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11 Hanover Square, New York, NY 10005
1-800-400-MIDAS (6432) for Investment Information
1-888-503-VOICE (8642) for Shareholder Services
www.midasfunds.com
The Fund's approach of investing exclusively in short term U.S. Government securities, a portion of the income from which is generally free from state income and personal property taxes, makes it a sound choice for safety conscious investors with the added convenience of free, unlimited check writing. As always, there is no charge for your personalized checks.
We are very pleased to welcome shareholders of the Fund who have joined us since our December 31, 1998 Report either by opening accounts directly, or through their Bull & Bear Securities discount brokerage accounts, where customer's cash balances are promptly put to work by being automatically swept into shares of the Fund.
Review and Outlook
Short term interest rates rose modestly during the first half of 1999. Three month Treasury bills ended 1998 yielding 4.45% and rose to 4.78% by the end of June 1999. The Federal Funds rate also rose during the first half of the year, but just barely. On June 30th, the Federal Reserve raised this benchmark level from 4.75% to 5.00%, consistent with market expectations since Federal Reserve Chairman Alan Greenspan had made clear his intention to raise this rate in prior testimony to Congress.
During the first half of the year the domestic economy performed exceptionally well, with inflation adjusted gross domestic product (GDP) growing 4.3% for the first quarter, and 2.3% for the second quarter, above the Federal Reserve's presumed trend rate. The employment rate declined to as low as 4.2%, and new jobs were created at an average rate of 195,000 per month, down from the 275,000 pace at the end of last year. The new jobs total for July, however, jumped to 310,000. Nevertheless, despite the robust economy, inflation as measured by the Consumer Price Index has remained in check it was unchanged in May and June after moving up 0.7% in April.
In deciding to raise short term rates pre-emptively to avoid future inflationary pressures, the Federal Reserve recognized that some of the conditions responsible for the 0.75% easing of last fall had abated. Financial markets have become, for now, more orderly and liquid. The economies of several countries which were in distress last fall and this winter have shown significant signs of improvement, although, as is often the case, some financial markets have performed in a way which seems to overstate the extent of the recoveries. A meaningful economic recovery in either Japan or industrial Europe remains the greatest uncertainty for the continuation of the benign inflationary environment of the last three years.
The Federal Reserve Open Market Committee will meet again in August, October, November, and December. Market expectations, as reflected in futures contracts, suggest an additional rate hike by year end. We are skeptical that June's 0.25% rate hike will have any significant impact in slowing the current expansion, but are optimistic with regard to the prospects for inflation in any case. It is important to keep in mind that long term interest rates have risen by as much as a full percent already this year, and this should exert some restraint on the rate of growth for the balance of the year.
Additionally, imbalances between current equity market valuations and historic norms have the potential to exert unusual pressure on the economy and financial markets in the future. Not only are traditional measures, such as dividend yields and price earnings ratios stretched, but a macro view of equity markets presents an equally disturbing picture. U.S. equity market capitalization is approaching 150% of GDP, compared with its 60-year moving average of 50%. In the last ten years, equities have increased from 10% to 25% of household assets, and U.S. equity market capitalization has increased to over 50% of global market capitalization from 28%.
The Fund has recently expanded the list of U.S. Government agency securities
in which it invests in seeking to increase diversification, portfolio management
flexibility, and performance. Most of these higher yielding U.S. Government
securities pay interest that is not state tax free, so a portion of the
Fund's dividend payments will be state tax free, but not all, as had been
the case. The Fund will continue to invest opportunistically in short term
U.S. Government securities, and will maintain a portfolio that attempts
to maximize yield for shareholders consistent with preservation of capital
and maintenance of liquidity.
Monthly Investing Made Easy
The Fund's all-weather income and safety conscious approach makes it an ideal vehicle for a program of steady monthly investing. To make investing in the Fund as easy, safe, convenient and affordable as possible, we offer three different plans, the Midas Bank Transfer Plan, the Midas Salary Investing Plan and the Midas Government Direct Deposit Plan. For information on any of these free services simply give us a call and we will help you get started.
