Midas Fund
Semi-Annual Report
Report From The
Portfolio Manager
& Strategic Advisor
August 15, 1998
It is a pleasure to welcome the many new shareholders who have invested
in Midas Fund despite the difficult market of the past six months. We also note
that many shareholders have taken advantage of lower prices to add to their
investment.
The decline in the gold price in January to an eighteen year low of $278,
and subsequent failure to recover, has impacted negatively on the prices of gold
stocks. Although gold stocks fell across the board, the smaller development
capital companies were particularly severely affected.
The South East Asian economic and financial crisis has had a depressing
effect on the demand for precious metals as currency devaluations pushed up
prices in domestic currencies. We expect that a return of stability to the
region will see demand for gold and silver recover, especially from the larger
consumers such as India and China.
Probably the most important factor overhanging the gold market currently
is the advent of the European single currency, the "Euro" and the role of gold
in the European Central Bank system. It has already been established that gold
will form 15% of the ECB's foreign exchange reserves, but the unresolved
question is the policy with regard to the gold remaining in the national central
banks.
In this context, it is important to note that the President of the ECB
stated that he wants to bring all foreign exchange reserves of the national
central banks, including gold, under the control of the ECB. Once this
uncertainty is removed, and gold is an integral part of the Euro, the overall
direction of ECB policy should be positive for gold.
The low gold price is resulting in many mining companies cutting
operations and reducing costs, while expanding reserves and production at the
same time. In South Africa, Australia, and to a lesser extent Canada, domestic
currencies have declined against the U.S. dollar, thereby further lowering costs
and enhancing the profitability of mines in these countries. Despite this,
stocks have continued to drift lower, and at current levels, gold stocks are
trading at their lowest valuations, relative to gold, for twelve years.
We are very optimistic that a recovery in the gold price above $300 will
produce a sharp rally in gold stocks. 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 June 30, 1998
1) Homestake Mining
The oldest gold producing company in the United States, with expanding
international production as well. Generally does not hedge the future price of
its gold production.
2) Anglogold
This South African company is the world's largest gold producer and owner of
undeveloped gold reserves.
3) Greenstone Resources Ltd.
Exploration in Central America and rapidly expanding gold production at its
mines in Panama and Nicaragua.
4) Stillwater Mining
The only palladium and platinum mining company in the United States,
with plans to further expand production.
<PAGE>
Currently benefiting from the high prices for these metals.
5) Normandy Mining
Australia's largest gold mining company, with outstanding international
operations. Production is substantially hedged at attractive prices.
6) 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.
7) Freeport Copper & Gold
Mining one of the world's largest copper and gold deposits in Indonesia, with
operations offering considerable leverage to a rise in the price of these
metals.
8) Industrias Penoles
Mexican-based company is one of the largest silver
producers in the world, also mines base metals.
9) 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.
10) Rio Narcea Gold Mines
Emerging gold producer. Its new mine in Spain began operations in 1998.
Holdings by Type of Company
MAJOR PRODUCING COMPANIES 50.7%
PROJECT DEVELOPMENT COMPANIES 7.5%
SMALLER PRODUCING COMPANIES 37.0%
GOLD AND SILVER BULLION 4.8%
Holdings by Operations
UNITED STATES 34.5%
LATIN AMERICA 13.2%
ASIA 5.9%
EUROPE 6.1%
AUSTRALIA 8.6%
SOUTH AFRICA 10.5%
AFRICA (EXCEPT S. AFRICA) 7.8%
CANADA 8.4%
BULLION 5.0%
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<TABLE>
<CAPTION>
Schedule of Portfolio Investments
June 30, 1998 (Unaudited)
Troy Ounces Market Value
Bullion (5.0%)
<S> <C>
10,036.304 Gold Bullion $ 2,980,782
319,569.019 Silver Bullion 1,759,866
Total Bullion (cost $4,895,092) 4,740,648
Shares Market Value
Common Stocks and Warrants (94.3%)
North America (67.6%)
2,445,800 AMT International Mining Corp.* (2) 749,556
282,700 Argentina Gold Corp.* 82,787
896,200 Argosy Mining Corp.* 140,379
