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Previous: PINE VIEW TECHNOLOGIES CORP, NT 10-Q, 1999-09-15 |
Next: HERBALIFE INTERNATIONAL INC, 8-K, 1999-09-15 |
We are pleased to submit this Semi-Annual Report for the six months ended June 30, 1999 and to welcome our shareholders who have opened a new account during the period.
Review and Outlook
Government and private sources provide strong new evidence that despite some slowing, the economy continues to grow, and inflation pressures remain relatively subdued.
For example, personal income jumped 0.7% in June, compared with an 0.3% increase in May, the Commerce Department reported. But in a positive sign for maintaining a low level of inflation, personal income growth in June outpaced consumer spending for the first time since January, suggesting a more conservative and cautious attitude on the part of consumers. This also suggests that consumption rates are sustainable, a positive for businesses nationwide.
Confirming a cooling of the economy, the Commerce Department reported that real gross domestic product -- the total value of goods and services produced in the United States -- slowed in the second quarter to a gain of just 2.3% following first quarter growth of 4.3%. However, the employment cost index (ECI) showed a surprising jump of 1.1%, up from a first quarter increase of 0.4%, and its biggest gain in eight years. Such unexpected news rattled financial markets as Wall Street saw it as an inflation warning signal which could lead to higher interest rates and lower stock prices. Nevertheless, many economists are taking this ECI spurt with a grain of salt, since it followed a puzzling slowdown last winter when the ECI barely rose despite unemployment dropping to its lowest level in three decades.
Tending to balance evidence of a slowing economy is a turnaround for the nation's previously slumping factories -- the National Association of Purchasing Management reports manufacturing activity in July posted its sixth consecutive month of growth, though at a slower pace than June. Also, construction spending bounced back in June, rising 0.5% after falling 1.4% in both April and May, according to the Commerce Department. The June level was 4% higher than a year ago.
Reflecting a generally healthy economy at home and recovering economies abroad, corporate earnings exploded in the second quarter with a gain of 37% from a year ago. Further, from the National Association of Realtors comes word that sales of existing homes soared to a record rate in June on a gain of 10.7% from May. Although new home sales in May were off 5.1% following a 6.4% jump in April, consumer confidence as reported by the Conference Board rose in June to the highest level since October 1968.
The Russell 2000, an unmanaged, fully invested small company index showed a total return for the six months of 9.28%. Total return for the Fund was .10%, a disappointing result following the Fund's strong 1998 fourth quarter gain which we will continue to be seeking to build on over the balance of the year.
Convenient Ways to Increase your Account
Our strategy is to attempt to identify fast growing companies with reasonable valuations, and to hold their equity securities for capital appreciation. To take advantage of this and the favorable economic background, we recommend building your account on a regular basis, which can be down safely, automatically, and conveniently through our Midas Bank Transfer Plan, Midas Salary Investing Plan and Midas Government Direct Deposit Plan. For information on any of these free services, give us a call and we will help you get started.
If you have any questions or would like information on any of
the Midas Funds, or the Midas Traditional, Roth or Education IRA, we would
be very pleased to hear from you. Just call us at
1-800-400-MIDAS (6432) and an Investor Service Representative will
be happy to assist you, as always, without any obligation on your part.
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Thomas B. Winmill
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Seeking capital appreciation and protection against inflation, with current income as a secondary goal.
Seeks long term capital appreciation in investments with the potential to provide a hedge against inflation and preserve the purchasing power of the dollar.
The Fund seeks its objective of long term capital appreciation by investing primarily less in equity securities that, in the opinion of the Investment Manager, are available at prices less than their intrinsic value.
Invests aggressively for maximum capital appreciation.
Invests worldwide for the highest possible total return.
A high quality money market fund investing in U.S. Government securities. A portion of income is generally free from state income and intangible personal property taxes. Free unlimited check writing with only a $250 minimum per check.