If you have any questions or would like further information on the Midas
Funds Family, or our Traditional, Roth or Education IRA, we would be very
pleased to hear from you. Just call toll-free
1-800-400-MIDAS (6432), and an Investor Service Representative will
be glad to assist you, as always, without any obligation on your part.
Sincerely,
| Thomas B. Winmill
President |
Steve A. Landis
Vive President Portfolio Manager |
DOLLAR RESERVES, INC.
Schedule of Portfolio Investments - June 30, 1999
(Unaudited)
| Principal
Amount |
Yield* | Value** | |
| U.S. Government Agencies (100%) | |||
|
$1,017,000
|
Federal Farm Credit, due 7/01/99 | 4.75% |
$1,017,000
|
|
374,000
|
Federal Farm Credit, due 7/15/99 | 5.00 |
373,316
|
|
280,000
|
Federal Farm Credit, due 7/16/99 | 4.84 |
279,452
|
|
2,200,000
|
Federal Farm Credit, due 8/02/99 | 4.62 |
2,199,535
|
|
4,500,000
|
Federal Farm Credit, due 8/03/99 | 5.50 |
4,502,313
|
|
3,000,000
|
Federal Farm Credit, due 9/01/99 | 5.19 |
3,000,859
|
|
2,605,000
|
Federal Farm Credit, due 10/01/99 | 4.98 |
2,604,083
|
|
865,000
|
Federal Farm Credit, due 11/01/99 | 5.00 |
851,021
|
|
318,000
|
Federal Home Loan Banks, due 7/01/99 | 4.89 |
318,000
|
|
1,500,000
|
Federal Home Loan Banks, due 7/06/99 | 6.01 |
1,500,204
|
|
366,000
|
Federal Home Loan Banks, due 7/07/99 | 4.74 |
365,711
|
|
3,000,000
|
Federal Home Loan Banks, due 7/09/99 | 4.88 |
2,996,807
|
|
1,250,000
|
Federal Home Loan Banks, due 7/13/99 | 5.54 |
1,250,210
|
|
230,000
|
Federal Home Loan Banks, due 7/14/99 | 4.74 |
229,606
|
|
1,000,000
|
Federal Home Loan Banks, due 7/15/99 | 5.54 |
1,000,262
|
|
1,500,000
|
Federal Home Loan Banks, due 7/15/99 | 5.54 |
1,500,338
|
|
835,000
|
Federal Home Loan Banks, due 7/16/99 | 5.00 |
833,356
|
|
250,000
|
Federal Home Loan Banks, due 7/26/99 | 8.45 |
250,590
|
|
250,000
|
Federal Home Loan Banks, due 7/27/99 | 5.53 |
250,107
|
|
585,000
|
Federal Home Loan Banks, due 7/28/99 | 4.89 |
582,929
|
|
1,000,000
|
Federal Home Loan Banks, due 7/30/99 | 5.60 |
1,000,255
|
|
4,000,000
|
Federal Home Loan Banks, due 8/03/99 | 5.56 |
4,002,444
|
|
1,000,000
|
Federal Home Loan Banks, due 8/04/99 | 5.56 |
1,000,695
|
|
271,000
|
Federal Home Loan Banks, due 8/06/99 | 4.72 |
269,721
|
|
500,000
|
Federal Home Loan Banks, due 8/09/99 | 6.26 |
500,719
|
|
307,000
|
Federal Home Loan Banks, due 8/13/99 | 5.05 |
305,189
|
|
1,000,000
|
Federal Home Loan Banks, due 8/17/99 | 5.55 |
1,000,680
|
|
749,000
|
Federal Home Loan Banks, due 9/02/99 | 5.05 |
742,538
|
|
300,000
|
Federal Home Loan Banks, due 9/03/99 | 5.16 |
297,355
|
|
1,700,000
|
Federal Home Loan Banks, due 9/08/99 | 4.74 |
1,684,555
|
|
300,000
|
Federal Home Loan Banks, due 9/09/99 | 6.93 |
301,068
|
|
1,500,000
|
Federal Home Loan Banks, due 9/10/99 | 5.16 |
1,485,445
|
|
1,615,000
|
Federal Home Loan Banks, due 9/16/99 | 6.05 |
1,617,509
|
|
720,000
|
Federal Home Loan Banks, due 10/08/99 | 4.69 |
710,724
|
|
3,010,000
|
Federal Home Loan Banks, due 10/15/99 | 4.61 |
3,005,860
|
|
1,675,000
|
Federal Home Loan Banks, due 10/20/99 | 7.40 |
1,687,014
|
|
2,500,000
|
Federal Home Loan Banks, due 11/05/99 | 5.81 |
2,504,422
|
|
1,300,000
|
Federal Home Loan Banks, due 11/05/99 | 5.91 |
