must adhere to certain conditions under
that Rule relating to the Fund's investments. Amortized cost is an approximation
of market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account and
thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, the Fund might have to sell portfolio securities prior to maturity
and at prices that might not be desirable.
The Fund's Board has established, as a particular responsibility within the
overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board, at such intervals as it deems appropriate, to
determine whether the Fund's net asset value calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost. Market quotations and market equivalents used in such review are
obtained from independent pricing service (the "Service") appoved by the Board.
The service values the Fund's investments based on methods which include
consideration of: yields or prices of bonds of comparable quality, coupon,
maturity and type; indications of values from dealers; and general market
conditions. The Service also may employ electronic data processing techniques
and/or a matrix system to determine valuations.
PURCHASE OF SHARES
The Fund will only issue shares upon payment of the purchase price by check
made drawn to the Fund's order in U.S. dollars on a U.S. bank, or by Federal
Reserve wire transfer. Second and third party checks, credit cards, and cash
will not be accepted. The Fund reserves the right to reject any order, to cancel
any order due to nonpayment, to accept initial orders by telephone or telegram,
and to waive the limit on subsequent orders by telephone, with respect to any
person or class of persons. If an order is canceled because of non-payment or
because the purchaser's check does not clear, the purchaser will be responsible
for any loss the Fund incurs. If the purchaser is already a shareholder, the
Fund can redeem shares from the purchaser's account to reimburse the Fund for
any loss. In addition, the purchaser may be prohibited or restricted from
placing future purchase orders in the Fund or any of the other Funds in the
Investment Company Complex. In order to permit the Fund's shareholder base to
expand, to avoid certain shareholder hardships, to correct transactional errors,
and to address similar exceptional situations, the Fund may waive or lower the
investment minimums with respect to any person or class of persons. The Fund has
authorized one or more brokers to accept on its behalf purchase and redemption
orders. Such brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. The Fund will be deemed to
have received a purchase or redemption order when an authorized broker or, if
applicable, a broker's authorized designee, accepts the order. A shareholder's
order will be priced at the Fund's net asset value next computed after such
order is received by an authorized broker or the broker's authorized designee.
ALLOCATION OF BROKERAGE
Under present investment policies the Fund is not expected to incur any
substantial brokerage commission costs. For the fiscal years ended June 30,
1996, 1997, 1998, and the six months ended December 31, 1998, the Fund did not
pay any brokerage commissions. The Fund is not currently obligated to deal with
any particular broker, dealer or group thereof.
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. The Fund may purchase portfolio securities from dealers and
underwriters as well as from issuers. Purchases of securities include a
commission or concession paid to the underwriter, and purchases from dealers
include a spread between the bid and asked price. When securities are purchased
directly from an issuer, no commissions or discounts are paid.
Transactions may be directed to dealers who provide research and other
services in the execution of orders. There is no certainty that such services
provided, if any, will be beneficial to the Fund, and it may be that other
affiliated investment companies will derive benefit therefrom. It is not
possible to place a dollar value on such services received by the Investment
Manager from dealers effecting transactions in portfolio securities. Such
services may permit the Investment Manager to supplement its own research and
other activities and may make available to the Investment Manager the opinions
and information of individuals and research staffs of other securities firms.
Portfolio transactions will not be directed to dealers solely on the basis of
research services provided. The Fund will not purchase portfolio securities at a
higher price or sell such securities at a lower price in connection with
transactions effected with a dealer who furnishes research services to the
Investment Manager than would be the case if no weight were given by the
Investment Manager to the dealer's furnishing of such services. Until March 31,
1999, Bull & Bear Securities, Inc. ("BBSI") was a wholly owned subsidiary of
Winmill and the Investment Manager's affiliate. BBSI provides discount brokerage
services to the public as an introducing broker clearing through unaffiliated
firms on a fully disclosed basis.
Investment decisions for the Fund and for the other Funds managed by the
Investment Manager or its affiliates are made independently based on each Fund's
investment objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the Investment
Manager may combine orders for two or more Funds for a particular security if it
appears that a combined order would reduce brokerage commissions and/or result
in a more favorable transaction price. Combined purchase or sale orders are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each Fund. While in some cases this practice could have a
detrimental effect upon the price or
10
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quantity available of the security with respect to the Fund, the Investment
Manager believes that the larger volume of combined orders can generally result
in better execution and prices.
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Investment Company Complex does
business with may, from time to time, own more than 5% of the publicly traded
Class A non-voting Common Stock of Winmill, the parent of the Investment
Manager.
