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To Our Shareholders These are sunny days for investors! Global economic strength of prior years has continued through the first half of 2007. Although U.S. growth appears constrained due to housing weakness or other factors, Europe, Asia, and many emerging market economies are seeing impressive growth in industrial output, employment, and consumer spending. Even though demand for goods may occasionally overwhelm supply and commodity prices have risen (in some cases dramatically), consumer price inflation seems modest. There may be some clouds, however, on the horizon. In February, an apparently minor, but adverse, development in China briefly caused markets worldwide to tumble. Many central banks in developing countries are raising interest rates to head off inflation – which might have the effect of breaking the growth momentum of their economies. In the United States, higher interest rates burst the residential real estate bubble and its negative effect is now spilling over to the sub-prime mortgage market. Financial markets, nonetheless, seem buoyant. Fortunately, the Midas Funds have a flexible investing approach, an important advantage in formulating a superior strategy to participate in this global growth as financial markets evolve. Further, the Midas Funds remain focused on quality companies with unique combinations of strength in operations, finances, and products. With our disciplined and flexible analytical process, we continue to seek attractive investments that offer the potential for rewarding returns across varied economic cycles.
Table of ContentsThe Bureau of Economic Analysis, an agency of the U.S. Department of Commerce, recently released revised figures on personal income and expenditures. In April, personal disposable income decreased 0.2% and personal consumption expenditures increased 0.5%. In fact, the U.S. personal saving rate has been negative every quarter since March 31, 2005, according to the Bureau. Investing Now . . . For Your Future The last time the U.S. savings rate was negative for a full year was 1933 – during the Great Depression. Americans should be investing now during sunny markets, knowing that occasional storms in the future are all but inevitable. Predictably volatile financial markets mean that most investors should consider diversifying their portfolios – and we would suggest that you consider some or all of the Midas Funds, which combined can balance the returns offered by precious metals, general equities, and money market investments. Midas also offers an excellent service to make regular investing safe and convenient. With regular automatic investing, you decide now to invest through the free Midas Bank Transfer Plan, and at the same time each month for as long as you like, a fixed amount of money will be transferred from your bank account for investment in one or more of your Midas Funds accounts you have designated. You should then periodically review your overall portfolio. Investing the same amount regularly, known as “dollar cost averaging,” can reduce the anxiety of investing in a rising or falling market or buying all your shares at market highs. Although this strategy cannot assure a profit or protect against loss in a declining market, it can result in a lower average cost for your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels when undertaking such a strategy. Discovering Opportunities for Personal Investment Planning We believe personal investment planning can be successful by following three simple steps. First, commit to a long term investing approach. Second, follow a regular investment plan as described above. Third, manage your investment risk by diversifying among the three Midas Funds: Midas Special Fund for longer term, stock market-oriented objectives, Midas Dollar Reserves money market fund for income, and short term liquidity, and check writing, and Midas Fund for precious metals capital appreciation and as a hedge against inflation. As you invest in the Midas Funds for your future, we will remain committed to seeking to achieve the investment objectives of the Funds. If you have any questions, we will be happy to assist you without any obligation. Please call us at 1-800-400-MIDAS (6432), or visit www.MidasFunds.com.
