As filed with the Securities and Exchange Commission on June 26, 1995
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[X]
Excel Midas Gold Shares, Inc. (File No. 2-98229):
Post-Effective Amendment No. 16
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940[X]
Excel Midas Gold Shares, Inc. (File No. 811-4316):
Post-Effective Amendment No. 16
EXCEL MIDAS GOLD SHARES, INC.
(Exact Name of Registrant as Specified in Charter)
16955 Via Del Campo, Suite 120, San Diego, California 92127
(Address of Principal Executive Offices) (Zip Code)
(619) 485-9400
(Registrant's Telephone Number, including Area Code)
Gary B. Sabin
16955 Via Del Campo, Suite 120, San Diego, California 92127
(Name and Address of Agent for Service)
Copy to:
Michael J. Radmer, Esq.
Dorsey & Whitney P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
/ / immediately upon filing pursuant to paragraph (b) of rule 485
/ / on _______ pursuant to paragraph (b) of rule 485
/X/ 60 days after filing pursuant to paragraph (a) of rule 485
/ / on (specify date) pursuant to paragraph (a) of rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on April 19, 1995.
<PAGE>
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
Item No.
of Form N-lA Caption in Prospectus
------------ ---------------------
1 Cover Page
2 "Fees and Expenses"
3 "Financial Highlights"; "Performance Information"
4 "Investment Objectives and Policies of the Fund";
"Investments the Fund Will Not Make; Restrictions";
"Appendix A"
5 "The Investment Manager"; "The Subadviser"; "Custodian
and Transfer Agent"
5A "Management's Discussion of Fund Performance"
6 Cover Page; "The Investment Manager"; "The Subadviser";
"Distributions and Taxes"; "Determination of Net Asset
Value"; "Shareholder Services"
7 "How to Purchase Shares"; "Shareholder Services";
"Determination of Net Asset Value"; "Distribution of
Shares"
8 "How to Redeem Shares"; "Determination of Net Asset
Value"
9 Not Applicable
Caption in Statement of Additional Information
----------------------------------------------
10 Cover Page
11 "Table of Contents"
12 Not Applicable
13 "Investment Restrictions"; "Allocation of Brokerage"
14 "Officers and Directors"
15 "Officers and Directors"; "The Investment Manager"
16 "Officers and Directors"; "The Investment Manager";
"The Subadviser and the Subadvisory Agreement";
"Distribution of Shares"; "Custodian, Transfer and
Dividend Disbursing Agent"; "Auditors"
17 "Allocation of Brokerage"
18 Not Applicable
19 "Purchase of Shares"
20 "Distributions and Taxes"
21 Not Applicable
22 "Calculation of Performance Data"
23 "Financial Statements"
<PAGE>
MIDAS FUND, INC.
Prospectus Dated August __, 1995
Midas Fund, Inc. ("the "Fund") is a mutual fund that continuously offers
its shares for sale. 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 primarily in (i)
securities of United States and Canadian 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.
There can be no assurance that the Fund will achieve its investment
objectives. Prior to August __, 1995, the Fund was known as Excel Midas Gold
Shares, Inc.
Midas Management Corporation is the Fund's Investment Manager and Lion
Resource Management Limited is the Fund's Subadviser. Since 1992, Mr. Kjeld
Thygesen, Managing Director of the Subadviser, has been the portfolio manager of
the Fund. Based in London (U.K.), the Subadviser is a part of Lion Mining Group,
which specializes in gold mining and resource company investment management,
corporate finance and consulting.
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NEWSPAPER LISTING. Shares of the Fund are sold at the net asset
value per share which is shown daily in the mutual fund section of
newspapers nationwide under the heading "Midas Fund."
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. You should read it to decide if an investment
in the Fund is right for you. Please keep it with your investment records for
future reference. The Fund has filed a Statement of Additional Information (also
dated August __, 1995) with the Securities and Exchange Commission. The
Statement of Additional Information is available free of charge by calling
1-800_________ , and is incorporated by reference into this Prospectus in
accordance with the Commission's rules. Fund shares are not bank deposits or
obligations of, or guaranteed or endorsed by any bank or any affiliate of any
bank, and are not Federally insured by, obligations of or otherwise supported by
the U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Shareholder Transaction Expenses
Sales Load Imposed on Purchases..................NONE
Sales Load Imposed on Reinvested Dividends.......NONE
Deferred Sales Load..............................NONE
Redemption Fees..................................NONE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................................1.00%
12b-1 Fees......................................0.25%
Other Expenses ................................ 0.90%
----
Total Fund Operating Expenses...................2.15%
=====
Example 1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
assuming a 5% annual return and a
redemption at the end of each time
period ............................ $66 $113 $164 $315
The example set forth above assumes reinvestment of all dividends and other
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). The example is an illustration only
and should not be considered an indication of past or future returns and
expenses. Actual returns and expenses may be greater or less than those shown.
The percentages given for annual Fund expenses are based on the Fund's operating
expenses and average daily net assets during its fiscal year ended December 31,
1994. Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.'s ("NASD") rules regarding investment companies. "Other
Expenses" includes amounts paid to the Fund's former investment manager,
custodian, and transfer agent for certain custodian, accouting, administrative
and shareholder services, and does not include interest expense from the Fund's
bank borrowing.
Financial Highlights are presented below for a share of capital stock
outstanding throughout each period since the Fund's inception. The following
information is supplemental to the Fund's financial statements and report
thereon of Squire & Co., independent accountants, appearing in the December 31,
1994 Annual Report to Shareholders and incorporated by reference in the
Statement of Additional Information.
2
<PAGE>
Years Ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA**
Net asset value, beginning of year .......... $ 4.16 $ 2.35 $ 2.55 $ 2.59 $ 3.12 $ 2.58 $ 3.16 $ 2.63 $ 2.33
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) ................ (0.05) (0.01) 0.01 0.03 -- (0.01) (0.02) 0.00 (0.01)
Net gain (loss) on securities (both realized
and unrealized) ............................. (0.67) 2.34 (0.19) (0.04) (0.53) 0.57 (0.58) 0.92 0.31
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations .......... (0.72) 2.33 (0.18) (0.01) (0.53) 0.56 (0.60) 0.92 0.30
Less distributions:
Dividends from net investment income ........ -- (0.52) (0.02) (0.03) -- -- -- -- --
Distributions from capital gains ............ (0.12) -- -- -- -- -- -- (0.33) --
Return of capital distributions ............. -- -- -- -- -- -- -- (0.06) --
Total distributions ....................... (0.12) (0.52) (0.02) (0.03) 0.00 0.00 0.00 (0.39) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ................ $ 3.32 $ 4.16 $ 2.35 $ 2.55 $ 2.59 $ 3.12 $ 2.56 $ 3.16 $ 2.63
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN ................................ (17.27)% 99.24% (7.16)% (0.20)% (16.99)% 21.88% (18.99)% 34.77% 12.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (In 000's) .......... $7,052 $10,357 $4,943 $8,202 $7,571 $11,168 $12,726 $19,145 $7,367
Ratio of expenses to average net assets(a): . 2.15% 2.18% 2.25% 2.25% 2.25% 2.20% 1.82% 1.79% 1.97%
Ratio of net investment income (loss) to
average net assets(b): ...................... (1.26)% (0.25)% 0.56% 1.10% 0.06% (0.32)% (0.42)% 0.36% (1.05)%
Portfolio Turnover .......................... 52.62% 63.44% 72.23% 77.26% 58.46% 23.60% 7.52% 27.29% 8.28%
</TABLE>
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*From commencement of operations, January 8, 1986. **Per share net investment
loss and net realized and unrealized gain (loss) on investments have been
computed using the average number of shares outstanding. (a) Ratio prior to
reimbursement by the Investment Manager was 2.47%,2.51%, and 2.53% for 1990,
1991, and 1992. (b) Ratio prior to reimbursement by the Investment Manager was
(0.16)%, 0.83%, and 0.28% for 1990, 1991, and 1992.
PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost. In addition to
advertising average annual total return and cumulative total return, comparative
performance information may be used from time to time in advertising the Fund's
shares, including data from Lipper Analytical Services, Inc., the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Toronto Stock
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Exchange Gold Sub-Index Average and other industry publications. "Average annual
total return" is the average annual compounded rate of return on a hypothetical
$1,000 investment made at the beginning of the advertised period. In calculating
average annual total return, the maximum sales charge is deducted from the
hypothetical investment and all dividends and distributions are assumed to be
reinvested. "Cumulative total return" is calculated by subtracting a
hypothetical $1,000 payment to the Fund from the ending redeemable value of such
payment (at the end of the relevant advertised period), dividing such difference
by $1,000 and multiplying the quotient by 100. In calculating ending redeemable
value, all income and capital gain distributions are assumed to be reinvested in
additional Fund shares and the maximum sales load is deducted. For more
information regarding how the Fund's average annual total return and cumulative
total return is calculated, see "Calculation of Performance Data" in the
Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
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 primarily in (i)
securities of United States and Canadian 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. Of course, there can be no assurance
that the Fund will achieve its investment objectives.
Only the holders of a "majority" of the Fund's outstanding shares as
defined in the Investment Company Act of 1940 (the "1940 Act") can change the
Fund's investment objectives described above. Policies not designated as
"fundamental" may be changed by the board of directors of the Fund if, in the
board's discretion, it believes it is in the best interests of the Fund to do
so.
Investments the Fund Will Make
Midas Management Corporation, the Fund's Investment Manager (the
"Investment Manager"), believes that precious metal investment medium offer an
opportunity to achieve long-term capital appreciation and protection against
inflation. The Investment Manager believes that investments in precious metals,
especially gold, and shares of companies in related industries have historically
tended to provide a hedge against inflation and the risks associated with
uncertain and unstable political, monetary and social conditions. Under normal
circumstances, at least 65% of the value of the Fund's total assets will be
invested collectively in (i) securities of companies primarily involved,
directly or indirectly, in the business of mining, processing, fabricating,
distributing or otherwise dealing in gold and (ii) gold bullion. Additionally,
up to 35% of the value of the Fund's total assets may be invested in 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 (which, together with
securities of companies "primarily involved" in such activities are referred to
herein as "Mining Securities").
No more than 20% of the value of the Fund's total assets will be invested
in Mining Securities of issuers domiciled or having principal operations in
foreign countries other than Canada. See "Risk Considerations."
The Mining Securities held by the Fund may include both equity and debt
securities. The market performance of debt Mining Securities can be expected to
be comparable to that of other debt obligations and generally will not react to
fluctuations in the prices of precious metals. Therefore, an investment in debt
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<PAGE>
Mining Securities cannot be expected to provide the hedge against inflation that
may be provided through investments in equity Mining Securities.
Not more than 10% of the value of the Fund's total assets (taken at cost)
may be invested directly in gold, silver and platinum bullion. Gold, silver and
platinum bullion in the form of coins will be purchased only if there is an
actively quoted market for the coins, as exists, for example, for the Canadian
Maple Leaf, the South African Krugerrand, the Mexican Peso and Onza, the
Austrian Corona, and the Noble of the Isle of Man. Coins will only be purchased
for their metallic value and not for their currency or numismatic value. See
"Risk Considerations."
The Fund will generally hold approximately 5% to 10% of its net assets in
cash or high-quality, short-term, fixed-income investments in order to maintain
the liquidity necessary for timely responses to investment opportunities and for
satisfaction of redemption requests. These short-term, fixed-income investments
will be limited to obligations rated at the time of purchase within the two
highest ratings of either Standard & Poor's Corporation ("Standard & Poor's") or
Moody's Investors Services, Inc. ("Moody's") or, if not so rated, determined by
the Fund's investment adviser to be of equivalent investment quality.
In the event of economic, political or financial conditions that would
adversely affect the Mining Securities and precious metals markets, the Fund may
depart from its normal policies and assume a temporary defensive position by
investing a substantial portion of its assets in debt securities other than
Mining Securities, such as bonds, debentures, commercial paper, repurchase
agreements and certificates of deposit, or cash. These debt securities will be
limited to obligations rated at the time of purchase within the four highest
ratings of Standard & Poor's or Moody's or, if not so rated, determined by the
Fund's investment adviser to be of equivalent investment quality. Debt
securities in the lowest of these four ratings are medium grade obligations and
may be considered speculative. It is expected that the emphasis of defensive
security selection will be on short-term instruments (i.e, those maturing in one
year or less from the date of purchase), since such securities usually can be
disposed of quickly at prices not involving significant gains or losses when
management wishes to increase the portion of the portfolio invested in
securities selected for appreciation possibilities. The Fund does not have a
current intention of investing more than 5% of its net assets in repurchase
agreements. See Appendix A hereto for a description of repurchase agreements and
certain of the risks associated therewith.
