IDS LIFE INVESTMENT SERIES INC, 485APOS, 1999-08-27

IDS LIFE INVESTMENT SERIES INC
485APOS, 1999-08-27

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 39 (File No. 2-73115) [X]
---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 41 (File No. 811-3218) [X]
---

AXP Variable Portfolio - Investment Series, Inc.
(Formerly known as IDS LIFE INVESTMENT SERIES, INC.)
IDS Tower 10
Minneapolis, Minnesota 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)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on Oct. 29, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) 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.
<PAGE>

American Express(R)Variable Portfolio Funds

AXPSM Variable Portfolio - Blue Chip Advantage Fund
AXPSM Variable Portfolio - Bond Fund
AXPSM Variable Portfolio - Capital Resource Fund
AXPSM Variable Portfolio - Cash Management Fund
AXPSM Variable Portfolio - Diversified Equity Income Fund
AXPSM Variable Portfolio - Extra Income Fund
AXPSM Variable Portfolio - Federal Income Fund
AXPSM Variable Portfolio - Global Bond Fund
AXPSM Variable Portfolio - Growth Fund
AXPSM Variable Portfolio - International Fund
AXPSM Variable Portfolio - Managed Fund
AXPSM Variable Portfolio - New Dimensions Fund
AXPSM Variable Portfolio - Small Cap Advantage Fund
AXPSM Variable Portfolio - Strategy Aggressive Fund

Prospectus
Oct. 29, 1999

Please note that each 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

Like all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.

<PAGE>

Table of Contents

TAKE A CLOSER LOOK AT:

THE FUNDS

AXP VARIABLE PORTFOLIO - BLUE CHIP ADVANTAGE FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - BOND FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - CAPITAL RESOURCE FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - CASH MANAGEMENT FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - EXTRA INCOME FUND
Goal
Investment Strategy
Risks
Past Performance
Management

<PAGE>

AXP VARIABLE PORTFOLIO - FEDERAL INCOME FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - GLOBAL BOND FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO - GROWTH FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO- INTERNATIONAL FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO- MANAGED FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO- NEW DIMENSIONS FUND
Goal
Investment Strategy
Risks
Past Performance
Management

AXP VARIABLE PORTFOLIO- SMALL CAP ADVANTAGE FUND
Goal
Investment Strategy
Risks
Past Performance
Management

<PAGE>

AXP VARIABLE PORTFOLIO- STRATEGY AGGRESSIVE FUND
Goal
Investment Strategy
Risks
Past Performance
Management

FEES AND EXPENSES
Shareholder Fees
Annual Fund Operating Expenses

BUYING AND SELLING SHARES
Valuing Fund Shares
Purchasing Shares
Transferring/Selling Shares

DISTRIBUTIONS AND TAXES

ABOUT THE COMPANY

FINANCIAL HIGHLIGHTS

<PAGE>

The Funds

References to "Fund" throughout this prospectus refer to AXP Variable Portfolio
- - Blue Chip Advantage Fund, AXP Variable Portfolio Bond Fund, AXP Variable
Portfolio - Capital Resource Fund, AXP Variable Portfolio - Cash Management
Fund, AXP Variable Portfolio Diversified Equity Income Fund, AXP Variable
Portfolio - Extra Income Fund, AXP Variable Portfolio - Federal Income Fund, AXP
Variable Portfolio - Global Bond Fund, AXP Variable Portfolio - Growth Fund, AXP
Variable Portfolio - International Fund, AXP Variable Portfolio - Managed Fund,
AXP Variable Portfolio - New Dimensions Fund, AXP Variable Portfolio - Small Cap
Advantage Fund and AXP Variable Portfolio - Strategy Aggressive Fund, singularly
or collectively as the context requires.

Please remember that you may not buy (nor will you own) shares of the Fund
directly. You invest by buying a variable annuity or life insurance policy and
allocating your purchase payments to the variable subaccount or account (the
subaccount) that invests in the Fund.

The Fund was patterned after an existing retail fund managed by American Express
Financial Corporation (AEFC), the Fund's investment advisor. The Fund has
substantially the same investment policies, goals and objectives as the retail
fund. In addition, the Fund will be managed by the same portfolio manager and
will have substantially similar investment strategies, techniques and
characteristics as the retail fund. However, the Fund is not the same as the
retail fund. The Fund will have its own portfolio holdings and its own fees and
operating expenses. Therefore, the performance of the Fund may be greater or
less than the performance of the retail fund.

AXP Variable Portfolio - Blue Chip Advantage Fund

GOAL
The Fund seeks to provide shareholders with a long-term total return exceeding
that of the U.S. stock market. Because any investment involves risk, achieving
this goal cannot be guaranteed.

INVESTMENT STRATEGY
Currently, the S&P 500 Index is the unmanaged market index used to measure total
return of the U.S. stock market (the Fund may change this market index from time
to time). Accordingly, the Fund's assets primarily are invested in common stocks
of companies that are included in the S&P 500 Index. To the extent practicable,
the Fund's total assets are fully invested in stocks with 65% of those being
blue chip stocks. Blue chip stocks are issued by companies with a market
capitalization of at least $1 billion, an established management, a history of
consistent earnings and a leading position within their respective industries.
Although the Fund invests in common stocks that comprise the S&P 500 Index, it
is not an index fund, it will not own all of the companies in the market index,
and its results will likely differ from the market index.

The selection of common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:

o Identifying companies that are included in the S&P 500 Index with:
- effective management,
- financial strength,
- strong, sustainable earnings growth, and
- competitive market position.
o Focusing on those companies that AEFC considers to be "blue chips."
o Establishing one or more industry classifications for each company
(AEFC will classify each company into one of at least 25 industries -
the classifications may or may not be the same as the ones assigned by
others).
o Assigning ratings to each company based on that company's merits and on
its industry grouping(s).
o Buying a diversified portfolio of securities. AEFC will over-weight
certain industry classifications based on AEFC's expectations for
growth and for expected market trends.

<PAGE>

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued,
- the security has reached AEFC's price objective,
- the company has met AEFC's earnings and/or growth expectations,
- political, economic, or other events could affect the company's
performance,
- AEFC wishes to minimize potential losses (i.e., in a market down-turn),
- AEFC wishes to lock-in profits,
- AEFC identifies a more attractive opportunity, and
- the company or the security continues to meet the other standards
described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as derivative instruments (generally options and futures
contracts that are based on the S&P 500 Index) in order to remain fully invested
and money market securities.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could cause the Fund to
lose the opportunity to participate in market improvement. During these times,
AEFC may make frequent securities trades that could result in increased fees and
expenses.

For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.

RISKS
This Fund is designed for investors with above-average risk tolerance. Please
remember that with any mutual fund investment you may lose money. Principal
risks associated with an investment in the Fund include:

Market Risk
Style Risk

Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.

Style Risk
The objective of the Fund is to provide shareholders with a long-term return
exceeding that of the U.S. stock market. Currently, the S&P 500 Index is the
market index used to measure total return of the U.S. stock market. However,
unlike the unmanaged index, the Fund's performance is affected by factors such
as the size of the Fund's portfolio, transaction costs, management fees and
expenses, brokerage commissions and fees, the extent and timing of cash flows in
and out of the Fund, stock selection, sector weightings, and other such factors.
As a result, once these factors are accounted for, the Fund may under-perform
the market index.

<PAGE>

PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance
information is not available.

MANAGEMENT
Keith Tufte and James Johnson are primarily responsible for the day-to-day
operations of AXP Variable Portfolio-Blue Chip Advantage Fund.

Keith Tufte joined AEFC in 1990. Besides managing this Fund, he has managed AXP
Blue Chip Advantage Fund and Aggressive Growth Portfolio since November 1998. He
also became director of research-equities in 1998. Prior to that he was
portfolio manager of Equity Income Portfolio.

