Midas Fund
Discovering Opportunities
1997 ANNUAL REPORT
FROM THE PORTFOLIO MANAGER & STRATEGIC ADVISOR
February 12, 1998
It is a pleasure to welcome the many new Midas Fund shareholders who have
invested despite the difficult market of the past year. We also note that many
shareholders have taken advantage of lower prices to add to their investment.
The 21.8 % decline in the gold price over the year resulted in a 42.7%
fall in the Toronto Gold and Silver Index, and a slump of 40.8% in the Financial
Times Gold Mines Index, a more representative global gold stock index. Many of
the development project companies were particularly oversold, to the extent that
several are trading below book or cash value in the balance sheet.
In our December 31, 1997 special letter to shareholders, we detailed the
background to the negative events of 1997: the Bre-X Indonesian fraud, central
bank sales, hedge fund short sales, Southeast Asia economic crisis, and North
American tax loss selling. These events combined to depress all categories of
mining stocks, irrespective of quality, size, location, or financial strength.
During January, the gold price fell to an eighteen year low of $278. As
we have pointed out before, approximately one third of the world's gold industry
operates at a loss under $300, while the figure for South Africa is close to
sixty per cent. Already mines in Canada, Chile, and Australia have been closed,
and failing any recovery in the gold price, two South African mining groups have
stated that they will be forced to shut high cost mines. Low gold prices for any
length of time should result in a meaningful reduction in supply.
Given these market conditions, over the past year we continued to invest
the majority of the Fund's portfolio in quality producers that meet our
stringent criteria of long life reserves, expanding production, costs below the
industry average, and experienced operational management. This strategy reflects
our experience that these types of stocks are driven primarily by the direction
of the gold price, and should be the first to respond to a gold bullion price
recovery.
The share prices of project development capital companies, which have
served Midas well in the past, are currently languishing. The companies invested
in by the Fund, however, have been subjected to our continuous rigorous
analysis. Using techniques honed over decades of mining investment experience,
we carefully evaluate the strength of management, technical merits of the
project, and pricing by market capitalization. The share prices of these
companies will be news driven, but with the numerous project programs underway,
there are likely to be some positive developments.
While there are uncertainties facing world markets in 1998, some of these
may work to the benefit of gold. In contrast to the general equity markets, the
precious metals sector is at an historic low trading range. From current
depressed levels, a modest improvement in precious metal prices can be expected
to generate above average returns.
We remain dedicated to the consistent, disciplined investment process we
have established for Midas Fund, and appreciate your confidence and support.
Sincerely,
Kjeld Thygesen James Turk
10 LARGEST HOLDINGS AS OF DECEMBER 31, 1997
1) Dayton Mining Corporation New gold producer with expanding low-cost
production from its mine in Chile.
2) Greenstone Resources Ltd. Exploration in Central America and rapidly
expanding gold production at its mines in
Panama and Nicaragua.
3) ASARCO Large copper producer with operations in the United
States and Peru, trading at a substantial discount
to net assets. Produces silver as a by-product.
4) Phelps Dodge Premier U.S.-based copper producer, also active
internationally developing new mining projects.
5) Newmont Gold Company Major international gold producer with principal
operations in Nevada, Peru and Indonesia. Generally
does not hedge the future price of its gold
production.
6) Newmont Mining Corp. Parent company of Newmont Gold, one of North
America's largest gold mining companies.
7) Normandy Mining Australia's largest gold mining company, with outstanding
international operations. Production is substantially
hedged at attractive prices.
8) Plutonic Gold Large Australian gold producer, with one of the largest
land holdings in Western Australia. A recent take-over bid
by Homestake Mining has been accepted.
9) Rio Narcea Gold Mines Emerging gold producer. Its new mine in Spain begins
operation in 1998.
10) Golden Cycle Gold Owner of the historic Cripple Creek mining district
in Colorado, being mined by joint venture partner
Minorco, the international arm of Anglo-American.
