Midas FUND
DISCOVERING Opportunities
1998 ANNUAL REPORT
REPORTFROM THE PORTFOLIO MANAGER
We are very pleased to welcome the many new shareholders who have joined Midas,
and to note that many shareholders have taken advantage of lower prices to add
to their investment.
The past year proved to be one of the most difficult for many years
in the gold sector. In late August the gold price fell to a nineteen year low of
$272, before rallying to $300 as the Long Term Capital Management hedge fund
crisis broke. The subsequent rescue by a consortium of banks restored stability
to the financial markets, and gold subsequently fell back to the $280 level.
The weak gold price had a severely negative impact on prices of gold
mining shares. Gold stock indices declined by more than 30% as even the major
quality producers fell sharply, while smaller producers and development capital
companies were particularly hard hit. Many stocks fell to multi-year lows before
showing some recovery. Reflecting these conditions, shares of the Fund declined
28.44% for the year.
Despite the vagaries of the market, the condition of the gold mining
industry continues to improve. Significant consolidation has taken place in the
South African industry, whereby numerous individual mines have been merged into
Anglogold, and Gold Fields Ltd. This has enhanced productivity, reduced costs,
and boosted profitability. A near 20% devaluation of the South African rand in
July also materially increased revenues. In light of the considerably improved
outlook for the South African mines, the portfolio weighting was increased to
over 20%.
Similarly, consolidation is underway in North America and Australia,
although in the form of acquisitions. The majors have been aggressive in the
acquisition of companies with proven reserves, the value or potential of which
is not being fully recognized by the investment market. Notable deals over the
past year include Homestake's acquisition of Plutonic Resources in Australia,
and Placer Dome's offer for Getchell Gold - the latter at more than a 100%
premium to market price! Placer's offer to joint venture the Western Areas South
Deep project in South Africa is the first significant investment by a foreign
mining company in a South African gold operation, expressing confidence in the
future of the gold sector in that country. These companies are core holdings in
Midas. Should the gold market remain subdued, more of this activity can be
expected.
Exposure to platinum group metals was increased during the year.
Robust demand from the auto catalyst industry, coupled with supply problems in
Russia, resulted in both platinum and palladium prices trading at a premium to
the gold price. The holdings in Stillwater Mining and Impala were increased to
bring exposure to platinum to close to 10% of assets. These companies are
experiencing record profitability.
The portfolio has undergone a restructuring over the past year.
Exposure to junior development companies is now less than 5%, considering that
this sector will require significantly higher gold prices to come to life again.
The majority of the portfolio is in quality major and medium size producing
companies that have streamlined their operations and are generating positive
cash flow at current depressed gold prices. This bodes well for the performance
of these companies on any improvement in the gold price.
We remain dedicated to the consistent, disciplined process we have
established for Midas Fund, and appreciate your confidence and support.
Sincerely,
Kjeld Thygesen
<PAGE>
10 Largest Holdings as of December 31, 1998
1) Stillwater Mining
The only palladium and platinum mining company in the United States. Currently
benefiting from the high prices for these metals, with plans to further expand
production.
2) Meridian Gold Inc.
Operates two mines in the U.S., Beartrack and Jerrit Canyon, but future
potential lies in the exciting El Penon project in Chile. This is a high grade
project which will have very low costs.
3) Getchell Gold Corp.
Over the past few years, the Getchell property in Nevada has developed into one
of the major success stories of North American gold mining, resulting in the
company receiving an offer from Placer Dome at more than 100% premium to the
market price.
4) Anglogold Ltd.
This South African company is the world's largest gold producer and owner of
undeveloped gold reserves.
5) Normandy Mining
Australia's largest gold mining company, with outstanding international
operations. Production is substantially hedged at attractive prices.
6) Newmont Mining Corp.
The largest of the North American producers, with a globally diversified spread
of low cost gold operations. Production is unhedged, which should generate
outperformance on higher gold prices.
7) Delta Gold NL
A leading Australian gold producer with operations in the Granny Smith and
Kanowna Bell mines. Future growth potential from the exciting Sunrise Dam and
Wallaby Projects.
8) Rio Narcea Gold Mines
Emerging gold producer. Its new mine in Spain began operations in 1998.
9) Gold Fields Ltd.
The second largest but lowest cost producer in South Africa after Anglogold.
Growth will come through expansion of intemational operations.
10) 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.
COMMENTS from the Strategic Advisor
Feruary 15th, 1999
Even though the gold price ended 1998 virtually unchanged from where
it began the year, it was buffeted by a number of factors. Together, these
generally had a bearish influence on the gold price, which in August briefly
touched a nineteen year low, and ended the year at $288.10 per ounce.
