EXCEL MIDAS GOLD SHARES, INC.
REGISTRATION STATEMENT ON FORM N-1A
PART A -- PROSPECTUS
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EXCEL MIDAS GOLD SHARES, INC.
Excel Midas Gold Shares, 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.
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 April 27, 1995) with the Securities and Exchange Commission. The Statement
of Additional Information is available free of charge from the Fund at the
mailing address and telephone number below, and is incorporated by reference
into this Prospectus in accordance with the Commission's rules.
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To invest, you may fill out the application that accompanies this
Prospectus, or simply contact Warner Beck Incorporated or one of the
broker-dealers that have sales agreements with Warner Beck Incorporated. For
more information or assistance in opening an account, please contact:
WARNER BECK INCORPORATED
16955 Via Del Campo
San Diego, California 92127
(619) 485-9400
(800) 783-3444
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS DATED APRIL 27, 1995
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No dealer, sales representative or other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus (and/or in the Statement of Additional Information referred to
on the cover page of this Prospectus), and, if given or made, such information
or representations must not be relied upon as having been authorized by the Fund
or Warner Beck Incorporated. This Prospectus does not constitute an offer or
solicitation by anyone in the state in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
SUMMARY OF CONTENTS
This summary describes some important facts concerning an investment in the
Fund. It also tells you where a more detailed discussion may be found in the
text of this Prospectus or the Fund's Statement of Additional Information.
The Fund is an open-end, diversified management investment company that
only issues shares of common stock. By purchasing shares in the Fund, you and
the other investors in the Fund are pooling your money to acquire a diversified
portfolio of securities and other assets.
Objectives Prospectus, page 1
The investment objectives of the Fund are set forth in the cover page of
this Prospectus.
Valuing Shares Prospectus, page 15
Generally the value of a share of the Fund is determined each day. Such
value may fluctuate from day to day as the value of the Fund's investments
fluctuate.
Buying Shares Prospectus, page 16
You can start your investment in the Fund with $100. Just fill out the
application that accompanies this Prospectus or call a sales representative of
Warner Beck Incorporated ("Warner Beck") at (619) 485-9400 or toll-free at (800)
783-3444. You can also buy shares through other broker-dealers that have sales
agreements with Warner Beck.
Once you have made your initial investment, you can make additional
investments of $25 or more at any time.
Sales Charge Prospectus, page 17
Shares of the Fund may be purchased at the Fund's public offering price,
which is the next determined net asset value of one share of the Fund plus a
sales charge. The maximum sales charge for shares of the Fund is 4.50% of the
offering price (4.71% of the net investment).
Excel Advisors, Inc. and Prospectus, page 23
Warner Beck Incorporated Statement of Additional Information, page B-4
Your investment is professionally managed. Excel Advisors, Inc. ("Excel")
is the Fund's investment adviser. The Fund pays Excel a fee based on a
percentage of the Fund's net assets. The total fees (expressed as a percentage
of average daily net assets) payable by the Fund for these services equal 1%
(annualized) of the first $200 million of the Fund's average daily net assets
and thereafter decline as a percentage of average daily net assets as the size
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of the Fund increases. The fees paid by the Fund for advisory services are
higher than the advisory fees of many other mutual funds.
Warner Beck is the principal distributor of the Fund's shares.
The address and phone number of Excel and Warner Beck is the same as the
Fund's, which are on the cover page of this Prospectus.
Brokerage Statement of Additional Information, page B-9
The Fund's investment adviser may consider sales of shares of the Fund and
of any other funds the adviser may advise as a factor in the selection of the
broker-dealers to execute the Fund's portfolio transactions. The Fund expects to
use affiliates of Excel (including Warner Beck and Planners Independent
Management, Inc.) as a broker of the Fund's portfolio securities but only if the
provisions of Section 17(e) of the Investment Company Act of 1940 (and the rules
thereunder) are complied with and only when, in the judgment of Excel, such firm
will be able to obtain a price and execution at least as favorable as other
qualified brokers, and the transactions effected by such firm, including the
frequency thereof, the receipt of commissions payable in connection therewith
and the selection of such firm, are not unfair or unreasonable to the
shareholders of the Fund.
Investment Income; Reinvestments Prospectus, pages 18 and 19
The Fund intends to pay out substantially all of its net investment income
on at least a semi-annual basis and net realized capital gains, if any, prior to
the end of its fiscal year (December 31). Income dividends and capital gains
distributions may be reinvested without a sales charge.
Taxes Prospectus, page 19
The Fund intends to meet the requirements for regulated investment
companies under Subchapter M of the Internal Revenue Code, and if so qualified,
the Fund will not be taxed on the income or capital gains it distributes.
Although the Fund's investment in gold, silver and platinum bullion may result
in its failure to meet these requirements, management of the Fund will endeavor
to meet all such requirements. Each shareholder must report his or her own
income dividends and any capital gains distributions, whether received in cash
or additional shares.
Retirement Accounts Statement of Additional Information, page B-10
Given the Fund's objectives, an investment in the Fund may be appropriate
for Individual Retirement Accounts ("IRAs"), Keogh Plans, Tax-Deferred
Investment Plans and other similar plans. However, under the Economic Recovery
Act of 1981, the acquisition by an IRA or certain individually directed accounts
under certain types of tax-sheltered retirement plans of any "collectible"
(defined to include precious metals), and, therefore, an investment in the Fund,
may be subject to special tax treatment. A tax-qualified plan investor should
consult his or her own tax adviser before investing in the Fund.
IRAs are available from the Fund. For information about the available IRAs
or about any other of such plans, contact the Fund.
Redeeming Shares Prospectus, page 20
Shareholders of the Fund can redeem their shares at any time by mailing a
request to the Fund in the care of Excel, or by having a broker-dealer that has
a sales agreement with Warner Beck telephone or telegraph the redemption request
to the Fund.