Charts:
Holdings by Type of Company
Major Producing Companies 51.4%
Smaller Producing Companies 33.5%
Project Development Companies 15.1%
Holdings by Region
North America 75.1%
Australia 9.9%
South Africa 6.8%
Gold and Silver Bullion 4.5%
Latin America 1.9%
Africa (excludingSouth Africa) 1.2%
Asia 0.6%
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1997
Bullion (4.5%)
10,036.304 Gold Bullion $ 2,902,499
319,569.019 Silver Bullion 1,896,003
Total Bullion (cost $4,895,092) 4,798,502
Common Stocks and Warrants (83.0%)
North America (62.8%)
49,000 America Mineral Fields Inc.* 116,581
2,445,800 AMT International Mining Corp.* (2) 1,266,500
282,700 Argentina Gold Corp.* 217,606
896,200 Argosy Mining Corp.* 232,038
3,114,600 Armada Gold Corp.* (2) 544,872
199,000 ASARCO Inc. 4,465,063
350,000 Attwood Gold Corp.* 112,662
1,186,000 Aurizon Mines Ltd.* 647,339
208,000 Battle Mountain Gold Co. 1,222,000
430,000 Boliden Ltd.* 1,098,282
2,600,000 B.Y.G. Natural Resources Inc.* (2) 582,205
230,000 Cambior Inc. 1,335,852
850,000 Campbell Resources, Inc.* 371,875
731,000 Canyon Resources Corp.* 868,063
150,000 Colossal Resources Corp.* 93,750
1,075,000 Consolidated Nevada Goldfields Corp.* 270,809
858,000 Cornucopia Resources Ltd.* 156,104
2,079,500 Dayton Mining Corporation* (2) 3,928,939
459,300 Eldorado Gold Corp. Ltd.* 244,266
275,000 Etruscan Resources Inc.* 767,818
1,810,000 Fairmile Gold Corp.* (2) 127,671
1,259,500 Fairstar Explorations Inc.* (2) 308,474
425,000 First Dynasty Mines Ltd.* 148,700
48,000 Franco-Nevada Mining Corp. Ltd. 943,844
75,500 Getchell Gold Corp.* 1,812,000
113,700 Gitennes Exploration Inc.* 202,887
300,000 Glamis Gold, Ltd. 1,106,250
400,000 Glenmore Highlands Inc.* 559,812
328,900 Golden Cycle Gold Corp.* (2) 2,178,963
500,000 Golden Knight Resources, Inc.* 1,182,604
749,000 Golden Queen Mining Co. Ltd.* 471,712
370,000 Golden Star Resources Ltd.* 1,318,125
120,000 Gold Reserve Corp.* 435,000
1,525,000 Goldstake Explorations Inc.* 261,450
64,500 Gran Colombia Resources Inc.* 8,125
689,300 Greater Lenora Resources Corp.* (2) 173,645
585,000 Greenstone Resources Ltd.* 2,851,875
523,800 High River Gold Mines Ltd.* 348,210
181,800 Homestake Mining Co. 1,613,475
554,000 IMA Resource Corp. Special Warrants* 124,054
322,000 Indomin Resources Ltd.* 153,221
503,999 International All-North Resources Ltd.* 67,009
400,000 International Precious Metals Corp.* 512,413
400,000 Jordex Resources, Inc.* 251,916
<PAGE>
500,000 Kenrich Mining Corp.* 104,965
300,000 Kenrich Mining Corp. Units 62,979
200,000 Kinross Gold Corp.* 678,773
204,167 Lytton Minerals, Ltd.* 271,451
800,000 Madsen Gold Corp. Units* 263,112
772,000 Meridian Gold Inc.* 2,160,876
460,000 Metallica Resources, Inc.* 804,730
500,000 Minera Andes Inc. Special Warrants* 419,859
647,142 Minorca Resources, Inc.* 407,563
590,830 Miramar Mining Corp.* 1,178,311
1,000,000 Nelson Gold Corporation Ltd.* 213,428