1,304,079
|
|
500,000
|
Federal Home Loan Banks, due 2/25/00 | 5.03 |
497,875
|
|
3,000,000
|
Federal Home Loan Banks, due 4/07/00 | 5.15 |
2,999,685
|
|
1,000,000
|
Federal Home Loan Banks, due 4/12/00 | 5.35 |
1,000,453
|
|
5000,000
|
Federal Home Loan Banks, due 6/02/00 | 5.63 |
502,216
|
|
1,000,000
|
Federal Home Loan Banks, due 6/14/00 | 5.42 |
1,000,231
|
|
1,000,000
|
Student Loan Marketing Assn., due 8/02/99 | 4.50 |
999,501
|
|
5,000,000
|
Student Loan Marketing Assn., due 12/02/99 | 5.53 |
5,999,387
|
|
1,250,000
|
Student Loan Marketing Assn., due 12/03/99 | 5.53 |
1,249,982
|
|
700,000
|
Student Loan Marketing Assn., due 1/20/00 | 5.53 |
699,991
|
|
2,000,000
|
Student Loan Marketing Assn., due 2/14/00 | 5.53 |
1,999,876
|
|
370,000
|
Tennessee Valley Authority, due 10/01/99 | 8.38 |
372,865
|
| Total Investments (100%) |
$65,649,033
|
||
|
=========
|
* Represents annualized yield at date of purchase for discount
securities, or coupon for coupon bearing securities.
**Cost of investments for financial reporting and for Federal income
tax purposes is the same as value.
See accompanying notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
ASSETS:
Investments at value which equals
amortized cost (note 1)
....................................... $65,649,033
Cash .........................................................................
116,820
Interest receivable.......................................................
870,548
Receivable for Fund shares sold..................................
24,186
Other assets ...............................................................
6,470
Total assets.........................................................
66,667,057
LIABILITIES:
Payables:
Fund shares redeemed ...........................................
24,493
Dividend ................................................................
1,317
Accrued expenses ......................................................
81,693
Accrued management and distribution fees ..................
20,002
Total liabilities ....................................................
127,505
NET ASSETS:
(applicable to 66,539,552
outstanding shares: 500,000,000 shares
of $.01 par value authorized) ..................................
$66,539,552
&nb
sp;
=========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($66,539,552 ÷ 66,539,552) .................................
$1.00
At June 30, 1999, net assets consisted of:
Paid-in capital ........................................................
$66,544,965
Accumulated net realized loss on
investments ........................................................
(5,413)
&nb
sp;
$66,539,552
&nb
sp;
=========
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (Unaudited)
INVESTMENT INCOME:
Interest ................................................................
$1,650,704
EXPENSES:
Investment management (note 3) ..........................
164,882
Transfer agent .....................................................
97,691
Distribution (note 3) ............................................
82,441
Custodian ...........................................................
27,897
Registration (note 3) ...........................................
