As filed with the Securities and Exchange Commission on May 24, 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. 55
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 46
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. DAVID STEPHENS, ESQ.
CEF Advisers, Inc. 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 June 30, 1999
pursuant to paragraph (a) 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>
[Insert Midas Design]
Midas Funds
Prospectus dated June 30, 1999
As with all mutual funds, 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
MIDAS FUND, INC................................................................2
MIDAS INVESTORS, LTD...........................................................5
MIDAS MAGIC, INC...............................................................7
MIDAS SPECIAL EQUITIES FUND, INC..............................................10
MIDAS U.S. AND OVERSEAS FUND LTD..............................................12
DOLLAR RESERVES, INC..........................................................15
RISKS OF INVESTING............................................................17
PORTFOLIO MANAGEMENT..........................................................18
MANAGEMENT FEES...............................................................19
DISTRIBUTION AND SHAREHOLDER SERVICES.........................................19
PURCHASING SHARES.............................................................20
REDEEMING SHARES..............................................................21
ACCOUNT AND TRANSACTION POLICIES..............................................21
DISTRIBUTIONS AND TAXES.......................................................22
FINANCIAL HIGHLIGHTS..........................................................23
1
<PAGE>
MIDAS FUND, INC.
INVESTMENT OBJECTIVE
Midas Fund seeks primarily capital appreciation and protection against inflation
and, secondarily, current income.
INVESTMENT STRATEGY
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 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. 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, management 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 may also 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 borrow money to purchase and hold securities and may engage in
short selling where risk of loss is potentially unlimited. The Fund may utilize
other investments and investment techniques that may impact Fund performance
including, but not limited to, options, futures and other derivatives (financial
instruments that derive their values from other securities or commodities or
that are based on indices). The Fund may also lend portfolio securities to other
parties. 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 such as investing some or all of its assets in cash and cash
equivalents, money market securities, short-term bonds, repurchase agreements,
and convertible bonds. When the Fund takes such temporary defensive positions,
the Fund may not achieve its investment objective.
PRINCIPAL RISKS
Precious Metals Price. The primary risk affecting this Fund's performance is
that its investments are linked to the prices of gold, silver, platinum and
other 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 of the major sources of gold,
silver, platinum and other resources could have a substantial effect on supply
and demand in countries throughout the world.
Non-Diversification. The Fund is non-diversified which means that more than 5%
of the Fund's assets may be invested in the securities of one issuer. As a
result, the 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.
BAR CHART AND PERFORMANCE TABLE
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 table compares the Fund's average annual returns for the 1, 5 and 10
year periods with those of the Standard & Poor's 500 Stock Index ("S&P 500") and
Morningstar Precious Metals Fund Average ("PMFA"). The S&P 500 is an index that
is unmanaged and fully invested in common stocks. The PMFA is an equally
weighted average of the 22 managed precious metals funds tracked by Morningstar.
Both the bar chart and the table assume reinvestment of dividends and
distributions. As with all mutual funds, past performance is not necessarily an
indication of future performance.
2
<PAGE>
Year-by-year total percent return as of 12/31 each year
[GRAPHIC OMITTED]
1989: 21.88, 1990: (16.99), 1991: (0.20), 1992: (7.16), 1993: 99.24,
1994: (17.27) 1995: 36.73, 1996: 21.22, 1997: (59.03), 1998: (28.44)
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)%
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
(as a percentage of offering price)..................................... NONE
Maximum Deferred Sales Charge (Load)..................................... NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends.............. NONE
Redemption Fee within 30 days of purchase................................ 1.00%
Annual Fund operating expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees......................................................... 1.00%
Distribution and service (12b-1) fees................................... 0.25%
Other expenses.......................................................... 1.08%
-----
Total annual fund operating expenses.................................... 2.33%
3
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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:................................. $236 $727 $1,245 $2,666
</TABLE>
4
<PAGE>
MIDAS INVESTORS, LTD.
INVESTMENT OBJECTIVE
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. The Fund invests 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
("gold mining shares"). Income is a secondary objective.
INVESTMENT STRATEGY
In seeking to achieve its primary investment objective of long term capital
appreciation, the Fund will concentrate its investments in gold mining shares
and gold, platinum, and silver bullion. This means at least 25% will, and up to
100% of its assets may, be so invested. Generally, at least 65% of the Fund's
total assets will be invested in 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,
gold, platinum and silver bullion and gold coins. Currently, the Fund limits
bullion investments to less than 25% of its total assets.
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, in 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), 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. The Investment Manager believes that such investments can
also offer excellent opportunities to provide hedges against inflation. Pending
investment or for temporary defensive purposes, the Fund may commit all or a
portion of its assets to cash (U.S. dollars and/or foreign currencies) or invest
in money market instruments of U.S. and foreign issuers, including repurchase
agreements.
Options, Futures, and Forward Currency Contracts. The Fund may purchase call
options on securities that the Investment Manager intends to include in the
Fund's portfolio in order to fix the cost of a future purchase or to attempt to
enhance return by, for example, participating in an anticipated price increase
of a security. The Fund may purchase put options to hedge against a decline in
the market value of securities held in the Fund's portfolio or to attempt to
enhance return. The Fund may write (sell) covered put and call options on
securities in which it is authorized to invest. The Fund may purchase and write
covered straddles, purchase and write put and call options on stock and bond
indexes, and take positions in options on foreign currencies to hedge against
the risk of foreign exchange rate fluctuations on foreign securities the Fund
holds in its portfolio or that it intends to purchase. The Fund may purchase and
sell interest rate futures contracts, stock and bond index futures contracts and
foreign currency futures contracts, and may purchase put and call options and
write covered put and call options on such futures contracts.
The Fund may enter into forward currency contracts to set the rate at which
currency exchanges will be made for contemplated or completed transactions. The
Fund might also enter into forward currency contracts in amounts approximating
the value of one or more portfolio positions to fix the U.S. dollar value of
those positions. For example, when the Investment Manager believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, the Fund may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund has no specific limitation on the percentage of
assets it may commit to foreign currency exchange contracts, except that it will
not attempt to enter into a forward contract if the amount of assets set aside
to cover the contract would impede portfolio management or the Fund's ability to
meet redemption requests.
Short Sales. The Fund may from time to time use short sales, which means that
the Fund may sell a security that it does not own in the hope of replacing it by
a later purchase at a lower price. In order to make delivery to the buyer, the
Fund must borrow the security. When it does, the Fund incurs an obligation to
replace that security, whatever its price may be, at the time the Fund purchases
it for delivery to the lender. The Fund must also pay to the lender of the
security the dividends or interest payable during such period and may have to
pay a premium to borrow the security. The proceeds of the short sale will be
retained by the broker, to the extent necessary to meet the margin requirements,
until the short position is closed out. The obligation to restore the borrowed
security will at all times also be secured by collateral consisting of cash or
liquid securities whose value is marked to the market daily. In addition to the
amount required to be maintained by the broker, a similarly collateralized
deposit will be made to a segregated account at the Fund's custodian bank in an
amount such that the value of these two deposits will, at all times, be at least
equal to the
5
<PAGE>
current market value of the securities sold short. Ordinarily, no interest will
be received by the Fund on the proceeds of the short sale held by the broker,
although income from the collateral securities will belong to the Fund. The Fund
will incur a loss, which could be substantial, if the price of the security
increases between the date of the short sale and the date on which it purchases
securities to replace those borrowed. The Fund will realize a gain if the
security declines in price between those dates. Any such gain will be a short
term gain.