412,400 Nevsun Resources Ltd.* 1,050,443
71,000 Newmont Gold Company 2,116,688
71,000 Newmont Mining Corp. 2,085,625
31,250 New Venoro Gold Corp.* 2,624
805,000 Oliver Gold Corp.* 197,159
827,400 Oro Nevada Resources Inc.* 144,747
800,000 Ourominas Minerals Inc.* 123,159
1,225,000 Palmer Industries* (2) 1,585,844
330,000 Pangea Goldfields, Inc.* 392,568
72,500 Phelps Dodge Corp. 4,513,125
300,000 Prime Resource Group, Inc.* 1,994,332
800,330 Rio Narcea Gold Mines, Ltd.* 2,380,184
375,500 River Gold Mines Ltd.* 972,219
299,000 Samax Gold Inc.* 889,227
1,433,333 Sedex Mining Corp.* 260,779
818,800 South American Gold & Copper Ltd.* 85,945
90,000 Stillwater Mining Company* 1,507,500
280,000 Tenke Mining Corp.* 507,470
1,552,500 Tombstone Explorations Co. Ltd.* (2) 412,827
500,000 Trio Gold Corp.* 132,955
74,500 Trumpeter Yukon Gold Inc.* 9,384
634,300 Viceroy Resource Corp.* 1,176,232
4,437,400 Vista Gold Corp.* (2) 1,024,696
600,000 Western Pacific Mining Exploration Inc. Units* 239,320
3,055,333 William Resources Inc.* (2) 748,306
66,823,464
Australia (9.9%)
1,350,000 Aurora Gold Ltd.* 1,539,169
700,000 Emperor Mines Ltd.* 205,222
3,250,000 Normandy Mining Ltd. 3,154,889
3,000,000 Normandy Mining Ltd. Warrants* 342,025
1,250,000 Plutonic Resources Ltd.* 3,485,525
2,500,000 Resolute Limited 1,824,200
10,551,030
China (0.6%)
400,000 San Kung Investment Corp. Units (1) 650,000
Ghana (1.2%)
123,762 Ashanti Goldfields Co. Ltd.* 228,960
140,944 Ashanti Goldfields Co. Ltd. GDS 1,057,080
1,286,040
<PAGE>
Mexico (1.9%)
450,000 Industrias Penoles S.A. 2,003,845
South Africa (6.6%)
540,680 Durban Roodeport Deep Ltd. Warrants,
expires12/31/99* 291,643
430,000 Durban Roodeport Deep Ltd.* 621,902
170,800 Free State Consolidated Gold Mines Ltd. ADR 752,588
87,500 Free State Consolidated Gold Mines Ltd. Ordinary 398,258
100,000 Impala Platinum Holdings Ltd. 950,000
582,000 New East Daggafontein Mines Ltd. 743,869
594,800 Oryx Gold Holdings Ltd.* 391,115
200,000 Randgold & Exploration Co. Ltd.* 258,913
148,909 Randgold Resources Ltd. 744,545
12,200 Vaal Reefs Exploration & Mining Company Ltd. 488,852
100,000 Western Areas Gold Mining Co. Ltd.* 550,704
44,400 Western Deep Levels Ltd. 821,124
7,013,513
Total Common Stocks and Warrants
(cost: $207,798,173) 88,327,892
Contracts Options (1.2%)
2,000 Barrick Gold Corp., expires 4/18/98 525,000
500 Harmony Gold Mining Co., expires 7/31/01 226,050
2,000 Homestake Mining Co., expires 4/18/98 150,000
2,000 Newmont Mining Corp., expires 3/21/98 450,000
Total Options (cost: $1,703,333) 1,351,050
Par Value U.S. Government Obligations (11.3%)
$1,000,000 Federal Home Loan Bank, due 1/23/98 996,517
11,000,000 Federal Mortgage Association, due 1/6/98 10,991,750
Total U.S. Government Obligations
(cost: $11,988,267) 11,988,267
Total Investments (100.0%)
(cost: $226,384,865) $106,465,711
* Indicates non-income producing security.
(1) Restricted security (see note 5).