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Shareholder Services/Transfers Prospectus, page 21
Shareholders may make systematic investments automatically on a monthly,
quarterly or semiannual basis. This type of arrangement helps the shareholder
put money aside regularly. The Fund also offers a plan for redeeming your
investment in regular installments. Shareholders selecting the periodic pay-out
plan must reinvest any dividends and capital gains distributions. Shareholders
may transfer their investment from the Fund to Cash Equivalent Fund --
Government Securities Portfolio, a money market fund offered through Warner Beck
("CEF"), and from CEF to the Fund without incurring a sales charge.
Risk Considerations for Investment in the Fund Prospectus, page 11
There are certain special risks inherent in the Fund's investment policies
which you should consider before investing in the Fund. These risks include the
risk of sharp fluctuations in the prices of certain of the Fund's assets, the
risks resulting from the Fund's concentration of its investments in one industry
located largely in a limited number of countries, the risks of investing in some
small or thinly capitalized companies, the risks of investing in some foreign
securities, the risks of participating in an only recently developed and
currently unregulated gold, silver and platinum bullion market which may be
affected by national and international monetary or political conditions, the
risks of investing in certain assets which do not generate income and will
subject the Fund to taxes and insurance, shipping and storage costs, and certain
tax risks.
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FEES AND EXPENSES OF THE FUND
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a Percentage of Offering Price)............................. 4.50%
Exchange Fee*................................................... 0%
Annual Fund Operating Expenses (as a
percentage of Average Net Assets)
Management Fees (After Fee Waiver).............................. 1.00%
l2b-1 Fees (After Fee Waiver)................................... .25%
Other Expenses (After Expense Reimbursements)................... .90%
----
Total Fund Operating Expenses
(After Fee Waiver and Expense Reimbursements)................... 2.15%
====
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Example
You would pay the following expenses on
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each
time period............................................ $66 $113 $164 $315
</TABLE>
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*Plus a $7.50 transfer agent's fee per exchange.
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that investors in the Fund will bear directly or
indirectly. The above example should not be considered a representation of past
or future expenses of the Fund; actual expenses may be greater or less than
those shown. If the Fund's expenses, including the investment advisory fee but
excluding interest expense, 12b-1 fees, taxes, brokerage fees and commissions,
exceed 2.0% of the first $10 million of its average net assets, plus 1.5% of the
next $20 million of its average net assets, plus 1.25% of its average net assets
above $30 million, then the Fund's investment adviser will reimburse the Fund,
in an amount not greater than the investment advisory fees, for such excess.
Absent expense reimbursements and fee waivers, the Fund would bear management
fees equal to approximately 1.00% of its average daily net assets on an annual
basis and would bear 12b-1 fees of approximately .25% of its average daily net
assets on an annual basis. Total fees and expenses incurred by the Fund before
expense reimbursements and fee waivers for the year ended December 31, 1994
amounted to 2.15% of average daily net assets. See "Management."
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FINANCIAL HIGHLIGHTS
Selected data for a share of the Fund outstanding throughout the period
from January 8, 1986 (commencement of operations) through December 31, 1986 and
the years ended December 31, 1987 through 1994 is as follows. This information
has been derived from the Fund's financial statements which have been audited by
independent certified public accountants. The report of Squire & Co. appears in
the Statement of Additional Information.
<TABLE>
<CAPTION>
Period from
January 8,
Year ended December 31 1986 to
------------------------------------------------------------------------------------ December 31,
1994 1993 1992** 1991** 1990** 1989** 1988 1987* 1986*
------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income $ .04 $ .07 $ .07 $ .07 $ .07 $ .05 $ .05 $ .01 $ .01
Expenses .09 .08 .06 .04 .07 .06 .07 .01 .02
------ ------ ------ ------ ------ ------ ------ ------ -----
Net investment income (loss) (.05) (.01) .01 .03 -- (.01) (.02) -- (.01)
Distributions declared from
net investment income -- (.52) (.02) (.03) -- -- -- -- --
Return of capital -- -- -- -- -- -- -- (.06) --
Net realized and unrealized
gain (loss) on
investments (.67) 2.34 (.19) (.04) (.53) .57 (.58) .92 .31
Capital gain distribution
declared (.12) -- -- -- -- -- -- (.33) --
------ ------ ------ ------ ------ ------ ------ ------ -----
Net increase (decrease) in net
asset value (.84) 1.81 (.20) (.04) (.53) .56 (.60) .53 .30
Net asset value:
Beginning of period 4.16 2.35 2.55 2.59 3.12 2.56 3.16 2.63 2.33
------ ------ ------ ------ ------ ------ ------ ------ -----
End of period $ 3.32 $ 4.16 $ 2.35 $ 2.55 $ 2.59 $ 3.12 $ 2.56 $ 3.16 $2.63
====== ------ ====== ====== ====== ====== ====== ====== =====
Total Return*** (17.27)% 90.27% (11.34)% (4.69)% (20.8)% 14.71% (23.81)% 18.79% 5.91%
Ratio of net expenses to
average net assets 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 (1.26)% (.28)% .56% 1.10% .06% (.32)% (.42)% (.36)% (1.05)%
Portfolio turnover 52.62% 63.44% 72.23% 77.26% 56.46% 23.60% 7.52% 27.29% 8.28%
Number of shares outstanding at
end of period
(in thousands) 2,126 2,490 2,101 2,433 2,920 3,581 4,972 6,060 2,803
</TABLE>
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* Restated to give retroactive effect to the three-for-one stock split in
August 1987.
** Excel has acted as the Fund's investment adviser, accounting services
agent, transfer agent, dividend disbursing agent and administrative
services agent since May 10, 1989. Prior thereto, IRI Asset Management,
Inc. served the Fund in such capacities.
*** Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and the maximum front-end sales
charge of 4.5% currently in effect.
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<PAGE>
PERFORMANCE INFORMATION
MANAGEMENTS'S DISCUSSION OF FUND PERFORMANCE
Following the strong recovery in the gold sector in 1993, the 1994 fiscal
year proved to be one of consolidation for the gold price and a period of
weakness for gold stocks.
