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1997 ANNUAL REPORT
IDS
Precious
Metals
Fund
(prospectus enclosed)
(Icon of) mining car filled with gems
The goal of IDS Precious Metals Fund, Inc. is long-term growth of capital. The
Fund invests primarily in securities of companies engaged in exploration,
mining, processing or distribution of gold and other precious metals. Most of
these companies will be located outside of the United States.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc., Member
SIPC.
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(Icon of) mining cart filled with gems
While investors typically look to stocks and bonds for the best return on their
money, there are times when hard assets such as gold can play a small but
important role in a diversified portfolio. Because owning the metal itself is
often impractical, most investors put their money in stocks of companies that
mine gold and other precious metals. These stocks, which form the bedrock of IDS
Precious Metals Fund, usually move in tandem with the prices of the metals.
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Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1997 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of the Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 24
IDS mutual funds 27
Federal income tax information 31
1997 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Total returns 8p
Investment policies and risks 10p
Facts about investments and their risks 10p
Alternative investment option 15p
Valuing Fund shares 15p
How to purchase, exchange or redeem shares 16p
Alternative purchase arrangements 16p
How to purchase shares 18p
How to exchange shares 21p
How to redeem shares 21p
Reductions and waivers of the sales charge 25p
Special shareholder services 29p
Services 29p
Quick telephone reference 29p
Distributions and taxes 30p
Dividend and capital gain distributions 30p
(This annual report is not part of the prospectus.)
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Reinvestments 31p
Taxes 31p
How to determine the correct TIN 33p
How the Fund is organized 34p
Shares 34p
Voting rights 34p
Shareholder meetings 34p
Board members and officers 34p
Investment manager 36p
Administrator and transfer agent 36p
Distributor 37p
About American Express Financial Corporation 38p
General information 38p
Appendix 39p
Descriptions of derivative instruments 39p
(This annual report is not part of the prospectus.)
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To our shareholders
(Photo of) William R. Pearce
President of the Fund
(Photo of) Richard Warden
Portfolio manager
From the president
If you're an experienced investor, you know that the past two years have been
unusually strong one in many financial markets. Perhaps just as important, you
also know that history shows that bull markets don't last forever. Though
they're often unpredictable, declines--whether they're brief or long-lasting,
moderate or substantial--are always a possibility.
That fact reinforces the need for investors to periodically review their
long-term goals and examine whether their investment program remains on track to
achieving them. Your quarterly investment statements are one part of that
monitoring process. The other is a meeting with your American Express financial
advisor. That becomes even more important if there's a major change in your
financial situation or in the financial markets.
(reproduced signature)
William R. Pearce
From the portfolio manager
Gold stocks were under selling pressure for most of the past fiscal year--April
1996 through March 1997--resulting in a loss of 19.9% for IDS Precious Metals
Fund's Class A shares. (This figure includes a capital gain that was paid to
shareholders last December and reduced the Fund's net asset value by the same
amount at that time.)
The period began with gold stocks still sprinting ahead, continuing a trend that
had been in place for more than a year. Although gold is traditionally viewed as
a hedge against rising inflation, in this case inflation remained well-behaved
in most major world markets. Supporting the subdued inflation level, the price
of gold, which typically moves in tandem with inflation, fluctuated to only a
small degree. Instead, the run-up stemmed more from a fundamental factor--demand
for gold was outstripping supply.
A market reversal
However, following powerful upward moves in April and May, the trend quickly
reversed, sending gold stocks sprawling. The market calmed down somewhat during
the summer, but over the fall and winter prices again eroded as European
countries sold gold bullion as part of their transition to become aligned with
the new European Monetary Union. The final blow to Fund performance came in
March, when Bre-X Minerals, a stock that had been a spectacular winner for the
Fund in recent years, nose-dived on reports that it had made false claims
regarding a gold exploration site in Indonesia. To
(This annual report is not a part of the prospectus.)
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PAGE 6
limit the negative effect on the Fund, I sold all of the Bre-X shares, which, on
an overall basis, still generated a substantial profit for the Fund.
While the past period was often a trying one, the volatility was nothing new in
the gold market. The speculation level in the market clearly became excessive in
1996, and, sooner or later, excessiveness gets corrected in financial markets.
Much of the decline was concentrated in the stocks of small gold-exploration
companies, many of them with limited track records. The Fund owned several of
these issues, which in general had been a big boon to performance in prior
months. As the period progressed, I trimmed the Fund's exposure to such stocks
and reduced major positions in others that had experienced substantial price
increases. There was little change in the period as to the regional mix of the
holdings; a majority of the assets remained in stocks of Canada-based companies,
with the rest in U.S., Australia and South Africa.
Some favorable factors
As for the new fiscal year, I expect volatility to continue and, perhaps,
increase as currently weak gold prices may lead to more gold producers being
acquired. This trend should benefit the prices of the acquisition candidates,
several of which are held in the Fund. Beyond that possibility, it appears that
the likelihood for higher inflation in the U.S. has increased, while the
worldwide gold supply/demand situation continues to favor higher gold prices.