The Fund may invest up to 10% of its total assets in securities the sale
of which is limited by contract or law. See "Investments the Fund Will Not Make;
Restrictions." Such restricted securities may be sold only in a privately
negotiated transaction. Because of such restrictions, the Fund may not be able
to dispose of a block of restricted securities for a substantial period of time
or at prices as favorable as those prevailing in the open market should like
securities of an unrestricted class of the same issuer be freely traded.
Short-term Trading
The Fund purchases securities for investment and does not, as a policy,
trade for short-term profits. But if the Fund feels it is wise to sell a
security, it will not hesitate even if it has had the security just a short
time. Turnover of the Fund's assets will affect brokerage costs and may affect
the taxes you pay. The Fund calculates its portfolio turnover as the ratio of
the lesser of annual purchases or sales of portfolio securities to average
monthly portfolio value (not including short-term securities, if any). If the
Fund had a 100% turnover rate, it would mean that the Fund replaced all of its
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<PAGE>
portfolio securities within a year. The Fund's turnover rate for the year ended
December 31, 1994 was 52.62%.
Risk Considerations
Although there is some degree of risk in all investments, there are
special risks inherent in the Fund's investment policies. Because of these
risks, an investment in the Fund should not be considered a complete investment
program. The risks related to the Fund's investment policy of concentrating in
Mining Securities and gold, silver and platinum bullion include, among others,
the following:
1. Risk of Price Fluctuations. Precious metals prices may be affected by a
variety of factors such as economic conditions, political events, monetary
policies and other factors. As a result, prices of Mining Securities and gold,
silver and platinum bullion may fluctuate sharply. The price of gold, in
particular, has fluctuated dramatically during recent years.
2. Potential Effects of Concentration of Sources of Gold Supply and Controls of
Gold Sales. The four largest producers of gold, in current order of magnitude,
are the Republic of South Africa, the United States, Australia, and the
Commonwealth of Independent States (formerly the Union of Soviet Socialist
Republics). Economic and political conditions and objectives prevailing in these
countries may have a direct effect on the production and marketing of newly
produced gold and sales of central bank gold holdings.
3. Concentration. As a fundamental policy, the Fund concentrates its investments
in Mining Securities and in gold, silver and platinum bullion. By so
concentrating its investments, the Fund will not enjoy the protections of an
industry-varied portfolio, and will be subject to the risk of industry-wide
adverse developments.
4. United States and Canadian Issuers. Under normal circumstances, at least 60%
and up to 100% of the Fund's assets will be invested in Mining Securities issued
by United States and Canadian companies. Many of these companies are small or
thinly capitalized, and investment in their securities may be considered
speculative.
5. Foreign Securities. The Fund may invest up to 20% of the value of its assets
in Mining Securities of foreign (other than Canadian) issuers, and up to 100% of
its assets in Mining Securities of Canadian issuers. Investments in foreign
securities may involve risks greater than those attendant to investments in
securities of United States issuers. Among other things, the financial and
economic policies of some foreign countries in which the Fund may invest are not
as stable as in the United States. Furthermore, foreign issuers are not
generally subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to U.S. corporate issuers. There may
also be less government supervision and regulation of foreign securities
exchanges, brokers and issuers than exist in the United States. Restrictions and
controls on investment in the securities markets of some countries may have an
adverse effect on the availability and costs to the Fund of investments in those
countries. In addition, there may be the possibility of expropriations, foreign
withholding taxes, confiscatory taxation, political, economic or social
instability or diplomatic developments which could affect assets of the Fund
invested in issuers in foreign countries.
There may be less publicly available information about foreign issuers
than is contained in reports and reflected in ratings published for U.S.
issuers. Some foreign securities markets have substantially less volume than the
New York Stock Exchange, and some foreign government securities may be less
6
<PAGE>
liquid and more volatile than U.S. Government securities. Transaction costs on
foreign securities exchanges may be higher than in the United States, and
foreign securities settlements may, in some instances, be subject to delays and
related administrative uncertainties.
When purchasing foreign securities, the Fund will ordinarily purchase
securities which are traded in the U.S. or purchase American Depository Receipts
("ADR's") which are certificates issued by U.S. banks representing the right to
receive securities of a foreign issuer deposited with that bank or a
correspondent bank. However, the Fund may purchase foreign securities directly
in foreign markets so long as in management's judgment an established public
trading market exists (that is, there are a sufficient number of shares traded
regularly relative to the number of shares to be purchased by the Fund).
6. New Developing Markets for Private Gold Ownership. Between 1933 and December
31, 1974, a market did not exist in the United States in which gold bullion
could be purchased by individuals for investment purposes. Since then, gold
bullion markets have begun to develop in the United States. The Fund intends to
purchase and sell gold bullion principally in the New York market, the principal
U.S. market for gold bullion.
7. Tax Status. The Fund intends to qualify as a regulated investment company
under the Internal Revenue Code so that the Fund will not be subject to Federal
income taxes on its taxable income to the extent distributed to shareholders. By
investing in gold, silver and platinum bullion, the Fund risks failing to
qualify as a regulated investment company. This would occur if (i) more than 10%
of the Fund's gross income in any year were derived from its investments in
gold, silver and platinum bullion, (ii) more than 50% of the value of the Fund's
assets, at the end of any quarter, were invested in gold, silver and platinum
bullion or (iii) certain other requirements are not satisfied. Accordingly, the
Fund's investment adviser will endeavor to manage the Fund's portfolio within
these limitations.
8. Unpredictable International Monetary Policies and Economic and Political
Conditions. There is the possibility that, under unusual international monetary
or political conditions, the Fund's assets might be less liquid or that changes
in value of its assets might be more volatile than would be the case with other
investments. In particular, the price of gold is affected by its direct and
indirect use to settle net deficits and surpluses between nations. Because the
prices of precious metals may be affected by unpredictable international
monetary policies and economic conditions, there may be greater likelihood of a
more dramatic impact upon the market prices of the Fund's investments than of
other investments.
9. Lack of Income on Gold, Silver and Platinum Investments. Investments in gold,
silver and platinum bullion do not generate income and will subject the Fund to
taxes and insurance, shipping and storage costs. The sole source of return to
the Fund from such investments would be gains realized on sales, and a negative
return would be realized if such investments are sold at a loss.
Earning Income in Other Ways
Consistent with the Fund's primary objectives of capital appreciation and
protection against inflation and secondary objective of current income, the Fund
may engage in certain special investment techniques.
The Fund may write "covered" call options on the securities and gold and
silver bullion in its portfolio, stock indexes of companies representative of
the precious metals industry ("Mining Securities Indexes") and gold and silver
futures contracts. Call options may be written by the Fund if (i) thereafter not
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<PAGE>
more than 25% of its total assets are subject to call options; (ii) the call
options are listed on a domestic securities or commodities exchange or quoted on
the automatic quotation systems of the National Association of Securities
Dealers, Inc. ("Nasdaq"); and (iii) the call options are "covered," i.e., during
the period the call option is outstanding, the Fund owns (a) in the case of a
call option on portfolio securities or gold or silver bullion, the assets
subject to the call, (b) in the case of a call option on a Mining Securities
Index, Mining Securities in an amount at least equal to the value of the
securities subject to the call, or (c) in the case of a call option on gold or
silver futures contracts, gold or silver bullion in an amount at least equal to
the value of all futures contracts subject to the call. For further information
about covered call options, see Appendix A.
The Fund's writing of "covered" call options on Mining Securities Indexes
involves certain special risks not present in its writing of "covered" call
options on securities or gold or silver bullion in its portfolio, or gold or
silver futures contracts. When the Fund writes a call option on securities or
gold or silver bullion in its portfolio, or gold or silver futures contracts,
the Fund will own the underlying assets throughout the term of the option.
Ownership of such assets negates the risk to the Fund of an increase in the
market price of the underlying assets above the exercise price of the call
option during the term the option is outstanding . When the Fund writes a call
option on a Mining Securities Index, the Fund will not own the assets underlying
such option. Rather, the Fund will own Mining Securities in an amount at least
equal to the value of the securities subject to the call. Unless such Mining
Securities exactly mirror the securities underlying such Mining Securities
Index, price movements of such Mining Securities will not correlate exactly with
price movements of such Mining Securities Index. Because of this imperfect
correlation, ownership of Mining Securities in an amount at least equal to the
value of securities subject to a call option written on a Mining Securities
Index will provide the Fund with only an imperfect hedge against the risk of an
increase in such Mining Securities Index.
The Fund may purchase and sell put and call options written by others as
a trading technique to facilitate buying and selling securities for investment
reasons. This technique involves the sale of a call option or the purchase of a
put option with the expectation that the option would be exercised immediately
and would be used to take advantage of any disparity which might exist between
the price of the underlying security on the stock market and its price on the
options market. It is anticipated that the proposed trading technique will be
utilized to effect a securities transaction when the price of the security plus
the option price will be as good or better than the price at which the security
could be bought or sold directly. When using this trading technique and the
option is bought, the Fund pays a premium and a commission. It then pays a
second commission on the purchase or sale of the underlying security when the
option is exercised. For record keeping and tax purposes, the price obtained on
the purchase or sale of the underlying security will be the combination of the
exercise price, the premium and both of the commissions. For further information
about put and call options, see Appendix A.
The Fund may purchase "protective" put options on the securities in its
portfolio and Mining Securities Indexes. Put options may be purchased by the
Fund if (i) the put options are listed on a domestic securities exchange or
quoted on Nasdaq; (ii) after any purchase, the value of all puts held by the
Fund does not exceed 5% of the Fund's total assets (at the time of purchase);
and (iii) during the period the put option is outstanding, the Fund owns (a) in
the case of a put option on portfolio securities, the assets subject to the put
and (b) in the case of a put option on Mining Securities Indexes, Mining
Securities in an amount at least equal to the value of the securities subject to
the put. Buying a protective put permits the Fund to protect itself during the
put period against a decline in the value of the underlying securities below the
exercise price by selling them through the exercise of the put.
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The Fund's purchasing of "protective" put options on Mining Securities
Indexes involves certain special risks not present in its purchasing of
"protective" put options on securities in its portfolio. When the Fund purchases
a put option on securities in its portfolio, the Fund will own the underlying
securities throughout the term of the option. Ownership of the put option
negates the risk to the Fund of a decrease in the market price of the underlying
securities below the exercise price of the put option during the period the
option is held. When the Fund purchases a put option on a Mining Securities
Index, the Fund will not own the securities underlying such option. Rather, the
Fund will own Mining Securities in an amount at least equal to the value of the
securities subject to the put. Unless such Mining Securities exactly mirror the
securities underlying such Mining Securities Index, price movements of such
Mining Securities Index will not correlate exactly with price movements of such
Mining Securities. As a result of this imperfect correlation, ownership of a put
option on a Mining Securities Index will provide the Fund with only an imperfect
hedge against the risk of a decrease in the price of Mining Securities owned by
the Fund.
The Fund may from time to time lend securities representing up to 25% of
its net assets. If the Fund makes such loans it will get the market price in
cash as collateral. The Fund will then invest the cash collateral in short-term
securities. If the market price of the loaned securities goes up, the Fund will
get additional cash. A risk of lending its securities is that the borrower may
not be able to give additional cash or return the securities. The Fund will not,
however, loan its securities unless the opportunity for additional income
outweighs the risk. If some major event affecting the Fund's investment is going
to be considered, the Fund will try to vote loaned securities by asking for
their return. Also, during the existence of the loan, the Fund receives cash
payments equivalent to all dividends, interest or other distributions paid on
the loaned securities.
INVESTMENTS THE FUND WILL NOT MAKE; RESTRICTIONS
The Fund has adopted certain investment restrictions set forth in their
entirety in the Statement of Additional Information, which restrictions,
together with the fundamental investment objectives and policies of the Fund,
cannot be changed without approval by holders of a majority of the Fund's
outstanding voting shares, as explained in the Statement of Additional
Information. These restrictions include, but are not limited to, the following
items:
Not more than 10% of the Fund's net assets will, at any time, be subject
to repurchase agreements which mature in more than seven days.
The Fund will not invest more than 10% of its total assets, in restricted
securities. Restricted securities are those the sale of which is limited by
contract or law. They are usually traded in private, direct negotiations.
The Fund will not invest in exploration or development programs such as
oil or gas programs.
If a percentage limitation described above is adhered to at the time of
the investment by the Fund, a later increase or decrease in the percentage
resulting from any change in the value of the Fund's net assets will not
constitute a violation of the restriction.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value
per share next determined after receipt and acceptance of the order by Midas
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $500 for regular and gifts/transfers to minors custody accounts,
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and $100 for Midas retirement plans, which include Individual Retirement
Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit sharing and money purchase
plans, and 403(b) plan accounts. The minimum subsequent investment is $50. The
initial investment minimums are waived if you elect to invest $50 or more each
month in the Fund through the Midas Automatic Investment Program (see
"Additional Investments" below).
