[GRAPHIC OMITTED]
Prospectus Dated May 1, 1996
Midas Fund, Inc. (the "Fund") seeks primarily capital appreciation and
protection against inflation and, secondarily, current income. Under normal
circumstances, the Fund invests at least 65% of its total assets in (i)
securities of companies primarily involved, directly or indirectly, in the
business of mining, processing, fabricating, distributing or otherwise dealing
in gold, silver, platinum or other natural resources and (ii) gold, silver and
platinum bullion. Such investments are considered speculative and subject to
substantial price fluctuations and risks. There can be no assurance that the
Fund will achieve its investment objectives.
Midas Management Corporation is the Fund's Investment Manager, and Lion
Resource Management Limited is the Fund's Subadviser. Since 1992, Mr. Kjeld
Thygesen, Managing Director of the Subadviser, has been a portfolio manager of
the Fund. Based in London (U.K.), the Subadviser is a part of Lion Mining Group,
which specializes in gold mining and resource company investment management,
corporate finance and consulting.
NEWSPAPER LISTING. Shares of the Fund are sold at the net asset value per share
which is shown daily in the mutual fund section of newspapers nationwide under
the heading "Midas Fund."
This prospectus contains information you should know about the Fund, which
is an open-end, management investment company, 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 May 1, 1996) with the Securities and Exchange
Commission. The Statement of Additional Information is available free of charge
by calling 1-800- 400-MIDAS, and is incorporated by reference in this
prospectus. Fund shares are not bank deposits or obligations of, or guaranteed
or endorsed by any bank or any affiliate of any bank, and are not Federally
insured by, obligations of or otherwise supported by the U.S. Government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
TABLE OF CONTENTS
Expense Tables...........................2 Distributions and Taxes............9
Financial Highlights.....................2 Determination of Net Asset Value...9
The Fund's Investment Program............3 Investment Manager and Subadviser.10
Risk Factors.............................4 Distribution of Shares............10
How to Purchase Shares...................6 Performance Information...........10
Shareholder Services.....................7 Capital Stock.....................11
How to Redeem Shares.....................8 Custodian and Transfer Agent......11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
EXPENSE TABLES. The tables and the example below are designed to help you
understand the various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. A $2 monthly account fee is charged if
your average monthly balance is less than $100, unless you are in the Automatic
Investment Program (see "How to Purchase Shares").
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES ANNUAL FUND OPERATING EXPENSES
<S> <C> <C> <C>
Sales Load Imposed on Purchases............ NONE (as a percentage of average net assets)
Sales Load Imposed on Reinvested Dividends. NONE Management Fees (after reimbursement).............. 0.74%
Deferred Sales Load........................ NONE 12b-1 Fees......................................... 0.25%
Redemption Fee* within 30 days of purchase Other Expenses .................................... 1.27%
(Value of shares redeemed)................. 1.00%
Total Fund Operating Expenses (after reimbursement) 2.26%
</TABLE>
Exchange Fee.............................. NONE
*There is NO redemption fee after 30 days of purchase.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each time
period..............................................
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
$23 $71 $121 $260
The example set forth above assumes reinvestment of all dividends and other
distributions and assumes a 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). THE EXAMPLE IS AN ILLUSTRATION ONLY
AND SHOULD NOT BE CONSIDERED AN INDICATION OF PAST OR FUTURE RETURNS AND
EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Without the Investment Manager's expense reimbursement, Management fees and
Total Fund Operating Expenses would have been 1.00% and 2.52% of average net
assets, respectively.The percentages given for Annual Fund Expenses are based on
the Fund's operating expenses and average daily net assets during its fiscal
year ended December 31, 1995. Long term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.'s ("NASD") rules regarding
investment companies. "Other Expenses" includes amounts paid for certain
custodian, accounting, administrative and shareholder services, and does not
include interest expense from the Fund's bank borrowing.
FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout each period since the Fund's inception. The following
information is supplemental to the Fund's financial statements and accompanying
notes, appearing in the December 31, 1995 Annual Report to Shareholders and
incorporated by reference in the Statement of Additional Information. The
financial statements and notes for the fiscal year ended December 31, 1995, as
well as the information in the table below insofar as it relates to the fiscal
year ended December 31, 1995, have been audited by Tait, Weller & Baker, whose
report thereon is included in the Annual Report to Shareholders. Information in
the table below for the periods prior to December 31, 1994 was audited by other
auditors.
<TABLE>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
PER SHARE DATA**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $3.32 $4.16 $2.35 $2.55 $2.59 $3.12 $2.56 $3.16 $2.63 $2.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss).........(0.06) (0.05) (0.01) 0.01 0.03 - (0.01) (0.02) 0.00 (0.01)
Net realized and unrealized gain (loss)1.28 (0.67) 2.34 (0.19) (0.04) (0.53) 0.57 (0.58) 0.92 0.31
on investment ---- ------ ---- ------ ------ ------ ---- ------ ---- ----
Total from investment operations... 1.22 (0.72) 2.33 (0.18) (0.01) (0.53) 0.56 (0.60) 0.92 0.30
Less distributions:
Dividends from net investment income. - - - (0.01) (0.03) - - - - -
Distributions from net realized gains(0.29) (0.12) (0.52) (0.01) - - - - (0.33) -
Return of capital distributions...... - - - - - - - - (0.06) -
Total distributions................(0.29) (0.12) (0.52) (0.02) (0.03) 0.00 0.00 0.00 (0.39) 0.00
------ ------ ------ ------ ------ ---- ---- ---- ------ ----
Net asset value, end of year......... $4.25 $3.32 $4.16 $2.35 $2.55 $2.59 $3.12 $2.56 $3.16 $2.63
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN.........................36.73% (17.27)% 99.24% (7.16)% (0.20)% (16.99)% 21.88% (18.99)% 34.77% 12.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)...$15,753 $7,052 $10,357 $4,943 $6,202 $7,571 $11,168 $12,726 $19,145 $7,367
Ratio of expenses to average net asset 2.26% 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(c):........... (1.47)% (1.26)% (0.28)% 0.56% 1.10% 0.06% (0.32)% (0.42)% 0.36%(1.05)%
Portfolio turnover .................. 47.72% 52.62% 63.44% 72.23% 77.26% 58.46% 23.60% 7.52% 27.29% 8.28%
</TABLE>
*From commencement of operations, January 8, 1986.
