As filed with the Securities and Exchange Commission on April 28, 2000
1933 Act File No. 2-57953
1940 Act File No. 811-2474
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 57 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 48 [X]
DOLLAR RESERVES, INC.
(Exact Name of Registrant as Specified in Charter)
11 HANOVER SQUARE, NEW YORK, NEW YORK, 10005
(Address of Principal Executive Offices) (Zip Code)
(212) 480-6432
(Registrant's Telephone Number, including Area Code)
THOMAS B. WINMILL, ESQ.
11 Hanover Square, New York, NY 10005
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
____ immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 2000 pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
____ on (date)pursuant to paragraph (a)(i) of Rule 485
____ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
____ on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
[ LOGO: "MIDAS FUNDS Discovering Opportunities"]
MIDAS MAGIC
MIDAS SPECIAL EQUITIES FUND
MIDAS U.S. AND OVERSEAS FUND
MIDAS FUND
MIDAS INVESTORS
DOLLAR RESERVES
Prospectus dated May 1, 2000
Newspaper Listing The Funds' net asset values are shown daily in the mutual fund
section of newspapers nationwide under the heading "Midas."
This prospectus contains information you should know about the Funds before you
invest. The operations and results of each Fund are unrelated to those of the
other Funds. This combined prospectus has been prepared for your convenience so
that you can consider six investment choices in one document. Please keep it for
future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS 2
PAST PERFORMANCE 3
FEES AND EXPENSES OF THE FUNDS 7
PRINCIPAL INVESTMENT OBJECTIVES, STRATEGIES AND RISKS 8
PORTFOLIO MANAGEMENT 12
MANAGEMENT FEES 13
DISTRIBUTION AND SHAREHOLDER SERVICES 13
PURCHASING SHARES 13
REDEEMING SHARES 15
ACCOUNT AND TRANSACTION POLICIES 15
DISTRIBUTIONS AND TAXES 16
FINANCIAL HIGHLIGHTS 16
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS SUMMARY
What are the principal investment objectives of the Midas Funds?
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MIDAS MAGIC seeks long term capital appreciation.
MIDAS SPECIAL EQUITIES FUND seeks capital appreciation.
MIDAS U.S. AND OVERSEAS FUND seeks to obtain the highest possible total return
on its assets from long term growth of capital and from income principally
through a portfolio of securities of U.S. and overseas issuers.
MIDAS FUND seeks primarily capital appreciation and protection against inflation
and, secondarily, current income.
MIDAS INVESTORS seeks long term capital appreciation in investments with the
potential to provide a hedge against inflation and preserve the purchasing power
of the dollar. Income is a secondary objective.
DOLLAR RESERVES is a money market fund seeking maximum current income consistent
with preservation of capital and maintenance of liquidity.
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What are the principal investment strategies of the Midas Funds?
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MIDAS MAGIC invests primarily in equity securities of companies whose earnings
or revenue prospects are improving as a result of management, technology,
regulation, financial structure, or other special situations (e.g. liquidations
and reorganizations) and in companies whose shares have upward price momentum.
The Fund will normally sell investments with valuations that unduly increase
risk levels or no longer have desired upward price momentum.
MIDAS SPECIAL EQUITIES FUND invests aggressively primarily in equity securities,
often involving special situations (e.g. liquidations and reorganizations) and
emerging growth companies. The Fund will normally sell investments when the
value or growth potential of the investment appears limited or exceeded by other
investment opportunities.
MIDAS U.S. AND OVERSEAS FUND invests principally in a portfolio of securities of
U.S. and overseas issuers with growth in earnings or reasonable valuations in
terms of price/sales and similar ratios. The Fund will normally sell investments
when the value or growth potential of the investment appears limited or exceeded
by other investment opportunities.
MIDAS FUND invests at least 65% of its total assets in (i) securities of
companies primarily involved, directly or indirectly, in the business of mining,
processing, fabricating, distributing or otherwise dealing in gold, silver,
platinum or other natural resources and (ii) gold, silver and platinum bullion.
Up to 35% of the Fund's assets may be invested in securities of selected growth
companies and in U.S. Government securities. The Fund will emphasize the
potential for growth when choosing investments. A stock is typically sold when
its potential to meet the Fund's investment objective is limited or exceeded by
another potential investment.
MIDAS INVESTORS invests at least 65% of the Fund's total assets in (i) equity
securities (including common stocks, convertible securities and warrants) of
companies involved, directly or indirectly, in mining, processing or dealing in
gold or other precious metals, (ii) gold, platinum and silver bullion, and (iii)
gold coins. Up to 35% of the Fund's assets may be invested in securities of
selected growth companies and in U.S. Government securities. The Fund will
invest in companies whose earnings are expected to grow faster than the rate of
inflation. A stock is typically sold when its potential to meet the Fund's
investment objective is limited or exceeded by another potential investment.
DOLLAR RESERVES invests exclusively in money market obligations of the U.S.
Government, its agencies and instrumentalities.
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What are the principal risks of investing in the Midas Funds?
All of the Funds (except Dollar Reserves) are subject to the risks associated
with:
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Market. The market risks associated with investing in a Fund are those related
to fluctuations in the value of the Fund's portfolio. A risk of investing in
stocks is that their value will go up and down reflecting stock market movements
and you could lose money.
Small Capitalization. The Funds may invest in companies that are small or thinly
capitalized, and may have a limited operating history. Small-cap stocks are more
vulnerable than larger companies to adverse business or economic developments.
During broad market downturns, Fund values may fall further than that of funds
investing in larger companies.
Foreign Investment. The Funds are subject to the unique risks of foreign
investing. Political turmoil and economic instability in the countries in which
the Funds may invest could adversely affect the value of your investment. Also,
if the value of any foreign currency in which a Fund's investments are
denominated declines relative to the U.S. dollar, the value and total return of
your investment in the Fund may decline as well.
Non-Diversification. The Funds are non-diversified which means that more than 5%
of a Fund's assets may be invested in the securities of one issuer. As a result,
each Fund may hold a smaller number of issuers than if it were diversified.
Investing in a Fund could involve more risk than investing in a fund that holds
a broader range of securities because changes in the financial condition of a
single issuer could cause greater fluctuation in the Fund's total returns.
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Midas Fund and Midas Investors are subject to the risks associated with:
- --------------------------------------------------------------------------------
Precious Metals Price. The prices of gold, silver, platinum and other natural
resources can be influenced by a variety of global economic, financial and
political factors and may fluctuate substantially over short periods of time and
be more volatile than other types of investments.
Mining. Resource mining by its nature involves significant risks and hazards to
which these Funds are exposed. Even when a resource mineralization is
discovered, there is no guarantee that the actual reserves of a mine will
increase. Exploratory mining can last over a number of years, incur substantial
costs, and not lead to any new commercial mining.
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Dollar Reserves is subject to the following risk:
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An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental 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.
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PAST PERFORMANCE
The bar charts provide some indication of the risks of investing in the Funds by
showing changes in each Fund's performance from year to year. The tables compare
the Funds' average annual returns for the 1, 5 and 10 year periods with
appropriate broad-based securities market indexes (except in the case of Dollar
Reserves) and in so doing, also reflects the risks of investing in the Funds.
The Standard & Poor's 500 Stock Index ("S&P 500") is an index that is unmanaged
and fully invested in common stocks. The Morningstar Specialty Fund-Precious
Metals Average ("PMA") is an equally weighted average of the 42 managed precious
metals funds tracked by Morningstar. The Morgan Stanley Capital International
World Index ND ("MSCI World Index") is an unmanaged index which is derived from
equities of Europe, Australasia and Far East countries and equities from Canada
and the U.S. The Russell 2000 Index is an index that is unmanaged and fully
invested in common stocks of small companies. Morningstar's World Stock Fund
Average ("MSFA") is an equally weighted average of 25 world equity mutual funds.
The Lipper Analytical Money Market Index ("LAMMI") is an unmanaged index of
money market funds that invest principally in financial instruments issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, with
dollar-weighted average maturities of less than 90 days and which intend to keep
a constant net asset value ("NAV"). Both the bar charts and the tables assume
reinvestment of dividends and distributions. As with all mutual funds, past
performance is not necessarily an indication of future performance. The one year
performance of some Midas Funds in 1999 was due in large part to a period of
unusual and extremely strong stock market performance, which should not be
expected over the long term. bar charts and performance tables
MIDAS MAGIC
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Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
10/99-12/99
29.04%
Worst Quarter:
7/90-9/90
(19.47)%
Average annual total return for the periods ended 12/31/99
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1 Year 5 Years 10 Years
----------------------------------------------------
Midas Magic 70.58% 19.13% 9.98%
S&P 500 21.04% 28.54% 18.20%
Russell 2000 21.26% 16.70% 13.40%
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MIDAS SPECIAL EQUITIES FUND
- --------------------------------------------------------------------------------
Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
10/99-12/99
35.37%
Worst Quarter:
7/90-9/90
(43.75)%
Average annual total return for the periods ended 12/31/99
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------
Midas Special Equities Fund 30.58% 13.08% 7.50%
S&P 500 21.04% 28.54% 18.20%
Russell 2000 Index 21.26% 16.70% 13.40%
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MIDAS U.S. AND OVERSEAS FUND
- --------------------------------------------------------------------------------
Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
10/99-12/99
51.37%
Worst Quarter:
7/98-9/98
(24.43)%
Average annual total return for the periods ended 12/31/99
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
----------------------------------------
Midas U.S. and Overseas Fund 47.44% 15.74% 9.57%
MSFA 37.22% 18.52% 12.76%
MSCI World Index 24.93% 19.76% 11.42%
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MIDAS FUND
- --------------------------------------------------------------------------------
Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
4/93-6/93
36.64%
Worst Quarter:
10/97-12/97
(40.90)%
Average annual total return for the periods ended 12/31/99
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------
Midas Fund (9.93)% (15.23)% (5.72)%
S&P 500 21.04% 28.54% 18.20%
PMA 4.35% (9.71)% (4.95)%
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MIDAS INVESTORS
- --------------------------------------------------------------------------------
Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
4/93-6/93
34.87%
Worst Quarter:
10/97-12/97
(32.99)%
Average annual total return for the periods ended 12/31/99
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1 Year 5 Years 10 Years
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Midas Investors (6.03)% (22.57)% (11.74)%
S&P 500 21.04% 28.54% 18.20%
PMA 4.35% (9.71)% (4.95)%
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DOLLAR RESERVES
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Year-by-year total return as of 12/31 each year (%)
[graphic omitted]
Best Quarter:
1/90-3/90
1.85%
Worst Quarter:
4/93-6/93
0.58%
For information on the Fund's 30-day annualized yield, call toll-free
1-800-400-MIDAS (6432).
Average annual total return for the periods ended 12/31/99
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
----------------------------------------------------------
Dollar Reserves 4.38% 4.74% 4.54%
LAMMI 4.58% 4.98% 4.79%
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<PAGE>
FEES AND EXPENSES OF THE FUNDS
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the following tables. Shareholder fees are paid out of
your account. Annual Fund operating expenses are paid out of Fund assets, so
their effect is included in the share price.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE
Redemption Fee within 30 days of purchase 1.00%
(all Funds except Dollar Reserves)
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses as % of average daily net assets that are deducted from Fund assets)
- ----------------------------------------- -------------- --------------- ------------- --------------- --------------- -------------
Management Distribution Other Total Annual Fee Waiver Net Expenses
Fees and Service Expenses * Fund and Expense
(12b-1) Fees Operating Reimburse-ment
Expenses
-------------- --------------- ------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Midas Magic 1.00% 0.25% 11.19% 12.44% 10.04% 2.40%***
Midas Special Equities Fund 0.90% 1.00% 1.23% 3.13% 0.00 3.13%
Midas U.S. and Overseas Fund 1.00% 0.25%** 1.69% 2.94%** 0.00 2.94%**
Midas Fund 1.00% 0.25% 1.56% 2.81% 0.00 2.81%
Midas Investors 1.00% 0.25%** 2.54% 3.79%** 0.00 3.79%**
Dollar Reserves 0.50% 0.25% 0.59% 1.34% 0.00 1.34%
- ----------------------------------------- -------------- --------------- ------------- --------------- --------------- -------------
</TABLE>
* Includes the reimbursement by each Fund to Midas Management Corporation for
accounting and other administrative services which are authorized by the Board
of Directors. These services may vary over time, therefore, the amount of the
reimbursement may fluctuate.