James Johnson joined AEFA in 1994. Besides managing this Fund, he also is a
member of the portfolio management team for Total Return Portfolio. He began
managing portfolios for American Express Asset Management in 1996. Prior to
joining American Express Financial Advisors Inc. (AEFA), he worked for Piper
Capital Management as an equity quantitative analyst.

<PAGE>

AXP Variable Portfolio - Bond Fund

GOAL
The Fund seeks to provide shareholders with a high level of current income while
attempting to conserve the value of the investment and to continue a high level
of income for the longest period of time. Because any investment involves risk,
achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in bonds and other debt obligations.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in bonds. Additionally, at least 50% of the Fund's investments will be
invested in (1) investment-grade corporate bonds, (2) unrated corporate bonds
that are believed to be of investment grade quality, and (3) government bonds
(including mortgage-backed securities). Although the Fund emphasizes high and
medium-quality debt securities, it will assume some credit risk to achieve
higher dividends and/or capital appreciation (by buying junk bonds). As a
result, lower-quality bonds may comprise a large percentage of the Fund's
investments. The Fund may invest up to 25% of its total assets in foreign
investments.

The selection of debt obligations is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks by reviewing interest rate and economic
forecasts.
o Overweighting certain segments based on AEFC's expectations for interest
rates.
o Identifying U.S. and foreign bonds that:
-are investment-grade,
-are below investment-grade (junk bonds), and
-are expected to outperform comparable investments on a risk-adjusted basis
(i.e., after considering coupon, sinking fund provision, call protection,
and quality).
o Identifying investments that contribute to portfolio diversification.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-the interest rate or economic outlook changes,
-the security is overvalued,
-the issuer's credit rating declines or AEFC expects a decline (the Fund
may continue to own securities that are down-graded until AEFC believes it
is advantageous to sell),
-the security has reached AEFC's price objective,
-AEFC identifies a more attractive opportunity, and
-the issuer or the security continues to meet the other standards described
above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities, common stocks, preferred stocks,
derivative instruments and convertible securities.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:

<PAGE>

Call/Prepayment Risk
Credit Risk
Event Risk
Foreign/Emerging Markets Risk
Interest Rate Risk
Liquidity Risk
Market Risk

Call/Prepayment Risk
The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity.

Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.

Event Risk
Occasionally, the value of a security may be seriously and unexpectedly changed
by a natural or industrial accident or occurrence.

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Country risk includes the political, economic and other conditions of a
country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing and financial
reporting standards), the possibility of government-imposed restrictions and
even the nationalization of assets.

Currency risk results from the constantly changing exchange rate
between local currency and the U.S. dollar. Whenever the Fund holds securities
valued in a foreign currency or holds the currency, changes in the exchange rate
add or subtract from the value of the investment.

Custody risk refers to the process of clearing and settling trades. It
also covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.

Emerging markets risk includes the dramatic pace of change (economic,
social and political) in these countries as well as the other considerations
listed above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners and hostile relations with neighboring countries.

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation the higher its
yield and the greater the sensitivity to changes in interest rates.

Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.

<PAGE>

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to a recognized index.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Bond Fund Performance (based on calendar years)
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

During the period shown in the bar chart, the highest return for a calendar
quarter was _____% (quarter ending _____, 199_) and the lowest return for a
calendar quarter was _____% (quarter ending _____, 19__).

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years 10 years

AXP VP - Bond Fund

Lehman Brothers Aggregate
Bond Index

This table shows total returns from a hypothetical investment in the Fund.
Comparison index returns are for the same periods. The results do not reflect
the expenses that apply to the variable accounts or the policies. Inclusion of
these charges would reduce total return for all periods shown.

For purposes of this calculation, information about the Fund assumes the
deduction of applicable fund expenses and makes no adjustments for taxes that
may have been paid on the reinvested income and capital gains.

Lehman Brothers Aggregate Bond Index is an unmanaged index made up of a
representative list of government, corporate, asset-backed and mortgage-backed
securities. The index is frequently used as a general measure of bond market
performance. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees. However, the
securities used to create the index may not be representative of the bonds held
in the Fund.

MANAGEMENT
Steve Merrell manages the day-to-day operations of AXP Variable Portfolio - Bond
Fund. He joined AEFC in 1991 and currently serves as vice president and senior
portfolio manager. Besides managing this Fund since 1991, he also serves as
portfolio manager for Total Return Portfolio.

<PAGE>

AXP Variable Portfolio - Capital Resource Fund

GOAL
The Fund seeks capital appreciation. Because any investment involves risk,
achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in U.S. common stocks and other
securities convertible into common stock. Additionally, the Fund may invest up
to 25% of its total assets in foreign investments.

The selection of U.S. common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Portfolio's investment advisor, chooses
investments by:

o Identifying larger companies with:
-effective management,
-financial strength,
-competitive market or product position, and
-earnings growth potential.

o Identifying securities that AEFC believes have good capital appreciation
potential.

o Considering opportunities and risks by reviewing interest rates and
economic forecasts.

o Buying a diversified portfolio of securities. AEFC will over-weight certain
sectors based on AEFC's expectations for growth and for expected market
trends.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:

-the interest rate or economic outlook changes,
-the security is overvalued relative to other potential investments,
-the security has reached AEFC's price objective,
-AEFC wishes to lock-in profits,
-AEFC identifies a more attractive opportunity, and
-the issuer or the security continues to meet the other standards described
above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities, debt obligations and derivative
instruments.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund will invest in these securities
primarily to avoid losses, this type of investing also could cause the Fund to
lose the opportunity to participate in market improvement. During these times,
AEFC may make frequent securities trades that could result in increased fees and
expenses.

For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.

RISKS
This Fund is designed for investors with above-average risk tolerance. Please
remember that with any investment you may lose money. Principal risks associated
with an investment in the Fund include:

Market Risk
Style Risk
Foreign/Emerging Markets Risk

<PAGE>

Style Risk
The Fund purchases stocks based on the expectation that the companies will have
strong growth in earnings. The price paid often reflects an expected rate of
growth. If that growth fails to occur, the price of the stock may decline
significantly and quickly.

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Emerging markets risk includes the dramatic pace of change (economic,
social and political) in emerging market countries as well as the other
considerations listed above. These markets are in early stages of development
and are extremely volatile. They can be marked by extreme inflation, devaluation
of currencies, dependence on trade partners and hostile relations with
neighboring countries.

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to a recognized index.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Capital Resource Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

<PAGE>

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years 10 years

AXP VP - Capital Resource
Fund

S&P 500 Index

The 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 Index Companies are generally larger than
those in which the Fund invests.

The securities included in the index may not be the same as those held by the
Fund.

MANAGEMENT
Joseph M. Barsky manages the day-to-day operations of AXP Variable Portfolio -
Capital Resource Fund. He joined AEFC in 1979 and serves as vice president -
mutual fund equities and senior portfolio manager. He served as portfolio
manager of AXP Equity Select Fund from 1983 to 1997. He also serves as vice
president and senior portfolio manager of IDS Equity Advisors, a division of
American Express Asset Management Group Inc.

<PAGE>

AXP Variable Portfolio - Cash Management Fund

GOAL
The Fund seeks to provide shareholders with maximum current income consistent
with liquidity and conservation of capital. Because any investment involves
risk, the Fund cannot guarantee this goal.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in money market instruments, such as
marketable debt obligations issued by the U.S. government or its agencies, bank
certificates of deposit, bankers' acceptances, letters of credit, and commercial
paper. The Fund may invest more than 25% of its total assets in U.S. banks, U.S.
branches of foreign banks and U.S. government securities. Additionally, the Fund
may invest up to 25% of its total assets in foreign investments.

Because the Fund seeks to maintain a constant net asset value of $1.00 per
share, capital appreciation is not expected to play a role in the Fund's return.
The Fund's yield will vary from day-to-day.