21,324
Professional (note 3) ...........................................
20,084
Directors ............................................................
5,207
Other .................................................................
16,651
Total expenses ...............................................
436,177
Investment management
fees and distribution plan
expenses waived (note 3) ...........................
(131,905)
Fee reduction (note 5) ....................................
(4,094)
Net expenses .............................................
300,178
Net investment income ...............................
1,350,526
NET REALIZED GAIN FROM
SECURITY TRANSACTIONS .........................
172
Net increase in net assets
resulting from operations
................................
$1,350,698
&nb
sp;
========
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 (Unaudited) and December 31,
1998
and for the year ended June 30, 1998
| OPERATIONS: |
1999 |
1999 |
1999 |
||
| Net investment invome |
$ 1,350,526
|
$ 1,395,986
|
$ 2,961,905
|
||
| Net realized gain from security transactions |
172
|
2,607
|
774
|
||
| Net increase in net assets resulting from operations |
1,350,698
|
1,398,593
|
2,962,679
|
||
| DISTRIBUTIONS TO SHAREHOLDERS: | |||||
| Distribution from net investment income
($0.022 and $0.047 per share, respectively) |
(1,350,526) |
(1,395,986) |
(2,961,905) |
||
| Distribution in excess of net realized gains ($0.000 per share) |
(172)
|
(2,607)
|
|
||
| Distribution from paid-in capital ($0.001 per share) |
|
|
(70,279)
|
||
| CAPITAL SHARE TRANSACTIONS: | |||||
| Change in net assats resulting from capital share transactions (a) |
1,004,347
|
3,932,762
|
(1,235,973)
|
||
| Total increase (decrease) in net assets |
1,004,347
|
3,932,762
|
(1,305,478)
|
||
| NET ASSETS: | |||||
| Beginning of period |
65,535,205
|
61,602,443
|
62,907,921
|
||
| End of Period |
$66,539,552
|
$65,535,205
|
$61,602,443
|
||
|
=========
|
=========
|
=========
|
|||
| (a) Transactions in capital shares were as follows: | |||||
| Shares sold |
$27,339,761
|
$ 24,217,074
|
$ 49,705,407
|
||
| Shares issued in reinvestment ofdistributions |
1,347,470
|
1,381,063
|
2,981,463
|
||
| Shares redeemed |
(27,682,884)
|
(21,665,375)
|
(53,922,843)
|
||
| Net increase (decrease) |
$ 1,004,347
|
$ 3,932,762
|
$ (1,235,973)
|
||
|
=========
|
=========
|
==========
|
Notes to Financial Statements
(Unaudited)
(1) Dollar Reserves, Inc. (formerly, Bull & Bear Dollar Reserves, a series of Bull & Bear Funds II, Inc.) (the "Fund") is a Maryland corporation registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Fund's investment objective is to provide its shareholders maximum current income consistent with preservation of capital and maintenance of liquidity. The Fund invests exclusively in obligations of the U.S. Government, its agencies and instrumentalities, as set forth in its prospectus. On March 4, 1998, the Board of Directors of the Fund approved a change in the fiscal year end to December 31. Previously, the fiscal year end was June 30. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The market value of the Fund's portfolio securities is cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized in accordance with income tax regulations. Dividends from net investment income (investment income less expenses plus or minus all realized gains or losses on the Fund's portfolio securities) are declared daily and reinvested or paid monthly. Security transactions are accounted for on the trade date (the date the order to buy or sell is executed). Interest income is recorded on the accrual basis. In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable investment income and net capital gains, if any, after utilization of any capital loss carryforward, to its shareholders and therefore no Federal income tax provision is required. At December 31, 1998, the Fund had an unused capital loss carryforward of approximately $5,400 of which $5,200 and $200 expire in 2002 and 2003, respectively.