For most of the year, the gold price traded between $370 and $395 per
ounce. Failure to break through the upper end of the range was largely due to
producer forward selling, as companies took advantage of futures prices being
enhanced by higher interest rates. Additionally, a material quantity of
commodity/hedge fund gold positions were liquidated as a result of the price
failing to break through $395.
The combination of a 3% decline in the gold price and unstable financial
markets caused severe weakness in many gold stocks. For the year ended December
31, 1994, the Net Asset Value of the Fund declined 17.3% compared with a fall of
15% in the Financial Time Gold Mines Index. That index is a weighted measure of
the North American, Australian and South African gold stock sectors. The Fund's
performance was affected by weakness in North American stocks which was
compounded by widespread tax loss selling in the fourth quarter of 1994. Many of
the smaller companies with new development projects had declined to unrealistic
levels.
An improving gold price towards the end of the first quarter of 1995 has
generated a recovery in gold stocks and, consequently, in the net asset value of
the Fund.
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PERFORMANCE GRAPH
[The following plot points were used to construct a graph which appears in the
printed prospectus:
<TABLE>
<CAPTION>
12/85 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P500 $10,000 11,868 12,492 14,567 19,182 18,584 24,250 26,097 28,722 23,098
Index
Midas 9,400 10,591 14,273 11,563 14,093 11,699 11,676 10,839 21,596 17,867
Fund
Lipper 10,000 13,472 18,047 15,217 19,980 15,267 15,409 12,913 23,855 21,348
Gold
</TABLE>
Excel Midas Gold Shares, Inc. had the following average annual total returns for
the periods ending December 31, 1994: 1 year: (17.27)%*; 5 year: 7.68%*; since
inception on January 14, 1986: 6.66%*.]
* Represents average annual total return for the period, including
reinvestment of all dividend and capital gains distributions and the
maximum front-end sales charge of 4.5% currently in effect.
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment made in the Fund on January
14, 1986 (Inception Date) to a $10,000 investment made in the Standard & Poor's
500 Stock Index and the Lipper Gold Fund Index on that date. For comparative
purposes, the value of the Indices on December 31, 1985 is used as the beginning
value on January 14, 1986. All dividends and capital gain distributions are
reinvested.
Unlike the Fund, the Standard & Poor's 500 Stock Index and the Lipper Gold Fund
Index are unmanaged total return performance benchmarks consisting of a
broad-based basket of 500 securities and 10 mutual funds, respectively. The
indices do not take into account charges, fees and other expenses. Further
information relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of this Prospectus
and elsewhere herein.
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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
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 OF THE FUND
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) 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
Excel believes that precious metal investment medium offer an opportunity
to achieve long-term capital appreciation and protection against inflation.
Excel 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
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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
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
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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
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, Commonwealth of
Independent States (formerly the Union of Soviet Socialist Republics),
Canada and the United States. 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 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.
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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
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.
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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.
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,
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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.
VALUING SHARES
The value of an individual share of the Fund is figured by dividing all
outstanding shares of the Fund into the Fund's net assets. The Fund will figure
net assets by valuing all the securities the Fund owns, then adding it to the
Fund's other assets and subtracting all outstanding liabilities. The Fund will
calculate the value of its shares once daily, Monday through Friday, as of 1:00
p.m., Pacific time (the close of primary trading on the New York Stock
Exchange), except on (i) days on which changes in the value of the Fund's
portfolio securities will not materially affect the current net asset value of
the Fund's shares, (ii) days during which no shares of the Fund are tendered for
redemption and no order to purchase or sell shares of the Fund is received by
the Fund or (iii) customary national business holidays on which the New York
Stock Exchange is closed for trading (as of the date of this Prospectus, New
Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day). The Fund will value its
portfolio securities and other assets as follows:
The Fund will value stocks, convertible debentures and bonds, warrants
and options traded on major exchanges each day at their last quoted sales
price on their primary exchange as of the close of primary trading on the
New York Stock Exchange. If a particular security has not been traded on a
certain day, the Fund takes the average price between the last offer to buy
and the last offer to sell.
The Fund will value stocks, convertible debentures and bonds and
warrants with readily available market quotations but without a listing on
an exchange at the average between the last bid and asked price at the time
of the close of the New York Stock Exchange.
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The Fund will value short-term securities maturing more than 60 days
from the valuation date at the readily available market price or
approximate market value based on current interest rates. The board of
directors of the Fund has determined that this method is an appropriate
means of valuing such securities. The Fund will value short-term securities
maturing in 60 days or less but which originally had maturities of more
than 60 days at the acquisition date on an amortized cost basis using the
market value on the 61st day before maturity, and the Fund will value
short-term securities maturing in 60 days or less at the acquisition date
at amortized cost unless the board of directors of the Fund determines
that, under the circumstances, the amortized cost method does not represent
fair value. (Amortized cost is an approximation of market value determined
by systematically increasing the carrying value of a security if acquired
at a discount, or systematically reducing the carrying value if acquired at
a premium, so that the carrying value is equal to maturity value on the
maturity date.)
The Fund will value any foreign securities in its portfolio which are
traded on major exchanges at their last quoted sales price (or, if it has
not been traded on a certain day, the average between the last offer to buy
and the last offer to sell) on their primary exchange as of the close of
the New York Stock Exchange. The Fund will value any foreign securities
which are not listed on a major exchange but have readily available market
quotations at the average between the last bid and asked price at the time
of the close of primary trading on the New York Stock Exchange. Any foreign
securities held by the Fund will be valued in United States dollars.
Gold, silver and platinum bullion held by the Fund will be valued at
its fair market value determined on the basis of the mean between the last
current bid and asked prices based on dealer or exchange quotations.
Puts and calls held by the Fund are valued at the last sales price
therefor, or, if there are no transactions, at the mean between the closing
bid and asked prices. When the Fund writes a call, an amount equal to the
premium received is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is "marked-to-market" to reflect
the current market value of the call. If a call expires, the Fund has a
gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction.