** Reflects a contractual distribution fee waiver that will continue through May
1, 2001. Without such waiver, distribution and service fee and total annual Fund
operating expenses would have been 1.00% and 3.69%, respectively, for Midas U.S.
and Overseas Fund and 1.00% and 4.54%, respectively, for Midas Investors.
*** Reflects a contractual obligation by Midas Management Corporation to waive
and/or reimburse the Fund through December 31, 2001 to the extent total annual
Fund operating expenses exceed 1.90% of average daily net assets, excluding
certain expenses which totaled 0.50% in 1999.
- --------------------------------------------------------------------------------
EXAMPLE:
This example assumes that you invest $10,000 in each of the Funds for the time
periods indicated and then redeem all of your shares at the end of those
periods. This example also assumes that your investment has a 5% return each
year and that the Funds' operating expenses remain the same (except in the cases
footnoted below). Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
---------------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Midas Magic* $243 $2,609 $4,637 $8,524
Midas Special Equities Fund $316 $966 $1,640 $3,439
Midas U.S. and Overseas Fund* $297 $1,010 $1,746 $3,688
Midas Fund $284 $871 $1,484 $3,138
Midas Investors* $381 $1,305 $2,236 $4,603
Dollar Reserves $136 $425 $734 $1,613
- ------------------------------------------- ---------------------- --------------------- ---------------------- --------------------
</TABLE>
* The first year expenses in each of the time periods indicated reflect expense
waivers by contractual agreement.
<PAGE>
PRINCIPAL INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MIDAS MAGIC seeks long term capital appreciation. The Fund seeks to achieve this
objective by investing primarily in equity securities that, in the opinion
of the investment manager, are available at prices less than their
intrinsic value. The Fund will purchase primarily common stocks, which will
be selected generally for their potential for long term capital
appreciation. Generally, the Fund will invest in companies expected to
achieve above-average growth, which have small, medium or large
capitalizations and whose earnings or revenue prospects are improving as a
result of management, technology, regulation, financial structure, or other
special situations (e.g. liquidations and reorganizations) and in companies
whose shares have upward price momentum. The Fund will normally sell
investments with valuations that unduly increase risk levels or, no longer
have desired upward price momentum.
In attempting to achieve capital appreciation, the Fund employs aggressive
and speculative investment strategies. The Fund may invest in certain
derivatives such as options, futures and forward currency contracts.
Derivatives are financial instruments that derive their values from other
securities or commodities or that are based on indices. The Fund also may
engage in leverage by borrowing money for investment purposes. The Fund
also may lend portfolio securities to other parties and may engage in
short-selling. Additionally, the Fund may invest in special situations such
as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value of
the Fund's portfolio. A risk of investing in stocks is that their value
will go up and down reflecting stock market movements and you could lose
money. However, you also have the potential to make money. Also, investing
in stocks involves a greater risk of loss of income than bonds because
stocks need not pay dividends.
The Fund may use leverage and engage in short-selling and options and
futures transactions to increase returns. There is a risk that these
transactions sometimes may reduce returns or increase volatility. In
addition, derivatives, such as options and futures, can be illiquid and
highly sensitive to changes in their underlying security, interest rate or
index, and as a result can be highly volatile. A small investment in
certain derivatives could have a potentially large impact on the Fund's
performance.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS SPECIAL EQUITIES FUND invests aggressively for maximum capital
appreciation. The Fund invests primarily in equity securities, often
involving special situations and emerging growth companies. The Fund seeks
to invest in equity securities of companies with optimal combinations of
growth in earnings and other fundamental factors, while also offering
reasonable valuations in terms of price/sales and similar ratios. The Fund
may invest in domestic or foreign companies which have small, medium or
large capitalizations. 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.
In attempting to achieve capital appreciation, the Fund employs aggressive
and speculative investment strategies. The Fund may invest in certain
derivatives such as options, futures and forward currency contracts.
Derivatives are financial instruments that derive their values from other
securities or commodities or that are based on indices. The Fund also may
engage in leverage by borrowing money for investment purposes. The Fund
also may lend portfolio securities to other parties and may engage in
short-selling. Additionally, the Fund may invest in special situations such
as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value of
the Fund's portfolio. A risk of investing in stocks is that their value
will go up and down reflecting stock market movements and you could lose
money. However, you also have the potential to make money. Also, investing
in stocks involves a greater risk of loss of income than bonds because
stocks need not pay dividends.
The Fund may use leverage and engage in short-selling and options and
futures transactions to increase returns. There is a risk that these
transactions sometimes may reduce returns or increase volatility. In
addition, derivatives, such as options and futures, can be illiquid and
highly sensitive to changes in their underlying security, interest rate or
index, and as a result can be highly volatile. A small investment in
certain derivatives could have a potentially large impact on the Fund's
performance.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS U.S. AND OVERSEAS FUND seeks to obtain the highest possible total return
on its assets from long term growth of capital and from income. The Fund
may invest substantially all of its assets in equity securities of issuers
located in foreign countries with developed and/or emerging markets. The
Fund may invest a portion of its assets in debt securities and in a
combination of countries which include the U.S. and foreign markets.
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/sales and similar
ratios. The Fund may sell an investment when the value or growth potential
of the investment appears limited or exceeded by other investment
opportunities, when the issuer's investment no longer appears to meet the
Fund's investment objective, or when the Fund must meet redemptions.
The Fund may invest in companies which have small, medium or large
capitalizations. The Fund may invest in certain derivatives such as
options, futures and forward currency contracts. Derivatives are financial
instruments that derive their values from other securities or commodities
or that are based on indices. The Fund also may engage in leverage by
borrowing money for investment purposes. The Fund also may lend portfolio
securities to other parties and may engage in short-selling. Additionally,
the Fund may invest in special situations such as liquidations and
reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund is subject to market risk related to fluctuations in the value of
the Fund's portfolio. A risk of investing in stocks is that their value
will go up and down reflecting stock market movements and you could lose
money. However, you also have the potential to make money. Also, investing
in stocks involves a greater risk of loss of income than bonds because
stocks need not pay dividends. The Fund will be exposed to the unique risks
of foreign investing. Additionally, the Fund may use leverage and engage in
short-selling and futures and options strategies.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS FUND seeks primarily capital appreciation and protection against inflation
and, secondarily, current income. The Fund pursues its objective by
investing primarily in domestic or foreign companies involved with gold,
silver, platinum, or other natural resources and gold, silver, and platinum
bullion. The Fund will invest at least 65% of its total assets in (i)
securities of companies involved, directly or indirectly, in the business
of mining, processing, fabricating, distributing or otherwise dealing in
gold, silver, platinum or other natural resources and (ii) gold, silver and
platinum bullion. Additionally, up to 35% of the Fund's total assets may be
invested in securities of companies that derive a portion of their gross
revenues, directly or indirectly, from the business of mining, processing,
fabricating, distributing or otherwise dealing in gold, silver, platinum or
other natural resources, in securities of selected growth companies, and in
securities issued by the U.S. Government, its agencies or
instrumentalities.
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. In making
investments for the Fund, the investment manager may consider, among other
things, the ore quality of metals mined by a company, a company's mining,
processing and fabricating costs and techniques, the quantity of a
company's unmined reserves, quality of management, and marketability of a
company's equity or debt securities. Management will emphasize the
potential for growth of the proposed investment, although it also may
consider an investment's income generating capacity as well. A stock is
typically sold when, in the opinion of the portfolio management team, its
potential to meet the Fund's investment objective is limited or exceeded by
another potential investment. When seeking to achieve its secondary
objective of income, the Fund will normally invest in investment grade
fixed income securities.
The Fund may invest in certain derivatives such as options, futures and
forward currency contracts. Derivatives are financial instruments that
derive their values from other securities or commodities or that are based
on indices. The Fund also may engage in leverage by borrowing money for
investment purposes. The Fund also may lend portfolio securities to other
parties and may engage in short-selling. Additionally, the Fund may invest
in special situations such as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund's investments are linked to the prices of gold, silver, platinum
and other natural resources. These prices can be influenced by a variety of
global economic, financial and political factors and may fluctuate
substantially over short periods of time and be more volatile than other
types of investments. Economic, political, or other conditions affecting
one or more of the major sources of gold, silver, platinum and other
natural resources could have a substantial effect on supply and demand in
countries throughout the world.
Resource mining by its nature involves significant risks and hazards. Even
when a resource mineralization is discovered, there is no guarantee that
the actual reserves of a mine will increase. Exploratory mining can last
over a number of years, incur substantial costs, and not lead to any new
commercial mining. Resource mining runs the risk of increased
environmental, labor or other costs in mining due to environmental hazards,
industrial accidents, labor disputes, discharge of toxic chemicals, fire,
drought, flooding and other natural acts. Changes in laws relating to
mining or resource production or sales could also substantially affect
resource values.
The Fund may use leverage and engage in short-selling and futures and
options strategies. Also, the Fund may invest up to 35% of its assets in
fixed income securities rated below investment grade, although it has no
current intention of investing more than 5% of its assets in such
securities during the coming year. These securities may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed income
securities.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
MIDAS INVESTORS seeks long term capital appreciation in investments with the
potential to provide a hedge against inflation and preserve the purchasing
power of the dollar. Income is a secondary objective.
The Fund pursues its objective by investing primarily in gold, platinum,
and silver bullion and a global portfolio of securities of companies
involved directly or indirectly in mining, processing, or dealing in gold
or other precious metals. Generally, at least 65% of the Fund's total
assets will be invested in (i) equity securities (including common stocks,
convertible securities and warrants) of companies involved directly or
indirectly in mining, processing, or dealing in gold or other precious
metals, (ii) gold, platinum, and silver bullion, and (iii) gold coins.
Additionally, the Fund may invest up to 35% of its total assets in
securities of companies that own or develop natural resources and other
basic commodities, securities of selected growth companies, and securities
issued by the U.S. Government, its agencies or instrumentalities.
Natural resources include ferrous and non-ferrous metals (such as iron,
aluminum and copper), strategic metals (such as uranium and titanium),
hydrocarbons (such as coal, oil and natural gases), chemicals, forest
products, real estate, food products and other basic commodities. 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. 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. When
seeking to achieve its secondary objective of income, the Fund will
normally invest in investment grade fixed income securities.
The Fund may invest in certain derivatives such as options, futures and
forward currency contracts. Derivatives are financial instruments that
derive their values from other securities or commodities or that are based
on indices. The Fund also may engage in leverage by borrowing money for
investment purposes. The Fund also may lend portfolio securities to other
parties and may engage in short-selling. Additionally, the Fund may invest
in special situations such as liquidations and reorganizations.
The Fund may, from time to time, under adverse market conditions take
temporary defensive positions and invest some or all of its assets in cash
and cash equivalents, money market securities of U.S. and foreign issuers,
short-term bonds, repurchase agreements, and convertible bonds. When the
Fund takes such a temporary defensive position, it may not achieve its
investment objective.
Principal Risks
- --------------------------------------------------------------------------------
The Fund's investments are linked to the prices of gold, silver, platinum
and other natural resources. These prices can be influenced by a variety of
global economic, financial and political factors and may fluctuate
substantially over short periods of time and be more volatile than other
types of investments. Economic, political, or other conditions affecting
one or more of the major sources of gold, silver, platinum, and other
natural resources could have a substantial effect on supply and demand in
countries throughout the world.
Resource mining by its nature involves significant risks and hazards. Even
when a resource mineralization is discovered, there is no guarantee that
the actual reserves of a mine will increase. Exploratory mining can last
over a number of years, incur substantial costs, and not lead to any new
commercial mining. Resource mining runs the risk of increased
environmental, labor or other costs in mining due to environmental hazards,
industrial accidents, labor disputes, discharge of toxic chemicals, fire,
drought, flooding and other natural acts. Changes in laws relating to
mining or resource production or sales could also substantially affect
resource values.