Perhaps the biggest factors adversely affecting the gold price last
year were the declines in most commodity prices, and the price of crude oil in
particular. These declines helped restrain the rate of inflation, and the
Producer Price Index was basically unchanged last year, while the Consumer Price
Index rose only 1.6%.
M3 Money Supply Growth at 16-Year High
Evidence that inflation remains a threat, however, is the rapid
growth of M3, a broad definition of the total quantity of dollars in
circulation. The Federal Reserve reported that M3 grew by 11.3% in 1998, the
highest rate of monetary growth since the 12 months ending April 1982, during
which period the inflation rate was 6.6%. Unless commodity prices remain weak,
rapid monetary expansion will put upward pressure on the inflation rate, as will
a decline in the exchange rate of the dollar.
The strength of the dollar was called into question during 1998. In
June, the U.S. Treasury intervened to halt the dollar's rise against the
Japanese yen, which since then has gained more than 20% against the dollar.
Further evidence that the trend for the dollar may be turning for the worse can
be made by comparing the dollar's rate of exchange to the major European
currencies. For the first time in three years, the dollar in 1998 failed to
trade at an exchange rate above the highest level it reached in the previous
year.
However, the dollar remained strong in 1998 in a few selective
areas, most notably against those countries whose currencies were pummeled in
the Asian crisis. The dollar also remained strong against the currencies of
countries which are commodity exporters. In particular, the dollar rose against
the currencies of Australia, Canada and South Africa, which did have some impact
on Midas Fund.
Nevertheless, investing internationally remains an important
strategy of Midas Fund because a broad geographic mix provides useful and
prudent diversification, enabling the worldwide deployment of assets in
companies perceived to offer the most value and best opportunity for share price
appreciation. For example, Anglogold Ltd. of South Africa is the second largest
holding in the Midas Fund. It is the largest gold mining company in the world,
with twice the production and three to four times the reserves of its North
American counterparts. It also pays a healthy dividend. Yet Anglogold commands
only one-third of the market capitalization of the large North American gold
mining companies, seemingly making Anglogold relatively undervalued.
The Holdings by Operations chart above shows the worldwide scope of
the operations of the companies within Midas Fund's portfolio, with the largest
exposure to the United States at 38.7% of the portfolio followed by companies
whose principal operations are in South Africa at 22.2%. The other chart clearly
shows the emphasis on quality major and medium size producing companies.
Equity markets in much of the world remained strong in 1998,
diverting investor attention away from the precious metals. Nevertheless, recent
reports by Gold Fields Mineral Services Ltd. indicate that the demand for gold
remains strong, and in continuation of a multi-year trend, is still outstripping
the supply of gold from new production. This imbalance could cause the gold
price to rise.
Sincerely,
James Turk
<PAGE>
Rio Narcea Gold Mines, Ltd.
Rio Narcea commenced production at the El Valle gold mine in February 1998, in
an area first mined some 2000 years ago by the Romans. Spanish geologists
rediscovered the gold deposits in 1993. Five years of development and drilling
defined a geological reserve of two million ounces of gold in three open pit
deposits.
With a strong production growth profile and favorable cost structure, we believe
Rio Narcea is destined to become Europe's largest gold producer, and a rewarding
investment to its shareholders.