DIVIDENDS AND TAXES
Dividends. All of the net income of the Fund is declared daily as dividends
to shareholders of record as of the close of regular trading on the NYSE each
Business Day. Net income of the Fund (during the period commencing at the time
of the immediately preceding dividend declaration) consists of accrued interest
or earned discount (including both original issue and market discounts) on the
assets of the Fund for so long as the Fund utilizes the amortized cost method of
valuing portfolio securities, less the estimated expenses of the Fund plus or
minus all realized gains or losses on the Fund's portfolio securities applicable
to that period. The Fund's net income is determined by the Custodian on a daily
basis as of the close of regular trading on the NYSE on each Business Day (see
"Determination of Net Asset Value").
If the Fund incurs or anticipates any unusual expense, loss or depreciation
that could adversely affect its income or net asset value, the Corporation's
Board of Directors would at that time consider whether to adhere to the present
income accrual and distribution policy described above or to revise it in light
of then prevailing circumstances. For example, under such unusual circumstances
the Directors might reduce or suspend declaration of daily dividends in order to
prevent to the extent possible the per share net asset value of the Fund from
being reduced below $1.00. Thus, such expenses or losses or depreciation may
result in shareholders receiving less income.
If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional Fund shares at the then
current net asset value in lieu of the cash payment and to thereafter issue such
shareholder's distributions in additional Fund shares. No interest will accrue
on amounts represented by uncashed distribution or redemption checks.
Taxes. The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for that treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (generally consisting of net investment income and net short-term
capital gains) and must meet several additional requirements. Among these
requirements are the following: (1) at least 90% of the Fund's gross income each
taxable year must be derived from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities, or
other income derived with respect to its business of investing in securities and
(2) the Fund's investments must satisfy certain diversification requirements. In
any year during which the applicable provisions of the Code are satisfied, the
Fund will not be liable for Federal income tax on net income and gains that are
distributed to its shareholders. If for any taxable year the Fund does not
qualify for treatment as a RIC, all of its taxable income will be taxed at
corporate rates.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year an amount equal to the sum
of (1) 98% of its ordinary income, (2) 98% of its capital gain net income
(determined on an October 31 fiscal year basis), plus (3) generally, income and
gain not distributed or subject to corporate tax in the prior calendar year.
The Fund intends to avoid imposition of this excise tax by making adequate
distributions.
The foregoing discussion of Federal tax consequences is based on the tax law
in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial, or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.
REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets. The Fund's fiscal year ends on
December 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO 64105
("Custodian") has been retained by the Corporation to act as Custodian of the
Fund's investments and may appoint one or more subcustodians. The Custodian also
performs certain accounting services for the Fund. As part of its agreement with
the Corporation, the Custodian may apply credits or charges for its services to
the Fund for, respectively, positive or deficit cash balances maintained by the
Fund with the Custodian. DST Systems, Inc., Box 419789, Kansas City, Missouri
64141-6789, is the Fund's Transfer and Dividend Disbursing Agent.
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AUDITORS
Tait, Weller & Baker, 8 Penn Center, Suite 800, Philadelphia, PA 19103-2108,
are the Fund's independent accountants. Financial statements of the Fund are
audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended December 31, 1998,
together with the Report of the Fund's independent accountants thereon, appear
in the Fund's Annual Report to Shareholders and are incorporated herein by
reference.
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DOLLAR RESERVES, INC.
Part C. Other Information
Item 23. Exhibits
(a) Articles of Amendment and Articles Supplementary: Filed herewith.
(b) By-Laws as now in effect: Filed with the Securities and Exchange
Commission September 3, 1998, Accession Number 0000015260-98-000004
(c) Articles of Amendment and Articles Supplementary: Filed herewith.
By-Laws as now in effect: Filed with the Securities and Exchange
Commission September 3, 1998, Accession Number 0000015260-98-000004
(d) Investment Management Agreement: Filed herewith.
(e) (1) Distribution Agreement, filed with the
Securities and Exchange Commission on October
26, 1995, accession number 0000015260-95-000010.
(2) Form of Related Agreement to Plan of Distribution
between Investor Service Center, Inc. and Hanover
Direct Advertising Company, Inc., filed with the
Securities and Exchange Commission on October 26,
1995, Accession Number 0000015260-95-000010
(f) not applicable.