The Fund will value securities and gold, silver and platinum bullion
held by the Fund without a ready market price, bonds and notes other than
convertibles, and other assets at fair value. In valuing such securities,
the Fund's directors are responsible for selecting methods that they
believe represent the fair value. For example, if the Fund held
nonconvertible bonds, the usual method is to use the pricing service of an
outside organization. The pricing service may take into consideration
yield, quality, coupon, maturity, type of issue, trading characteristics
and other market data in determining valuations for normal institutional
size trading units of debt securities and does not rely exclusively on
quoted prices.
BUYING SHARES
You can start your investment in the Fund with a $100 investment. You can
make additional investments at any time of $25 or more. The Fund may waive the
foregoing minimums for sales to a group of investors with a single agent, such
as a corporation acting on behalf of participating employees, for sales
involving spousal IRAs and for shares being purchased through the Fund's
periodic payment plan. For your initial investment you can complete the
Application delivered with this Prospectus yourself and mail it to Warner Beck,
at the address on the cover page of this Prospectus, along with a check in the
amount of your investment, or, if you desire, you can contact Warner Beck who
will see that the investment is made for you. You can make additional
investments by sending a check in the amount of your investment along with a
letter identifying your account number (or one of the payment stubs provided to
shareholders) to Warner Beck, or you can make additional investments by
telephoning Warner Beck.
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In addition to buying shares through Warner Beck, you can also invest in
the Fund through certain other broker-dealers which are members of the National
Association of Securities Dealers, Inc. and which have sales agreements with
Warner Beck.
Once you have decided to invest in the Fund, and your purchase order is
accepted, the Fund will then compute the number of shares you will receive by
dividing the offering price of one share into your investment. The Fund will use
the offering price at the close of business on the day the Fund accepts your
order. The Fund's close of business is the closing time of primary trading on
the New York Stock Exchange on that day. The Fund reserves the right to reject
any purchase order. The Fund will accept or reject your purchase order on the
day your purchase order, containing all required information, is received by the
Fund.
The offering price of one share of the Fund is the net asset value of such
share plus the applicable sales charge (set forth below), rounded to the nearest
whole cent. The net asset value is the total value of all the Fund's assets
minus any outstanding liabilities. The net assets are divided by the number of
shares of the Fund outstanding before any shareholder transactions, such as
purchases or redemptions, for that day, to determine the net asset value per
share of the Fund.
SALES CHARGE
The person buying shares pays a sales charge. The amount of sales charge
depends on the size of that person's investment. The larger the investment, the
lower the rate of sales charge. The following sliding scale applies for the
Fund:
<TABLE>
<CAPTION>
Sales Charge in
Relation to: Sales Charge
------------------------- Allowed to Broker-
Offering Net Dealer as Percentage
Amount of Investment Price Investment of Offering Price
- -------------------- ----------- ---------- -----------------
<S> <C> <C> <C>
Less than $20,000.................................... 4.50% 4.71% 4.25%
$20,000 but less than $35,000........................ 4.00 4.17 3.75
$35,000 but less than $50,000........................ 3.50 3.63 3.25
$50,000 but less than $75,000........................ 3.00 3.09 2.75
$75,000 but less than $100,000....................... 2.50 2.56 2.25
$100,000 but less than $200,000...................... 2.00 2.04 1.80
$200,000 but less than $400,000...................... 1.50 1.52 1.40
$400,000 but less than $700,000...................... 1.00 1.01 .95
$700,000 but less than $1,000,000.................... .50 .50 .50
$1,000,000 or more................................... .25 .25 .25
</TABLE>
Assume that you decide to invest $6,000 in the Fund, the investment was
accepted, and the net asset value of one share of the Fund was $10. The offering
price of a single share of the Fund would be $10.47 (the sum of the net asset
value and the sales charge) and you would be purchasing approximately 573
shares.
Notwithstanding the above table, Warner Beck may from time to time reallow
up to 100% of the sales charge referred to above as an additional incentive to
broker-dealers selling Fund shares.
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REDUCING SALES CHARGES
Certain groups of investors may aggregate their share purchases into a
single purchase in order to take advantage of lower sales charges. Participants
in a plan qualified under Section 401(k) of the Internal Revenue Code may
aggregate their purchases of the Fund's shares into a single purchase, provided
that their purchases are made through such plan's trustee or other fiduciary.
Clients of an investment adviser or financial planner may aggregate their
purchases of the Fund's shares into a single purchase, provided that each client
investing in the Fund invests at least $25,000 and provided that their purchases
are made through such investment adviser or financial planner.
Statement of Intention
You may also obtain the reduced sales charges shown above by means of a
written Statement of Intention, which expresses your intention to invest not
less than $20,000 in shares of the Fund (including certain "credits" described
below) within a period of 13 months. Each purchase of shares under a Statement
of Intention will be made at the public offering price applicable at the time of
such purchase to a single transaction of the dollar amount indicated in the
Statement. A Statement of Intention may include purchases of shares made not
more than 90 days prior to the date that you sign a Statement; however, the
13-month period during which the Statement is in effect will begin on the date
of the earliest purchase to be included.
The Statement of Intention is not a binding obligation upon you to purchase
the full amount indicated. The minimum initial investment under a Statement of
Intention is 5% of such amount. Shares purchased with the first 5% of such
amount will be held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased, the escrow will be
released. To the extent that you purchase more than the dollar amount indicated
on the Statement of Intention and qualify for a further reduced sales charge,
the sales charge will be adjusted for the entire amount purchased at the end of
the 13-month period. The difference in sales charge will be used to purchase
additional shares at the then current offering price applicable to the actual
amount of the aggregate purchases. Statement of Intention forms may be obtained
from the Fund or from broker-dealers who sell the Fund's shares.