Initial Investment. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Midas Fund, mailed to Midas Service Center, P.O. Box 419789, Kansas
City, MO 64141-6789. Initial investments also may be made by having your bank
wire money, as set forth below, in order to avoid mail delays.
Additional Investments. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o 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. Each
Plan is designed to facilitate an automatic monthly investment of $25 or
more into your Fund account.
The Midas Bank Transfer Plan lets you purchase Fund shares on a
certain day each month by transferring electronically a specified
dollar amount from your regular checking account, NOW account, or
bank money market deposit account.
In the Midas Salary Investing Plan, part or all of your salary may
be invested electronically in shares of the Fund on each pay date,
depending upon your employer's direct deposit program.
The Midas Government Direct Deposit Plan allows you to deposit
automatically part or all of certain U.S. Government payments into
your Fund account. Eligible U.S. Government payments include
Social Security, pension benefits, military or retirement
benefits, salary, veteran's benefits and most other recurring
payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Midas Service Center, 1-800______. You may
modify or terminate the Bank Transfer Plan at any time by written notice
received at least 10 days prior to the scheduled investment date. To modify or
terminate the Salary Investing Plan or Government Direct Deposit Plan, you
should contact, respectively, your employer or the appropriate U.S. government
agency. The Fund reserves the right to redeem any account if participation in
the Program is terminated and the account's value is less than $500. The Program
does not assure a profit or protect against loss in a declining market, and you
should consider your ability to make purchases when prices are low.
o Check. Mail a check or other negotiable bank draft ($25 minimum), made
payable to Midas Fund, together with a Midas FastDeposit form to Midas
Service Center, P.O. Box 419789, Kansas City, MO 64141-6789. If you do
not use that form, please send a letter indicating the account number to
which the subsequent investment is to be credited, and name(s) of the
registered owner(s).
o Electronic Funds Transfer (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Midas Service
Center, 1-800______. We will contact the bank you designate on your
Account Application or Authorization Form to arrange for the EFT, which
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is done through the Automated Clearing House system, to your Fund
account. For requests received by 4 p.m., eastern time, the investment
will be credited to your Fund account ordinarily within two business
days. There is a $50 minimum for each EFT investment. 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 or deposit slip.
o Federal Funds Wire. You may wire money, by following the procedures set
forth below, to receive that day's net asset value per share.
Investing by Wire. For an initial investment by wire, you must first telephone
Midas Service Center, 1-800- 847-4200, to give the name(s) under which the
account is to be registered, tax identification number, the name of the bank
sending the wire, and to be assigned a Midas 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]; Midas 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 Midas Service Center, P.O. Box 419789, Kansas City, MO
64141-6789. This service is not available on days when the Federal Reserve wire
system is closed. Subsequent investments by wire may be made at any time without
having to call Midas Service Center by simply following the same wiring
procedures.
Shareholder Accounts. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). Stock certificates will be issued only for full
shares when requested in writing. In order to facilitate redemptions and
exchanges and provide safekeeping, we recommend that you do not request
certificates. You will receive transaction confirmations upon purchasing or
selling shares, and quarterly statements.
When Orders are Effective. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Midas
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be drawn
in U.S. dollars on a U.S. bank. The Fund reserves the right to reject any order.
Accounts are charged $30 by the Transfer Agent for submitting checks for
investment which are not honored by the investor's bank. The Fund may in its
discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's
special plans or services at any time. Shares or cash should not be withdrawn
from any tax-advantaged retirement plan described below, however, without
consulting a tax adviser concerning possible adverse tax consequences.
Additional information regarding any of the following services is available from
Midas Service Center, 1-800______.
Electronic Funds Transfer (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account through Midas's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
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the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check or deposit slip.
Systematic Withdrawal Plan. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed or variable amounts, subject to a minimum amount of
$100. Under the Systematic Withdrawal Plan, all dividends and other
distributions, if any, are reinvested in the Fund.
Assignment. Fund shares may be transferred to another owner. Instructions are
available from Midas Service Center, 1-800_________.
Tax-Advantaged Retirement Plans. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible for Federal income
tax purposes as noted below. Information on any of the plans described below is
available from Midas Service Center, 1-800_________.
The minimum investment to establish a Midas IRA or other retirement plan
is $___. Minimum subsequent investments are $___. The initial investment
minimums are waived if you elect to invest $___ or more each month in the Fund
through the Midas Automatic Investment Program. There are no set-up fees for any
Midas Retirement Plans. Subject to change on 30 days' notice, the plan custodian
charges Midas IRAs a $10 annual fiduciary fee, $10 for each distribution prior
to age 59 1/2, and a $20 plan termination fee; however, the annual fiduciary fee
is waived if your IRA has assets of $10,000 or more or if you invest regularly
through the Midas Automatic Investment Program.
o Individual Retirement Accounts. Anyone with earned income who is less
than age 70 1/2at the end of the tax year, even if also participating in
another type of retirement plan, may establish an IRA and contribute each
year up to $2,000 or 100% of earned income, whichever is less, and an
aggregate of up to $2,250 when a non-working spouse is also covered in a
separate spousal account. If each spouse has at least $2,000 of earned
income each year, they may contribute up to $4,000 annually. Employers
may also make contributions to an IRA on behalf of an individual under a
Simplified Employee Pension Plan ("SEP") in any amount up to 15% of up to
$150,000 of compensation. Generally, taxpayers may contribute to an IRA
during the tax year and through the next year until the income tax return
for that year is due, without regard to extensions. Thus, most
individuals may contribute for the 1995 tax year from January 1, 1995
through April 15, 1996.
Deductibility. IRA contributions are fully deductible for most taxpayers.
For a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is), a portion of IRA contributions is
deductible if adjusted gross income (before the IRA deductions) is
$40,000-$50,000 (if married) and $25,000-$35,000 (if single). Only IRA
contributions by a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse is) and has adjusted
gross income of more than $50,000 (if married) and $35,000 (if single)
will not be deductible. An eligible individual may establish a Midas IRA
under the prototype plan available through the Fund, even though such
individual or spouse actively participates in an employer-maintained
retirement plan.
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o IRA Transfer and Rollover Accounts. Special forms are available from
Midas Service Center, 1- 800_________, which make it easy to transfer or
roll over IRA assets to a Midas IRA. An IRA may be transferred from one
financial institution to another without adverse tax consequences.
Similarly, no taxes need be paid on a lump-sum distribution which you may
receive as a payment from a qualified pension or profit sharing plan due
to retirement, job termination or termination of the plan, so long as the
assets are put into an IRA Rollover account within 60 days of the receipt
of the payment. Withholding for Federal income tax purposes is required
at the rate of 20% for "eligible rollover distributions" made from any
retirement plan (other than an IRA) that are not directly transferred to
an "eligible retirement plan," such as a Midas Rollover Account.
o Profit Sharing and Money Purchase Plans. These provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees
generally to contribute (and deduct) up to $30,000 annually or, if less,
25% (15% for profit sharing plans) of compensation or self-employment
earnings of up to $150,000. Corporations and partnerships, as well as all
self-employed persons, are eligible to establish these Plans. In
addition, a person who is both salaried and self-employed, such as a
college professor who serves as a consultant, may adopt these retirement
plans based on self-employment earnings.
o Section 403(b) Accounts. Section 403(b)(7) of the Internal Revenue Code
of 1986, as amended ("Code"), permits the establishment of custodial
accounts on behalf of employees of public school systems and certain
tax-exempt organizations. A participant in such a plan does not pay taxes
on any contributions made by the participant's employer to the
participant's account pursuant to a salary reduction agreement, up to a
maximum amount, or "exclusion allowance." The exclusion allowance is
generally computed by multiplying the participant's years of service
times 20% of the participant's compensation included in gross income
received from the employer (reduced by any amount previously contributed
by the employer to any 403(b) account for the benefit of the participant
and excluded from the participant's gross income). However, the exclusion
allowance may not exceed the lesser of 25% of the participant's
compensation (limited as above) or $30,000. Contributions and subsequent
earnings thereon are not taxable until withdrawn, when they are received
as ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
By Mail. You may request that the Fund redeem any amount of shares by submitting
a written request to Midas Service Center, P.O. Box 419789, Kansas City, MO
64141-6789, signed by the record owner(s). If the written request is sent to the
Fund, it will be forwarded to the above address. If stock certificates have been
issued for shares being redeemed, they must accompany the written request.
By Telephone. You may telephone Midas Service Center, 1-800________ to expedite
redemption of Fund shares if share certificates have not been issued.
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You may redeem as little as $250 worth of shares by requesting Electronic
Funds Transfer (EFT) service. With EFT, you can redeem Fund shares
quickly and conveniently because Midas Service Center will contact the
bank designated on your Account Application or Authorization Form to
arrange for the electronic transfer of your redemption proceeds (through
the Automated Clearing House system) to your bank account. EFT proceeds
are ordinarily available in your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to
your authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time
will be redeemed from your account that day, and if after, on the next Fund
business day. Any subsequent changes in bank account information must be
submitted in writing, signature guaranteed, with a voided check or deposit slip.
Redemptions by telephone may be difficult or impossible to implement during
periods of rapid changes in economic or market conditions.
Redemption Price. The redemption price is the net asset value per share next
determined after receipt of the redemption request in proper form. Registered
broker/dealers, investment advisers, banks, and insurance companies may open
accounts and redeem shares by telephone or wire and may impose a charge for
handling purchases and redemptions when acting on behalf of others.
Redemption Payment. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York Stock
Exchange is closed or trading thereon is restricted as determined by the SEC;
(ii) under emergency circumstances as determined by the SEC that make it not
reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a ten business day delay to allow the check or transfer to
clear. The ten day clearing period does not affect the trade date on which a
purchase or redemption order is priced, or any dividends and other distributions
to which you may be entitled through the date of redemption. The clearing period
does not apply to purchases made by wire. Due to the relatively higher cost of
maintaining small accounts, the Fund reserves the right, upon 45 days' notice,
to redeem any account, other than IRA and other Midas prototype retirement plan
accounts, worth less than $500 except if solely from market action, unless an
investment is made to restore the minimum value.
Telephone Privileges. You automatically have all telephone privileges to, among
other things, authorize purchases, redemptions and exchanges, with EFT or by
other means, unless declined on the Account Application or otherwise in writing.
Neither the Fund nor Midas Service Center shall be liable for any loss or damage
for acting in good faith upon instructions received by telephone and believed to
be genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it does not, it may be liable for
losses due to unauthorized or fraudulent transactions. These procedures include
requiring personal identification prior to acting upon telephone instructions,
providing written confirmation of such transactions, and tape recording
telephone conversations. The Fund may modify or terminate any telephone
privileges or shareholder services (except as noted) at any time without notice.
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Signature Guarantees. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. A notary
public may not guarantee signatures. The Transfer Agent may require further
documentation, and may restrict the mailing of redemption proceeds to your
address of record within 30 days of such address being changed unless you
provide a signature guarantee as described above.
DISTRIBUTIONS AND TAXES
Distributions. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Midas
Service Center, 1-800________. For Federal income tax purposes, dividends and
other distributions are treated in the same manner whether received in
additional Fund shares or in cash. Any election will remain in effect until you
notify Midas Service Center to the contrary.
Taxes. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (generally consisting
of net investment income, net short term capital gains, and net gains from
certain foreign currency transactions) and net capital gain (the excess of net
long term capital gain over net short term capital loss) that is distributed to
its shareholders. Dividends paid by the Fund from its investment company taxable
income (whether paid in cash or in additional Fund shares) generally are taxable
to shareholders, other than shareholders that are not subject to tax on their
income, as ordinary income to the extent of the Fund's earnings and profits; a
portion of those dividends may be eligible for the corporate dividends-received
deduction. Distributions by the Fund of its net capital gain (whether paid in
cash or in additional Fund shares), when designated as such by the Fund, are
taxable to the shareholders as long term capital gains, regardless of how long
they have held their Fund shares. The Fund notifies its shareholders following
the end of each calendar year of the amounts of dividends and capital gain
distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction. Any
dividend or other distribution paid by the Fund will reduce the net asset value
of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes.
The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Such withholding also is required with respect
to shareholders who are otherwise subject to backup withholding.
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The foregoing is only a summary of some of the important Federal income
tax considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of the Fund's investments and all other
assets minus any liabilities. The value of one share is determined by dividing
the net assets by the total number of shares outstanding. This is referred to as
"net asset value per share," and 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 business day of the Fund. A business day of the Fund is any day on which
the New York Stock Exchange is open for trading. The following are not business
days of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Foreign securities are
valued on the basis of quotations from a primary market in which they are traded
and are translated from the local currency into U.S. dollars using current
exchange rates. Securities and other assets for which quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Foreign securities are
valued on the basis of quotations from a primary market in which they are traded
and are translated from the local currency into U.S. dollars using current
exchange rates. Securities and other assets for which quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
THE INVESTMENT MANAGER
Midas Management Corporation (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.