Schedule of Portfolio Investments
December 31, 1998
Shares Market Value
Common Stocks and Warrants (99.6%)
North America (58.0%)
2,445,800 AMT International Mining Corp.* (2) $ 399,379
896,200 Argosy Mining Corp.* 87,805
3,114,600 Armada Gold Corp.* (2) 152,577
50,000 ASA Limited 778,125
385,000 Attwood Gold Corp.* 123,220
1,186,000 Aurizon Mines Ltd.* 542,260
208,000 Battle Mountain Gold Co. 858,000
430,000 Boliden Ltd.* 1,081,319
2,600,000 B.Y.G. Natural Resources Inc.* (2) 118,877
230,000 Cambior Inc. 1,134,226
850,000 Campbell Resources Inc.* 212,500
1,231,000 Canyon Resources Corp.* 307,750
228,571 Claude Resources, Inc.* 216,478
294,000 Cornucopia Resources Ltd.* 8,641
2,079,500 Dayton Mining Corporation* 461,809
459,300 Eldorado Gold Corp.* 120,000
63,900 Etruscan Resources Inc.* 25,460
1,810,000 Fairmile Gold Corp.* (2) 70,934
1,259,500 Fairstar Explorations Inc.* (2) 98,720
108,000 Franco-Nevada Mining Corp. Ltd. 2,070,411
200,000 Freeport-McMoRan Copper & Gold A* 1,937,500
200,500 Getchell Gold Corp.* 5,463,625
113,700 Gitennes Exploration Inc.* 22,280
300,000 Glamis Gold Ltd. 562,500
328,900 Golden Cycle Gold Corp.* (2) 2,261,188
500,000 Golden Knight Resources Inc.* 146,963
749,000 Golden Queen Mining Co. Ltd.* 254,396
370,000 Golden Star Resources Ltd.* 393,125
120,000 Gold Reserve Corp.* 142,500
1,525,000 Goldstake Explorations Inc.* 169,334
3,285,000 Greenstone Resources Ltd.* 1,711,720
170,000 Greenstone Resources Ltd. Warrants* 49,967
523,800 High River Gold Mines Ltd.* 201,856
281,800 Homestake Mining Co. 2,589,038
400,000 Jordex Resources, Inc.* 117,570
100,000 Kenrich Mining Corp.* 13,063
300,000 Kenrich Mining Corp. Units* 39,190
330,000 Kinross Gold Corp.* 760,875
104,167 Lytton Minerals Ltd.* 11,567
359,163 McWatters Mining Inc.* 179,465
972,000 Meridian Gold Inc.* 5,713,912
460,000 Metallica Resources, Inc.* 216,329
500,000 Minera Andes Inc. Special Warrants* 212,280
590,830 Miramar Mining Corp.* 501,685
1,000,000 Nelson Gold Corporation Ltd.* 91,443
412,400 Nevsun Resources Ltd.* 253,204
193,775 Newmont Mining Corp. 3,500,061
805,000 Oliver Gold Corp.* 63,096
800,000 Ourominas Minerals Inc.* 33,965
1,225,000 Palmer Industries* (2) 280,046
330,000 Pangea Goldfields Inc.* 420,314
100,000 Placer Dome Inc. 1,150,000
1,768,330 Rio Narcea Gold Mines, Ltd.* 2,945,292
375,500 River Gold Mines Ltd. 981,058
333,333 Sedex Mining Corp.* 13,063
430,000 South American Gold & Copper Ltd.* 12,639
150,000 Stillwater Mining Company* 6,150,000
2,000,000 Sunshine Mining and Refining Co.* 1,000,000
280,000 Tenke Mining Corp.* 58,524
1,552,500 Tombstone Explorations Co. Ltd.* (2) 111,545
1,000,000 Vengold Inc.* 613,978
680,947 Viceroy Resource Corp.* 1,067,454
4,437,400 Vista Gold Corp.* (2) 666,624
3,055,333 William Resources Inc.* (2) 109,760
52,062,485
Australia (14.5%)
2,000,000 Delta Gold NL 3,033,040
700,000 Emperor Mines Ltd.* 256,830
255,000 Homestake Mining Co.* 2,342,813
4,750,000 Normandy Mining Ltd. 4,385,984
7,000,000 Normandy Mining Ltd. Warrants, expire 4/30/01* 513,660
3,500,000 Resolute Limited 2,461,288
12,993,615
China (.4%)
400,000 San Kung Investment Corp. Units (1) 333,333
Ghana (2.5%)
241,962 Ashanti Goldfields Co. Ltd. GDS 2,268,394
Mexico (2.8%)
850,000 Industrias Penoles S.A. 2,540,131
South Africa (21.4%)
121,012 AngloGold Ltd. 4,734,624
56,891 AngloGold Ltd. ADR 1,112,930
150,000 Driefontein Consolidated Ltd. 600,000
170,000 Durban Roodeport Deep Ltd. ADR* 467,500
430,000 Durban Roodeport Deep Ltd.* 1,182,500
668,380 Durban Roodeport Deep Ltd. Warrants,
expire 12/31/99* 325,087
487,818 Gold Fields Ltd.* 2,691,581
45,100 Gold Fields Ltd. ADR* 242,412
210,700 Harmony Gold Mining Warrants*, expire 7/31/01 148,459
500,000 Harmony Gold Mining Co. Ltd.* 2,499,894
120,000 Impala Platinum Holdings Ltd. 1,590,000
582,000 New East Daggafontein Mines Ltd. 123,509
500,000 Randfontein Estates Ltd. 1,103,519
169,909 Randgold Resources Ltd.* 424,772
600,000 Western Areas Ltd.* 1,950,681
19,197,468
Total Common Stocks and Warrants
(cost: $215,503,158) 89,395,426
Contracts Options (.4%)
5,500 Harmony Gold Mining Co., expire 7/30/99
(cost: $610,333) 387,530
Total Investments (100.0%) $89,782,956
(cost: $216,113,491)
* Indicates non-income producing security.