(g) (1) Form of Custody and Investment Accounting
Agreement, filed with the Securities and Exchange
Commission on September 2, 1997, accession number
0000015260-97-000005
(2) Form of Retirement Plan Custodial Services
Agreement, filed with the Securities and Exchange
Commission on October 26, 1995, Accession Number
0000015260-95-000010.
(h) (a) Form of Transfer Agency Agreement, filed with
the Securities and Exchange Commission on October
26, 1995, accession number 0000015260-95-000010
(1) Form of Agency Agreement, filed with the
Securities and Exchange Commission on October 26,
1995, accession number 0000015260-95-000010
(2) Shareholder Administration Agreement, filed with
the Securities and Exchange Commission on
October 26, 1995, accession number
0000015260-95-000010.
(3) Form of credit facilities agreement, filed with
the Securities and Exchange Commission on
September 3, 1998, accession number
0000015260-98-000004.
(4) Form of Securities Lending Authorization
Agreement, filed with the Securities and Exchange
Commission on September 3, 1998, accession number
0000015260-98-000004.
(5) Form of Segregated Account Procedural and
Safekeeping Agreement, filed with the Securities
and Exchange Commission on September 3, 1998,
accession number 0000015260-98-000004.
(i) Opinion and Consent of Counsel as to Legality of
Securities: Filed herewith.
(j) (1) Accountants Consent: Filed herewith.
(2) Opinion of Counsel with respect to eligibility for
effectiveness under paragraph (b) of Rule 485:
Filed herewith.
(n) Financial Data Schedule for the Fiscal Year Ends June 30,
1998, and December 31, 1998.
Item 24. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 25. Indemnification
The Registrant is incorporated under Maryland law. Section 2-418 of the
Maryland General Corporation Law requires the Registrant to indemnify its
directors, officers and employees against expenses, including legal fees, in a
successful defense of a civil or criminal proceeding. The law also permits
indemnification of directors, officers, employees and agents unless it is proved
that (a) the act or omission of the person was material and was committed in bad
faith or was the result of active or deliberate dishonesty, (b) the person
received an improper personal benefit in money, property or services or (c) in
the case of a criminal action, the person had reasonable cause to believe that
the act or omission was unlawful.
Registrant's amended and restated Articles of Incorporation: (1)
provide that, to the maximum extent permitted by applicable law, a director or
officer will not be liable to the Registrant or its stockholders for monetary
damages; (2) require the Registrant to indemnify and advance expense as provided
in the By-laws to its present and past directors, officers, employees and
agents, and persons who are serving or have served at the request of the
Registrant in similar capacities for other entities in advance of final
disposition of any action against that person to the extent permitted by
Maryland law and the 1940 Act; (3) allow the corporation to purchase insurance
for any present or past director, officer, employee, or agent; and (4) require
that any repeal or modification of the amended and restated Articles of
Incorporation by the shareholders, or adoption or modification of any provision
of the Articles of Incorporation inconsistent with the indemnification
provisions, be prospective only to the extent such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
or indemnification available to any person covered by the indemnification
provisions of the amended and restated Articles of Incorporation.
Section 11.01 of Article XI of the By-Laws sets forth the procedures by
which the Registrant will indemnify its directors, officers, employees and
agents. Section 11.02 of Article XI of the By-Laws further provides that the
Registrant may purchase and maintain insurance or other sources of reimbursement
to the extent permitted by law on behalf of any person who is or was a director
or officer of the Registrant, or is or was serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in or arising out of his or her position.
Registrant's Investment Management Agreement between the Registrant and
Midas Management Corporation ("Investment Manager"), with respect to Dollar
Reserves, Inc. provides that the Investment Manager shall not be liable to the
Registrant or its series or any shareholder of the Registrant or its series for
any error of judgment or mistake of law or for any loss suffered by the
Registrant in connection with the matters to which the Investment Management
Agreement relates. However, the Investment Manager is not protected against any
liability to the Registrant or to the series by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under the Investment
Management Agreement.