The Investment Manager manages the investment and reinvestment of the Fund's
assets, subject to the control and final direction of the Board of Directors.
The Investment Manager may allocate transactions to broker/dealers that remit a
portion of their commissions as a credit against the Fund's expenses.
For its services, the Investment Manager receives a fee based on the
average daily net assets of the Fund, at the annual rate of 1% on the first $200
million and declining thereafter as a percentage of average daily net assets.
This fee is higher than fees paid by most other investment companies. During the
fiscal year ended December 31, 1994, investment management fees paid by the Fund
to Excel Advisors, Inc., its former investment adviser, represented
approximately 1.00% of average daily net assets. The Investment Manager provides
certain administrative services to the Fund at cost. Bassett S. Winmill may be
deemed a controlling person of the Investment Manager.
THE SUBADVISER
The Investment Manager has entered into a sub-advisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
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such investments. The Subadviser also provides the Investment Manager with
advice as to allocating the Fund's portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Manager, not the Fund, pays the Subadviser monthly a percentage of the
Investment Manager's net fees based upon the Fund's performance and its total
net assets ranging from ten to fifty percent. The Subadviser, whose principal
business address is 7 - 8 Kendrick Mews, London, U.K. SW7 3HG, is a
majority-owned subsidiary of Lion Mining Group, which is controlled by Andrew F.
Malim. The Subadviser has not served directly as an investment adviser to a U.S.
mutual fund, although Mr. Kjeld Thygesen, its Managing Director, has been the
portfolio manager of the Fund since January 1992.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement between the Fund and Midas Service
Center, Inc. (the "Distributor"), the Distributor acts as the Fund's principal
agent for the sale of Fund shares. The Fund has also adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to
the Plan, the Fund pays the Distributor a distribution fee in an amount of 0.25%
percent per annum of the Fund's average daily net assets. This fee may be
retained by the Distributor or passed through to brokers, banks and others who
provide services to their customers who are Fund shareholders at the rate of
thirty-five basis points on such customer balances. The Fund will pay the fee to
the Distributor until either the Plan is terminated or not renewed. In that
event, the Distributor's expenses in excess of fees received or accrued through
the termination day will be the Distributor's sole responsibility and not
obligations of the Fund. During the period they are in effect, the Distribution
Agreement and Plan obligate the Fund to pay fees to the Distributor as
compensation for its service and distribution activities. If the Distributor's
expenses exceeds the fee, the Fund will not be obligated to pay any additional
amount to the Distributor. If the Distributor's expenses are less than the fee,
it may realize a profit.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as a Maryland corporation (the "Corporation") in 1995. Prior to August
__, 1995, the Fund operated under the name "Excel Midas Gold Shares, Inc.," a
Minnesota corporation organized in 1985. The Corporation is authorized to issue
up to 1,000,000,000 shares ($.01 par value). The Board of Directors of the
Corporation may establish additional series or classes of shares, although it
has no current intention of doing so.
The Fund's stock is freely assignable by way of pledge (as, for example,
for collateral purposes), gift, settlement of an estate and also by an investor
to another investor. Each share has equal dividend, voting, liquidation and
redemption rights with every other share. The shares have no preemptive,
conversion or cumulative voting rights and they are not subject to further call
or assessment.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters which would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 10% of the Fund's shares may call
a meeting at any time. There will normally be no meetings of shareholders for
the purpose of electing Directors unless fewer than a majority of the Directors
holding office have been elected by shareholders. Shareholder meetings will be
held in years in which shareholder vote on the Fund's investment management
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agreement, plan of distribution, or fundamental investment objectives, policies
or restrictions is required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts
as custodian of the Fund's assets and may appoint one or more subcustodians
provided such subcustodianship is in compliance with the rules and regulations
promulgated under the 1940 Act. The Fund may maintain a portion of its assets in
foreign countries pursuant to such subcustodianships and related foreign
depositories. Utilization by the Fund of such foreign custodial arrangements and
depositories will increase the Fund's expenses. All of the Fund's gold,
platinum, and silver bullion is held by Wilmington Trust Company, Rodney Square
North, Wilmington, DE 19890. The custodian also performs certain accounting
services for the Fund.
The Fund's transfer and dividend disbursing agent is DST Systems, Inc.,
P.O. Box 419789, Kansas City, MO 64141-6789. The Distributor provides certain
shareholder administration services to the Fund and is reimbursed its cost by
the Fund.
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APPENDIX A
Options
When the Fund writes a call, it receives a premium and agrees to
sell the callable securities to a purchaser of a call during the call period
(usually not more than 9 months except in the case of certain debt securities)
at a fixed exercise price (which may differ from the market price of the
underlying security) regardless of market price changes during the call period.
If the call is exercised, the Fund foregos any gain from an increase in the
market price over the exercise price. To terminate its obligation on a call
which it has written, the Fund may purchase a call in a "closing purchase
transaction." A profit or loss will be realized depending on the amount of
option transaction costs and whether the premium previously received is more or
less than the price of the call purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the underlying security and
the premium received. Any such profits are considered short-term gains for
federal tax purposes and, when distributed by the Fund, are taxable to its
shareholders as ordinary income.
When the Fund buys a put, it pays a premium and has the right to
sell the underlying security to the seller of the put during the put period at a
fixed exercise price. If the market price of the underlying securities is above
the exercise price and, as a result, the put is not exercised or resold (whether
or not at a profit), the put will become worthless at its expiration date.
An option position may be closed out only on an exchange which
provides a secondary market for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
The put and call activities of the Fund may affect its turnover rate and
brokerage commission payments. The exercise of calls written by the Fund may
cause the Fund to sell portfolio securities, thus increasing the Fund's turnover
rate in a manner beyond the Fund's control. The exercise of puts may also cause
the sale of securities, also increasing turnover; although such exercise is
within the Fund's control, holding a protective put might cause the Fund to sell
the underlying securities for reasons which would not exist in the absence of
the put. The put and call activities of the Fund will be restricted by the
limited availability of options relating to Mining Securities and gold and
silver that are listed on domestic exchanges or quoted at some future date on
Nasdaq. The Fund will pay a brokerage commission each time it buys or sells a
put or call or sells an asset in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct purchases
or sales or portfolio assets. The Fund's custodian or a securities depository
acting for it will act as the Fund's escrow agent as to the securities on which
the Fund has written calls, or as to other securities acceptable for such
escrow, so that pursuant to the rules of the Option Clearing Corporation and
certain exchanges, no margin deposit will be required of the Fund. Until the
securities are released from escrow, they cannot be sold by the Fund; this
release will take place on the expiration of the call or the Fund's entering
into a closing purchase transaction. For information on the valuation of puts
and calls, see "Valuing Shares" in the Prospectus.
The Commodity Futures Trading Commission (the "CFTC"), a Federal
agency, regulates trading activity on the commodity exchanges pursuant to the
Commodity Exchange Act, as amended. The CFTC requires the registration of
"commodity pool operators," defined as any person engaged in a business which is
of the nature of an investment trust, syndicate or similar form of enterprise,
and who, in connection therewith, solicits, accepts or receives from others,
funds, securities or property, either directly or through capital contributions,
the sale of stock or other forms of securities or otherwise, for the purpose of
trading in any commodity for future delivery on or subject to the rules of any
contract market, but does not include such persons not within the intent of this
definition as the CFTC may specify by rule, regulation or order. The CFTC has
adopted certain regulations which exclude from the definition of "commodity pool
A-1
<PAGE>
operator" an investment company, like the Fund, registered with the Securities
and Exchange Commission under the 1940 Act, and any principal or employee
thereof, which investment company files a notice of eligibility with the CFTC
and the National Futures Association containing certain information about the
investment company and representing that it (i) will use commodity futures or
commodity options contracts solely for bona fide hedging purposes, or for other
purposes so long as aggregate initial margin and premiums required in connection
with non-hedging positions do not exceed 5% of the liquidation value of the
Fund's portfolio, (ii) will not be, and has not been, marketing participations
to the public as or in a commodity pool or otherwise as or in a vehicle for
trading in the commodity futures or commodity options markets, (iv) will
disclose in writing to each prospective participant the purpose of and the
limitations on the scope of the commodity futures and commodity options trading
in which the entity intends to engage, and (v) will submit to such special calls
as the CFTC may make to require the qualifying entity to demonstrate compliance
with these representations. The "bona fide hedging" transactions and positions
authorized by these regulations mean transactions or positions in a contract for
future delivery on any contract market, where such transactions or positions
normally represent a substitute for transactions to be made or positions in a
contract for future delivery on any contract market, where such transactions or
positions normally represent a substitute for transactions to be made or
positions to be taken at a later time in a physical marketing channel, and where
they are economically appropriate to the reduction of risks in the conduct and
management of a commercial enterprise, and where they arise from (i) the
potential change in the value of assets which a person owns, produces,
manufactures, processes or merchandises or anticipates owning, producing,
manufacturing, processing or merchandising, (ii) the potential change in the
value of liabilities a person owes or anticipates incurring or (iii) the
potential change in the value of services which a person provides, purchases or
anticipates providing or purchasing; provided that, notwithstanding the
foregoing, no transactions or positions shall be classified as bona fide hedging
unless their purpose is to offset price risk incidental to commercial cash or
spot operations and such positions are established and liquidated in an orderly
manner in accordance with sound commercial practices and unless certain
statements are filed with the CFTC with respect to such transactions or
positions. The Fund intends to meet these requirements or such other
requirements as the CFTC or its staff may from time to time issue, in order to
render registration of the Fund and any of its principals and employees as a
commodity pool operator unnecessary.
Repurchase Agreements
A repurchase agreement is an instrument under which securities are
purchased from a bank or securities dealer with an agreement by the seller to
repurchase the securities at a mutually agreed date, interest rate and price.
Generally, repurchase agreements are of short duration -- usually less than a
week, but on occasion are for longer periods. The Fund will limit its investment
in repurchase agreements with a maturity of more than seven days to 10% of the
Fund's total assets. In investing in repurchase agreements, the Fund's risk is
limited to the ability of the bank or securities dealer to pay the agreed upon
amount at the maturity of the repurchase agreement. In the opinion of the Fund's
investment adviser, such risk is not material; if the other party defaults, the
underlying security constitutes collateral for the obligation to pay -- although
the Fund may incur certain delays in obtaining direct ownership of the
collateral, plus costs in liquidating the collateral. In the event the bank or
securities dealer defaults on the repurchase agreement, the Fund's investment
adviser believes that, barring extraordinary circumstances, the Fund will be
entitled to sell the underlying securities (if they are not consistent with the
investment objectives and policies of the Fund) or otherwise receive adequate
protection (as defined in the federal Bankruptcy Code) for its interest in such
securities. The Fund's custodian, or a duly appointed subcustodian, will hold
the securities underlying any repurchase agreement in a segregated account or
such securities may be part of the Federal Reserve Book Entry System. The market
A-2
<PAGE>
value of the collateral underlying the repurchase agreement will be determined
on each business day. If at any time the market value of the collateral falls
below the repurchase price of the repurchase agreement (including any accrued
interest), the Fund will promptly receive additional collateral (so the total
collateral is in an amount at least equal to the repurchase price plus accrued
interest). To the extent that proceeds from any sale upon a default were less
than the repurchase price, the Fund could suffer a loss. If the Fund owns
underlying securities following a default on the repurchase agreement, the Fund
will be subject to the risk associated with changes in the market value of such
securities.
A-3
<PAGE>
[Left Side of Back Cover Page]
MIDAS FUND
=================================================
11 Hanover Square
New York, NY 10005
1-800-
- -------------------------------------------------
Call toll-free for Fund performance, telephone
purchases, and to obtain information concerning
your account.
1-800-
- -------------------------------------------------
[Right Side of Back Cover Page]
MIDAS FUND
=================================================
Seeking capital appreciation and protection
against inflation and, secondarily, current
income
Electronic Funds Transfers
Automatic Investment Program
Retirement Plans: IRA, SEP-IRA,
Qualified Profit Sharing/Money
Purchase, 403(b), Keogh
- -------------------------------------------------
Minimum Initial Investment:
Regular Accounts, $500;
IRAs, $100; Automatic
Investment Programs, $50
Minimum Subsequent Investments: $50
- -------------------------------------------------
Prospectus
August __, 1995
<PAGE>
MIDAS FUND ACCOUNT APPLICATION
For regular accounts only. For an IRA Application, call 1-800-400-MIDAS
Mail to: Midas Fund, Box 419789, Kansas City, MO 64141-6789.
