<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 30 (File No. 2-93745) X
---- --
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 32 (File No. 811-4132) X
---- --
IDS PRECIOUS METALS FUND, INC.
IDS Tower 10, Minneapolis, MN 55440-0010
Leslie L. Ogg - 901 S. Marquette Ave., Suite 2810,
Minneapolis, MN 55402-3268
(612) 330-9283
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on May 30, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Section 24f-2 of the Investment Company
Act of 1940. Registrant's Rule 24f-2 Notice for its most recent fiscal year
ended March 31, 1997 was filed on or about May 21, 1997.
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Cross reference sheet showing the location in its prospectus and the Statement
of Additional Information of the information called for by the items enumerated
in Parts A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
PART A PART B
<TABLE>
<CAPTION>
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and Fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Portfolio Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Board members and officers of the Fund;**
(b) Investment policies and risks Board members and officers
(c) Investment policies and risks (b) Board members and Officers
(c) Board members and Officers
5(a) Board members and officers; Board members
and officers of the Fund (listing) 15(a) NA
(b)(i) Investment manager and transfer agent; (b) NA
About American Express Financial (c) Board members and Officers
Corporation -- General Information
(b)(ii) Investment manager and transfer agent 16(a)(i) How the Fund is organized; About American
(b)(iii) Investment manager and transfer agent Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Investment manager and transfer agent Agreement, Plan and Supplemental
(e) Investment manager and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager and transfer agent; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Portfolio Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Portfolio Transactions
(g) Taxes (d) Portfolio Transactions
(h) Alternative sales arrangements (e) Portfolio Transactions
7(a) Distributor 18(a) Shares; Voting rights**
(b) Valuing Fund shares (b) NA
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund Shares; Investing in the Fund
(f) Distributor (c) NA
8(a) How to redeem shares 20 Taxes
(b) NA
(c) How to purchase shares: Three ways to invest 21(a) Agreements: Distribution Agreement
(d) How to purchase, exchange or redeem shares: (b) Agreements: Distribution Agreement
Redemption policies -- "Important..." (c) NA
9 None 22(a) Performance Information (for money market
funds only)
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
</TABLE>
*Designates information is located in annual report.
**Designates location in prospectus.
<PAGE>
PAGE 3
IDS Precious Metals Fund
Prospectus
May 30, 1997
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.
Since the securities in which the Fund invests generally involve certain risks
not associated with more traditional investments, an investment in this Fund may
not be appropriate for all investors and, by itself, should not be considered a
balanced investment program.
This prospectus contains facts that can help you decide if the Fund is the right
investment for you. Read it before you invest and keep it for future reference.
Additional facts about the Fund are in a Statement of Additional Information
(SAI), filed with the Securities and Exchange Commission (SEC) and available for
reference, along with other related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated here by reference. For a free
copy, contact American Express Shareholder Service.
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
Please note that the Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
<PAGE>
PAGE 4
Table of contents
The Fund in brief
Goal
Investment policies and risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendix
Descriptions of derivative instruments
<PAGE>
PAGE 5
The Fund in brief
Goal
IDS Precious Metals Fund (the Fund) seeks to provide shareholders with long-term
growth of capital. The Fund seeks to achieve its goal primarily by investing in
companies that mine and process precious metals. Because any investment involves
risk, achieving this goal cannot be guaranteed. Only shareholders can change the
goal.
Investment policies and risks
The Fund is a non-diversified mutual fund that invests primarily in securities
of companies engaged in exploration, mining, processing or distribution of gold
and other precious metals. The Fund also may invest directly in such metals.
Non-diversified mutual funds may have more market risk than funds that have
broader diversification. Other investments may include derivative instruments
and money market instruments.
The Fund's investments may be thought of as volatile and may involve certain
risks not associated with more traditional investments. For further information,
refer to the later section in the prospectus titled "Investment policies and
risks."
Manager and distributor
The Fund is managed by American Express Financial Corporation (AEFC), a provider
of financial services since 1894. AEFC currently manages more than $58 billion
in assets for the IDS MUTUAL FUND GROUP. Shares of the Fund are sold through
American Express Financial Advisors Inc., a wholly-owned subsidiary of AEFC.
Portfolio manager
Dick Warden joined AEFC in 1962 and serves as portfolio manager. He has managed
this Fund since 1991 and also serves as portfolio manager of Equity Portfolio.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are subject to a
sales charge at the time of purchase. Class B shares are subject to a contingent
deferred sales charge (CDSC) on redemptions made within six years of purchase
and an annual distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an investor on the
purchase or redemption of Fund shares. Fund operating expenses are paid out of
Fund assets for each class of shares. Operating expenses are reflected in the
Fund's daily share price and dividends, and are not charged directly to
shareholder accounts.
<PAGE>
PAGE 6
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%
Annual Fund operating expenses
(as a percentage of average daily net assets):
Class A Class B Class Y
Management fee** 0.90% 0.90% 0.90%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses*** 0.60% 0.62% 0.37%
Total 1.50% 2.27% 1.27%
*This charge may be reduced depending on your total investments in
IDS funds. See "Reductions of the sales charge."
**Includes the impact of a performance fee that increased the management fee by
0.10% in fiscal year 1997.
***Other expenses include an administrative services fee, a shareholder services
fee for Class A and Class B, a transfer agency fee and other nonadvisory
expenses.
Example: Suppose for each year for the next 10 years, Fund expenses are as above
and annual return is 5%. If you sold your shares at the end of the following
years, for each $1,000 invested, you would pay total expenses of:
1 year 3 years 5 years 10 years
Class A $65 $95 $128 $221
Class B $73 $111 $142 $242**
Class B* $23 $71 $122 $242**
Class Y $13 $40 $ 70 $154
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown. Because Class B pays annual
distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay
an equivalent of more than a 6.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
<PAGE>
PAGE 7
Performance
Financial highlights
IDS Precious Metals Fund, Inc.
Performance
Financial highlights
Fiscal period ended March 31,
Per share income and capital changes*
<TABLE>
<CAPTION>
Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $13.75 $7.99 $8.44 $6.00 $5.15 $5.40 $6.98 $6.76 $7.06 $8.57
beginning of period
Income from investment operations:
Net investment income (loss) (.08) (.05) .04 .04 .04 .06 .12 .21 .12 .12
Net gains (losses) (2.54) 5.82 (.45) 2.44 .84 (.24) (1.57) .10 (.30) (.73)
(both realized
and unrealized)
Total from investment (2.62) 5.77 (.41) 2.48 .88 (.18) (1.45) .31 (.18) (.61)
operations
Less distributions:
Dividends from net -- (.01) (.04) (.04) (.03) (.07) (.13) (.09) (.12) (.11)
investment income
Distributions from (.66) -- -- -- -- -- -- -- -- (.79)
realized gains
Total distributions (.66) (.01) (.04) (.04) (.03) (.07) (.13) (.09) (.12) (.90)
Net asset value, $10.47 $13.75 $7.99 $8.44 $6.00 $5.15 $5.40 $6.98 $6.76 $7.06
end of period
Ratios/supplemental data
Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of $83 $101 $72 $74 $53 $53 $68 $91 $103 $118
period (in millions)
Ratio of expenses to 1.50% 1.65% 1.61% 1.51% 1.79% 1.59% 1.48% 1.46% 1.33% 1.11%
average daily net assets+
Ratio of net income (loss) (.58%) (.64%) .31% .46% .86% .64% 1.95% 2.75% 1.60% 1.44%
to average daily net assets
Portfolio turnover rate 76% 50% 37% 49% 19% 21% 54% 76% 49% 77%
(excluding short-term
securities)
Average brokerage
commission rate++ $.0236 -- -- -- -- -- -- -- -- --
Total return** (19.9%) 72.1% (4.9%) 41.3% 17.2% (3.3%) (20.8%) 4.4% (2.5%) (8.1%)
</TABLE>
* For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
+ Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
++Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
<PAGE>
PAGE 8
IDS Precious Metals Fund, Inc.
Fiscal period ended March 31,
Per share income and capital changes*
<TABLE>
<CAPTION>
Class B Class Y
1997 1996 1995** 1997 1996 1995**
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $13.65 $7.99 $7.72 $13.76 $7.99 $7.62
beginning of period
Income from investment operations:
Net investment income
(loss) (.14) (.09) .01 (.05) (.04) --
Net gains (losses) (2.55) 5.75 .26 (2.53) 5.81 .37
(both realized and unrealized)
Total from investment (2.69) 5.66 .27 (2.58) 5.77 .37
operations
Distributions from (.66) -- -- (.66) -- --
realized gains
Net asset value, $10.30 $13.65 $7.99 $10.52 $13.76 $7.99
end of period
Ratios/supplemental data
Class B Class Y
1997 1996 1995** 1997 1996 1995**
Net assets, end of $ 8 $ 3 $ -- $ -- $ -- $ --
period (in millions)
Ratio of expenses to 2.27% 2.31% .08%# 1.27% 1.39% --%+
average daily net assets++
Ratio of net income (loss) (1.46%) (1.18%) .28%# (.33%) (.43%) --%+
to average daily net assets
Portfolio turnover rate 76% 50% 37% 76% 50% 37%
(excluding short-term
securities)
Total return+++ (20.5%) 70.8% 3.5% (19.8%) 72.3% 4.9%
Average brokerage
commission rate## $.0236 -- -- $.0236 -- --
</TABLE>
* For a share outstanding throughout the period. Rounded to the nearest cent.
** Inception date was March 20, 1995.
+ Ratio of expenses and net investment income to average daily net assets is
not presented for class Y as only three shares were outstanding during the
period.
++ Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
+++Total return does not reflect payment of a sales charge.
# Adjusted to an annual basis.
## Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the
fact that commission rates per share vary significantly among foreign
countries.
The information in these tables has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the Fund's annual
report which, if not included with this prospectus, may be obtained without
charge.
Total returns
Total return is the sum of all of your returns for a given period, assuming you
reinvest all distributions. It is calculated by taking the total value of shares
you own at the end of the period (including shares acquired by reinvestment),
less the price of shares you purchased at the beginning of the period.
<PAGE>
PAGE 9
Average annual total return is the annually compounded rate of return over a
given time period (usually two or more years). It is the total return for the
period converted to an equivalent annual figure.
Average annual total returns as of March 31, 1997
Purchase 1 year Since 5 years 10 years
made ago inception* ago ago
Precious Metals:
Class A -23.92% -- 15.58% 3.99%
Class B -23.54% 16.48% -- --
Class Y -19.75% 20.31% -- --
S&P 500 19.81% 25.67%** 16.38% 13.35%
Lipper
Gold Fund Index -21.56% -1.20%** 6.94% -0.63%
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
Cumulative total returns as of March 31, 1997
Purchase 1 year Since 5 years 10 years
made ago inception* ago ago
Precious Metals:
Class A -23.92% -- 106.36% 47.98%
Class B -23.54% 36.54% -- --
Class Y -19.75% 44.96% -- --
S&P 500 19.81% 58.03%** 113.55% 250.43%
Lipper
Gold Fund Index -21.56% -2.38%** 39.87% -6.17%
*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.
These examples show total returns from hypothetical investments in Class A,
Class B and Class Y shares of the Fund. These returns are compared to those of
popular indexes for the same periods. The performance of Class B and Class Y
will vary from the performance of Class A based on differences in sales charges
and fees. March 20, 1995 was the inception date for Class B and Class Y. Past
performance for Class Y for the periods prior to March 20, 1995 may be
calculated based on the performance of Class A, adjusted to reflect differences
in sales charges although not for other differences in expenses.
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
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PAGE 10
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.
Standard & Poor's 500 Stock Index (S&P 500), 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. The
index reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
Lipper Gold Fund Index, an unmanaged index published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
Investment policies and risks
The Fund invests primarily in securities of companies engaged in exploration,
mining, processing or distribution of gold and other precious metals. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in the precious metals industry. This policy is fundamental and may be changed
only if holders of a majority of the outstanding voting securities agree to make
the change.
In the event economic, political or financial conditions adverse to gold or
metals industries or the metals themselves occur, the Fund temporarily may
invest over 75% of its total assets in U.S. government securities or
investment-grade short-term obligations (denominated either in foreign
currencies or U.S. dollars).
The Fund may invest up to 10% of its total assets in gold and silver bullion,
other precious metals, strategic metals and other metals occurring naturally
with such metals and securities convertible into metals. The Fund will invest
only in metals and securities convertible into metals that are readily
marketable.
The various types of investments the portfolio manager uses to achieve
investment performance are described in more detail in the next section and in
the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations. Stocks of
foreign companies may be subject to abrupt or erratic price movements. While
established companies in which the Fund invests generally have adequate
financial reserves, some of the Fund's investments involve substantial risk and
may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
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PAGE 11
common stock, at prestated prices. When the trading price of the common stock
makes the exchange likely, convertible securities trade more like common stock.
Debt securities: The price of bonds generally falls as interest rates increase,
and rises as interest rates decrease. The price of bonds also fluctuates if the
credit rating is upgraded or downgraded. The price of bonds below investment
grade may react more to the ability of the issuing company to pay interest and
principal when due than to changes in interest rates. These bonds have greater
price fluctuations and are more likely to experience a default. The Fund will
not invest more than 5% of its net assets in bonds below investment grade.
Securities that are subsequently downgraded in quality may continue to be held
by the Fund and will be sold only when the investment manager believes it is
advantageous to do so.
Foreign investments: Because most of the world's gold production is outside the
United States, the Fund expects most of its assets to be invested in securities
of foreign issuers. The percentage of assets invested in particular countries or
regions, however, will change from time to time according to the investment
manager's judgment of their political stability and economic outlook. Foreign
investments are subject to political and economic risks of the countries in
which the investments are made, including the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a foreign market,
the local currency may be purchased using a forward contract in which the price
of the foreign currency in U.S. dollars is established on the date the trade is
made, but delivery of the currency is not made until the securities are
received. As long as the Fund holds foreign currencies or securities valued in
foreign currencies, the value of those assets will be affected by changes in the
value of the currencies relative to the U.S. dollar. Because of the limited
trading volume in some foreign markets, efforts to buy or sell a security may
change the price of the security, and it may be difficult to complete the
transaction. Under normal market conditions, the Fund intends to invest at least
50% of its total assets in foreign investments.