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Table of ContentsCOMMENTARY We are very pleased to welcome our new shareholders attracted to Midas Fund by its track record of past performance, its policy of investing primarily in securities of companies principally involved in mining, processing, fabricating, distributing or otherwise dealing in gold, silver, platinum, or other natural resources, and its no-charge shareholder services. Midas Fund rose 11.89% in the first half of 2007, a satisfying result on top of having achieved a total return of 44.02% in 2006 and 39.72% in 2005. We wish to caution our shareholders, however, that just as Midas Fund was down 2.72% in 2004, long term investing can be inevitably inclusive of frustrating as well as rewarding periods. Midas Fund Outperforms Gold Bullion Increasing about 3% from $632 at the end of 2006 to $651 by June 30, 2007, gold’s average price in the first half of the year was $658, peaking at $691 in April (prices based on the London p.m. fix). Reflecting the added advantage of its managed portfolio approach, Midas Fund’s net asset value increased 11.89%, almost quadrupling gold bullion’s gain for the six month period. Similarly, the Fund’s 2006 and 2005 gains of 44.02% and 39.72%, respectively, were nearly twice the 2006 and 2005 bullion gains of about 23% and 20%, respectively. We are pleased to also note the Fund’s performance relative to the unmanaged Philadelphia Gold and Silver Sector Index of stocks, which declined about 4% in the first half of 2007, and rose only 11% in 2006 and 29% in 2005. Market Review, Strategies, and Outlook After sharply increasing early in the year, gold prices dropped in February as interest rate increases around the globe dampened speculative fever and equity markets suffered. Recovering in the second quarter to new 2007 highs, gold prices then declined during the period of traditional seasonal weakness in May through June. Of continuing concern, we are seeing a positive real interest rate environment in many economies — calculated as average interest rates minus the inflation rate — which can be negative for hard assets such as precious metals. Given this market environment, and using its core strategy of “quality, with growth,” Midas Fund broadened its focus to invest in a number of quality growth companies in exploration and project development, as well as companies with larger exposure to a mix of precious and base metals. Adjusting leverage and re-weighting the portfolio to companies with financial strength, strong management and project development plans continues to play a large part in Midas Fund’s strong performance. Due to robust emerging market demand for commodities, large cap diversified mining companies, with a mix of gold, silver, platinum, base metals, energy and other natural resources production, contributed most to returns in the second quarter while smaller operations and uranium underperformed. Midas Fund is leveraged currently for recovery in precious metals prices, and is re-emphasizing both gold and silver in its portfolio. Since the beginning of 2007, gold prices have oscillated between approximately $608 and $691. We anticipate seasonal fabrication demand emerging as the year progresses and investment demand potentially driving the gold price over $690 if the U.S. dollar weakens or greater inflation appears on the horizon. Other potential catalysts for gold include further terrorist activity and mining supply restrictions from looming strikes by the South African National Union of Mineworkers (South Africa remains the world’s largest gold producer). Other natural resources may benefit from continuing global economic growth. We will seek to position Midas Fund for these dynamic trends. As a matter of interest, net assets of Midas Fund at this writing are above $200 million compared with $134 million at the start of the year. TOP 10 HOLDINGS AS OF JUNE 30, 2007
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Table of ContentsCOMMENTARY It is a pleasure to submit the 2007 Semi-Annual Report for Midas Special Fund, and to welcome our new shareholders who find the Fund’s aggressive and flexible investment approach attractive. The Fund invests aggressively for capital appreciation, using a flexible strategy in the selection of securities, and is not limited by an issuer’s location, size, or market capitalization. The Fund may invest in equity and fixed income securities of both new and seasoned U.S. and foreign issuers with no minimum rating, including securities convertible into common stock, debt securities, futures, options, derivatives, and other instruments. The Fund also may employ aggressive and speculative investment techniques, such as selling securities short and borrowing money for investment purposes, a practice known as “leveraging,” and may invest defensively in short term, liquid, high grade securities. To achieve its objective, Midas Special Fund may use a seasonal investing strategy to invest the Fund’s assets to gain exposure to the securities markets during periods anticipated to be favorable based on patterns of investor behavior related to accounting periods, tax events, holidays, and other factors. During periods anticipated to be less favorable, and from time to time, the Fund may take a defensive position. Markets Conditions and Investment Strategies In the first half of 2007, certain equity markets reached medium term highs, despite a weaker economic outlook in the United States and indications that global growth may have peaked. While many factors were likely supportive of the gains, we believe large moves were powered by continued strong earnings growth, share buy backs, and merger and acquisition activity. Strength in emerging markets often reflected improved credit worthiness and more stable political and economic conditions. Nevertheless, in some of the rising markets we see signs of investor complacency towards risk, which can boost market prices higher. In view of these changes in market sentiment, the Fund’s portfolio reduced its emphasis on home building and technology and increased its weighting of consumer products companies. By the end of the first half of 2007, Midas Special Fund’s holdings included the stocks