1/ Registration (Please print)
Individual
First Name:
Middle Initial:
Last Name:
Social Security Number:
Joint Tenant
First Name:
Middle Initial:
Last Name:
Social Security Number:
Note: Registration will be Joint Tenants With Right of Survivorship,
unless otherwise specified.
Gift/Transfer to a Minor
Name of Custodian (only one):
Name of Minor (only one):
State of Uniform Gifts/Transfers to Minors Act:
Custodian's State of Residence:
Minor's Social Security Number:
Minor's Date of Birth:
Corporations, Partnerships, Trusts and others
Name of Corporation, Partnership, or other Organization:
Name of individual(s) authorized to act for the Corporation,
Partnership, or other organization:
Tax I.D. Number:
Name of Trustee(s):
Date of Trust Instrument:
2/ Mailing Address, Telephone Number and Citizenship
Street
City
State
Zip
Daytime Telephone Number
<PAGE>
Owner
Citizen of:|_| U.S. |_| Other:
Joint Owner
Citizen of: |_| U.S. |_| Other:
3/ Amount invested ($500 minimum): Note: The $500 minimum initial
investment is waived if you elect to invest through the Midas Bank
Transfer Plan, the Midas Salary Investing Plan and/or the Midas
Government Direct Deposit Plan (see Section 4, over).
Initial Investment $
By Check -- Please make your check(s) payable to Midas
Fund and enclose with this Account Application.
By Wire -- Funds were wired on Date Assigned account number*
*Please call 1-800-400-MIDAS before making an initial investment by
wire, as an account number must be assigned to you.
4/ Midas Automatic Investment Program ($100 minimum initial investment)
|_| Midas Bank Transfer Plan - Automatically purchase shares each
month by transferring the dollar amount you specify from your
regular checking account, NOW account, or bank money market
deposit account. Please attach a voided bank account check.
Amount $ Day of Month: |_| 10th, |_| 15th or |_| 20th ($50
minimum)
|_| Midas Salary Investing Plan- The enrollment form will be sent
to the above address or call 1-800-400-MIDAS to have the form
sent to your place of employment.
|_| Midas Government Direct Deposit Plan - Your request will be
processed and you will receive the enrollment form.
5/ Distributions
If no box is checked, the Automatic Compounding Option will be assigned
to reinvest all dividends and distributions in your account to increase
the shares you own.
Automatic Compounding Option -|_|Dividends and distributions reinvested
in additional shares.
Payment Option: |_| Dividends in cash, distributions reinvested, or
|_| Dividends and distributions in cash.
6/ Investments and Redemptions by Telephone
Shareholders automatically enjoy the privilege of calling
1-800-400-MIDAS to purchase additional shares of the Fund or to
expedite a redemption and have the proceeds sent directly to their
address or to their bank account, unless declined by checking the box
|_|. The Midas link with your bank offers flexible access to your
<PAGE>
money. Transfers occur only when you initiate them and may be made
through either bank wire or via electronic bank transfer through Midas
Electronic Funds Transfer. To establish this bank account link, attach
a voided check from your bank account. One common name must appear on
your Midas and bank accounts.
7/ Signature and Certification to Avoid Backup Withholding
By signing this application, I certify that: I have received and read
the prospectus for Midas Fund and I agree to the terms of the
prospectus. I have the authority and legal capacity to purchase mutual
fund shares, am of legal age and believe each investment is suitable
for me. I understand that neither the Fund nor Investor Service Center,
Inc. is a bank, and Fund shares are not backed or guaranteed by any
bank or insured by the FDIC. I ratify any instructions, including
telephone instructions, given on this account. I agree that neither the
Fund nor Investor Service Center, Inc. will be liable for any loss,
cost or expense for acting upon any instructions believed by it to be
genuine and in accordance with reasonable procedures designed to
prevent unauthorized transactions. I understand that for joint tenant
accounts, "I" refers to all account owners, and each of the account
owners agrees that any account owner has authority to act on the
account without notice to the other account owners. Investor Service
Center, Inc. in its sole discretion, and for its protection, may
require the written consent of all account owners prior to acting upon
the instructions of any account owner. I (we) understand telephone
conversations with Investor Service Center, Inc. representatives are
tape-recorded so it can compare actions taken with original
instructions should clarification be necessary and hereby consent to
such recording. The following is required by Federal tax law to avoid
backup withholding: "By signing below, I certify under penalties of
perjury that (1) the Social Security or taxpayer identification number
provided above is correct, and (2)I am not subject to IRS backup
withholding because (a) I am exempt from backup withholding, or (b) I
have not been notified by the IRS that I am subject to backup
withholding, or (C) I have been notified by the IRS that I am no longer
subject to backup withholding." (Please cross out item 2 if it does not
apply to you.)
Signature |_| Owner |_| Trustee |_| Custodian Date
Signature of Joint Owner (if any) Date
<PAGE>
Statement of Additional Information August __, 1995
MIDAS FUND, INC.
11 Hanover Square
New York, NY 10005
1-800-_______
This Statement of Additional Information regarding Midas Fund, Inc.
(the "Fund") is not a prospectus and should be read in conjunction with the
Fund's Prospectus dated August __, 1995. Prior to August __, 1995, the Fund was
known as Excel Midas Gold Shares, Inc. The Prospectus is available to
prospective investors without charge upon request to Midas Service Center, the
Fund's Distributor, by calling 1-800_______.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS ................................................... 2
OFFICERS AND DIRECTORS .................................................... 2
THE INVESTMENT MANAGER .................................................... 4
THE SUBADVISER AND THE SUBADVISORY AGREEMENT ............................. 5
CALCULATION OF PERFORMANCE DATA ........................................... 6
DISTRIBUTION OF SHARES .................................................... 9
DETERMINATION OF NET ASSET VALUE .......................................... 10
PURCHASE OF SHARES ........................................................ 11
ALLOCATION OF BROKERAGE ................................................... 11
DISTRIBUTIONS AND TAXES ................................................... 13
REPORTS TO SHAREHOLDERS ................................................... 15
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT ......................... 15
AUDITORS .................................................................. 15
FINANCIAL STATEMENTS ...................................................... 15
APPENDIX--DESCRIPTIONS OF BOND RATINGS .................................... 16
1
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions set forth below
which, together with the fundamental investment objective and policies of the
Fund, cannot be changed without approval by holders of a majority of the
outstanding voting shares of the Fund. As defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares of the Fund are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund. These investment restrictions
are set forth below:
(1) The Fund will not invest more than 5% of its net assets (taken at the
lower of cost or value) in securities of any one company. The Fund will also
limit its investment in a single company to not more than 10% of that company's
outstanding voting securities.
(2) The Fund will not invest more than 5% of its total assets in
securities of companies, including any predecessors, less than three years old.
(3) The Fund will not invest in another investment company except as a
part of a plan of merger, acquisition or consolidation.
(4) The Fund will not buy or sell real estate.
(5) The Fund will not invest in any commodities other than gold, silver
and platinum, and will not invest in commodities futures contracts other than
gold and silver futures contracts.
(6) The Fund will not buy on margin or sell short.
(7) The Fund will not pledge or mortgage its assets, except to the extent
that writing covered call options may be deemed to be pledging or mortgaging
assets.
(8) The Fund will not borrow money or property (for example, securities),
except that as a temporary measure for extraordinary purposes or emergencies the
Fund may borrow from banks up to 5% of the value of its total assets.
(9) The Fund will not make cash loans. However the Fund may purchase
bonds or other debt securities sold publicly, including short-term securities
which may be acquired under agreements by the sellers to repurchase; provided
that not more than 10% of the Fund's net assets will, at any time, be subject to
repurchase agreements which mature in more than seven days. The Fund does not
consider these debt securities and other short-term investments to be loans.
(10) The Fund will not invest more than 10% of its total assets, in
restricted securities. Restricted securities are those the sale of which is
limited by contract or law. They are usually traded in private, direct
negotiations.
(11) The Fund will not act as an underwriter.
(12) The Fund will not buy any securities of a company if it knows that
the officers or directors of the Fund, who own 1/2 of 1% or more of the
company's securities, together own more than 5% of the company's securities.
(13) The Fund will not invest in exploration or development programs,
such as oil or gas programs.
If a percentage limitation described above is adhered to at the time of
the investment by the Fund, a later increase or decrease in the percentage
resulting from any change in the value of the Fund's net assets will not
constitute a violation of the restriction.
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices and
principal occupations during the last five years are set forth below. Unless
otherwise noted, the address of each is 11 Hanover Square, New York, NY 10005.
RUSSELL E. BURKE III -- Director. 36 East 72nd Street, New York, NY 10021. He is
President of Russell E. Burke III, Inc. Fine Art, New York, New York. From 1988
to 1991, he was President of Altman Burke Fine Arts, Inc. From 1983 to 1988, he
was Senior Vice President of Kennedy Galleries.
BRUCE B. HUBER, CLU -- Director. 298 Broad Street, Red Bank, NJ 07701. He is
President of Huber, Hogan & Knotts, Inc. financial consultants and insurance
planners. He was born February 7, 1930. From 1988 to 1990, he was Chairman of
2
<PAGE>
Bruce Huber Associates. From 1987 to 1988, he was Chairman of Economic Benefits
Corporation, and prior thereto President of Bruce Huber Associates, Inc., a
financial and insurance consulting firm specializing in estate, corporate, and
executive benefit planning.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry.
MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief Financial
Officer. He is Co-President, Co-Chief Executive Officer, and Chief Financial
Officer of the Investment Manager and certain of its affiliates. He was born
November 26, 1957. He received his M.B.A. from the Fuqua School of Business at
Duke University in 1987. From 1983 to 1985 he was Assistant Vice President and
Director of Marketing of E.P. Wilbur & Co., Inc., a real estate development and
syndication firm and Vice President of E.P.W. Securities, its broker/dealer
subsidiary. He is the brother of Thomas B. Winmill.
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is Co-President, Co- Chief Executive Officer, and General
Counsel of the Investment Manager and certain of its affiliates. He was born
June 25, 1959. He was associated with the law firm of Harris, Mericle & Orr from
1984 to 1987. He is a member of the New York State Bar. He is the brother of
Mark C. Winmill.
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. He was born March 1, 1955.
From 1993 to 1995, he was Associate Director -- Proprietary Trading at Barclays
De Zoete Wedd Securities Inc., from 1992 to 1993 he was Director, Bond Arbitrage
at WG Trading Company, and from 1989 to 1992 he was Vice President of Wilkinson
Boyd Capital Markets.
BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. He was born June 11, 1941. He
is a Chartered Financial Analyst, a member of the Association for Investment
Management and Research, and a member of the New York Society of Security
Analysts. From 1986 to 1988, he managed private accounts, from 1981 to 1986, he
was Vice President of Morgan Stanley Asset Management, Inc. and prior thereto
was a portfolio manager and member of the Finance and Investment Committees of
American International Group, Inc., an insurance holding company.
WILLIAM K. DEAN, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer
and Chief Accounting Officer of the Investment Manager and its affiliates. He
was born September 5, 1955. From 1984 to 1995 he held various positions with The
Dreyfus Corporation, a mutual fund company. He is a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Investment Manager and its affiliates. He was born September
13, 1964. From 1991 to 1994 he was associated with the law firm of Skadden,
Arps, Slate, Meagher & Flom. He is a member of the New York State Bar.
* Thomas B. Winmill is an "interested person" of the Fund as defined by the 1940
Act, because of his positions with the Investment Manager.
Compensation Table
<TABLE>
<CAPTION>
====================================================================================================================================
Total Compensation
Pension or Retirement Estimated Annual From Registrant and
Name of Person, Aggregate Compensa- Benefits Accrued as Benefits Upon Fund Complex Paid to
Position tion From Registrant Part of Fund Expenses Retirement Directors
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Russell E. Burke III $500 None None $____ from 3 Funds
Director
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce B. Huber $500 None None $______ from 6 Funds
Director
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Hunt $500 None None $_____ from 6 Funds
Director
- ------------------------------------------------------------------------------------------------------------------------------------
Frederick A. Parker $500 None None $______ from 6 Funds
Director
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Russell $500 None None $______ from 6 Funds
Director
- ------------------------------------------------------------------------------------------------------------------------------------
Mark C. Winmill None None None None
Co-President
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas B. Winmill, None None None None
Director, Co-President
- ------------------------------------------------------------------------------------------------------------------------------------
Steven A. Landis None None None None
Senior Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
Brett B. Sneed None None None None
Senior Vice President
====================================================================================================================================
</TABLE>
Directors who are not "interested persons" of the Fund may elect to defer
receipt of fees for serving as a Director of the Fund. No officer, Director or
employee of the Fund's Investment Manager receives any compensation from the
Fund for acting as an officer, Director or employee of the Fund. As of April 28,
1994, officers and Directors of the Fund owned less than 1% of the outstanding
shares of the Fund. As of April 1, 1995, no shareholder was known by the Fund to
own of record 5% or more of the outstanding shares of the Fund.