**Per share net investment income (loss) and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. (a) Ratio prior to reimbursement by the investment manager was
2.47%, 2.51%, 2.53%, and 2.52% for 1990, 1991, 1992, and 1995, respectively.
(b) The 1995 ratio after custodian credits was 2.25%. Prior to 1995, such
credits were reflected in the ratio.
(c) Ratio prior to reimbursement by the investment manager was (0.16)%, 0.83%,
0.28%, and (1.73)% for 1990, 1991, 1992, and 1995, respectively.
2
THE FUND'S INVESTMENT PROGRAM
The investment objectives of the Fund are primarily capital appreciation and
protection against inflation and, secondarily, current income. The Fund seeks to
achieve these objectives by investing, under normal circumstances, at least 65%
of its total assets in (i) securities of companies primarily involved, directly
or indirectly, in the business of mining, processing, fabricating, distributing
or otherwise dealing in gold, silver, platinum or other natural resources and
(ii) gold, silver and platinum bullion. Additionally, up to 35% of the Fund's
total assets may be invested in securities of companies that derive a portion of
their gross revenues, directly or indirectly, from the business of mining,
processing, fabricating, distributing or otherwise dealing in gold, silver,
platinum or other natural resources, in securities of selected growth companies,
and in securities issued by the U.S. Government, its agencies or
instrumentalities. For purposes of the foregoing, natural resources includes
ferrous and non-ferrous metals (such as iron, aluminum and copper), strategic
metals (such as uranium and titanium), hydrocarbons (such as coal, oil and
natural gases), chemicals, forest products, real estate, food products and other
basic commodities, which historically have been produced and marketed profitably
during periods of rising inflation. See "Risk Factors."
The Fund retains the flexibility to respond promptly to changes in market
and economic conditions and the Investment Manager may employ a temporary
defensive investment strategy if it determines such a strategy to be warranted.
Under a defensive strategy, the Fund may hold cash and/or invest any portion or
all of its assets in high quality money market instruments of U.S. or foreign
government or corporate issuers. To the extent the Fund adopts a temporary
defensive posture, it will not be invested so as to directly achieve its
investment objectives. In addition, pending investment of proceeds from new
sales of Fund shares or in order to meet ordinary daily cash needs, the Fund may
hold cash and may invest in foreign or domestic high quality money market
instruments. Money market instruments in which the Fund may invest include U.S.
or foreign government securities, high grade commercial paper, bank certificates
of deposit, bankers' acceptances, and repurchase agreements relating to any of
the foregoing.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the Fund
purchases securities from a bank or securities dealer and simultaneously commits
to resell the securities to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased securities. The Fund maintains custody of the underlying
securities prior to their repurchase; thus, the obligation of the bank or dealer
to pay the repurchase price on the date agreed to is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price, plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by the Fund upon their acquisition is
accrued as interest and included in the Fund's net investment income. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent. The Fund intends to enter into repurchase
agreements only with banks and dealers in transactions believed by the
Investment Manager to present minimum credit risks in accordance with guidelines
established by the Fund's board of directors. The Investment Manager reviews and
monitors the creditworthiness of those institutions under the board's general
supervision.
DEBT SECURITIES. When seeking to achieve its secondary objective of current
income, the Fund will normally invest in investment grade debt securities.
Investment grade securities are those rated in the top four categories by a
nationally recognized statistical rating organization such as Standard & Poor's
Ratings Services ("Standard & Poor's") or Moody's Investors Service, Inc.,
("Moody's") or, if unrated, are determined by the Investment Manager to be of
comparable quality. Moody's considers securities in the fourth highest category
to have speculative characteristics. Such securities may include long,
intermediate and short maturities, depending on the Investment Manager's
evaluation of market patterns and trends. The Fund may invest up to 35% of its
total assets in debt securities rated below investment grade, although it has no
current intention of investing more than 5% of its net assets in such securities
during the coming year. The Fund may also invest without limit in unrated
securities if such securities offer, in the Investment Manager's opinion, the
opportunity for a high overall return by reason of their yield, discount at
purchase, or potential for capital appreciation without undue risk. Securities
rated below investment grade and many unrated securities may be considered
predominantly speculative and subject to greater market fluctuations and risks
of loss of income and principal than higher rated debt securities. The market
value of debt securities usually is affected by changes in the level of interest
rates. An increase in interest rates tends to reduce the market value of such
investments, and a decline in interest rates tends to increase their value. In
addition, debt securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities. Fluctuations in the market value of
debt securities subsequent to their acquisition do not affect cash income from
such securities but are reflected in the Fund's net asset value.