Although the Fund will attempt to reduce sales charges in all applicable
situations, the Fund cannot assure shareholders that they will make the required
reductions in every instance. Accordingly, it is the responsibility of each
shareholder to notify the Fund if an investment qualifies for a reduced sales
charge.
Certain Affiliated Persons
Shares of the Fund may be purchased at net asset value, without a sales
charge, by (i) officers, directors, full-time employees and general counsel of
the Fund, Excel and Warner Beck, and any affiliates thereof, if they have been
such for at least 90 days, (ii) registered personnel and employees of
broker-dealers, and their spouses and immediate family members in accordance
with the internal policies and procedures of the employing broker-dealers, who
have sales agreements for the Fund's shares with Warner Beck and (iii) any
trust, pension, profit-sharing or other benefit plan for such persons. Such
sales are made upon the written assurance of the purchaser that the purchase is
made for investment purposes and that the shares will not be resold except
through redemption by or on behalf of the Fund. Employees of broker-dealers must
obtain a special application from their employers or from the Fund in order to
qualify. Additionally, shares of each fund may be purchased at net asset value
without a sales charge by Investment Rarities, Inc. The investors referred to in
this paragraph are not required to pay a sales charge because of the reduced
sales effort involved in their purchases of the Fund's shares.
Other Persons
Pursuant to special selling agreements between Warner Beck and certain
broker-dealers selling shares of the Fund, customers of such broker-dealers may
purchase shares of the Fund without paying a sales charge to the extent that the
purchase of such shares is funded by the proceeds from the sale of shares of any
mutual fund having a front-end or back-end sales charge. In order to exercise
this privilege, an order for shares of the Fund must be received by the
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broker-dealer offering the privilege within 30 days after redemption of shares
of the other mutual fund. An investor wishing to exercise this privilege must
notify his or her registered representative prior to purchasing Fund shares.
INVESTMENT INCOME
Dividends and Interest
Investment income includes dividends on stocks and interest on bonds or
other securities the Fund holds. The Fund will distribute investment income to
its shareholders. First the Fund deducts operating expenses. Although dividends
and interest are fairly regular, the Fund cannot guarantee any investment
income.
Twice a year the Fund distributes substantially all its investment income
minus operating expenses, if any. The distributions will be payable to
shareholders who owned the shares on the date of record.
Capital Gains
A capital gain is made by selling a security or other capital asset for
more than its cost. Because capital gains are realized only when an asset is
sold, these gains are quite unpredictable. Before the end of December 31 of each
year, the Fund intends to distribute at least 98% of its net capital gains, if
any, for the twelve-month period ending December 31 of the calendar year.
REINVESTMENTS
Your income dividends and capital gains distributions will be reinvested in
additional shares unless you instruct the Fund to do otherwise. This allows you
to accumulate additional shares of the Fund without paying a sales charge. The
price you pay is the net asset value of the Fund's shares, and the dividends and
capital gains distributions are reinvested on the first business day following
the dividend record date.
If you prefer to take part or all of your income distributions and capital
gains in cash, you have two other options: You can accept any income dividends
in cash and any capital gains in additional shares at the net asset value of the
Fund's shares, or you can accept any income dividends and capital gains in cash.
Cash distributions will be paid seven to fourteen days following the dividend
record date. Dividend checks which are returned to the Fund marked "unable to
forward" by the postal service will be deemed to be a request to change the
dividend option and the proceeds will be reinvested in additional shares at the
net asset value until new instructions are received.
Indicate your option on the Application delivered with this Prospectus. You
can cancel or change your authorization any time if you notify the Fund in
writing. Any change in your option is effective when it reaches the Fund in care
of Excel. Only dividends and distributions declared after your changed
authorization has arrived can be reinvested. A confirmation of the reinvestment
will be mailed to you.
TAXES
Since its inception the Fund has met, and the Fund intends to continue to
meet, the requirements for regulated investment companies under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code") and, if it meets
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these requirements, the Fund will not be liable for federal income taxes to the
extent it distributes its taxable income to its shareholders.
Distributions by the Fund are generally taxable to the shareholders,
whether received in cash or additional shares of the Fund. Dividends paid from
the Fund's net investment income, including net short-term capital gains, will
be taxable to its shareholders as ordinary income. Dividends paid from the net
capital gains of the Fund and designated as capital gain dividends will be
taxable to shareholders as long-term capital dividends, regardless of the length
of time for which they have held their shares in the Fund.
If shares of the Fund are sold or otherwise disposed of more than twelve
months from the date of acquisition, the shareholder will realize a long-term
capital gain or loss equal to the difference between the purchase price and the
sale price of the shares disposed of, if, as is usually the case, the shares are
a capital asset in the hands of the shareholder. In addition, pursuant to a
special provision in the Code, if the Fund's shares with respect to which a
long-term capital gain distribution has been made are held for six months or
less, any loss on the sale or other disposition of such shares will be a
long-term capital loss to the extent of such long-term capital gain
distribution.
Shareholders will be notified annually as to the Federal income tax status
of dividends and distributions. Distributions and redemption payments will also
be reported to the Internal Revenue Service. Payors of interest and dividends
must generally withhold 31% of taxable interest, dividends and certain other
payments, including redemption payments, if the shareholder fails to furnish and
certify his correct taxpayer identification number (for most individuals, their
Social Security number) or as a result of certain other events specified in
Section 3406 of the Code. Payees that are exempt from this "back up withholding"
are generally not individuals, but are corporate, trust or governmental
entities. In order to avoid withholding, a shareholder of the Fund must provide
and certify to the Fund that his taxpayer identification number is correct and
that he is not subject to back up withholding. The new account application
included with this Prospectus provides for shareholder compliance with these
certification requirements.
The foregoing discussion of Federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. Further, in those states that
have income tax laws, the tax treatment of the Fund and of shareholders in
respect to distributions by the Fund may differ from Federal tax treatment. For
a more detailed discussion of the federal income tax consequences of investing
in shares of the Fund, see "Taxes" in the Statement of Additional Information.