THE INVESTMENT MANAGER
Midas Management Corporation (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including the regular furnishing of advice with respect to portfolio
transactions. As compensation for its services to the Fund, the Investment
Manager is entitled to a fee, payable within five days after the end of each
fiscal quarter, based upon the Fund's average daily net assets. Under the Fund's
Investment Advisory Agreement, the Investment Manager receives a fee at the
annual rate of:
1.00% of the first $200 million of the Fund's average daily net asset
.95% of average daily net assets over $200 million up to $400 million
.90% of average daily net assets over $400 million up to $600 million
.85% of average daily net assets over $600 million up to $800 million
.80% of average daily net assets over $800 million up to $1 billion
.75% of average daily net assets over $1 billion.
The percentage fee is calculated on the daily value of the Fund's net assets at
the close of each business day. The foregoing fees are higher than fees paid by
most other investment companies.
All costs and expenses (other than those specifically referred to as
being borne by the Investment Manager) incurred in the operation of the Fund are
borne by the Fund. These expenses include, among others, interest, taxes,
brokerage fees and commissions, fees of the directors who are not full-time
employees of the Investment Manager or any of its affiliates, expenses of
directors' and shareholders' meetings, including the cost of printing and
mailing proxies, expenses of insurance premiums for fidelity and other coverage,
expenses of repurchase and redemption of shares, expenses of issue and sale of
shares, expenses of printing and mailing stock certificates representing shares
of the Fund, association membership dues, charges of custodians, transfer
agents, dividend disbursing agents and accounting services agents, and
bookkeeping, auditing and legal expenses. The Fund will also pay the fees and
bear the expense of registering and maintaining the registration of the Fund and
its shares with the Securities and Exchange Commission and registering or
qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to existing Fund shareholders.
4
<PAGE>
The Investment Management Agreement dated August __, 1995 between the
Investment Manager and the Fund was approved by the shareholders of the Fund on
that date. The Fund's Investment Management Agreement continues from year to
year only if a majority of the Fund's directors (including a majority of
disinterested directors) approve. The Fund's Investment Management Agreement may
be terminated by either the Fund or the Investment Manager on 60 days' written
notice to the other, and terminates automatically in certain situations.
For the years ended December 31, 1992, 1993 and 1994, Excel Advisors,
Inc., the Fund's previous investment adviser, earned, before reimbursement of
certain expenses, $54,991, $72,039 and $85,126, respectively, in fees from the
Fund. These fees were calculated pursuant to the same fee schedule under which
the Investment Manager's fee is currently calculated. For the years ended
December 31, 1992, 1993 and 1994, Excel Advisors, Inc. reimbursed $15,536, $0
and $0, respectively, to the Fund for expenses in excess of the expense
limitations under the Investment Advisory Agreement.
The Investment Manager, a registered investment adviser, is a
wholly-owned subsidiary of Bull & Bear Group, Inc. ("Group"). The other
principal subsidiaries of Group include Bull & Bear Service Center, Inc. (which
may do business as "Midas Service Center"), a registered broker-dealer, and Bull
& Bear Securities, Inc., a registered broker/dealer providing discount brokerage
services.
Group is a publicly-owned company whose securities are listed on the
Nasdaq and traded in the over-the-counter market. Bassett S. Winmill may be
deemed a controlling person of Group on the basis of his ownership of 100% of
Group's voting stock and, therefore, of the Investment Manager. The Bull & Bear
Funds, each of which is managed by the Investment Manager, had net assets in
excess of approximately $230,000,000 as of May 25, 1995.
THE SUBADVISER AND THE SUBADVISORY AGREEMENT
The Investment Manager has entered into a subadvisory agreement with Lion
Resource Management Limited (the "Subadviser") for certain subadvisory services.
The Subadviser advises and consults with the Investment Manager regarding the
selection, clearing and safekeeping of the Fund's portfolio investments and
assists in pricing and generally monitoring such investments. The Subadviser
also provides the Investment Manager with advice as to allocating the Fund's
portfolio assets among various countries, including the United States, and among
equities, bullion, and other types of investments, including recommendations of
specific investments.
In consideration of the Subadviser's services, the Investment Manager,
and not the Fund, pays to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are defined as the actual amounts received by the
Investment Manager as compensation less reimbursements, if any, pursuant to the
guaranty of the Investment Management Agreement and waivers of such compensation
by the Investment Manager. The amount of the percentage is determined by the
grid and accompanying definitions set forth as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
RELATIVE PERFORMANCE(A)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS(B) More than 50 basis points Within 50 basis points More than 50 basis
better than BTR of BTR points below BTR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<=$15,000,000 30% 20% 10%
- -------------------------------------------------------------------------------------------------------------------
>$15,000,000 and 40% 30% 20%
<=$50,000,00
- -------------------------------------------------------------------------------------------------------------------
>$50,000,000 50% 40% 30%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
A. "Relative Performance" is determined from comparing the total return
performance of the Fund and the total return performance of the
"Benchmark Performance" of the objective category of "precious metals"
funds ("BTR") as determined by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The
Relative Performance is determined as of the last calendar day of each
month ("Performance Determination Date") and measures the Relative
Performance for the most recent 12 month period ("Measurement Period"),
except that for the first 12 months of the Subadvisory Agreement,
Relative Performance is based upon annualized returns, the first three
Performance Determination Dates are the next three calendar quarter ends
after the effective date of the Subadvisory Agreement, and the
5
<PAGE>
Measurement Periods are the most recent three months and the fourth
Performance Determination Date is the next calendar quarter end and the
Measurement Period is the most recent twelve months.
B. "Total Net Assets" are the total net assets of the Fund as of the
Performance Determination Date.
The Subadvisory Agreement is not assignable and automatically terminates
in the event of its assignment, or in the event of the termination of the
Investment Management Agreement. The Subadvisory Agreement may also be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the Fund, by the Board of Directors or by a vote of Fund
shareholders. The Subadvisory Agreement provides that the Subadviser shall not
be liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with any investment policy or the
purchase, sale or retention of any security on the recommendation of the
Subadviser. Nothing contained in the Subadvisory Agreement, however, shall be
construed to protect the Subadviser against any liability to the Fund by reason
of willful malfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of obligations and duties under
the Subadvisory Agreement.
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost.
Average Annual Total Return
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)^n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The following table sets forth the average annual total return for the
Fund for the periods ended December 31, 1994, as set forth below:
Periods Ended December 31, 1994
Since inception (Jan. 8, 1986) 6.66%
Five Years 7.68%
One Year (17.27%)
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Cumulative Total Return
Cumulative total return is calculated by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = ( ERV-P ) 100
-----------
P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 payment made at the beginning of such period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The cumulative return for the Fund for the period beginning at the
inception of the Fund (January 8, 1986) and ending December 31, 1994 is 78.67%.
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 data.
Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Index (20 year) Bond. 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,
manage ment results, income and dividend records, and price ranges.
Composite Index -- 70% Standard & Poor's 500 Composite Stock Price Index ("S&P
500") and 30% Nasdaq Industrial Index.
Composite Index -- 35% S&P 500 Index and 65% Salomon Brothers High Grade Bond
Index.
Composite Index -- 65% S&P 500 Index and 35% Salomon Brothers High Grade Bond
Index.
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.
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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.
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 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 -- is composed 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, Mutual Fund Values, 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 3000 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 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 perfor mance, yields, indexes, and
portfolio holdings.
Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
Salomon Brothers 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 Brothers Broad Investment-Grade Bond -- is a market-weighted index that
contains approximately 4700 individually priced investment-grade corporate bonds
rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.
Salomon Brothers Market Performance tracks the Salomon Brothers bond index.
S&P 500 -- is a well diversified list of 500 companies representing the U.S.
stock market.
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Standard & Poor's 100 Composite Stock Price Index -- is a well diversified list
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 the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.
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.
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.
Wall Street Journal, a nationally distributed newspaper which regularly covers
financial news.
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 S&P 500.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Midas Service Center acts as the
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 sold 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 one-quarter of one
percent per annum of the Fund's average daily net assets as compensation for its
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 or service shareholder accounts such as office rent and equipment,
employee salaries, employee bonuses and other overhead expenses.
Among other things, the Plan provides that (1) the Distributor will
submit to the Corporation's Board of Directors at least quarterly, and the
Directors will review, reports regarding all amounts expended under the Plan and
the purposes for which such expenditures were made, (2) the Plan will continue
in effect only so long as it is approved at least annually, and any material
amendment or agreement related thereto is approved, by the Corporation's Board
of Directors, including those Directors who are not "interested persons" of the
Corporation 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 shall 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 Corporation shall be committed to the discretion of
the Directors who are not interested persons of the Corporation.
With the approval of the vote 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 Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
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services to the Distributor on behalf of the Fund 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. The offsetting of
redemptions through sales efforts benefits shareholders by maintaining the
viability of a fund. In periods where net sales are achieved, additional
benefits may accrue relative to portfolio management and increased shareholder
servicing capability. Increased assets enable the Fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. 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
to 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 Corporation has any direct or indirect
financial interest in the operation of the Plan or any related agreement.
The Glass-Steagall Act prohibits certain banks from engaging in the
business of underwriting, selling, or distributing securities such as shares of
a mutual fund. Although the scope of this prohibition under the Glass-Steagall
Act has not been fully defined, in the Distributor's opinion it should not
prohibit banks from being paid for administrative and accounting services under
the Plan. If, because of changes in law or regulation, or because of new
interpretations of existing law, a bank or the Fund were prevented from
continuing these arrangements, it is expected that other arrangements for these
services will be made. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Fund's portfolio securities are traded in the over the counter market
and are valued at the mean between the current bid and asked prices. Securities
for which such prices are not readily available or reliable and other assets may
be valued as determined in good faith by or under the general supervision of the
board of Directors. Short term securities are valued either at amortized cost or
at original cost plus accrued interest, both of which approximate current value.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.
eastern time) each business day of the Fund. The following are not business days
of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Because a
substantial portion of the Fund's net assets may be invested in gold, platinum
and silver bullion, foreign securities and/or foreign currencies, trading in
each of which is also conducted in foreign markets which are not necessarily
closed on days when the NYSE is closed, the net asset value per share may be
significantly affected on days when shareholders have no access to the Fund or
its transfer agent.
Securities owned by the Fund are valued by various methods depending on
the market or exchange on which they trade. Securities traded on the NYSE, the
American Stock Exchange and the Nasdaq National Market System are valued at the
last sales price, or if no sale has occurred, at the mean between the current
bid and asked prices. Securities traded on other exchanges are valued as nearly
as possible in the same manner. Securities traded only OTC are valued at the
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<PAGE>
mean between the last available bid and ask quotations, if available, or at
their fair value as determined in good faith by or under the general supervision
of the Board of Directors. Short term securities are valued either at amortized
cost or at original cost plus accrued interest, both of which approximate
current value.
Foreign securities and bullion, if any, are valued at the price in a
principal market where they are traded, or, if last sale prices are unavailable,
at the mean between the last available bid and ask quotations. Foreign security
prices are expressed in their local currency and translated into U.S. dollars at
current exchange rates. Any changes in the value of forward contracts due to
exchange rate fluctuations are included in the determination of the net asset
value. Foreign currency exchange rates are generally determined prior to the
close of trading on the NYSE. Occasionally, events affecting the value of
foreign securities and such exchange rates occur between the time at which they
are determined and the close of trading on the NYSE, which events will not be
reflected in a computation of the Fund's net asset value on that day. If events
materially affecting the value of such securities or exchange rates occur during
such time period, the securities will be valued at their fair value as
determined in good faith under the direction of the Fund's Board of Directors.
Price quotations generally are furnished by pricing services, which may
also use a matrix system to determine valuations. This system considers such
factors as security prices, yields, maturities, call features, ratings, and
developments relating to specific securities in arriving at valuations.
PURCHASE OF SHARES
The Fund will not issue shares for consideration other than cash. The
Fund reserves the right to reject any order, to cancel any order due to
nonpayment, to accept initial orders by telephone or telegram, and to waive the
limit on subsequent orders by telephone, with respect to any person or class of
persons. Orders to purchase shares are not binding on the Fund until they are
confirmed by the Transfer Agent. 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.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. The Fund is not currently obligated to deal with any particular
broker, dealer or group thereof. Fund transactions in debt and OTC securities
generally are with dealers acting as principals at net prices with little or no
brokerage costs. In certain circumstances, however, the Fund may engage a broker
as agent for a commission to effect transactions for such securities. Purchases
of securities from underwriters include a commission or concession paid to the
underwriter, and purchases from dealers include a spread between the bid and
asked price. While the Investment Manager generally seeks reasonably competitive
spreads or commissions, payment of the lowest spread or commission is not
necessarily consistent with obtaining the best net results. Accordingly, the
Fund will not necessarily be paying the lowest spread or commission available.