Derivative instruments: The portfolio manager may use derivative instruments in
addition to securities to achieve investment performance. Derivative instruments
include futures, options and forward contracts. Such instruments may be used to
maintain cash reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce transaction
costs or to pursue higher investment returns. Derivative instruments are
characterized by requiring little or no initial payment and a daily change in
price based on or derived from a security, a currency, a group of securities or
currencies, or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance characteristics. A
small change in the value of the underlying security, currency or index will
cause a sizable gain or loss in
<PAGE>
PAGE 12
the price of the derivative instrument. Derivative instruments allow the
portfolio manager to change the investment performance characteristics very
quickly and at lower costs. Risks include losses of premiums, rapid changes in
prices, defaults by other parties and inability to close such instruments. The
Fund will use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding those
securities and currencies permitted under the investment policies. The Fund will
designate cash or appropriate liquid assets to cover its portfolio obligations.
No more than 5% of the Fund's net assets can be used at any one time for good
faith deposits on futures and premiums for options on futures that do not offset
existing investment positions. This does not, however, limit the portion of the
Fund's assets at risk to 5%. The Fund is not limited as to the percentage of its
assets that may be invested in permissible investments, including derivatives,
except as otherwise explicitly provided in this prospectus or the SAI. For
descriptions of these and other types of derivative instruments, see the
Appendix to this prospectus and the SAI.
Securities and other instruments that are illiquid: A security or other
instrument is illiquid if it cannot be sold quickly in the normal course of
business. Some investments cannot be resold to the U.S. public because of their
terms or government regulations. Securities and instruments, however, can be
sold in private sales, and many may be sold to other institutions and qualified
buyers or on foreign markets. The portfolio manager will follow guidelines
established by the board and consider relevant factors such as the nature of the
security and the number of likely buyers when determining whether a security is
illiquid. No more than 10% of the Fund's net assets will be held in securities
and other instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the top two grades
or the equivalent are used to meet daily cash needs and at various times to hold
assets until better investment opportunities arise. Generally, less than 25% of
the Fund's total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that amount for a
limited period of time.
Precious metals companies: A company will be considered engaged in exploration,
mining, processing or distribution of gold and other precious metals if, as
determined by the investment manager, at least 50% of the company's assets,
revenues or operating earnings are related to or derived from precious metals
activities.
The investment policies described above, except for the concentration policy,
may be changed by the board.
Lending portfolio securities: The Fund may lend its securities to earn income so
long as borrowers provide collateral equal to the market value of the loans. The
risks are that borrowers will not provide collateral when required or return
securities when due. Unless a majority of the outstanding voting securities
approve otherwise, loans may not exceed 30% of the Fund's net assets.
<PAGE>
PAGE 13
Alternative investment option
In the future, the board of the Fund may determine for operating efficiencies to
use a master/feeder structure. Under that structure, the Fund's assets would be
invested in an investment company with the same goal as the Fund, rather than
invested directly in a portfolio of securities.
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for the sales
charge for Class A. It is the NAV for Class B and Class Y.
The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business, normally 3 p.m. Central time, each
business day (any day the New York Stock Exchange is open).
To establish the net assets, all securities are valued as of the close of each
business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis
o Securities maturing in 60 days or less are valued at amortized
cost
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class B and Class
Y. The primary differences among the classes are in the sales charge structures
and in their ongoing expenses. These differences are summarized in the table
below. You may choose the class that best suits your circumstances and
objectives.
<TABLE>
<CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
</TABLE>
<PAGE>
PAGE 14
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
Conversion of Class B shares to Class A shares - Eight calendar years after
Class B shares are purchased, Class B shares will convert to Class A shares and
will no longer be subject to a distribution fee. The conversion will be on the
basis of relative net asset values of the two classes, without the imposition of
any sales charge. Class B shares purchased through reinvested dividends and
distributions will convert to Class A shares in the same pro rata portion as
other Class B shares.
Considerations in determining whether to purchase Class A or Class B shares -
You should consider the information below in determining whether to purchase
Class A or Class B shares. The distribution fee (included in "Ongoing expenses")
and sales charges are structured so that you will have approximately the same
total return at the end of eight years regardless of which class you chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds that are subject to a sales charge total
$250,000 or more, you are better off paying the reduced sales charge in Class A
than paying the higher fees in Class B. If you qualify for a waiver of the sales
charge, you should purchase Class A shares.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
<PAGE>
PAGE 15
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and you
than Class B shares. will no longer be
subject to higher fees.
You should consider how long you plan to hold your shares and whether the
accumulated higher fees and CDSC on Class B shares prior to conversion would be
less than the initial sales charge on Class A shares. Also consider to what
extent the difference would be offset by the lower expenses on Class A shares.
To help you in this analysis, the example in the "Sales charge and Fund
expenses" section of the prospectus illustrates the charges applicable to each
class of shares.
Class Y shares - Class Y shares are offered to certain institutional investors.
Class Y shares are sold without a front-end sales charge or a CDSC and are not
subject to either a service fee or a distribution fee. The following investors
are eligible to purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable organizations
that meet the definition in Section 501(c)(3) of the Internal Revenue
Code.* These must have at least $10 million invested in funds of the IDS
MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants are
included in a qualified employee benefit plan described above.
* Eligibility must be determined in advance by American Express Financial
Advisors. To do so, contact your financial advisor.
How to purchase shares
If you're investing in this Fund for the first time, you'll need to set up an
account. Your financial advisor will help you fill out and submit an
application. Once your account is set up, you can choose among several
convenient ways to invest.
<PAGE>
PAGE 16
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
When you purchase shares for a new or existing account, the price you pay per
share is determined at the close of business on the day your investment is
received and accepted at the Minneapolis headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be included
in your account that day and to receive that day's share price.
Otherwise, your purchase will be processed the next business day and you
will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC, the Fund
and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any
reason.
o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
Three ways to invest
1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none
Your financial advisor will help you with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
</TABLE>
<PAGE>
PAGE 17
o direct deposit of
Social Security check
o other plan approved by the Fund
<TABLE>
<CAPTION>
3
<S> <C> <C>
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
</TABLE>
*If your account balance falls below $300, you will be asked in writing to bring
it up to $300 or establish a scheduled investment plan. If you don't do so
within 30 days, your shares can be redeemed and the proceeds mailed to you.
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of the same
class of any other publicly offered fund in the IDS MUTUAL FUND GROUP available
in your state. Exchanges into IDS Tax-Free Money Fund must be made from Class A
shares. For complete information, including fees and expenses, read the
prospectus carefully before exchanging into a new fund.
If your exchange request arrives at the Minneapolis headquarters before the
close of business, your shares will be redeemed at the net asset value set for
that day. The proceeds will be used to purchase new fund shares the same day.
Otherwise, your exchange will take place the next business day at that day's net
asset value.
For tax purposes, an exchange represents a redemption and purchase and may
result in a gain or loss. However, you cannot create a tax loss (or reduce a
taxable gain) by exchanging from the Fund within 91 days of your purchase.
For further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request.
When you redeem shares, the amount you receive may be more or less than the
amount you invested. Your shares will be redeemed at net asset value, minus any
applicable sales charge, at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives after the
close of business, the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next business day.
A redemption is a taxable transaction. If your proceeds from your redemption are
more or less than the cost of your shares, you will have a gain or loss, which
can affect your tax liability. Redeeming shares held in an IRA or qualified
retirement account may subject you to certain federal taxes, penalties and
reporting requirements. Consult your tax advisor.
<PAGE>
PAGE 18
Two ways to request an exchange or redemption of shares
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or
redeemed
o your account number(s) (for exchanges,
both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you
want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want
your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Financial o The Fund and AEFC will honor any telephone
Advisors Telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures
800-437-3133 or to confirm that they are. This includes asking
612-671-3800 identifying questions and tape recording calls.
If reasonable procedures are not or followed,
the Fund or AEFC will be liable for any loss
resulting from fraudulent requests.
o Phone exchange and redemption privileges
automatically apply to all accounts except
custodial, corporate or qualified retirement
accounts unless you request these privileges
NOT apply by writing American Express
Shareholder Service. Each registered owner
must sign the request.
o AEFC answers phone requests promptly, but
you may experience delays when call volume
is high. If you are unable to get through,
use mail procedure as an alternative.
o Acting on your instructions, your financial
advisor may conduct telephone transactions
on your behalf.
o Phone privileges may be modified or
discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
Exchange policies:
o You may make up to three exchanges within any 30-day period, with each limited
to $300,000. These limits do not apply to scheduled exchange programs and
certain employee benefit plans or other arrangements through which one
shareholder represents the interests of several. Exceptions may be allowed with
pre-approval of the Fund.
o Exchanges must be made into the same class of shares of the new
fund.
o If your exchange creates a new account, it must satisfy the minimum investment
amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
<PAGE>
PAGE 19
o If your shares are pledged as collateral, the exchange will be delayed until
written approval is obtained from the secured party.
o AEFC and the Fund reserve the right to reject any exchange, limit the amount,
or modify or discontinue the exchange privilege, to prevent abuse or adverse
effects on the Fund and its shareholders. For example, if exchanges are too
numerous or too large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after requesting a
redemption and to use all or part of the proceeds to purchase new shares in the
same account from which you redeemed. If you reinvest in Class A, you will
purchase the new shares at net asset value rather than the offering price on the
date of a new purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take advantage of this
option, send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this option. This
privilege may be limited or withdrawn at any time, and it may have tax
consequences.
o A telephone redemption request will not be allowed within 30 days of a
phoned-in address change.
Important: If you request a redemption of shares you recently purchased by a
check or money order that is not guaranteed, the Fund will wait for your check
to clear. It may take up to 10 days from the date of purchase before a check is
mailed to you. (A check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
Three ways to receive payment when you redeem shares
<TABLE>
<CAPTION>
1
<S> <C>
By regular or express mail o Mailed to the address on record
o Payable to names listed on the account
NOTE: You will be charged a fee if you
request express mail delivery.
2
By wire o Minimum wire redemption: $1,000
o Request that money be wired to your bank
o Bank account must be in the same
ownership as the IDS fund account
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
</TABLE>
3
By scheduled payout plan o Minimum payment: $50
o Contact your financial
advisor or American
Express Shareholder
Service to set up regular
payments to you on a
monthly, bimonthly,
quarterly, semiannual or
annual basis
o Purchasing new shares
while under a payout plan
may be disadvantageous
because of the sales
charges
<PAGE>
PAGE 20
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now,
o the amount of your existing investment in this Fund, if any, and
o the amount you and your primary household group are investing or have in other
funds in the IDS MUTUAL FUND GROUP that carry a sales charge. (The primary
household group consists of accounts in any ownership for spouses or domestic
partners and their unmarried children under 21. Domestic partners are
individuals who maintain a shared primary residence and have joint property or
other insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash Management Fund do not
carry sales charges. However, you may count investments in these funds if you
acquired shares in them by exchanging shares from IDS funds that carry sales
charges.
o IRA purchases or other employee benefit plan purchases made through a payroll
deduction plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be added together
to reduce sales charges for all shares purchased through that plan.
o If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a letter of intent.
<PAGE>
PAGE 21
For more details, see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired board members, officers or employees of the Fund or AEFC or
its subsidiaries, their spouses and unmarried children under 21.
o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.
o Investors who have a business relationship with a newly associated financial
advisor who joined AEFA from another investment firm provided that (1) the
purchase is made within six months of the advisor's appointment date with AEFA,
(2) the purchase is made with proceeds of a redemption of shares that were
sponsored by the financial advisor's previous broker dealer and, (3) the
proceeds must be the result of a redemption of an equal or greater value where a
sales load was previously assessed.
o Qualified employee benefit plans* using a daily transfer recordkeeping system
offering participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial sales charge is
waived may be subject to a deferred sales charge of up to 4% on certain
redemptions. For more information, see the SAI.)
o Shareholders who have at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP. If the investment is redeemed in the first year after purchase, a
CDSC of 1% will be charged on the redemption.
o Purchases made within 30 days after a redemption of shares (up to the amount
redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred sales
charge or
- in a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment servicing
relationship.
Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from the same class
of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through American Express Strategic Portfolio Service (total
amount of all investments made in the Strategic Portfolio Service must be at
least $50,000).
<PAGE>
PAGE 22
o Purchases made under the University of Texas System ORP.
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount of the
redemption and the number of calendar years, including the year of purchase,
between purchase and redemption. The following table shows the declining scale
of percentages that apply to redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value of your
investment in Class B shares below the total dollar amount of all your purchase
payments during the last six years (including the year in which your redemption
is made), the CDSC is based on the lower of the redeemed purchase payments or
market value.
The following example illustrates how the CDSC is applied. Assume you had
invested $10,000 in Class B shares and that your investment had appreciated in
value to $12,000 after 15 months, including reinvested dividend and capital gain
distributions. You could redeem any amount up to $2,000 without paying a CDSC
($12,000 current value less $10,000 purchase amount). If you redeemed $2,500,
the CDSC would apply only to the $500 that represented part of your original
purchase price. The CDSC rate would be 4% because a redemption after 15 months
would take place during the second year after purchase.
Because the CDSC is imposed only on redemptions that reduce the total of your
purchase payments, you never have to pay a CDSC on any amount you redeem that
represents appreciation in the value of your shares, income earned by your
shares or capital gains. In addition, when determining the rate of any CDSC,
your redemption will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been redeemed, the next
amount redeemed is the next oldest purchase payment. By redeeming the oldest
purchase payments first, lower CDSCs are imposed than would otherwise be the
case.
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
<PAGE>
PAGE 23
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified
plans for which American Express Trust Company acts as custodian, such as Keogh
plans, tax-sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part of a
transfer to an IRA or qualified plan in a product distributed by
American Express Financial Advisors, or a custodian-to-custodian
transfer to a product not distributed by American Express Financial
Advisors, the CDSC will not be waived), or
- redeeming under an approved substantially equal periodic payment
arrangement.
For investors in Class A shares who have over $1 million invested in one year,
the 1% CDSC on redemption of those shares will be waived in the same
circumstances described for Class B.
Special shareholder services
Services
To help you track and evaluate the performance of your investments, AEFC
provides these services:
Quarterly statements listing all of your holdings and transactions during the
previous three months.
Yearly tax statements featuring average-cost-basis reporting of capital gains or
losses if you redeem your shares along with distribution information which
simplifies tax calculations.
A personalized mutual fund progress report detailing returns on your initial
investment and cash-flow activity in your account. It calculates a total return
to reflect your individual history in owning Fund shares. This report is
available from your financial advisor.
