1998 ANNUAL REPORT
IDS
Precious
Metals
Fund
(prospectus enclosed)
(icon of) cart of precious gems
The goal of IDS Precious Metals Fund, Inc. is long-term growth of capital. The
Fund invests primarily in securities of companies engaged in exploration,
mining, processing or distribution of gold and other precious metals. Most of
these companies will be located outside of the United States.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
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(icon of) cart of precious gems
While investors typically look to stocks and bonds for the best return on their
money, there are times when hard assets such as gold can play a small but
important role in a diversified portfolio. Because owning the metal itself is
often impractical, most investors put their money in stocks of companies that
mine gold and other precious metals. These stocks, which form the bedrock of IDS
Precious Metals Fund, usually move in tandem with the prices of the metals.
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Contents
The purpose of this annual report is to tell investors how the Fund performed.
(icon of) one open book inside of another
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1998 annual report
From the chairman 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 23
IDS mutual funds 26
Federal income tax information 30
1998 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Total returns 8p
Investment policies and risks 10p
Facts about investments and their risks 11p
Alternative investment option 15p
Valuing Fund shares 15p
How to purchase, exchange or redeem shares 16p
Alternative purchase arrangements 16p
How to purchase shares 18p
How to exchange shares 21p
How to redeem shares 21p
Reductions and waivers of the sales charge 25p
Special shareholder services 33p
Services 33p
Quick telephone reference 33p
Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 35p
How to determine the correct TIN 37p
How the Fund is organized 38p
Shares 38p
Voting rights 38p
Shareholder meetings 38p
Board members and officers 38p
Investment manager 40p
Administrator and transfer agent 41p
Distributor 42p
About American Express Financial Corporation 44p
General information 44p
Year 2000 45p
Appendix 46p
Descriptions of derivative instruments 46p
(This annual report is not part of the prospectus.)
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To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in Asian markets spawned a
sharp drop in several financial markets worldwide, including the U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
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From the portfolio manager
An overall decline in
the price of gold kept stocks of gold mining and exploration companies
under severe selling pressure for much of the past fiscal year. That
situation was reflected in the performance of IDS Precious Metals Fund,
whose Class A shares produced a loss of 32.9% for the 12 months -- April
1997 through March 1998.
The period began with the gold market in turmoil resulting from what
proved to be a false gold-discovery claim by Bre-X, a Canadian mining
company that had been exploring a site in Indonesia. Although no other
company was involved in the claim, gold stocks in general suffered by
implication.
Compounding the situation in the ensuing months was the fact that a number
of central banks were selling substantial portions of their gold reserves,
a trend that continued throughout most of the fiscal year. The selling
pressure pushed down the price of gold and, consequently, the prices of
gold stocks. Also contributing to the difficult environment was tame
inflation rates in virtually all major economies. (Although gold has, in
recent years, lost much of its appeal as a store of value in times of
rising inflation, the price of gold still reacts positively to an
inflation spike.)
Period ends on up note
Despite the negatives, there were periodic upturns for gold stocks,
especially in the early months of 1998. The rebound was largely a result
of factors associated with the formation of the European Monetary Union
and the creation of a common currency in Europe backed by gold reserves.
The anticipation of this unified financial front in Europe drove gold
prices higher in world markets. In response to the upturn, the Fund gained
about 10% in the first quarter of 1998.
Looking at the broader influences on the gold market, demand (essentially
for gold jewelry on the part of consumers worldwide) remained healthy
during the 12 months, while supply continued to contract. Clearly,
gold-producing companies continued to believe that increasing production
at still-depressed price levels is not worthwhile.
Should the completion of the European Monetary Union go smoothly,
gold-selling by central banks is likely to taper off. That would help
provide some support for gold prices. On the other hand, inflation has yet
to become a problem in the world's major economies, so that potential
impetus for prices continues to be a non-factor.
As for the Fund, I have continued to concentrate investments in large,
well-established gold-exploration companies with ample cash reserves,
which they can use to increase gold reserves or production should market
conditions improve. I also expect more merger or acquisition activity
among companies that have healthy reserves or low-cost operations.