The frequency of short sales by the Fund may vary substantially, and no
specified portion of the Fund's assets will be invested in short sales. However,
not more than 25% of the Fund's net assets will be used to collateralize short
sales. To adhere to the 25% limitation, the Fund may be required to cover short
sales at a disadvantageous time.
The Fund may also make short sales "against the box." A short sale is "against
the box" to the extent that the Fund contemporaneously owns or has the right to
obtain without additional cost securities identical to those sold short. Such
sales will not be subject to the limitations referred to above.
Fixed Income Securities. When seeking to achieve its secondary objective of
income, the Fund will normally invest in investment grade fixed income
securities. Investment grade securities are those rated in the top four
categories by a nationally recognized statistical rating organization such as
Standard & Poor's Ratings Group or Moody's Investors Service, Inc., ("Moody's")
or, if unrated, are determined by the Investment Manager to be of comparable
quality. Moody's considers securities in the fourth highest category to have
speculative characteristics. Such securities may include long, intermediate and
short maturities, depending on the Investment Manager's evaluation of market
patterns and trends. 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.
The Fund may also invest without limit in unrated securities if such securities
offer, in the Investment Manager's opinion, the opportunity for a high overall
return by reason of their yield, discount at purchase, or potential for capital
appreciation without undue risk. Securities rated below investment grade and
many unrated securities may be considered predominantly speculative and subject
to greater market fluctuations and risks of loss of income and principal than
higher rated fixed income securities. The market value of fixed income
securities usually is affected by changes in the level of interest rates. An
increase in interest rates tends to reduce the market value of such investments,
and a decline in interest rates tends to increase their value. In addition,
fixed income securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater fluctuations in price than
obligations with shorter maturities. Fluctuations in the market value of fixed
income securities subsequent to their acquisition do not affect cash income from
such securities but are reflected in the Fund's net asset value.
Lending. 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. There are risks to the Fund of delay in receiving
additional collateral and risks of delay in recovery of, and failure to recover,
the assets lent should the borrower fail financially or otherwise violate the
terms of the lending agreement. 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.
PRINCIPAL RISKS
Precious Metals Price. The primary risk affecting this Fund's performance is
that its investments are linked to the prices of gold, silver, platinum and
other 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 of the major sources of gold,
silver, platinum and other resources could have a substantial effect on supply
and demand in countries throughout the world.
Non-Diversification. The Fund is non-diversified which means that more than 5%
of the Fund's assets may be invested in the securities of one issuer. As a
result, the 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.
BAR CHART AND PERFORMANCE TABLE
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 table compares the Fund's average annual returns for the 1, 5 and 10
year periods with those
6
<PAGE>
of the Standard & Poor's 500 Stock Index ("S&P 500") and Morningstar Specialty
Fund-Precious Metals Average ("PMFA"). The S&P 500 is an index that is unmanaged
and fully invested in common stocks. The PMFA is an equally weighted average of
the 22 managed precious metals funds tracked by Morningstar. Both the bar chart
and the table assume reinvestment of dividends and distributions. As with all
mutual funds, past performance is not necessarily an indication of future
performance.
Year-by-year total percent return as of 12/31 each year
[GRAPHIC OMITTED]
1989: x%, 1990: x%, 1991: x%, 1992: x%, 1993: x%, 1994: x%, 1995: x%,
1996: x%, 1997: x%, 1998: x%.
Best Quarter (x/xx - x/xx) = x.x%
Worst Quarter (x/xx - x/xx) =(x.x)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
------ ------- --------
Midas Investors Ltd. (32.21)% (23.90)% (9.61)%
S&P 500 28.58% 24.05% 19.20%
PMFA (11.35)% (12.91)% (3.27)%
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
(as a percentage of offering price).................................. NONE
Maximum Deferred Sales Charge (Load).................................. NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends........... NONE
Redemption Fee within 30 days of purchase............................. 1.00%
Annual Fund operating expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees....................................................... x.x%
Distribution and service (12b-1) fees................................. x.x%
Other expenses........................................................ x.x%
----
Total annual fund operating expenses.................................. x.x%
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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:.................................. $x $x $x $x
</TABLE>
7
<PAGE>
MIDAS MAGIC, INC.
INVESTMENT OBJECTIVE
The Fund seeks long term capital appreciation.
INVESTMENT STRATEGY
The Fund seeks to achieve this objective by investing primarily in equity
securities. Any income which the Fund earns is incidental to its objective of
capital appreciation. The Fund will purchase primarily common stocks, which will
be selected generally for their potential for long term capital appreciation and
not dividend yield. Generally, the Fund will invest in companies expected to
achieve above-average growth, which have small, medium or large capitalizations.
In attempting to achieve capital appreciation, the Fund employs aggressive and
speculative investment strategies. The Fund may borrow money to purchase
securities and engage in short selling, where risk of loss is potentially
unlimited. Additionally, the Fund may invest in special situations such as
liquidations and reorganizations. The Fund may also lend portfolio securities to
other parties. The Fund may invest in options, warrants, financial futures, and
forward contracts, for which there is no assurance of success.
The Fund may from time to time take defensive positions, such as investing some
or all of its assets in cash, cash equivalents, money market securities,
short-term bonds, repurchase agreements, and convertible bonds. When the Fund
takes a defensive position, the Fund may not achieve its investment objective
over the short term.
PRINCIPAL RISKS
Market. The primary market risks associated with investing in the 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. 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.
Small Capitalization. The 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 value may fall further than that of funds
investing in larger companies. Full development of small-cap companies takes
time, and for this reason the Fund should be considered a long term investment
and not a vehicle for seeking short term profit.
BAR CHART AND PERFORMANCE TABLE
Past Performance. The bar chart provides some indiction of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year. The table compares the Fund's average annual returns for the 1, 5 and 10
year periods with those of the Russell 2000 Index, an index that is unmanaged
and fully invested in common stocks of small companies. Both the bar chart and
the table assume reinvestment of dividends and distributions. As with all mutual
funds, past performance is not necessarily an indication of future performance.
8
<PAGE>
Year-by-year total percent return as of 12/31 each year
[GRAPHIC OMITTED]
1989: 19.14, 1990: (31.75), 1991: 6.39, 1992: 28.00, 1993: 14.30,
1994: 1.58, 1995: 32.84, 1996: 18.67, 1997: 3.54, 1998: (13.82)
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%
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
(as a percentage of offering price)......................................NONE
Maximum Deferred Sales Charge (Load).......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends................NONE
Redemption Fee within 30 days of purchase..................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) (as % of average daily net assets)
Management fees ..........................................................1.00%
Distribution and service (12b-1) fees ....................................0.25%
Other expenses ...........................................................8.02%
Total annual fund operating expenses .....................................9.27%
Fee waiver and Expense reimbursement......................................7.29%
Net expenses..............................................................1.98%*
*Reflects a contractual obligation by Rockwood Advisers, Inc. to waive and/or
reimburse the Fund to the extent Total annual fund operating expenses exceed
1.90% of average daily net assets, excluding certain expenses.