(1) Security is not publicly traded (see note 5).
(2) Affiliated company.
Statement of Assets and Liabilities
December 31, 1998
Assets:
Investments at market value
(cost: $216,113,491) (note 1) ........................ $89,782,956
Cash ............................................................. 215,160
Foreign currencies ............................................... 2,470,022
Receivables:
Fund shares sold .............................................. 179,587
Interest ...................................................... 53,180
Investment securities sold .................................... 6,387
Other assets ..................................................... 21,053
Total assets .................................................. 92,728,345
Liabilities:
Payables:
Demand note payable to bank (note 4) .......................... 3,564,963
Fund shares redeemed .......................................... 338,284
Investment securities purchased ............................... 829,630
Forward currency contract (note 5) ............................ 563
Accrued management and distribution fees ......................... 80,404
Accrued expenses ................................................. 73,103
Total liabilities ............................................. 4,886,947
Net Assets:
(Applicable to 58,174,800 outstanding shares:
250,000,000 of $.01 par value authorized) ....................... $87,841,398
________________________________________________________________________________
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($87,841,398 / 58,174,800) ...................................... $1.51
________________________________________________________________________________
At December 31, 1998, net assets consisted of:
Paid-in capital .................................................$270,942,869
Accumulated net realized loss on investments ....................(56,759,649)
Net unrealized depreciation on investments
and foreign currencies .............................(126,341,822)
$87,841,398
Statement of Operations
Year Ended December 31, 1998
Investment Income:
Dividends (net of $61,967 foreign tax expense) .................. $ 2,211,164
Interest ........................................................ 415,502
Total investment income ......................................... 2,626,666
Expenses
Investment management (note 3) .................................. 1,018,983
Transfer agent .................................................. 490,420
Distribution (note 3) ........................................... 254,746
Shareholder administration (note 3) ............................. 170,317
Custodian ....................................................... 167,877
Professional (note 3) ........................................... 79,808
Printing ........................................................ 74,527
Registration (note 3) ........................................... 67,544
Interest ........................................................ 17,653
Directors ....................................................... 15,148
Other ........................................................... 14,042
Total expenses .................................................. 2,371,065
Transfer agent credits (note 5) ................................. (19,684)
Fee reductions (note 5) ......................................... (6,660)
Net expenses .................................................... 2,344,721
Net investment income ........................................... 281,945
Realized and Unrealized Loss on
Investments, Foreign Currencies, and Futures:
Net realized loss from foreign currency and
futures transactions ..................................... (307,036)
Net realized loss from security transactions ....................(28,397,116)
Unrealized depreciation of investments and
foreign currencies during the period ..................... (6,280,375)
Net realized and unrealized loss on investments
and foreign currencies ...................................(34,984,527)
Net decrease in net assets resulting
from operations .........................................$(34,702,582)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Years Ended December 31,
Operations: 1998 1997
<S> <C> <C>
Net investment income (loss) ......................$ 281,945 $ (1,132,867)
Net realized loss from
foreign currency and futures transactions . (307,036) (1,267,776)
Net realized loss from security transactions ...... (28,397,116) (24,033,256)
Unrealized depreciation of investments and
foreign currencies during the period ..... (6,280,375) (106,987,683)
Net decrease in net assets resulting
from operations .......................... (34,702,582) (133,421,582)
Capital Share Transactions:
Increase in net assets resulting from
capital share transactions ............... 21,722,639 33,786,396 (a)
Total decrease in net assets .................... (12,979,943) (99,635,186)
Net Assets:
Beginning of period ............................... 100,821,341 200,456,527
End of period ..................................... $87,841,398 $100,821,341
</TABLE>
(a) Transactions in capital shares were as follows:
1998 1997
Shares Value Shares Value
Shares sold 53,935,734 $97,702,211 53,337,981 $191,963,387
Shares redeemed (43,523,746) (75,979,572) (44,503,491) (158,176,991)
Net increase 10,411,988 $21,722,639 8,834,490 $33,786,396
<PAGE>
Notes to Financial Statements
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. Futures contracts are marked to market
daily and the variation margin is recorded as an unrealized gain or loss. When a
contract is closed, a realized gain or loss is recorded equal to the difference
between the opening and closing value of the contract. Forward contracts are
marked to market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When a contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The Fund
could be exposed to risk if the counterparties are unable to meet the terms of
the contracts. 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. Premiums and discounts are amortized in accordance with income tax
regulations. 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.