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MIDAS SPECIAL EQUITIES FUND
Schedule of Portfolio Investments - June 30, 1999 (Unaudited)
| Shares | Market Value | ||
| COMMON STOCKS AND WARRANTS (94.8%) | |||
| Aircraft Engines & Engine Parts (4.2%) | |||
| 19,500 | United Technologies Corp. | $ 1,397,906 | |
| Arrangement of Transportation of Freight & Cargo (3.4%) | |||
| 42,400 | Expeditors International of Washington, Inc. | 1,155,400 | |
| Commercial Printing (1.5%) | |||
| 23,650 | Quebecor Printing Inc. | 512,909 | |
| Concrete, Gypsum & Plaster Products (1.6%) | |||
| 12,000 | Florida Rock Industries, Inc. | 546,000 | |
| Construction Machinery & Equipment (2.6%) | |||
| 21,000 | Manitowoc Company, Inc. | 874,125 | |
| Electronic Components & Accessories (5.0%) | |||
| 23,800 | CTS Corp. | 1,666,000 | |
| General Industrial Machinery & Equipment (2.2%) | |||
| 11,500 | Ingersoll-Rand Co. | 743,188 | |
| Heavy Construction Other Than Building Construction Contractors (1.0%) | |||
| 9,100 | Jacobs Engineering Group Inc. | 345,800 | |
| Men's & Boys' Furnishings, Work Clothing & Allied Garments (5.3%) | |||
| 67,900 | Quiksilver Inc.* | 1,769,644 | |
| Millwood, Veneer, Plywood & Structural Wood Members (1.8%) | |||
| 17,100 | American Woodmark Corp. | 602,775 | |
| Miscellaneous Building & Construction Products (0.6%) | |||
| 10,600 | CRH plc | 193,450 | |
| Motor Vehicles & Passenger Car Bodies (4.3%) | |||
| 28,500 | Navistar International Corp. | 1,425,000 | |
| Operative Builders (2.6%) | |||
| 16,800 | NVR, Inc. | 876,750 | |
| Printed Circuit Boards (13.9%) | |||
| 41,100 | Benchmark Electronics, Inc.* | 1,477,031 | |
| 26,400 | Jabil Circuit, Inc.* | 1,191,300 | |
| 45,000 | Plexus Corp.* | 1,355,625 | |
| 9,600 | Solectron Corp.* | 640,200 | |
| 4,664,156 | |||
| Retail-Catalog & Mail-Order Houses (2.5%) | |||
| 19,100 | CDW Computer Centers, Inc.* | 840,400 | |
| Retail-Eating Places (1.6%) | |||
| 29,800 | Consolidated Products, Inc. | 536,400 | |
| Retail-Grocery Stores (4.2%) | |||
| 28,500 | Safeway Inc.* | $ 1,410,750 | |
| Retail-Jewelry Stores (1.8%) | |||
| 15,000 | Zale Corp.* | 600,000 | |
| Retail-Variety Stores (6.5%) | |||
| 26,000 | Ames Department Stores, Inc.* | 1,186,250 | |
| 20,700 | Wal-Mart Stores, Inc. | 998,775 | |
| Services-Advertising Agencies (4.5%) | |||
| 17,500 | WPP Group plc | 1,500,625 | |
| Services-Engineering Services (2.9%) | |||
| 33,100 | URS Corp. | 970,244 | |
| Services-Specialty Outpatient Facilities (4.1%) | |||
| 22,700 | Express Scripts, Inc.* | 1,366,256 | |
| Services-Motion Pictures & Video Tape Production (1.9%) | |||
| 48,864 | News Corp. Ltd. ADS warrants | 635,232 | |
| Soap, Detergent, Cleaning Preparations, Perfume, Cosmetics (2.2%) | |||
| 16,600 | Church & Dwight Co., Inc. | 722,100 | |
| Special Machinery (0.6%) | |||
| 14,600 | Quipp, Inc.* | 189,800 | |
| Trucking (1.2%) | |||
| 18,200 | Swift Transportation Co., Inc.* | 400,400 | |
| Wholesale-Computer & Peripheral Equipment & Software (1.6%) | |||
| 8,900 | Safeguard Scientifics, Inc.* | 551,800 | |
| Wholesale-Drugs Proprietaries & Druggists' Sundries (3.8%) | |||
| 55,700 | Bindley Western Industries, Inc. | 1,284,589 | |
| Wholesale-Groceries & Related Products (1.6%) | |||
| 17,500 | SYSCO Corp. | 521,719 | |
| Wholesale-Medical, Dental & Hospital Equipment & Supplies (1.4%) | |||
| 13,900 | Patterson Dental Co.* | 483,025 | |
| Women's, Misses' and Juniors Outerwear (2.4%) | |||
| 35,600 | Tarrant Apparel Group* | 806,562 | |
| Total Common Stocks and Warrants (cost: $23,968,582) | 31,778,030 | ||
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Short Term Investments (5.2%) |
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| $1,750,000 | U.S. Treasury Bill, due 8/19/99 | $1,739,377 | |
| 1,725 | State Street Bank and Trust Repurchase Agreement 3.5%, June 30, 1999, due July 1, 1999 (collaterized by $5,000 U.S. Treasury Note 5.5%, 2/29/00 market value $5,098) (proceeds at maturity $1,725) |