Prospective investors are advised to consult with their tax advisers concerning
the application of state and local taxes to distributions by and investments in
the Fund which may differ from the Federal income tax consequences described
above.
REDEEMING SHARES
As a shareholder in the Fund, you have a right to redeem your shares any
time. The Fund will redeem your shares at their net asset value, as of the time
net asset value is next determined after receipt of your redemption request by
the Fund in care of Excel. See "Valuing Shares." The value of the redeemed
shares may be more or less than what you invested. IF SHARES OF THE FUND ARE
REDEEMED IMMEDIATELY AFTER THEY HAVE BEEN PURCHASED BY NON-GUARANTEED FUNDS
(SUCH AS A PERSONAL CHECK), THE FUND WILL DELAY MAILING THE REDEMPTION CHECK
UNTIL THE FUND HAS VERIFIED YOUR CHECK HAS CLEARED, WHICH MAY TAKE UP TO 15
DAYS. If the value of shares of the Fund in your account falls below $100
because of a redemption and not because of a decrease in market value, the Fund
reserves the right to redeem its shares in your account on 60 days' written
notice to you and pay the proceeds to you, unless you make additional
investments to bring the account value above $100. Therefore, shareholders who
invest only $100 (the minimum investment), and who redeem any amount in excess
of any market appreciation, may have the remaining shares redeemed by the Fund.
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<PAGE>
You may redeem your shares in writing. A written redemption request must
include a specific request to redeem part or all of your shares. Any written
request must be signed by each registered owner. In the event that the
redemption request exceeds $5,000 or the redemption proceeds are to be paid to
someone other than the registered holder or are to be mailed to an address other
than that of the registered holder, all signatures on the redemption request
must be guaranteed by a national bank or state chartered commercial bank or
trust company (except a savings bank) or a member of the New York or American
Stock Exchange, the National Association of Securities Dealers, Inc. or any
regional stock exchange. Occasionally the Fund, or Excel as its agent, may ask
for additional proof of identification and authority to redeem. Such a request
is more likely to happen if the shareholder is a corporate, partnership or
fiduciary account or if redemption is requested by someone who is not the
registered owner. If you have a certificate for shares you want to redeem, it
must accompany your redemption request.
The Fund will accept redemption requests by telephone or telegraph from
broker-dealers which have sales agreements with Warner Beck for the Fund's
shares. The Fund will employ reasonable means to confirm that instructions
communicated to the Fund by telephone with respect to redemptions are genuine;
if the Fund fails to do so, it may be liable for any losses due to unauthorized
or fraudulent transactions. Your broker-dealer may require certain documentation
from you before executing a redemption request on your behalf, and may charge a
fee for handling the redemption request for you.
Payment for your redeemed shares will be sent to you within seven days
after receipt of your request in proper form, except that the Fund may delay the
mailing of the redemption check, or a portion thereof, until the Fund's
depository bank has made fully available for withdrawal the check used to
purchase Fund shares, which may take up to 15 days or more. Although the use of
a certified or cashier's check will generally reduce this delay, shares
purchased with these checks will also be held pending clearance. Shares
purchased by federal funds wire are available for immediate redemption. In
addition, the right of redemption may be suspended or the date of payment
postponed if the Exchange is closed (other than customary closing) or upon the
determination of the SEC that trading on the Exchange is restricted or an
emergency exists, or if the SEC permits it by order for the protection of
shareholders. Of course, the amount you receive may be more or less than your
investment, depending on fluctuations in the market value of securities owned
the Fund. Certain large redemptions may be paid in kind. See "Additional
Purchase and Redemption Information" in the Statement of Additional Information.
Should the Fund stop selling shares, the directors of the Fund may, after
notification to shareholders, make a deduction from the value of the assets it
holds to cover the cost of future liquidations of its assets so as to distribute
fairly these costs among all shareholders.
Change of Mind
If you redeem shares of the Fund and then change your mind, you can use all
or part of the proceeds to buy new shares in the Fund at the net asset value
rather than the public offering price when payment is received. To take
advantage of this privilege, send Excel as agent of the Fund a written request
within 120 days of the date Excel received your original redemption request. You
may use this privilege only once for the Fund and the Fund may withdraw this
privilege at any time without notice to you.
A redemption is considered a taxable transaction by the Internal Revenue
Service. If there is a gain, it may be taxable. If there is a loss, and shares
are reacquired 30 days or less after redemption, some or all of the loss may be
disallowed as a deduction depending on the number of shares reacquired.
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SHAREHOLDER SERVICES/TRANSFERS
For each shareholder, Excel establishes an account to which is credited
purchases and dividends and from which is deducted all redemptions. This
procedure makes additional purchases and redemptions more convenient and makes
the issuance of share certificates unnecessary.
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Periodic Payment Plan
After you make your first cash investment, you may arrange to make
additional payments of $25 or more on a regular basis. You decide how often you
want to make them: monthly, quarterly or semiannually. You are not obligated to
make these payments, so if you cannot make a payment, you can skip it or you can
drop the plan altogether. The Fund can also change its plan or end it anytime on
five days' notice.
You may arrange to have the regular payments described above automatically
invested in the Fund. If you authorize Excel to do so, Excel will prepare a
check at the time each periodic payment is to be made, drawn on your account,
and payable to its order. This payment will be used to purchase the Fund's
shares in the same way as if you had written a check and mailed it to Excel,
only you do not have to write the check out and mail it. After each automatic
investment, you will receive a confirmation, and the canceled check will be
returned to you in your regular checking account statement. For information on
establishing an automatic investment plan, you should communicate with your
sales representative or contact the Fund.
The periodic payment plan works as follows: When your payment is received,
all the shares of the Fund which your money can buy will be purchased at the
public offering price. This includes fractions of a share. Your regular
investment amount will purchase more shares when the net asset value per share
decreases, and fewer shares when the net asset value per share increases.
