|
||||
|
|
|||
|
So it seems clear to us at Midas that some things may change for the United States if it is to deal effectively with its $76 trillion burden. Taxes may increase, inflation may increase, reduced government spending may mean a slower economy, and entitlement benefits may be reduced. Speaking of the future, investors might plan for even more market volatility in 2013. That’s when some estimate the United States will be faced with yet another debt ceiling crisis, the Bush tax cuts are scheduled to expire, and the sequester goes into effect, i.e. across the board spending cuts if U.S. debt reduction goals are not met.
Economic changes, market volatility, and the future always pose challenges for investors. That’s what makes financial planning now so important. To support sound financial plans, at Midas we emphasize quality investing over the long term.
DISCOVERING OPPORTUNITIES AND PLANNING
Standard & Poor’s, in contrast to Moody’s, recently did downgrade U.S. debt from AAA to AA+. Interestingly, Canada lost its AAA rating in April 1993 and then Canadian stocks gained more than 15% in the subsequent year. After Moody's downgraded Japan in November 1998, its stock market rose over 25% in the following 12 months. By riding out the current storm of market volatility and investor worry, could U.S. investors likewise benefit? No one knows today, of course, but the current situation may represent an opportunity to get started for those seeking to plan for financial goals, such as college tuition or retirement.
At Midas, we have long recognized the importance of dealing with economic and market uncertainty in an investment portfolio and that is why we offer three funds – so investors can diversify their portfolios among the three funds, with their differing investment objectives and policies. Midas Fund seeks primarily capital appreciation and protection against inflation and, secondarily, current income through investments primarily in precious metals and natural resource companies and gold, silver, and platinum bullion. Midas Perpetual Portfolio seeks to preserve and increase the purchasing power value of its shares with a target asset allocation strategy that includes gold and silver, Swiss franc assets, hard asset securities, large cap growth stocks, and dollar assets. Midas Magic seeks capital appreciation by investing in any security type in any industry sector and in domestic and foreign companies of any size and typically employs leverage to enhance returns.
Given the uncertainties, we suggest that investors take positive steps today to implement a plan to seek their own long term goals. Positive steps might include regularly adding to your Midas account pursuant to a long term plan and contributing to a tax advantaged retirement account. In this connection, we suggest you consider one or more of the Midas Funds and the tax advantaged Midas Traditional, Roth, SEP, and SIMPLE IRA. Midas also offers Health Savings Accounts as well as Education Savings Accounts. Forms for all of these plans may be found at www.MidasFunds.com.
SIGN UP FOR ELECTRONIC DELIVERY
Midas shareholders can also sign up for electronic delivery of their account statements, confirmations, annual and semi-annual reports, prospectuses, and other updates. Benefits of electronic delivery include getting all your Midas information more quickly and conveniently, securely storing your account documents on the site for up to four years where you can view or print them at any time, and reducing the risk of identity theft. It is fast and easy to sign up for electronic delivery. Just follow these three simple steps: (1) go to www.MidasFunds.com and log into “Account Access,” (2) after logging in, at the Portfolio Summary, click on an account number and then select “Account Detail” from the left side menu, and (3) click on “Electronic Document Delivery.” On this page you can choose to have either account and confirmation statements or regulatory items, such as annual and semi-annual reports and prospectuses, or both, sent to the email address you wish.
MIDAS QUALITY FOR THE LONG TERM
If you would like to learn more about the Midas philosophy of quality investing for the long term, the Midas family of funds, or our attractive suite of shareholder services, please call us at 1-800-400-MIDAS (6432), or visit www.MidasFunds.com. We will be happy to answer any questions you may have, without any obligation on your part. We look forward to hearing from you. Thank you for investing with Midas!
Sincerely,
 Thomas B. Winmill
President
1
MIDAS Fund
Midas Fund seeks primarily capital appreciation and protection against inflation and, secondarily, current income. The Fund primarily invests in (i) securities of companies principally involved in the business of mining, processing, fabricating, distributing or otherwise dealing in gold, silver, platinum, or other natural resources and (ii) gold, silver, and platinum bullion. We are pleased to submit this 2011 Semi-Annual report and to welcome new shareholders attracted to the Fund by its objectives and policies, as well as its track record of past performance and its no charge shareholder services.