The selection of short-term debt obligations is the primary decision in building
the investment portfolio. The Fund restricts its investments to instruments that
meet certain maturity and quality standards required by the SEC for money market
funds. For example, the Fund:

o limits its average portfolio maturity to ninety days or less;
o buys obligations with remaining maturities of 397 days or less; and
o buys only obligations that are denominated in U.S. dollars and present
minimal credit risk.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks given current interest rates and
anticipated interest rates.
o Purchasing securities based on the timing of cash flows in and out of the
Fund.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
-the issuer's credit rating declines or AEFC expects a decline (the Fund,
in certain cases, may continue to own securities that are down-graded
until AEFC believes it is advantageous to sell),
-political, economic, or other events could affect the issuer's
performance,
-AEFC identifies a more attractive opportunity, and
-the issuer or the security continues to meet the other standards
described above.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
Please remember that with any mutual fund investment you may lose money.
Although the Fund's share price has remained constant in the past, THE FUND
CANNOT GUARANTEE THAT IT WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE. An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Principal risks
associated with an investment in the Fund include:

Credit Risk
Foreign/Emerging Markets Risk
Interest Rate Risk
Market Risk
Sector/Concentration Risk

<PAGE>

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).

<PAGE>

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Cash Management Fund Performance (based on calendar years)
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years 10 years

AXP VP - Cash Management Fund

This table shows total returns from hypothetical investments in shares of the
Fund. The results do not reflect the expenses that apply to the variable
accounts or the policies. Inclusion of these charges would reduce total return
for all periods shown.

MANAGEMENT
Terry Fettig manages the day-to-day operations of AXP Variable Portfolio - Cash
Management Fund. He joined AEFC in 1986 and currently serves as senior portfolio
manager. He also serves as portfolio manager for AXP Cash Management Fund, AXP
Intermediate Tax-Exempt Fund, IDS Life Series Fund, Money Market Portfolio and
AXP Tax-Free Money Fund.

<PAGE>

AXP Variable Portfolio - Diversified Equity Income Fund

GOAL
The Fund seeks to provide shareholders with a high level of current income and,
as a secondary goal, steady growth of capital. Because any investment involves
risk, achieving these goals cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in equity securities. Under normal
market conditions, the Fund will invest at least 65% of its net assets in
dividend-paying common and preferred stocks.

The selection of dividend-paying stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:

o Identifying companies with:
- dividend-paying stocks,
- effective management,
- financial strength, and
- moderate growth potential.

o Determining specific industry weightings within the following sectors:
- Consumer cyclical - Energy
- Consumer stable - Technology
- Financial - Industrial

o Identifying stocks that are selling at low prices in relation to:
- current and projected earnings,
- current and projected dividends, and
- historic price levels.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued,
- the security has reached AEFC's price objective,
- the company has met AEFC's earnings and/or growth expectations, and
- the company or the security continues to meet the other standards
described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as foreign securities, convertible securities, real estate
investment trusts, debt obligations and money market securities.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:

Market Risk
Sector/Concentration Risk
Inflation Risk

<PAGE>

Inflation Risk
Also known as purchasing power risk, inflation risk measures the effects of
continually rising prices on investments. If an investment's yield is lower than
the rate of inflation, your money will have less purchasing power as time goes
on.

PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance
information is not available.

MANAGEMENT
Kurt Winters manages the day-to-day operations of AXP Variable
Portfolio-Diversified Equity Income Fund. He is a senior portfolio manager at
AEFC. He joined AEFC in 1987. Kurt is responsible for overall portfolio
management, including the determination of the sectors in which the Fund will
invest. A team of research professionals makes investment decisions within those
sectors. From 1992 to 1995, he managed IDS Life Series Fund, Managed Portfolio.
He also manages AXP Discovery Fund and provides overall portfolio management for
AXP Equity Value Fund, AXP Progressive Fund, Balanced Portfolio, Equity Income
Portfolio and IDS Life Series Fund, Equity Income Portfolio.

<PAGE>

AXP variable Portfolio - Extra Income Fund

GOAL
The Fund seeks to provide shareholders with high current income as its primary
goal and, as its secondary goal, capital growth.

INVESTMENT STRATEGY
The Fund invests primarily, and may invest all of its assets, in high-yielding,
high risk corporate bonds (junk bonds). These bonds may be issued by U.S. and
foreign companies and governments. The Fund may invest up to 25% of its total
assets in foreign investments.

The selection of debt obligations is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks by reviewing interest rate and
economic forecasts.
o Identifying securities and /or companies that:
- have medium and low quality ratings,
- have similar qualities, in AEFC's opinion, even though they are not
rated or have been given a different rating by a rating agency,
- have growth potential,
- have the potential for capital appreciation through credit upgrades.
o Buying securities that are expected to outperform other securities on a
risk-adjusted basis (i.e., after considering coupon, sinking fund
provision, call protection, and quality). AEFC believes that credit
selection is a primary concern and aggressively manages the Fund to earn a
high total return.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the interest rate or economic outlook changes,
- a sector or industry is experiencing change,
- a security's rating is changed,
- the security is overvalued,
- the company does not meet AEFC's performance expectations,
- AEFC wishes to lock-in profits,
- AEFC identifies a more attractive opportunity, and
- the issuer or the security continues to meet the other standards
described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities, convertible securities, preferred
stocks and common stocks.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
This Fund is designed for long-term investors with above-average risk tolerance.
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:

Market Risk
Interest Rate Risk
Credit Risk
Foreign/Emerging Markets Risk

<PAGE>

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

<PAGE>

AXP VP - Extra Income Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year Since inception

AXP VP - Extra Income Fund *

Lehman Brothers Aggregate
Bond Index

Merrill Lynch High Yield
Bond Index

* May 1, 1996

Merrill Lynch High Yield Bond Index provides a broad-based measure of
performance of the non-investment grade U.S. domestic bond market. The index
currently captures close to $200 billion of the outstanding debt of domestic
market issuers rated below investment grade but not in default. The index is
"rule-based," which means there is a defined list of criteria that a bond must
meet in order to qualify for inclusion in the index.

The securities included in the indexes may not be the same as those held by the
Fund.

MANAGEMENT
Jack Utter and Scott Schroepfer are primarily responsible for the day-to-day
operations of AXP Variable Portfolio - Extra Income Fund.

Jack Utter, vice president and senior portfolio manager, joined AEFC in 1962.
Besides serving as co-manager of this Fund, he also has managed the assets of
High Yield Portfolio since 1985.

Scott Schroepfer, senior portfolio manager, joined AEFC in 1990. He became
co-manager of this Fund and AXP Extra Income Fund in March 1999. He also serves
as a portfolio manager of IDS Life Series Fund - Managed Portfolio since 1995
and as an associate manager since 1994.

<PAGE>

AXP Variable Portfolio - Federal Income Fund

GOAL
The Fund seeks to provide shareholders with a high level of current income and
safety of principal consistent with an investment in U.S. government and
government agency securities. Because any investment involves risk, achieving
this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in debt obligations. Under normal
market conditions, at least 65% of the Fund's total assets are invested in
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities. Although the Fund may invest in
any U.S. government securities, it is anticipated that U.S. government
securities representing part ownership in pools of mortgage loans
(mortgage-backed securities) will comprise a large percentage of the Fund's
investments. Additionally, the Fund will aggressively utilize derivative
instruments and when-issued securities to produce incremental earnings, to hedge
existing positions, and to increase flexibility. The Fund's potential losses
from the use of these instruments could extend beyond its initial investment.