3,114,600 Armada Gold Corp.* (2) 530,289
150,000 ASARCO Inc. 3,337,500
385,000 Attwood Gold Corp.* 104,880
1,186,000 Aurizon Mines Ltd.* 476,549
208,000 Battle Mountain Gold Co. 1,235,000
430,000 Boliden Ltd.* 2,342,766
2,600,000 B.Y.G. Natural Resources Inc.* (2) 371,846
230,000 Cambior Inc. 1,354,922
850,000 Campbell Resources Inc.* 318,750
1,231,000 Canyon Resources Corp.* 923,250
228,572 Claude Resources, Inc.* 295,765
858,000 Cornucopia Resources Ltd.* 46,746
2,079,500 Dayton Mining Corporation* (2) 1,345,405
459,300 Eldorado Gold Corp.* 265,880
275,000 Etruscan Resources Inc.* 736,030
1,810,000 Fairmile Gold Corp.* (2) 110,941
1,259,500 Fairstar Explorations Inc.* (2) 278,774
425,000 First Dynasty Mines Ltd.* 75,255
<PAGE>
48,000 Franco-Nevada Mining Corp. Ltd. 952,906
200,000 Freeport-McMoRan Copper & Gold A 2,850,000
75,500 Getchell Gold Corp.* 1,132,500
113,700 Gitennes Exploration Inc.* 70,465
300,000 Glamis Gold Ltd.* 1,050,000
400,000 Glenmore Highlands Inc.* 488,984
328,900 Golden Cycle Gold Corp.* (2) 2,590,087
500,000 Golden Knight Resources, Inc.* 282,630
749,000 Golden Queen Mining Co. Ltd.* 408,077
370,000 Golden Star Resources Ltd.* 786,250
120,000 Gold Reserve Corp.* 232,500
1,525,000 Goldstake Explorations Inc.* 124,630
689,300 Greater Lenora Resources Corp.* (2) 178,387
3,285,000 Greenstone Resources Ltd.* 4,159,466
170,000 Greenstone Resources Ltd. Warrants* 298,124
523,800 High River Gold Mines Ltd.* 410,236
281,800 Homestake Mining Co. 2,923,675
554,000 IMA Resource Corp. Special Warrants* 137,712
250,000 Indomin Resources Ltd.* 40,862
184,000 International All-North Resources Ltd.* 6,266
400,000 International Precious Metals Corp.* 25,000
400,000 Jordex Resources, Inc.* 133,483
500,000 Kenrich Mining Corp.* 170,259
300,000 Kenrich Mining Corp. Units 110,328
330,000 Kinross Gold Corp.* 1,112,473
204,167 Lytton Minerals Ltd.* 65,351
772,000 Meridian Gold Inc.* 1,603,569
460,000 Metallica Resources, Inc.* 469,915
500,000 Minera Andes Inc. Special Warrants* 374,570
647,142 Minorca Resources, Inc.* 264,436
<PAGE>
590,830 Miramar Mining Corp.* 760,492
1,000,000 Nelson Gold Corporation Ltd.* 170,259
412,400 Nevsun Resources Ltd.* 533,633
71,000 Newmont Gold Company 1,752,812
71,000 Newmont Mining Corp. 1,677,375
805,000 Oliver Gold Corp.* 115,129
827,400 Oro Nevada Resources Inc.* 104,246
800,000 Ourominas Minerals Inc.* 29,966
1,225,000 Palmer Industries* (2) 379,593
330,000 Pangea Goldfields, Inc.* 323,629
65,250 Pioneer Group, Inc. 1,716,891
205,000 Prime Resource Group, Inc. 1,438,009
107,500 Real del Monte Mining Corp.* 56,739
50,000 Reliance Steel & Aluminum Co. 1,931,250
1,068,330 Rio Narcea Gold Mines, Ltd.* 2,371,884
375,500 River Gold Mines Ltd.* 831,120
315,500 Samax Gold Inc.* 1,149,539
1,433,333 Sedex Mining Corp.* 195,230
818,800 South American Gold & Copper Ltd.* 47,399
150,000 Stillwater Mining Company* 4,068,750
2,000,000 Sunshine Mining and Refining Co.* 1,875,000
280,000 Tenke Mining Corp.* 371,846
1,552,500 Tombstone Explorations Co. Ltd.* (2) 253,754
500,000 Trio Gold Corp.* 99,602
1,000,000 Vengold Inc.* 1,014,744
634,300 Viceroy Resource Corp.* 993,557
4,437,400 Vista Gold Corp.* (2) 755,508
600,000 Western Pacific Mining Exploration Inc. Units* 88,875
3,055,333 William Resources Inc.* (2) 374,543
30,000 World Fuel Services Corp. 519,375
<PAGE>
64,577,160
Australia (11.4%)
1,500,000 Delta Gold NL 1,838,430
700,000 Emperor Mines Ltd.* 199,318
255,000 Homestake Mining Co. 2,645,640
4,250,000 Normandy Mining Ltd. 3,472,590
7,000,000 Normandy Mining Ltd. Warrants expires 4/30/01* 541,625
3,500,000 Resolute Limited* 2,123,170
750,000 Resolute Limited Rights* 8,356
10,829,129
China (.5%)
400,000 San Kung Investment Corp. Units (1) 500,000
Ghana (1.2%)
141,962 Ashanti Goldfields Co. Ltd. GDS 1,153,446
Mexico (2.8%)
850,000 Industrias Penoles S.A. 2,701,271
South Africa (10.8%)
87,223 Anglogold Ltd. 3,459,976
56,891 Anglogold Ltd. ADR 1,154,242
27,500 Durban Roodeport Deep Ltd. Option B
expires 6/30/02* 9,950
668,380 Durban Roodeport Deep Ltd. Warrants,
expires 12/31/99* 238,443
430,000 Durban Roodeport Deep Ltd.* 927,801
135,809 Gold Fields Ltd.* 563,523
65,700 Gold Fields of South Africa Ltd. 759,656
210,700 Harmony Gold Mining Warrants, expires 7/31/01 154,738
100,000 Impala Platinum Holdings Ltd. 850,000
582,000 New East Daggafontein Mines Ltd. 449,178
200,000 Randgold & Exploration Co. Ltd.* 149,378
<PAGE>
148,909 Randgold Resources Ltd. 800,386
250,000 Western Areas Gold Mining Co. Ltd.* 788,383
10,305,654
Total Common Stocks and Warrants