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
<PAGE>
PAGE 24
current Fund prices and performance, account values and recent
account transactions
800-862-7919
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net income and any
net gains realized on its investments. The Fund distributes dividends and
capital gain distributions to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes. Dividend and capital gain
distributions will have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is distributed to
you by the end of the calendar year as dividends. Short-term capital gains are
included in net investment income. Long-term capital gains are realized whenever
a security held for more than one year is sold for a higher price than was paid
for it.
The Fund will offset any net realized capital gains by any available capital
loss carryovers. Net realized long-term capital gains, if any, are distributed
at the end of the calendar year as capital gain distributions. Before they are
distributed, both net investment income and net long-term capital gains are
included in the value of each share. After they are distributed, the value of
each share drops by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings will not change.)
Dividends for each class will be calculated at the same time, in the same manner
and will be the same amount prior to deduction of expenses. Expenses
attributable solely to a class of shares will be paid exclusively by that class.
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
o you request the Fund in writing or by phone to pay
distributions to you in cash, or
o you direct the Fund to invest your distributions in the same class of
another publicly available IDS fund for which you've previously opened
an account.
The reinvestment price is the net asset value at close of business on the day
the distribution is paid. (Your quarterly statement will confirm the amount
invested and the number of shares purchased.)
If you choose cash distributions, you will receive only those declared after
your request has been processed.
<PAGE>
PAGE 25
If the U.S. Postal Service cannot deliver the checks for the cash distributions,
we will reinvest the checks into your account at the then-current net asset
value and make future distributions in the form of additional shares.
Taxes
Distributions are subject to federal income tax and also may be subject to state
and local taxes. Distributions are taxable in the year the Fund declares them
regardless of whether you take them in cash or reinvest them.
Income received by the Fund may be subject to foreign tax and withholding. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. You may be entitled to claim foreign tax credits or deductions subject to
provisions and limitations of the Internal Revenue Code. The Fund will notify
you if such credit or deduction is available.
Each January, you will receive a tax statement showing the kinds and total
amount of all distributions you received during the previous year. You must
report distributions on your tax returns, even if they are reinvested in
additional shares.
Buying a dividend creates a tax liability. This means buying shares shortly
before a net investment income or a capital gain distribution. You pay the full
pre-distribution price for the shares, then receive a portion of your investment
back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain. If you sell
shares for more than their cost, the difference is a capital gain. Your gain may
be either short term (for shares held for one year or less) or long term (for
shares held for more than one year).
Your Taxpayer Identification Number (TIN) is important. As with any financial
account you open, you must list your current and correct Taxpayer Identification
Number (TIN) -- either your Social Security or Employer Identification number.
The TIN must be certified under penalties of perjury on your application when
you open an account at AEFC.
If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of taxable distributions and proceeds from
certain sales and exchanges. You also could be subject to further penalties,
such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.
<PAGE>
PAGE 26
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
Important: This information is a brief and selective summary of certain federal
tax rules that apply to this Fund. Tax matters are highly individual and
complex, and you should consult a qualified tax advisor about your personal
situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. The Fund issues shares in three classes -
Class A, Class B and Class Y. Each class has different sales arrangements and
bears different expenses. Each class represents interests in the assets of the
Fund. Par value is one cent per share. Both full and fractional shares can be
issued.
The Fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
<PAGE>
PAGE 27
share you own. Shares of the Fund have cumulative voting rights. Each class has
exclusive voting rights with respect to the provisions of the Fund's
distribution plan that pertain to a particular class and other matters for which
separate class voting is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the board members
may call meetings at their discretion, or on demand by holders of 10% or more of
the outstanding shares, to elect or remove board members.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund and chooses
its officers. Its officers are responsible for day-to-day business decisions
based on policies set by the board. The board has named an executive committee
that has authority to act on its behalf between meetings. Board members and
officers serve 47 IDS and IDS Life funds and 15 Master Trust portfolios, except
for William H. Dudley, who does not serve the nine IDS Life funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President and director, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).
Independent board members
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs, The Reader's Digest
Association, Inc.
Alan K. Simpson
Former United States senator for Wyoming.
<PAGE>
PAGE 28
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the Fund.
Other officer
Leslie L. Ogg
Vice president, treasurer and corporate secretary of Board Services Corporation.
Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
Investment manager
The Fund pays AEFC for managing its assets. Under its Investment Management
Services Agreement, AEFC is paid a fee for these services based on the average
daily net assets of the Fund, as follows:
Assets Annual rate
(billions) at each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675
This fee may be increased or decreased by a performance adjustment based on a
comparison of performance of Class A shares of the Fund
<PAGE>
PAGE 29
to the Lipper Gold Fund Index. The maximum adjustment is 0.12% of
the Fund's average daily net assets on an annual basis.
For the fiscal year ended March 31, 1997, the Fund paid AEFC a total investment
management fee of 0.90% of its average daily net assets. Under the Agreement,
the Fund also pays taxes, brokerage commissions and nonadvisory expenses.
Administrator and transfer agent
The Fund pays AEFC for shareholder accounting and transfer agent services under
two agreements. The first agreement, the Administrative Services Agreement, has
a declining annual rate beginning at 0.06% and decreasing to 0.035% as assets
increase. The second agreement, the Transfer Agency Agreement, has an annual fee
per shareholder account as follows:
o Class A $15
o Class B $16
o Class Y $15
Distributor
The Fund has an exclusive distribution agreement with American Express Financial
Advisors, a wholly-owned subsidiary of AEFC. Financial advisors representing
American Express Financial Advisors provide information to investors about
individual investment programs, the Fund and its operations, new account
applications, and exchange and redemption requests. The cost of these services
is paid partially by the Fund's sales charges.
Persons who buy Class A shares pay a sales charge at the time of purchase.
Persons who buy Class B shares are subject to a contingent deferred sales charge
on a redemption in the first six years and pay an asset-based sales charge (also
known as a 12b-1 plan) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based sales charge.
Financial advisors may receive different compensation for selling Class A, Class
B and Class Y shares. Portions of the sales charge also may be paid to
securities dealers who have sold the Fund's shares or to banks and other
financial institutions. The amounts of those payments range from 0.8% to 4% of
the Fund's offering price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares.
Total expenses paid by the Fund's Class A shares for the fiscal year ended March
31, 1997, were 1.50% of its average daily net assets. Expenses for Class B and
Class Y were 2.27% and 1.27%, respectively.
<PAGE>
PAGE 30
The expense ratio of the Fund may be higher than that of a fund investing
exclusively in domestic securities because the expenses of the Fund, such as the
investment management fee and the custodial costs, are higher. The expense ratio
generally is not higher, however, than that of funds with similar investment
goals and policies.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also insurance,
annuities, investment certificates and a broad range of financial management
services.
Besides managing investments for all funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on March
31, 1997 were more than $149 billion.
American Express Financial Advisors serves individuals and businesses through
its nationwide network of more than 178 offices and more than 8,426 advisors.
Other AEFC subsidiaries provide investment management and related services for
pension, profit sharing, employee savings and endowment funds of businesses and
institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is a
wholly-owned subsidiary of American Express Company (American Express), a
financial services company with headquarters at American Express Tower, World
Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates of AEFC.
<PAGE>
PAGE 31
Appendix
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the Fund may use.
At various times the Fund may use some or all of these instruments and is not
limited to these instruments. It may use other similar types of instruments if
they are consistent with the Fund's investment goal and policies. For more
information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or sell an
instrument at a set price during a certain period of time. A futures contract is
an agreement to buy or sell an instrument for a set price on a future date. The
Fund may buy and sell options and futures contracts to manage its exposure to
changing interest rates, security prices and currency exchange rates. Options
and futures may be used to hedge the Fund's investments against price
fluctuations or to increase market exposure.
Indexed securities. The value of indexed securities is linked to currencies,
interest rates, commodities, indexes or other financial indicators. Most indexed
securities are short- to intermediate- term fixed income securities whose values
at maturity or interest rates rise or fall according to the change in one or
more specified underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Structured products. Structured products are over-the-counter financial
instruments created specifically to meet the needs of one or a small number of
investors. The instrument may consist of a warrant, an option or a forward
contract embedded in a note or any of a wide variety of debt, equity and/or
currency combinations. Risks of structured products include the inability to
close such instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 32
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS PRECIOUS METALS FUND
May 30, 1997
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus and the financial statements contained in the
Annual Report which may be obtained from your American Express financial advisor
or by writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534.
This SAI is dated May 30, 1997, and it is to be used with the prospectus dated
May 30, 1997, and the Annual Report for the fiscal year ended March 31, 1997.
<PAGE>
PAGE 33
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p. 3
Security Transactions.........................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporationp.......................p. 8
Performance Information.......................................p. 9
Valuing Fund Shares...........................................p. 10
Investing in the Fund.........................................p. 11
Redeeming Shares..............................................p. 15
Pay-out Plans.................................................p. 16
Taxes.........................................................p. 17
Agreements....................................................p. 19
Organizational Information....................................p. 23
Board Members and Officers....................................p. 23
Compensation for Board Members................................p. 26
Independent Auditors..........................................p. 27
Financial Statements..............................See Annual Report
Prospectus....................................................p. 27
Appendix A: Foreign Currency Transactions....................p. 28
Appendix B: Options and Stock Index Futures Contracts........p. 33
Appendix C: Mortgage-Backed Securities.......................p. 40
Appendix D: Dollar-Cost Averaging............................p. 41
<PAGE>
PAGE 34
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies of the Fund and may be changed only
with shareholder approval. Unless holders of a majority of the outstanding
voting securities agree to make the change the Fund will not:
'Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund may be deemed to be an underwriter when it purchases
securities directly from the issuer and later resells them.
'Borrow money or property, except as a temporary measure for extraordinary or
emergency purposes, in an amount not exceeding one-third of the market value of
its total assets (including borrowings) less liabilities (other than borrowings)
immediately after the borrowing. The Fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the Fund's total
assets.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one company,
government or political subdivision thereof, except the limitation will not
apply to investments in securities issued by the U.S. government, its agencies
or instrumentalities, and except that up to 25% of the Fund's total assets may
be invested without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership of securities
or other instruments, except this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or securities of companies
engaged in the real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited partnerships.
'The Fund may purchase gold, silver or other precious metals, strategic metals
or other metals occurring naturally with such metals. The Fund will not buy or
sell physical commodities unless acquired as a result of ownership of securities
or other instruments, except this shall not prevent the Fund from buying or
selling options and future contracts or from investing in securities or other
instruments backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express Financial Corporation
(AEFC), to the board members and officers of AEFC or to its own board members
and officers.
'Purchase securities of an issuer if the board members and officers of the Fund
and of AEFC hold more than a certain percentage of the issuer's outstanding
securities. If the holdings of all board members and officers of the Fund and of
AEFC who own more than 0.5%
<PAGE>
PAGE 35
of an issuer's securities are added together, and if in total they own more than
5%, the Fund will not purchase securities of that issuer.
'Lend Fund securities in excess of 30% of its net assets. The current policy of
the Fund's board is to make these loans, either long- or short-term, to
broker-dealers. In making loans, the Fund receives the market price in cash,
U.S. government securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Fund will get additional collateral on a
daily basis. The risks are that the borrower may not provide additional
collateral when required or return the securities when due. During the existence
of the loan, the Fund receives cash payments equivalent to all interest or other
distributions paid on the loaned securities. A loan will not be made unless the
investment manager believes the opportunity for additional income outweighs the
risks.
'Issue senior securities, except to the extent that borrowing from banks or the
use of options or futures contracts (as discussed elsewhere in the Fund's
prospectus and SAI) may be deemed to constitute the issuance of a senior
security.
'Invest less than 25% of its total assets in the precious metals industry, based
on current market value at the time of purchase, unless market conditions
temporarily require a defensive investment strategy.
Unless changed by the board, the Fund will not:
'Buy on margin or sell short, but it may make margin payments in connection with
transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the Fund were ever
to do so, valuation of the pledged or mortgaged assets would be based on market
values. For purposes of this policy, collateral arrangements for margin deposits
on futures contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of companies, domestic or
foreign, including any predecessors, that have a record of less than three years
continuous operations.
'Invest more than 10% of its assets in securities of investment companies. The
Fund has no current intention to invest in securities of other investment
companies.
'Invest in a company to control or manage it.
'Invest directly in exploration or development programs, such as oil, gas or
mineral leases, except that the Fund will invest in securities of companies
engaged in exploration or other development of precious metals.
'Invest more than 5% of its net assets in warrants.
<PAGE>
PAGE 36
'Invest more than 10% of its net assets in securities and other instruments that
are illiquid. For purposes of this policy illiquid securities include some
privately placed securities, public securities and Rule 144A securities that for
one reason or another may no longer have a readily available market, repurchase
agreements with maturities greater than seven days, non-negotiable fixed-time
deposits and over-the-counter options.
'Invest in a company if the Fund's investments would result in the total
holdings of all funds in the IDS MUTUAL FUND GROUP being in excess of 15% of
that company's issued shares.
In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S.
government or its agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to purchase or
sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of 1933,
the investment manager, under guidelines established by the board, will evaluate
relevant factors such as the issuer and the size and nature of its commercial
paper programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and settlement procedures
for the paper.
The Fund may make contracts to purchase securities for a fixed price at a future
date beyond normal settlement time (when-issued securities or forward
commitments). Under normal market conditions, the Fund does not intend to commit
more than 5% of its total assets to these practices. The Fund does not pay for
the securities or receive dividends or interest on them until the contractual
settlement date. The Fund will designate cash or liquid high-grade debt
securities at least equal in value to its commitments to purchase the
securities. When-issued securities or forward commitments are subject to market
fluctuations and they may affect the Fund's total assets the same as owned
securities.
In making direct investments in metals, the Fund may buy from U.S. or foreign
banks, exchanges regulated by U.S. securities or commodities agencies, U.S.
securities firms that are reporting companies pursuant to Section 12 of the
Securities Exchange Act of 1934, or affiliates thereof. The Fund normally will
not take possession of the metals, but instead will obtain receipts or
certificates representing ownership. In the event the Fund does take possession,
the metals would be delivered to and held by a non-affiliated sub-custodian in a
segregated account. When it purchases metals, either by purchasing receipts or
certificates or by having a custodian physically hold such metals, the Fund will
pay for the metals only upon actual receipt. Although the Fund would incur
storage, shipping and other costs by owning metals, these costs would be
minimized by the use of receipts of certificates.