The Fund may use leverage and engage in short-selling and futures and
options strategies. Also, the Fund may invest up to 35% of its assets in
fixed income securities rated below investment grade, although it has no
current intention of investing more than 5% of its assets in such
securities during the coming year. These securities may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed income
securities.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
DOLLAR RESERVES seeks maximum current income consistent with preservation of
capital and maintenance of liquidity. The Fund invests exclusively in
obligations of the U.S. Government, its agencies and instrumentalities
("U.S. Government Securities"). The U.S. Government Securities in which the
Fund may invest include U.S. Treasury notes and bills and certain agency
securities that are backed by the full faith and credit of the U.S.
Government. The Fund also may invest without limit in securities issued by
U.S. Government agencies and instrumentalities that may have different
degrees of government backing as to principal or interest but which are not
backed by the full faith and credit of the U.S. Government.
The Fund is a money market fund and as such is subject to certain specific
SEC rule requirements. Among other things, the Fund is limited to investing
in U.S. dollar-denominated instruments with a remaining maturity of 397
days or less (as calculated pursuant to Rule 2a-7 under the Investment
Company Act of 1940 ("1940 Act")).
The Fund may invest in securities which have variable or floating rates of
interest. These securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to an
interest rate index or market interest rate. Variable and floating rate
securities are subject to changes in value based on changes in market
interest rates or changes in the issuer's or guarantor's creditworthiness.
The Fund may borrow money from banks for temporary or emergency purposes
(not for leveraging or investment) up to one-third of the Fund's total
assets. 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 a borrower
suffers financial problems and is unable to return the assets lent.
For additional principal risks associated with the Fund, please read
"Additional Principal Investment Risks" on page 11.
ADDITIONAL PRINCIPAL INVESTMENT RISKS
Some additional principal risks that apply to all of the Funds (except
Dollar Reserves) are: Small Capitalization. Each Fund may invest in
companies that are small or thinly capitalized, and may have a limited
operating history. Small-cap companies are more vulnerable than larger
companies to adverse business or economic developments. During broad market
downturns, Fund values may fall further than that of funds investing in
larger companies. Full development of small-cap companies takes time, and
for this reason each Fund should be considered a long term investment and
not a vehicle for seeking short term profit.
Foreign Investment. Midas U.S. and Overseas Fund normally will be, and each
of the other Funds can be, exposed to the unique risks of foreign
investing. Political turmoil and economic instability in the countries in
which a Fund invests could adversely affect the value of your investment.
Also, if the value of any foreign currency in which a Fund's investment is
denominated declines relative to the U.S. dollar, the value and total
return of your investment in the Fund may decline as well. Foreign
investments, particularly investments in emerging markets, carry added
risks due to the potential for inadequate or inaccurate financial
information about companies, political disturbances, and wider fluctuations
in currency exchange rates.
Non-Diversification. Each Fund is non-diversified which means that the
proportion of the Fund's assets that may be invested in the securities of a
single issuer is not limited by the 1940 Act. A "diversified" investment
company is required by the 1940 Act, generally, with respect to 75% of its
total assets, to invest not more than 5% of its assets in the securities of
a single issuer. As a result, a Fund may hold a smaller number of issuers
than if it were diversified. If this situation occurs, investing in the
Fund could involve more risk than investing in a fund that holds a broader
range of securities because changes in the financial condition of a single
issuer could cause greater fluctuation in the Fund's total return.
Short-selling and Options and Futures Transactions. Each Fund may engage in
short-selling and options and futures transactions to increase returns.
There is a risk that these transactions may reduce returns or increase
volatility. In addition, derivatives, such as options and futures, can be
illiquid and highly sensitive to changes in their underlying security,
interest rate or index, and as a result can be highly volatile. A small
investment in certain derivatives could have a potentially large impact on
the Fund's performance.
Leverage. Leveraging (buying securities using borrowed money) exaggerates
the effect on NAV of any increase or decrease in the market value of a
Fund's investment. Money borrowed for leveraging is limited to 33 1/3 % of
the value of each Fund's total assets. These borrowings would be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased.
Active Trading. Each Fund may trade securities actively. This strategy
could increase transaction costs, reduce performance and may result in
taxable distributions, and accordingly lower the Fund's after-tax
performance.
Illiquid Securities. Each Fund may invest up to 15% of their assets in
illiquid securities. A potential risk from investing in illiquid securities
is that illiquid securities cannot be disposed of quickly in the normal
course of business. Also, illiquid securities can be more difficult to
value than more widely traded securities and the prices realized from their
sale may be less than if such securities were more widely traded.
All of the Funds are subject to the principal risks associated with:
Interest Rates. Fixed-income investments are affected by interest rates to
which each of the Funds is exposed. When interest rates rise, the prices of
bonds typically fall in proportion to their maturities.
Lending. Pursuant to an agency arrangement with an affiliate of its
Custodian, all of the Funds may lend portfolio securities or other assets
through such affiliate for a fee to other parties. Each 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 a
Fund will provide that it may be terminated by either party upon reasonable
notice to the other party.
Portfolio Management. The portfolio manager's skill in choosing appropriate
investments for the Funds will determine in large part whether the Funds
achieve their investment objectives.
<PAGE>
PORTFOLIO MANAGEMENT
Midas Management Corporation is the investment manager of each of the Funds. It
provides day-to-day advice regarding portfolio transactions for each Fund. The
investment manager also furnishes or obtains on behalf of each Fund all services
necessary for the proper conduct of the Fund's business and administration. Its
address is 11 Hanover Square, New York, New York 10005.
Bassett S. Winmill is the portfolio manager of Midas Magic, Midas Special
Equities Fund, and Midas U.S. and Overseas Fund. He is the Chief Investment
Strategist of the investment manager, a member of its Investment Policy
Committee and a director of three of the Funds. He has served as the portfolio
manager of Midas Magic since February 2, 1999 and as the portfolio manager of
Midas Special Equities Fund and Midas U.S. and Overseas Fund since November 30,
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.
Midas Fund is managed by the investment manager's Investment Policy Committee.
From 1995 through November 30, 1999, the Investment Policy Committee was a
co-manager of the Fund.
Thomas B. Winmill is the portfolio manager of Midas Investors. He has served as
the portfolio manager of the Fund since May 1, 1998. He is the President and
Chief Executive Officer of the investment manager and the Funds. He has served
as a member of the investment manager's Investment Policy Committee since 1990.
As the current Chairman of the Investment Policy Committee, he helps establish
general investment guidelines.
Steven A. Landis is the portfolio manager of Dollar Reserves. He is also a
Senior Vice President of the investment manager and all the Funds. He has served
as portfolio manager of Dollar Reserves 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 to the investment manager at an annual rate
based on each Fund's average daily net assets. Midas Fund and Midas Magic pay
1.00% on the first $200 million of average daily net assets, declining
thereafter. Midas Investors, Midas Special Equities Fund, and Midas U.S. and
Overseas Fund pay 1.00% on the first $10 million of average daily net assets,
declining thereafter. Dollar Reserves pays 0.50% on the first $250 million of
average daily net assets, declining thereafter. For the fiscal year ended
December 31, 1999, Midas Fund, Midas Magic, Midas Investors, Midas Special
Equities Fund, Midas U.S. and Overseas Fund and Dollar Reserves paid the
investment manager a fee of 1.00%, 1.00%, 1.00%, 0.90%, 1.00% and 0.50%,
respectively, of the Fund's average daily net assets.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. is the distributor of the Funds and provides
distribution and shareholder services. Each of the Funds has adopted a plan
under Rule 12b-1 and pays the distributor a 12b-1 fee as compensation for
distribution and shareholder services based on each Fund's average daily net
assets, as shown below. These fees are paid out of the Fund's assets on an
ongoing-basis. Over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Dollar Reserves, Midas Fund, and Midas Magic each pays a 12b-1 fee equal to
0.25% per annum of the Fund's average daily net assets. Based on a one year
contractual agreement which may be renewed, Midas Investors and Midas U.S. and
Overseas Fund each pays a 12b-1 fee equal to 0.25% per annum of the Fund's
average daily net assets. Without the agreement, each of these
Funds would pay a 12b-1 fee equal to 1.00% per annum of the Fund's average daily
net assets. Midas Special Equities Fund pays a 12b-1 fee equal to 1.00% per
annum of the Fund's average daily net assets.
PURCHASING SHARES
Your price for Fund shares (except for Dollar Reserves) is the Fund's next
calculation, after the order is placed, of 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, unless weather, equipment failure or other factors contribute
to an earlier closing) each day the exchange is open. With respect to Dollar
Reserves, the NAV per share is determined as of 11 a.m. eastern time and as of
the close of regular trading on the New York Stock Exchange (currently, 4 p.m.
eastern time, unless weather, equipment failure or other factors contribute to
an earlier closing) each day the exchange is open; purchase orders submitted in
proper form along with payment in Federal funds available to the Fund for
investment by 11 a.m. eastern time on any Fund business day will be of record at
the close of business that day and entitled to receive that day's dividends. The
Funds' shares will not be priced on the days on which the exchange is closed for
trading. Except for Dollar Reserves, the Funds' investments are valued based on
market value, or where market quotations are not readily available, based on
fair value as determined in good faith by or under the direction of the Fund's
board. In the case of Dollar Reserves, the Fund values its portfolio securities
using the amortized cost method of valuation, under which the market value is
approximated by amortizing the difference between the acquisition cost and value
at maturity of an instrument on a straight-line basis over its remaining life.
Opening Your Account
- --------------------------------------------------------------------------------
By check. Complete and sign the Account Application that accompanies this
prospectus and mail it, along with your check drawn to the order of the Fund, to
Investor Service Center, P.O. Box 219789, Kansas City, MO 64121-9789 (see
Minimum Investments below). Checks must be payable to Midas Funds in U.S.
dollars. Third party checks cannot be accepted. You will be charged a fee for
any check that does not clear.
By wire. Call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m., eastern time, on
business days to speak with an Investor Service Representative and give the
name(s) under which the account is to be registered, tax identification number,
the name of the bank sending the wire, and to be assigned a Fund account
number,. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to: United Missouri Bank
NA, ABA #10-10-00695; for Account 98-7052-724-3; name of Fund. Your account
number and name(s) must be specified in the wire as they are to appear on the
account registration. You should then enter your account number on your
completed Account Application and promptly forward it to Investor Service
Center, P.O. Box 219789, Kansas City, MO 64121-9789. This service is not
available on days when the Federal Reserve wire system is closed (see Minimum
Investments below). For automated 24 hour service, call toll-free
1-888-503-VOICE (8642) or visit www.midasfunds.com.
Minimum Investments
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
Account Type Initial Subsequent IRA Accounts Initial Subsequent
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
Regular $1,000 $100 Traditional, Roth IRA $1,000 $100
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
UGMA/UTMA $1,000 $100 Spousal, Rollover IRA $1,000 $100
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
403(b) plan $1,000 $100 Education $500 N/A
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
Automatic Investment Program SEP, SAR-SEP, SIMPLE IRA
$100 $100 $1,000 $100
- -------------------------------- ----------------- ---------------- ------------------------------ ----------------- ---------------
</TABLE>
IRAs and retirement accounts. For more information about IRAs and 403(b)
accounts, please call 1-800-400-MIDAS (6432). For automated 24 hour service,
call toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
Midas Automatic Investment Program. With the Midas Automatic Investment Program,
you can establish a convenient and affordable long term investment program
through one or more of the plans explained below. Minimum investments above are
waived for each plan since they are designed to facilitate an automatic monthly
investment of $100 or more into your Fund account.
Midas Automatic Investment Program
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Plan Description
- ------------------------------------------------------------------------------------------------------------------------------------
Midas Bank Transfer Plan For making automatic investments from a designated bank account.
- ------------------------------------------------------------------------------------------------------------------------------------
Midas Salary Investing Plan For making automatic investments through a payroll deduction.
- ------------------------------------------------------------------------------------------------------------------------------------
Midas Government Direct Deposit Plan For making automatic investments from your federal employment, Social Security or
other regular federal government check.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund reserves the right to redeem any account if participation in the
program ends and investments are less than $1,000.