(cost: $225,359,882) 90,066,660
Contracts Options (.7%)
2,000 ASA Ltd., expires 8/8/98 81,250
4,000 Barrick Gold Corp., expires 7/18/98 175,000
4,000 Barrick Gold Corp., expires 7/18/98 37,520
5,500 Harmony Gold Mining Co., expires 7/30/99 403,920
Total Options (cost: $3,240,333) 697,690
Total Investments (100.0%) $95,504,998
(cost: $233,495,307)
* Indicates non-income producing security.
(1) Security is not publicly traded (see note 5).
(2) Affiliated company.
</TABLE>
<PAGE>
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
Assets:
Investments at market value
(cost: $233,495,307) (note 1) $95,504,998
Collateral for securities loaned, at
market value (note 5) 4,042,422
Foreign currencies 565,585
Receivables:
Fund shares sold 1,044,281
Interest 148,375
Investment securities sold 63,032
Dividends 2,215
Other assets 21,053
Total assets 101,391,961
Liabilities:
Due to bank 43,172
Payables:
Demand note payable to bank (note 4) 1,667,338
Fund shares redeemed 132,888
Investment securities purchased 27,062
Collateral for securities loaned 4,042,422
Accrued management and distribution fees 83,206
Accrued expenses 183,403
Total liabilities 6,179,491
(Applicable to 56,364,671 outstanding shares:
250,000,000 of $.01 par value authorized) $95,212,470
NET ASSET VALUE, OFFERING AND
<PAGE>
REDEMPTION PRICE PER SHARE
($95,212,470 / 56,364,671) $1.69
At June 30, 1998, net assets consisted of:
Paid-in capital $266,576,183
Accumulated net realized loss on investments (33,002,236)
Net unrealized depreciation on investments
and foreign currencies (138,091,847)
Accumulated deficit in net investment income (269,630)
$95,212,470
Statement of Operations
Six Months Ended June 30, 1998 (Unaudited)
Dividends (net of $9,469 foreign tax expense) $ 702,533
Interest 292,081
Total investment income 994,614
Investment management (note 3) 553,301
Distribution (note 3) 138,325
Transfer agent 287,790
Shareholder administration (note 3) 89,080
Custodian 82,723
Printing 39,287
Registration (note 3) 31,364
Professional (note 3) 16,074
Directors 14,212
Interest 7,521
Other 19,688
Total expenses 1,279,365
Transfer agent credits (note 5) (9,668)
Fee Reductions (note 5) (5,453)
<PAGE>
Net expenses 1,264,244
Net investment loss (269,630)
Net realized loss from foreign currency
and futures transactions (946,644)
Net realized loss from security transactions (4,201,174)
Unrealized depreciation of investments and
foreign currencies during the period (18,030,400)
Net realized and unrealized loss on investments and foreign (23,178,218)
currencies
Net decrease in net assets resulting from operations $(23,447,848)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998
(Unaudited) and the Year Ended December 31, 1997&009;
June 30, December 31,
Operations: 1998 1997
<S> <C> <C>
Net investment loss $ (269,630) $ (1,132,867)
Net realized loss from foreign currency and futures (946,644) (1,267,776)
transactions
Net realized loss from security transactions (4,201,174) (24,033,256)
Unrealized depreciation of investments and foreign (18,030,400) (106,987,683)
currencies during the period
Net decrease in net assets resulting from operations (23,447,848) (133,421,582)
Capital Share Transactions:
Increase in net assets resulting from capital share 17,838,977 33,786,396
transactions (a)
<PAGE>
Total decrease in net assets (5,608,871) (99,635,186)
Net Assets:
Beginning of period 100,821,341 200,456,527
End of period (including accumulated deficit in net $95,212,470 $100,821,341
investment income of $269,630 in 1998)
(a) Transactions in capital shares were as follows:
Shares Value
Shares sold $191,963,387
Shares redeemed (158,176,991)
Net increase $33,786,396
</TABLE>
<PAGE>
Notes to Financial Statements (Unaudited)
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
$233,495,307, gross unrealized appreciation and gross unrealized depreciation
were $1,470,270 and $139,460,579, respectively, at June 30, 1998. 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. 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 net 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. 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 six months ended June 30, 1998, an affiliate
of the Investment Manager, received commissions of $18,006 for brokerage
services. The Fund reimbursed the Investment Manager $24,536 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
<PAGE>
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 $89,080 for shareholder
administration services which it provided to the Fund at cost during the six
months ended June 30, 1998.