<PAGE>
PAGE 37
The Fund may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the Fund may use are short-term
investments in repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with U.S. banks, in high-grade notes and
obligations (rated Aaa and Aa by Moody's Investors Service (Moody's) or AAA and
AA by Standard & Poor's Corporation (S&P) or the equivalent) of U.S. banks
(including their branches located outside of the United States and U.S. branches
of foreign banks) and corporations. A risk of a repurchase agreement is that if
the seller seeks the protection of the bankruptcy laws, the Fund's ability to
liquidate the security involved could be impaired.
The Fund may also maintain a portion of its assets in the form of cash in the
currencies of countries other than the U.S., Canada and the United Kingdom. This
could occur because of a distribution from a foreign issuer, or it may be done
in connection with the purchase or sale of foreign securities.
Notwithstanding any of the Fund's other investment policies, the Fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies and restrictions as the Fund for the
purpose of having those assets managed as part of a combined pool.
For a discussion about foreign currency transactions, see Appendix A. For a
discussion on options and stock index futures contracts, see Appendix B. For a
discussion on mortgage-backed securities, see Appendix C.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to determine,
consistent with the Fund's investment goal and policies, which securities will
be purchased, held or sold. In determining where the buy and sell orders are to
be placed, AEFC has been directed to use its best efforts to obtain the best
available price and the most favorable execution except where otherwise
authorized by the board. In selecting broker-dealers to execute transactions,
AEFC may consider the price of the security, including commission or mark-up,
the size and difficulty of the order, the reliability, integrity, financial
soundness and general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services provided by the
broker.
AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund in the IDS MUTUAL FUND
GROUP. AEFC carefully monitors compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing AEFC to do so to the extent authorized by
law, if AEFC determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage or research
<PAGE>
PAGE 38
services provided by a broker or dealer, viewed either in the light of that
transaction or AEFC's overall responsibilities to the funds in the IDS MUTUAL
FUND GROUP and other funds for which it acts as investment advisor.
Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making
purposes, which include the research, portfolio management and trading functions
and other services to the extent permitted under an interpretation by the
Securities and Exchange Commission (SEC).
When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research services it has
provided. The second procedure permits AEFC, in order to obtain research, to
direct an order on an agency basis to buy or sell a security traded in the
over-the-counter market to a firm that does not make a market in that security.
The commission paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the amount another
broker might have charged. AEFC has advised the Fund it is necessary to do
business with a number of brokerage firms on a continuing basis to obtain such
services as the handling of large orders, the willingness of a broker to risk
its own money by taking a position in a security, and the specialized handling
of a particular group of securities that only certain brokers may be able to
offer. As a result of this arrangement, some portfolio transactions may not be
effected at the lowest commission, but AEFC believes it may obtain better
overall execution. AEFC has assured the Fund that under all three procedures the
amount of commission paid will be reasonable and competitive in relation to the
value of the brokerage services performed or research provided.
All other transactions shall be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given by such person to those firms offering research
services. Such services may be used by AEFC in providing advice to all the funds
in the IDS
<PAGE>
PAGE 39
MUTUAL FUND GROUP even though it is not possible to relate the benefits to any
particular fund or account.
Each investment decision made for the Fund is made independently from any
decision made for another fund in the IDS MUTUAL FUND GROUP or other account
advised by AEFC or any AEFC subsidiary. When the Fund buys or sells the same
security as another Fund or account, AEFC carries out the purchase or sale in a
way the Fund agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the Fund, the Fund
hopes to gain an overall advantage in execution. AEFC has assured the fund it
will continue to seek ways to reduce brokerage costs.
On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.
The Fund paid total brokerage commissions of $308,973 for the fiscal year ended
March 31, 1997, $199,926 for fiscal year 1996, and $115,157 for fiscal year
1995.
In fiscal year ended March 31, 1997, transactions amounting to $35,754,000, on
which $117,828 in commissions were imputed or paid, were specifically directed
to firms in exchange for research services.
As of the fiscal year ended March 31, 1997, the Fund held no securities of its
regular brokers or dealers or of the parents of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which AEFC is a
wholly owned subsidiary) may engage in brokerage and other securities
transactions on behalf of the Fund according to procedures adopted by the Fund's
board and to the extent consistent with applicable provisions of the federal
securities laws. AEFC will use an American Express affiliate only if (i) AEFC
determines that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers performing similar
brokerage and other services for the Fund and (ii) the affiliate charges the
Fund commission rates consistent with those the affiliate charges comparable
unaffiliated customers in similar transactions and if such use is consistent
with terms of the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
<PAGE>
PAGE 40
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
Information about brokerage commissions paid by the Fund for the last three
fiscal years to brokers affiliated with AEFC is contained in the following
table:
For the Fiscal Year Ended March 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------- ----------- -------
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
- ------ ----------- ------ ----------- -------------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
American
Enterprise
Investment
Services Inc. (1) $3,400 1.10% 2.00% $2,225.00 $600
</TABLE>
(1) Wholly owned subsidiary of AEFC.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return quotations used by the Fund are based on
standardized methods of computing performance as required by the SEC. An
explanation of the methods used by the Fund to compute performance follows
below.
Average annual total return
The Fund may calculate average annual total return for a class for certain
periods by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T) n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment, made
at the beginning of a period, at the end of the period (or
fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the Fund
over a specified period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
<PAGE>
PAGE 41
ERV = ending redeemable value of a hypothetical $1,000 payment, made
at the beginning of a period, at the end of the period (or
fractional portion thereof)
In its sales material and other communications, the Fund may quote, compare or
refer to rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial
Services Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
VALUING FUND SHARES
The value of an individual share for each class is determined by using the net
asset value before shareholder transactions for the day. On April 1, 1997, the
first business day following the end of the fiscal year, the computation looked
like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
<S> <C> <C> <C>
Class A $84,335,233 divided by 7,971,194 equals $10.58
Class B 8,348,029 801,924 10.41
Class Y 1,370 129 10.62
</TABLE>
In determining net assets before shareholder transactions, the Fund's securities
are valued as follows as of the close of business of the New York Stock Exchange
(the Exchange):
'Securities, except bonds other than convertibles, traded on a securities
exchange for which a last-quoted sales price is readily available are valued at
the last-quoted sales price on the exchange where such security is primarily
traded.
'Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first to the bid and asked prices on the exchange where the
security is primarily traded and, if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities traded
over-the-counter but not included in the NASDAQ National Market System are
valued at the mean of the closing bid and asked prices.
'Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.
<PAGE>
PAGE 42
'Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the current rate of exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange that will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the board.
'Short-term securities maturing more than 60 days from the valuation date are
valued at the readily available market price or approximate market value based
on current interest rates. Short- term securities maturing in 60 days or less
that originally had maturities of more than 60 days at acquisition date are
valued at amortized cost using the market value on the 61st day before maturity.
Short-term securities maturing in 60 days or less at acquisition date are valued
at amortized cost. Amortized cost is an approximation of market value determined
by systematically increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium, so that the
carrying value is equal to maturity value on the maturity date.
'Securities without a readily available market price, bonds other than
convertibles and other assets including investments in metals are valued at fair
value as determined in good faith by the board. The board is responsible for
selecting methods it believes provide fair value. When possible, bonds are
valued by a pricing service independent from the Fund. If a valuation of a bond
is not available from a pricing service, the bond will be valued by a dealer
knowledgeable about the bond if such a dealer is available.
The Exchange, AEFC and the Fund will be closed on the following
holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the Fund are sold at the public offering price determined at the close
of business on the day an application is accepted. The public offering price is
the net asset value of one share plus a sales charge, if applicable. For Class B
and Class Y, there is no initial sales charge so the public offering price is
the same as the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made April 1, 1997, was determined by dividing
the net asset value of one share, $10.58, by 0.95 (1.00-0.05 for a maximum 5%
sales charge) for a public offering price of $11.14. The sales charge is paid to
American Express Financial Advisors by the person buying the shares.
<PAGE>
PAGE 43
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.
For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.
In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.
The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
The initial sales charge is waived for certain qualified plans that meet the
requirements described in the prospectus. Participants in these qualified plans
may be subject to a deferred sales charge on certain redemptions. The deferred
sales charge on certain
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PAGE 44
redemptions will be waived if the redemption is a result of a participant's
death, disability, retirement, attaining age 59 1/2, loans or hardship
withdrawals. The deferred sales charge varies depending on the number of
participants in the qualified plan and total plan assets as follows:
Deferred Sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
Less than $1 million 4% 0%
$1 million or more 0% 0%
- ---------------------------------------------------------
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in the Fund. The
amount of all prior investments plus any new purchase is referred to as your
"total amount invested." For example, suppose you have made an investment of
$20,000 and later decide to invest $40,000 more. Your total amount invested
would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for
the lower 4.5% sales charge that applies to investments of more than $50,000 and
up to $100,000.
The total amount invested includes any shares held in the Fund in the name of a
member of your primary household group. (The primary household group consists of
accounts in any ownership for spouses or domestic partners and their unmarried
children under 21. Domestic partners are individuals who maintain a shared
primary residence and have joint property or other insurable interests.) For
instance, if your spouse already has invested $20,000 and you want to invest
$40,000, your total amount invested will be $60,000 and therefore you will pay
the lower charge of 4.5% on $10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses and unmarried
children under 21 of deceased board members, officers or employees of the Fund
or AEFC or its subsidiaries and deceased advisors.
The total amount invested also includes any investment you or your immediate
family already have in the other publicly offered funds in the IDS MUTUAL FUND
GROUP where the investment is subject to a sales charge. For example, suppose
you already have an investment of $30,000 in another IDS fund. If you invest
$40,000 more in this Fund, your total amount invested in the funds will be
$70,000 and therefore $20,000 of your $40,000 investment will incur a 4.5% sales
charge.
Finally, Individual Retirement Account (IRA) purchases, or other employee
benefit plan purchases made through a payroll deduction plan or through a plan
sponsored by an employer, association of
<PAGE>
PAGE 45
employers, employee organization or other similar entity, may be added together
to reduce sales charges for shares purchased through that plan.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a LOI. The agreement can start at any
time and will remain in effect for 13 months. Your investment will be charged
normal sales charges until you have invested $1 million. At that time, your
account will be credited with the sales charges previously paid. Class A
investments made prior to signing an LOI may be used to reach the $1 million
total, excluding Cash Management Fund and Tax-Free Money Fund. However, we will
not adjust for sales charges on investments made prior to the signing of the
LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you'll just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an investment of
$100,000 at that time. You pay the normal 5% sales charge on the first $50,000
and 4.5% sales charge on the next $50,000 of this investment. Let's say you make
a second investment of $900,000 (bringing the total up to $1 million) one month
before the 13-month period is up. On the date that you bring your total to $1
million, AEFC makes an adjustment to your account. The adjustment is made by
crediting your account with additional shares, in an amount equivalent to the
sales charge previously paid.
Systematic Investment Programs
After you make your initial investment of $2,000 or more, you can arrange to
make additional payments of $100 or more on a regular basis. These minimums do
not apply to all systematic investment programs. You decide how often to make
payments - monthly, quarterly, or semiannually. You are not obligated to make
any payments. You can omit payments or discontinue the investment program
altogether. The Fund also can change the program or end it at any time. If there
is no obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have a goal to
work for.
How does this work? Your regular investment amount will purchase more shares
when the net asset value per share decreases, and fewer shares when the net
asset value per share increases. Each purchase is a separate transaction. After
each purchase your new shares will be added to your account. Shares bought
through these programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is not an option
or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
<PAGE>
PAGE 46
decide to discontinue the program and redeem your shares when their net asset
value is less than what you paid for them, you will incur a loss.
For a discussion on dollar-cost averaging, see Appendix D.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;
Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);
Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The Fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you should read its prospectus. You will receive a confirmation
that the automatic directed dividend service has been set up for your account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an explanation of
redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net asset value,
stop accepting payments for purchase of shares or suspend the duty of the Fund
to redeem shares for more than seven days. Such emergency situations would occur
if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
<PAGE>
PAGE 47
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the fair
value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of 1940 (the 1940
Act), as amended, declares a period of emergency to exist.
Should the Fund stop selling shares, the board may make a deduction from the
value of the assets held by the Fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to lesser of $250,000 or 1% of the net assets of
the Fund at the beginning of the period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the right to make
these payments in whole or in part in securities or other assets in case of an
emergency, or if the payment of a redemption in cash would be detrimental to the
existing shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set forth in the
prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.
Applications for a systematic investment in a class of the Fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.
To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/MN) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
<PAGE>
PAGE 48
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice
is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves the right to
change or stop any pay-out plan and to stop making such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.
TAXES
If you buy shares in the Fund and then exchange into another fund, it is
considered a sale and subsequent purchase of shares. Under the tax laws, if this
exchange is done within 91 days, any sales charge waived on Class A shares on a
subsequent purchase of shares applies to the new shares acquired in the
exchange. Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91 days.
Retirement Accounts
If you have a nonqualified investment in the Fund and you wish to move part or
all of those shares to an IRA or qualified retirement
<PAGE>
PAGE 49
account in the Fund, you can do so without paying a sales charge. However, this
type of exchange is considered a sale of shares and may result in a gain or loss
for tax purposes. In addition, this type of exchange may result in an excess
contribution under IRA or qualified plan regulations if the amount exchanged
plus the amount of the initial sales charge applied to the amount exchanged
exceeds annual contribution limitations. For example: If you were to exchange
$2,000 in Class A shares from a nonqualified account to an IRA without
considering the 5% ($100) initial sales charge applicable to that $2,000, you
may be deemed to have exceeded current IRA annual contribution limitations. You
should consult your tax advisor for further details about this complex subject.
Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend that is
attributable to dividends the Fund received from domestic (U.S.) securities. For
the fiscal year ended March 31, 1997, none of the Fund's net investment income
dividends qualified for the corporate deduction.
Capital gain distributions received by individual and corporate shareholders, if
any, should be treated as long-term capital gains regardless of how long they
owned their shares. Short-term capital gains earned by the Fund are paid to
shareholders as part of their ordinary income dividend and are taxable.
Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.