(2) Affiliated company.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
Assets:
Investments at market value
(cost: $226,384,865) (note 1) $106,465,711
Collateral for securities loaned, at market
value (note 5) 14,566,785
Foreign currencies 558,722
Receivables:
Investment securities sold 86,235
Fund shares sold 979,016
Option premium written 492,494
Dividends 31,003
Other assets 21,053
Total assets 123,201,019
Liabilities:
Due to bank 95,730
Payables:
Uncovered options written (note 5) 562,500
Fund shares redeemed 1,388,166
Investment securities purchased 5,385,614
Collateral for securities loaned (note 5) 14,566,785
Accrued management and distribution fees 84,048
Accrued expenses 296,835
Total liabilities $22,379,678
Net Assets:
Applicable to 47,762,811 outstanding shares;
250,000,000 of $.01 par value authorized $100,821,341
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($100,821,341 / 47,762,811) $2.11
At December 31, 1997, net assets consisted of:
Paid-in capital $248,737,206
Accumulated net realized loss on investments (27,854,418)
Net unrealized depreciation on investments
and foreign currencies (120,061,447)
$100,821,341
Statement of Operations
Year Ended December 31, 1997
Investment Income
Dividends (net of $30,781 foreign tax expense) 1,744,074
Interest 82,180
Total investment income 1,826,254
<PAGE>
Expenses
Investment management (note 3) 1,577,627
Distribution (note 3) 394,557
Interest 302,687
Transfer agent 292,484
Custodian 181,736
Shareholder administration (note 3) 145,706
Registration (note 3) 142,548
Printing 134,575
Professional (note 3) 71,067
Directors 14,295
Other 142,875
Total expenses 3,400,157
Fee reductions (note 5) (38,485)
Expenses reimbursed (note 3) (402,551)
Net expenses 2,959,121
Net investment loss (1,132,867)
Realized and Unrealized Loss on Investments,
Foreign Currencies, and Futures:
Net realized loss from foreign currency and
futures transactions (1,267,776)
Net realized loss from security transactions (24,033,256)
Unrealized depreciation of investments and
foreign currencies during the period (106,987,683)
Net realized and unrealized loss on investments
and foreign currencies (132,288,715)
Net decrease in net assets resulting
from operations $(133,421,582)
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
OPERATIONS: 1997 1996
<S> <C> <C>
Net investment loss $ (1,132,867) $ (1,420,721)
Net realized loss from foreign currency and futures transactions (1,267,776) (379,853)
Net realized loss from security transactions (24,033,256) (2,303,822)
Unrealized depreciation of investments and foreign currencies
during the period (106,987,683) (14,771,827)
Net decrease in net assets resulting from operations (133,421,582) (18,876,223)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains ($.0023 per share in 1996) -- (84,946)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting
from capital share transactions (a) 33,786,396 203,664,653
Total increase (decrease) in net assets (99,635,186) 184,703,484
NET ASSETS:
Beginning of period 200,456,527 15,753,043
End of period $100,821,341 $200,456,527
</TABLE>
<PAGE>
(a) Transactions in capital shares were as follows:
1997 1996
SHARES VALUE SHARES VALUE
Shares sold 53,337,981 $ 191,963,387 60,650,936 $342,691,686
Shares issued in
reinvestment of distributions 13,52381,851
Shares redeemed (44,503,491) (158,176,991)(25,443,864) 139,108,884)
Net increase 8,834,490 $ 33,786,396 35,220,595 $203,664,653
Notes to Financial Statements
1) Midas Fund, 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 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 65% of its total assets primarily in (1) 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 (2) gold, silver and platinum bullion,
as set forth in its prospectus. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. With respect to security valuation, investments in
securities traded on a national securities exchange and securities traded on the
Nasdaq National Market System ("NMS") are valued at the last quoted sales price
on the day the valuations are made. Such securities that are not traded on a
particular day, securities traded in the over-the-counter market that are not on
NMS, and bullion are valued at the mean between the last reported bid and asked
prices. Foreign securities, currencies, and gold, platinum and silver coins are
valued in U.S. dollars at prevailing exchange rates. Assets for which quotations
are not readily available are valued as determined in good faith by or under the
direction of the Board of Directors. Security transactions are accounted for on
the trade date (the date the order to buy or sell is executed). Dividend income
and distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on an accrual basis. Debt securities with remaining
maturities of 60 days or less are valued at cost adjusted for amortization of
premiums and accretion of discounts. 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
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. Based upon Federal income tax cost of
$226,384,865, gross unrealized appreciation and gross unrealized depreciation
were $288,223 and $120,207,377, respectively, at December 31, 1997. At December
31, 1997, the Fund had an unused capital loss carryforward of approximately
$27,854,400 of which $25,267,300 and $2,587,100 expires in 2005 and 2004,
respectively.