3. The Fund has a bank line of credit for leveraging and temporary or emergency
purposes. At June 30, 1998, the balance outstanding was $1,667,338 and the
interest rate was equal to the Federal Reserve Funds Rate plus 1.00 percentage
point. For the six months ended June 30, 1998, the weighted average interest
rate was 6.34% based on the balances outstanding during the period and the
weighted average amount outstanding was $165,431.
4. 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 $9,668 and $5,453, respectively, under
such arrangements. Purchases and proceeds of sales of securities other than
short term investments and bullion aggregated $34,857,473 and $13,931,363,
respectively, during the six months ended June 30, 1998. As of June 30, 1998,
the Fund loaned common stocks having a value of $974,631 and received cash
collateral of $4,042,422 for the loan.
5. On June 30, 1998, the Fund held certain securities which are not publicly
traded and 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 such
securities are as follows:
...Shares Date of Acquisition Cost Value
400,000 San Kung 2/4/97 $1,000,000 $500,000
Investment Corp. Units $1,000,000 $500,000
At June 30, 1998, the total value of such securities represented 0.53% of net
assets.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Years Ended December 31,
Six Months 1997 1996 1995 1994 1993
Ended June
30, 1998
(Unaudited)*
Per Share Data
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $2.11 $5.15 $4.25 $3.32 $4.16 $2.35
Income from investment operations:
Net investment loss (.01) (.03) (.05) (.06) (.05) (.01)
Net realized and unrealized gain (loss) on
investments (.41) (3.01) .95 1.28 (.67) 2.34
Total from investment operations (.42) (3.04) .90 1.22 (.72) 2.33
Less distributions:
Distributions from net investment income _ _ _ _ _ _
Distributions from net realized gains _ _ _ (.29) (.12) (.52)
Total distributions _ _ (.29) (.12) (.52)
Net asset value at end of period $1.69 $2.11 $5.15 $4.25 $3.32 $4.16
TOTAL RETURN (19.91)% (59.03%) 21.22% 36.73% (17.27)% 99.24%
Ratios/Supplemental Data
Net assets at end of period (000's omitted) $95,212 $100,793 $200,457 $15,753 $7,052 $10,357
Ratio of expenses to average net assets (a) 2.31%** 1.90% 1.63% 2.26% 2.15% 2.18%
(b)
Ratio of net investment loss to average net (.49)%** (.72)% (.92)% (1.47)% (1.26)% (0.28)%
assets (c)
Portfolio turnover rate 14% 50% 23% 48% 53% 63%
Average commission per share $.0118 $.0116 $.0204
</TABLE>
*Per share net investment 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.
**Annualized
(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 were 2.29%**, 1.88%, 1.61%
and 2.25% for the six months ended June 30, 1998 and 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 years ended December 31, 1997, 1996, and 1995,
respectively.
<PAGE>
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 Traditional Deductible IRA, Roth IRA, SEP-IRA, SIMPLE IRA, 403(b), $1,000 o
Education IRA, $500 o Automatic Investment Program, $100 o Subsequent
Investments, $100
ACCOUNT ACCESS
For Fund prospectuses and other investment information, call toll-free
1-888-503-FUND (3863) For shareholder services by Investor Access, call
toll-free
1-888-503-VOICE (8642)
Or, access the Fund on the the web at
www.midasfund.com