By making investments directly in gold, silver or other metals, the Fund may
risk failing to qualify as a regulated investment company under the Internal
Revenue Code, as amended (the Code). This would occur if the Fund either (a)
derived 10% or more of its gross income (as defined in the Code, which
disregards losses for this purpose) from sources other than dividends, interest
or payments with respect to securities loans and gains from the sale of stock or
securities, or from other sources that would include sales or other dispositions
of metal investments, or (b) held more than 50% of its total net assets in the
form of such investments or in securities not meeting certain tests. The primary
effects of losing this tax status would be that the Fund would owe taxes on its
net income, and the shareholders, if they received a dividend, might receive a
return of capital that would reduce the basis of their shares of the Fund.
Accordingly, the Fund will endeavor to qualify as a regulated investment
company, although there can be no assurance the Fund will qualify in every year.
Furthermore, the Fund may be required to make less than optimal investment
decisions, foregoing the opportunity to realize gains, if necessary, to permit
the Fund to qualify.
<PAGE>
PAGE 50
The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or 50% or more
of the average value of its assets consists of assets that produce or could
produce passive income.
Income earned by the Fund may give rise to foreign taxes imposed and withheld in
foreign countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% of the Fund's total
assets at the close of its fiscal year consist of securities of foreign
corporations, the Fund will be eligible to file an election with the Internal
Revenue Service under which shareholders of the Fund would be required to
include their pro rata portions of foreign taxes withheld by foreign countries
as gross income in their federal income tax returns. These pro rata portions of
foreign taxes withheld may be taken as a credit or deduction in computing
federal income taxes. If the election is filed, the Fund will report to its
shareholders the amount per share of such foreign taxes withheld and the amount
of foreign tax credit or deduction available for federal income tax purposes.
This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state and local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC. For its
services, AEFC is paid a fee based on the following schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675
On March 31, 1997, the daily rate applied to the Fund's net assets was equal to
0.800% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made.
Before the fee based on the asset charge is paid, it is adjusted
for investment performance. The adjustment, determined monthly,
will be calculated using the percentage point difference between
the change in the net asset value of one Class A share of the Fund
and the change in the Lipper Gold Fund Index (Index). The
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PAGE 51
performance of one Class A share of the Fund is measured by computing the
percentage difference between the opening and closing net asset value of one
Class A share of the Fund, as of the last business day of the period selected
for comparison, adjusted for dividend or capital gain distributions which are
treated as reinvested at the end of the month during which the distribution was
made. The performance of the Index for the same period is established by
measuring the percentage difference between the beginning and ending Index for
the comparison period. The performance is adjusted for dividend or capital gain
distributions (on the securities which comprise the Index), which are treated as
reinvested at the end of the month during which the distribution was made. One
percentage point will be subtracted from the calculation to help assure that
incentive adjustments are attributable to AEFC's management abilities rather
than random fluctuations and the result multiplied by 0.01%. That number will be
multiplied times the Fund's average net assets for the comparison period and
then divided by the number of months in the comparison period to determine the
monthly adjustment.
Where the Fund's Class A share performance exceeds that of the Index, the base
fee will be increased. Where the performance of the Index exceeds the
performance of Class A shares, the base fee will be decreased. The maximum
monthly increase or decrease will be 0.12% of the Fund's average net assets on
an annual basis.
The 12 month comparison period rolls over with each succeeding month, so that it
always equals 12 months, ending with the month for which the performance
adjustment is being computed. The adjustment increased the fee by $110,012 for
the fiscal year ended March 31, 1997.
The management fee is paid monthly. Under the agreement, the total amount paid
was $1,008,365 for the fiscal year ended March 31, 1997, $705,799 for fiscal
year 1996, and $586,618 for fiscal year 1995.
Under the agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending securities of the Fund; and expenses properly payable by the Fund,
approved by the board. Under the agreement, the Fund paid nonadvisory expenses
of $188,674 for the fiscal year ended March 31, 1997, $201,736 for fiscal year
1996, and $232,426 for fiscal year 1995.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:
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PAGE 52
Assets Annual rate
(billions) each asset level
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Next 1.0 0.040
Over 2.0 0.035
On March 31, 1997, the daily rate applied to the Fund's net assets was equal to
0.060% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made. Under the agreement, the Fund paid fees
of $67,376 for the fiscal year ended March 31, 1997.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement governs
AEFC's responsibility for administering and/or performing transfer agent
functions, for acting as service agent in connection with dividend and
distribution functions and for performing shareholder account administration
agent functions in connection with the issuance, exchange and redemption or
repurchase of the Fund's shares. Under the agreement, AEFC will earn a fee from
the Fund determined by multiplying the number of shareholder accounts at the end
of the day by a rate determined for each class per year and dividing by the
number of days in the year. The rate for Class A and Class Y is $15 per year and
for Class B is $16 per year. The fees paid to AEFC may be changed from time to
time upon agreement of the parties without shareholder approval. Under the
agreement, the Fund paid fees of $225,739 for the fiscal year ended March 31,
1997.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to American Express Financial Advisors daily. These charges
amounted to $495,141 for the fiscal year ended March 31, 1997. After paying
commissions to personal financial advisors, and other expenses, the amount
retained was $34,844. The amounts were $183,769 and $23,393 for fiscal year
1996, and $224,151 and $168,205 for fiscal year 1995.
Additional information about commissions and compensation for the fiscal year
ended March 31, 1997, is contained in the following table:
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
AEFC None None $3,400* $52,490**
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PAGE 53
American
Express
Financial
Advisors $495,141 None None None
*For further information see "Brokerage Commissions Paid to Brokers Affiliated
with AEFC." **Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B shares.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors defray the cost
of distribution and servicing, not covered by the sales charges received under
the Distribution Agreement, the Fund and American Express Financial Advisors
entered into a Plan and Agreement of Distribution (Plan). These costs cover
almost all aspects of distributing the Fund's shares except compensation to the
sales force. A substantial portion of the costs are not specifically identified
to any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, American Express
Financial Advisors is paid a fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a majority of the
disinterested board members, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of board members who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's Class B shares or by American Express Financial
Advisors. The Plan (or any agreement related to it) will terminate in the event
of its assignment, as that term is defined in the 1940 Act, as amended. The Plan
may not be amended to increase the amount to be spent for distribution without
shareholder approval, and all material amendments to the Plan must be approved
by a majority of the board members, including a majority of the board members
who are not interested persons of the Fund and who do not have a financial
interest in the operation of the Plan or any agreement related to it. The
selection and nomination of disinterested board members is the responsibility of
the other disinterested board members. No board member who is not an interested
person, has any direct or indirect financial interest in the operation of the
Plan or any related agreement. For the fiscal year ended March 31, 1997, under
the agreement, the Fund paid fees of $52,490.
<PAGE>
PAGE 54
Custodian Agreement
The Fund's securities and cash are held by American Express Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307, through a
custodian agreement. The custodian is permitted to deposit some or all of its
securities in central depository systems as allowed by federal law. For its
services the Fund pays the custodian a maintenance charge and a charge per
transaction in addition to reimbursing the custodian's out-of-pocket expenses.
The custodian has entered into a sub-custodian arrangement with the Morgan
Stanley Trust Company (Morgan Stanley), One Pierrepont Plaza, Eighth Floor,
Brooklyn, NY 11201-2775. As part of this arrangement, securities purchased
outside the United States are maintained in the custody of various foreign
branches of Morgan Stanley or in such other financial institutions as may be
permitted by law and by the Fund's sub-custodian agreement.
Total fees and expenses
The Fund paid total fees and nonadvisory expenses of $1,735,212 for the fiscal
year ended March 31, 1997.
ORGANIZATIONAL INFORMATION
The Fund is a non-diversified, open-end management investment company, as
defined in the Investment Company Act of 1940. It was incorporated on Oct. 5,
1984 in Minnesota. The Fund headquarters are at 901 S. Marquette Ave., Suite
2810, Minneapolis, MN 55402- 3268.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards.) All shares have cumulative voting
rights with respect to the election of board members.
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Former chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
<PAGE>
PAGE 55
Lockheed-Martin, Union Pacific Resources, and FPL Group, Inc.
(holding company for Florida Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer, AEFC.
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC. Previously, senior vice
president, finance and chief financial officer of AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term U.S.
Congressman, U.S. Secretary of Defense and Presidential Counsellor.
<PAGE>
PAGE 56
Director, Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's Digest Funds
and Public Oversight Board (SEC Practice Section, American Institute of
Certified Public Accountants).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President and director, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Former vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former
Assistant Republican Leader, U.S. Senate. Director, PacifiCorp
(electric power).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
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Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
Vice president, treasurer and corporate secretary of Board Services Corporation.
Vice president, general counsel and secretary for the Fund.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of AEFC. Director,
executive vice president and controller of IDS Life Insurance Company. Treasurer
for the Fund.
COMPENSATION FOR FUND BOARD MEMBERS
Members of the board who are not officers of the Fund or AEFC receive an annual
fee of $100, and the chair of the Contracts Committee receives an additional
$90. Board members receive a $50 per day attendance fee for board meetings. The
attendance fee for meetings of the Contracts and Investment Review Committees is
$50; for meetings of the Audit Committee and Personnel Committee $25 and for
traveling from out-of-state $8. Expenses for attending meetings are reimbursed.
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During the fiscal year ended March 31, 1997, the members of the board, for
attending up to 28 meetings, received the following compensation:
Compensation Table
<TABLE>
<CAPTION>
Pension or Estimated Total cash compensation
Aggregate Retirement annual from the IDS MUTUAL FUND
compensation benefits accrued benefit upon GROUP and the Preferred
Board member from the Fund as Fund expenses* retirement Master Trust Group
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $392 $0 $ 0 $41,400
(part of year)
Lynne V. Cheney 660 0 50 86,500
Robert F. Froehlke 825 0 50 95,100
Heinz F. Hutter 734 0 24 89,600
Anne P. Jones 786 0 50 94,400
Donald M. Kendall 61 0 50 7,000
(part of year)
Melvin R. Laird 671 0 50 87,100
Lewis W. Lehr 89 0 49 8,000
(part of year)
Alan K. Simpson 177 0 0 22,600
(part of year)
Edson W. Spencer 866 0 27 98,700
Wheelock Whitney 791 0 50 94,100
C. Angus Wurtele 730 0 50 89,600
</TABLE>
*The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
On March 31, 1997, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares. During the fiscal year ended March 31, 1997,
no board member or officer earned more than $60,000 from this Fund. All board
members and officers as a group earned $5,535 from this Fund.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to shareholders for the
fiscal year ended March 31, 1997, were audited by independent auditors, KPMG
Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis, MN
55402-3900. The independent auditors also provide other accounting and
tax-related services as requested by the Fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the Annual Report to shareholders for the fiscal year ended 1997,
pursuant to Section 30(d) of the Investment Company Act of 1940, as amended, are
hereby incorporated in this SAI by reference. No other portion of the Annual
Report, however, is incorporated by reference.
PROSPECTUS
The prospectus for IDS Precious Metals Fund, dated May 30, 1997, is hereby
incorporated in this SAI by reference.
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APPENDIX A
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies of foreign
countries, and since the Fund may hold cash and cash-equivalent investments in
foreign currencies, the value of the Fund's assets as measured in U.S. dollars
may be affected favorably or unfavorably by changes in currency exchange rates
and exchange control regulations. Also, the Fund may incur costs in connection
with conversions between various currencies.
Spot Rates and Forward Contracts. The Fund conducts its foreign currency
exchange transactions either at the spot (cash) rate prevailing in the foreign
currency exchange market or by entering into forward currency exchange contracts
(forward contracts) as a hedge against fluctuations in future foreign exchange
rates. A forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days from the
contract date, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged at any stage
for trades.
The Fund may enter into forward contracts to settle a security transaction or
handle dividend and interest collection. When the Fund enters into a contract
for the purchase or sale of a security denominated in a foreign currency or has
been notified of a dividend or interest payment, it may desire to lock in the
price of the security or the amount of the payment in dollars. By entering into
a forward contract, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between different
currencies from the date the security is purchased or sold to the date on which
payment is made or received or when the dividend or interest is actually
received.
The Fund also may enter into forward contracts when management of the Fund
believes the currency of a particular foreign country may suffer a substantial
decline against another currency. It may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future value of
such securities in foreign currencies more than likely will change between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movements is extremely difficult and
successful execution of a short-term hedging strategy is highly uncertain. The
Fund will not enter into such forward contracts or maintain a net exposure to
such contracts when consummating the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
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PAGE 60
The Fund will designate cash or securities in an amount equal to the value of
the Fund's total assets committed to consummating forward contracts entered into
under the second circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a daily basis so
that the value of the cash or securities will equal the amount of the Fund's
commitments on such contracts.
At maturity of a forward contract, the Fund may either sell the security and
make delivery of the foreign currency or retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
offsetting contract with the same currency trader obligating it to buy, on the
same maturity date, the same amount of foreign currency.
If the Fund retains the security and engages in an offsetting transaction, the
Fund will incur a gain or a loss (as described below) to the extent there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date the Fund enters
into a forward contract for selling foreign currency and the date it enters into
an offsetting contract for purchasing the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to buy. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to buy exceeds the price of the currency it has agreed to
sell.
It is impossible to forecast what the market value of securities will be at the
expiration of a contract. Accordingly, it may be necessary for the Fund to buy
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver.
The Fund's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Fund's securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some point in time. Although such forward
contracts tend to minimize the risk of loss due to a decline in value of hedged
currency, they tend to limit any potential gain that might result should the
value of such currency increase.
Although the Fund values its assets each business day in terms of U.S. dollars,
it does not intend to convert its foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and shareholders should be aware
of currency conversion costs. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference
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PAGE 61
(spread) between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
Options on Foreign Currencies. The Fund may buy put and write covered call
options on foreign currencies for hedging purposes. For example, a decline in
the dollar value of a foreign currency in which securities are denominated will
reduce the dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions in the
value of securities, the Fund may buy put options on the foreign currency. If
the value of the currency does decline, the Fund will have the right to sell
such currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to the Fund
derived from purchases of foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, the
Fund could sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of advantageous
changes in such rates.
The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, when the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of securities will be fully or
partially offset by the amount of the premium received.
As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to buy or sell
the underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the Fund also may
be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements on exchange rates.
All options written on foreign currencies will be covered. An option written on
foreign currencies is covered if the Fund holds currency sufficient to cover the
option or has an absolute and immediate right to acquire that currency without
additional cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An option writer
could lose amounts substantially in excess of its
<PAGE>
PAGE 62
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in certain foreign countries
for the purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Fund may enter into currency
futures contracts to sell currencies. It also may buy put options and write
covered call options on currency futures. Currency futures contracts are similar
to currency forward contracts, except that they are traded on exchanges (and
have margin requirements) and are standardized as to contract size and delivery
date. Most currency futures call for payment of delivery in U.S. dollars. The
Fund may use currency futures for the same purposes as currency forward
contracts, subject to Commodity Futures Trading Commission (CFTC) limitations.