MARKET REVIEW, STRATEGIES, AND OUTLOOK
In the first half of 2011, gold prices fluctuated between $1,319 and $1,552 per ounce, averaging about $1,447 and ending the period at $1,505 (all prices based on the London pm fix). The gold price has recently continued to strengthen to over $1,600, apparently as worries of global fiscal instability from the threatened insolvency of Greece and ongoing weakness of U.S. and other world economies make headlines. Less often mentioned in the media are U.S. Bureau of Labor Statistics reports of continuing increases in the consumer price index (the CPI, which is often viewed as a measure of inflation). In the 12 months ending in June 2010, the CPI rose 1.1%, but since then inflation has started to accelerate. In the 12 months ending in December 2010 the CPI rose 1.5%, by March 2011, 2.7%, and in June 2011 to 3.6%. We expect even more inflation in the years ahead.
While the “fear factor” may drive future short term price swings, we believe that gold has the potential to spike as high as $1,700 per ounce by year end due to medium term favorable seasonal and fundamental supply and demand factors. According to the World Gold Council, Chinese and Indian jewelry purchasing could remain a continuing source of gold demand in the second half of 2011, as seen during the recent Akshaya Tritiya festival and the beginning of the wedding season. Formerly a dampening source of supply, net purchasing by central banks is resulting in an important new actual and psychological source of demand. Meanwhile, increased scrap sales and mining supply appear to be offset in part by increased retail investment demand both in the United States and abroad. But it is due to longer term, intractable, U.S. fiscal and monetary woes that we are projecting gold prices to rise as high as $1,800 in 2012. Global institutional capital, and its enormous money flows, could seek gold as an “alternative currency.” Catalysts for the perception of gold as a viable and attractive alternative to currencies, particularly the currencies of debtor nations, include the continuation of the fiscaland monetary policies, including seemingly unstoppable deficit spending, being implemented in most industrial countries today in order to counter sluggish economies and stubbornly high unemployment rates. Indeed, if this stimulus spending is successful in raising productivity rates and economic growth, the result might be dramatically lower gold prices. By searching for quality investments consistent with our growth discipline, however, we seek to address the risks inherent in the precious metals sector yet position Midas Fund to benefit from these important global trends.
The first half of the year witnessed much market volatility, and mining stocks generally underperformed the metal. The Fund’s strategy of investing in quality precious metals and natural resource companies resulted in disappointing returns in the first half. Nevertheless, Midas Fund increased its overall investments in the second quarter as we waited patiently for the valuations of the shares versus the metal to come back in balance. As economic and market conditions and concerns unfold over the second half 2011, the Fund expects its aggressively leveraged posture to result in further volatility, but also further potential to enhance returns with its portfolio of strong companies at attractive valuations. Midas continues to emphasize mining companies offering financial strength, expanding production profiles, increasing cash flow, promising exploration potential, and/or other special growth features.
2
MIDAS Magic
Although renamed from Midas Special Fund, Midas Magic has continued seeking its objective of capital appreciation in quality companies with unique combinations of strength in operations, products, and finances with growth or value characteristics. We are pleased to submit this 2011 Semi-Annual Report for the Fund to update shareholders on the Fund’s strategy of investing in any security type and in any industry sector, in domestic or foreign companies, and in companies of any size to seek its investment objective. We note that the Fund also may invest defensively, as well as employ speculative investment techniques such as borrowing money for investment purposes, a practice known as leveraging.
ECONOMIC AND MARKET REPORT
While the global economy is no longer in crisis, according to a recent report of the World Bank, economic activity in developing countries has slowed due to the earthquake and tsunami in Japan and political turmoil in the Middle East and North Africa. Possibly, economic activity has been further dampened by uncertainty over the ongoing sovereign debt crisis in Europe and the debt ceiling impasse in the United States. Interestingly, the World Bank forecasts global growth to recover from 2011 through 2013, strengthening from 3.2% in 2011 to a 3.6% pace in each of 2012 and 2013.
In the United States, economic activity in the manufacturing sector expanded in June for the 23rd consecutive month, but non-manufacturing declined, indicating a slowing of service sector growth, according to the Institute of Supply Management. In keeping its target rate to a range of between 0% and 0.25% –which has been in effect since December 2008 – the U.S. Federal Reserve Open Market Committee (FOMC) noted at its June meeting that recent economic data had been weaker than expected, and expressed caution about the likely pace of improvement in the economy over coming quarters. Specific concerns of the FOMC were recent increases in the prices of food and energy (with annualized general inflation recently over 3%), damped consumer sentiment, the pace of business investment and hiring, unemployment, and the depressed housing sector. Slowing growth appears to be leading to a jobless recovery in the United States. In the recent quarter, real personal income and spending weakened and the number of Americans working in full time jobs is actually down slightly from June 2010.