of some of the largest and best known U.S. companies in consumer products, insurance, technology, and banking. Going forward, we note that a number of forecasters anticipate the continuation of benign market and economic conditions. We are concerned, however, by a number of issues including a rise in global inflation pressures, a U.S. recession as manufacturing activity diminishes, global current account imbalances among major economies, and national budget deficits in leading nations. In late February and early March 2007, we saw how financial developments in one country – China – could have a strong impact on markets worldwide, due to the impact of large and volatile capital flows on markets already “priced to perfection.” For these and other reasons, Midas Special Fund’s emphasis on financial strength and quality should appeal to investors concerned with future unexpected shocks to the marketplace. Objective: Capital Appreciation Midas Special Fund will pursue its capital appreciation objective aggressively as financial market conditions evolve, seeking to discover long term opportunities for attractive investment – whether due to a changing outlook for the prospects of a particular company or an industry sector generally. Since these strategies may reflect longer term wealth building goals, we believe the Fund can be especially appropriate for tax advantaged retirement accounts. For long term investing goals, consider the tax-advantaged Midas Traditional, Roth, SEP, or SIMPLE IRA, as well as the Midas Education Savings Account and 403(b)(7) Account. Forms for all of these plans may be found at www.midasfunds.com. Of course, we also would be very pleased to discuss with you any questions you may have. Call us at 1-800-400-MIDAS (6432) and a Shareholder Service Representative will be glad to assist you, as always, without obligation on your part. TOP 10 HOLDINGS AS OF JUNE 30, 2007
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Table of ContentsCOMMENTARY We are pleased to submit this Semi-Annual Report for the period ended June 30, 2007 and to welcome our new shareholders who have made their initial investment since our last Report. The Fund’s all-weather income and safety conscious approach, plus free check writing, make it an ideal vehicle for a program of steady monthly investing, or as a temporary and easily accessible haven for proceeds from sales of other assets. The Fund invests exclusively in obligations of the U.S. Government, its agencies and instrumentalities (U.S. Government Securities). The U.S. Government Securities in which the Fund may invest include U.S. Treasury bills and notes and certain agency securities that are backed by the full faith and credit of the U.S. Government. The Fund also may invest without limit in securities issued by U.S. Government agencies and instrumentalities that may have different degrees of U.S. backing as to principal or interest but which are not backed by the full faith and credit of the U.S. Government. Investment Strategy, Review, and Outlook Under the seasoned leadership of Federal Reserve Chairman Bernanke, the Federal Open Market Committee (FOMC) left the Federal funds target rate unchanged at its June meeting observing that core inflation has improved modestly, but noting that a sustained moderation in inflation pressures has yet to be convincingly demonstrated. U.S. economic activity, according to the Federal Reserve, continued to expand from mid-April through May with consumer spending and retail sales generally improving and tourism robust, notwithstanding the higher gasoline prices. Recently, the Institute for Supply Management reported that its index of manufacturing activity registered its strongest monthly gain since April 2006. According to a recent Wall Street Journal survey of forecasters, economic growth in the United States is likely to recover over the course of the year and the outlook for the economy is positive. In view of these conditions, the strategy of Midas Dollar Reserves was to continue seeking the benefit of relative safety through investment in money market obligations of the U.S. Government, its agencies and instrumentalities, and maintaining an average maturity in the first half of the year of approximately 46 days. As we look ahead we expect the FOMC to consider maintaining its target rate at 5.25% for the short to medium term. The Bureau of Labor Statistics of the U.S. Department of Labor recently reported that nonfarm payroll employment increased by 132,000 in June, and the unemployment rate was unchanged at 4.5%. Interestingly, the report indicated that while employment rose in health care and social assistance, food services, and wholesale trade, the manufacturing sector continued to lose jobs. Although hourly wages are up 3.9% in the year through June, the U.S. consumer price index has risen only 2.7% in the twelve months through May. Easy, Safe, and Convenient Shareholder Services The Fund’s objective of seeking maximum current income consistent with preservation of capital and maintenance of liquidity has great appeal to safety conscious investors. To help investors get started with a regular plan of setting amounts aside to meet long term financial goals, the Fund offers automatic investing under three different plans: the Midas Bank Transfer Plan, the Midas Salary Investing Plan, and the Midas Government Direct Deposit Plan. Forms for all three may be found at www.midasfunds.com. For further information and assistance with any of these free services, simply give us a call at 1-800-MIDAS (6432) and a Shareholder Service Representative will help you, as always, without obligation on your part. TOP 10 HOLDINGS AS OF JUNE 30, 2007
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Table of ContentsAllocation of Portfolio Holdings on June 30, 2007 (Unaudited)
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Table of ContentsSchedule of Portfolio Investments - June 30, 2007 (Unaudited) COMMON STOCKS AND WARRANTS (114.41%)
See notes to financial statements.
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Table of ContentsSchedule of Portfolio Investments - June 30, 2007 (Unaudited) COMMON STOCKS (118.83%)
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