All futures contracts are aggregated for purposes of the percentage limitations.
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Currency futures and options on futures values can be expected to correlate with
exchange rates, but will not reflect other factors that may affect the values of
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the Fund
against price decline if the issuer's creditworthiness deteriorates. Because the
value of the Fund's investments denominated in foreign currency will change in
response to many factors other than exchange rates, it may not be possible to
match the amount of a forward contract to the value of the Fund's investments
denominated in that currency over time.
The Fund will hold securities or other options or futures positions whose values
are expected to offset its obligations. The Fund will not enter into an option
or futures position that exposes the Fund to an obligation to another party
unless it owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations.
<PAGE>
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APPENDIX B
OPTIONS AND STOCK INDEX FUTURES CONTRACTS
The Fund may buy or write options traded on any U.S. or foreign exchange or in
the over-the-counter market. The Fund may enter into stock index futures
contracts traded on any U.S. or foreign exchange. The Fund may also buy or write
put and call options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment manager
believes a liquid secondary market exists for the options and only from dealers
and institutions the investment manager believes present a minimal credit risk.
Some options are exercisable only on a specific date. In that case, or if a
liquid secondary market does not exist, the Fund could be required to buy or
sell securities at disadvantageous prices, thereby incurring losses. The Fund
may also invest in futures contracts in metals, but it will not do so until it
has resolved certain regulatory issues associated with such investments.
OPTIONS. An option is a contract. A person who buys a call option for a security
has the right to buy the security at a set price for the length of the contract.
A person who sells a call option is called a writer. The writer of a call option
agrees to sell the security at the set price when the buyer wants to exercise
the option, no matter what the market price of the security is at that time. A
person who buys a put option has the right to sell a security at a set price for
the length of the contract. A person who writes a put option agrees to buy the
security at the set price if the purchaser wants to exercise the option, no
matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.
The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
another commission, at the time the option is written. The cash received is
retained by the writer whether or not the option is exercised. A writer of a
call option may have to sell the security for a below-market price if the market
price rises above the exercise price. A writer of a put option may have to pay
an above-market price for the security if its market price decreases below the
exercise price. The risk of the writer is potentially unlimited, unless the
option is covered.
Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options may benefit the Fund and its shareholders by improving the Fund's
liquidity and by helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading technique to
facilitate buying and selling securities for investment reasons. Options are
used as a trading technique to take advantage of any disparity between the price
of the underlying
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PAGE 65
security in the securities market and its price on the options market. It is
anticipated the trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as good or better
than the price at which the security could be bought or sold directly. When the
option is purchased, the Fund pays a premium and a commission. It then pays a
second commission on the purchase or sale of the underlying security when the
option is exercised. For record keeping and tax purposes, the price obtained on
the purchase of the underlying security will be the combination of the exercise
price, the premium and both commissions. When using options as a trading
technique, commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Fund for investment purposes.
Options permit the Fund to experience the change in the value of a security with
a relatively small initial cash investment.
The risk the Fund assumes when it buys an option is the loss of the premium. To
be beneficial to the Fund, the price of the underlying security must change
within the time set by the option contract. Furthermore, the change must be
sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.
Writing covered options. The Fund will write covered options when it feels it is
appropriate and will follow these guidelines:
'All options written by the Fund will be covered. For covered call options if a
decision is made to sell the security, the Fund will attempt to terminate the
option contract through a closing purchase transaction.
'The Fund will deal only in standard option contracts traded on national
securities exchanges or those that may be quoted on NASDAQ (a system of price
quotations developed by the National Association of Securities Dealers, Inc.)
'The Fund will write options only as permitted under federal or state laws or
regulations, such as those that limit the amount of total assets subject to the
options. While no limit has been set by the Fund, it will conform to the
requirements of those states. For example, California limits the writing of
options to 50% of the assets of a fund.
Net premiums on call options closed or premiums on expired call options are
treated as short-term capital gains. Since the Fund is taxed as a regulated
investment company under the Internal Revenue Code, any gains on options and
other securities held less than three months must be limited to less than 30% of
its annual gross income.
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If a covered call option is exercised, the security is sold by the Fund. The
premium received upon writing the option is added to the proceeds received from
the sale of the security. The Fund will recognize a capital gain or loss based
upon the difference between the proceeds and the security's basis. Premiums
received from writing outstanding call options are included as a deferred credit
in the Statement of Assets and Liabilities and adjusted daily to the current
market value.
Options are valued at the close of the New York Stock Exchange. An option listed
on a national exchange, CBOE or NASDAQ will be valued at the last-quoted sales
price or, if such a price is not readily available, at the mean of the last bid
and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are commodity
contracts listed on commodity exchanges. They currently include contracts on the
Standard & Poor's 500 Stock Index (S&P 500 Index) and other broad stock market
indexes such as the New York Stock Exchange Composite Stock Index and the Value
Line Composite Stock Index, as well as narrower sub-indexes such as the S&P 500
Energy Stock Index and the New York Stock Exchange Utilities Stock Index. A
stock index assigns relative values to common stocks included in the index and
the index fluctuates with the value of the common stocks so included.
A futures contract is a legal agreement between a buyer or seller and the
clearinghouse of a futures exchange in which the parties agree to make a cash
settlement on a specified future date in an amount determined by the stock index
on the last trading day of the contract. The amount is a specified dollar amount
(usually $100 or $500) multiplied by the difference between the index value on
the last trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index, and the Index
fluctuates with changes in the market values of those stocks. In the case of S&P
500 Index futures contracts, the specified multiple is $500. Thus, if the value
of the S&P 500 Index were 150, the value of one contract would be $75,000 (150 x
$500). Unlike other futures contracts, a stock index futures contract specifies
that no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the contract. For
example, excluding any transaction costs, if the Fund enters into one futures
contract to buy the S&P 500 Index at a specified future date at a contract value
of 150 and the S&P 500 Index is at 154 on that future date, the Fund will gain
$500 x (154-150) or $2,000. If the Fund enters into one futures contract to sell
the S&P 500 Index at a specified future date at a contract value of 150 and the
S&P 500 Index is at 152 on that future date, the Fund will lose $500 x (152-150)
or $1,000.
Unlike the purchase or sale of an equity security, no price would be paid or
received by the Fund upon entering into futures contracts. However, the Fund
would be required to deposit with its custodian, in a segregated account in the
name of the futures
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broker, an amount of cash or U.S. Treasury bills equal to approximately 5% of
the contract value. This amount is known as initial margin. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve borrowing
funds by the Fund to finance the transactions. Rather, the initial margin is in
the nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker would be
made on a daily basis as the price of the underlying stock index fluctuates,
making the long and short positions in the contract more or less valuable, a
process known as marking to market. For example, when the Fund enters into a
contract in which it benefits from a rise in the value of an index and the price
of an underlying stock index has risen, the Fund will receive from the broker a
variation margin payment equal to that increase in value. Conversely, if the
price of the underlying stock index declines, the Fund would be required to make
a variation margin payment to the broker equal to the decline in value.
How the Fund Would Use Stock Index Futures Contracts. The Fund intends to use
stock index futures contracts and related options for hedging and not for
speculation. Hedging permits the Fund to gain rapid exposure to or protect
itself from changes in the market. For example, the Fund may find itself with a
high cash position at the beginning of a market rally. Conventional procedures
of purchasing a number of individual issues entail the lapse of time and the
possibility of missing a significant market movement. By using futures
contracts, the Fund can obtain immediate exposure to the market and benefit from
the beginning stages of a rally. The buying program can then proceed and once it
is completed (or as it proceeds), the contracts can be closed. Conversely, in
the early stages of a market decline, market exposure can be promptly offset by
entering into stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of the resulting
short contract position.
The Fund may enter into contracts with respect to any stock index or sub-index.
To hedge the Fund's portfolio successfully, however, the Fund must enter into
contracts with respect to indexes or sub- indexes whose movements will have a
significant correlation with movements in the prices of the Fund's securities.
Special Risks of Transactions in Stock Index Futures Contracts
1. Liquidity. The Fund may elect to close some or all of its contracts prior to
expiration. The purpose of making such a move would be to reduce or eliminate
the hedge position held by the Fund. The Fund may close its positions by taking
opposite positions. Final determinations of variation margin are then made,
additional cash as required is paid by or to the Fund, and the Fund realizes a
gain or a loss.
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Positions in stock index futures contracts may be closed only on an exchange or
board of trade providing a secondary market for such futures contracts. For
example, futures contracts transactions can currently be entered into with
respect to the S&P 500 Stock Index on the Chicago Mercantile Exchange, the New
York Stock Exchange Composite Stock Index on the New York Futures Exchange and
the Value Line Composite Stock Index on the Kansas City Board of Trade. Although
the Fund intends to enter into futures contracts only on exchanges or boards of
trade where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
at any particular time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, the Fund would
have to make daily cash payments of variation margin. Such price movements,
however, will be offset all or in part by the price movements of the securities
subject to the hedge. Of course, there is no guarantee the price of the
securities will correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index futures contracts
as a hedging device. One risk arises because the prices of futures contracts may
not correlate perfectly with movements in the underlying stock index due to
certain market distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements. Rather than making
additional variation margin payments, investors may close the contracts through
offsetting transactions which could distort the normal relationship between the
index and futures markets. Second, the margin requirements in the futures market
are lower than margin requirements in the securities market, and as a result the
futures market may attract more speculators than does the securities market.
Increased participation by speculators in the futures market also may cause
temporary price distortions. Because of price distortion in the futures market
and because of imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast of general
market trends may not result in a successful hedging transaction over a short
period.
Another risk arises because of imperfect correlation between movements in the
value of the futures contracts and movements in the value of securities subject
to the hedge. If this occurred, the Fund could lose money on the contracts and
also experience a decline in the value of its portfolio securities. While this
could occur, the investment manager believes that over time the value of the
Fund's portfolio will tend to move in the same direction as the market indexes
and will attempt to reduce this risk, to the extent possible, by entering into
futures contracts on indexes whose movements it believes will have a significant
correlation with movements in the value of the Fund's securities sought to be
hedged. It also is possible that if the Fund has hedged against a decline in the
value of the stocks held in its portfolio and stock prices increase instead, the
Fund will lose part or all of the benefit of the increased value of its stock
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin
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requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index futures
contracts are similar to options on stock except that options on futures
contracts give the purchaser the right, in return for the premium paid, to
assume a position in a stock index futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the period of the option. If the option is
closed instead of exercised, the holder of the option receives an amount that
represents the amount by which the market price of the contract exceeds (in the
case of a call) or is less than (in the case of a put) the exercise price of the
option on the futures contract. If the option does not appreciate in value prior
to the exercise date, the Fund will suffer a loss of the premium paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities traded on
national securities exchanges. An option on a stock index is similar to an
option on a futures contract except all settlements are in cash. A fund
exercising a put, for example, would receive the difference between the exercise
price and the current index level. Such options would be used in the same manner
as options on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND
OPTIONS ON STOCK INDEXES. As with options on stocks, the holder of an option on
a futures contract or on a stock index may terminate a position by selling an
option covering the same contract or index and having the same exercise price
and expiration date. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid secondary
market. The Fund will not purchase options unless the market for such options
has developed sufficiently, so that the risks in connection with options are not
greater than the risks in connection with stock index futures contracts
transactions themselves. Compared to using futures contracts, purchasing options
involves less risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). There may be circumstances,
however, when using an option would result in a greater loss to the Fund than
using a futures contract, such as when there is no movement in the level of the
stock index.
TAX TREATMENT. As permitted under federal income tax laws, the Fund intends to
identify futures contracts as mixed straddles and not mark them to market, that
is, not treat them as having been sold at the end of the year at market value.
Such an election may result in the Fund being required to defer recognizing
losses incurred by entering into futures contracts and losses on underlying
securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether such option is a section
1256 contract. If the option is a non-
<PAGE>
PAGE 70
equity option, the Fund will either make a 1256(d) election and treat the option
as a mixed straddle or mark to market the option at fiscal year end and treat
the gain/loss as 40% short-term and 60% long-term. Certain provisions of the
Internal Revenue Code may also limit the Fund's ability to engage in futures
contracts and related options transactions. For example, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its assets must
consist of cash, government securities and other securities, subject to certain
diversification requirements. Less than 30% of its gross income must be derived
from sales of securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements. In order to avoid realizing a gain within the
three-month period, the Fund may be required to defer closing out a contract
beyond the time when it might otherwise be advantageous to do so. The Fund also
may be restricted in purchasing put options for the purpose of hedging
underlying securities because of applying the short sale holding period rules
with respect to such underlying securities.
Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received depending upon whether gains
or losses are incurred. All contracts and options will be valued at the
last-quoted sales price on their primary exchange.
<PAGE>
PAGE 71
APPENDIX C
MORTGAGE-BACKED SECURITIES
A mortgage pass-through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the Fund, which is influenced by both stated interest
rates and market conditions, may be different than the quoted yield on
certificates. Some U.S. government securities may be purchased on a when-issued
basis, which means that it may take as long as 45 days after the purchase before
the securities are delivered to the Fund.
Stripped Mortgage-Backed Securities. The Fund may invest in stripped
mortgage-backed securities. Generally, there are two classes of stripped
mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs
entitle the holder to receive distributions consisting of all or a portion of
the interest on the underlying pool of mortgage loans or mortgage-backed
securities. POs entitle the holder to receive distributions consisting of all or
a portion of the principal of the underlying pool of mortgage loans or
mortgage-backed securities. The cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments (including prepayments) on
the underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. A slow
rate of principal payments may adversely affect the yield to maturity of POs. On
an IO, if prepayments of principal are greater than anticipated, an investor may
incur substantial losses. If prepayments of principal are slower than
anticipated, the yield on a PO will be affected more severely than would be the
case with a traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Fund may purchase mortgage-backed
security (MBS) put spread options and write covered MBS call spread options. MBS
spread options are based upon the changes in the price spread between a
specified mortgage-backed security and a like-duration Treasury security. MBS
spread options are traded in the OTC market and are of short duration, typically
one to two months. The Fund would buy or sell covered MBS call spread options in
situations where mortgage-backed securities are expected to underperform
like-duration Treasury securities.