OPTIONS, FUTURES, AND FORWARD CURRENCY CONTRACTS. The Fund may purchase and sell
options (including options on precious metals, foreign currencies, equity and
debt securities, and securities indices), futures contracts (including futures
contracts on precious metals, foreign currencies, securities and securities
indices), options on futures contracts, and forward currency contracts. The Fund
may use options, futures, and forward contracts for hedging and yield or income
enhancement purposes. For example, the Fund could purchase call options on
securities that the Investment Manager intends to include in the Fund's
portfolio in order to fix the cost of a future purchase or to attempt to enhance
return by, for example, participating in an anticipated price increase of a
security. The Fund could purchase put options on securities to hedge against a
decline in the market value of securities held in the Fund's portfolio or to
attempt to enhance yield or income. The Fund could write (sell) put and call
options on securities to enhance yield or income or as a limited hedge. The Fund
could purchase and sell these instruments in order to attempt to hedge against
changes in securities prices, interest rates or foreign currency exchange rates
or precious metal prices or to enhance yield or income.
OTHER INFORMATION. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), but intends to continue to
qualify as a regulated investment company for Federal income tax purposes. This
means, in general, that more than 5% of the Fund's total assets may be invested
in the securities of one issuer (including a foreign government), but only if at
the close of each quarter of the Fund's taxable year, the aggregate amount of
such holdings is less than 50% of the value of its total assets and no more than
25% of the value of its total assets is invested in the securities of a single
issuer. To the extent that the Fund's portfolio at times may include the
securities of a smaller number of issuers than if it were "diversified," as
defined in the 1940 Act, the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market
3
assessment of a single issuer may cause greater fluctuation in the Fund's total
return. The Fund may invest (i) up to 15% of its net assets in illiquid
securities, including repurchase agreements with a maturity of more than seven
days, and (ii) up to 10% of its total assets in restricted securities. Illiquid
securities may be more difficult to value than more widely traded securities and
the prices realized from the sales of illiquid securities may be less than if
such securities were more widely traded. The Fund may borrow money from banks
for temporary or emergency purposes (not for leveraging or investment) and
engage in reverse repurchase agreements, but not in excess of an amount equal to
one third of the Fund's total net assets. The Fund may not purchase securities
for investment while any bank borrowing equaling more than 5% of its total
assets is outstanding.
In addition to the Fund's fundamental investment objectives and
concentration policy, the Fund has adopted certain investment restrictions set
forth in the Statement of Additional Information that are fundamental and may
not be changed without shareholder approval. The Fund's other investment
policies are not fundamental and may be changed by the Board of Directors
without shareholder approval.
RISK FACTORS
Because of the following considerations, Fund shares should be considered
speculative, are subject to substantial price fluctuations and risks and are not
a complete investment program. Risks in the Fund's investment policies include:
1. PRICE FLUCTUATIONS IN BULLION. The value of the Fund's investments may be
affected by changes in the price of gold, platinum, and silver. Gold, platinum,
and silver have been subject to substantial price fluctuations over short
periods of time. The prices have been influenced by industrial and commercial
demand, investment and speculation, and monetary and fiscal policies of central
banks and governmental and international agencies. Price fluctuations in bullion
can also cause large price fluctuations in the securities in which the Fund may
invest.
2. CONCENTRATION OF SOURCE OF SUPPLY AND CONTROL OF SALES. Currently, there are
only six major producers of gold: the Republic of South Africa ("South Africa"),
the United States, Australia, the Commonwealth of Independent States (the "CIS,"
formerly the Union of Soviet Socialist Republics), Canada, and China. As South
Africa, the CIS and China are three major producers of gold and platinum,
changes in political, social and economic conditions affecting these countries
pose certain risks to the Fund's investments. The social upheaval and related
economic difficulties in South Africa, the CIS and China, may, from time to
time, influence the price of gold and platinum and the share values of mining
companies involved in South Africa, the CIS, and China and elsewhere. For
example, South Africa depends significantly on gold sales for the foreign
exchange necessary to finance its imports. Accordingly, investors should
understand the special considerations and risks related to such an investment
emphasis, and its potential effect on the Fund's per share value. National
economic and political developments could affect South Africa's policy regarding
gold sales and in turn the price of gold and the share values of mining
companies involved in South Africa.
3. CONCENTRATION. As a matter of fundamental investment policy, the Fund
concentrates its investments in (i) securities of companies primarily involved,
directly or indirectly in, or that derive a portion of their gross revenues,
directly or indirectly from, the business of mining, processing, fabricating,
distributing or otherwise dealing in gold, silver, platinum, or other natural
resources and (ii) gold, silver and platinum bullion. Such concentration
subjects the Fund's shares to greater risk than a fund whose portfolio is not so
concentrated in that the Fund's shares will be affected by economic, political,
legislative and regulatory developments impacting the companies or bullion in
which it may invest. As a result of such concentration the Fund may experience
increased problems of liquidity and the value of Fund shares may fluctuate more
than if it invested in a greater number of industries.
4. PRIVATE PLACEMENTS. The Fund may invest in securities that are sold in
private placement transactions between the issuers and their purchasers and that
are neither listed on an exchange nor traded in the secondary market. In many
cases, privately placed securities will be subject to contractual or legal
restrictions on transfer. As a result of the absence of a public trading market,
privately placed securities may in turn be less liquid and more difficult to
value than publicly traded securities. Although privately placed securities may
be resold in privately negotiated transactions, the prices realized from the
sales could, due to illiquidity, be less than if such securities were more
widely traded. In addition, issuers whose securities are not publicly traded may
not be subject to the disclosure and other investor protection requirements that
may be applicable if their securities were publicly traded. If any privately
placed securities held by the Fund are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration.
5. SMALL CAPITALIZATION COMPANIES. The Fund may invest in companies that are
small or thinly capitalized, and may have a limited operating history. As a
result, investment in these securities involves greater risks and may be
considered speculative. For example, such companies may have more limited
product lines, markets or financial resources than companies with larger
capitalizations, and may be more dependent on a small management group. In
addition, the securities of such companies may trade less frequently and in
smaller volume, and may be subject to more abrupt or erratic price movements,
than securities of large companies. The Fund's positions in securities of such
companies may be substantial in relation to the market of such securities.