A plan is not an option or an absolute right to buy shares. Each purchase
is a separate transaction. After each purchase the Fund will add your new shares
to your account. You will receive a confirmation of shares purchased and total
number of shares held.
Shares of the Fund bought through the periodic payment plan are exactly the
same as any other shares of the Fund. They may be redeemed anytime after the
check clears.
If you are interested in this plan, remember the plan itself cannot assure
there will be a profit. Neither can it protect against a loss in a declining
market. If you decide to discontinue the plan and redeem your shares when their
net asset value is less than what you paid for them, you will suffer a loss. For
this reason, you should think about your ability to continue the plan even
during "down" periods in markets.
Pay-Out Plan
As a shareholder in the Fund, you may use a pay-out plan to redeem your
investment in regular installments at no extra cost to you and regardless of the
size of your investment. All you have to do is make a written request at least
five days before the date you want your payments to begin and state the amount
of the payment (minimum of $150) and the frequency thereof (monthly, quarterly,
semiannually or annually). Once your request is received, the Fund will pay out
a fixed amount that you decide on as frequently as you have requested by
redeeming whatever number of shares are necessary to make the payment at the
times requested. The Fund will make regular installments until the account is
closed or you terminate the plan. You can change or cancel your request by
giving the Fund five days' notice in care of Excel. To the extent payments made
under this plan exceed the amount of dividend 24 income and capital gains income
that you have reinvested in shares, such payments will constitute a return of
the capital that you invested.
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<PAGE>
Exchange Privilege
Subject to the following limitations, you may exchange some or all of your
shares of the Fund for shares of Cash Equivalent Fund - Government Securities
Portfolio (a money market fund) ("CEF"). CEF is managed by Kemper Financial
Services, Inc. and is offered through Warner Beck Incorporated. If a shareholder
wishes to exchange shares of the Fund for shares of CEF, the shareholder should
first contact Warner Beck and obtain and read the prospectus of CEF.
Shares of CEF which were acquired by purchase (including shares acquired by
dividend reinvestment) are subject to the applicable sales charge if they are
exchanged for shares of the Fund. The Fund may elect five business day
settlement period for all exchanges before shares may be re-exchanged. Such
exchange is considered a taxable transaction, and gain or loss will be
recognized. The Fund's transfer agent charges a nominal fee of $7.50 per
exchange for this service. The exchange must satisfy the minimum dollar amount
necessary for new purchases.
This exchange privilege is available only in states where shares of the
Fund being acquired may legally be offered and sold and may be modified or
terminated at any time by the Fund. Broker-dealers which have sales agreements
with Warner Beck may charge a fee for processing exchange orders on behalf of
their customers.
MANAGEMENT
Both Excel and Warner Beck are wholly owned by Excel Interfinancial
Corporation ("EIC"). All of EIC's common shares, on a fully diluted basis, are
owned by officers and directors of EIC. EIC, through its various subsidiaries,
provides securities brokerage and investment advisory services and real estate
syndication and management.
Excel has been the investment adviser to the Fund since May 10, 1989. Kjeld
Thygesen has been the portfolio manager for the Fund since 1992. During the past
five years, Mr. Thygesen has been director of Lion Resource Management, involved
in mining research and investment consulting. The Fund pays Excel a fee for
investment advice based on a percentage of the Fund's net assets. Under the
Fund's Investment Advisory Agreement, the fee for these services equals 1.00%
(annualized) of the first $200 million of the Fund's average daily net assets
and thereafter declines as a percentage of average daily net assets as the size
of the Fund increases. The fees paid by the Fund for these services are higher
than the fees most other mutual funds pay to investment advisers.
In addition to the investment advisory fees paid to the Fund's investment
adviser, the Fund pays all of its expenses not assumed by its investment adviser
or its distributor, including certain expenses incurred in the operation of the
Fund and the public offering of its shares.
The Fund has adopted a Plan of Distribution pursuant to Rule l2b-1 under
the Investment Company Act of 1940. Pursuant to the Fund's Plan of Distribution,
Warner Beck will receive, as compensation for shareholder services it performs
under its Distribution Agreement with the Fund, a fee from the Fund equal to .25
of 1% per year of the Fund's average daily net assets. Warner Beck and Excel,
each at its own expense, may provide additional compensation to dealers in
connection with sales of Fund shares.
The Bank of California, N.A., 475 Sansome Street, 11th Floor, San
Francisco, California 94111, acts as custodian of the Fund's assets, other than
the Fund's gold, silver and platinum bullion. Wilmington Trust Company, Rodney
Square North, Wilmington, DE 19890, acts as custodian for the Fund's investments
in gold, silver and platinum bullion.
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<PAGE>
Excel acts as the Fund's accounting services agent pursuant to an
Accounting Services Agreement with the Fund. As compensation for these services,
the Fund pays Excel a monthly fee equivalent to $1,000 for the first $15 million
of the Fund's average net assets, $500 for the next $10 million of average net
assets, $500 for the next $25 million of average net assets and $250 for each
additional $25 million in average net assets thereafter.
Excel also acts as the Fund's transfer agent, dividend disbursing agent and
administrative services agent pursuant to an Administrative Agreement with the
Fund. As compensation for these services, the Fund pays Excel a separate fee per
service provided as follows: $.75 per account maintenance per month; $7.50 per
dealer confirmation; $10.00 per wire transfer; and $50.00 per 1,000 customer
statements. Additionally, the Fund reimburses Excel for all out-of-pocket
expenses incurred by Excel in connection with the rendering of services under
the Administrative Agreements.
Both the accounting services fee and the administrative services fee paid
by the Fund to Excel is in addition to the Fund's investment advisory fee.
OTHER INFORMATION
Shares
All shares issued by the Fund are the same class--common stock. They have a
par value of $.01 a share. They are fully paid, nonassessable and can be
transferred. All shares of the Fund have equal voting rights. They can be issued
as full shares or fractions. A fraction of a share has the same kind of rights
and privileges a full share has. The shares do not have cumulative voting or
preemptive rights.