The selection of debt obligations is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks by reviewing credit characteristics
and the interest rate outlook.
o Identifying and buying securities that:
- are high quality or have similar qualities, in AEFC's opinion,
even though they are not rated or have been given a lower rating
by a rating agency, and
- have short or intermediate-term maturities.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the interest rate or economic outlook changes,
- the security is overvalued,
- AEFC wishes to lock-in profits,
- AEFC identifies a more attractive opportunity, and
- the issuer or the security continues to meet the other standards
described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities and investment grade
non-governmental debt obligations.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:

Market Risk
Correlation Risk
Interest Rate Risk
Call/Prepayment Risk

<PAGE>

Correlation Risk
The risk that a given transaction may fail to achieve its objectives due to an
imperfect relationship between markets. Certain investments may react more
negatively than others in response to changing market conditions.

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

Call/Prepayment Risk
The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity.

PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance
information is not available.

MANAGEMENT
Jim Snyder manages the day-to-day operations of AXP Variable Portfolio - Federal
Income Fund. Jim joined AEFC in 1989 and currently serves as vice president and
senior portfolio manager. Besides managing this Fund, he also manages the assets
of Government Income Portfolio.

<PAGE>

AXP Variable Portfolio - Global Bond Fund

GOAL
The Fund seeks to provide shareholders with high total return through income and
growth of capital. Because any investment involves risk, achieving this goal
cannot be guaranteed.

INVESTMENT STRATEGY
The Fund is a non-diversified mutual fund that invests primarily in debt
obligations of U.S. and foreign issuers. Under normal market conditions, at
least 80% of the Fund's net assets will be invested in investment-grade
corporate or government debt obligations including money market instruments of
issuers located in at least three different countries. Although the Fund
emphasizes high and medium-quality debt securities, it will assume some credit
risk to achieve higher dividends and /or capital appreciation (by buying junk
bonds).

The selection of investment-grade government and corporate debt obligations is
the primary decision in building the portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks by credit rating and currency.
o Identifying investment-grade U.S. and foreign bonds.
o Identifying below investment-grade U.S. and foreign bonds (junk bonds).
o Identifying bonds that can take advantage of currency movements and
interest rate differences among nations.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued, and
- the security continues to meet the standards described above.

AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments (such as options and
forward contracts) to hedge against currency fluctuations. Although not a
primary investment strategy, the Fund also may invest in other instruments such
as money market securities.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

RISKS
Please remember that with any mutual fund investment you may lose money. In
addition, since the Fund is a non-diversified mutual fund, it may concentrate
its investments in securities of fewer issuers than would a diversified fund.
Accordingly, the Fund may have more risk than mutual funds that have broader
diversification. Principal risks associated with an investment in the Fund
include:

Credit Risk
Foreign/Emerging Markets Risk
Interest Rate Risk
Market Risk

<PAGE>

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Global Bond Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

<PAGE>

Average Annual Total Returns (as of Dec. 31, 1998)

1 year Since inception

AXP VP - Global Bond Fund *

Salomon Brothers World
Government Bond Index

Lipper Global Income Fund
Index

Salomon Brothers Global
Government Bond Composite
Index

*May 1, 1996

Salomon Brothers World Government Bond Index, is an unmanaged market
capitalization weighted benchmark, tracks the performance of the 17 government
bond markets around the world. It is widely recognized by investors as a
measurement index for portfolios of government bond securities. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.

Lipper Global Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.

Salomon Brothers Global Government Bond Composite Index is an unmanaged index
that includes all government bond markets tracked by Salomon Brothers. The index
is a general measure of government bond performance. Performance is expressed in
the U.S. dollar as well as the currencies of governments making up the index.
The bonds included in the index may not be the same as those in the Fund. The
index reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.

The securities included in the indexes may not be the same as those held by the
Fund.

MANAGEMENT
Michael Ng manages the day-to-day operations of AXP Variable Portfolio - Global
Bond Fund. He joined AEFC in 1994 and has served as portfolio manager of this
Fund since July 1998. He also manages AXP Global Balanced Fund. Prior to joining
AEFC, he was a fixed income analyst for the St. Paul Companies.

<PAGE>

AXP Variable Portfolio - Growth Fund

GOAL
The Fund seeks to provide shareholders with long-term capital growth. Because
any investment involves risk, achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund primarily invests in common stocks and securities convertible into
common stocks that appear to offer growth opportunities. These growth
opportunities could result from new management, market developments, or
technological superiority. The Fund may invest up to 25% of its total assets in
foreign investments.

The selection of common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Identifying companies with:
- effective management,
- financial strength,
- competitive market or product position, and
- technological advantage.

o Selecting companies that AEFC believes have good long-term growth
potential.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the company has met AEFC's earnings and/or growth expectations,
- political, economic, or other events could affect the company's
performance,
- AEFC identifies a more attractive opportunity, and
- the company continues to meet the other standards described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities, preferred stock, debt obligations,
derivative instruments and convertible securities.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

Market Risk
Style Risk

Style Risk
AEFC purchases growth stocks based on the expectation that the companies will
have strong growth in earnings. The price paid often reflects an expected rate
of growth. If that growth fails to occur, the price of the stock may decline
significantly and quickly.

<PAGE>

PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance
information is not available.

MANAGEMENT
Mitzi Malevich manages the day-to-day operations of AXP Variable
Portfolio-Growth Fund. She joined AEFC in 1983 and currently serves as vice
president and senior portfolio manager. She also serves as portfolio manager of
Growth Portfolio and IDS Life Variable Annuity Funds A and B.

<PAGE>

AXP Variable Portfolio - International Fund

GOAL
The Fund seeks to provide shareholders with capital appreciation. Because any
investment involves risk, achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in equity securities of foreign issuers
that offer strong growth potential. Under normal market conditions, at least 65%
of the Fund's total assets are invested in common stocks or convertible
securities of companies located in at least three foreign countries. The Fund
may invest in developed and in emerging markets.

The selection of geographic regions is the primary decision in building the
investment portfolio. The percentage of the Fund's total assets invested in
particular countries or regions will change according to their political
stability and economic condition.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Considering opportunities and risks within regions or countries.
o Identifying sectors or companies with strong growth potential.
o Selecting stocks of large companies that AEFC believes have the following
fundamental strengths:
- financial strength,
- high demand for their products or services, and
- effective management.
o Identifying securities with sufficient liquidity in trading volume
(however, AEFC may invest up to 10% of the Fund's net assets in illiquid
securities).

AEFC decides how much to invest in various countries and local currencies, and
then buys securities that offer the best opportunity for long-term growth.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued,
- the security has reached AEFC's price objective,
- the company or the security continues to meet the standards
described above, and
- the region or country is undergoing political, economic, or other
change.

AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments to hedge against currency
fluctuations. Although not a primary investment strategy, the Fund also may
invest in other instruments such as money market securities and debt securities.

During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in money market securities. Investments
in U.S. issuers generally will constitute less than 20% of the Fund's total
assets. If, however, investments in foreign securities appear to be relatively
unattractive in AEFC's judgment, as a temporary defensive strategy, the Fund may
invest any portion of its assets in securities of U.S. issuers appearing to
offer opportunities for superior growth. Although the Fund will invest in these
securities primarily to avoid losses, this type of investing also could cause
the Fund to lose the opportunity to participate in market improvement. During
these times, AEFC may make frequent securities trades that could result in
increased fees and expenses.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

<PAGE>

Market Risk
Foreign/Emerging Markets Risk
Liquidity Risk
Style Risk

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Country risk includes the political, economic and other conditions of a
country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.

Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other investments
or forego an investment opportunity.

<PAGE>

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - International Fund Performance (based on calendar years)
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years Since inception

AXP VP - International Fund a

MSCI EAFE Index b

Lipper International Fund
Index

MSCI World Index

a Jan. 13, 1992.
b Measurement period started Feb. 1, 1992.

Morgan Stanley Capital International EAFE Index (MSCI EAFE) is an unmanaged
index compiled from a composite of securities markets of Europe, Australia and
the Far East, is widely recognized by investors in foreign markets as the
measurement index for portfolios of non-North American securities. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.