Ultimately, while I hesitate to predict gold-price movements, I would
expect a more normal market to emerge in the months ahead, particularly
after the monetary unification in Europe is completed.
Richard H. Warden
(picture of) Richard H. Warden
Richard Warden
Portfolio manager
(This annual report is not part of the prospectus.)
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Class A
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 6.82
March 31, 1997 $10.47
Decrease $ 3.65
Distributions
April 1, 1997 - March 31, 1998
From income $ .08
From capital gains $ .11
Total distributions $ .19
Total return* -32.9%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 6.73
March 31, 1997 $10.30
Decrease $ 3.57
Distributions
April 1, 1997 - March 31, 1998
From income $ .01
From capital gains $ .11
Total distributions $ .12
Total return* -33.4%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 6.80
March 31, 1997 $10.52
Decrease $ 3.72
Distributions
April 1, 1997 - March 31, 1998
From income $ .12
From capital gains $ .11
Total distributions $ .23
Total return* -32.8%**
* The prospectus discusses the effect of sales charges, if any, on the various
classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
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The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of March 31, 1998)
Stillwater Mining 9.17% $6,444,063
Francisco Gold 5.45 3,831,187
Getchell Gold 5.20 3,653,125
Barrick Gold 4.93 3,459,999
Meridian Gold 4.83 3,389,231
Franco-Nevada Mining 4.64 3,262,135
Placer Dome 3.75 2,637,499
Euro-Nevada Mining 3.62 2,541,924
Sons of Gwalia 3.16 2,216,844
Gencor 2.91 2,045,477
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The ten holdings listed here make up 47.66% of the Fund's net assets
(This annual report is not part of the prospectus.)
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Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low...
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
oyour shares increase in value when the Fund's
investments do well
oyou receive capital gains when the gains on
investments sold by the Fund exceed losses
oyou receive income when the Fund's stock dividends, interest and
short-term gains exceed its expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and
capital gain distributions to buy additional shares of the Fund or another
fund.
How your $10,000 has grown in IDS Precious Metals Fund
$50,000
S&P 500
Stock Index
$40,000
$30,000 $10,806
IDS Precious
Metals Fund
Class A
$20,000
$9,500
Lipper Gold Fund Index
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Assumes: oHolding period from 4/1/88 to 3/31/98 oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $1,626. Also see
"Performance" in the Fund's current prospectus.
The 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.
Lipper Gold Fund Index, published by Lipper Analytical Services, Inc.,
includes 10 funds that are generally similar to this Fund, although some
funds in the index may have somewhat different investment policies or
objectives.
Average annual total return
(as of March 31, 1998)
1 year Since 5 years 10 years
inception*
Class A -36.23% --% +3.40% +0.78%
Class B -36.02% -3.00% --% -- %
Class Y -32.79% -1.05% -- % -- %
*Inception date was March 20, 1995.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Stock Index and the Lipper
Gold Fund Index. In comparing Precious Metals Fund (Class A) to the two
indexes, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5%, while such charges are not
reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the impact of the applicable sales charge up
to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #31 to
Registration Statement No. 2-93745 filed on or about May 27, 1998 are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
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IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
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IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
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IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
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IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
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IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
IDS Precious Metals Fund, Inc.
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its
fiscal year. The dividends listed below were reported to you on Form
1099-DIV, Dividends and Distributions, last January. Shareholders should
consult a tax advisor on how to report distributions for state and local
purposes.
IDS Precious Metals Fund, Inc.
Fiscal year ended March 31, 1998
Class A
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.07929
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.10714
Total distributions $0.18643
The long-term capital gains distribution is divided into two categories:
28% - $0.10714 and 20% - $0.00000.
Class B
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.00831
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.10714
Total distributions $0.11545
The long-term capital gains distribution is divided into two categories:
28% - $0.10714 and 20% - $0.00000.
Class Y
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.12349
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.10714
Total distributions $0.23063
The long-term capital gains distribution is divided into two categories:
28% - $0.10714 and 20% - $0.00000.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Precious Metals Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