Accordingly, it may be difficult for the Fund to dispose of securities of these
companies at prevailing market prices. Full development of these companies takes
time, and for this reason the Fund should be considered a long term investment
and not a vehicle for seeking short term profit. The securities of small or
thinly capitalized companies may also be more sensitive to market changes than
the securities of large companies. Such companies may not be well known to the
investing public and may not have institutional ownership. Such companies may
also be more vulnerable than larger companies to adverse business or economic
developments.
6. TAX OR CURRENCY LAWS. Changes in tax or currency laws of the United States or
foreign countries, such as imposition of withholding taxes or other taxes or of
exchange controls on foreign currencies, may inhibit or increase the cost of the
Fund's pursuit of its investment program.
4
7. UNPREDICTABLE INTERNATIONAL MONETARY POLICIES, ECONOMIC AND POLITICAL
CONDITIONS. Under unusual international monetary or political conditions, the
Fund's assets might be less liquid and the change in value of its assets more
volatile than would be the case with other investments. In particular, because
the prices of gold and platinum 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 securities of companies mining,
processing or dealing in gold and other precious metals than would occur in
other industries.
8. FOREIGN SECURITIES, MARKETS AND CURRENCIES. All or a portion of the Fund's
assets may be invested in foreign securities. Investing in foreign securities,
which are generally denominated in foreign currencies, and utilization of
forward contracts on foreign currencies involve certain considerations
comprising both risk and opportunity not typically associated with investing in
U.S. securities. These considerations include: fluctuations in currency exchange
rates; restrictions on foreign investment and repatriation of capital; costs of
converting foreign currency into U.S. dollars; greater price volatility and
trading illiquidity; less public information on issuers of securities;
non-negotiable brokerage commissions; difficulty in enforcing legal rights
outside of the United States; lack of uniform accounting, auditing, and
financial reporting standards; the possible imposition of foreign taxes,
exchange controls (which may include suspension of the ability to transfer
currency from a given country), and currency restrictions; and the possible
greater political, economic, and social instability of developing as well as
developed countries, including nationalization, expropriation of assets, and
war. Furthermore, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency, and
balance of payments position. These risks are often heightened when the Fund's
investments are concentrated in a small number of countries. In addition,
because transactional and custodial expenses for foreign securities are
generally higher than for domestic securities, the Fund's expense ratio can be
expected to be higher than for investment companies investing exclusively in
domestic securities.
The Fund may invest in securities of issuers located in emerging market
countries. The risks of investing in foreign securities may be greater with
respect to securities of issuers in, or denominated in the currencies of,
emerging market countries. The possibility of revolution and the dependence on
foreign economic assistance may be greater in emerging market countries than in
developed countries. The economies of emerging market countries generally are
heavily dependent upon international trade and accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade. The securities markets of emerging market
countries are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the U.S. and other developed countries.
Disclosure and regulatory standards in many respects are less stringent in
emerging market countries than in the U.S. and other major markets. There also
may be a lower level of monitoring and regulation of emerging markets and the
activities of investors in such markets, and enforcement of existing regulations
may be extremely limited. Investing in local markets, particularly in emerging
market countries, may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund. Certain emerging market countries may also restrict
investment opportunities in issuers in industries deemed important to national
interests.
The Fund may purchase securities on U.S. and foreign stock exchanges or in
the over-the-counter market. Foreign stock markets are generally not as
developed or efficient as those in the United States. In most foreign markets
volume and liquidity are less than in the United States and, at times,
volatility of price can be greater than in the United States. Fixed commissions
on some foreign stock exchanges are higher than the negotiated commissions on
U.S. exchanges. There is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the United States. If the
Fund invests in countries in which settlement of transactions is subject to
delay, the Fund's ability to purchase and sell portfolio securities at the time
it desires may be hampered. Delays in settlement practices in foreign countries
may also affect the Fund's liquidity, making it more difficult to meet
redemption requests, or require the Fund to maintain a greater portion of its
assets in money market investments in order to meet such requests. Some of the
securities in which the Fund invests may not be widely traded, and the Fund's
position in such securities may be substantial in relation to the market for
such securities. Accordingly, it may be difficult for the Fund to dispose of
such securities at prevailing market prices in order to meet redemption
requests.
Since investment in foreign securities usually involves foreign currencies
and since the Fund may temporarily hold cash in bank deposits in foreign
currencies in order to facilitate portfolio transactions, the value of the
Fund's assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. For example, if the value of the U.S. dollar decreases relative to
a foreign currency in which a Fund investment is denominated or which is
temporarily held by the Fund to facilitate portfolio transactions, the value of
such Fund assets and the Fund's net asset value per share will increase, all
else being equal. Conversely, an increase in the value of the U.S. dollar
relative to such a foreign currency will result in a decline in the value of
such Fund assets and its net asset value per share. The Fund may incur
additional costs in connection with conversions of currencies and securities
into U.S. dollars. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis, or through entering into
forward contracts.
The Fund generally will not enter into a forward contract with a term of greater
than one year.
The Fund may hold a portion or all of its cash in the form of foreign
currencies. Since investments in foreign currencies, bullion and coins do not
yield income, the Fund may not achieve its secondary objective during periods
when it holds significant positions in such investments. The Fund purchases or
sells gold, platinum, and silver bullion primarily of standard weight at the
best available prices in the New York bullion market (see "Determination of Net
Asset Value"). The Investment Manager retains discretion, however, to purchase
or sell bullion in other markets, including foreign markets, if better prices
can be obtained.
When purchasing foreign securities, the Fund will ordinarily purchase
securities which are traded in the U.S. or purchase American Depository Receipts
("ADRs") 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).