<PAGE>
PAGE 72
APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.
While this technique does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many shareholders who
can continue investing on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
- -------------------------------------------------------------------
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
---- ----- -----
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
<PAGE>
Independent auditors' report
The board and shareholders
IDS Precious Metals Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of IDS Precious
Metals Fund, Inc. as of March 31, 1997, and the related statement of
operations for the year then ended, and the statements of changes in net
assets for each of the years in the two-year period ended March 31, 1997,
and the financial highlights for each of the years in the ten-year period
ended March 31, 1997. These financial statements and the financial
highlights are the responsibility of fund management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
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 the
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. Investment securities held in
custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered and securities on loan, we request
confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. 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 referred to above present fairly,
in all material respects, the financial position of IDS Precious Metals
Fund, Inc. at March 31, 1997, and the results of its operations, changes
in its net assets, and the financial highlights for the periods stated in
the first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 2, 1997
<PAGE>
Financial statements
<TABLE>
<CAPTION>
Statement of assets and liabilities IDS Precious Metals Fund, Inc.
March 31, 1997
Assets
<S> <C>
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers
(identified cost $92,796,977) $92,796,977
Investments in securities of affiliated issuer (identified cost $953,584) 953,584
Dividends and accrued interest receivable 56,626
Receivable for investment securities sold 814,221
U.S. government securities held as collateral (Note 6) 4,572,400
- ----------
Total assets 99,193,808
==========
Liabilities
Disbursements in excess of cash on demand deposit 781,342
Payable for investment securities purchased 451,508
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 6,770
Payable upon return of securities loaned (Note 6) 6,181,900
Accrued investment management services fee 9,130
Accrued distribution fee 754
Accrued service fee 1,997
Accrued transfer agency fee 1,999
Accrued administrative services fee 685
Other accrued expenses 52,854
-----------
Total liabilities 7,488,939
===========
Net assets applicable to outstanding capital stock $91,704,869
===========
Represented by
Capital stock-- authorized 10,000,000,000 shares of $.01 par value $ 87,732
Additional paid-in capital 86,014,386
Undistributed net investment income 6,771
Accumulated net realized gain (Notes 1) 896,262
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies (Note 4) 4,699,718
- -----------
Total-- representing net assets applicable to outstanding capital stock $91,704,869
===========
Net assets applicable to outstanding shares: Class A $83,443,272
Class B $ 8,260,240
Class Y $ 1,357
Net asset value per share of outstanding capital stock:
Class A shares 7,971,194 $ 10.47
Class B shares 801,924 $ 10.30
Class Y shares 129 $ 10.52
See accompanying notes to financial statements.
<PAGE>
Statement of operations
IDS Precious Metals Fund, Inc.
Year ended March 31, 1997
Investment income
Income:
Dividends (net of foreign taxes withheld of $31,672) $ 491,233
Interest 525,710
---------
Total income 1,016,943
---------
Expenses (Note 2):
Investment management services fee 1,008,365
Distribution fee -- Class B 52,490
Transfer agency fee 224,250
Incremental transfer agency fee-- Class B 1,489
Service fee
Class A 180,377
Class B 12,191
Administrative services fees and expenses 67,376
Compensation of board members 4,934
Compensation of officers 601
Custodian fees 80,723
Postage 12,239
Registration fees 54,051
Reports to shareholders 10,450
Audit fees 21,500
Other 11,618
---------
Total expenses 1,742,654
Earnings credits on cash balances (Note 2) (7,442)
- ---------
Total net expenses 1,735,212
---------
Investment loss-- net (718,269)
---------
Realized and unrealized gain (loss) -- net
Net realized gain on security and foreign currency transactions
(including gain of $2,173 from foreign currency transactions) (Note 3) 13,933,568
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies (35,518,462)
-----------
Net loss on investments and foreign currencies (21,584,894)
-----------
Net decrease in net assets resulting from operations $(22,303,163)
============
See accompanying notes to financial statements.
<PAGE>
Financial statements
Statements of changes in net assets
IDS Precious Metals Fund, Inc.
Year ended March 31,
Operations and distributions 1997 1996
Investment loss-- net $ (718,269) $ (504,852)
Net realized gain on investments and foreign currencies 13,933,568 17,556,494
Net change in unrealized appreciation or depreciation of
investments and on translation of assets and liabilities
in foreign currencies (35,518,462) 28,256,105
Net increase (decrease) in net assets resulting from operations (22,303,163) 45,307,747
Distributions to shareholders
from:
Net investment income
Class A -- (63,093)
Net realized gain
Class A (4,975,911) --
Class B (416,645) --
Class Y (81) --
---------- -------
Total distributions (5,392,637) (63,093)
---------- -------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 205,793,924 114,090,666
Class B shares 14,073,563 5,261,955
Class Y shares -- 1,000
Reinvestment of distributions at net asset value
Class A shares 4,825,220 61,004
Class B shares 415,636 --
Class Y shares 81 --
Payments for redemptions
Class A shares (203,245,482) (129,488,052)
Class B shares (Note 2) (6,954,011) (2,659,608)
- ---------- ----------
Increase (decrease) in net assets from capital
share transactions 14,908,931 (12,733,035)
---------- -----------
Total increase (decrease) in net assets (12,786,869) 32,511,619
Net assets at beginning of year 104,491,738 71,980,119
----------- ----------
Net assets at end of year
(including undistributed net investment income of
$6,771 and $700) $ 91,704,869 $104,491,738
============= ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a non-diversified, open-end management investment company. The
Fund invests primarily in securities of companies engaged in the
exploration, mining, processing or distribution of gold and other precious
metals. Most of these companies will be located outside of the United
States. The Fund offers Class A, Class B and Class Y shares. Class A
shares are sold with a front-end sales charge. Class B shares may be
subject to a contingent deferred sales charge and such shares
automatically convert to Class A after eight years. Class Y shares have no
sales charge and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price; securities for which
market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Determination of
fair value involves, among other things, reference to market indexes,
matrixes and data from independent brokers. Short-term securities maturing
in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost. Investments in
metals, if any, are valued daily using data from independent brokers and
pricing services.
Option transactions
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
or write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is
dependent upon the credit standing of the other party. The Fund also may
buy and sell put and call options and write covered call options on
portfolio securities and may write cash-secured put options. The risk in
writing a call option is that the Fund gives up the opportunity of profit
if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an
option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not
exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The
Fund will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the
cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
<PAGE>
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S.
or foreign exchange. The Fund also may buy or write put and call options
on these futures contracts. Risks of entering into futures contracts and
related options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities and income and expenses are translated at the exchange rate on
the transaction date. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net
realized gains or losses from foreign currency transactions may arise from
sales of foreign currency, closed forward contracts, exchange gains or
losses realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends, interest
income and foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
hedging purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that
the other party will not complete the obligations of the contract.
Illiquid securities
At March 31, 1997, investments in securities included issues that are
illiquid. The Fund currently limits investments in illiquid securities to
10% of the net assets, at market value, at the time of purchase. The
aggregate value of such securities at March 31, 1997, was $3,345,160
representing 3.65% of net assets. Pursuant to guidelines adopted by the
Fund's board, certain unregistered securities are determined to be liquid
and are not included within the 10% limitation specifies above.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ from the year
that the income or realized gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, undistributed net investment income has been
increased by $724,340 and accumulated net realized gain has been decreased
by $2,173, resulting in a net reclassification adjustment to decrease
paid-in-capital by $722,167.
Dividends to shareholders
An annual dividend declared and paid by the end of the calendar year from
net investment income, when available, is reinvested in additional shares
of the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
or upon receipt of ex-dividend notification in the case of certain foreign
securities. Interest income, including level-yield amortization of premium
and discount is accrued daily.
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent. Under its
Investment Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage of the
Fund's average daily net assets in reducing percentages from 0.8% to
0.675% annually. The fee is adjusted upward or downward by a performance
incentive adjustment based on the Fund's average daily net assets over a
rolling 12-month period as measured against the change in the Lipper Gold
Fund Index. The maximum adjustment is 0.12% of the Fund's average daily
net assets after deducting 1% from the performance difference. If the
performance difference is less than 1%, the adjustment will be zero. The
adjustment increased the fee by $110,012 for the year ended March 31,
1997.
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.06% to 0.035%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultant's fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses, and any other
expenses properly payable by the Fund approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
o Class A $15
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing related services. Under a Plan and Agreement of Distribution,
the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares.
Sales charges received by American Express Financial Advisors for
distributing Fund shares were $481,408 for Class A and $13,733 for Class B
for the year ended March 31, 1997. The Fund also pays custodian fees to
American Express Trust Company, an affiliate of AEFC.
During the year ended March 31, 1997, the Fund's custodian and transfer
agency fees were reduced by $7,442 as a result of earnings credits from
overnight cash balances.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $81,834,136 and $77,658,723,
respectively, for the year ended March 31, 1997. Realized gains and losses
are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $3,400 for
the year ended March 31, 1997.
4. Foreign currency contracts
At March 31, 1997, the Fund had entered into a foreign currency exchange
contract that obligates the Fund to deliver currency at a specified future
date. The unrealized appreciation and/or depreciation (see Summary of
significant accounting policies) on this contract is included in the
accompanying financial statements. The terms of the open contract are as
follows:
Exchange date Currency to be Currency to be Unrealized Unrealized
delivered received appreciation depreciation
- --------------------------------------------------------------------------------
April 2, 1997 458,278 625,000 $ -- $6,770
U.S. Dollar Canadian Dollar
5. Capital share transactions
Transactions in shares of capital stock for the years indicated are as
follows:
Year ended March 31, 1997
Class A Class B Class Y
- --------------------------------------------------------------------------------
Sold 15,209,456 1,037,294 --
Issued for reinvested 381,893 33,366 6
distributions
Redeemed (14,971,123) (516,323) --
- --------------------------------------------------------------------------------
Net increase 620,226 554,337 6
- --------------------------------------------------------------------------------
Year ended March 31, 1996
Class A Class B Class Y
- --------------------------------------------------------------------------------
Sold 11,145,976 478,047 120
Issued for reinvested 6,147 -- --
distributions
Redeemed (12,805,371) (235,650) --
- --------------------------------------------------------------------------------
Net increase (decrease) (1,653,248) 242,397 120
- --------------------------------------------------------------------------------
6. Lending of portfolio securities
At March 31, 1997, securities valued at $5,526,575 were on loan to
brokers. For collateral, the Fund received $1,609,500 in cash and U.S.
government securities valued at $4,572,400. Income from securities lending
amounted to $20,180 for the year ended March 31, 1997. The risks to the
Fund of securities lending are that the borrower may not provide
additional collateral when required or return the securities when due.
7. Financial highlights
"Financial highlights" showing per share data and selected information is
presented on pages 6 and 7 of the prospectus.
<PAGE>
Investments in securities
IDS Precious Metals, Inc.
March 31, 1997
(Percentages represent
value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
Common stocks (80.6%)(c)
Issuer Shares Value(a)
Australia (11.0%)
Acacia Resources 1,500,000(b)$ 2,387,130
Newcrest Mining 250,000(b) 819,229
Plutonic Resources 600,000(b) 2,328,334
Sons of Gwalia 900,000(d) 4,557,891
Total 10,092,584
North/South America (64.3%)
America Mineral Fields 90,000(b) 195,051
Argosy Mining 1,348,200(b) 1,120,044
Argosy Mining 151,800(b,e) 126,111
Asia Pacific Resources 175,000(b) 796,460
Banro Resource 80,000(b) 231,172
Barrick Gold 50,000 1,187,500
Bre-X Minerals 600,000(b) 1,165,974
Cambiex Exploration 500,000(b) 227,560
Cambior 212,700 2,881,073
Canarc Resources 460,000(b) 498,461
Dayak Goldfield 500,000(b) 397,325
Dayton Mining 700,000(b,e) 2,882,425
Diamondworks 255,500(b) 406,066
Euro-Nevada Mining 172,700 4,990,427
Euro-Nevada Mining 12,500(e) 361,206
Francisco Gold 250,000(b) 4,515,080
Franco Nevada Mining 51,300(e) 2,371,826
Freeport-McMoRan Copper & Gold 250,000 7,593,750
Geomaque Exploration 300,000(b) 693,516
Getchell Gold 154,000(b) 6,256,250
Goldcorp 210,000(b) 1,744,625
Golden Bear 500,000(b,e) 270,905
Greenstone Resources 100,000(b) 1,011,378
Java Gold 500,000(b) 252,840
Meridian Gold 1,000,000(b) 2,528,440
Metallica Resources 300,000(b) 866,895
Minefinders 34,500(b) 112,154
Nevsun Resources 501,200(b) 1,810,364
Oliver Gold 350,000(b,e) 442,477
Romarco Minerals 250,000(b) 686,290
Stillwater Mining 170,454(b,h) 3,345,160
Tombstone Explorations 700,000(b) 986,090
TVI Pacific 476,000(b,e) 326,674
TVI Pacific 200,000(b) 137,258
TVX Gold 500,000(b) 3,503,700
Westmin Resources 170,000(b) 828,968
Williams Resources 300,000(b) 279,573
Williams Resources 1,000,000(b,e) 931,910
Total 58,962,978
South Africa (2.3%)
Driefontein Consolidated ADR 100,000 925,000
Goldfields of South Africa 10,000 242,500
Vaalreef Exploration
& Mining ADR 100,000 606,250
Western Area Gold ADR 35,071 355,094
Total 2,128,844
United Kingdom (3.0%)
Ashanti Gold Fields 200,000(d) 2,750,000
Total common stocks
(Cost: $66,938,245) $73,934,406
Other (5.3%)(c)
Issuer Shares Value(a)
America Mineral Fields
Warrants 45,000(f) $ --
Argosy Mining
Warrants 250,000(f) --
Banro Resource
Special Warrants 80,000(b) 231,172
Campbell Resources
Warrants 250,000 67,725
Canarc Resources
Warrants 230,000(f) --
Diamondworks
Special Warrants 300,000 476,790
Golden Bear Minerals
Warrants 500,000(f) --
Granges
Warrants 75,000(f) --
Minefinders
Special Warrants 125,000 406,357
Nevsun Resources
Special Warrants 250,000 903,015
Oliver Gold
Warrants 225,000(e,f) --
Panorama Resources
Special Warrants 2,500,000 734,953
Rio Narcea Gold Mines
Special Warrants 400,000 1,560,408
South American Gold & Copper
Special Warrants 510,000(e) 497,378
Steppe Gold
Warrants 150,000(f) --
Tombstone Exploration
Warrants 350,000(f) --
Valerie Gold Resources
Warrants 5,500(f) --
Total other
(Cost: $6,160,183) $ 4,877,798
Bond (2.1%)
Issuer and Principal Value(a)
coupon rate amount
Dayton Mining
7.00% Cv 04-01-02 $2,000,000(e) $1,920,000
Total bond
(Cost $2,000,000) $1,920,000
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agency (1.4%)
Federal Natl Mtge Assn Disc Nts
04-10-97 5.47% $500,000 $ 499,318
04-11-97 5.25 800,000 798,839
Total 1,298,157
Commercial paper (9.1%)
Cargill
04-18-97 5.34 1,500,000 1,496,232
Motorola
05-08-97 5.58 3,300,000 3,281,176
Paccar Financial
04-01-97 5.32 3,500,000 3,500,000
Total 8,277,408
Letter of credit (2.7%)
First Chicago-
Commed Fuel
04-29-97 5.58% 2,500,000 2,489,208
Total short-term securities
(Cost: $12,064,773) $12,064,773
Total investment in securities of unaffiliated issuers
(Cost: $87,163,201) $92,796,977
Investments in securities of affiliated issuer (g)
Common stock (1.0%)
Issuer Shares Value(a)
First Dynasty Mines 400,000(b) $953,584
Total investments in securities of affiliated issuer
(Cost: $1,887,642) $953,584
Total investments in securities
(Cost: $89,050,843)(i) $93,750,561
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Security is partially on loan. See Note 6 to the financial statements.