For more information, or to request the necessary authorization form, call
1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m., eastern time, on business days
to speak with an Investor Service Representative. You may modify or terminate
the Midas Bank Transfer Plan at any time by written notice received 10 days
prior to the scheduled investment date. To modify or terminate the Midas Salary
Investing Plan or Midas Government Direct Deposit Plan, you should contact your
employer or the appropriate U.S. Government agency, respectively.
Adding to Your Account
- --------------------------------------------------------------------------------
By check. Complete a Midas Funds FastDeposit form which is detachable from the
bottom of your account statement and mail it, along with your check, drawn to
the order of the Fund, to Investor Service Center, P.O. Box 219789, Kansas City,
MO 64121-9789 (see Minimum Investments above). If you do not use that form,
include a letter indicating the account number to which the subsequent
investment is to be credited, the name of the Fund and the name of the
registered owner.
By Electronic Funds Transfer (EFT). The bank you designate on your Account
Application or Authorization Form will be contacted to arrange for the EFT,
which is done through the Automated Clearing House system, to your Fund account.
Requests received by 4 p.m., eastern time, will ordinarily be credited to your
Fund account on the next business day. Your designated bank must be an Automated
Clearing House member and any subsequent changes in bank account information
must be submitted in writing with a voided check (see Minimum Investments
above). To speak with an Investor Service Representative between 9 a.m. and 5
p.m.,eastern time, on business days, call 1-800-400-MIDAS (6432).
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures under "Opening Your
Account" (see Minimum Investments above).
REDEEMING SHARES
Generally, you may redeem shares of the Funds by any of the methods explained
below. Requests for redemption should include the following information: name(s)
of the registered owner(s) of the account, account number, Fund name, amount you
want to sell (number of shares or dollar amount), and 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, P.O. Box 219789, Kansas City, MO
64121-9789, and request the specific amount to be redeemed. The request must be
signed by the registered owner(s) and additional documentation may be required.
Dollar Reserves Check Writing Privilege for Easy Access. Upon request, you may
establish free, unlimited check writing privileges with only a $250 minimum per
check, through Dollar Reserves. In addition to providing easy access to your
account, it enables you to continue receiving dividends until your check is
presented for payment. You will be subject to a $20 charge for refused checks,
which may change without notice. To obtain checks, please call an Investor
Service Representative between 9 a.m. and 5 p.m., eastern time, on business
days, at 1-800-400-MIDAS (6432). The Fund generally will not honor a check
written by a shareholder that requires the redemption of recently purchased
shares for up to 10 calendar days or until the Fund is reasonably assured of
payment of the check representing the purchase. Since the value of your account
changes each day as a result of daily dividends, you should not attempt to close
an account by writing a check.
By telephone. To expedite the redemption of Fund shares call 1-800-400-MIDAS
(6432) to speak with an Investor Service Representative between 9 a.m. and 5
p.m., eastern time, on business days. For automated 24 hour service, call
toll-free 1-888-503-VOICE (8642) or visit www.midasfunds.com.
For Electronic Funds Transfer (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. For Federal Funds Wire. If you are
redeeming $1,000 or more worth of shares, you may request that the proceeds be
wired to your authorized bank.
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.
ACCOUNT AND TRANSACTION POLICIES
Telephone privileges. The Fund accepts telephone orders from all shareholders
and guards against fraud by following reasonable precautions such as requiring
personal identification before carrying out shareholder requests. You could be
responsible for any loss caused by an order which later proves to be fraudulent
if the Fund followed reasonable procedures.
Assignment. You may transfer your Fund shares to another owner. For
instructions, call 1-800-400-MIDAS (6432) between 9 a.m. and 5 p.m., eastern
time, on business days to speak with an Investor Service Representative.
Redemption fee. The Fund is designed as a long term investment, and short term
trading is discouraged. If shares of the Fund held for 30 days or less are
redeemed or exchanged, the Fund will deduct a redemption fee equal to one
percent of the NAV of shares redeemed or exchanged. Redemption fees are retained
by the Fund.
Redemption payment. Payment for shares redeemed will ordinarily be made within
three business days after receipt of the redemption request in proper form.
Redemption proceeds from shares purchased by check or EFT transfer may be
delayed 15 calendar days to allow the check or transfer to clear.
Accounts with below-minimum balances. You will be charged a $2.00 account fee if
your monthly balance is less than $500, unless you participate in the Midas
Automatic Investment Program. If your account balance falls below $500 as a
result of selling shares and not because of market action, the Fund reserves the
right, upon 45 days' notice, to close your account or request that you buy more
shares. The Fund reserves the right to close your account if you terminate your
participation in the Midas Automatic Investment Program and your investment is
less than $1,000.
Delivery of Shareholder Documents. Shareholders in a family residing at the same
address will receive one copy of the Midas Funds prospectus and shareholder
report to share with all members of the family who invest in Midas Funds. If at
any time you would like to receive separate copies of the Midas Funds prospectus
or shareholder report, please call 1-800-400-MIDAS (6432) and an Investor
Service Representative will be happy to change your delivery status. The
material will be sent within 30 days of your request.
DISTRIBUTIONS AND TAXES
Distributions. Each Fund (except Dollar Reserves) pays its shareholders
dividends from any net investment income and distributes net capital gains that
it has realized, if any. Income dividends are normally declared and paid
annually and capital gains, if any, normally are paid once a year. Your
distributions will be reinvested in the Fund unless you instruct the Fund
otherwise.
Dollar Reserves declares dividends each day from net investment income
(investment income less expenses plus or minus all realized gains or losses on
the Fund's portfolio securities) to shareholders of record as of the close of
regular trading on the New York Stock Exchange on that day. Shareholders
submitting purchase orders in proper form and payment in Federal funds available
to the Fund for investment by 11 a.m. eastern time are entitled to receive that
day's dividend. Shares redeemed by 11 a.m. eastern time are not entitled to that
day's dividend, but proceeds of the redemption normally are available to
shareholders by Federal funds wire the same day. Shares redeemed after 11 a.m.
eastern time and before the close of regular trading on the New York Stock
Exchange are entitled to that day's dividend, and proceeds of the redemption
normally are available to shareholders by Federal funds wire the next Fund
business day. Distributions of declared dividends are made the last business day
of each month in additional shares of the Fund, unless you elect to receive
dividends in cash on the Account Application or so elect subsequently by calling
1-800-400-MIDAS between 9 a.m. and 5 p.m., eastern time, on business days. For
Federal income tax purposes, such distributions are generally taxable as
ordinary income, whether or not a shareholder receives such dividends in
additional shares or elects to receive cash. Any election will remain in effect
until you notify Investor Service Center to the contrary. The Fund does not
expect to realize net long term capital gains and thus does not anticipate
payment of any long term capital gain distributions.
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 which normally takes place in December. Each
January, the Fund issues tax information on its distributions for the previous
year. Any investor for whom the Fund does not have a valid taxpayer
identification number will be subject to backup withholding for taxes. The tax
considerations described in this section do not apply to tax-deferred accounts
or other non-taxable entities. Because everyone's tax situation is unique,
please consult your tax professional about your investment.
FINANCIAL HIGHLIGHTS
The following tables describe the Funds' performance for the past five years.
Each Fund's fiscal year end is December 31. The fiscal year end for Dollar
Reserves, Midas Investors, and Midas Magic was changed to December 31 during
1998. Previously, the fiscal year end for Dollar Reserves, Midas Investors, and
Midas Magic was June 30, June 30 and October 31, respectively. Certain
information reflects financial results for a single Fund share. Total return
shows how much your investment in the Fund would have increased (or decreased)
during each period, assuming you had reinvested all dividends and distributions.
The figures for the periods shown, with the exception of 1996 through 1998 for
Midas Magic, were audited by Tait, Weller & Baker, the Funds' independent
accountants, whose report, along with the Funds' financial statements, are
included in the combined Annual Report, which is available upon request. The
figures for Midas Magic for the period 1996 through 1998 were audited by other
independent accountants.
<TABLE>
<CAPTION>
MIDAS MAGIC
Year Ended Two Months Years Ended October 31,
December 31, Ended
December 31,
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995
PER SHARE DATA*
Net asset value at beginning of period $14.57 $15.67 $24.92 $24.24 $18.73 $16.61
Income from investment operations:
Net investment income (loss) .03 (.04) (.25) (.59) (.56) (.31)
Net realized and unrealized gain (loss) 10.28 .98 (7.20) 6.17 6.07 2.43
Total from investment operations 10.31 .94 (7.45) 5.58 5.51 2.12
Less distributions:
Distributions from net investment income (.03) -- -- -- -- --
Distributions from net realized gains (3.22) (2.04) (1.80) (4.90) .00 .00
Total distributions (3.25) (2.04) (1.80) (4.90) .00 .00
Net asset value at end of period $21.63 $14.57 $15.67 $24.92 $24.24 $18.73
TOTAL RETURN 70.58% 6.48% (31.29)% 27.55% 29.42% 12.76%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $857 $548 $613 $1,771 $1,200 $774
Ratio of expenses to average net assets(a)(b) 2.40% 2.85%** 2.09% 2.81% 2.55% 2.30%
Ratio of net investment income (loss) to average 0.18% (1.54)%** (1.38)% (2.65)% (2.23)% (1.77)%
net assets
Portfolio turnover rate 358% 0% 207% 44% 43% 30%
</TABLE>
*Per share net investment income (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.
**Annualized. (a) Ratio prior to reimbursement by the investment manager was
12.44%, 18.84%**, 9.27%, 10.47%, 4.44%, and 3.00% for the year ended December
31, 1999, two months ended December 31, 1998 and the years ended October 31,
1998, 1997, 1996, and 1995, respectively. (b) Ratio after custodian fee credits
was 2.13% for the year ended December 31, 1999 and 1.97% for the year ended
October 31, 1998. There were no custodian fee credits for prior years.
MIDAS SPECIAL EQUITIES FUND
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
PER SHARE DATA*
Net asset value at beginning of period $20.34 $23.38 $22.96 $25.42 $19.11
Income from investment operations:
Net investment loss (.27) (.61) (.38) (.73) (.81)
Net realized and unrealized gain (loss) 6.49 (.65) 1.55 0.99 8.51
Total from investment operations 6.22 (1.26) 1.17 0.26 7.70
Less distributions:
Distributions from net realized gains -- (1.78) (.75) (2.72) (1.39)
Net increase (decrease) in net asset value 6.22 (3.04) .42 (2.46) 6.31
Net asset value at end of period $26.56 $20.34 $23.38 $22.96 $25.42
TOTAL RETURN 30.58% (5.0)% 5.3% 1.0% 40.5%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $41,629 $36,807 $44,773 $49,840 $56,340
Ratio of expenses to average net assets(a)(b) 3.13% 3.42% 2.81% 2.92% 3.67%
Ratio of net investment loss to average net assets (1.44)% (2.57)% (1.48)% (2.81)% (2.70)%
Portfolio turnover rate 159% 97% 260% 311% 319%
</TABLE>
*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) Ratio excluding interest expense was 2.71%, 2.63%, 2.53%, 2.45%, and 2.88%
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively.
(b) Ratio after transfer agent and custodian fee credits was 3.04%, 3.41% and
2.79% for the years ended December 31, 1999, 1998 and 1997. There were no
custodian fee credits for 1996 and 1995.