9
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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, except for the
first year in each of the time periods indicated. Although
your actual costs may be higher or lower, based on these
assumptions your costs would be**............................... $201 $2,030 $3,707 $7,310
<FN>
** The first year expenses in each of the time periods indicated are based on a
contractual agreement.
</FN>
</TABLE>
10
<PAGE>
MIDAS SPECIAL EQUITIES FUND, INC.
INVESTMENT OBJECTIVE
Midas Special Equities Fund seeks capital appreciation.
INVESTMENT STRATEGY
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 borrow money to purchase and
hold securities and engage in short selling, where risk of loss is potentially
unlimited. Additionally, the Fund may invest in special situations such as
liquidations and reorganizations. The Fund may also lend portfolio securities to
other parties. The Fund may invest in options, warrants, financial futures, and
forward contracts, for which there is no assurance of success.
The Fund may from time to time take defensive positions, such as investing some
or all of its assets in cash, cash equivalents, money market securities,
short-term bonds, repurchase agreements, and convertible bonds. When the Fund
takes a defensive position, the Fund may not achieve its investment objective
over the short term.
PRINCIPAL RISKS
Market. The primary market risks associated with investing in the 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. 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.
BAR CHART AND PERFORMANCE TABLE
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 table compares the Fund's average annual returns for the 1, 5 and 10
year periods with those of the Russell 2000 Index, an index that is unmanaged
and fully invested in common stocks of small companies. Both the bar chart and
the table assume reinvestment of dividends and distributions. As with all mutual
funds, past performance is not necessarily an indication of future performance.
Year-by-year total return as of 12/31 each year
[GRAPHIC OMITTED]
1989: 42.29, 1990: (36.39), 1991: 40.54, 1992: 28.38, 1993: 16.35,
1994: (16.54), 1995: 40.47, 1996: 1.06, 1997: 5.23, 1998: (5.00)
Best Quarter:
10/92 - 12/92
24.29%
Worst Quarter:
7/90 - 9/90
(43.75)%
11
<PAGE>
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%
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
(as a percentage of offering price)......................................NONE
Maximum Deferred Sales Charge (Load).......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends................NONE
Redemption Fee within 30 days of purchase..................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees ...........................................................0.87%
Distribution and service (12b-1) fees .....................................1.00%
Other expenses ............................................................1.55%
Total annual fund operating expenses ......................................3.42%
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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:............................ $345 $1,051 $1,779 $3,703
</TABLE>
12
<PAGE>
MIDAS U.S. AND OVERSEAS FUND LTD.
INVESTMENT OBJECTIVE
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 principally
through a portfolio of securities of U.S. and overseas issuers.
INVESTMENT STRATEGY
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 borrow money to purchase and hold securities and
engage in short selling, where risk of loss is potentially unlimited.
Additionally, the Fund may invest in special situations such as liquidations and
reorganizations. The Fund may also lend portfolio securities to other parties.
The Fund may invest in options, warrants, financial futures, and forward
contracts, for which there is no assurance of success.
The Fund may from time to time take defensive positions such as investing some
or all of its assets in cash, cash equivalents, money market securities,
short-term bonds, repurchase agreements, and convertible bonds. When the Fund
takes a defensive position, the Fund may not achieve its investment objective
over the short term.
PRINCIPAL RISKS
Market. The primary market risks associated with investing in the 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. 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.
Foreign Investment. The Fund can be exposed to the unique risks of foreign
investing. Political turmoil and economic instability in the countries in which
the Fund invests could adversely affect the value of your investment. Also, if
the value of any foreign currency in which the 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. Foreign investments,
particularly investments in emerging markets, carry added risks due to
inadequate or inaccurate financial information about companies, potential
political disturbances, and fluctuations in currency exchange rates.
BAR CHART AND PERFORMANCE TABLE
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 table compares the Fund's average annual returns for the 1, 5 and 10
year periods with those of the Morgan Stanley Capital International ("MSCI")
World Index, an index that is unmanaged and fully invested in common stocks.
Both the bar chart and the table assume reinvestment of dividends and
distributions. As with all mutual funds, past performance is not necessarily an
indication of future performance.
13
<PAGE>
Year-by-year total return as of 12/31 each year
[GRAPHIC OMITTED]
1989: 11.10, 1990: (8.61), 1991: 22.55, 1992: 2.57, 1993: 26.71,
1994: (13.12), 1995: 25.11, 1996: 5.34, 1997: 5.64, 1998: 1.18.
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 Ltd. 1.18% 4.12% 6.94%
MSCI World Index 24.34% 15.68% 10.66%
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
(as a percentage of offering price)......................................NONE
Maximum Deferred Sales Charge (Load).......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends................NONE
Redemption Fee within 30 days of purchase..................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees ..........................................................1.00%
Distribution and service (12b-1) fees ....................................0.25%*
Other expenses ...........................................................1.33%
Total annual fund operating expenses .....................................2.58%
*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 3.33%, respectively.
14
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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, except for the
first year periods. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be**................................................................ $261 $955 $1,672 $3,571
<FN>
**Year one fees are based on contractual Distribution fee.
</FN>
</TABLE>
15
<PAGE>
DOLLAR RESERVES, INC.
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide its shareholders maximum current
income consistent with preservation of capital and maintenance of liquidity.
INVESTMENT STRATEGY
The Fund invests exclusively in obligations of the U.S. Government, its agencies
and instrumentalities ("U.S. Government Securities"). The monthly dividends the
Fund pays are generally exempt from state and local income taxes. In addition,
the value of Fund shares is generally exempt from state intangible personal
property taxes.
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 may also 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 managed so the dollar-weighted average maturity of its portfolio
does not exceed 90 days, and all investments have, or are deemed to have, a
remaining maturity of less than 397 days.
The Fund may purchase securities on a "when-issued" basis. In such transactions
the price is fixed at the time the commitment to make the purchase is made, but
delivery and payment occur at a later date. The Fund will only make commitments
to purchase U.S.
Government Securities maturing in less than 397 days from the date of the
commitment.
When the Fund purchases securities on a when-issued basis, its custodian will
set aside in a segregated account cash or liquid securities whose value is
marked to the market daily with a market value at least equal to the amount of
the commitment. If necessary, assets will be added to the account daily so that
the value of the account will not be less than the amount of the Fund's purchase
commitment.
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.
The Fund operates in accordance with a nonfundamental policy that complies with
Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act") that limits the
amount the Fund may invest in the securities of any one issuer to 5% of the
Fund's total assets, except that this limitation does not apply to U.S.
Government Securities. The Fund is also subject to a fundamental limitation that
provides it with the ability to invest, with respect to 25% of the Fund's
assets, more than 5% of its total assets in any one issuer. The Fund will
operate in accordance with this fundamental limitation only in the event that
Rule 2a-7 is amended and the Fund's Board amends the nonfundamental policy
discussed above. The Fund may borrow money from banks for temporary or emergency
purposes (not for leveraging or investment), but not in excess of an amount
equal to one third of the Fund's total assets. The Fund may also invest up to
10% of its net assets in illiquid assets and up to 10% of its total assets in
restricted securities.