The bylaws of the Fund provide that annual shareholder meetings are not
required and that meetings need be held only with such frequency as required by
Minnesota Law or the Investment Company Act of 1940. The Fund's Articles of
Incorporation limit the liability of its directors to the fullest extent
permitted by law.
Financial Reports
As required by the Investment Company Act of 1940, the Fund will mail
annual and semiannual reports to each of its shareholders. The Fund's financial
statements at the close of its fiscal year (December 31) will be audited by
Squire & Company, independent public accountants.
Stock Certificates
The Fund will maintain a permanent record of all accounts so that the
issuance of stock certificates is generally not necessary. However, the Fund
will issue you a certificate if so requested.
Incorporation and Headquarters
The Fund was incorporated on April 15, 1985 in Minnesota. The business and
affairs of the Fund are managed under the direction of the Fund's Board of
Directors. The Fund's headquarters are located at the address set forth on the
cover page of this Prospectus. Shareholder inquiries may be made to the Fund at
this address.
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<PAGE>
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
operator" an investment company, like the Fund, registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, 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,
A-26
<PAGE>
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
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-27
<PAGE>
APPLICATION AND INSTRUCTIONS
Opening Your Account
You may purchase shares of Excel Midas Gold Shares, Inc. with an initial
investment of $100 or more. Once you are a shareholder in the Fund you can make
additional investments of $25 or more by mail.
To Invest By Mail
Complete this application and mail it with your check payable to Excel
Midas Gold Shares, Inc. at the address set forth on the cover page of the
prospectus. If you are currently a shareholder, you may mail additional
investments at any time. Please enclose one of the payment stubs that is
provided to shareholders or enclose a brief note indicating your account number.
To Invest By Phone
If you are already a shareholder, you may purchase additional shares by
telephone and receive that day's closing public offering price. Simply call
Warner Beck prior to the close of the New York Stock Exchange (normally 4:00
p.m. Eastern time) at (619) 485-9400 or (toll free) (800) 783-3444 or call the
broker through whom you made your original investment. Payments must be received
within five days of your order.
Withdrawals
You have a right to redeem your shares at any time in writing or by
telephone through your broker. All written requests for withdrawals must be
signed by each shareholder, and all signatures on requests for withdrawals
exceeding $5,000 must be guaranteed by a national bank or state chartered
commercial bank or trust company (except a savings bank) or a member of the New
York or American Stock Exchange, the National Association of Securities Dealers,
Inc. or any regional stock exchange.
The Fund will require certain legal documents from corporations or other
organizations, executors, and trustees, or if anyone other than the shareholder
of record requests redemption. If you have any questions concerning a
redemption, telephone the Fund's transfer agent, Excel Advisors, Inc. at (619)
485-9400 or (toll free) (800) 783-3444.
The Fund also offers a systematic withdrawal plan whereby you can authorize
periodic automatic redemptions. Contact the broker through whom you made your
original investment or the Fund for further information.
<PAGE>
Supplement dated June 23, 1995
to the Prospectus of
Excel Midas Gold Shares, Inc.
Excel Advisors, Inc. ("Excel") currently serves as investment adviser to
Excel Midas Gold Shares, Inc. (the "Fund") pursuant to an Investment Advisory
Agreement. The Fund's portfolio manager since 1992 has been Mr. Kjeld Thygesen,
Managing Director of Lion Resource Management Limited ("Lion"). On May 22, 1995,
Excel entered into an agreement with Midas Management Corporation ("MMC")
pursuant to which MMC would purchase certain assets of Excel. As a result of
this proposed transaction (the "Reorganization"), Excel will resign as the
Fund's investment adviser and MMC will provide investment management services
pursuant to a new Investment Management Agreement. MMC contemplates, however,
that it will retain Lion at its own expense to provide subadvisory services with
respect to the Fund pursuant to a subadvisory agreement. Accordingly, Mr.
Thygesen would remain the Fund's portfolio manager. MMC and its affiliates
currently provide investment advisory and related services to mutual funds with
over $225 million in total assets.
On May 22, 1995, the Fund also entered into an Agreement and Plan of
Succession (the "Succession Agreement") with MMC. In connection with the
Succession Agreement, the Fund's Board of Directors approved the new Investment
Management Agreement with MMC. Compensation payable to MMC under the new
Investment Management Agreement will be the same as it is to Excel under the
existing agreement. The new agreement will take effect only if approved by a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act). Until the new agreement is approved, Excel will continue to be the
Fund's investment adviser.
Excel has advised the Fund that the Reorganization, if completed, is
expected to ultimately enhance the quality of the investment management and
other services provided to the Fund. The Reorganization is contingent upon a
number of conditions, including the Fund's shareholders either (1) approving the
new Investment Management Agreement, a new plan of distribution, the subadvisory
agreement, changing the Fund's name to "Midas Fund, Inc.", and electing a new
board of directors; or (2) approving an agreement whereby all, or substantially
all, of the Fund's assets would be transferred to a new open-end investment
company, whose initial shareholder would approve a substantially identical new
investment management agreement, new plan of distribution, subadvisory
agreement, and elect a board of directors. Closing on the Reorganization is
expected to occur in August 1995, provided the necessary approvals are obtained.
Excel also acts as the Fund's accounting services agent pursuant to an
Accounting Services Agreement, and as its transfer, dividend disbursing and
administrative services agent pursuant to an Administration Agreement. Warner
Beck, an affiliate of Excel, distributes the Fund's shares under a Distribution
Agreement. Excel and Warner Beck will terminate these agreements in connection
with the Reorganization, such termination to be effective as of the consummation
of the Reorganization. To replace such agreements, Excel will ask the Fund's
Board of Directors to approve a shareholder administrative services agreement
and a distribution agreement with Investor Service Center, Inc., transfer agency
and agency agreements with DST Systems, Inc. and a custodial agreement and a
service agency agreement with Investors Bank & Trust Company. The new agreements
will be effective upon successful completion of the Reorganization.