MIDAS U.S. AND OVERSEAS FUND
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
PER SHARE DATA*
Net asset value at beginning of period $7.17 $7.35 $7.91 $8.36 $7.08
Income from investment operations:
Net investment loss (.10) (.10) (0.05) (0.24) (0.23)
Net realized and unrealized gain 3.49 .18 0.46 0.68 2.00
Total from investment operations 3.39 .08 0.41 0.44 1.77
Less distributions:
Distributions from net realized gains (.04) (.26) (0.97) (0.89) (0.49)
Net asset value at end of period $10.52 $7.17 $7.35 $7.91 $8.36
TOTAL RETURN 47.44% 1.18% 5.64% 5.34% 25.11%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $9,881 $7,340 $8,446 $9,836 $9,808
Ratio of expenses to average net assets(a)(b)(c) 3.19% 3.33% 3.28% 3.20% 3.55%
Ratio of net investment loss to average net assets (1.52)% (1.38)% (0.63)% (2.74)% (2.85)%
Portfolio turnover rate 174% 69% 205% 255% 214%
</TABLE>
* Per share net investment 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. (a) Ratio prior to
reimbursement by the investment manager was 3.84% for the year ended December
31, 1995. (b) Ratio after the transfer agent and custodian fee credits was
3.16%, 3.22% and 3.49% for 1999, 1997 and 1995, respectively. There were no
custodian credits for 1998 and 1996. (c) Ratio prior to waiver by the
Distributor was 3.69% for the year ended December 31, 1999.
MIDAS FUND
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
PER SHARE DATA*
Net asset value at beginning of period $1.51 $2.11 $5.15 $4.25 $3.32
Income from investment operations:
Net investment loss (.01) -- (.03) (.05) (.06)
Net realized and unrealized gain (loss) (.14) (.60) (3.01) .95 1.28
Total from investment operations (.15) (.60) (3.04) .90 1.22
Less distributions:
Distributions from net realized gains - - - - (.29)
Net asset value at end of period $1.36 $1.51 $2.11 $5.15 $4.25
TOTAL RETURN (9.93)% (28.44)% (59.03)% 21.22% 36.73%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $71,820 $87,841 $100,793 $200,457 $15,753
Ratio of expenses to average net assets(a)(b) 2.81% 2.33% 1.90% 1.63% 2.26%
Ratio of net investment loss to average net assets(c) (.80)% (.02)% (.72)% (.92)% (1.47)%
Portfolio turnover rate 74% 27% 50% 23% 48%
</TABLE>
*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) 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) Ratio after transfer agent
and custodian credits was 2.73%, 2.30%, 1.88%, 1.61% and 2.25% for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995. (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, respectively.
MIDAS INVESTORS
<TABLE>
<CAPTION>
Year Ended Six Months Years Ended June 30,
December 31, Ended
December 31,
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995
PER SHARE DATA*
Net asset value at beginning of period $2.82 $3.67 $7.14 $14.02 $13.13 $15.71
Income from investment operations:
Net investment loss (.06) (.04) (.12) (.25) (.22) --
Net realized and unrealized gain (loss) (.11) (.81) (2.94) (4.36) 2.72 (1.13)
Total from investment operations (.17) (.85) (3.06) (4.61) 2.50 (1.13)
Less distributions:
Distributions from net realized gains -- -- (.41) (2.27) (1.61) (1.45)
Total distributions -- -- (.41) (2.27) (1.61) (1.45)
Net asset value at end of period $2.65 $2.82 $3.67 $7.14 $14.02 $13.13
TOTAL RETURN (6.03)% (23.16)% (43.45)% (37.81)% 21.01% (8.01)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $5,045 $6,293 $8,324 $15,217 $27,485 $29,007
Ratio of expenses to average net assets(a)(b)(c) 4.05% 3.88% 2.94% 3.05% 2.93% 4.32%**
Ratio of net investment income (loss) to (2.29)% (2.40)% (2.06)% (1.61)% 0.01% (2.50)%**
average net assets
Portfolio turnover rate 52% 36% 136% 37% 61% 158%
</TABLE>
* Per share net investment loss and net realized 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 3.92%, 3.96%**, 3.57%, 2.77%, 2.93%,
and 2.82% for the year ended December 31, 1999, the six months ended December
31, 1998 and the years ended June 30, 1998, 1997, 1996, and 1995, respectively.
(b) Ratio after transfer agent and custodian credits was 3.80%, 4.30%** and
3.82% for the year ended December 31, 1999,the six months ended December 31,
1998 and the year ended June 30, 1998, respectively. (c) Ratio prior to waiver
by Distributor was 4.54% for the year ended December 31, 1999.
DOLLAR RESERVES
<TABLE>
<CAPTION>
Year Ended Six Months Years Ended June 30,
December 31, Ended
December 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995
PER SHARE DATA
Net asset value at beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment operations:
Net investment income .043 .022 .048 .047 .047 .044
Less distributions:
Distributions from net investment income (.043) (.022) (.047) (.047) (.047) (.044)
Distributions from paid-in capital -- -- ($.001) -- -- --
Net asset value at end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
TOTAL RETURN 4.38% 4.46%** 4.88% 4.83% 4.81% 4.53%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $64,250 $65,535 $61,602 $62,908 $62,467 $65,278
Ratio of expenses to average net assets (a) 0.94% .93%** .86% .71% .90% .89%
Ratio of net investment income to average 4.30% 4.43%** 4.71% 4.73% 4.70% 4.41%
net assets (b)
</TABLE>
** Annualized. (a) Ratio prior to waiver by the Investment Manager and
Distributor was 1.34%, 1.30%**, 1.20%, 1.21%, 1.40%, and 1.39% for the year
ended December 31, 1999, the six months ended December 31, 1998 and the years
ended June 30, 1998, 1997, 1996, and 1995, respectively. (b) Ratio prior to
waiver by the Investment Manager and Distributor was 3.90%, 4.06%**, 4.37%,
4.23%, 4.20%, and 3.91% for the year ended December 31, 1999, the six months
ended December 31, 1998 and the years ended June 30, 1998, 1997, 1996, and 1995,
respectively.
[ LOGO: "MIDAS FUNDS Discovering Opportunities"]
FOR MORE INFORMATION
For investors who want more information on the Midas 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 (6432) to speak to an Investor Service
Representative, 9:00 a.m. to 5:00 p.m. on business days, eastern time
or 1-888-503-VOICE (8642) for 24 hour, 7 day a week automated
shareholder services.
By mail, write to:
Midas Funds
P.O. Box 219789
Kansas City, MO 64121-9789
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 Funds at http://www.midasfunds.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (for information, call (202) 942-8090) or, after paying a
duplicating fee, by e-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102. The Funds' Investment
Company Act file numbers are as follows: 811-04534 (Midas Magic); 811-04625
(Midas Special Equities Fund); 811-04741 (Midas U.S. and Overseas Fund);
811-04316 (Midas Fund); 811-00835 (Midas Investors) and 811-02474 (Dollar
Reserves).
<PAGE>
Statement of Additional Information 1933 Act File No. 2-57953
May 1, 2000 1940 Act File No. 811-2474
DOLLAR RESERVES, INC.
11 Hanover Square
New York, NY 10005
1-800-400-MIDAS (6432)
Dollar Reserves, Inc. ("Fund") is a diversified, open-end management
investment company organized as a Maryland corporation. This Statement of
Additional Information regarding the Fund is not a prospectus and should be read
in conjunction with the Fund's Prospectus dated May 1, 2000. The Prospectus is
available without charge upon request by calling toll-free at 1-800-400-MIDAS
(6432).
The most recent Annual Report and Semi-Annual Report to Shareholders for
the Fund are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
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
THE FUND'S INVESTMENT PROGRAM
The Fund's investment objective is to provide its shareholders maximum
current income consistent with preservation of capital and maintenance of
liquidity. The Fund seeks to achieve this objective by investing exclusively in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). Although the Fund's investment
policies also permit the Fund to invest in bank obligations and instruments
secured thereby, high quality commercial paper, high grade corporate
obligations, and repurchase agreements pertaining to these securities and U.S.
Government Securities, the Board of Directors has determined that the Fund shall
not do so until and after 60 days' notice to shareholders. There can be no
assurance that the Fund will achieve its investment objective.
The Fund is managed to maintain a net asset value of $1.00 per share,
although there can be no assurance that it will be able to do so. An investment
in the Fund is neither insured nor guaranteed by the U.S. Government.
Dividends from net investment income paid by the Fund to its shareholders
(except Massachusetts corporate shareholders) are exempt from state income taxes
to the extent such income is derived from holding debt securities of the U.S.
Government, its agencies or instrumentalities, the income from which is state
tax exempt by Federal law. The following states currently have no state
individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington,
and Wyoming. This information is current as of the date of this Statement of
Additional Information and is subject to change.
Borrowing. The Fund may borrow money from banks, but only for temporary or
emergency purposes, in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the Fund's total assets, the Fund will not
make any additional investments. The Fund may incur overdrafts at its custodian
bank from time to time in connection with redemptions and/or the purchase of
portfolio securities. In lieu of paying interest to the custodian bank, the Fund
may maintain equivalent cash balances prior or subsequent to incurring such
overdrafts. If cash balances exceed such overdrafts, the custodian bank may
credit interest thereon against fees.
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. Except for the percentage
limitations referred to below in (5) with respect to borrowing, and (v) with
respect to illiquid assets, if a percentage restriction is adhered to at the
time an investment is made, a later change in percentage resulting from a change
in value or assets will not constitute a violation of that restriction. The Fund
may not:
(1) Purchase the securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of such issuer,
or the Fund would own or hold 10% or more of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to these limitations and provided that these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(2) Issue senior securities as defined in the Investment Company Act of 1940
("1940 Act"). The following will not be deemed to be senior securities for
this purpose: (a) evidences of indebtedness that the Fund is permitted to
incur, (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;
(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 Fund'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 Fund 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.) ("Winco") ("Investment Company
Complex") are:
Bexil Corporation
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
OFFICERS AND DIRECTORS
The Fund's board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements with those companies that
furnish services to the Fund. These companies are as follows: Midas Management
Corporation, the Investment Manager; Investor Service Center, Inc., Distributor;
DST Systems, Inc., Transfer and Dividend Disbursing Agent; and, State Street
Bank and Trust Company, Custodian.
The Directors of the Fund, their respective offices, date of birth and
principal occupations during the last five years are set forth below. Unless
otherwise noted, the address of each Director and officer is 11 Hanover Square,
New York, NY 10005.
BASSETT S. WINMILL* -- Chairman of the Board and Chief Investment Strategist. He
is the Chief Investment Strategist of the Investment Manager and the Chairman of
the Board of five of the other investment companies in the Investment Company
Complex. He is a member of the New York Society of Security Analysts, the
Association for Investment Management and Research and the International Society
of Financial Analysts. He is 70 years old.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is a Financial Representative with New England Financial, specializing in
financial, estate and insurance matters. From March 1990 to December 1995, he
was President of Huber Hogan Knotts Consulting, Inc., financial consultants and
insurance planners. From 1978 to 1990, he was Chairman of Bruce Huber
Associates. He is also a Director of five other investment companies in the
Investment Company Complex. He is 70 years old.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a Managing Director of Hunt & Howe LLC, executive recruiting consultants. He is
also a Director of five other investment companies in the Investment Company
Complex. He is 69 years old.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He is a Director of Wheelock, Inc., a manufacturer of signal products, and a
consultant for the National Executive Service Corps. He is also a Director of
five other investment companies in the Investment Company Complex. He is 77
years old.
THOMAS B. WINMILL, ESQ.* -- Director, Chief Executive Officer, President, and
General Counsel of the Fund. He is President of the Investment Manager and the
Distributor, and of their affiliates. He is a member of the New York State Bar
and the SEC Rules Committee of the Investment Company Institute. He is a son of
Bassett S. Winmill. He is also a Director of eight other investment companies in
the Investment Company Complex. He is 41 years old.
The Fund's executive officers, each of whom serves at the pleasure of the
Board of Directors, are as follows:
THOMAS B. WINMILL, ESQ.* -- Chief Executive Officer, President, and General
Counsel. (see biographical information above)
BASSETT S. WINMILL* -- Chairman of the Board and Chief Investment Strategist.
(see biographical information above)
ROBERT D. ANDERSON -- Vice Chairman. He is Vice Chairman and a Director of four
other investment companies in the Investment Company Complex and of the
Investment Manager and its affiliates. He is a former member of the District
#12, District Business Conduct and Investment Companies Committees of the NASD.
He is 70 years old.
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and its affiliates. From 1993 to 1995, he was Associate
Director -- Proprietary Trading at Barclays De Zoete Wedd Securities Inc., and
from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company. He is
45 years old.