The Investment Manager directs portfolio transactions to broker/dealers
for execution on terms and at rates which it believes, in good faith, to be
reasonable in view of the overall nature and quality of services provided by a
particular bro ker/dealer, including brokerage and research services, sales of
Fund shares, and allocation of commissions to the Fund's Custodian. With respect
to brokerage and research services, consideration may be given in the selection
of broker/dealers to brokerage or research provided and payment may be made for
a fee higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") or other applicable
law are met. Section 28(e) of the 1934 Act was adopted in 1975 and specifies
that a person with investment discretion shall not be "deemed to have acted
unlawfully or to have breached a fiduciary duty" solely because such person has
caused the account to pay a higher commission than the lowest available under
certain circumstances. To obtain the benefit of Section 28(e), the person so
exercising investment discretion must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided ... viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion." Thus, although the Investment Manager
may direct portfolio transactions without necessarily obtaining the lowest price
at which such broker/dealer, or another, may be willing to do business, the
Investment Manager seeks the best value to the Fund on each trade that
circumstances in the market place permit, including the value inherent in
on-going relationships with quality brokers.
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Currently, it is not possible to determine the extent to which
commissions that reflect an element of value for brokerage or research services
might exceed commissions that would be payable for execution alone, nor
generally can the value of such services to the Fund be measured, except to the
extent such services have a readily ascertainable market value. There is no
certainty that services so purchased, or the sale of Fund shares, if any, will
be beneficial to the Fund. Such services being largely intangible, no dollar
amount can be attributed to benefits realized by the Fund or to collateral
benefits, if any, conferred on affiliated entities. These services may include
(1) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities or purchasers or sellers of securities, (2) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (3) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody). Pursuant to arrangements with certain
broker/dealers, such broker/dealers provide and pay for various computer
hardware, software and services, market pricing information, investment
subscriptions and memberships, and other third party and internal research of
assistance to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only for
"brokerage and research services" provided directly or indirectly by the
broker/dealer and under no circumstances will cash payments be made by such
broker/dealers to the Investment Manager. To the extent that commission "soft
dollars" do not result in the provision of any "brokerage and research services"
by a broker/dealer to whom such commissions are paid, the commissions,
nevertheless, are the property of such broker/dealer. To the extent any such
services are utilized by the Investment Manager for other than the performance
of its investment decision-making responsibilities, the Investment Manager makes
an appropriate allocation of the cost of such services according to their use.
Bull & Bear Securities, Inc. ("BBSI"), a wholly owned subsidiary of Group
and the Investment Manager's affiliate, provides discount brokerage services to
the public as an introducing broker clearing through unaffiliated firms on a
fully disclosed basis. The Investment Manager is authorized to place Fund
brokerage through BBSI at its posted discount rates and indirectly through a
BBSI clearing firm. The Fund will not deal with BBSI in any transaction in which
BBSI acts as principal. The clearing firm will execute trades in accordance with
the fully disclosed clearing agreement between BBSI and the clearing firm. BBSI
will be financially responsible to the clearing firm for all trades of the Fund
until complete payment has been received by the Fund or the clearing firm. BBSI
will provide order entry services or order entry facilities to the Investment
Manager, arrange for execution and clearing of portfolio transactions through
executing and clearing brokers, monitor trades and settlements and perform
limited back-office functions including the maintenance of all records required
of it by the National Association of Securities Dealers, Inc. ("NASD").
In order for BBSI to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by BBSI must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. The Fund's Board of Directors has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid to
BBSI are reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than some
other discount brokers and certain brokers may be willing to do business at a
lower commission rate on certain trades. The Fund's Board of Directors has
determined that portfolio transactions may be executed through BBSI if, in the
judgment of the Investment Manager, the use of BBSI is likely to result in price
and execution at least as favorable as those of other qualified broker/dealers
and if, in particular transactions, BBSI charges the Fund a rate consistent with
that charged to comparable unaffiliated customers in similar transactions.
Brokerage transactions with BBSI are also subject to such fiduciary standards as
may be imposed by applicable law. The Investment Manager's fees under its
agreement with the Fund are not reduced by reason of any brokerage commissions
paid to BBSI.
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Fund does business with may, from
time to time, own more than 5% of the publicly traded Class A non-voting Common
Stock of Group, the parent of the Investment Manager, and may provide clearing
services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and will
not be a limiting factor when the Investment Manager deems portfolio changes
appropriate. The portfolio turnover rate is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities in the
portfolio during the year.
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From time to time, certain brokers may be paid a fee for recordkeeping,
shareholder communications and other services provided by them to investors
purchasing shares of the Fund through the "no transaction fee" programs offered
by such brokers. This fee is based on the average daily value of the investments
in the Fund made by such brokers on behalf of investors participating in their
"no transaction fee" programs. The Fund's directors have further authorized the
Investment Manager to place a portion of the Fund's brokerage transactions with
any of such brokers, if the Investment Manager reasonaby believes that, in
effecting the Fund's transactions in portfolio securities, such broker or
brokers are able to provide the best execution of orders at the most favorable
prices. Commissions earned by such brokers from executing portfolio transactions
on behalf of the Fund may be credited by them against the fee they charge the
Fund, on a basis which has resulted from negotiations between the Investment
Manager and such brokers.
DISTRIBUTIONS AND TAXES
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 shares of the Fund at the
then current net asset value in lieu of the cash payment and to thereafter issue
such shareholder's distributions in additional shares of the Fund.
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 this treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions) 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 foreign currencies, or
other income (including gains from options, futures, or forward contracts)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities,
or any of the following, that were held for less than three months - options,
futures, or forward contracts (other than those on foreign currencies), or
foreign currencies (or options, futures, or forward contracts thereon) that are
not directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation"); and
(3) 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 taxes 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.
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or in additional Fund shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
A loss on the sale of Fund shares that were held for six months or less
will be treated as a long term (rather than a short term) capital loss to the
extent the seller received any capital gain distributions attributable to those
shares.
Any dividend or other distribution will have the effect of reducing the
net asset value of the Fund's shares on the payment date by the amount thereof.
Furthermore, any such dividend or other distribution, although similar in effect
to a return of capital, will be subject to taxes. Dividends and other
distributions may also be subject to state and local taxes.
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.
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
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the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that would enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions' income taxes paid by it. Pursuant to the election, the Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by the shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources, and (3) either deduct the taxes
deemed paid by the shareholder in computing the shareholder's taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the shareholder's Federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain from disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long term capital gain over net short term
capital loss), even if they are not distributed to the Fund; those amounts would
be subject to the distribution requirements described above. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Three bills passed by Congress in 1991 and 1992 and vetoed by President
Bush would have substantially modified the taxation of U.S. shareholders of
foreign corporations, including eliminating the provisions described above
dealing with PFICs and replacing them (and other provisions) with a regulatory
scheme involving entities called "passive foreign corporations." The "Tax
Simplification Bill and Technical Corrections of 1993," passed in May 1994 by
the House of Representatives contains the same modifications. It is unclear at
this time whether, and in what form, the proposed modifications may be enacted
into law.
Proposed regulations have been published pursuant to which open-end RICs,
such as the Fund, would be entitled to elect to "mark-to-market" their stock in
certain PFICs. "Marking-to-market," in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
Options, Futures, and Forward Contracts. The Fund's use of hedging strategies,
such as selling (writing) and purchasing options and futures contracts and
entering into forward contracts, involves complex rules that will determine for
income tax purposes the timing of recognition and character of the gains and
losses the Fund realizes in connection therewith. Income from foreign currencies
(except certain gains therefrom that may be excluded by future regulations), and
income from transactions in options, futures, and forward contracts derived by
the Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options, futures, and forward contracts
(other than those on foreign currencies) will be subject to the Short-Short
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward contracts
on foreign currencies, also will be subject to the Short-Short Limitation if
they are held for less than three months and are not directly related to the
Fund's principal business of investing in securities (or options and futures
with respect thereto).
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the that limitation. The
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures, and forward
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
14
<PAGE>
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 of the Fund. The Fund's fiscal
year ends on December 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, P.O. Box 2197, Boston, MA 02111 has been
retained by the Corporation to act as Custodian of the Fund's investments and
may appoint one or more subcustodians. The Custodian also performs certain
accounting services for the Fund. As part of its agreement with the Corporation,
the Custodian may apply credits or charges for its services to the Fund for,
respectively, positive or deficit cash balances maintained by the Fund with the
Custodian. DST Systems, Inc., P.O. Box 419789, Kansas City, Missouri 64141-6789,
is the Fund's Transfer and Dividend Disbursing Agent.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19101-1707, are the independent accountants for the Fund. Financial statements
of the Fund are audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended December 31,
1994, 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.
15
<PAGE>
APPENDIX--DESCRIPTIONS OF BOND RATINGS
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards
and, together with the Aaa group, comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities of fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the longer term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Standard & Poor's Ratings Group's Corporate Bond Ratings
AAA This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay principal interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB Bonds rated BBB are regarded as having adequate capacity to pay principal
and interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this capacity than
for bonds in the A category.
BB, B, CCC, CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
16
<PAGE>
PART C -- OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Financial statements of the Registrant are
included in the Registrant's Statement of Additional Information filed
as part of this Registration Statement.
(b) Exhibits:
1 Restated Articles of Incorporation of Midas Gold Shares &
Bullion, Inc. Incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement on Form N-lA of Midas
Gold Shares & Bullion, Inc. filed with the Securities and
Exchange Commission on October 2, 1985.
Articles of Amendment of Midas Gold Shares & Bullion, Inc.
Incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A of IRI Stock Fund, Inc.
and Post-Effective Amendment No. 8 to the Registration Statement
on Form N-1A of Midas Gold Shares & Bullion, Inc. filed with the
Securities and Exchange Commission on May 2, 1988.
Articles of Amendment of Midas Gold Shares & Bullion, Inc. to
change name to "Excel Midas Gold Shares, Inc." Incorporated by
reference to Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A of Excel Value Fund, Inc. and Post
Effective Amendment No. 10 to the Registration Statement on Form
N-1A of Excel Midas Gold Shares, Inc. filed with the Securities
and Exchange Commission on May 1, 1990.
2 Restated Bylaws of Excel Midas Gold Shares, Inc. Incorporated by
reference to Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A of Excel Value Fund, Inc. and Post
Effective Amendment No. 10 to the Registration Statement on Form
N-1A of Excel Midas Gold Shares, Inc. filed with the Securities
and Exchange Commission on May 1, 1990.
3 Not applicable.
4 Specimen copy of share certificate of Excel Midas Gold Shares,
Inc. Incorporated herein by reference to Pre-Effective Amendment
No. 2 to Registration Statement on Form N-lA of Midas Gold Shares
& Bullion, Inc. filed with the Securities and Exchange Commission
on October 28, 1985.
5 Form of Investment Advisory Agreement of Excel Midas Gold Shares,
Inc. Incorporated by reference to Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A of IRI Stock Fund,
Inc. and Post Effective Amendment No. 9 to the Registration
Statement on Form N-1A of Midas Gold Shares & Bullion, Inc. filed
with the Securities and Exchange Commission on March 30, 1989.
6 Form of Distribution Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 14 to
the Registration Statement on Form N-1A of Excel Midas Gold
Shares, Inc. filed with the Securities and Exchange Commission on
April 29, 1994.
7 Not applicable.
8(a) Custodian Agreement of Excel Midas Gold Shares, Inc. Incorporated
by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A of Excel Midas Gold Shares,
Inc. filed with the Securities and Exchange Commission on May 1,
1992.
Part C-1
<PAGE>
8(b) Form of Precious Metals Storage and Custodial Arrangements letter
agreement. Incorporated by reference to Post-Effective Amendment
No. 12 to the Registration Statement on Form N-1A of Excel Midas
Gold Shares, Inc. filed with the Securities and Exchange
Commission on May 1, 1992.
9(a) Form of Administration Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A of IRI Stock Fund, Inc.
and Post Effective Amendment No. 9 to the Registration Statement
on Form N-1A of Midas Gold Shares & Bullion, Inc. filed with the
Securities and Exchange Commission on March 30, 1989.
9(b) Form of Accounting Services Agreement of Excel Midas Gold Shares,
Inc. Incorporated by reference to Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A of IRI Stock Fund,
Inc. and Post Effective Amendment No. 9 to the Registration
Statement on Form N-1A of Midas Gold Shares & Bullion, Inc. filed
with the Securities and Exchange Commission on March 30, 1989.