3) The Fund retains Midas Management Corporation (the "Investment Manager") 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 1% of assets up to
$200 million, .95% over $200 million up to $400 million, .90% over $400 million
up to $600 million, .85% over $600 million up to $800 million, .80% over $800
million up to $1 billion and .75% over $1 billion. 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. In
addition, the Investment Manager had agreed to be subject to the following
expense limitation for a period of two years from the date of the Investment
<PAGE>
Management Agreement, August 25, 1995, which limitation is calculated as an
amount not in excess of the fee payable by the Fund if and to the extent that
the aggregate operating expenses of the Fund (excluding interest expense, Rule
12b-1 Plan of Distribution fees, taxes, brokerage fees and commissions) are in
excess of 2.0% of the first $10 million of average net assets of the Fund, plus
1.5% of the next $20 million of average net assets, plus 1.25% of average net
assets above $30 million. Reimbursement for the year ended December 31, 1997 was
$402,551. Pursuant to the Investment Management Agreement, the Investment
Manager retains Lion Resource Management Limited (the "Subadviser") regarding
portfolio investments. Pursuant to the Subadvisory agreement, 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 net assets. Certain officers and directors of the Fund are
officers and directors of the Investment Manager and Investor Service Center,
Inc. (the "Distributor"). For the year ended December 31, 1997, an affiliate of
the Investment Manager, received commissions of $83,700 for brokerage services.
The Fund reimbursed the Investment Manager $64,081 for providing certain
administrative and accounting services at cost. 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 pays the Distributor an amount up
to 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 maintenance of
shareholder accounts and all other activities and expenses primarily intended to
result in the sale of the Fund's shares. Investor Service Center also received
$145,706 for shareholder administration services which it provided to the Fund
at cost during the year ended December 31, 1997.
4) The Fund has a committed bank line of credit for leveraging and temporary or
emergency purposes. At December 31, 1997, there was no balance outstanding and
the interest rate was equal to the Federal Reserve Funds Rate plus 1.00
percentage points. For the year ended December 31, 1997, the weighted average
interest rate was 6.72% based on the balances outstanding during the period and
the weighted average amount outstanding was $4,367,103.
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 transfer agent
fees and custodian fees were reduced by $27,740 and $10,745, respectively, under
such arrangements. Purchases and proceeds of sales of securities other than
short term investments and bullion aggregated $90,604,020 and $79,044,201,
respectively, during the year ended December 31, 1997. As of December 31, 1997,
the Fund loaned common stocks having a value of $12,855,769 and received cash
collateral of $14,566,785 for the loan. At December 31, 1997, uncovered options
written consisted of:
Index Expiration Month Contracts Value
and Exercise Price
Philadelphia Gold March 70 (premiums 1,000 $562,500
& Silver Index received $492,494)
On December 31, 1997, the Fund held certain securities which are subject to
restrictions on resale. Investments in restricted securities are valued at fair
value as determined in good faith by or under the direction of the Board of
Directors. Dates of acquisition and cost of restricted securities are as
follows:
Shares Date of Acquisition Cost Value
400,000 San Kung 2/4/97 $1,000,000 $650,000
Investment Corp. Units $1,000,000 $650,000
At December 31, 1997, the total value of restricted securities represent 0.64%
of net assets.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Years Ended December 31,
PER SHARE DATA 1997* 1996* 1995* 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $5.15 $4.25 $3.32 $4.16 $2.35
Income from investment operations:
Net investment loss (.03) (.05) (.06) (.05) (.01)
Net realized and unrealized gain (loss)
on investments (3.01) .95 1.28 (.67) 2.34
Total from investment operations (3.04) .90 1.22 (.72) 2.33
Less distributions:
Distributions from net realized gains _ _ (.29) (.12) (.52)
Total distributions _ _ (.29) (.12) (.52)
Net asset value at end of period $2.11 $5.15 $4.25 $3.32 $4.16
TOTAL RETURN (59.03)% 21.22% 36.73% (17.27)% 99.24%
Ratios/Supplemental Data 1997* 1996 1995* 1994 1993
Net assets at end of period (000's omitted) $100,793 $200,457 $15,753 $7,052 $10,357
Ratio of expenses to average net assets (a) (b) 1.90% 1.63% 2.26% 2.15% 2.18%
Ratio of net investment loss to average
net assets (c) (.72)% (.92)% (1.47)% (1.26)% (0.28)%
Portfolio turnover rate 50% 23% 48% 53% 63%
Average commission per share $.0116 $.0204
</TABLE>
* 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. These computations had no effect on net asset value per share.
(a) Ratio prior to reimbursement by the Investment Manager was 2.15%, 1.83%,
and 2.52% for the years ended December 31, 1997, 1996, and 1995, respectively.