JOSEPH LEUNG, CPA -- Chief Accounting Officer, Chief Financial Officer,
Treasurer and Vice President. He is Chief Accounting Officer, Chief Financial
Officer, Treasurer and Vice President of the Investment Manager and its
affiliates. From 1992 to 1995 he held various positions with Coopers & Lybrand
L.L.P., a public accounting firm. He is a member of the American Institute of
Certified Public Accountants. He is 34 years old.
*Thomas B. Winmill and Bassett S. Winmill are "interested persons" of the Fund
as defined by the 1940 Act, because of their positions and other relationships
with the Investment Manager.
Compensation Table
<TABLE>
<CAPTION>
===============================================================================================================================
Name of Person, Aggregate Pension or Retirement Estimated Annual Total Compensation From Fund
Position Compensation From Benefits Accrued as Part Benefits Upon and Investment Company Complex
Fund of Fund Expenses Retirement Paid To Directors
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bruce B. Huber, $13,500 from 6 Investment
Director $2,400 None None Companies
- -------------------------------------------------------------------------------------------------------------------------------
James E. Hunt, $13,500 from 6 Investment
Director $2,400 None None Companies
- -------------------------------------------------------------------------------------------------------------------------------
John B. Russell, $13,500 from 6 Investment
Director $2,400 None None Companies
===============================================================================================================================
</TABLE>
Information in the above table is based on fees paid during the fiscal year
ended December 31, 1999.
No officer, Director or employee of the Investment Manager receives any
compensation from the Fund for acting as an officer, Director or employee of the
Fund. As of April 24, 2000, officers and Directors of the Fund owned less than
1% of the outstanding shares of the Fund. As of April 24, 2000, U.S. Clearing
Corp., 26 Broadway, New York, NY 10004-1798 owned of record 57.08% of the Fund's
outstanding shares.
The Fund, the Investment Manager and Investor Service Center, Inc. (the
Fund's distributor) each have adopted a Code of Ethics that permits its
personnel, subject to such Code, to invest in securities, including securities
that may be purchased or held by the Fund. The Investment Manager's Code of
Ethics restricts the personal securities transactions of its employees, and
requires portfolio managers and other investment personnel to comply with the
Code's preclearance and disclosure procedures. Its primary purpose is to ensure
that personal trading by the Investment Manager's employees does not
disadvantage the Fund.
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. Winco's other
principal subsidiaries include Investor Service Center, Inc., the Fund's
Distributor and a registered broker/dealer, and CEF Advisers, Inc., a registered
investment adviser.
Winco 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 Winco 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 $231,000,000 as
of February 11, 2000.
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 Fund may have
to indemnify its officers and Directors with respect thereto. For the fiscal
years ended June 30, 1997 and 1998, the six months ended December 31, 1998, and
the fiscal year ended December 31, 1999, the Investment Manager received
$319,712, $314,628, $157,444, and $339,177, respectively, in management fees
from the Fund and waived $159,856, $53,911, $36,743, and $164,026, respectively,
of such fees to improve the Fund's yield. 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.
Pursuant to the Investment Management Agreement, if requested by the Fund'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 Fund who are not
"interested persons" of the Investment Manager or any affiliate thereof. For the
fiscal years ended June 30, 1997 and 1998, the six months ended December 31,
1998, and the fiscal year ended December 31, 1999, the Fund reimbursed the
Investment Manager $25,463, $27,357, $17,039, and $44,242, 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 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 Fund 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 Fund 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 Fund 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.
Winco has granted the Fund a non-exclusive license to use various service
marks 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 Winco. 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. This Statement of Additional Information may be in use for a
full year and performance results for periods subsequent to December 31, 1999
may vary substantially from those shown below. An investment in the Fund is
neither insured nor guaranteed by the U.S. Government as is a bank account or
certificate of deposit.
The Fund's yield used in advertisements, sales material and shareholder
communications, may be calculated in two ways in order to show Current Yield and
Effective Yield, in each case to two decimal places. To obtain the Fund's yield,
please call Investor Service Center toll-free at 1-800-400-MIDAS (6432).
Current Yield refers to the income 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, 1999.
Current Yield 4.55%
Effective Yield 4.65%
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.
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 investment 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.
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. (the
"Distributor") 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 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 Fund'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 Fund'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 Winco, 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 funds in the Investment Company Complex 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.
Of the amounts compensated to the Distributor during the Fund's fiscal year
ended December 31, 1999, approximately $142 represented expenses incurred for
advertising, $21,206 for printing and mailing prospectuses and other information
to other than current shareholders, $25,794 for salaries of marketing and sales
personnel, $7,629 for payments to third parties who sold shares of the Fund and
provided certain services in connection therewith, and $7,502 for overhead and
miscellaneous expenses.
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, Martin Luther King,
Jr. Day, Washington's Birthday (Presidents' Day), Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value
per share is determined by dividing the value of the Fund's net assets by the
total number of shares outstanding.
The Fund has adopted the amortized cost method of valuing portfolio
securities provided by Rule 2a-7 under the 1940 Act. To use amortized cost to
value its portfolio securities, the Fund must adhere to certain conditions under
that Rule relating to the Fund's investments. Amortized cost is an approximation
of market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account and
thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, the Fund might have to sell portfolio securities prior to maturity
and at prices that might not be desirable.
The Fund's board has established as a particular responsibility within the
overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the Fund's
holdings by the Board, at such intervals as it deems appropriate, to determine
whether the Fund's net asset value calculated by using available market
quotations or market equivalents deviates from $1.00 per share based on
amortized cost. Market quotations and market equivalents used in such review are
obtained from an independent pricing service (the "Service") approved by the
Board. The service values the Fund's investments based on methods which include
consideration of: yields or prices of municipal bonds of comparable quality,
coupon, maturity and type: indications of values from dealers; and general
market conditions. The Service also may employ electronic data processing
techniques and/or a matrix system to determine valuations.
PURCHASE OF SHARES
The Fund will only issue shares upon payment of the purchase price by check
made drawn to the Fund's order in U.S. dollars on a U.S. bank, or by Federal
Reserve wire transfer. Second and third party checks, credit cards, and cash
will not be accepted. The Fund reserves the right to reject any order, to cancel
any order due to nonpayment, to accept initial orders by telephone or telegram,
and to waive the limit on subsequent orders by telephone, with respect to any
person or class of persons. If an order is canceled because of non-payment or
because the purchaser's check does not clear, the purchaser will be responsible
for any loss the Fund incurs. If the purchaser is already a shareholder, the
Fund can redeem shares from the purchaser's account to reimburse the Fund for
any loss. In addition, the purchaser may be prohibited or restricted from
placing future purchase orders in the Fund or any of the other funds in the
Investment Company Complex. In order to permit the Fund's shareholder base to
expand, to avoid certain shareholder hardships, to correct transactional errors,
and to address similar exceptional situations, the Fund may waive or lower the
investment minimums with respect to any person or class of persons. The Fund has
authorized one or more brokers to accept on its behalf purchase and redemption
orders. Such brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. The Fund will be deemed to
have received a purchase or redemption order when an authorized broker or, if
applicable, a broker's authorized designee, accepts the order. A shareholder's
order will be priced at the Fund's net asset value next computed after such
order is 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 year ended June 30, 1998,
the six months ended December 31, 1998, and the fiscal year ended December 31,
1999, 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.
Investment decisions for the Fund and for the other Funds managed by the
Investment Manager or its affiliates are made independently based on each Fund's
investment objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the Investment
Manager may combine orders for two or more Funds for a particular security if it
appears that a combined order would reduce brokerage commissions and/or result
in a more favorable transaction price. Combined purchase or sale orders are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each Fund. While in some cases this practice could have a
detrimental effect upon the price or 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 Winco, 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 Fund'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
State Street Bank and Trust Company, 801 Pennsylvania, Kansas City, MO
64105 ("Custodian"), has been retained by the Fund 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 Fund, 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.
The Fund and/or the Distributor has entered into certain agreements with
third party service providers ("Recordkeepers") pursuant to which the Fund
participates in various "no transaction fee" programs offered by the
Recordkeepers and pursuant to which the Recordkeepers provide distribution
services, shareholder services, and/or co-transfer agency services. The fees of
such Recordkeepers are charged to the Fund for co-transfer agency services and
to the Distributor for distribution and shareholder services and allocated
between the Distributor and the Fund in a manner deemed equitable by the Board
of Directors.
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,
1999, 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.
<PAGE>
DOLLAR RESERVES, INC.
Part C. Other Information
Item 23. Exhibits
(a) Amended and Restated Articles of Incorporation filed October 26, 1995
Accession Number 0000015260-95-000010; Articles of Amendment and Articles
Supplementary filed with the Securities and Exchange Commission on July 12,
1999, accession number 0000015260-99-000007.
(b) By-Laws filed with the Securities and Exchange Commission September 3,
1998, Accession Number 0000015260-98-000004
(c) Amended and Restated Articles of Incorporation filed October 26, 1995
Accession Number 0000015260-95-000010; Articles of Amendment and Articles
Supplementary filed with the Securities and Exchange Commission on July 12,
1999, accession number 0000015260-99-000007. By-Laws 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 July 12, 1999, accession number 0000015260-99-000007.
(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) (1) Form of Transfer Agency Agreement, filed with the Securities and
Exchange Commission on October 26, 1995, accession number
0000015260-95-000010
(2) Form of Agency Agreement, filed with the Securities and Exchange
Commission on October 26, 1995, accession number 0000015260-95-000010
(3) Shareholder Administration Agreement, filed with the Securities and
Exchange Commission on October 26, 1995, accession number
0000015260-95-000010.
(4) Form of credit facilities agreement, filed with the Securities and
Exchange Commission on September 3, 1998, accession number
0000015260-98-000004.
(5) Form of Securities Lending Authorization Agreement, filed with the
Securities and Exchange Commission on September 3, 1998, accession number
0000015260-98-000004.
(6) Form of Segregated Account Procedural and Safekeeping Agreement, filed
with the Securities and Exchange Commission on September 3, 1998, accession
number 0000015260-98-000004.
(i) Opinion and Consent of Counsel as to Legality of Securities: Filed with the
Securities and Exchange Commission on July 12, 1999, accession number
0000015260-99-000007.
(j) (1) Accountants Consent: Filed herewith
(2) Opinion of Counsel with respect to eligibility for effectiveness under
paragraph (b) of Rule 485: Filed herewith.
(n) Not applicable.
(p) Code of Ethics filed herewith.
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 amended Investment Management Agreement between the Registrant
and Midas Management Corporation ("Investment Manager") 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.
Section 9 of the Distribution Agreement between the Registrant 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 Investment Manager is a wholly-owned subsidiary of Winmill & Co.
Incorporated (formerly Bull & Bear Group, Inc.) ("Winco"). Winco'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.
Winco is also the parent of CEF Advisers, Inc. ("CEF"), a registered investment
adviser and Investor Service Center, Inc., the Funds' distributor and a
registered broker/dealer. The principal business of the Investment Manager and
CEF since their founding has been to serve as investment managers to registered
investment companies. The directors and officers of Winco and its subsidiaries
are also directors and officers of the investment companies managed by the
Investment Manager and CEF. The Investment Manager serves as investment manager
of Dollar Reserves, Inc., Midas Fund, Inc., Midas Investors Ltd., Midas Magic,
Inc., Midas Special Equities Fund Ltd., and Midas U.S. and Overseas Fund Ltd.
CEF serves as investment manager to Bexil Corporation, Global Income Fund, Inc.,
and Tuxis Corporation.
Item 27. Principal Underwriters
a) Including the Registrant, Investor Service Center, Inc. serves a principal
underwriter of Dollar Reserves, Inc., Midas Fund, Inc., Midas Investors
Ltd., Midas Magic, Inc., Midas Special Equities Fund Ltd., and Midas U.S.
and Overseas Fund Ltd.
b) Service Center serves as the Registrant's principal underwriter. 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.