Lipper International Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.

<PAGE>

Morgan Stanley Capital International (MSCI) World Index, an unmanaged market
index, compiled from a composite of over 1,500 companies listed on the stock
exchanges of North America, Europe, New Zealand and the Far East, is widely
recognized by investors as the measurement index for portfolios of global
securities. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.

The securities included in the indexes may not be the same as those held by the
Fund.

MANAGEMENT
Peter Lamaison manages the day-to-day operations of AXP Variable Portfolio -
International Fund. He joined AEFC in 1981 and has since served as president,
chief executive officer and chief investment officer of American Express Asset
Management International Inc. He also serves as portfolio manager of AXP Global
Balanced Fund and AXP International Fund.

<PAGE>

AXP Variable Portfolio - Managed Fund

GOAL
The Fund seeks maximum total investment return through a combination of capital
growth and current income. Because any investment involves risk, achieving this
goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in a combination of equity and debt
securities. It will invest in a combination of common and preferred stocks,
convertible securities, bonds and other debt securities. Under normal market
conditions, at least 50% of the Fund's total assets are invested in common
stocks. Although the Fund emphasizes high and medium-quality securities for the
debt portion of its portfolio, it will assume some credit risk to achieve higher
dividends and/or capital appreciation (by buying lower-quality bonds). The Fund
may invest up to 25% of its total assets in foreign investments.

The selection of common stocks and debt obligations are the primary decisions in
building the investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:

o Identifying companies with:
-effective management,
-financial strength,
-competitive market position, and
-growth potential.

o Considering opportunities and risks given overall market conditions and
industry outlook.

AEFC chooses debt obligations by:

o Considering opportunities and risks by reviewing interest rate and
economic forecasts.
o Identifying U.S. and foreign bonds that:
-are investment-grade,
-are below investment-grade (lower-quality bonds), and
-are expected to outperform comparable investments on a risk-adjusted
basis (i.e., after considering coupon, sinking fund provision,
call protection, and quality).
o Identifying investments that contribute to portfolio diversification.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:

- the interest rate or economic outlook changes,
- the security is overvalued,
- the issuer's credit quality declines or AEFC expects a decline (the
Fund may continue to own securities that are down-graded until AEFC
believes it is advantageous to sell),
- the security has reached AEFC's price objective, and
- AEFC identifies a more attractive opportunity.

Although not a primary investment strategy, the Fund also may invest other
instruments such as derivatives and money market securities.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Investments other than common stock will constitute 50%
or less of the Fund's total assets. However, under unusual market conditions,
the Fund may invest any portion of its assets in securities other than common
stocks. Although the Fund will invest in these securities primarily to avoid
losses, this type of investing also could cause the Fund to lose the opportunity
to participate in market improvement. During these times, AEFC may make frequent
securities trades that could result in increased fees and expenses.

<PAGE>

For more information on strategies and holdings, see the SAI and the
annual/semiannual reports.

RISKS
Please remember that with any investment you may lose money. Principal risks
associated with an investment in the Fund include:

Market Risk
Interest Rate Risk
Credit Risk
Foreign/Emerging Markets Risk
Liquidity Risk

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

<PAGE>

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to a recognized index.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Managed Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years 10 years

AXP VP - Managed Fund

S&P 500 Index

The securities included in the index may not be the same as those held by the
Fund.

MANAGEMENT
Alfred Henderson and Deborah Pederson are primarily responsible for the
day-to-day operations of AXP Variable Portfolio - Managed Fund.

Alfred Henderson joined AEFC in 1996 and serves as senior portfolio manager. He
has managed the equity portfolio of this Fund since 1996. From 1995-1996 he was
a portfolio manager at Montgomery Asset Management. From 1992-1995 he was a
senior portfolio manager as Husic Capital Management.

Deborah L. Pederson joined AEFC in 1986 and serves as portfolio manager. She has
managed the fixed income portfolio of this Fund since January 1994. She also
manages the low grade invested assets of IDS Life Insurance Company, IDS Life
Insurance Company of New York and American Enterprise Life Insurance Company.

<PAGE>

AXP Variable Portfolio - New Dimensions Fund

GOAL
The Fund seeks to provide shareholders with long-term growth of capital. Because
any investment involves risk, achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund primarily invests in common stocks showing potential for significant
growth. These companies often operate in areas where dynamic economic and
technological changes are occurring. The Fund may invest up to 30% of its total
assets in foreign investments.

The selection of common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Identifying companies with:
-effective management,
-financial strength, and
-competitive market position.

o Selecting companies that AEFC believes have good long-term growth potential.

o Considering opportunities and risks by reviewing interest rate and economic
forecasts both domestically and abroad.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued relative to alternative investments,
- the company has met AEFC's earnings and/or growth expectations,
- political, economic, or other events could affect the company's
performance,
- AEFC wishes to minimize potential losses (i.e., in a market down-turn),
and
- AEFC identifies a more attractive opportunity.

During weak or declining markets or when growth opportunities are not available,
the Fund may invest more of its assets in money market securities. Although the
Fund primarily will invest in these securities to avoid losses, this type of
investing also could cause the Fund to lose the opportunity to participate in
market improvement. During these times, AEFC may make frequent securities trades
that could result in increased fees and expenses.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

Market Risk
Style Risk
Foreign/Emerging Markets Risk

<PAGE>

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - New Dimensions Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

<PAGE>

Average Annual Total Returns (as of Dec. 31, 1998)

1 year Since inception

AXP VP - New Dimensions *
Fund

S&P 500 Index

Lipper Growth Fund Index

*May 1, 1996

Lipper Growth Fund Index, an unmanaged index published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.

The securities included in the indexes may not be the same as those held by the
Fund.

MANAGEMENT
Gordon Fines manages the day-to-day operations of AXP Variable Portfolio - New
Dimensions Fund. He joined AEFC in 1981 and currently serves as vice president
and senior portfolio manager. He also serves as portfolio manager of Growth
Trends Portfolio and leads the growth team for AEFC.

<PAGE>

AXP Variable Portfolio - Small Cap Advantage Fund

GOAL
The Fund seeks to provide shareholders with long-term capital growth. Because
any investment involves risk, achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in equity securities. Under normal
market conditions, at least 80% of the Fund's net assets are invested in equity
securities of small companies. These companies will often be those included in
the S&P SmallCap 600 Index or the Russell 2000 Index.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, employs an
active investment strategy that focuses on individual stock selection.

AEFC manages the Fund to provide diversified exposure to the small cap segment
of the U.S. stock market. Under normal market conditions, it is expected that
the Fund will be fully invested in common stocks, and will typically hold
between 175 and 225 issues, across a wide range of industries.

AEFC buys stocks based on an analysis of valuation and earnings. This selection
discipline favors companies that exhibit:

o Attractive valuations, based on measures such as the ratio of stock price
to company earnings, free cash flow or book value; and

o Improving earnings, based on an analysis of trends in earnings forecasts
and prior period earnings that were better than expected, as well as a
qualitative assessment of the company's competitive market position.

AEFC will normally sell a stock holding if:
- the stock's price moves above a reasonable valuation target; or
- the company's financial performance fails to meet expectations.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities and debt securities.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund would invest in these securities
primarily to reduce risk, this type of investment also could cause the Fund to
lose the opportunity to participate in market improvement. During these times,
AEFC may make frequent securities trades that could result in increased fees and
expenses.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

Market Risk
Small Company Risk

<PAGE>

Small Company Risk
Investments in small and medium companies often involve greater risks than
investments in larger, more established companies because small and medium
companies may lack the management experience, financial resources, product
diversification and competitive strengths of larger companies. In addition, in
many instances the securities of small and medium companies are traded only
over-the-counter or on regional securities exchanges and the frequency and
volume of their trading is substantially less than is typical of larger
companies.

PAST PERFORMANCE
The Fund is new as of the date of this prospectus and therefore performance
information is not available.