Variable and Floating Rate Securities. The Fund may purchase variable and
floating rate U.S. Government Securities. The yield on these securities is
adjusted in relation to changes in specific rates, such as the prime rate, and
different securities may have different adjustment rates. The Fund's investments
in these securities must comply with conditions established by the SEC under
which they may be considered to have remaining maturities of 397 days or less.
16
<PAGE>
PRINCIPAL RISKS
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.
BAR CHART AND PERFORMANCE TABLE
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. As with all mutual funds, past performance is not necessarily an
indication of future performance.
Year-by-year total return as of 12/31 each year
[GRAPHIC OMITTED]
1989: x%, 1990: x%, 1991: X%, 1992: x%, 1993: x%, 1994: x%, 1995: x%,
1996: x%, 1997: x%, 1998: x%.
Best Quarter (x/xx - x/xx) = x.x%
Worst Quarter (x/xx - x/xx) =(x.x)%
For information on the Fund's 7-day yield, call toll-free 1-888-503-FUND.
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
(as a percentage of offering price)......................................NONE
Maximum Deferred Sales Charge (Load).......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends................NONE
Redemption Fee within 30 days of purchase..................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees ............................................................x.%
Distribution and service (12b-1) fees .......................................x%
Other expenses ..............................................................x%
Total annual fund operating expenses ........................................x%
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
Year Years Years Years
The example assumes that you invest $10,000 in the Fund for <C> <C> <C> <C>
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:.................................. $x $x $x $x
</TABLE>
17
<PAGE>
RISKS OF INVESTING:
RISKS OF INVESTING IN THE MIDAS FAMILY OF FUNDS
The following risks apply to each of the Funds:
Market. The primary market risks associated with investing in the 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. 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.
Illiquid Securities. The Fund may invest up to 15% of its assets in illiquid
securities. Potential risks from investing in illiquid securities are that
illiquid securities can be more difficult to value than more widely traded
securities and the prices realized from the sales of illiquid securities may be
less than if such securities were more widely traded.
Lending. The Fund may lend portfolio securities to borrowers for a fee.
Securities may only be lent if the Fund receives collateral equal to the market
value of the assets lent. Some risk is involved if the borrowers suffer
financial problems and are 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.
Active Trading. The Fund expects to trade securities actively. This strategy
could increase transaction costs, reduce performance and may result in taxable
distributions.
Temporary Defensive Positions. The Fund may from time to time take defensive
positions such as investing some or all of its assets in cash, cash equivalents,
money market securities, short-term bonds, repurchase agreements, and
convertible bonds. When the Fund takes a defensive position, the Fund may not
achieve its investment objective over the short term.
Year 2000. The Fund could be adversely affected if computer systems used by CEF
Advisers, Inc. (formerly Bull & Bear Advisers, Inc.) and the Fund's other
service providers do not properly process and calculate date-related information
on and after January 1, 2000. CEF Advisers, Inc. 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.
RISKS OF INVESTING IN SECURITIES OF SMALL COMPANIES
Small Capitalization. Some of the Funds 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 the affected Funds should be considered a long term
investment and not a vehicle for seeking short term profit.
RISKS OF INVESTING IN FOREIGN SECURITIES
Foreign Investment. Some of the Funds 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 the Funds
investments are denominated declines relative to the U.S. dollar, the value and
total return of your investment in the Funds may decline as well. Foreign
investments, particularly investments in emerging markets, carry added risks due
to inadequate or inaccurate financial information about companies, potential
political disturbances, and fluctuations in currency exchange rates.
RISKS OF MINING AND INVESTING IN PRECIOUS METALS
Precious Metals Price. Some of the Funds investments are linked to the prices of
gold, silver, platinum and other 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 of the
major sources of gold, silver,
18
<PAGE>
platinum and other resources could have a substantial effect on supply and
demand in countries throughout the world.
Mining. Resource mining by its nature involves significant risks and hazards to
which some of the 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. 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.
NON-DIVERSIFICATION RISK
Non-Diversification. Some of the Funds are non-diversified which means that more
than 5% of the Fund's assets may be invested in the securities of one issuer. As
a result, the Funds may hold a smaller number of issuers than if it were
diversified. If this situation occurs, investing in these Funds 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.
INTEREST RATE RISK
Interest Rates. Bond investments are affected by interest rates to which some of
the Funds are exposed. When interest rates rise, the prices of bonds typically
fall in proportion to their duration. Duration, expressed in years, is based on
the estimated payback period, or "duration," of a bond and is the most widely
used gauge of sensitivity to interest rate change.
PORTFOLIO MANAGEMENT
Midas Fund, Inc.
Midas Management Corporation is the investment manager. It regularly furnishes
advice with respect to portfolio transactions and provides 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.
Lion Resource Management Limited is the subadviser. Mr. Kjeld Thygesen, the
subadviser's Managing Director, has been the Fund's portfolio manager since
January 1992 and currently serves as the Fund's portfolio manager together with
the investment manager's Investment Policy Committee. Mr. Thygesen has been a
Managing Director of the subadviser since 1989. Its principal business address
is 7 - 8 Kendrick Mews, London, U.K. SW7 3HG. The subadviser advises and
consults with the investment manager regarding the selection, clearing and
safekeeping of the Fund's portfolio investments and assists in pricing and
generally monitoring such investments. The subadviser also provides the
investment manager with advice as to allocating the Fund's portfolio assets
among various countries, including the United States, and among equities,
bullion, and other types of investments, including recommendations of specific
investments.
Midas Investors, Ltd., Midas Special Equities Fund, Inc., and Midas U.S. and
Overseas Fund Ltd.
CEF Advisers, Inc. is the investment manager of the Fund, providing day-to-day
advice regarding portfolio transactions and is located at 11 Hanover Square, New
York, New York 10005. Thomas B. Winmill, President and Chief Executive Officer
of the investment manager and the Fund, is the Fund's portfolio manager. Mr.
Winmill 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 Fund since May 1, 1998.
Midas Magic, Inc.
Rockwood Advisers, Inc. is the investment manager of the Fund, providing
day-to-day advice regarding portfolio transactions and is located at 11 Hanover
Square, New York, New York 10005. Bassett S. Winmill, Chief Investment Officer
of the investment manager, is the Fund's portfolio manager. Mr. Winmill has
served as a 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.
19
<PAGE>
Dollar Reserves, Inc.
CEF Advisers, Inc. is the investment manager of the Fund, providing day-to-day
advice regarding portfolio transactions and is located at 11 Hanover Square, New
York, New York 10005. Steven A. Landis, Senior Vice President of the investment
manager and the Fund, is the Fund's portfolio manager. Mr. Landis has served as
a member of the investment manager's Investment Policy Committee since 1995. As
a member of the Investment Policy Committee, he assembles and disseminates
information with respect to the fund's performance. 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.