5
9. OPTIONS, FUTURES, AND FORWARD CURRENCY CONTRACTS. Strategies with options,
futures, and forward currency contracts may be limited by market conditions,
regulatory limits and tax considerations, and the Fund might not employ any of
the strategies described above. There can be no assurance that any strategy used
will be successful. The loss from investing in certain of these instruments is
potentially unlimited. Options and futures may fail as hedging techniques in
cases where price movements of the instruments underlying the options and
futures do not follow the price movements of the instrument subject to the
hedge. Gains and losses on investments in options and futures depend on the
Investment Manager's ability to predict correctly the direction of stock prices,
interest rates, foreign currency exchange rates, precious metals prices, and
other economic factors. In addition, the Fund will likely be unable to control
losses by closing its position where a liquid secondary market does not exist
and there is no assurance that a liquid secondary market for all of these
instruments will always exist. It also may be necessary to defer closing out
hedged positions to avoid adverse tax consequences. The percentage of the Fund's
assets set aside to cover its obligations under options, futures, or forward
currency contracts could impede effective portfolio management or the ability to
meet redemption or other current obligations.
10. 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.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $500 for regular and gifts/transfers to minors custody accounts,
and $100 for Midas retirement plans, which include individual retirement
accounts ("IRAs"), simplified employee pension plan IRAs ("SEP-IRAs"), rollover
IRAs, profit sharing and money purchase plans, and 403(b) plan accounts. The
minimum subsequent investment is $50. The initial investment minimums are waived
if you elect to invest $50 or more each month in the Fund through the Midas
Automatic Investment Program (see "Additional Investments" below).
INITIAL INVESTMENT. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Midas Fund, mailed to Investor Service Center, Box 419789, Kansas
City, MO 64141-6789. Initial investments also may be made by having your bank
wire money, as set forth below, in order to avoid mail delays.
ADDITIONAL INVESTMENTS. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o MIDAS AUTOMATIC INVESTMENT PROGRAM. With the Midas Automatic Investment
Program, you can establish a convenient and affordable long term investment
program through one or more of the Plans explained below. Each Plan is
designed to facilitate an automatic monthly investment of $50 or more into
your Fund account.
The MIDAS BANK TRANSFER PLAN lets you purchase Fund shares on a certain day
each month by transferring electronically a specified dollar amount from
your regular checking account, NOW account, or bank money market deposit
account.
In the MIDAS SALARY INVESTING PLAN, part or all of your salary may be
invested electronically in shares of the Fund on each pay date, depending
upon your employer's direct deposit program.
The MIDAS GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit automatically
part or all of certain U.S. Government payments into your Fund
account. Eligible U.S. Government payments include Social Security, pension
benefits, military or retirement benefits, salary, veteran's benefits and
most other recurring payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center, 1-800-400-MIDAS.
You may modify or terminate the Bank Transfer Plan at any time by written
notice received at least 10 days prior to the scheduled investment date. To
modify or terminate the Salary Investing Plan or Government Direct Deposit
Plan, you should contact, respectively, your employer or the appropriate
U.S. government agency. The Fund reserves the right to redeem any account if
participation in the Program is terminated and the account's value is less
than $500. The Program and the Plans do not assure a profit or protect
against loss in a declining market, and you should consider your ability to
make purchases when prices are low.
o CHECK. Mail a check or other negotiable bank draft ($50 minimum), made
payable to Midas Fund, together with a Midas FastDeposit form to Investor
Service Center, Box 419789, Kansas City, MO 64141-6789. If you do not use
that form, please send a letter indicating the account number to which the
subsequent investment is to be credited, and name(s) of the registered
owner(s).
o ELECTRONIC FUNDS TRANSFER (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Investor Service
Center, 1-800-400-MIDAS. We will contact the bank you designate on your
Account Application or Authorization Form to arrange for the EFT, which is
done through the Automated Clearing House system, to your Fund account. For
requests received by 4 p.m., eastern time, the investment will be credited
to your Fund account ordinarily within two business days. There is a $50
minimum for each EFT investment. Your designated bank must be an Automated
Clearing House member and any subsequent changes in bank account information
must be submitted in writing with a voided check or deposit slip.
o FEDERAL FUNDS WIRE. You may wire money, by following the procedures set forth
below, to receive that day's net asset value per share.
6
INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Investor Service Center, 1-800-400-MIDAS, to give the name(s) under which the
account is to be registered, tax identification number, the name of the bank
sending the wire, and to be assigned a Midas Fund account number. You may then
purchase shares by requesting your bank to transmit immediately available funds
("Federal funds") by wire to: United Missouri Bank NA, ABA #10-10-00695; for
Account 98-7052-724-3; Midas Fund. Your account number and name(s) must be
specified in the wire as they are to appear on the account registration. You
should then enter your account number on your completed Account Application and
promptly forward it to Investor Service Center, Box 419789, Kansas City, MO
64141- 6789. This service is not available on days when the Federal Reserve wire
system is closed. Subsequent investments by wire may be made at any time without
having to call Investor Service Center by simply following the same wiring
procedures.
SHAREHOLDER ACCOUNTS. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). For joint tenant accounts, any account owner has the
authority to act on the account without notice to the other account owners.
Investor Service Center in its sole discretion and for its protection may, but
is not obligated to, require the written consent of all account owners of a
joint tenant account prior to acting upon the instructions of any account owner.
Stock certificates will be issued only for full shares when requested in
writing. In order to facilitate redemptions and provide safekeeping, we
recommend that you do not request certificates. You will receive transaction
confirmations upon purchasing or selling shares, and quarterly statements.