MANAGEMENT
Jacob E. Hurwitz and Kent A. Kelly are primarily responsible for the day-to-day
management of AXP Variable Portfolio-Small Cap Advantage Fund. They are both
principals and senior portfolio managers at Kenwood Capital Management LLC
(Kenwood), an indirect subsidiary of AEFC. Besides managing the assets of this
Fund, they have managed AXP Small Cap Advantage Fund since May 1999.

From 1992 until the establishment of Kenwood in 1998, Jake Hurwitz served as
senior vice president and equity portfolio manager at Travelers Investment
Management Company (TIMCO) where he had primary responsibility for stock
selection and portfolio management for TIMCO's small and mid-cap portfolios.

Prior to the establishment of Kenwood in 1998, Kent Kelley was chief executive
officer at TIMCO. From 1993 to 1995, Mr. Kelley served as TIMCO's president and
chief executive officer. As chief executive officer, he was responsible for all
portfolio management, research and trading operations.

<PAGE>

AXP Variable Portfolio - Strategy Aggressive Fund

GOAL
The Fund seeks to provide shareholders with capital appreciation. Because any
investment involves risk, achieving this goal cannot be guaranteed.

INVESTMENT STRATEGY
The Fund primarily invests in securities of growth companies.

The selection of common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
equity investments by:
o Considering opportunities and risks within growing industries and new
technologies.
o Selecting companies that AEFC believes have aggressive growth prospects.
o Identifying small and medium companies with:
- effective management,
- financial strength, and
- competitive market position.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued relative to other potential investments,
- the security has reached AEFC's price objective,
- the company's characteristics change,
- the company has met AEFC's earnings and/or growth expectations,
- political, economic, or other events could affect the company's
performance,
- AEFC wishes to minimize potential losses (i.e., in a market down-turn),
- AEFC wishes to lock-in profits,
- AEFC identifies a more attractive opportunity, and
- the company or the security continues to meet the other standards
described above.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as foreign securities, money market securities, debt
obligations, derivative instruments and convertible securities.

During weak or declining markets or when growth opportunities are unavailable,
the Fund may invest more of its assets in money market securities. Although the
Fund primarily will invest in these securities to avoid losses, this type of
investing also could cause the Fund to lose the opportunity to participate in
market improvement. During these times, AEFC may make frequent securities trades
that could result in increased fees and expenses.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

Market Risk
Style Risk
Small Company Risk
Issuer Risk

<PAGE>

Issuer Risk
The risk that an issuer, or the value of its stocks or bonds, will perform
poorly. Poor performance may be caused by poor management decisions, competitive
pressures, breakthroughs in technology, reliance on suppliers, labor problems or
shortages, corporate restructurings, fraudulent disclosures or other factors.

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

AXP VP - Strategy Aggressive Fund Performance (based on calendar years)
- ----------------------------------------------------------------------------

- ----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

<PAGE>

Average Annual Total Returns (as of Dec. 31, 1998)

1 year 5 years Since inception

AXP VP - Strategy a
Aggressive Fund

S&P 500 Index b

Russell Midcap Growth Index

a Jan. 13, 1992.
b Measurement period started Feb. 1, 1992.

Russell Midcap Growth Index, an unmanaged list of common stocks, measures the
performance of the 800 smallest companies in the Russell 1000 Index,
representing approximately 35% of the total market capitalization of the Russell
1000 Index.

The securities included in the index may not be the same as those held by the
Fund.

MANAGEMENT
Martin G. Hurwitz manages the day-to-day operations of AXP Variable Portfolio -
Strategy Aggressive Fund. He joined AEFC in 1987 and has served as portfolio
manager of this Fund since January 1995. He also manages accounts for American
Express Asset Management Group Inc.

<PAGE>

Fees and Expenses

Fund investors pay various expenses. The summary below describes the fees and
expenses that you would pay if you buy a variable annuity or life insurance
policy and allocate your purchase payments to the subaccount that invests in the
Fund.

SHAREHOLDER FEES (fees paid directly from your investment)
Because the Fund is the underlying investment vehicle for a variable annuity or
life insurance policy, there is no sales charge for the purchase or sale of Fund
shares. However, there may be charges associated with your annuity contract or
life insurance policy, including those that may be associated with surrender or
withdrawal. Any charges that apply to the subaccount and your contract or policy
are described in the annuity or life insurance policy prospectus.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)

o Management Fees
The Fund pays IDS Life Insurance Company (IDS Life) a fee for managing
its assets. AXP Variable Portfolio - Blue Chip Advantage Fund, AXP
Variable Portfolio - Diversified Equity Income Fund, AXP Variable
Portfolio - Federal Income Fund, AXP Variable Portfolio - Growth Fund
and AXP Variable Portfolio - Small Cap Advantage Fund commenced
operations in September 1999. Therefore no management fees were paid
for these Funds for the most recent fiscal year. The fee schedule for
each of these Funds is:

- ------------------------------------- -----------------------------------
AXP Variable Portfolio -
Blue Chip Advantage Fund and
AXP Variable Portfolio - AXP Variable Portfolio -
Diversified Equity Income Fund Federal Income Fund
------------------------------ -------------------
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
- ---------- ---------------- ---------- ----------------
First $0.50 0.560% First $1.00 0.610%
Next 0.50 0.545 Next 1.00 0.595
Next 1.00 0.530 Next 1.00 0.580
Next 1.00 0.515 Next 3.00 0.565
Next 3.00 0.500 Next 3.00 0.550
Over 6.00 0.470 Over 9.00 0.535
- ------------------- ----------------- ----------------- -----------------

- ------------------------------------- -----------------------------------
AXP Variable Portfolio - AXP Variable Portfolio -
Growth Fund Small Cap Advantage Fund
----------- ------------------------
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
- ---------- ---------------- ---------- ----------------
First $1.00 0.630% First $0.25 0.790%
Next 1.00 0.615 Next 0.25 0.770
Next 1.00 0.600 Next 0.25 0.750
Next 3.00 0.585 Next 0.25 0.730
Over 6.00 0.570 Next 1.00 0.710
Over 2.00 0.650
- ------------------- ----------------- ----------------- -----------------

<PAGE>

For the most recent fiscal year, the following management fees were
paid as a percentage of average daily net assets:
<TABLE>
<CAPTION>

- ---------------------------------------------------------------- ----------------------------------------------------
Fund Fee
- ---------------------------------------------------------------- ----------------------------------------------------
<S> <C>
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Bond Fund %
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Capital Resource Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Cash Management Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Extra Income Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Global Bond Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - International Fund*
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Managed Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - New Dimensions Fund
- ---------------------------------------------------------------- ----------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------
AXP Variable Portfolio - Strategy Aggressive Fund
- ---------------------------------------------------------------- ----------------------------------------------------
</TABLE>

*AEFC pays American Express Asset Management International Inc. for managing the
assets of AXP Variable Portfolio - International Fund. The fee for the most
recent fiscal year was __% of the Fund's average daily net assets.

o Distribution (12b-1) Fees
AXP Variable Portfolio - Blue Chip Advantage Fund, AXP Variable
Portfolio - Diversified Equity Income Fund, AXP Variable Portfolio -
Federal Income Fund, AXP Variable Portfolio - Growth Fund and AXP
Variable Portfolio - Small Cap Advantage Fund have each adopted a plan
under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays
IDS Life an annual fee of up to 0.125% of average daily net assets as
payment for distributing its shares and providing shareholder services.
Because this fee is paid out of the Fund's assets on an on-going basis,
over time this fee will increase the cost of your investment and may
cost you more than paying other types of sales charges.

o Other Expenses
The Fund pays taxes, brokerage commissions and other nonadvisory
expenses including administrative and accounting services.

o Expense Limitation
Through Aug. 31, 2000, IDS Life and AEFC have agreed to waive certain
fees and reimburse expenses to the extent that total expenses exceed
the following percentage of Fund average daily net assets:

AXP Variable Portfolio-Blue Chip Advantage Fund 0.950%
AXP Variable Portfolio-Diversified Equity Income Fund 0.950
AXP Variable Portfolio-Federal Income Fund 0.875
AXP Variable Portfolio-Growth Fund 0.950
AXP Variable Portfolio-Small Cap Advantage Fund 1.225

Buying and Selling Shares

VALUING FUND SHARES
The net asset value (NAV) is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business of the New York Stock
Exchange, normally 3 p.m. Central Standard Time (CST), each business day (any
day the New York Stock Exchange is open).