CAPITAL APPRECIATION STRATEGIES AND OUTLOOK
In these uncertain economic conditions, the Fund’s strategy was generally to stay the course, maintain a disciplined but aggres-sively leveraged investment posture, and concentrate its portfolio in quality companies with attractive valuations. At June 30, 2011, the Fund held shares in just 12 companies and its top ten holdings comprised approximately 87% of its total assets, with its long term holdings including some of the largest and best known U.S. companies with global operations in finance, technology, insurance, and banking. Our current view of financial markets suggests that the Fund may benefit during the remainder of 2011 from its flexible portfolio approach, investing opportunistically, and employing aggressive and speculative investment techniques as deemed appropriate. As the Fund pursues its capital appreciation objective through this flexible approach, its holdings and allocations are subject to substantial change at any time.
CONTACT US FOR INFORMATION AND SERVICES
Midas Magic’s solid approach to quality companies makes it an attractive vehicle for a program of long term investing and we believe the Fund can be especially appropriate for tax advantaged retirement accounts. For retirement, medical, and tuition financial planning goals, consider the Midas Traditional, Roth, SEP, or SIMPLE IRA, the Midas Health Savings Account, as well as the Midas Education Savings Account. Forms for all of these tax advantaged plans may be found at www.MidasFunds.com.
3
MIDAS Perpetual Portfolio
We are delighted to welcome our new shareholders who have invested in Midas Perpetual Portfolio directly or through one of the many brokerage firms making the Fund available to its customers. In these times particularly, it is gratifying indeed to see such a welcoming response to Midas Perpetual Portfolio’s objective of preserving and increasing the purchasing power value of its shares over the long term. It is also a pleasure to submit this 2011 Semi-Annual Report for the Fund.
ECONOMIC REPORT AND FUND STRATEGIES
The pace of growth in the world economy is generally slowing. Real U.S. gross domestic product (GDP) – the output of goods and services produced by labor and property located in the country – increased at an annual rate of 1.9% in the first quarter of 2011, according to the U.S. Bureau of Economic Analysis, compared to 3.1% in the fourth quarter. GDP growth in China, the world second biggest economy, was reported by its National Bureau of Statistics to have moderated to a 9.7% rate in the first quarter’s end, still impressive but reflective of the government’s attempt to cool the economy and tame inflation apparently now exceeding a 6% annualized rate. Japan, the world third largest economy, saw its GDP actually contract 0.9% in the first quarter of 2011. In contrast, the Euro area is showing slightly improving growth, with its GDP estimated to have increased by 0.8% during the first quarter of 2011 compared to 0.3% in the fourth quarter of 2010, according to estimates released by Eurostat, the statistical office of the European Union.
In the first half of 2011, Midas Perpetual Portfolio hewed to its core asset allocation strategy to preserve and increase the value of its overall portfolio in view of these challenging circumstances. The Fund invested in gold and silver (through exchange traded funds), Swiss franc denominated bonds of the federal government of Switzerland, shares of real estate and natural resource companies, large capitalization growth stocks, and U.S. money market funds. In pursuit of its investment objective, the Fund generally seeks to invest a “Target Percentage” of its total assets in each ofthe above categories, consistent with tax planning and controlling portfolio turnover. These investment categories, although subject to risk of potential loss, have been chosen and weighted with the goal of providing downside protection to the overall portfolio in most foreseeable economic conditions, whether the outcome of slowing world growth is inflation or deflation, fluctuating interest rates, a depreciating U.S. dollar, a resurgent U.S. economy, or otherwise.
TAX ADVANTAGED INVESTING
Importantly, the investment strategy of Midas Perpetual Portfolio acknowledges a broad range of economic possibilities and investing outlooks, and seeks to incorporate investments appropriate for each of them. Investors who wish to invest all or a portion of their capital in a way that does not depend on any particular outcome for the economy should consider purchasing shares of the Fund. To make regular investing in Midas Perpetual Portfolio as easy, convenient, and affordable as possible, we offer the Midas Bank Transfer Plan. The Fund’s objective also makes it attractive for investment through our Traditional or Roth IRAs, Health Savings Accounts, and our Education Savings Accounts. For information simply give us a call toll free at 1-800-400-MIDAS (6432) and we will be happy to provide this information to you or a friend or relative.
4
5
See notes to financial statements.
6
(a) Fully or partially pledged as collateral on bank credit facility.
(b) All or a portion of this security was on loan.
(c) Non-income producing.
(d) Illiquid and/or restricted security that has been fair valued.
ADR means “American Depositary Receipt.”
See notes to financial statements.
7
See notes to financial statements.
8
See notes to financial statements.
9
See notes to financial statements.
10
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