34
<PAGE>
Section 9 of the Distribution Agreement between Bull & Bear Funds II,
Inc. and Investor Service Center, Inc. ("Service Center") provides that the
Registrant will indemnify Service Center and its officers, directors and
controlling persons against all liabilities arising from any alleged untrue
statement of material fact in the Registration Statement or from any alleged
omission to state in the Registration Statement a material fact required to be
stated in it or necessary to make the statements in it, in light of the
circumstances under which they were made, not misleading, except insofar as
liability arises from untrue statements or omissions made in reliance upon and
in conformity with information furnished by Service Center to the Registrant for
use in the Registration Statement; and provided that this indemnity agreement
shall not protect any such persons against liabilities arising by reason of
their bad faith, gross negligence or willful misfeasance; and shall not inure to
the benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of the Distribution
Agreement also provides that Service Center agrees to indemnify, defend and hold
the Registrant, its officers and Directors free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of material
fact contained in information furnished by Service Center for use in the
Registration Statement or arising out of any agreement between Service Center
and any retail dealer, or arising out of supplementary literature or advertising
used by Service Center in connection with the Distribution Agreement.
The Registrant undertakes to carry out all indemnification provisions
of its Articles of Incorporation and By-Laws and the above-described Investment
Management Agreement in accordance with Investment Company Act Release No. 11330
(September 4, 1980) and successor releases.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 26. Business and other Connections of Investment Adviser
The directors and officers of the Investment Manager are also directors
and officers of other Funds managed by CEF Advisers, Inc., which is also wholly
owned subsidiaries of Winmill & Co. Incorporated (formerly Bull & Bear Group,
Inc.)("Winmill")("Funds"). In addition, such officers are officers and directors
of Winmill and its other subsidiaries; Service Center, the distributor of the
Registrant and the Funds and a registered broker/dealer. Winmill's predecessor
was organized in 1976. In 1978, it acquired control of and subsequently merged
with Investors Counsel, Inc., a registered investment adviser organized in 1959.
The principal business of both companies since their founding has been to serve
as investment manager to registered investment companies. Midas Management
Corporation serves as investment manager of Dollar Reserves, Inc.; Midas
Investors Ltd.; Midas U.S. and Overseas Fund Ltd.; Midas Special Equities Fund,
Inc.; Midas Fund, Inc., and Midas Magic, Inc.. CEF Advisers, Inc. serves as
investment manager of Bull & Bear U.S. Government Securities Fund, Inc., Global
Income Fund, Inc., and Tuxis Corporation.
35
<PAGE>
Item 27. Principal Underwriters
a) In addition to the Registrant, Service Center serves as principal
underwriter of Midas Investors Ltd., Midas Special Equities Fund, Inc., Midas
U.S. and Overseas Fund Ltd., Midas Fund, Inc., and Midas Magic, Inc.
b) Service Center will serve as the Registrant's principal underwriter with
respect to the Registrant. The directors and officers of Service Center,
their principal business addresses, their positions and offices with Service
Center and their positions and offices with the Registrant (if any) are set
forth below.
Name and Principal Position and Offices with Position and Offices
Business Address Investor Service Center, Inc. with Registrant
- ---------------------------------------------------------------------------
Robert D. Anderson Vice Chairman and Director Vice Chairman
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Thomas B. Winmill, Esq. President, Director, General Chief Executive Officer,
11 Hanover Square Counsel President, Director
New York, NY 10005 and General Counsel
Deborah Ann Sullivan, Esq. Chief Compliance Officer, Chief Compliance Officer,
11 Hanover Square Vice President,Secretary Vice President, Secretary
New York, NY 10005 Assoc. General Counsel Assoc. General Counsel
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
Joseph Leung Treasurer, Chief Accounting Treasurer, Chief
11 Hanover Square Officer Accounting Officer
New York, NY 10005
Item 28. Location of Accounts and Records
The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
the Registrant and its Investment Manager). All other records required by
Section 31(a) of the Investment Company Act of 1940 are located at Investors
Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO 64105 (the offices of
Registrant's custodian) and DST Systems, Inc., 1055 Broadway, Kansas City, MO
64105-1594 (the offices of the Registrant's Transfer and Dividend Disbursing
Agent). Copies of certain of the records located at Investors Fiduciary Trust
Company and DST Systems, Inc. are kept at 11 Hanover Square, New York, NY 10005
(the offices of the Registrant and the Investment Manager).
Item 29. Management Services -- none
Item 30. Undertakings -- The Registrant hereby undertakes to furnish
each person to whom a prospectus is delivered with a copy
of the Registrant's annual report to shareholders upon request and
without charge.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City, County and State of New York on this 29th day of June,
1999.
DOLLAR RESERVES, INC.