AXP Variable Portfolio - Cash Management Fund's securities are valued at
amortized cost. In valuing assets of all other Funds, the Fund's investments are
valued based on market quotations, or where market quotations are not readily
available, based on methods selected in good faith by the board. If the Fund's
investment policies permit it to invest in securities that are listed on foreign
stock exchanges that trade on weekends or other days when the Fund does not
price its shares, the value of the Fund's underlying investments may change on
days when you could not buy or sell shares of the Fund. Please see the SAI for
further information.

<PAGE>

PURCHASING SHARES
You may not buy (nor will you own) shares of the Fund directly. You invest by
buying a variable annuity or life insurance policy and allocating your purchase
payments to the subaccount that invests in the Fund. Your purchase price will be
the next NAV calculated after your request is received by the Fund or an
authorized insurance company.

For further information concerning minimum and maximum payments and submission
and acceptance of your application, see your annuity or life insurance policy
prospectus.

TRANSFERRING/SELLING SHARES
There is no sales charge for the sale of Fund shares, but there may be charges
associated with the surrender or withdrawal of your annuity contract or life
insurance policy. Any charges that apply to the subaccount and your contract or
policy are described in your annuity or life insurance policy prospectus.

You may transfer all or part of your value in a subaccount investing in shares
of the Fund to one or more of the other subaccounts investing in shares of other
funds with different investment objectives.

You may sell any shares you have allocated to the subaccounts. IDS Life or an
authorized agent will mail your payment within seven days after accepting your
surrender or withdrawal request. The amount you receive may be more or less than
the amount you invested. Your sale price will be the next NAV calculated after
your request is received by the Fund or an authorized insurance company.

Please refer to your annuity or life insurance policy prospectus for more
information about transfers among subaccounts as well as surrenders and
withdrawals.

Distributions and Taxes

The Fund distributes to shareholders (subaccounts) dividends and capital gains
to qualify as a regulated investment company and to avoid paying corporate
income and excise taxes.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income is distributed to the shareholders
(subaccounts) as dividends. Capital gains are realized when a security is sold
for a higher price than was paid for it. Each realized capital gain or loss is
either long-term or short-term depending on the length of time the Fund held the
security. Realized capital gains or losses offset each other. The Fund offsets
any net realized capital gains by any available capital loss carryovers. Net
short-term capital gains are included in net investment income. Net realized
long-term capital gains, if any, are distributed by the end of the calendar year
as capital gain distributions.

REINVESTMENT
Since the distributions are automatically reinvested in additional Fund shares,
the total value of your holdings will not change. The reinvestment price is the
next calculated NAV after the distribution is paid.

TAXES
The Fund intends to comply with the regulations relating to the diversification
requirements under section 817(h) of the Internal Revenue Code.

Important: This information is a brief and selective summary of some of the tax
rules that apply to the Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.

Federal income taxation of subaccounts, life insurance companies and annuities
or life insurance policies is discussed in your annuity or life insurance policy
prospectus.

<PAGE>

About The Company
BUSINESS STRUCTURE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

--------------------
Annuity or life
insurance contract
owners invest in a
subaccount
--------------------
~/
-------------------- --------------------
Administrative Subaccount invests
Services Agent: in the Fund
--------------------
American Express
Financial ~/
Corporation

- ----------------------- -------------------- -------------------- --------------------
Sub-Advisor: Investment Advisor: Provides Custodian:
American Express American Express administrative and American Express
Asset Management Financial accounting <- Trust Company
International Inc. Corporation services for the
Subadvises AXP Fund: receives a
Variable Portfolio - fee based on
International Fund. assets.

Kenwood Capital
Management LLC
--------------------
Subadvises AXP <- <- The Fund ->
Variable Portfolio -
Small Cap Advantage
Fund.

American Express
Asset Mangement Group
Inc.
Subadvises AXP
Variable Portfolio -
Strategy Aggressive
Fund.

- -----------------------
--------------------
Executes purchases Investment Manager: Provides
and sales and IDS Life Insurance safekeeping of
negotiates Company <- assets: receives a
brokerage as fee that varies
directed by IDS based on the
Life. number of
securities held.
-------------------- -------------------- --------------------
Manages the ~/
--------------------
Fund's investments Sub-Custodian:
and receives a fee
based on average Bank of New York
daily net assets.
-------------------- --------------------

</TABLE>

<PAGE>

ABOUT IDS LIFE AND AEFC
IDS Life is a stock life insurance company organized in 1957 under the laws of
the State of Minnesota and located at IDS Tower 10, Minneapolis, MN 55440-0010.
IDS Life conducts a conventional life insurance business in the District of
Columbia and all states except New York.

IDS Life is a wholly-owned subsidiary of AEFC, located at IDS Tower 10,
Minneapolis, MN 55440-0010. The AEFC family of companies offers not only
insurance and annuities, but also mutual funds, investment certificates and a
broad range of financial management services. AEFC has been a provider of
financial services since 1894 and as of the end of the most recent fiscal year
managed more than $___ billion in assets.

AEFC is a wholly-owned subsidiary of American Express Company, a financial
services company with headquarters at American Express Tower, World Financial
Center, New York, NY 10285.

YEAR 2000
The Fund could be adversely affected if the computer systems used by AEFC and
the Fund's other service providers do not properly process and calculate
date-related information from and after Jan. 1, 2000. While Year 2000-related
computer problems could have a negative effect on the Fund, AEFC is working to
avoid such problems and to obtain assurances from service providers that they
are taking similar steps.

The companies, governments or international markets in which the Fund invests
also may be adversely affected by Year 2000 issues. To the extent a portfolio
holding is adversely affected by a Year 2000 processing issue, the Fund's return
could be adversely affected.

Financial Highlights

[Insert for 9 funds from Accounting]

<PAGE>

Additional information about the Fund and its investments is available in the
Fund's SAI, annual and semiannual reports to shareholders. In the Fund's annual
report, you will find a discussion of market conditions and investment
strategies that significantly affected the Fund during the last fiscal year. The
SAI is incorporated by reference in this prospectus. For a free copy of the SAI,
the annual report or the semiannual report, or to make inquiries about the Fund,
contact American Express Variable Portfolio Funds.

American Express Variable Portfolio Funds
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-0602
TTY: 800-285-8846

You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-800-SEC-0330). Reports and other information about the Fund are available on
the Commission's Internet site at http://www.sec.gov. Copies of this information
may be obtained by writing and paying a duplicating fee to the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.