(3) The Fund retains Midas Management Corporation as its Investment
Manager. Under the terms of the Investment Management Agreement, the Investment
Manager receives a management fee, payable monthly, based on the average
daily net assets of the Fund, at the annual rate of .50 of 1% of the first
$250 million, .45 of 1% from $250 million to $500 million, and .40 of 1%
over $500 million. The Investment Manager has agreed to waive all or part
of its fee or reimburse the Fund monthly if and to the extent the aggregate
operating expenses of the Fund exceed the most restrictive limit imposed
by any state in which shares of the Fund are qualified for sale, although
currently the Fund is not subject to any such limits. Effective June 30,
1999, the investment management agreement with CEF Advisers, Inc. (formerly,
Bull & Bear Advisers, Inc.) ("CEF") was transferred to the Investment
Manager. The terms of the investment management agreement, other than the
name of the investment manager, did not change. Certain officers and directors
of the Fund are officers and directors of the Investment Manager, CEF,
and Investor Service Center, Inc., the Fund's Distributor. The Investment
Manager, CEF, and the Distributor voluntarily waived $131,905 in management
and distribution fees for the six months ended June 30, 1999. The Fund
reimbursed the Investment Manager and CEF $20,018 for providing certain
administrative and
accounting services at cost for the six months ended June 30, 1999.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plan"). Pursuant to the Plan,
the Fund may pay the Distributor a fee in an amount of one quarter of one
percent per annum of the Fund's average daily net assets as compensation
for distribution and service activities. The fee is intended to cover personal
services provided to shareholders in the Fund and the maintenance of shareholder
accounts and all other activities and expenses primarily intended to result
in the sale of the Fund's shares.
(4) The Fund has a committed bank line of credit. At June 30, 1999, there was no balance outstanding and the interest rate was equal to the Federal Reserve Funds Rate plus 1.00 percentage point. For the six months ended June 30, 1999, the weighted average interest rate was 5.63% based on the balances outstanding during the period and the weighted average amount outstanding was $178,549.
(5) The Fund has entered into an arrangement with its transfer agent and custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. During the period, the Fund's custodian fees were reduced by $4,094 under such arrangements.
Year 2000. The Fund could be adversely affected if computer systems
used by the Investment Manager and the Fund's other service providers do
not properly process and calculate date-related information on and after
January 1, 2000. The Investment Manager is working to avoid these problems
and to obtain assurances from other service providers that they are taking
similar steps. There could be a negative impact on the Fund. While the
Fund cannot, at this time, predict the degree of impact, it is possible
that foreign markets will be less prepared than U.S. markets.
FINANCIAL HIGHLIGHTS
| Six Months Ended Years Ended June 30, | ||||||||
|
1999 |
1998 |
1998 |
1997 |
1996 |
1995 |
1994 |
||
| PER SHARE DATA | ||||||||
| Net asset value at beginning of period |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
|
| Income from investment operations: | ||||||||
| Net investment income | .020 | .022 | .048 | .047 | .047 | .044 | .026 | |
| Less distributions: | ||||||||
| Distributions from net investment income |
(.020) |
(.022) |
(.047) |
(.047) |
(.047) |
(.044) |
(.026) |
|
| Distributions from paid-in capital |
- |
- |
(.001) |
- |
- |
- |
- |
|
| Net asset value at end of period |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
$1.000 |
|
| TOTAL RETURN | 4.13% | 4.46% | 4.88% | 4.83% | 4.81% | 4.53% | 2.59% | |
| RATIOS/SUPPLEMENTAL DATA | ||||||||
| Net assets at end of period (000's omitted) |
$66,540 |
$66,535 |
$61,602 |
$62,908 |
$62,467 |
$65,278 |
$76,351 |
|
| Ratio of expenses to average net assets (a) |
.92%** |
.931%** |
.86% |
.71% |
.90% |
.89% |
.89% |
|
| Ratio of net investment income to average net assets (b) |
4.09% |
4.43% |
4.71% |
4.73% |
4.70% |
4.41% |
2.56% |
|
|
|