(b) Ratio after transfer agent and custodian credits was 1.88%, 1.61% and 2.25%
for the years ended December 31, 1997, 1996 and 1995, respectively. Prior to
1995, such credits were reflected in the ratio. There were no custodian
credits for 1996.
(c) Ratio prior to reimbursement by the Investment Manager was (.97)%,
(1.12)%, and (1.73)% for the periods ended December 31, 1997, 1996, and 1995,
respectively.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of Midas Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Midas Fund, Inc. (formerly Excel Midas Gold Shares, Inc. until August 28, 1995)
including the statement of investments as of December 31, 1997, the related
statement of operations for the year then ended, the statements of changes in
net assets for the two years then ended and financial highlights for the three
years then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial statements of Excel Midas Gold Shares, Inc. as of December
31, 1994, which include financial highlights for each of the two years in the
period then ended, was audited by other auditors whose report dated February 10,
1995, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence
<PAGE>
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Midas Fund, Inc., as of December 31, 1997, and the results of its operations for
the year then ended, the changes in its net assets for the two years then ended
and the financial highlights for the three years then ended in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 23, 1998
Midas Fund Average Annual Return
1 Year -59.03%
5 Years 2.28%
10 Years -1.61%
Chart: Total Return performance in thousands of dollars
Plot Points:
Midas Fund PMFA S&P500
12/87 10000 10000 10000
12/88 8101 8101 11661
12/89 9873 10241 15356
12/90 8196 7802 14877
12/91 8180 7491 19412
12/92 7594 6179 20891
12/93 15094 11557 22992
12/94 12518 10203 23294
12/95 17115 10601 32037
12/96 20748 11403 39388
12/97 8501 6512 52525
The Performance Graph shows results of an initial investment of $10,000 in Midas
Fund, in the Standard & Poor's 500 Stock Index ("S&P 500"), and in the
Morningstar Precious Metals Fund Average ("PMFA") from January 1, 1988 to
December 31, 1997. Results in each case reflect reinvestment of dividends and
distributions. The S&P 500 is unmanaged and fully invested in common stocks. The
PMFA is an equally weighted average of the 19 precious metals funds tracked by
Morningstar. The Fund invests primarily in (1) securities of companies involved
in the business of mining, processing, fabricating, distributing or otherwise
dealing in gold, silver, platinum or other natural resources and (2) gold,
silver and platinum bullion. Past performance is not predictive of future
performance. Until 8/25/95, the maximum sales charge imposed on purchases of the
Fund shares was 4.5%. This sales charge is not reflected in the standardized
returns set forth since it has heen discontinued.
Average
Final Value Total Return Annual Return
MIDAS Fund $8,501 -14.99% -1.61%
S&P 500 52,525 425.25 18.04
PMFA 6,512 -34.88 -4.20
Source: Morningstar, Inc.
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FUND FEATURES & SERVICES
INVESTMENT OBJECTIVES
The Fund seeks capital appreciation and protection against inflation, with
current income as a secondary goal.
FUND MANAGEMENT
Midas Management Corporation acts as general manager of the Fund and Lion
Resource Management Limited serves as subadviser. Kjeld Thygesen is the Fund's
portfolio manager. Mr. Thygesen has been Managing Director of the subadviser
since 1989 and portfolio manager of the Fund since 1992.
INVESTMENT STRATEGY
Midas Fund invests primarily in the equity securities of established mining
companies worldwide. The Fund also invests a smaller portion of its assets in
developing companies that offer strong growth potential.
PORTFOLIO BENEFITS
o Long term growth potential through appreciation in the value of equity
securities held in its portfolio. o Diversification for overall stock and bond
portfolios seeking a growth investment that can capitalize on favorable trends
in the precious metals resource markets. o An inflation hedge is offered by the
Fund's international focus on resource opportunities.
MINIMUM INVESTMENTS
o Regular Accounts, $1,000
o IRAs, $500
o Automatic Investment Program, $50
o Subsequent Investments, $50
ACCOUNT ACCESS
For Fund prospectuses and other investment information, call toll-free
1-888-503-FUND (3863)
For shareholder services by Direct Access, call toll-free
1-888-503-VOICE (8642)
Or, access the Fund on the the web at
www.midasfund.com
Midas Fund
11 Hanover Square
New York, NY 10005