WHEN ORDERS ARE EFFECTIVE. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be made
payable to Midas Fund and drawn in U.S. dollars on a U.S. bank. No third party
checks will be accepted and the Fund reserves the right to reject any order for
any reason. Accounts are charged $30 by the Transfer Agent for submitting checks
for investment which are not honored by the investor's bank. The Fund may in its
discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged retirement plan described below, however, without consulting a
tax adviser concerning possible adverse tax consequences. Additional information
regarding any of the following services is available from Investor Service
Center, 1-800-400-MIDAS.
ELECTRONIC FUNDS TRANSFER (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account with Midas EFT service. With EFT, you use the Automated
Clearing House system to electronically transfer money quickly and safely
between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check.
SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed dollar, share, or percentage amounts, subject to a
minimum amount of $100. Under the Systematic Withdrawal Plan, all dividends and
other distributions, if any, are reinvested in the Fund.
ASSIGNMENT. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center, 1-800-400-MIDAS.
TAX-ADVANTAGED RETIREMENT PLANS. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible (or
non-deductible) for Federal income tax purposes as noted below. Information on
any of the plans described below is available from Investor Service Center,
1-800-400-MIDAS.
The minimum investment to establish a Midas IRA or other retirement plan is
$100. Minimum subsequent investments are $50. The initial investment minimums
are waived if you elect to invest $50 or more each month in the Fund through the
Midas Automatic Investment Program. There are no set-up fees for any Midas
Retirement Plans. Subject to change on 30 days' notice, the plan custodian
charges Midas IRAs a $10 annual fiduciary fee, $10 for each distribution prior
to age 59 1/2, and a $20 plan termination fee; however, the annual fiduciary fee
is waived if your IRA has assets of $10,000 or more or if you invest regularly
through the Midas Automatic Investment Program.
|X| IRA AND SEP-IRA ACCOUNTS. Anyone with earned income who is less than age
70 1/2 at the end of the tax year, even if also participating in another
type of retirement plan, may establish an IRA and contribute each year
up to $2,000 or 100% of earned income, whichever is less, and an
aggregate of up to $2,250 when a non-working spouse is also covered in a
separate spousal account. If each spouse has at least $2,000 of earned
income each year, they may contribute up to $4,000 annually. Employers
may also make contributions to an IRA on behalf of an individual under a
SEP-IRA in any amount up to 15% of up to $150,000 of compensation.
Generally, taxpayers may contribute to an IRA during the tax year and
through the next year until the income tax return for that year is due,
without regard to extensions. Thus, most individuals may contribute for
the 1996 tax year from January 1, 1996 through April 15, 1997.
DEDUCTIBILITY. IRA contributions are fully deductible for many taxpayers.
For a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is), a portion of IRA contributions is
deductible if adjusted gross income (before the IRA deductions) is
$40,000-$50,000 (if married) and $25,000-$35,000 (if single). Only IRA
contributions by a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse
7
is) and has adjusted gross income of more than $50,000 (if married) and
$35,000 (if single) will not be deductible. An eligible individual may
establish a Midas IRA under the prototype plan available through the Fund,
even though such individual or spouse actively participates in an
employer-maintained retirement plan.
o IRA TRANSFER AND ROLLOVER ACCOUNTS. Special forms are available from
Investor Service Center, 1-800-400-MIDAS, which make it easy to transfer or
roll over IRA assets to a Midas IRA. An IRA may be transferred from one
financial institution to another without adverse tax consequences.
Similarly, no taxes need be paid on a lump-sum distribution which you may
receive as a payment from a qualified pension or profit sharing plan due to
retirement, job termination or termination of the plan, so long as the
assets are put into an IRA Rollover account within 60 days of the payment.
Withholding for Federal income tax purposes is required at the rate of 20%
for "eligible rollover distributions" made from any retirement plan (other
than an IRA) that are not directly transferred to an "eligible retirement
plan," such as a Midas Rollover Account.
o PROFIT SHARING AND MONEY PURCHASE PLANS. These provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees
generally to contribute (and deduct) up to $30,000 annually or, if less,
25% (15% for profit sharing plans) of compensation or self-employment
earnings of up to $150,000. Corporations and partnerships, as well as all
self-employed persons, are eligible to establish these Plans. In addition,
a person who is both salaried and self-employed, such as a college
professor who serves as a consultant, may adopt these retirement plans
based on self-employment earnings.
|X| SECTION 403(B) ACCOUNTS. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment of custodial accounts
on behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's
account pursuant to a salary reduction agreement, up to a maximum amount, or
"exclusion allowance." The exclusion allowance is generally computed by
multiplying the participant's years of service times 20% of the
participant's compensation included in gross income received from the
employer (reduced by any amount previously contributed by the employer to
any 403(b) account for the benefit of the participant and excluded from the
participant's gross income). However, the exclusion allowance may not exceed
the lesser of 25% of the participant's compensation (limited as above) or
$30,000. Contributions and subsequent earnings thereon are not taxable until
withdrawn, when they are received as ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
BY MAIL. You may request that the Fund redeem any amount by submitting a written
request to Investor Service Center, Box 419789, Kansas City, MO 64141- 6789,
signed by the record owner(s). If the written request is sent to the Fund, it
will be forwarded to the above address. If stock certificates have been issued
for shares being redeemed, they must accompany the written request.
BY TELEPHONE. You may telephone Investor Service Center, 1-800-400-MIDAS, to
expedite redemption of Fund shares if share certificates have not been issued.
You may redeem as little as $250 worth of shares by requesting Electronic
Funds Transfer (EFT) service. With EFT, you can redeem Fund shares quickly
and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for
the electronic transfer of your redemption proceeds (through the Automated
Clearing House system) to your bank account. EFT proceeds are ordinarily
available in your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time
will be redeemed from your account that day, and if after, on the next Fund
business day. Any subsequent changes in bank account information must be
submitted in writing, signature guaranteed, with a voided check. Redemptions by
telephone may be difficult or impossible to implement during periods of rapid
changes in economic or market conditions.