1,725 |
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| Total Short Term Investments (cost: $1,741,102) | 1,741,102 | ||
| Total Investments (cost: $25,709,684) (100%) | $33,519,132 | ||
| * Indicates non-income producing security | |||
| STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited) |
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| ASSETS: | ||||
| Investments at market value (cost: $25,709,684) (note 1)) | $33,519,132 | |||
| Collateral for securities loaned at market value (note 6) | 4,097,296 | |||
| Cash | 29,249 | |||
| Receivables: | ||||
| Investment securities sold | 87,876 | |||
| Dividends | 15,102 | |||
| Other assets | 5,625 | |||
| Total assets | 37,754,280 | |||
| LIABILITIES: | ||||
| Collateral for securities loaned (note 6) | 4,097,296 | |||
| Fund shares repurchases | 34,139 | |||
| Accured expenses | 46,858 | |||
| Accrued management and distribution fees | 57,100 | |||
| Total liabilities | 4,235,393 | |||
| NET ASSETS: | ||||
| (applicable to 1,646,710 outstanding shares:
500,000,000
shares of $.01 par value authorized) |
$33,518,887 | |||
| NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE |
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| ($33,518,887 ÷ 1,646,710) | $20.36 | |||
| At June 30, 1999, net assets consisted of: | ||||
| Paid-in capital | $33,174,853 | |||
| Accumulated net realized loss on investments | (7,229,309) | |||
| Accumulated deficit in net investment income | (236,105) | |||
| Net unrealized appreciation on investments | 7,809,448 | |||
| $33,518,887 | ||||
| STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Unaudited) |
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| INVESTMENT INCOME: | ||||
| Dividends(net of foregin taxes of $3,065) | $ 282,267 | |||
| Interest | 20,300 | |||
| Total investment income | 302,567 | |||
| EXPENSES: | ||||
| Distribution (note 3) | 169,387 | |||
| Investment management (note 3) | 151,834 | |||
| Interest (note 5) | 106,315 | |||
| Transfer agent | 43,457 | |||
| Custodian | 23,803 | |||
| Professional (note 3) | 20,265 | |||
| Registration (note 3) | 12,498 | |||
| Directors | 5,207 | |||
| Printing | 2,976 | |||
| Other | 2,930 | |||
| Total expenses | 538,672 | |||
| Net investment loss | (236,105) | |||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES: | ||||
| Net realized loss from security transactions | (4,052,090) | |||
| Net realized gain from futures transactions | 1,013,519 | |||
| Unrealized appreciation of investments during the period | 3,226,745 | |||
| Net realized and unrealized gain on investments and futures | 188,174 | |||
| Net increase in net assets resulting from operations | $(47,931) | |||
| STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999 (Unaudited) and the Year Ended December 31, 1998 |
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| June 30,
1999 |
December 31,
1998 |
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| OPERATIONS: | ||||
| Net investment loss | $ (236,105) | $ (1,088,343) | ||
| Net realized gain from futures transactions | 1,013,519 | 1,912,534 | ||
| Net realized loss from security transactions | (4,052,090) | (2,540,433) | ||
| Unrealized appreciation (depreciation) of investments during the period | 3,226,745 | 11,710 | ||
| Net decrease in net assets resulting from operations | (47,931) | (1,704,532) | ||
| DISTRIBUTIONS TO SHAREHOLDERS: | ||||
| Distribution from net realized gains ($1.78 per share) | - | (2,995,505) | ||
| CAPITAL SHARE TRANSACTIONS: | ||||
| Decrease in net assets resulting from capital share transactions (a) | (3,240,234) | (3,266,312) | ||
| Total increase (decrease) in net assets | (3,288,165) | (7,966,349) | ||
| NET ASSETS: | ||||
| Beginning of period | 36,807,052 | 44,773,401 | ||
| End of period (including accumulated deficit
in net investment
income of $236,105 in 1999) |