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
$216,113,491, gross unrealized appreciation and gross unrealized depreciation
were $6,618,227 and $132,948,762, respectively, at December 31, 1998. At
December 31, 1998, the Fund had an unused capital loss carryforward of
approximately $40,030,500 of which $2,587,100, $25,267,300, and $12,176,100
expires in 2004, 2005, and 2006, 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 year ended December 31,
<PAGE>
1998, an affiliate of the Investment Manager received commissions of $29,119 for
brokerage services. The Fund reimbursed the Investment Manager $50,160 for
providing certain administrative and accounting services at cost during the year
ended December 31, 1998. 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 $170,317
for shareholder administration services which it provided to the Fund at cost
during the year ended December 31, 1998. In addition, the Fund paid $135,453 to
Investor Service Center, which remitted such amount to certain no-transaction
fee brokers for transfer agent services.
The Fund has a bank line of credit for leveraging and temporary or emergency
purposes. At December 31, 1998, the balance outstanding was $3,564,963 and the
interest rate was equal to the Federal Reserve Funds Rate plus 1.00 percentage
point. For the year ended December 31, 1998, the weighted average interest rate
was 6.18% based on the balances outstanding during the period and the weighted
average amount outstanding was $350,353.
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 $19,684 and $6,660, respectively, under such
arrangements. Purchases and proceeds of sales of securities other than short
term investments and bullion aggregated $56,884,054 and $25,756,225,
respectively, during the year ended December 31, 1998.
On December 31, 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:
Date of
Units Acquisition Cost Value
400,000 San Kung Investment Corp. Units 2/4/97 $1,000,0000 $333,333
At December 31, 1998, the total value of such securities represented 0.38% of
net assets.
A forward currency contract is an obligation to purchase or sell a specific
currency for an agreed-upon price at a future date. When the Fund purchases or
sells foreign securities it customarily enters into a forward currency contract
to minimize foreign exchange risk between the trade date and the settlement date
of such transactions. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts. The Fund had the
following forward currency contracts outstanding at December 31, 1998:
Settlement Unrealized
Contracts to sell Foreign Currency In Exchange for Date Loss
1,232,500 Mexican Pesos U.S. $123,869 1/4/99 $(563)
<TABLE>
<CAPTION>
Financial Highlights
Years Ended December 31,
1998* 1997* 1996* 1995* 1994
Per Share Data
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ................ 2.11 $ 5.15 $ 4.25 $ 3.32 $ 4.16
Income from investment operations:
Net investment loss ................................ _ (.03) (.05) (.06) (.05)
Net realized and unrealized gain (loss) on
investments ................................... (.60) (3.01) .95 1.28 (.67)
Total from investment operations (.60) (3.04) .90 1.22 (.72)
Less distributions:
Distributions from net realized gains .. _ _ _ (.29) (.12)
Total distributions ............. _ _ _ (.29) (.12)
Net asset value at end of period ............... $ 1.51 $ 2.11 $ 5.15 $ 4.25 $ 3.32
TOTAL RETURN ............................................ (28.44)% (59.03%) 21.22% 36.73% (17.27)%
Ratios/Supplemental Data
Net assets at end of period (000's omitted) .......... $ 87,841 $ 100,793 $ 200,457 $ 15,753 $ 7,052
Ratio of expenses to average net assets (a) (b) ...... 2.33% 1.90% 1.63% 2.26% 2.15%
Ratio of net investment loss to average net assets (c) (.02)% (.72)% (.92)% (1.47)% (1.26)%
Portfolio turnover rate .............................. 27% 50% 23% 48% 53%
<FN>
* 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. (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 2.30%, 1.88%, 1.61% and 2.25% for the
years ended December 31, 1998, 1997, 1996 and 1995, respectively. Prior to 1995,
such credits were reflected in the ratio. (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.
</FN>
</TABLE>
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 schedule of portfolio investments as of December 31, 1998, 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 four 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 the year 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, 1998, by correspondence 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, 1998, 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 four years then ended in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 15, 1999
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, 1989 to
December 31, 1998. 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 22 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.
[Graph Omitted]
Average
Final Value Total Return Annual Return
MIDAS Fund $7,509 -24.91% -2.82%
PMFA 7,173 -28.27 -3.27
S&P 500 57,915 479.15 19.20
Source: Morningstar, Inc.
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
<PAGE>
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