REDEMPTION PRICE AND FEES. The redemption price is the net asset value per share
next determined after receipt of the redemption request in proper form. The Fund
is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund held for 30 days or less are redeemed or
exchanged, the Fund will deduct a redemption fee equal to one percent of the net
asset value of shares redeemed or exchanged. The fee will be retained by the
Fund and used to offset the transaction costs that short term trading imposes on
the Fund and its shareholders. If an account contains shares with different
holding periods (i.e. some shares held 30 days or less, some shares held 31 days
or more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. Shares acquired through the
reinvestment of dividends and other distributions or redeemed under the
Systematic Withdrawal Plan are exempt from the redemption fee. Registered
broker/dealers, investment advisers, banks, and insurance companies may open
accounts and redeem shares by telephone or wire and may impose a charge for
handling purchases and redemptions when acting on behalf of others.
REDEMPTION PAYMENT. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York
8
Stock Exchange is closed or trading thereon is restricted as determined by the
SEC; (ii) under emergency circumstances as determined by the SEC that make it
not reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a fifteen day delay to allow the check or transfer to
clear. The fifteen day clearing period does not affect the trade date on which a
purchase or redemption order is priced, or any dividends and other distributions
to which you may be entitled through the date of redemption. The clearing period
does not apply to purchases made by wire. Due to the relatively higher cost of
maintaining small accounts, the Fund reserves the right, upon 45 days' notice,
to redeem any account, other than IRA and other Midas prototype retirement plan
accounts, worth less than $500 except if solely from market action, unless an
investment is made to restore the minimum value.
TELEPHONE PRIVILEGES. You automatically have all telephone privileges to, among
other things, authorize purchases and redemptions with EFT or by other means,
unless declined on the Account Application or otherwise in writing. Neither the
Fund nor Investor Service Center shall be liable for any loss or damage for
acting in good faith upon instructions received by telephone and believed to be
genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it does not, it may be liable for
losses due to unauthorized or fraudulent transactions. These procedures include
requiring personal identification prior to acting upon telephone instructions,
providing written confirmation of such transactions, and recording telephone
conversations. The Fund may modify or terminate any telephone privileges or
shareholder services (except as noted) at any time without notice.
SIGNATURE GUARANTEES. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the NASD. A notary public may not guarantee signatures. The
Transfer Agent may require further documentation, and may restrict the mailing
of redemption proceeds to your address of record within 60 days of such address
being changed unless you provide a signature guarantee as described above.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Investor
Service Center, 1-800-400-MIDAS. For Federal income tax purposes, dividends and
other distributions are treated in the same manner whether received in
additional Fund shares or in cash. Any election will remain in effect until you
notify Investor Service Center to the contrary.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code ("RIC") so that it will be relieved of Federal
income tax on that part of its investment company taxable income (generally
consisting of net investment income, net short term capital gains, and net gains
from certain foreign currency transactions) and net capital gain (the excess of
net long term capital gain over net short term capital loss) that is distributed
to its shareholders. Dividends paid by the Fund from its investment company
taxable income (whether paid in cash or in additional Fund shares) generally are
taxable to shareholders, other than shareholders that are not subject to tax on
their income, as ordinary income to the extent of the Fund's earnings and
profits; a portion of those dividends may be eligible for the corporate
dividends-received deduction. Distributions by the Fund of its net capital gain
(whether paid in cash or in additional Fund shares), when designated as such by
the Fund, are taxable to the shareholders as long term capital gains, regardless
of how long they have held their Fund shares. The Fund notifies its shareholders
following the end of each calendar year of the amounts of dividends and capital
gain distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction. Any
dividend or other distribution paid by the Fund will reduce the net asset value
of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes. The Fund's investments in gold, platinum, and silver bullion and coins
may cause it to fail certain income or asset tests that must be satisfied to
qualify as a RIC under the Code. Accordingly, the Investment Manager will
endeavor to manage the Fund's portfolio so that (1) income and gains derived
from investments in bullion and coins (and any other "non-qualified" income)
will not exceed 10% of the Fund's gross annual income and (2) less than 50% of
the value of the Fund's total assets as of the close of each quarter of its
taxable year will be invested in bullion and coins (and any other "non-qualified
assets"). If the Fund did not qualify for taxation as a RIC, it would be
required to pay Federal income tax on its net income, which would reduce the
amount available for distribution to its shareholders. The Fund is required to
withhold 31% of all dividends, capital gain distributions, and redemption
proceeds payable to any individuals and certain other noncorporate shareholders
who do not provide the Fund with a correct taxpayer identification number.
Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who are otherwise subject to backup
withholding.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of the Fund's investments and all other
assets minus any liabilities. The value of one share is determined by dividing
the net assets by the total number of shares outstanding. This is referred to as
"net asset value per share," and is determined as of the close of regular
trading on the New York Stock Exchange (currently, 4 p.m. eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing)
each business day of the Fund. A business day of the Fund is any day on which
the New York Stock
9
Exchange is open for trading. The following are not business days of the Fund:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Foreign securities are
valued on the basis of quotations from a primary market in which they are traded
and are translated from the local currency into U.S. dollars using current
exchange rates. Securities and other assets for which quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
INVESTMENT MANAGER AND SUBADVISER
Midas Management Corporation (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager also furnishes or obtains on behalf of the Fund all
services necessary for the proper conduct of the Fund's business and
administration. The Investment Manager retains final discretion in the
investment and reinvestment of the Fund's assets, subject to the control and
oversight of the Board of Directors. The Investment Manager is authorized to
place portfolio transactions with an affiliated broker/dealer, and may allocate
brokerage transactions by taking into account the sales of shares of the Fund
and other affiliated investment companies. The Investment Manager may allocate
transactions to broker/dealers that remit a portion of their commissions as a
credit against the Fund's expenses.