Thomas B. Winmill
By: Thomas B. Winmill
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
____________________ Chairman, Chief Executive July 12, 1999
Thomas B. Winmill Officer, President and
General Counsel
____________________ Chief Financial Officer, July 12, 1999
Joseph Leung Chief Accounting
Officer and Treasurer
____________________ Director July 12, 1999
Bruce B. Huber
____________________ Director July 12, 1999
James E. Hunt
____________________ Director July 12, 1999
John B. Russell
37
<PAGE>
EXHIBIT INDEX
PAGE
EXHIBIT NUMBER
(23)(n) Financial Data Schedule for the Fiscal Year End July 31, 1998,
and for the six months ended December 31, 1998.
(23)(a) Articles of Amendment of Incorporation.
(23)(a) Articles Supplementary.
(23)(d) Investment Management Agreement.
(23)(i) Opinion and Consent of Counsel as to Legality of Securities
(23)(j) (1) Accountant's Consent.
(2) Opinion of Counsel with respect to eligibility
for effectiveness under paragraph (b)of Rule 485.
38
BULL & BEAR FUNDS II, INC.
ARTICLES OF AMENDMENT
Bull & Bear Funds II, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation hereby amends its charter as currently in effect
(the "Charter") by changing the name of the Corporation to Dollar Reserves, Inc.
SECOND: The Corporation hereby amends its Charter as currently in effect by
redesignating the shares of the Bull & Bear Dollar Reserves series to common
stock of the Corporation. Subsequent to the foregoing amendment, the total
number of shares of capital stock of all classes which the Corporation shall
have authority to issue is one billion (1,000,000,000) shares, all of which
shall have a par value of $.01 per share and an aggregate par value of
$10,000,000.
THIRD: A majority of the entire Board of Directors of the Corporation by
unanimous written consent dated June 30, 1999, adopted resolution in which was
set forth, and which authorized and approved the foregoing amendments to the
Charter.
FOURTH: The amendment to the Charter set forth above is expressly permitted
by ss.2-605 of the Maryland General Corporation Law ("MGCL") to be made without
action by the stockholders of the Corporation.
FIFTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
SIXTH: The foregoing amendment does not increase the authorized stock of
the Corporation, and does not change the preferences, conversion or other
rights, boring powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of any class or series of authorized stock
of the Corporation.
SEVENTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
1
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on _______________, 1999.
WITNESS: BULL & BEAR FUNDS II, INC.
_______________________________ By: ___________________ (SEAL)
2
BULL & BEAR FUNDS II, INC.
ARTICLES SUPPLEMENTARY
Bull & Bear Funds II, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Immediately prior to the filing of these Articles Supplementary, the
corporation had authority to issue one billion (1,000,000,000) shares of Common
Stock, $.01 par value per share, having an aggregate par value of $10,000,000,
of which five hundred million (500,000,000) shares are classified as Bull & Bear
Dollar Reserves series shares, two hundred fifty million (250,000,000) unissued
shares are classified as Bull & Bear Global Income Fund series shares and two
hundred fifty million (250,000,000) unissued shares are classified as Bull &
Bear U.S. Government Securities Fund series shares.
SECOND: The Board of Directors of the Corporation, by a unanimous written
consent effective June 30, 1999 and adopted by at least a majority of the Board
of Directors, reclassified two hundred fifty million (250,000,000) unissued
shares that were classified as the Bull & Bear Global Income Fund series shares
as two hundred fifty million (250,000,000) shares of the Bull & Bear Dollar
Reserves series and two hundred fifty million (250,000,000) unissued shares that
were classified as the Bull & Bear U.S. Government Securities Fund series shares
as two hundred fifty million (250,000,000) shares of the Bull & Bear Dollar
Reserves series, with all of the powers, preferences, participating, voting or
other special rights and qualifications, restrictions and limitations thereof,
as outlined in Article FIFTH of the Articles of Incorporation of the
Corporation.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue one billion (1,000,000,000) shares of Common
Stock, $.01 par value per share, having an aggregate par value of $10,000,000,
all of which are classified as Bull & Bear Dollar Reserves series.
FOURTH: Shares of the foregoing classes have been duly classified by the
board of directors pursuant to authority and power contained in Article FIFTH of
the Articles of Incorporation of the Corporation.
FIFTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
SIXTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
1
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on _______________, 1999.
WITNESS: BULL & BEAR FUNDS II, INC.