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Service Center Position and Offices
Business Address with Registrant
- --------------------------- ------------------------------------------ ---------------------------------
<S> <C> <C>
Thomas B. Winmill President, Director, Chief Executive President, Director, Chief
11 Hanover Square Officer and General Counsel Executive Officer and General
New York, NY 10005 Counsel
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
Joseph Leung Treasurer, Chief Accounting Officer, Treasurer, Chief Accounting
11 Hanover Square Chief Financial Officer Officer, Chief Financial Officer
New York, NY 10005
Irene K. Kawczynski Vice President N/A
11 Hanover Square
New York, NY 10005
</TABLE>
Item 28. Location of Accounts and Records
The minute books of the Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and its Investment Manager). All other records required by Section
31(a) of the Investment Company Act of 1940 are located at State Street Bank and
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 State Street Bank and Trust
Company and DST Systems, Inc. are kept at 11 Hanover Square, New York, NY 10005
(the offices of Registrant and the Investment Manager).
Item 29. Management Services
There are no management related service contracts not discussed in Part A
or Part B of this Registration Statement.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City, County and State of New York on this April 25,
2000.
DOLLAR RESERVES, INC.
/s/Thomas B. Winmill
Thomas B. Winmill, President
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:
Bassett S. Winmill Chairman April 25, 2000
Bassett S. Winmill
Thomas B. Winmill Director, President, Chief April 25, 2000
Thomas B. Winmill Executive Officer and General
Counsel
Joseph Leung Treasurer, Chief Accounting April 25, 2000
Joseph Leung Officer, Chief Financial Officer
Bruce B. Huber Director April 25, 2000
Bruce B. Huber
James E. Hunt Director April 25, 2000
James E. Hunt
John B. Russell Director April 25, 2000
John B. Russell
<PAGE>
EXHIBIT INDEX
EXHIBIT
(j) (1) Accountant's Consent.
(2) Opinion of Counsel with respect to eligibility for effectiveness
under paragraph (b) of Rule 485.
(p) Code of Ethics filed herewith
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated January 14, 2000 on the financial
statements and financial highlights of Dollar Reserves, Inc. Such financial
statements and financial highlights appear in the December 31, 1999 Annual
Report to Shareholders which is incorporated by reference in the Statement of
Additional Information filed in Post-Effective Amendment No. 57 under the
Securities Act of 1933 and Amendment No. 48 under the Investment Company Act of
1940 to the Registration Statement on Form N-1A of Dollar Reserves, Inc. We also
consent to the references to our Firm in the Registration Statement and
Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 24, 2000
April 24, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are counsel to Dollar Reserves, Inc. (the "Fund"), and in so acting have
reviewed Post-Effective Amendment No. 57 (the "Post-Effective Amendment") to the
Fund's Registration Statement on Form N-1A, Registration File No. 2-57953.
Representatives of the Fund have advised us that the Fund will file the
Post-Effective Amendment pursuant to paragraph (b) of Rule 485 ("Rule 485")
promulgated under the Securities Act of 1933. In connection therewith, the Fund
has requested that we provide this letter.
In our examination of the Post-Effective Amendment, we have assumed the
conformity to the originals of all documents submitted to us as copies.
Based upon the foregoing, we hereby advise you that the prospectus included as
part of the Post-Effective Amendment does not include disclosure which we
believe would render it ineligible to become effective pursuant to paragraph (b)
of Rule 485.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
Exhibit p
CODE OF ETHICS
Midas U.S. and Overseas Fund Ltd.
Dollar Reserves, Inc.
Global Income Fund, Inc.
Midas Investors Ltd.
Tuxis Corporation
Midas Special Equities Fund, Inc.
Bexil Corporation
Midas Fund, Inc.
Midas Magic, Inc.
CEF Advisers, Inc.
Midas Management Corporation
Investor Service Center, Inc.
The object of this Code of Ethics (the "Code") is to provide rules designed
to avoid conflicts of interest involving persons associated with the above
companies. Conflicts of interest may arise when a person has obligations to more
than one person or entity or has a personal interest in a situation which might
permit him to show preference or advantage to one person or entity at the
expense of another, or to himself at the expense of another. In view of the
fiduciary obligations of both the Funds' and their investment advisers'
employees, officers and directors, it is important not only to avoid violations
of law and regulatory rules, but also to avoid activities or practices which
have the appearance of or may give rise to a charge of a violation.
All employees are required to have a working familiarity with this Code. A
violation of the Code may result in penalties including censure, suspension or
dismissal. The Statement of Principles, as amended from time to time, (the
"Statement of Principles") is hereby incorporated into the Code.
If you have any questions about the applicability of the Code to any
particular transaction or account, please contact Deborah A. Sullivan.
A.Definitions.
1."Security" shall have the same meaning as set forth in Section
2(a)(36) of the Investment Company Act of 1940, as amended (the "1940
Act"), but shall not include securities issued by the Government of
the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment
companies. The 1940 Act definition of "security" is quite broad and
includes any option, futures contract, warrant or right to purchase
any security.
2.Persons subject to this Code ("Covered Persons" or individually
"Covered Person") shall include:
a.all directors and officers of CEF Advisers, Inc., Midas
Management Corporation, Rockwood Advisers, Inc. and the Funds;
b.any employee of CEF Advisers, Inc., Midas Management
Corporation, Rockwood Advisers, Inc. or any of the Funds (or a
company in a control relationship with any of the foregoing) (i)
who, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding the
purchase or sale of a Security (including the writing of an
option to purchase or sell a Security) by a Fund, or (ii) whose
functions relate to the making of any recommendation with respect
to the purchase or sale of a Security (including the writing of
an option to purchase or sell a Security) by a Fund;
c.directors and officers of Investor Service Center, Inc.
(i) who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding
the purchase or sale of a Security (including the writing of an
option to purchase or sell a Security) by a Fund, or (ii) whose
functions relate to the making of any recommendation with respect
to the purchase or sale of a Security (including the writing of
an option to purchase or sell a Security) by a Fund; and
d.any natural person in a control relationship with
respect to CEF Advisers, Inc., Midas Management Corporation,
Rockwood Advisers, Inc., Investor Service Center, Inc. or any of
the Funds who obtains information concerning recommendations made
to any Fund with respect to the purchase or sale of a Security
(including the writing of an option to purchase or sell a
Security). "Control" shall have the same meaning as that set
forth under Section 2(a)(9) of the 1940 Act.
3."Beneficial Ownership" for purposes of this Code shall be
interpreted in the same manner as it would be in determining whether a
person is subject to the provisions of Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, except
that the determination of direct or indirect beneficial ownership
shall apply to all Securities which the person has or acquires.
Beneficial Ownership is broadly interpreted to include securities in
which a Covered Person holds an ownership interest or the power to
vote. Examples include securities owned by a Covered Person's spouse
or minor children, held in a trust in which a Covered Person is a
trustee or beneficiary, owned by a partnership in which a Covered
Person is a partner or by a corporation in which a Covered Person is
an officer, director or major stockholder.
B.Prohibited Activities.
1. No Covered Person shall, in connection with the purchase or
sale (including the writing of an option to purchase or sell) of any
Security by such person (or involving a Security in which such person
has a director or indirect Beneficial Ownership interest) which,
within the most recent 15 days is or has been held by any Fund, or is
being or has been considered by any Fund or its investment adviser for
purchase by such Fund:
a.employ any device, scheme or artifice to defraud any
Fund;
b.make to any Fund any untrue statement of a material fact
or omit to state to any Fund a material fact necessary in order
to make the statements made, in light of the circumstances under
which they are made, not misleading;
c.engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any Fund; or
d.engage in any manipulative practice with respect to any
Fund.
2. No Covered Person shall purchase or sell, directly or
indirectly, any Security if he knows at the time of such purchase or
sale that the Security (i) is being considered for purchase or sale by
a Fund, (ii) is being purchased or sold by a Fund, or (iii) was
purchased or sold by the Fund within the most recent fifteen days if
such Covered Person participated in the recommendation to, or the
decision by, the Fund to purchase or sell such Security.
3. No Covered Person shall cause or attempt to cause any Fund to
purchase, sell or hold any Security in a manner calculated to create
any personal benefit to the Covered Person. A Covered Person who
participates in any research or investment decision concerning a
particular Security must disclose to those persons with authority to
make investment decisions for the Fund (or to the Administrator of the
Code if the Covered Person is a person with authority to make
investment decisions for the Fund), any personal or beneficial
interest that the Covered Person has in that Security or any Related
Security, or in the issuer thereof, where such decisions could create
a material benefit to the Covered Person. The person to whom the
Covered Person properly reports such interest, in consultation with
the Administrator, shall determine whether or not the Covered Person
will be restricted in pursuing the research or recommendation.
4.All Covered Persons are expressly prohibited from taking
personal advantage of any opportunity properly belonging to any Fund.
C. Confidentiality. Information about Securities transactions being
undertaken or considered for recommendation shall be treated as
confidential and may not communicated to other persons.
D.Administrator. The Boards of Directors of the Funds shall from time
to time appoint an Administrator of this Code who shall receive and review
the report hereinafter described and who shall:
1.abidentify and inform each Covered Person of the existence of
this Code and deliver a copy to such person; and
2.abmaintain in an easily accessible place at the offices of the
Funds a copy of this Code together with copies of all reports made
pursuant hereto and a record of any violations hereof during the prior
five years and a list of all Covered Persons during the prior five
years.
E.Reporting.
1. All Covered Persons shall report to the Administrator of the
Code, on or before the tenth day of each calendar quarter in which the
transaction to which the report relates was effected, with respect to
any transactions in any Security in which such person has a direct or
indirect Beneficial Ownership interest, the date of the transaction,
the title and the number of shares and the principal amount of each
Security involved, the nature of the transaction (purchase, sale or
any other type of acquisition or disposition), the price at which the
transaction was effected, and the name of the broker, dealer or bank
with or through whom the transaction was effected. Any such report may
contain a statement that the report shall not be construed as an
admission by the person that the person making the report that he or
she has any direct or indirect Beneficial Ownership in the Security to
which the report relates.
2. Notwithstanding the foregoing, no Covered Person shall be
required to make a report:
a.with respect to transactions affected for any account over
which such person does not have any direct or indirect influence
or control; or
b. if such person is an "independent" director of any of the
Funds, and would be required to make a report solely by reason of
being a director, except where such director knew or, in the
ordinary course of fulfilling his official duties as a director,
should have known that during the fifteen days immediately
preceding or after a transaction in a Security by the director,
such Security is or was purchased or sold by such Fund or such
purchase or sale by such Fund is or was considered by such Fund
or its investment adviser.
F.abPenalties. If the Administrator determines that a violation of
this Code has occurred, he or she shall report the relevant facts and
conclusions to the Board of Directors of any affected Fund(s), and to the
Chief Executive Officer of each entity employing the person responsible for
the violation. The applicable Board of Directors and Chief Executive
Officer shall each have the power to censure, suspend or dismiss such
person.
<PAGE>
STATEMENT OF PRINCIPLES
The Funds
Bexil Corporation
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
The Investment Managers
CEF Advisers, Inc.
Midas Management Corporation
Rockwood Advisers, Inc.
Investor Service Center, Inc.
I. INTRODUCTION
A. Fiduciary Duty.
1. This Statement of Principles, as amended (the "Statement"), applies
to all Access Persons* and focuses principally on preclearance and
reporting of personal securities transactions. Access Persons must avoid
activities, interests and relationships that may interfere with decision
making that is in the best interests of a Fund.*/ Transactions that are
debatable should be resolved in favor of the Funds. Compliance with the
Statement's procedures will not automatically insulate an Access Person's
transactions from scrutiny if there is an indication that fiduciary duties
were abused.
2. As fiduciaries, Access Persons must at all times:
a. Place the interests of the Funds first. Access Persons must
scrupulously avoid serving their own interest before the interest of
the Funds. Access Persons may not induce or cause a Fund to take
action, or not to take action, for their personal benefit, rather than
for the benefit of the Fund.
b. Avoid taking advantage of their positions. Access Persons may
not, for example, use their knowledge of portfolio transactions to
profit by the market effect of such transactions. Receipt of
investment opportunities, perquisites, or gifts from persons seeking
business with the Funds or the Investment Managers could subject an
Access Person to scrutiny.
c. Conduct all Personal Securities Transactions** in full
compliance with this Statement including both the preclearance and
reporting requirements.