MANAGEMENT FEES
Each Fund pays a management fee at an annual rate based on its average daily net
assets, to the investment manager of the Fund, as follows: Midas Fund pays 1% on
the first $200 million of average daily net assets, declining thereafter. Midas
Investors, Ltd. pays 1% on the first $10 million of average daily net assets,
declining thereafter. Midas Magic pays 1% on the first $200 million of average
daily net assets, declining thereafter. Midas Special Equities Fund, Inc. 1% on
the first $10 million of average daily net assets, declining thereafter. Midas
U.S. and Overseas pays 1% on the first $10 million of average daily net assets,
declining thereafter. Dollar Reserves 0.50% on the first $250 million of average
daily net assets, declining thereafter.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. is the distributor of the Fund and services
shareholder accounts. Each of the Funds has adopted a plan under Rule 12b-1 and
pays the distributor a distribution or 12b-1 fee as compensation for
distribution and service activities as follows: Midas Fund pays one-quarter of
one percent per annum of the Fund's average daily net assets. Midas Investors,
Ltd. pays one-quarter of one percent per annum of the Fund's average daily net
assets. Midas Magic pays one quarter of one percent per annum of the Fund's
average daily net assets. Midas Special Equities Fund, Inc. pays one percent per
annum of the Fund's average daily net assets. Midas U.S. and Overseas pays one
percent per annum of the Fund's average daily net assets. Dollar Reserves one
quarter of one percent per annum of the Fund's average daily net assets. These
fees are paid out of the Fund's assets on an ongoing-basis. Overtime these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
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 the close
of regular trading on the New York Stock Exchange (currently, 4 p.m. eastern
time) each day the exchange is open. 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 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 made payable to Dollar Reserves,
to Investor Service Center, Box 419789, Kansas City, MO 64141-6789 (see Minimum
Investments below).
By wire. Call toll-free 1-888-503-FUND, 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 Dollar Reserves account number. 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, Box 419789, Kansas City, MO
64141-6789. This service is not available on days when the Federal Reserve wire
system is closed (see Minimum Investments below).
20
<PAGE>
Minimum Investments
Account Type Initial Subsequent
- ---------------------------- ------------------------ ------------------------
Regular $1,000 $100
Unif Gifts/Trans to $1,000 $100
Minors
403(b) plan $1,000 $100
Automatic Investment $100 $100
Program
............................ ........................ ........................
IRA Accounts Initial Subsequent
- ---------------------------- ------------------------ ------------------------
Traditional, Roth IRA $1,000 $100
Spousal, Rollover IRA $1,000 $100
SEP-IRA, SIMPLE IRA $1,000 $100
Education IRA $500 No min.
............................ ........................ ........................
Checks must be payable to Dollar Reserves in U.S. dollars. Third party checks
cannot be accepted. You will be charged a fee for any check that does not clear.
IRAs and retirement accounts. For more information about the IRAs and retirement
accounts listed above, please call toll-free 1-888- 503-FUND.
Automatic Investment Program. With the 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.
Bank Transfer Plan For making automatic investments
from a designated bank account.
................................................................................
Salary Investing Plan For making automatic investments
through a payroll deduction.
................................................................................
Government Direct Deposit Plan For making automatic investments
from 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, please
call toll-free 1-888-503-FUND. You may modify or terminate the Bank Transfer
Plan at any time by written notice received 10 days prior to the scheduled
investment date. To modify or terminate the Salary Investing Plan or 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 FastDeposit form and mail it, along with your check,
made payable to Dollar Reserves, to Investor Service Center, Box 419789, Kansas
City, MO 64141-6789 (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, and the name of the registered owner.
By Electronic Funds Transfer (EFT). Call toll-free 1-888-503-FUND. 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).
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures above (see Minimum
Investments above).
REDEEMING SHARES
Generally, you may redeem by any of the methods explained below. Requests for
redemption should include the following information:
o name of the registered owner(s) of the account
o account number
o Fund name
o amount you want to sell
o name and address or wire information of person to receive proceeds
21
<PAGE>
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.
By mail. Write to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, 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. Call toll-free 1-888-503-FUND, to expedite redemption of Fund
shares.
By EFT. Call toll-free 1-888-503-FUND and request the specific amount to be
redeemed through 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.
By wire. Call toll-free 1-888-503-FUND and request the specific amount to be
redeemed by wire.
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. You may establish free, unlimited check
writing privileges with only $250 minimum per check upon request, by calling
toll-free 1-888-503-FUND. You will be subject to a $20 charge for refused
checks, which may change without notice.
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. Orders received on
Fund business days by 4 p.m., eastern time, will be executed from your account
that day. Orders received after 4 p.m., eastern time, will be executed from your
account on the next Fund business day.
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 paid to
the Fund.
Redemption payment. Payment for shares redeemed will ordinarily be made within
seven days after receipt of the redemption request in proper form.
Accounts with below-minimum balances. 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.
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. Fund shares may be transferred to another owner. Instructions are
available by calling toll-free 1-888-503-FUND.
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. Each of
these distributions, if any, is paid out once a year. Your distributions will be
reinvested in the Fund unless you instruct the Fund otherwise by calling
toll-free 1-888-503-FUND.
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:
22
<PAGE>
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 more than one year....Capital gains or
losses
Sales or exchanges of shares held for one year or less......Gains are treated as
ordinary income;
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. 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.
23
<PAGE>
FINANCIAL HIGHLIGHTS: MIDAS FUND, INC.
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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, 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>
Years Ended December 31,
-----------------------------------------------------------------
1998* 1997* 1996* 1995* 1994
----- ----- ----- ----- ----
PER SHARE DATA
<S> <C> <C> <C> <C> <C>
Net asset value, 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) on investments.... (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, 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, end of period (in 000's)...................... $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>
24
<PAGE>
FINANCIAL HIGHLIGHTS: MIDAS INVESTORS, LTD.
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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 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 Years Ended June 30,
December 31,* --------------------------------------------------------------
PER SHARE DATA* 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<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) on
investments.................................. (.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 on
investments.................................. -- (.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 $27,489 $29,007 $36,603
====== ====== ======= ======= ======= =======
Ratio of expenses to average net assets(a)(b)...... 4.32%** 3.57% 2.77% 2.93% 2.82% 2.54%
==== ==== ==== ==== ==== ====
Ratio of net investment income (loss) to
average net assets................................. (2.50)%** (2.09)% (1.89)% (1.49)% 0.12% (.65)%
====== ====== ====== ====== ==== =====
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 ending December 31, 1998 and the years ending June
30, 1998, 1997, 1996, 1995, and 1994, respectively. (b) Ratio after custodian
credits was 4.30%** and 3.82% for the six months ending December 31, 1998 and
the year ended June 30, 1998, respectively.
</FN>
</TABLE>
25
<PAGE>
FINANCIAL HIGHLIGHTS: MIDAS MAGIC, INC.
This table describes the Fund's performance for the past five years. In 1998,
the fiscal year end changed to December 31. Previously, the fiscal year end was
October 31. 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 ended 1996 through 1998
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. The Fund's financial statements for
periods prior to 1996 were audited by other auditors whose reports thereon
expressed unqualified opinions on those statements.