__________________________ By:________________________ (SEAL)
2
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 30th day of June, 1999, by and between DOLLAR RESERVES,
INC., a Maryland corporation (the "Fund") and MIDAS MANAGEMENT CORPORATION, a
Delaware Fund (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and offers for public sale shares of common stock; and
WHEREAS the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services and the Investment
Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is hereby agreed between the parties
hereto as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the assets of the Fund, including the regular
furnishing of advice with respect to portfolio transactions subject at all times
to the control and final direction of the Fund's Board of Directors, for the
period and on the terms set forth in this Agreement. The Investment Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth, for the compensation
herein provided. The Investment Manager shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any way, or
otherwise be deemed an agent of the Fund.
2. The Fund assumes and shall pay all the expenses required for the
conduct of its business including, but not limited to, salaries of
administrative and clerical personnel, brokerage commissions, taxes, insurance,
fees of the transfer agent, custodian, legal counsel and auditors, association
fees, costs of filing, printing and mailing proxies, reports and notices to
shareholders, preparing, filing and printing the prospectus and statement of
additional information, payment of dividends, costs of stock certificates, costs
of shareholders meetings, fees of the independent directors, necessary office
space rental, all expenses relating to the registration or qualification of
shares of the Fund under applicable Blue Sky laws and reasonable fees and
expenses of counsel in connection with such registration and qualification and
such non-recurring expenses as may arise, including, without limitation,
actions, suits or proceedings affecting the Fund and the legal obligation
1
<PAGE>
which the Fund may have to indemnify its officers and directors
with respect thereto.
3. The Investment Manager may, but shall not be obligated to, pay or
provide for the payment of expenses which are primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, without limitation, payments for: advertising, direct mail
and promotional expenses; compensation to and expenses, including overhead and
telephone and other communication expenses, of the Investment Manager and its
affiliates, the Fund, and selected dealers and their affiliates who engage in or
support the distribution of shares or who service shareholder accounts;
fulfillment expenses including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and, internal costs incurred by the
Investment Manager and its affiliates and allocated to efforts to distribute
shares of the Fund such as office rent and equipment, employee salaries,
employee bonuses and other overhead expenses. Such payments may be for the
Investment Manager's own account or may be made on behalf of the Fund pursuant
to a written plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act.
4. If requested by the Fund's Board of Directors, the Investment
Manager may provide other services such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof.
5. The services of the Investment Manager are not to be deemed
exclusive, and the Investment Manager shall be free to render similar services
to others in addition to the Fund so long as its services hereunder are not
impaired thereby.
6. The Investment Manager shall create and maintain all necessary
books and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from time to time,
pertaining to the investment management services performed by it hereunder and
not otherwise created and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall be maintained by
the Investment Manager for the periods and in the places required by Rule 3la-2
2
<PAGE>
under the 1940 Act. The books and records pertaining to the Fund which are in
the possession of the Investment Manager shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Investment Manager's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
7.A. As compensation for its services provided pursuant to this
Agreement, the Fund will pay to the Investment Manager a fee from the assets of
the Fund, such fee to be computed daily and paid monthly at the annual rate of
the Fund's net assets as set forth below:
Up to $250 million of average daily net
assets...................................0.50%
From $250 million to $500 million....................0.45%
Over $500 million....................................0.40%
B. As compensation for its services provided pursuant to this
Agreement, the Fund will pay to the Investment Manager from the assets of the
Fund a fee in an amount to be agreed upon in a written fee agreement ("Fee
Agreement") executed by the Fund and by the Investment Manager. All such Fee
Agreements shall provide that they are subject to all terms and conditions of
this Agreement.
C. The aggregate net assets for the Fund each day shall be computed
by subtracting the liabilities of the Fund from the value of its assets, such
amount to be computed as of the calculation of the net asset value per share on
each business day.
D. If this Agreement becomes effective or terminates with respect to
the Fund before the end of any month, the fee for the period from the effective
date to the end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such effectiveness or
termination occurs.
8. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and quality of services
provided by a particular broker/dealer, including brokerage and research
services and sales of shares of the Fund and shares of the other Midas Funds.