II. PERSONAL SECURITIES TRANSACTIONS
A. Pre-Clearance Requirements for Access Persons. Except for the
transactions set forth in Section II.C.1 and II.C.2, any Securities
Transaction in which an Access Person or a member of his or her
Immediate Family has a Beneficial Interest must be precleared with the
Compliance Officer.*/
B. Restrictions on Personal Securities Transactions.
1. Prohibited Securities Transactions. The following Securities
Transactions are prohibited and will not be authorized absent
exceptional circumstances. The prohibitions apply only to the
categories of Access Persons specified. Any profits realized from
prohibited Securities Transactions must be disgorged.
a. Initial Public Offerings (all Investment Personnel). Any
purchase of Securities in an initial public offering;
b. Pending Buy or Sell Orders (all Access Persons). Any
purchase or sale of Securities on any day during which any Fund
has a pending "buy" or "sell" order in the same Security*/ (or
Equivalent Security*/) until that order is executed or withdrawn;
c. Seven-Day Blackout (all Portfolio Managers*). Any
purchase or sale of Securities within seven calendar days of a
purchase or sale of the same Securities (or Equivalent
Securities) by a Fund managed by that Portfolio Manager. For
example, if a Fund trades a Security on day one, day eight is the
first day the Portfolio Manager may trade that Security for an
account in which he or she has a Beneficial Interest; and
d. 60-Day Blackout (all Investment Personnel). Any purchase
of a Security in which an Investment Person*/ thereby acquires a
Beneficial Interest within 60 days of a sale of the Security (or
an Equivalent Security) in which such Investment Person had a
Beneficial Interest, and any sale of a Security in which an
Investment Person has a Beneficial Interest within 60 days of a
purchase of the Security (or an Equivalent Security) in which the
same Investment Person had a Beneficial Interest, if, in either
case, a Fund held the same Security at any time during the 60
days.
2. Private Placements (all Investment Personnel). Acquisition of a
Beneficial Interest in Securities in a private placement by Investment
Personnel is strongly discouraged. The Compliance Officer (or a designee)
will give permission only after considering, among other facts, whether the
investment opportunity should be reserved for a Fund and whether the
opportunity is being offered to the person by virtue of the person's
position as an Investment Person. Investment Persons who have acquired
securities in a private placement are required to disclose that investment
to the Compliance Officer when they play a part in any subsequent
consideration of an investment in the issuer by a Fund, and the decision to
purchase securities of the issuer by a Fund must be independently
authorized by Investment Personnel with no Beneficial Interest in
Securities of, or other personal interest in, the issuer.
C. Transactions Exempt from Transaction Restrictions.
1. The following Securities Transactions are exempt from the
preclearance requirements set forth in Section II.A. and the restrictions
set forth in Section II.B.:
a. Mutual Funds. Securities issued by any registered open-end
investment companies (including but not limited to the Funds);
b. No Knowledge. Securities Transactions where neither the Access
Person nor an Immediate Family member knows of the transaction before
it is completed (for example, Securities Transactions effected for an
Access Person by a trustee of a blind trust or discretionary trades
involving an investment partnership or investment club in which
neither the Access Person nor any Immediate Family member is consulted
or advised of the trade before it is executed);
c. Certain Corporate Actions. Any acquisition of Securities
through stock dividends, dividend reinvestments, stock splits, reverse
stock splits, mergers, consolidations, spin-offs, or other similar
corporate reorganizations or distributions generally applicable to all
holders of the same class of Securities;
d. Rights. Any acquisition of Securities through the exercise of
rights issued by an issuer pro rata to all holders of a class of its
Securities, to the extent the rights were acquired directly from the
issuer at the time of their issuance; and
e. Miscellaneous. Any transaction in the following: (1) bankers'
acceptances, (2) bank certificates of deposit, (3) commercial paper,
(4)repurchase agreements, and (5) Securities that are direct
obligations of the U.S. Government.
2. Application to Commodities, Futures, Options on Futures.
Commodities, futures (including currency futures and futures on securities
comprising part of a broad-based, publicly traded market based index of
stocks) and options on futures are not subject to preclearance, nor to the
seven-day blackout, 60-day blackout, and prohibited transactions provisions
of Section II.B., but are subject to transaction reporting. Options on
certain broad-based indices designated by the Compliance Officer are
subject to the preclearance and transaction reporting provisions of the
Statement, but are not subject to the provisions regarding seven-day
blackout and 60-day profit disgorgement.
D. Trade Reporting Requirements
1. Reporting Requirements. Every Access Person and member of his
Immediate Family must arrange for the Compliance Officer to receive
directly from any broker, dealer, or bank that effects any Securities
Transaction, duplicate copies of each confirmation for each such
transaction and periodic statements for each brokerage account in which
such Access Person has a Beneficial Interest. If an Access Person is not
able to arrange for duplicate confirmations and periodic statements to be
sent, the Access Person must immediately notify the Compliance Officer. The
foregoing does not apply to transactions and holdings in registered
open-end investment companies other than the Funds.
2. Disclaimers. Any report of a Securities Transaction for the benefit
of a person other than the individual in whose account the transaction is
placed may contain a statement that the report should not be construed as
an admission by the person making the report that he or she has any direct
or indirect beneficial ownership in the Security to which the report
relates.
3. Availability of Reports. All information supplied pursuant to this
Statement may be made available for inspection to the Board of Directors of
any of the Investment Managers, any Fund, any party to which any
investigation is referred by any of the foregoing, the SEC,* any
self-regulatory organization of which Winmill & Co. Incorporated, or its
affiliates is a member, any state securities commission, and any attorney
or agent of the foregoing or of the Funds.
III. GIFTS AND DIRECTORSHIPS
A. Gifts. The following provisions on gifts apply to all Investment
Personnel.
1. Accepting Gifts. On occasion, Investment Personnel may be offered,
or may receive without notice, gifts from clients, brokers, vendors, or
other persons not affiliated with such entities. Acceptance of
extraordinary or extravagant gifts is not permissible. Any such gifts must
be declined or returned in order to protect the reputation and integrity of
the Funds and the Investment Managers. Gifts of a nominal value (i.e.,
gifts whose reasonable value is no more than $100 a year), and customary
business meals, entertainment (e.g., sporting events), and promotional
items (e.g., pens, mugs, T-shirts) may be accepted.
If an Investment Person receives any gift that might be prohibited under
this Statement, the Investment Person must inform the Compliance Officer.
2. Solicitation of Gifts. Investment Persons may not solicit gifts or
gratuities.
3. Giving Gifts. Investment Persons may not personally give any gift
with a value in excess of $100 per year to persons associated with
securities or financial organizations, including exchanges, other member
organizations, commodity firms, news media, or clients.
B. Service as a Director. No Investment Person may serve on the board of
directors of a publicly-held company (other than Winmill & Co.
Incorporated, its affiliates, and the Funds) absent prior written
authorization from the Compliance Officer. This authorization will
rarely, if ever, be granted and, if granted, will normally require
that affected Investment Person be isolated, through a"Chinese Wall"
or other procedures, from those making investment decisions related to
the issuer on whose board the person sits.
IV. COMPLIANCE WITH THIS STATEMENT OF PRINCIPLES
A. Annual Reports. The Statement and the Code of Ethics of the Investment
Managers and the Funds shall be reviewed at least once a year, in
light of legal and business developments and experience in
implementing the Statement and Code of Ethics and, as necessary or
appropriate, a report to the Board of Directors of each Fund shall be
prepared:
1. Summarizing existing procedures concerning personal investing and
any changes in the procedures made during the past year;
2. Identifying any violation requiring significant remedial action
during the past year; and
3. Identifying any recommended changes in existing restrictions or
procedures based on experience with the Statement and Code of Ethics,
evolving industry practices, or developments in applicable laws or
regulations.
B. Remedies
1. Sanctions. If it is determined by the Compliance Officer, the
Investment Managers, or a Fund that an Access Person has committed a
violation of the Statement, the Compliance Officer or applicable entity may
impose sanctions and take other actions as it deems appropriate, including
a letter of caution or warning, suspension of personal trading rights,
suspension of employment (with or without compensation), fine, civil
referral to the SEC, criminal referral, and termination of the employment
of the violator for cause. The Access Person may also be required to
reverse the trade(s) in question and forfeit any profit or absorb any loss
derived therefrom. Any profit shall be forwarded to the Fund in question or
to a charitable organization.
2. Review. If an Access Person commits a violation of this Statement
that merits remedial action, information relating to the investigation of
the violation, including any sanctions imposed will be reported to the
Boards of Directors of the applicable Fund, no less frequently than
quarterly. The Boards of Directors of the Funds may modify such sanctions
as they deem appropriate.
C. Acknowledgment of Receipt. All Access Persons will be required to
acknowledge receipt of the Statement.
D. Compliance Certification. On an annual basis, all Access Persons will
be required to certify that they have read and understand the
Statement, and that they have complied with the requirements of the
Statement.
E. Inquiries Regarding the Statement. The Compliance Officer will answer
any questions about this Statement or any other compliance-related
matters.
DEFINITIONS
"Access Person" means
(1) every director or officer of the Investment Managers or the Funds;
(2) every employee of the Investment Managers or the Funds (or a company
in a control relationship with any of the foregoing) (a) who, in
connection with his or her regular functions, makes, participates in,
or obtains information regarding the purchase or sale of a Security by
a Fund, or (b) whose functions relate to the making of any
recommendation with respect to the purchase or sale of a Security by a
Fund;
(3) every director or officer of the Investment Managers (a) who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of a Security by a Fund, or (b) whose functions relate to the making
of any recommendation with respect to the purchase or sale of a
Security by a Fund;
(4) any natural person in a control relationship with respect to the
Investment Managers or the Funds who obtains information concerning
recommendations made to any Fund with respect to the purchase or sale
of a Security; and
(5) such other persons as the Compliance Officer shall designate.
Any uncertainty as to whether an individual is an Access Person should be
brought to the attention of the Compliance Officer.
"Beneficial Interest" means the opportunity, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise, to profit, or share in any profit derived from, a transaction in
the subject Securities. An Access Person is deemed to have a Beneficial
Interest in Securities owned by members of his or her Immediate Family.
Common examples of Beneficial Interest include joint accounts, spousal
accounts, partnerships, trusts and controlling interests in corporations.
Any uncertainty as to whether an Access Person has a Beneficial Interest in
a Security should be brought to the attention of the Compliance Officer.
Such questions will be resolved in accordance with, and this definition
shall be subject to, the definition of "beneficial owner" found in Rules
16a-1(a)(2) and (5) promulgated under the Securities Exchange Act of 1934.
"Compliance Officer" means the person designated by Boards of
Directors of the Funds as the compliance person in connection with this
Statement.
"Equivalent Security" means any Security issued by the same entity as
the issuer of a subject Security, including options, rights, stock
appreciation rights, warrants, preferred stock, restricted stock, phantom
stock, bonds, and other obligations of that company or security otherwise
convertible into that security. Options on securities are included even if,
technically, they are issued by the Options Clearing Corporation or a
similar entity.
"Fund" means an investment company registered under the Investment
Company Act of 1940 (or a portfolio or series thereof) for which any of the
Investment Managers serves as investment adviser.
"Immediate Family" of an Access Person means any of the following persons
who reside in the same household as an Access Person:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
"Investment Personnel" and "Investment Person" mean each Portfolio
Manager and any Access Person who, in connection with his or her regular
functions or duties, provides information and advice to a Portfolio Manager
or who helps execute a Portfolio Manager's decisions.
"Portfolio Manager" means a person who has or shares principal
day-to-day responsibility for managing the portfolio of a Fund.
"SEC" means the Securities and Exchange Commission.
"Securities Transaction" means a purchase or sale of Securities in
which an Access Person or a member of his or her Immediate Family has or
acquires a Beneficial Interest.
"Security" and "Securities" include stock, notes, bonds, debentures,
and other evidences of indebtedness (including loan participations and
assignments), limited partnership interests, investment contracts, and all
derivative instruments of the foregoing, such as options, futures contracts
and warrants.