For its services, the Investment Manager receives a fee based on the average
daily net assets of the Fund, at the annual rate of 1% on the first $200 million
and declining thereafter as a percentage of average daily net assets. This fee
is higher than fees paid by most other investment companies. During the fiscal
year ended December 31, 1995, investment management fees paid by the Fund
represented approximately 1.00% of average daily net assets. The Investment
Manager provides certain administrative services to the Fund at cost. Bassett S.
Winmill may be deemed a controlling person of the Investment Manager.
The Investment Manager has entered into a subadvisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
such investments. The Subadviser also provides the Investment Manager with
advice as to allocating the Fund's portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Manager, not the Fund, pays the Subadviser monthly a percentage of the
Investment Manager's net fees based upon the Fund's performance and its total
net assets ranging from ten to fifty percent. The Subadviser, whose principal
business address is 7 - 8 Kendrick Mews, London, U.K. SW7 3HG, is a
majority-owned subsidiary of Lion Mining Group, which is controlled by Andrew F.
Malim. The Fund's investments may include securities of companies for which Lion
Mining Group provides technical, consulting, and investor relations services.
The Subadviser also serves as an investment adviser to another U.S. mutual fund
with net assets of approximately $32 million as of March 1, 1996. Mr. Kjeld
Thygesen, the Subadviser's Managing Director, has been the Fund's portfolio
manager since January 1992 and currently serves as the Fund's portfolio manager
together with the Investment Manager's Investment Policy Committee. Mr. Thygesen
has been a Managing Director of the Subadviser since 1989.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc. (the
"Distributor"), 11 Hanover Square, New York, NY 10005, acts as the Fund's
principal agent for the sale of its shares. The Investment Manager is an
affiliate of the Distributor. The Fund has also adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Plan,
the Fund pays the Distributor a distribution fee in an amount of 0.25% per annum
of the Fund's average daily net assets for distribution and service activities.
This fee may be retained by the Distributor or passed through to brokers, banks
and others who provide services to their customers who are Fund shareholders or
to the Distributor. The Fund will pay the fee to the Distributor until either
the Plan is terminated or not renewed. In that event, the Distributor's expenses
in excess of fees received or accrued through the termination day will be the
Distributor's sole responsibility and not obligations of the Fund. During the
period they are in effect, the Distribution Agreement and Plan obligate the Fund
to pay a fee to the Distributor as compensation for its service and distribution
activities. If the Distributor's expenses exceeds the fee, the Fund will not be
obligated to pay any additional amount to the Distributor. If the Distributor's
expenses are less than the fee, it may realize a profit.
PERFORMANCE INFORMATION
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 Morningstar, Inc., Lipper Analytical Services, Inc.
and other sources. "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,
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 $1,000 and multiplying the
quotient by 100. In calculating ending redeemable value, all dividends and other
distributions are assumed to be reinvested in additional Fund shares. Although
the Fund imposes a 1% redemption fee on the redemption of shares held for 30
days or less, all of the periods for which performance is quoted are longer than
30 days, and therefore the 1% fee is not reflected in the performance
calculations. In addition, there is no sales charge upon reinvestment of
dividends or other distributions. Until August 28, 1995, the maximum sales
charge imposed on purchases of Fund shares was 4.5%. This sales charge is not
reflected in the calculation of returns since the sales charge has been
discontinued. For more information regarding how the Fund's average annual total
return and cumulative total return is calculated, see "Calculation of
Performance Data" in the Statement
10
of Additional Information. The Fund's annual report to shareholders contains
further information about the Fund's performance, and is available free of
charge upon request.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as a Maryland corporation in 1995. Prior to August 28, 1995, the Fund
operated under the name "Excel Midas Gold Shares, Inc.," a Minnesota corporation
organized in 1985. The Fund is authorized to issue up to 1,000,000,000 shares
($.01 par value). The Board of Directors of the Fund may establish additional
series or classes of shares, although it has no current intention of doing so.
The Fund's stock is freely assignable by way of pledge (as, for example,
for collateral purposes), gift, settlement of an estate and also by an investor
to another investor. Each share has equal dividend, voting, liquidation, and
redemption rights with every other share. The shares have no preemptive,
conversion, or cumulative voting rights and they are not subject to further call
or assessment.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters that would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 10% of the Fund's shares may call
a meeting at any time. There will normally be no meetings of shareholders for
the purpose of electing Directors unless fewer than a majority of the Directors
holding office have been elected by shareholders. Shareholder meetings will be
held in years in which shareholder vote on the Fund's investment management
agreement, plan of distribution, or fundamental investment objectives, policies
or restrictions is required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
custodian of the Fund's assets, performs certain accounting services for the
Fund, and may appoint one or more subcustodians provided such subcustodianship
is in compliance with the rules and regulations promulgated under the 1940 Act.
The Fund may maintain a portion of its assets in foreign countries pursuant to
such subcustodianships and related foreign depositories. Utilization by the Fund
of such foreign custodial arrangements and depositories will increase the Fund's
expenses. All of the Fund's gold, platinum, and silver bullion is held by
Wilmington Trust Company, Rodney Square North, Wilmington, DE 19890.
The Fund's transfer and dividend disbursing agent ("Transfer Agent") is DST
Systems, Inc., Box 419789, Kansas City, MO 64141-6789. The Distributor provides
certain shareholder administration services to the Fund and is reimbursed its
cost by the Fund. The Fund may also enter into agreements with brokers, banks
and others who would perform, on behalf of its customers, certain shareholder
services not otherwise provided by the Transfer Agent or the Distributor.
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