The Investment Manager may also allocate portfolio transactions to
broker/dealers that remit a portion of their commissions as a credit against
Fund expenses. With respect to brokerage and research services, the Investment
Manager may
3
<PAGE>
consider in the selection of broker/dealers brokerage or research provided and
payment may be made of a fee higher than that charged by another broker/dealer
which does not furnish brokerage or research services or which furnishes
brokerage or research services deemed to be of lesser value, so long as the
criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended, or
other applicable law are met. Although the Investment Manager may direct
portfolio transactions without necessarily obtaining the lowest price at which
such broker/dealer, or another, may be willing to do business, the Investment
Manager shall seek the best value for the Fund on each trade that circumstances
in the market place permit, including the value inherent in on-going
relationships with quality brokers. To the extent any such brokerage or research
services may be deemed to be additional compensation to the Investment Manager
from the Fund, it is authorized by this Agreement. The Investment Manager may
place brokerage for the Fund through an affiliate of the Investment Manager,
provided that the Fund not deal with such affiliate in any transaction in which
such affiliate acts as principal; the commissions, fees or other remuneration
received by such affiliate be reasonable and fair compared to the commissions,
fees or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time; and such brokerage be
undertaken in compliance with applicable law. The Investment Manager's fees
under this Agreement shall not be reduced by reason of any commissions, fees or
other remuneration received by such affiliate from the Fund.
9. The Investment Manager shall waive all or part of its fee or
reimburse a Fund monthly if and to the extent the aggregate operating expenses
of the Fund exceed the most restrictive limit imposed by any state in which
shares of the Fund are qualified for sale. In calculating the limit of operating
expenses, all expenses excludable under state regulation or otherwise shall be
excluded. If this Agreement is in effect for less than all of a fiscal year, any
such limit will be applied proportionately.
10. Subject to and in accordance with the Articles of Incorporation
and By-laws of the Fund and of the Investment Manager, it is understood that
directors, officers, agents and shareholders of the Fund are or may be
interested in the Fund as directors, officers, shareholders or otherwise, that
the Investment Manager is or may be interested in the Fund as a shareholder or
otherwise and that the effect and nature of any such interests shall be governed
by law and by the provisions, if any, of said Articles of Incorporation or
By-laws.
11. Agreement shall become effective upon the date hereinabove
written provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a
4
<PAGE>
majority of the Directors of the Fund who are not parties to this Agreement, or
interested persons of any such party and (ii) by vote of the holders of a
majority of the Fund's outstanding voting securities.
B. Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (I) by a vote of a majority of the Directors of the Fund who
are not parties to this Agreement, or interested persons of any such party and
(ii) by the Board of Directors of the Fund or by the vote of the holders of a
majority of the outstanding voting securities of the Fund.
C. Agreement may be terminated without penalty at any time either by
vote of the Board of Directors of the Fund or by vote of the holders of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Investment Manager, or by the Investment Manager on 60 days'
written notice to the Fund. Termination of this Agreement shall in no way affect
the continued validity of this Agreement or the performance thereunder.
Agreement shall immediately terminate in the event of its assignment.
12. The Investment Manager shall not be liable to the Fund or any
shareholder of the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund or the Fund's shareholders in connection with the
matters to which this Agree ment relates, but nothing herein contained shall be
construed to protect the Investment Manager against any liability to the Fund or
the Fund's shareholders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Agreement.
13. As used in this Agreement, the terms "interested person,"
"assignment," and "majority of the outstanding voting securities" shall have the
meanings provided therefor in the 1940 Act, and the rules and regulations
thereunder.
14. Is Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
15. Agreement shall be construed in accordance with and governed by
the laws of the State of New York, provided, however, that nothing herein shall
be construed in a manner inconsistent
5
<PAGE>
with the 1940 Act or any rule or regulation promulgated
thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
ATTEST: DOLLAR RESERVES, INC.
ATTEST: MIDAS MANAGEMENT CORPORATION
6
KIRKPATRICK & LOCKHART
SOUTH LOBBY- 9TH FLOOR
1800 M STREET, NW.
WASHINGTON, D.C. 20036-5891
- --------------------------------------------------------------------------------
Telephone (202) 778-9000
Telex 440209 KL DC US
Facsimile (202) 788-9100
Arthur Brown
(202) 788-9046
September 3, 1992
Bull & Bear Incorporated
11 Hanover square
New York, New York 10005
Dear sir or Madam:
Bull & Bear Incorporated ("Company") is a corporation organized under the
laws of the state of Maryland. The Company currently has three series of shares
of stock outstanding: Bull & Bear Dollar Reserves, Bull & Bear High Yield Fund
and Bull & Bear U. S. Government securities Fund. We understand that the Company
is about to file Post-Effective Amendment No. 46 to its registration Statement
on Form N- lA for the purpose of registering additional shares of capital stock
of the company under the securities Act of 1913, as amended (1933 Act"),
pursuant to Section 24(e)(1) of the investment Company Act of 1940, as amended
("1940 Act").
