MIDAS FUND, INC.
Supplement dated March 25, 1996
to the Prospectus dated August 28, 1995
Effective May 1, 1996, the following information will supersede the
information appearing under the heading "Investment Objectives and Policies -
Investments the Fund May Make," on pages 4-6 of the Prospectus:
The investment objectives of the Fund are primarily capital
appreciation and protection against inflation and, secondarily, current income.
The Fund seeks to achieve these objectives by investing, under normal
circumstances, at least 65% of its total assets in (i) securities of companies
primarily involved, directly or indirectly, in the business of mining,
processing, fabricating, distributing or otherwise dealing in gold, silver,
platinum or other natural resources and (ii) gold, silver and platinum bullion.
Additionally, up to 35% of the Fund's total assets may be invested in securities
of companies that derive a portion of their gross revenues, directly or
indirectly, from the business of mining, processing, fabricating, distributing
or otherwise dealing in gold, silver, platinum or other natural resources, in
securities of selected growth companies, and in securities issued by the U.S.
Government, its agencies or instrumentalities. For purposes of the foregoing,
natural resources include, but are not limited to, ferrous and non-ferrous
metals (such as iron, aluminum and copper), strategic metals (such as uranium
and titanium), hydrocarbons (such as coal, oil and natural gases), chemicals,
forest products real estate, food products and other basic commodities, which
historically have been produced and marketed profitably during periods of rising
inflation.
The Fund retains the flexibility to respond promptly to changes in
market and economic conditions and Midas Management Corporation (the "Investment
Manager") may employ a temporary defensive investment strategy if it determines
such a strategy to be warranted. Under a defensive strategy, the Fund may hold
cash and/or invest any portion or all of its assets in high quality money market
instruments of U.S. or foreign government or corporate issuers. To the extent
the Fund adopts a temporary defensive posture, it will not be invested so as to
directly achieve its investment objectives. In addition, pending investment of
proceeds from new sales of Fund shares or in order to meet ordinary daily cash
needs, the Fund may hold cash and may invest in foreign or domestic high quality
money market instruments. Money market instruments in which the Fund may invest
include, but are not limited to, U.S. or foreign government securities; high
grade commercial paper; bank certificates of deposit; bankers' acceptances; and
repurchase agreements relating to any of the foregoing. Repurchase agreements
are transactions in which the Fund purchases securities from a bank or
recognized securities dealer and simultaneously commits to resell the securities
to the bank or dealer at an agreed-upon date and price reflecting a market rate
of interest unrelated to the coupon rate or maturity of the purchased
securities. Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying securities and delays and cost to the Fund if the other party to the
repurchase agreement becomes insolvent. The Fund intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
the Investment Manager to present minimum credit risks in accordance with
guidelines established by the Fund's board of directors.
Debt Securities. When seeking to achieve its secondary objective of current
income, the Fund will normally invest in investment grade debt securities.
Investment grade securities are those rated in the top four categories by a
nationally recognized statistical rating organization such as Standard & Poor's
Ratings Services or Moody's Investors Service, Inc., ("Moody's") or, if unrated,
are determined by the Investment Manager to be of comparable quality. Moody's
considers securities in the fourth highest category to have speculative
characteristics. Such securities may include long, intermediate and short
maturities, depending on the Investment Manager's evaluation of market patterns
and trends. The Fund may invest up to 35% of its assets in debt securities rated
below investment grade, although it has no current intention of investing more
than 5% of its assets in such securities during the coming year. The Fund may
also invest without limit in unrated securities if such securities offer, in the
Investment Manager's opinion, the opportunity for a high overall return by
reason of their yield, discount at purchase, or potential for capital
appreciation without undue risk. Securities rated below investment grade and
many unrated securities may be considered predominantly speculative and subject
to greater market fluctuations and risks of loss of income and principal than
higher rated debt securities. The market value of debt securities usually is
affected by changes in the level of interest rates. An increase in interest
rates tends to reduce the market value of such investments, and a decline in
interest rates tends to increase their value. In addition, debt securities with
longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities. Fluctuations in the market value of debt securities
subsequent to their acquisition do not affect cash income from such securities
but are reflected in the Fund's net asset value.
Options, Futures, and Forward Currency Contracts. The Fund may purchase and sell
options (including options on precious metals, foreign currencies, equity and
debt securities, and securities indices), futures contracts including futures
contracts on precious metals, foreign currencies, securities and securities
indices), options on futures contracts and forward currency contracts. The Fund
may use options, futures and forward contracts for hedging and yield or income
enhancement purposes. For example, the Fund could purchase call options on
securities that the Investment Manager intends to include in the Fund's
portfolio in order to fix the cost of a future purchase or to attempt to enhance
return by, for example, participating in an anticipated price increase of a
security. The Fund could purchase put options on securities to hedge against a
decline in the market value of securities held in the Fund's portfolio or to
attempt to enhance yield or income. The Fund could write (sell) put and call
options on securities to enhance yield or income or as a limited hedge. The Fund
could purchase and sell these instruments in order to attempt to hedge against
changes in securities prices, interest rates or foreign currency exchange rates
or precious metal prices or to enhance yield or income.