$33,518,887 |
$36,807,052 |
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(a) Transactions in capital shares were as follows:
| June 30, 1999 | December 31, 1998 | ||||
| Shares | Value | Shares | Value | ||
| Sahes sold | 15,383 | $ 301,378 | 109,718 | $ 2,667,221 | |
| Sahes issued in reinvstment of distributions | - | - | 144,137 | 2,794,520 | |
| Shares redeemed | (177,937) | (3,541,612) | (359,846) | (8,728,053) | |
| Net decrease | (162,554) | $ (3,240,234) | (105,991) | $ (3,266,312) | |
See accompanying notes to financial statements.
Notes to Financial Statements
(Unaudited)
(1) Midas Special Equities Fund, Inc. (the "Fund") (formerly, Bull & Bear Special Equities Fund, Inc.) 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 objective of the Fund is capital appreciation. The Fund seeks capital appreciation by investing aggressively as set forth in the prospectus, depending on the assessment of economic and market factors, in equity securities, warrants, convertible securities and debt instruments. 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, securities traded on a national securities exchange and securities traded on the Nasdaq National Market System ("NMS") are valued at the last reported sales price on the day the valuations are made. Such securities that are not traded on a particular day and securities traded in the over-the-counter market that are not on NMS are valued at the mean between the current bid and asked prices. Securities for which quotations are not readily available and other assets are valued at fair value as determined in good faith by or under the direction of the Board of Directors. Securities denominated in foreign currencies are translated into U.S. dollars at prevailing exchange rates. Debt obligations with remaining maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. 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. Premiums and discounts are amortized in accordance with income tax regulations. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex dividend date and 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 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 on Federal income tax cost of $25,709,684 gross unrealized appreciation and gross unrealized depreciation were $8,156,325 and $346,877, respectively, at June 30, 1999. Distributions paid to shareholders during the year ended December 31, 1998 differ from net realized gains from security transactions as determined for financial reporting purposes principally as a result of utilization of net operating losses to offset short-term capital gains.
(3) The Fund retains Midas Management Corporation as its Investment Manager. Under 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% on the first $10 million, 7/8 of 1% from $10 million to $30 million, 3/4 of 1% from $30 million to $150 million, 5/8 of 1% from $150 million to $500 million, and 1/2 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. ("CEF") (formerly, Bull & Bear Advisers, Inc.) 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. For the six months ended June 30, 1999, the Fund paid $8,264 to Bull & Bear Securities, Inc., formerly an affiliate of the Investment Manager and CEF until March 31, 1999 as commissions for brokerage services. The Fund reimbursed the Investment Manager and CEF $10,332 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 pays the Distributor a distribution fee in an amount of three-quarters of one percent per annum of the Fund's average daily net assets and a service fee in an amount of one-quarter of one percent per annum of the Fund's average daily net assets. The fee for service activities is intended to cover personal services provided to shareholders in the Fund and the maintenance of shareholder accounts. The fee for distribution activities is to cover all other activities and expenses primarily intended to result in the sale of the Fund's shares.