<TABLE>
<CAPTION>
Two Months Ended Years Ended October 31,
December 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
------ ------ ------ ------ ------ ------
Net investment loss.............................. (.04) (.25) (.59) (.56) (.31) (.22)
Net realized and unrealized gain (loss) on
investments................................... .98 (7.20) 6.17 6.07 2.43 .51
--- ------ ---- ---- ---- ---
Total from investment operations........... .94 (7.45) 5.58 5.51 2.12 .29
--- ------ ---- ---- ---- ----
Distributions from net realized gain
on investments................................ (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>
26
<PAGE>
FINANCIAL HIGHLIGHTS: MIDAS SPECIAL EQUITIES FUND, INC.
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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 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>
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
------ ------ ------ ------ ------
Net investment loss................................. (.61) (.38) (.73) (.81) (.55)
Net realized and unrealized gain (loss) on
investments...................................... (.65) 1.55 0.99 8.51 (3.28)
----- ---- ---- ---- ------
Total from investment operations.................... (1.26) 1.17 0.26 7.70 (3.83)
------ ---- ---- ---- ------
Distributions from net realized gains on
investments...................................... (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........................................... (5.0)% 5.3% 1.0% 40.5% (16.5)%
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>
27
<PAGE>
FINANCIAL HIGHLIGHTS: MIDAS U.S. AND OVERSEAS FUND LTD.
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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 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>
Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
PER SHARE DATA(1)
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period............................. $7.35 $7.91 $8.36 $7.08 $8.71
----- ----- ----- ----- -----
Net investment income (loss).................................... (.10) (0.05) (0.24) (0.23) (0.13)
Net realized and unrealized gain (loss) on investments.......... .18 0.46 0.68 2.00 (1.01)
--- ---- ---- ---- ------
Total from investment operations................................ .08 0.41 0.44 1.77 (1.14)
--- ---- ---- ---- ------
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 income (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>
1 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>
28
<PAGE>
FINANCIAL HIGHLIGHTS: DOLLAR RESERVES, INC.
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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 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 Years Ended June 30,
December 31, -----------------------------------------------------------------
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>
29
<PAGE>
FOR MORE INFORMATION
For investors who want more information on the Funds, the following documents
are available free upon request:
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.
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
By telephone, call
1-800-400-MIDAS (for Midas Fund) or 1-888-503-FUND (for all other Funds)
By mail, write to:
Midas Funds
Box 419789
Kansas City, MO 64141-6789
By e-mail, write to:
[email protected]
On the Internet, Fund documents
can be viewed online or downloaded from:
SEC at http://www.sec.gov, or
Midas Family of Funds at http://www.mutualfunds.net
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); 811-04741 (Midas U.S. and Overseas) and
811-02474 (Dollar Reserves) .
30
<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.
As with all mutual funds, 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.
CONTENTS
INVESTMENT OBJECTIVE AND STRATEGY..............................................2
MAIN RISKS ...................................................................2
PAST PERFORMANCE...............................................................4
FEES AND EXPENSES OF THE FUND..................................................4
PORTFOLIO MANAGEMENT...........................................................4
DISTRIBUTION AND SHAREHOLDER SERVICES..........................................5
FINANCIAL HIGHLIGHTS...........................................................5
PURCHASING SHARES..............................................................5
REDEEMING SHARES...............................................................7
ACCOUNT AND TRANSACTION POLICIES...............................................7
DISTRIBUTIONS AND TAXES........................................................8
1
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund's investment objective is to provide its shareholders 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 monthly dividends the
Fund pays are generally exempt from state and local income taxes. In addition,
the value of Fund shares is generally exempt from state intangible personal
property taxes.
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 may also 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 managed so the dollar-weighted average maturity of its portfolio
does not exceed 90 days, and all investments have, or are deemed to have, a
remaining maturity of less than 397 days.
The Fund may purchase securities on a "when-issued" basis. In such transactions
the price is fixed at the time the commitment to make the purchase is made, but
delivery and payment occur at a later date. The Fund will only make commitments
to purchase U.S. Government Securities maturing in less than 397 days from the
date of the commitment.
When the Fund purchases securities on a when-issued basis, its custodian will
set aside in a segregated account cash or liquid securities whose value is
marked to the market daily with a market value at least equal to the amount of
the commitment. If necessary, assets will be added to the account daily so that
the value of the account will not be less than the amount of the Fund's purchase
commitment.
Lending. 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.
The Fund operates in accordance with a nonfundamental policy that complies with
Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act") that limits the
amount the Fund may invest in the securities of any one issuer to 5% of the
Fund's total assets, except that this limitation does not apply to U.S.
Government Securities. The Fund is also subject to a fundamental limitation that
provides it with the ability to invest, with respect to 25% of the Fund's
assets, more than 5% of its total assets in any one issuer. The Fund will
operate in accordance with this fundamental limitation only in the event that
Rule 2a-7 is amended and the Fund's Board amends the nonfundamental policy
discussed above. The Fund may borrow money from banks for temporary or emergency
purposes (not for leveraging or investment), but not in excess of an amount
equal to one third of the Fund's total assets. The Fund may also invest up to
10% of its net assets in illiquid assets and up to 10% of its total assets in
restricted securities.
Variable and Floating Rate Securities. The Fund may purchase variable and
floating rate U.S. Government Securities. The yield on these securities is
adjusted in relation to changes in specific rates, such as the prime rate, and
different securities may have different adjustment rates. The Fund's investments
in these securities must comply with conditions established by the SEC under
which they may be considered to have remaining maturities of 397 days or less.
MAIN RISKS
There can be no assurance that the Fund will achieve its investment objective.
In periods of declining interest rates, the Fund's yields may be somewhat higher
than prevailing market rates, and in periods of rising rates the opposite may be
true. Also, when interest rates are falling, net cash inflows from the
continuous sale of the Fund's shares are likely to be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing its yield. In periods of rising interest rates, the opposite
may be true.
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.
2
<PAGE>
While the risks associated with investment in U.S. Government Securities are
minimal, an investment in the Fund is not completely risk free. The U.S.
Government is not obligated by law to provide financial support to certain
agencies, and securities issued by them may involve risk of loss of principal
and interest. For example, securities issued by the Federal Farm Credit Banks
are supported by the agency's limited right to borrow money from the U.S.
Treasury under certain circumstances, and securities issued by the Federal Home
Loan Banks are supported only by the credit of the agency that issued them. The
Fund invests in these securities only when satisfied that the issuer's credit
risk is minimal.
Acquiring securities in this manner involves a risk that yields available on the
delivery date may be higher than those received in such transactions, as well as
the risk of price fluctuation.
Although the Fund will enter into when-issued transactions with the intention of
acquiring the securities, the Fund may sell the securities prior thereto, which
may result in a gain or loss. Failure of the issuer to deliver the security may
cause the Fund to incur a loss or miss an opportunity to make an alternative
investment.
Lending. The Fund may lend portfolio securities to borrowers for a fee.
Securities may only be lent if the Fund receives collateral equal to the market
value of the assets lent. Some risk is involved if the borrowers suffer
financial problems and are unable to return the assets lent. There are risks to
the Fund of delay in receiving additional collateral and risks of delay in
recovery of, and failure to recover, the assets lent should the borrower fail
financially or otherwise violate the terms of the lending agreement.
Interest Rates. The Fund's bond investments are affected by interest rates. When
interest rates rise, the prices of bonds typically fall in proportion to their
duration. Duration, expressed in years, is based on the estimated payback
period, or "duration," of a bond and is the most widely used gauge of
sensitivity to interest rate change.