We have, as counsel, participated in various corporate and other
proceedings relating to the Company. We have examined copies, either certified
or otherwise proved to be genuine, of the Company's Articles of Incorporation
and By-Laws, as now in affect, the minutes of meetings of its board of directors
and other documents relating to its organization and operation. Based upon the
foregoing, it is our opinion that the shares of capital stock of the company
currently being registered pursuant to Section 24(e)(1) as reflected in
Post-Effective Amendment No. 46, when sold in accordance with the company's
Articles of Incorporation and By-Laws, will be legally issued, fully paid and
non-assessable, subject to compliance with the 1933 Act, the 1940 Act and
applicable state laws regulating the offer and sale of securities.
We hereby consent to this opinion accompanying Post-Effective Amendment No.
46 which you are about to file with the Securities and Exchange Commission.
Sincerely,
KIRKPATRICK & LOCKHART
BY: Arthur J. Brown
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated January 15, 1999 on the financial
statements and financial highlights of Dollar Reserves, Inc. (formerly Bull &
Bear Dollar Reserves, a series of common stock Bull & Bear Funds II, Inc.). Such
financial statements and financial highlights appear in the December 31, 1998
Annual Report to Shareholders which is incorporated by reference in the
Statement of Additional Informantion filed in Post-Effective Amendment No. 55
under the Securities Act of 1933 and Amendment No. 46 under the Investment
Company Act of 1940 to the Registration Statement on Form N-1A of Dollar
Reserves. We also consent to the references to our Firm in the Registration
Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 28, 1999
June 29, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are counsel to Dollar Reserves, Inc. (the "Fund"), and in so acting have
reviewed Post-Effective Amendment No. 55 (the "Post-Effective Amendment") to the
Fund's Registration Statement on Form N-1A, Registration File No. 2-57953.
Representatives of the Fund have advised us that the Fund will file the
Post-Effective Amendment pursuant to paragraph (b) of Rule 485 ("Rule 485")
promulgated under the Securities Act of 1933. In connection therewith, the Fund
has requested that we provide this letter.
In our examination of the Post-Effective Amendment, we have assumed the
conformity to the originals of all documents submitted to us as copies.
Based upon the foregoing, we hereby advise you that the prospectus included as
part of the Post-Effective Amendment does not include disclosure which we
believe would render it ineligible to become effective pursuant to paragraph (b)
of Rule 485.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Bull &
Bear Dollar Reserves annual Report and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000015260
<NAME> Bull & Bear Funds II, Inc.
<SERIES>
<NUMBER> 001
<NAME> Bull & Bear Dollar Reserves Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jul-31-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 65,823,477
<INVESTMENTS-AT-VALUE> 65,823,477
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<SHARES-COMMON-PRIOR> 61,602,433
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<ACCUMULATED-NET-GAINS> (5,413)
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<NET-ASSETS> 65,535,205
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 293,250
<NET-INVESTMENT-INCOME> 1,395,986
<REALIZED-GAINS-CURRENT> 2,607
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<NET-CHANGE-FROM-OPS> 1,398,593
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<DISTRIBUTIONS-OF-INCOME> 1,395,986
<DISTRIBUTIONS-OF-GAINS> 2,607
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<GROSS-EXPENSE> 408,779
<AVERAGE-NET-ASSETS> 62,778,340
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .022
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .93
[AVG-DEBT-OUTSTANDING] 66,134
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Bull &
Bear Dollar Reserves Annual Report and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000015260
<NAME> Bull & Bear Funds II, Inc.
<SERIES>
<NUMBER> 001
<NAME> Bull & Bear Dollar Reserves Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Jul-01-1997
<PERIOD-END> Jun-30-1998
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 61,034,171
<INVESTMENTS-AT-VALUE> 61,034,171
<RECEIVABLES> 627,423
<ASSETS-OTHER> 32,556
<OTHER-ITEMS-ASSETS> 0
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<OTHER-ITEMS-LIABILITIES> 91,707
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<PAID-IN-CAPITAL-COMMON> 61,610,246
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<SHARES-COMMON-PRIOR> 62,838,416
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,961,905
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 49,705,407
<NUMBER-OF-SHARES-REDEEMED> 53,922,843
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<GROSS-ADVISORY-FEES> 314,628
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<GROSS-EXPENSE> 751,640
<AVERAGE-NET-ASSETS> 62,925,633
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
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<PER-SHARE-DIVIDEND> .047
<PER-SHARE-DISTRIBUTIONS> 0.001
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .86
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>