Nevertheless, because of the inherent risks in the gold market, I caution
shareholders to use this Fund as no more than a small hedge in a diversified
investment plan.
(reproduced signature)
Richard Warden
Class A
12 - month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $10.47
March 31, 1996 $13.75
Decrease $ 3.28
Distributions
April 1, 1996 - March 31, 1997
From income $ --
From capital gains $ 0.66
Total distributions $ 0.66
(This annual report is not a part of the prospectus.)
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Total return* -19.9%**
Class B
12 - month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $10.30
March 31, 1996 $13.65
Decrease $ 3.35
Distributions
April 1, 1996 - March 31, 1997
From income $ --
From capital gains $ 0.66
Total distributions $ 0.66
Total return* -20.5%**
Class Y
12 - month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $10.52
March 31, 1996 $13.76
Decrease $ 3.24
Distributions
April 1, 1996 - March 31, 1997
From income $ --
From capital gains $ 0.66
Total distributions $ 0.66
Total return* -19.8%**
* The prospectus discusses the
effect of sales charges, if any,
on the various classes.
(This annual report is not part of the prospectus.)
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**The total return is a
hypothetical investment in
the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
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The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of March 31, 1997)
Freeport-McMoRan Copper & Gold 8.28% $7,593,750
Getchell Gold 6.82 6,256,250
Euro-Nevada Mining 5.84 5,351,633
Sons of Gwalia 4.97 4,557,891
Francisco Gold 4.92 4,515,080
TVX Gold 3.82 3,503,700
Stillwater Mining 3.65 3,345,160
Dayton Mining 3.15 2,882,425
Cambior 3.14 2,881,073
Ashanti Gold Fields 3.00 2,750,000
The ten holdings listed here make up 47.59% of the Fund's net assets
(This annual report is not part of the prospectus.)
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Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular basis,
even when the price of your shares falls or the market declines. Investing in
this matter can be an effective way to accumulate shares to meet your long-term
goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low...
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
You have paid an average price of only $17.91 per share over the 10 months,
while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold by
the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
How your $10,000 has grown in IDS Precious Metals Fund
$30,000
S&P 500 Stock Index
$20,000
$14,708
IDS Precious
Metals Fund
Class A
Lipper Gold Fund Index
$9,500
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Average annual total return
(as of March 31, 1997)
1 year Since inception* 5 years 10 years
Class A -23.92% --% 15.58% 3.99%
Class B -23.54% 16.48% --% --%
Class Y -19.75% 20.31% --% --%
*Inception date was March 20, 1995.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Stock Index and the Lipper Gold
Fund Index. In comparing Precious Metals Fund (Class A) to the two indexes, you
should take into account the fact that the Fund's performance reflects the
maximum sales charge of 5%, while such charges are not reflected in the
performance of the indexes.
(This annual report is not part of the prospectus.)
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investment and return values fluctuate so that your shares, when redeemed, may
be worth more or less than the original cost. Average annual total return
figures reflect the deduction of the maximum applicable sales charge. This was a
period of widely fluctuating security prices. Past performance is no guarantee
of future results.
Assumes: Holding period from 4/1/87 to 3/31/97. Returns do not
reflect taxes payable on distributions. Reinvestment of all income
and capital gain distributions for the Fund, with a value of
$3,190. Also see "Performance" in the Fund's current prospectus.
The Standard & Poor's 500 Stock Index, an unmanaged list of common stocks, is
frequently used as a general measure of market performance. However, the S&P 500
companies are generally larger than those in which the Fund invests.
Lipper Gold Fund Index, published by Lipper Analytical Services, Inc., includes
10 funds that are generally similar to this Fund, although some funds in the
index may have somewhat different investment policies or objectives.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #30 to
Registration Statement No. 2-93745 filed on or about May 23, 1997 are
incorporated herein by reference.
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IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale holding two worlds
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
(This annual report is not part of the prospectus.)
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IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) office building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
(This annual report is not part of the prospectus.)
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with significant growth
potential due to superiority in technology, marketing or management. The Fund
frequently changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
(This annual report is not part of the prospectus.)
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily of high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio that seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
(This annual report is not part of the prospectus.)
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head enclosed
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes.
Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star enclosed
(This annual report is not part of the prospectus.)
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower- quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with a tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
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Federal income tax information
IDS Precious Metals Fund
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below were reported to you on a Form 1099-DIV,
Dividends and Distributions, last January. Dividends paid to you since the end
of last year will be reported to you on a tax statement sent next January.
Shareholders should consult a tax adviser on how to report distributions for
state and local purposes.
IDS Precious Metals Fund, Inc.
Fiscal year ended March 31, 1997
Class A
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.66224
Class B
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.66224
Class Y
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.66224
(This annual report is not part of the prospectus.)
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Quick telephone reference
American Express Financial Advisors Telephone Transaction Service Redemptions
and exchanges, dividend payments or reinvestments and automatic payment
arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line Automated account
information (TouchToneR phones only), including current fund prices and
performance, account values and recent account transactions
800-562-7919
AMERICAN
EXPRESS
Financial
Advisors
IDS Precious Metals Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
