AXP(SM)
Precious
Metals Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
(icon of) ruler
American
Express(R)(logo)
Funds
AXP Precious Metals Fund seeks to provide shareholders with long-term growth of
capital.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
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A Historical Hedge
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 AXP
Precious Metals Fund, usually move in tandem with the prices of the metals.
AXP PRECIOUS METALS FUND (This annual report is not part of the prospectus.)
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2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 22
2000 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 5p
Past Performance 8p
Fees and Expenses 10p
Management 11p
Buying and Selling Shares 12p
Valuing Fund Shares 12p
Investment Options 12p
Purchasing Shares 14p
Transactions through Third Parties 17p
Sales Charges 17p
Exchanging/Selling Shares 21p
Distributions and Taxes 26p
Other Information 27p
Financial Highlights 28p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. But no matter what
transpires, this is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Arne H. Carlson
(picture of) Clay L. Hoes
Clay L. Hoes
Portfolio manager
From the Portfolio Manager
The price of gold was highly volatile during the past 12 months, but, in the
end, it finished the period slightly below where it began. AXP Precious Metals
Fund's performance followed a similar path, with its Class A shares realizing a
loss of 9.11% (excluding the sales charge) for the fiscal year -- April 1999
through March 2000.
During the first five months of the period, there was little indication of
impending change in the gold market. The fundamentals were pretty much the same
as they had been for years. Demand for gold
AXP PRECIOUS METALS FUND (This annual report is not part of the prospectus.)
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jewelry and coins remained healthy in the U.S., as well in overseas markets such
as China and the Middle East. On the other hand, the supply of gold remained
relatively low, as producers continued to cut back production because of weak
prices.
Among other factors, the United Kingdom announced that it would sell about half
of its gold reserves to meet reserve-ratio requirements of the new European
Union. Beyond that, the International Monetary Fund (IMF) said that it was
considering selling some of its gold reserves to provide financial relief for
third-world countries. Those events helped push gold prices down to a 20-year
low of $252 per ounce by mid-summer.
TEMPORARY TURNAROUND
In September, though, the environment began to change. First, the IMF decided to
abandon its plan to sell gold, thereby washing away worries that the market
would be flooded with more supply. That sense of relief was soon bolstered by a
gold auction by the Bank of England, at which demand swamped the supply. In
addition, 15 European central banks agreed to refrain from leasing their
reserves, a positive change that offered the possibility of curtailing
speculation activity in the gold market.
The price of gold responded immediately, soaring all the way to $340 an ounce by
early October. Stocks of gold producers, which form the core of the Fund's
portfolio, were swept along by the rally. To illustrate the strength of the
upturn, the Fund's value rose by more than 20% in the final two weeks of
September.
The run-up proved to be fleeting, however. Spooked first by the United Kingdom's
selling of a large portion of its gold reserves and later by the remarkable lack
of Y2K-related computer problems, gold slumped over the ensuing months to finish
at $276, just a few dollars below where it was at the outset of the fiscal year.
As for changes to the portfolio, upon being named portfolio manager last summer
I began to eliminate several smaller positions, ultimately reducing the total
number of holdings to about 30. I also employed a small amount of options (less
than 1% of assets), which boosted Fund performance when the price of gold spiked
last fall.
Clay L. Hoes
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $4.95
March 31, 1999 $5.45
Decrease $0.50
Distributions -- April 1, 1999 - March 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -9.11%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $4.85
March 31, 1999 $5.38
Decrease $0.53
Distributions -- April 1, 1999 - March 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -9.78%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $4.95
March 31, 1999 $5.43
Decrease $0.48
Distributions -- April 1, 1999 - March 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -8.89%**
* Returns do not include sales load. 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.
AXP PRECIOUS METALS FUND (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 2000)
Newmont Mining 14.17% $6,619,062
Stillwater Mining 13.27 6,200,000
Meridian Gold 9.17 4,285,124
Barrick Gold 6.72 3,137,500
Placer Dome 6.19 2,892,500
DeBeers Consol Mines ADR 5.40 2,523,125
Impala Platinum Holdings 5.20 2,431,337
Goldcorp Cl A 4.56 2,132,237
Delta Gold 4.54 2,122,925
Homestake Mining 3.85 1,800,000
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here make up 73.07% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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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. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $10
$ 5 $8 $5 $5 $8
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600.
* Shares purchased is determined by dividing the amount invested per month by
the current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. 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.
AXP PRECIOUS METALS FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in AXP Precious Metals Fund
$60,000
$50,000
X S&P 500 Index
$40,000
$30,000
$20,000
X Lipper Gold Funds Index
$9,425
X $7,713
AXP Precious
Metals Fund
Class A
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00
(The printed version of this chart contains a line graph with three lines
corresponding to the two Indexes and Fund noted above.)
Average annual total returns (as of March 31, 2000)
1 year 5 years 10 years (A) Since inception (B&Y)
Class A -14.33% -8.55% -2.56% --%
Class B -13.39% -8.34% --% -7.57%*
Class Y -8.89% -7.31% --% -6.53%*
*Inception date was March 20, 1995.
Assumes: Holding period from 4/1/90 to 3/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $1,025. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500
Index) and the Lipper Gold Funds 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 5.75%, 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
5.75%. This was a period of widely fluctuating security prices. Past performance
is no guarantee of future results.
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies may be generally larger than those
in which the Fund invests.
Lipper Gold Funds Index, an unmanaged index published by Lipper Inc., includes
the 30 largest funds that are generally similar to the Fund, although some funds
in the index may have somewhat different investment policies or objectives.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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The financial statements contained in Post-Effective Amendment #34 to
Registration Statement No. 2-93745 filed on or about May 17, 2000, are
incoporated herein by reference.
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American
Express(R)
Funds
AXP Precious Metals Fund
200 AXP Financial Center
Minneapolis, MN 55474
AMERICAN
EXPRESS (logo)
S-6142 R (5/00)
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
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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) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