(e) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(f) Negligible market value.
(g) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during
the year ended March 31, 1997 are as follows:
Issuer Beginning Purchase Sales Ending Dividend
cost cost cost cost income
First Dynasty Mines* $1,225,971 $661,671 $ -- $1,887,642 $ --
*Issuer not an affiliate for the entire fiscal year.
(h) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at March 31, 1997 is as follows:
Security Acquisition Purchase
date cost
Stillwater Mining 09-13-94 $999,997
(i) At March 31, 1997, the cost of securities for federal income tax purposes
was $89,516,244 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation................................$17,593,533
Unrealized depreciation................................(13,359,216)
-----------
Net unrealized appreciation............................$ 4,234,317
===========
<PAGE>
PAGE 73
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
List of financial statements filed electronically as part of this
Post-Effective Amendment to the Registration Statement:
o Independent Auditors' Report dated May 2, 1997
o Statement of Assets and Liabilities, March 31, 1997
o Statement of Operations, Year ended March 31, 1997
o Statements of Changes in Net Assets, for the two-year
period ended March 31, 1996 and March 31, 1997
o Notes to Financial Statements
o Investments in Securities, March 31, 1997
o Notes to Investments in Securities
(b) EXHIBITS:
1. Copy of Articles of Incorporation, as amended Oct. 17, 1988,
filed as Exhibit No. 1 to Post-Effective Amendment No. 8 to
Registration Statement No. 2-93745, is incorporated herein by
reference.
2. Copy of By-laws, as amended Jan. 12, 1989, filed as Exhibit
No. 2 to Post-Effective Amendment No. 8 to Registration Statement
No. 2-93745, is incorporated herein by reference.
3. Not Applicable.
4. Form of Stock Certificate for common stock, filed as Exhibit
No. 4 to original Registration Statement No. 2-93745, is
incorporated herein by reference.
5. Form of Investment Management Services Agreement between
Registrant and American Express Financial Corporation, dated March
20, 1995, filed electronically as Exhibit 5 to Registrant's Post-
Effective Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
6. Form of Distribution Agreement between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed
electronically as Exhibit 6 to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
7. All employees are eligible to participate in a profit sharing plan. Entry
into the plan is Jan. 1 or July 1. The Registrant contributes each year an
amount up to 15% of their annual salaries, the maximum deductible amount
permitted under Section 404(a) of the Internal Revenue Code.
8(a). Form of Custodian Agreement between Registrant and American
Express Trust Company, dated March 20, 1995, filed electronically
as Exhibit 8(a) to Registrant's Post-Effective Amendment No. 25 to
Registration Statement No. 2-93745 is incorporated herein by
reference.
<PAGE>
PAGE 74
8(b). Form of Custody Agreement between Morgan Stanley Trust
Company and IDS Bank and Trust dated May, 1993 filed electronically
as Exhibit 8(b) to Registrant's Post-Effective Amendment No. 26 to
Registration Statement No. 2-93745 is incorporated herein by
reference.
9(a). Form of Transfer Agency Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995, filed
electronically as Exhibit 9(a) to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
9(b). Copy of License Agreement, between Registrant and IDS
Financial Corporation, dated Jan. 25, 1988, filed as Exhibit 9(b)
to Post-Effective Amendment No. 10 to Registration Statement No.
2-93745, is incorporated herein by reference.
9(c). Form of Shareholder Service Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20, 1995,
filed electronically as Exhibit 9(c) to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
9(d). Form of Administrative Services Agreement between Registrant
and American Express Financial Corporation, dated March 20, 1995,
filed electronically as Exhibit 9(d) to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
9(e). Copy of the Class Y Shareholder Service Agreement between
Registrant and American Express Financial Advisors Inc., dated May
9, 1997, is filed electronically herewith as Exhibit 9(e) to
Registrant's Post-Effective Amendment No. 30 to Registration
Statement No. 2-93745.
10. Opinion and consent of counsel as to the legality of the securities being
registered is filed with Registrant's most recent 24f-2 notice.
11. Independent Auditors' Consent is filed electronically herewith.
12. None.
13. Not applicable.
14. Forms of Keogh, IRA and other retirement plans, filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc., Post-
Effective Amendment No. 34 to Registration Statement No. 2-38355 on
Sept. 8, 1986, are incorporated herein by reference.
15. Form of Plan and Agreement of Distribution between Registrant
and American Express Financial Advisors Inc., dated March 20, 1995,
filed electronically as Exhibit 15 to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 2-93745 is
incorporated herein by reference.
16. Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22(b) filed as
<PAGE>
PAGE 75
Exhibit 16 to Post-Effective Amendment No. 17 to Registration Statement No.
2-93745, is incorporated herein by reference.
17. Financial Data Schedule is filed electronically herewith.
18. Copy of Plan pursuant to Rule 18f-3 under the 1940 Act filed
electronically as Exhibit 18 to Registrant's Post-Effective
Amendment No. 26 to Registration Statement No. 2-93745 is
incorporated herein by reference.
19(a). Directors' Power of Attorney, dated Jan. 8, 1997, is filed
electronically herewith as Exhibit 19(a) to Registrant's Post-
Effective Amendment No. 30.
19(b). Officers' Power of Attorney, dated Nov. 1, 1995, filed
electronically as Exhibit 19(b) to Registrant's Post-Effective
Amendment No. 29, is incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class May 20, 1997
Common Stock 16,271
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
<PAGE>
PAGE 76
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
<PAGE>
PAGE 1<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IDS Precious Metals Fund, Inc. certifies
that it meets the requirements for the effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933,
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis and the State of Minnesota on the 23rd day of May, 1997.
IDS PRECIOUS METALS FUND, INC.
By /s/ Melinda S. Urion, Treasurer
Melinda S. Urion, Treasurer
By /s/ William R. Pearce**
William R. Pearce, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacities indicated the 23rd day of May, 1997.
Signature Capacity
/s/ William R. Pearce** President, Principal
William R. Pearce Executive Officer and
Director
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/s/ Robert F. Froehlke* Director
Robert F. Froehlke
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
/s/ Anne P. Jones* Director
Anne P. Jones
<PAGE>
PAGE 78
Signature Capacity
/s/ Melvin R. Laird* Director
Melvin R. Laird
/s/ Alan K. Simpson* Director
Alan K. Simpson
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele* Director
C. Angus Wurtele
*Signed pursuant to Directors' Power of Attorney, dated Jan. 8,
1997, is filed electronically herewith as Exhibit 18(a) to Post-
Effective Amendment No. 30 to Registration Statement No. 2-93749
by:
- ------------------------------
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney dated November 1, 1995, filed
electronically herewith as Exhibit 19(b) by:
- ------------------------------
Leslie L. Ogg
<PAGE>
PAGE 79
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 30
TO REGISTRATION STATEMENT NO. 2-93745
This Post-Effective Amendment comprises the following papers and documents:
The facing sheet.
Cross reference sheet.
Part A
The prospectus.
Part B
Statement of Additional Information.
Financial Statements.
Part C
Other information.
Exhibits.
The signatures.
<PAGE>
PAGE 1
IDS Precious Metals Fund, Inc.
File No. 2-93745/811-4132
EXHIBIT INDEX
Exhibit 9(e). Class Y Shareholder Service Agreement,
dated May 9, 1997.
Exhibit 11. Independent Auditors Consent
Exhibit 17. Financial Data Schedules
Exhibit 19(a). Director's Power of Attorney, January 8, 1997
<PAGE>
PAGE 1
Class Y Shareholder Service Agreement
This agreement is between IDS Precious Metals Fund, Inc. (the Fund)
and American Express Financial Advisors Inc. (AEFA), the principal
underwriter of the Fund, for services to be provided to
shareholders of Class Y of the Fund by AEFA and other servicing
agents.
AEFA represents that shareholders consider personal service a significant factor
in their satisfaction with their investment. AEFA represents that fees paid by
the Fund will be used to help shareholders thoughtfully consider their
investment goals and objectively monitor how well the goals are being achieved.
The Fund agrees to pay AEFA 0.10 percent of the net asset value of Class Y. The
Fund agrees to pay AEFA in cash within five (5) business days after the last day
of each month.
AEFA agrees to provide the Fund annually a budget covering its expected costs
and a quarterly report of its actual expenditures. AEFA agrees to meet with
representatives of the Fund at their request to provide information as may be
reasonably necessary to evaluate its performance under the terms of this
agreement.
This agreement shall continue in effect for a period of more than one year so
long as it is reapproved at least annually at a meeting called for the purpose
of voting on the agreement by a vote, in person, of the members of the Board who
are not interested persons of the Fund and have no financial interest in the
operation of the agreement, and of all the members of the Board.
This agreement may be terminated at any time without payment of any penalty by a
vote of a majority of the members of the Board who are not interested persons of
the Fund and have no financial interest in the operation of the agreement or by
AEFA. The agreement will terminate automatically in the event of its assignment
as that term is defined in the Investment Company Act of 1940. This agreement
may be amended at any time provided the amendment is approved in the same manner
the agreement was initially approved and the amendment is agreed to by AEFA.
Approved as of this 9th day of May, 1997.
IDS PRECIOUS METALS FUND, INC. AMERICAN EXPRESS
FINANCIAL ADVISORS INC.
/s/Leslie L. Ogg /s/Ward D. Armstrong
Leslie L. Ogg Ward D. Armstrong
Vice President Vice President
<PAGE>
PAGE 1
Independent auditors' consent
The board and shareholders
IDS Precious Metals Fund, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial highlights" in Part A and
"INDEPENDENT AUDITORS" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May , 1997
<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 1
<NAME> IDS PRECIOUS METALS CLASS A
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<PERIOD-END> MAR-30-1997
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<INVESTMENTS-AT-VALUE> 93750561
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<SHARES-REINVESTED> 381893
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<ACCUMULATED-NII-PRIOR> 700
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<GROSS-EXPENSE> 1742654
<AVERAGE-NET-ASSETS> 104940373
<PER-SHARE-NAV-BEGIN> 13.75
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> (2.54)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.66)
<RETURNS-OF-CAPITAL> 0
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<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> MAR-30-1997
<INVESTMENTS-AT-COST> 89050843
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<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 526
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<EXPENSES-NET> 1735212
<NET-INVESTMENT-INCOME> (718269)
<REALIZED-GAINS-CURRENT> 13933568
<APPREC-INCREASE-CURRENT> (35518462)
<NET-CHANGE-FROM-OPS> (22303163)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (416645)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1037294
<NUMBER-OF-SHARES-REDEEMED> (516323)
<SHARES-REINVESTED> 33366
<NET-CHANGE-IN-ASSETS> (12786869)
<ACCUMULATED-NII-PRIOR> 700
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (7642496)
<GROSS-ADVISORY-FEES> 1008365
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1742654
<AVERAGE-NET-ASSETS> 6974491
<PER-SHARE-NAV-BEGIN> 13.65
<PER-SHARE-NII> (.14)
<PER-SHARE-GAIN-APPREC> (2.54)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.66)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.30
<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> IDS PRECIOUS METALS CLASS Y
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-END> MAR-30-1997
<INVESTMENTS-AT-COST> 89050843
<INVESTMENTS-AT-VALUE> 93750561
<RECEIVABLES> 870847
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<TOTAL-ASSETS> 99193808
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<TOTAL-LIABILITIES> 7488939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86102118
<SHARES-COMMON-STOCK> 129
<SHARES-COMMON-PRIOR> 123
<ACCUMULATED-NII-CURRENT> 6771
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 896262
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4699718
<NET-ASSETS> 1357
<DIVIDEND-INCOME> 491
<INTEREST-INCOME> 526
<OTHER-INCOME> 0
<EXPENSES-NET> 1735212
<NET-INVESTMENT-INCOME> (718269)
<REALIZED-GAINS-CURRENT> 13933568
<APPREC-INCREASE-CURRENT> (35518462)
<NET-CHANGE-FROM-OPS> (22303163)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 81
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> (12786869)
<ACCUMULATED-NII-PRIOR> 700
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (7642496)
<GROSS-ADVISORY-FEES> 1008365
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1742654
<AVERAGE-NET-ASSETS> 1713
<PER-SHARE-NAV-BEGIN> 13.76
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> (2.53)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.66)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
PAGE 1
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the below listed
open-end, diversified investment companies that previously have filed
registration statements and amendments thereto pursuant to the requirements of
the Securities Act of 1933 and the Investment Company Act of 1940 with the
Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him in
her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Acts and any rules and
regulations thereunder, and to file such amendments with all exhibits thereto
and other documents in
<PAGE>
PAGE 2
connection therewith with the Securities and Exchange Commission, granting to
either of them the full power and authority to do and perform each and every act
required and necessary to be done in connection therewith.
Dated the 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