10 Opinion and Consent of Dorsey & Whitney with respect to Excel
Midas Gold Shares, Inc. Incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement on Form
N-lA of Midas Gold Shares & Bullion, Inc. filed with the
Securities and Exchange Commission on October 2, 1985.
11 Consent of Squire & Company.
12 Not applicable.
13 Letter of Investment Intent with respect to Excel Midas Gold
Shares, Inc. Incorporated herein by reference to Pre-Effective
Amendment No. 2 to Registration Statement on Form N-lA of Midas
Gold Shares & Bullion, Inc. filed with the Securities and
Exchange Commission on October 28, 1985.
14 Forms of Tax-Sheltered Retirement Plans Incorporated herein by
reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-1A of IRI Stock Fund, Inc. filed with the
Securities and Exchange Commission on January 6, 1982.
15 Form of Plan of Distribution of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A of IRI Stock Fund, Inc.
and Post Effective Amendment No. 9 to the Registration Statement
on Form N-1A of Midas Gold Shares & Bullion, Inc. filed with the
Securities and Exchange Commission on March 30, 1989.
16 Calculations of Total Returns of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A of IRI Stock Fund, Inc.
and Post-Effective Amendment No. 8 to the Registration Statement
on Form N-1A of Midas Gold Shares & Bullion, Inc. filed with the
Securities and Exchange Commission on May 2, 1988.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
The following table sets forth the number of holders of shares of Excel
Midas Gold Shares, Inc. as of ____________ ______, 1995:
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
Common stock, par value ________________________
$.01 per share
Part C-2
<PAGE>
Item 27. Indemnification
Indemnification. Article 7(d) of the Registrant's Articles of Incorporation
and Article VIII of its Bylaws provide that the Registrant shall indemnify such
persons, for such expenses and liabilities, in such manner, under such
circumstances, and to such extent as permitted by Section 302A.521 of the
Minnesota Statutes, as now enacted or hereafter amended; provided, however, that
no such indemnification may be made if it would be in violation of Section 17(h)
of the Investment Company Act of 1940, as now enacted or hereinafter amended,
and any rules, regulations or releases promulgated thereunder.
The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section 302A.521)
pursuant to a determination by the board of directors or shareholders of the
Registrant as set forth in Section 302A.521, by special legal counsel selected
by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification:
a) has not received indemnification for the same conduct from any
other party or organization;
b) acted in good faith;
c) received no improper personal benefit;
d) in the case of criminal proceedings, had no reasonable cause to
believe the conduct was unlawful;
e) reasonably believed that the conduct was in the best interest of
the Registrant, or in certain contexts, was not opposed to the
best interest of the Registrant; and
f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or Federal law (including,
without limitation, conduct constituting willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as set
forth in Section 17(h) and (I) of the Investment Company Act of
1940).
Advances. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the Registrant of reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in advance of the
final disposition of the proceeding, (a) upon receipt by the Registrant of a
written affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a determination that the facts then known
to those making the determination would not preclude indemnification under
Section 302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.
Undertaking. The Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, each 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 in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
Part C-3
<PAGE>
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.
Other. Reference is made to Section 9 of the Distribution Agreements filed
as Exhibits (6)(a) and 6(b) to the Registration Statement previously filed.
AS REFLECTED IN THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FILED
HEREWITH
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 Articles of Incorporation: (1) provide that, to the maximum
extent permitted by applicable law, a director or officer will not be liable to
the Registrant or its stockholders for monetary damages; (2) require the
Registrant to indemnify and advance expense as provided in the By-laws to its
present and past directors, officers, employees and agents, and persons who are
serving or have served at the request of the Registrant in similar capacities
for other entities in advance of final disposition of any action against that
person to the extent permitted by Maryland law and the 1940 Act; (3) allow the
corporation to purchase insurance for any present or past director, officer,
employee, or agent; and (4) require that any repeal or modification of the
amended and restated Articles of Incorporation by the shareholders, or adoption
or modification of any provision of the Articles of Incorporation inconsistent
with the indemnification provisions, be prospective only to the extent such
repeal or modification would, if applied retrospectively, adversely affect any
limitation on the liability of or indemnification available to any person
covered by the indemnification provisions of the amended and restated Articles
of Incorporation.
Section 11.01 of Article XI of the By-Laws sets forth the procedures by
which the Registrant will indemnify its directors, officers, employees and
agents. Section 11.02 of Article XI of the By-Laws further provides that the
Registrant may purchase and maintain insurance or other sources of reimbursement
to the extent permitted by law on behalf of any person who is or was a director
or officer of the Registrant, or is or was serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in or arising out of his or her position.
Registrant's Investment Management Agreement between the Registrant and
Midas Management Corporation (the "Investment Manager") provides that the
Investment Manager shall not be liable to the Registrant or any shareholder of
the Registrant 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 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
Part C-4
<PAGE>
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 contract 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 28. Business and other Connections of Investment Adviser
Information on the current business of the Registrant's investment adviser
is described in the section of the Statement of Additional Information entitled
"Excel Advisors, Inc. and Warner Beck Incorporated" filed previously as part of
the Registrant's Registration Statement under the Investment Company Act of 1940
(File No. 811-4316), Post-Effective Amendment No. 15.
The following table includes a listing of the name and principal business
address of each director and executive officer of Excel Advisors, Inc., the
Registrant's investment adviser, the position(s) held with Excel Advisors, Inc.
and any other business, profession, vocation or employment of a substantial
nature in which such persons currently engage or have engaged (in the capacity
of director, officer, employee, partner or trustee) during the past two years.
Name and Principal Position(s) With Other Occupations
Business Address Excel Advisors, Inc. During Past Two Years
---------------- -------------------- ---------------------
Gary B. Sabin Chairman of the Board of President and Chief
16955 Via Del Campo Directors and Chief Executive Officer of the
San Diego, CA 92127 Executive Officer Registrant. Chairman of the
Board of Directors and
President of Excel
Interfinancial Corporation,
the parent corporation of
Excel Advisors, Inc. Mr.
Sabin also serves as the
President and a Director of
other operating subsidiaries
of Excel Interfinancial
Corporation and President of
Excel Realty Trust, Inc.
("ERT").
Richard B. Muir President and Director Executive Vice President, Chief
San Diego, CA 92127 Financial Officer, Secretary
16955 Via Del Campo and Treasurer of the
Registrant; Executive Vice
President and Director of
Excel Interfinancial
Corporation and other of its
operating subsidiaries.
Executive Vice President of
ERT.
Part C-5
<PAGE>
Ronald H. Sabin Secretary and Vice President and Director
16955 Via Del Campo Director of Excel Interfinancial
San Diego, CA 92127 Corporation and President of
Excel Management, a wholly
owned subsidiary of Excel
Interfinancial Corporation.
Senior Vice President of ERT.
Mark T. Burton Vice President and Vice President and
16955 Via Del Campo Director Director of ERT.
AS REFLECTED IN THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FILED
HEREWITH
Information on the business of the Registrant's investment adviser is
described in the section of the Statement of Additional Information entitled
"The Investment Manager" filed as part of this Registration Statement.
The directors and officers of the Investment Manager are also directors and
officers of other Funds managed by Bull & Bear Advisers, Inc., a wholly-owned
subsidiary of Bull & Bear Group, Inc. (the "Bull & Bear Funds"). In addition,
such officers are officers and directors of Bull & Bear Group, Inc. and its
other subsidiaries; Service Center, the distributor of the Registrant and the
Bull & Bear Funds and a registered broker/dealer, and Bull & Bear Securities,
Inc., a discount brokerage firm. Bull & Bear Group, Inc.'s predecessor was
organized in 1976. In 1978, it acquired control of and subsequently merged with
Investors Counsel, Inc., a registered investment adviser organized in 1959. The
principal business of both companies since their founding has been to serve as
investment manager to registered investment companies. Bull & Bear Advisers,
Inc. serves as investment manager of Bull & Bear Dollar Reserves, Bull & Bear
Global Income Fund, and Bull & Bear U.S. Government Securities Fund, each a
series of shares issued by Bull & Bear Funds II, Inc.; Bull & Bear Municipal
Income Fund, a series of shares issued by Bull & Bear Municipal Securities,
Inc.; Bull & Bear Gold Investors Ltd.; Bull & Bear U.S. and Overseas Fund, and
Bull & Bear Quality Growth Fund, each a series of Bull & Bear Funds I, Inc.; and
Bull & Bear Special Equities Fund, Inc.
Item 29. Principal Underwriters
The following table sets forth the name and principal business address of
each director and officer of Warner Beck Incorporated, the Registrant's
principal underwriter, and the positions, if any, such persons hold with Excel
Midas Gold Shares, Inc.
Name and Principal Position(s) and Office(s) Positions and Offices
Business Address with Warner Beck Inc. with the Registrant
---------------- --------------------- -------------------
Gary B. Sabin Chairman of the Board President and Chief
16955 Via Del Campo of Directors and Chief Executive Officer
San Diego, CA 92127 Executive Officer
Richard B. Muir President and Executive Vice
16955 Via Del Campo Director President
San Diego, CA 92127
Ronald H. Sabin Secretary and Director None
16955 Via Del Campo
San Diego, CA 92127
Mark T. Burton Vice President None
16955 Via Del Campo and Director
San Diego, CA 92127
Part C-6
<PAGE>
AS REFLECTED IN THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FILED
HEREWITH
a) In addition to the Registrant, Service Center serves as principal
underwriter of Bull & Bear Funds II, Inc., Bull & Bear Special Equities Fund,
Inc., Bull & Bear Funds I, Inc., Bull & Bear Gold Investors Ltd. and Bull & Bear
Municipal Securities, Inc.
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 Position and Offices
Business Address Center with Registrant
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert D. Anderson Vice Chairman and Director N/A
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Brett B. Sneed Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Mark C. Winmill Chairman, Director and Chief Co-President and Co-Chief Executive
11 Hanover Square Financial Officer Officer
New York, NY 10005
Thomas B. Winmill President, Director, General Counsel Co-President, Director, and Co-Chief
11 Hanover Square Executive Officer
New York, NY 10005
Kathleen B. Fliegauf Vice President and Assistant Treasurer None
11 Hanover Square
New York, NY 10005
William J. Maynard Vice President, Secretary, Chief Vice President, Secretary, Chief
11 Hanover Square Compliance Officer Compliance Officer
New York, NY 10005
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
William K. Dean Treasurer, Chief Accounting Officer Treasurer, Chief Accounting Officer
11 Hanover Square
New York, NY 10005
Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005
H. Matthew Kelly Vice President None
11 Hanover Square
New York, NY 10005
</TABLE>
Part C-7
<PAGE>
Item 30. Location of Accounts and Records
The Bank of California, N.A., 475 Sansome Street, 11th Floor, San
Francisco, California 94111, acts as the custodian of the Registrant's portfolio
securities and cash. Wilmington Trust Company, Rodney Square North, Wilmington,
DE 19890, acts as the custodian of Excel Midas Gold Shares, Inc.'s gold, silver,
and platinum bullion. Excel Advisors, Inc., 16955 Via Del Campo, San Diego,
California 92127, acts as Excel Midas Gold Shares, Inc.'s transfer agent,
dividend disbursing agent, administrative services agent and accounting services
agent. The Bank of California, N.A., Wilmington Trust Company, and Excel
Advisors, Inc. will maintain certain books and records in connection with their
respective duties. All other records, including the Registrant's minute books,
will be kept by the Registrant.
AS REFLECTED IN THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FILED
HEREWITH
The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and its Investment Manager). All other records required by Section
31(a) of the Investment Company Act of 1940 are located at Investors Bank &
Trust Company, 89 South Street, Boston, MA 02111 (the offices of Registrant's
custodian) and DST Systems, Inc., 1055 Broadway, Kansas City, MO 64105-1594 (the
offices of the Registrant's Transfer and Dividend Disbursing Agent). Copies of
certain of the records located at Investors Bank & Trust Company & DST Systems,
Inc. are kept at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and the Investment Manager).
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
Part C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Minneapolis,
State of Minnesota, on this June 23, 1995.
EXCEL MIDAS GOLD SHARES, INC.
By /s/ Gary B. Sabin
------------------------
Gary B. Sabin, 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.
Signature Title Date
--------- ----- ----
/s/ Gary B. Sabin President and Chief Executive June 23, 1995
- -------------------- Officer of the Registrant
Gary B. Sabin
/s/ Richard B. Muir Vice President-Finance and June 23, 1995
- -------------------- Treasurer of the Registrant
Richard B. Muir (Chief Financial and
Accounting Officer)
John Mulder* Director of the Registrant
*By /s/ Richard B. Muir
--------------------
Richard B. Muir
(pursuant to Powers of Attorney, dated April 30, 1990, filed with the Commission
on or about May 1, 1990, with Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Excel Midas Gold Shares, Inc.)
Dated: June 23, 1995.