(4) Purchases and proceeds of sales of securities other than short term notes aggregated $18,747,077 and $23,356,731, respectively, for the six months ended June 30, 1999.
(5) 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 5.64% based on the balances outstanding during the period and the weighted average amount outstanding was $3,710,009.
(6) As of June 30, 1999, the Fund loaned common stocks having a value of $3,998,346 and received cash collateral of $4,097,296 for the loan.
The Fund loaned securities to certain brokers who paid the Fund lenders' fees. These fees, less costs to administer the program, are included in interest income on the Statement of Operations for the six months ended June 30, 1999. The loans are secured at all times by cash or U.S. Government obligations in an amount at least equal to the market value of the securities loaned, plus accrued interest, determined on a daily basis and adjusted accordingly. Although the Fund may regain record ownership of loaned securities to exercise certain beneficial rights, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially.
The Fund participates in repurchase agreements with the Fund's custodian. The custodian takes possession of the collateral pledged for investments in repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to ensure that the value, including accrued interest, is at least equal to the repurchase price. In the event of default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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
| Years Ended December 31, | ||||||||
| Six Months
Ended June 30, 1999 (Unaudited) |
1998 | 1997 | 1996 | 1995 | 1994 | |||
| PER SHARE DATA* | ||||||||
| Net asset value at beginning of period | $20.34 | $23.38 | $22.96 | $25.42 | $19.11 | $23.13 | ||
| Income from investment operations: | ||||||||
| Net investment loss | (.14) | (.61) | (.38) | (.73) | (.81) | (.55) | ||
| Net realized and unrealized gain (loss) on investments: | .16 | (.65) | 1.55 | .99 | 8.51 | (3.28) | ||
| Total from investment operations | .02 | (1.26) | 1.17 | .26 | 7.70 | (3.83) | ||
| Less distributions: | ||||||||
| Distributions from net realized gains on investments | - | (1.78) | (.75) | (2.72) | (1.39) | (.19) | ||
| Net increase (decrease) in net asset value | .02 | (3.04) | .42 | (2.46) | 6.31 | (4.02) | ||
| Net asset value at end of period | $20.36 | $20.34 | $23.38 | $22.96 | $25.42 | $19.11 | ||
| TOTAL RETURN | .10% | (5.0)% | 5.3% | 1.0% | 40.5% | (16.5)% | ||
| RATIOS/SUPPLEMENTAL DATA | ||||||||
| Net assets at end of period (000's omitted) | $ 33,519 | $36,807 | $44,773 | $49,840 | $56,340 | $45,614 | ||
| Ratio of expenses to average net assets (a) (b) | 3.18%** | 3.42% | 2.81% | 2.92% | 3.67% | 2.92% | ||
| Ratio of net investment loss to average net assets | (1.39)%** | (2.57)% | (1.48)% | (2.81)% | (2.70)% | (2.43)% | ||
| Portfolio turnover rate | 50% | 97% | 260% | 311% | 319% | 309% | ||
*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 including interest expense was 2.55%**, 2.63%, 2.53%
and 2.45% and 2.88% for the six months ended June, 30, 1999 and for the
years ended December 31, 1998, 1997, 1996 and 1995, respectively.
(b) Ratio after custodian fee credits was 3.41%** and 2.79% for
the years ended December 31, 1998 and 1997, respectively. Prior to 1995,
such credits were reflected in the ratio. There were no custodian fee credits
for 1996 and 1995.
For shareholder services by
Investor Access, call toll-free
1-888-503-VOICE (8642)
Or, access the Fund on the web at
www.midasfunds.com
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