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.
Active Trading. The Fund expects to trade securities actively. This strategy
could increase transaction costs, reduce performance, and may result in taxable
distributions.
Year 2000. The Fund could be adversely affected if computer systems used by CEF
Advisers, Inc. (formerly Bull & Bear Advisers, Inc.) and the Fund's other
service providers do not properly process and calculate date-related information
on and after January 1, 2000. CEF Advisers, Inc. 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.
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. As with all mutual
funds, past performance is not necessarily an indication of future performance.
Year-by-year total return as of 12/31 each year
Bar Chart: 1989, x%; 1990, x%; 1991, X%; 1992, x%; 1993, x%; 1994, x%; 1995, x%;
1996, x%; 1997, X%, 1998, x%.
Best Quarter:
--/-- - --/--
--%
Worst Quarter:
--/-- - --/--
--%
For information on the Fund's 7-day yield, Call toll-free 1-88-503-FUND.
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.
3
<PAGE>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)......................................NONE
Maximum Deferred Sales Charge (Load).......................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends................NONE
Redemption Fee within 30 days of purchase.................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees ..............................................................x%
Distribution and service (12b-1) fees ........................................x%
Other expenses ...............................................................x%
Total annual fund operating expenses .........................................x%
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<CAPTION>
<S>
One Three Five Ten
The example assumes that you invest $10,000 in the Fund for Year Years Years Years
the time periods indicated and then redeem all of your <C> <C> <C> <C>
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:................................... $x $x $x $x
</TABLE>
PORTFOLIO MANAGEMENT
CEF Advisers, Inc. is the investment manager of the Fund, providing day-to-day
advice regarding portfolio transactions and is located at 11 Hanover Square, New
York, New York 10005. Steven A. Landis, Senior Vice President of the investment
manager and the Fund, is the Fund's portfolio manager. Mr. Landis has served as
a member of the investment manager's Investment Policy Committee since 1995. As
a member of the Investment Policy Committee, he assembles and disseminates
information with respect to the fund's performance. 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.
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. During the fiscal year ended December 31, 1998, investment management
fees paid by the Fund represented approximately x.xx% of average daily net
assets.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. is the distributor of the Fund and services
shareholder accounts. The Fund has adopted a plan under Rule 12b-1 and pays the
distributor a distribution or 12b-1 fee in an amount of one quarter of one
percent per annum of the Fund's average daily net assets as compensation for
distribution and service activities. 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.
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the past five years. The fiscal
year end is December 31. 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 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.
4
<PAGE>
<TABLE>
<CAPTION>
x Months Ended
December 31, Years Ended June 30,
PER SHARE DATA 1998 1998 1997 1996 1995 1994
---- ---- ---- ------ ------ -----
<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
endedDecember 31, 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
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 the close
of regular trading on the New York Stock Exchange (currently, 4 p.m. eastern
time) each day the exchange is open. 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 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 made payable to Dollar Reserves,
to Investor Service Center, Box 419789, Kansas City, MO 64141-6789 (see Minimum
Investments below).
By wire. Call toll-free 1-888-503-FUND, 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 Dollar Reserves account number. 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, Box 419789, Kansas City, MO
64141-6789. This service is not available on days when the Federal Reserve wire
system is closed (see Minimum Investments below).
<TABLE>
<CAPTION>
Minimum Investments
Account Type Initial Subsequent IRA Accounts Initial Subsequent
- ----------------------------- --------- ----------- ---------------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Regular $1,000 $100 Traditional, Roth IRA $1,000 $100
Unif Gifts/Trans to Minors $1,000 $100 Spousal, Rollover IRA $1,000 $100
403(b) plan $1,000 $100 SEP-IRA, SIMPLE IRA $1,000 $100
Automatic Investment Program $100 $100 Education IRA $500 No min.
............................. ......... ........... ...................... ......... ............
</TABLE>
Checks must be payable to Dollar Reserves in U.S. dollars. Third party checks
cannot be accepted. You will be charged a fee for any check that does not clear.
IRAs and retirement accounts. For more information about the IRAs and retirement
accounts listed above, please call toll-free 1-888-503-FUND.
Automatic Investment Program. With the 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.
5
<PAGE>
................................................................................
Bank Transfer Plan For making automatic investments
from a designated bank account.
................................................................................
Salary Investing Plan For making automatic investments
through a payroll deduction.
................................................................................
Government Direct Deposit Plan For making automatic investments
from 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, please
call toll-free 1-888-503-FUND. You may modify or terminate the Bank Transfer
Plan at any time by written notice received 10 days prior to the scheduled
investment date. To modify or terminate the Salary Investing Plan or 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 FastDeposit form and mail it, along with your check,
made payable to Dollar Reserves, to Investor Service Center, Box 419789, Kansas
City, MO 64141-6789 (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, and the name of the registered owner.
By Electronic Funds Transfer (EFT). Call toll-free 1-888-503-FUND. 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).
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures above (see Minimum
Investments above).
REDEEMING SHARES
Generally, you may redeem by any of the methods explained below. Requests for
redemption should include the following information:
o name of the registered owner(s) of the account
o account number
o Fund name
o amount you want to sell
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.
By mail. Write to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, 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. Call toll-free 1-888-503-FUND, to expedite redemption of Fund
shares.
By EFT. Call toll-free 1-888-503-FUND and request the specific amount to be
redeemed through 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.
By wire. Call toll-free 1-888-503-FUND and request the specific amount to be
redeemed by wire.
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.
6
<PAGE>
Check Writing Privilege for Easy Access. You may establish free, unlimited check
writing privileges with only $250 minimum per check upon request, by calling
toll-free 1-888-503-FUND. You will be subject to a $20 charge for refused
checks, which may change without notice.
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. Orders received on
Fund business days by 4 p.m., eastern time, will be executed from your account
that day. Orders received after 4 p.m., eastern time, will be executed from your
account on the next Fund business day.
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 paid to
the Fund.
Redemption payment. Payment for shares redeemed will ordinarily be made within
seven days after receipt of the redemption request in proper form.
Accounts with below-minimum balances. 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.
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. Fund shares may be transferred to another owner. Instructions are
available by calling toll-free 1-888-503-FUND.
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. Each of
these distributions, if any, is paid out once a year. Your distributions will be
reinvested in the Fund unless you instruct the Fund otherwise by calling
toll-free 1-888-503-FUND.
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 more than one year.....Capital gains or
losses
Sales or exchanges of shares held for one year or less.......Gains are treated
as ordinary income;
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. 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.
7
<PAGE>
FOR MORE INFORMATION
For investors who want more information on the Fund, the following documents are
available free upon request:
Annual/Semi-annual reports. Contains performance data, lists portfolio holdings
and contains a letter from the Fund's manager discussing recent market
conditions, economic trends and Fund strategies that significantly affected the
Fund's performance during the last fiscal year.
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
By telephone, call:
1-888-503-FUND
By mail, write to:
Dollar Reserves, Inc.
Box 419789
Kansas City, MO 64141-6789
By e-mail, write to:
[email protected]
On the Internet, Fund documents
can be viewed online or downloaded from:
SEC at http://www.sec.gov, or
Dollar Reserves at http://www.mutualfunds.net
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 811-2474.