Other Information. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940 (the "1940 Act"), but intends to continue to qualify as a
regulated investment company for Federal income tax purposes. This means, in
general, that more than 5% of the Fund's total assets may be invested in the
securities of one issuer (including a foreign government), but only if at the
close of each quarter of the Fund's taxable year, the aggregate amount of such
holdings is less than 50% of the value of its total assets and no more than 25%
of the value of its total assets is invested in the securities of a single
issuer. To the extent that the Fund's portfolio at times may include the
securities of a smaller number of issuers than if it were "diversified," as
defined in the 1940 Act, the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return. The Fund may invest (i) up to 15% of its net assets in illiquid
securities, including repurchase agreements with a maturity of more than seven
days and (ii) up to 10% of its total assets in restricted securities.
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MIDAS FUND, INC.
Supplement dated March 25, 1996 to the
Statement of Additional Information
dated January 25, 1996
At a meeting scheduled to be held April 25, 1996, the Fund's
shareholders are being asked to approve changes to the Fund's fundamental
investment restrictions. If these changes are approved by the Fund's
shareholders, the section of the Fund's Statement of Additional Information
entitled "Investment Restrictions" on page 2 would be replaced with the
following:
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
that may not be changed without the approval of the lesser of (a) 67% or more of
the voting securities of the Fund present at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy or (b) more than 50% of the outstanding voting securities
of the Fund. Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
of securities or assets of, or borrowing by, the Fund. The Fund may not:
1. Borrow money, except to the extent permitted by the Investment Company Act
of 1940 ("1940 Act");
2. Engage in the business of underwriting 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;
3. 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;
4. Purchase or sell physical commodities (other than precious metals),
although it may enter into (a) commodity and other futures contracts
and options thereon, (b) options on commodities, including foreign
currencies and precious metals, (c) forward contracts on commodities,
including foreign currencies and precious metals, and (d) other
financial contracts or derivative instruments;
5. 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 objectives and policies, and (c) engaging in
securities, precious metals, and other asset loan transactions to the
extent permitted by the 1940 Act; or
6. Issue senior securities as defined in the 1940 Act. The following will
not be deemed to be senior securities prohibited by this provision: (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 transactions, and (d) to the extent consistent with the 1940
Act and applicable rules and policies adopted by the Securities and
Exchange Commission, (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.
The Fund's Board of Directors has established the following
non-fundamental investment limitations 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 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, and further
provided that this restriction does not apply to warrants attached to,
or sold as a unit with, other securities;
(ii) 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;
(iii) The Fund may not invest more than 5% of its assets in securities of
companies having a record of less than three years continuous
operations (including operations of predecessors);
(iv) The Fund may not purchase or otherwise acquire any security or invest
in a repurchase agreement if, as a result, (a) more than 15% 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, or (b) more than 10%
of the Fund's total assets would be invested in securities that are
illiquid by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act;
(v) The Fund may not make short sales of securities or maintain a short
position, except (a) the Fund may buy and sell options, futures
contracts, options on futures contracts, and forward contracts, and (b)
the Fund may sell "short against the box" where, by virtue of its
ownership of other securities, the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold and, if
the right is conditional, the sale is made upon the same conditions;
(vi) 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 contracts and other derivative instruments shall not be deemed
to constitute purchasing securities on margin;
(vii) The Fund may not purchase or retain securities of any issuer if those
officers or Directors of the Fund, its investment manager or its
subadviser 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;
(viii) The Fund may not purchase the securities of any investment company
except (a) by purchase in the open market where no commission or profit
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
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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;
(ix) The Fund may not borrow money, except (a) from a bank for temporary or
emergency purposes (not for leveraging or investment) or (b) by
engaging in reverse repurchase agreements, provided however, that
borrowings pursuant to (a) and (b) do 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 borrowings. 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
borrowings come to exceed the limitation set forth in (1) above, such
borrowing will be promptly (within three days, not including Sundays
and holidays) reduced to the extent necessary to comply with this
limitation;
(x) The aggregate value of securities underlying put options on securities
written by the Fund, determined as of the date the put options are
written, will not exceed 25% of the Fund's net assets, and the
aggregate value of securities underlying call options on securities
written by the Fund, determined as of the date the call options are
written, will not exceed 25% of the Fund's net assets;
(xi) The Fund may purchase a put or call option on a security or a security
index, including any straddles or spreads, only if the value of its
premium, when aggregated with the premiums on all other such
instruments held by the Fund, does not exceed 5% of the Fund's total
assets;
(xii) To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a CFTC-
regulated exchange, in each case that are not for bona fide hedging
purposes (as defined by the Commodity Futures Trading Commission
("CFTC")), the aggregate initial margin and premiums required to
establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the
Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into; and
(xiii) The Fund may not mortgage, pledge or hypothecate any assets in excess of
one-third of the Fund's total assets.
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