8
<PAGE>
Statement of Additional Information June 30, 1999
DOLLAR RESERVES, INC.
11 Hanover Square
New York, NY 10005
1-888-503-FUND
Dollar Reserves, Inc. ("Corporation") 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 1-888-503-FUND
(1-888-503-3863).
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. Subject to the limit on borrowing described in Investment
Restriction (5) below, 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 may
credit 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 CEF Advisers, Inc. (formerly Bull & Bear Advisers,
Inc.), (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. Any investment restriction involving a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition of securities or assets of, or borrowing by, the Fund.
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, (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:
Bexil U.S. Government Securities Fund, Inc.
Dollar Reserves, Inc.
Global Income Fund, Inc.
Midas Fund, Inc.
Midas Investors Ltd.
Midas Magic, Inc.
Midas Special Equities Fund, Inc.
Midas U.S. and Overseas Fund Ltd.
Tuxis Corporation
3
<PAGE>
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.
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 was born February 7, 1930.
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 was born December 14, 1930.
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 was born
February 9, 1923.
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
and brother of Mark C. Winmill. He is also a Director of eight other investment
companies in the Investment Company Complex. He was born June 25, 1959.
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 was born December 7, 1929.
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 was born March 1, 1955.
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 was born September 15,
1965.
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. She was born June 13, 1969.
*Thomas B. Winmill is an "interested person" of the Fund as defined by the 1940
Act, because of his position and other relationships with the Investment
Manager.
4
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
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, $6,250 from 6
Director $1,000 None None Investment Companies
James E. Hunt, $6,250 from 6
Director $1,000 None None Investment Companies
John B. Russell, $6,250 from 6
Director $1,000 None None Investment Companies
====================================================================================================================================
<FN>
Information in the above table is based on fees paid during the fiscal year
ended December 31, 1998.
</FN>
</TABLE>
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 xx, 1999, officers and Directors of the Fund owned less than 1% of
the outstanding shares of the Fund. As of xx, 1999, the following owner of
record owned more than 5% of the outstanding shares of the Fund:
U.S. Clearing Corp., 26 Broadway, New York, NY 10004-1798, xx%.
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 Midas Management Corporation and
Rockwood Advisers, Inc., registered investment advisers.
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 $ xx as
of xx, 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 $ xx
respectively, in management fees from the Fund and waived $152,876, $159,856,
$53,911, and $ xx respectively, of such fees to improve the Fund's yield.
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 $ xx 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
5
<PAGE>
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, reflecting the payment of a dividend each month, 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 1-888-503-FUND.
Current Yield refers to the income 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 xx%
Effective Yield xx%
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.
6
<PAGE>
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
<PAGE>
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/did not waive) 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 $ xx 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,
9
<PAGE>
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.
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 Board of Directors may authorize the use of one or more pricing services
which provide bid valuations (some of which may be "readily available market
quotations") on certain of the securities in which the Fund invests. Such
pricing services may employ electronic data processing techniques including the
use of a matrix pricing system which takes into consideration factors such as
yields, prices, maturities, call features and ratings on comparable securities.
Information obtained from such services may be used by the Fund both in the fair
valuation of securities for which there are no readily available market
quotations and in connection with the determination of the market prices of
securities held in the Fund's portfolio.
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. Orders to purchase shares are not binding on the
Fund until they are confirmed by the Fund's transfer agent. 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 accepted 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. The Distributor pays BBSI compensation monthly
for distribution and shareholder services in the amount of 0.25% per annum of
Fund assets held by customers of BBSI.
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
10
<PAGE>
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 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.
11
<PAGE>
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.
12
<PAGE>
DOLLAR RESERVES, INC.
Part C. Other Information
Item 23. Exhibits
(a) Articles of Incorporation: Filed with the Securities and Exchange
Commission on October 26, 1995, Accession Number 0000015260-95-000010
(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 Incorporation: Filed with the Securities and Exchange
Commission on October 26, 1995, Accession Number 0000015260-95-000010
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 with the Securities
and Exchange Commission on October 26, 1995, accession
number 0000015260-95-000010
(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: Previously Filed.
(j) not applicable
(n) Financial Data Schedule for the Fiscal Year End 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
CEF Advisers, Inc. ("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 Midas Management Corporation and Rockwood
Advisers, Inc., both of which are 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. CEF Advisers, Inc. serves as investment
manager of Dollar Reserves, Inc.; Midas Investors Ltd.; Midas U.S. and Overseas
Fund Ltd.; Midas Special Equities Fund, Inc., Bexil U.S. Government Securities
Fund, Inc., Global Income Fund, Inc., and Tuxis Corporation. Midas Management
Corporation serves as investment manager of Midas Fund, Inc., and Rockwood
Advisers, Inc. serves as investment adviser of Midas Magic, Inc.
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 Dollar Reserves, Inc. 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 and Secretary Vice President and
New York, NY 10005 Secretary
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 has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto authorized, in the
City, County and State of New York on this 24th day of May ,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 May 24, 1999
Thomas B. Winmill Officer, President and
General Counsel
____________________ Chief Financial Officer, May 24, 1999
Joseph Leung Chief Accounting
Officer and Treasurer
____________________ Director May 24, 1999
Bruce B. Huber
____________________ Director May 24, 1999
James E. Hunt
____________________ Director May 24, 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.
38
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
<RECEIVABLES> 390,675
<ASSETS-OTHER> 77,416
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,291,568
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 756,363
<TOTAL-LIABILITIES> 756,363
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 65,540,618
<SHARES-COMMON-STOCK> 65,540,618
<SHARES-COMMON-PRIOR> 61,602,433
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,413)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 65,535,205
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,689,236
<OTHER-INCOME> 0
<EXPENSES-NET> 293,250
<NET-INVESTMENT-INCOME> 1,395,986
<REALIZED-GAINS-CURRENT> 2,607
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,398,593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,395,986
<DISTRIBUTIONS-OF-GAINS> 2,607
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,217,074
<NUMBER-OF-SHARES-REDEEMED> 21,665,375
<SHARES-REINVESTED> 1,381,063
<NET-CHANGE-IN-ASSETS> 3,932,762
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,803)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157,444
<INTEREST-EXPENSE> 0
<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
<TOTAL-ASSETS> 61,694,150
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91,707
<TOTAL-LIABILITIES> 91,707
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,610,246
<SHARES-COMMON-STOCK> 61,602,443
<SHARES-COMMON-PRIOR> 62,838,416
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,803)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 61,602,443
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,502,320
<OTHER-INCOME> 0
<EXPENSES-NET> 540,415
<NET-INVESTMENT-INCOME> 2,961,905
<REALIZED-GAINS-CURRENT> 774
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,962,679
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,961,905
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,705,407
<NUMBER-OF-SHARES-REDEEMED> 53,922,843
<SHARES-REINVESTED> 2,981,463
<NET-CHANGE-IN-ASSETS> (1,305,478)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8,576)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314,628
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 751,640
<AVERAGE-NET-ASSETS> 62,925,633
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> .047
<PER-SHARE-DISTRIBUTIONS> 0.001
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .86
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>