Investment Company Act File #s:

AXP Variable Portfolio -- Blue Chip Advantage Fund 811-3218
AXP Variable Portfolio -- Bond Fund 811-3219
AXP Variable Portfolio -- Capital Resource Fund 811-3218
AXP Variable Portfolio -- Cash Management Fund 811-3190
AXP Variable Portfolio -- Diversified Equity Income Fund 811-4252
AXP Variable Portfolio -- Extra Income Fund 811-3219
AXP Variable Portfolio -- Federal Income Fund 811-3219
AXP Variable Portfolio -- Global Bond Fund 811-3219
AXP Variable Portfolio -- Growth Fund 811-3218
AXP Variable Portfolio -- International Fund 811-3218
AXP Variable Portfolio -- Managed Fund 811-4252
AXP Variable Portfolio -- New Dimensions Fund 811-3218
AXP Variable Portfolio -- Small Cap Advantage Fund 811-3218
AXP Variable Portfolio -- Strategy Aggressive Fund 811-3218

<PAGE>

American Express(R)Variable Portfolio Funds

AXPsm Variable Portfolio - New Dimensions Fund

Prospectus
Oct. 29, 1999

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

<PAGE>

Table of Contents

TAKE A CLOSER LOOK AT:

The Fund

Goal
Investment Strategy
Risks
Past Performance
Management

FEES AND EXPENSES
Shareholder Fees
Annual Fund Operating Expenses

BUYING AND SELLING SHARES
Valuing Fund Shares
Purchasing Shares
Transferring/Selling Shares

DISTRIBUTIONS AND TAXES

ABOUT THE COMPANY

FINANCIAL HIGHLIGHTS

<PAGE>

The Fund

GOAL
The Fund seeks to provide shareholders with long-term growth of capital. Because
any investment involves risk, achieving this goal cannot be guaranteed.

The selection of common stocks is the primary decision in building the
investment portfolio.

In pursuit of the Fund's goal, AEFC, the Fund's investment advisor, chooses
investments by:

o Identifying companies with:
-effective management,
-financial strength, and
-competitive market position.

o Selecting companies that AEFC believes have good long-term growth
potential.

o Considering opportunities and risks by reviewing interest rate and economic
forecasts both domestically and abroad.

For more information on strategies and holdings, see the Fund's SAI and the
annual/semiannual reports.

<PAGE>

Market Risk
Style Risk
Foreign/Emerging Markets Risk

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

<PAGE>

AXP VP - New Dimensions Fund Performance (based on calendar years)
- -----------------------------------------------------------------------------

- -----------------------------------------------------------------------------

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

The Fund's year to date return as of Sept. 30, 1999 was _____%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year Since inception

AXP VP - New Dimensions *
Fund

S&P 500 Index

Lipper Growth Fund Index

*May 1, 1996

The securities included in the indexes may not be the same as those held by the
Fund.

<PAGE>

Fees and Expenses

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)

o Management Fees
The Fund pays IDS Life Insurance Company (IDS Life) a fee for managing
its assets. For the most recent fiscal year, the following management
fees were paid as a percentage of average daily net assets:

AXP Variable Portfolio - New Dimensions Fund %

o Distribution (12b-1) Fees
The Fund adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940. The Fund pays IDS Life an annual fee of up to 0.125% of
average daily net assets as payment for distributing its shares and
providing shareholder services. Because this fee is paid out of the
Fund's assets on an on-going basis, over time this fee will increase
the cost of your investment and may cost you more than paying other
types of sales charges.

o Other Expenses
The Fund pays taxes, brokerage commissions and other nonadvisory
expenses including administrative and accounting services.

Buying and Selling Shares

The Fund's investments are valued based on market quotations, or where market
quotations are not readily available, based on methods selected in good faith by
the board. If the Fund's investment policies permit it to invest in securities
that are listed on foreign stock exchanges that trade on weekends or other days
when the Fund does not price its shares, the value of the Fund's underlying
investments may change on days when you could not buy or sell shares of the
Fund. Please see the SAI for further information.

For further information concerning minimum and maximum payments and submission
and acceptance of your application, see your annuity or life insurance policy
prospectus.

<PAGE>

Please refer to your annuity or life insurance policy prospectus for more
information about transfers among subaccounts as well as surrenders and
withdrawals.

Distributions and Taxes

The Fund distributes to shareholders (subaccounts) dividends and capital gains
to qualify as a regulated investment company and to avoid paying corporate
income and excise taxes.

TAXES
The Fund intends to comply with the regulations relating to the diversification
requirements under section 817(h) of the Internal Revenue Code.

Federal income taxation of subaccounts, life insurance companies and annuities
or life insurance policies is discussed in your annuity or life insurance policy
prospectus.

<PAGE>

About The Company
BUSINESS STRUCTURE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
--------------------
Annuity or life
insurance contract
owners invest in a
subaccount
--------------------
~/
-------------------- --------------------
Administrative Subaccount invests
Services Agent: in the Fund
--------------------
American Express
Financial ~/
Corporation

-------------------- -------------------- --------------------
Investment Advisor: Provides Custodian:
American Express administrative and American Express
Financial accounting <- Trust Company
Corporation services for the
Fund: receives a
fee based on
assets.
--------------------
<- The Fund ->
--------------------
Executes purchases Investment Manager: Provides
and sales and IDS Life Insurance safekeeping of
negotiates Company <- assets: receives a
brokerage as fee that varies
directed by IDS based on the
Life. number of
securities held.
-------------------- -------------------- --------------------
Manages the ~/
--------------------
Fund's investments Sub-Custodian:
and receives a fee
based on average Bank of New York
daily net assets.
-------------------- --------------------

</TABLE>

<PAGE>

AEFC is a wholly-owned subsidiary of American Express Company, a financial
services company with headquarters at American Express Tower, World Financial
Center, New York, NY 10285.

Financial Highlights

[Insert from Accounting]

<PAGE>

American Express Variable Portfolio Funds
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-0602
TTY: 800-285-8846

Investment Company Act File #811-3218

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

FOR

AXPSM Variable Portfolio - Income Series, Inc.
AXPSM Variable Portfolio - Bond Fund
AXPSM Variable Portfolio - Extra Income Fund
AXPSM Variable Portfolio - Federal Income Fund
AXPSM Variable Portfolio - Global Bond Fund
AXPSM Variable Portfolio - Investment Series, Inc.
AXPSM Variable Portfolio - Blue Chip Advantage Fund
AXPSM Variable Portfolio - Capital Resource Fund
AXPSM Variable Portfolio - Growth Fund
AXPSM Variable Portfolio - International Fund
AXPSM Variable Portfolio - New Dimensions Fund
AXPSM Variable Portfolio - Small Cap Advantage Fund
AXPSM Variable Portfolio - Strategy Aggressive Fund
AXPSM Variable Portfolio - Managed Series, Inc.
AXPSM Variable Portfolio - Diversified Equity Income Fund
AXPSM Variable Portfolio - Managed Fund
AXPSM Variable Portfolio - Money Market Series, Inc.
AXPSM Variable Portfolio - Cash Management Fund

(singularly and collectively, where the context requires, referred to as the
Fund)

Oct. 29, 1999

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
most recent Annual Report to Shareholders (Annual Report) that may be obtained
from your financial advisor or by writing to American Express(R) Variable
Portfolio Funds, IDS Tower 10, Minneapolis, MN 55440-0010 or by calling
800-437-0602.

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 are incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by reference. The
prospectus for the Fund, dated the same date as this SAI, also is incorporated
in this SAI by reference.

<PAGE>

TABLE OF CONTENTS

Fundamental Investment Policies.........................................p.

Investment Strategies and Types of Investments..........................p.

Information Regarding Risks and Investment Strategies...................p.

Security Transactions...................................................p.

Brokerage Commissions Paid to Brokers Affiliated with IDS Life..........p.

Performance Information.................................................p.

Valuing Fund Shares.....................................................p.

Selling Shares..........................................................p.

[Capital Loss Carryover................................................p.]

Taxes...................................................................p.

Agreements..............................................................p.

Organizational Information..............................................p.

Board Members and Officers..............................................p.

Compensation for Board Members..........................................p.

[Principal Holders of Securities.......................................p.]

Independent Auditors....................................................p.

Appendix: Description of Ratings.......................................p.

<PAGE>

FUNDAMENTAL INVESTMENT POLICIES
- --------------------------------------------------------------------------------

Throughout this SAI, the funds are referred to as follows:

AXP Variable Portfolio - Blue Chip Advantage Fund (Blue Chip Advantage)
AXP Variable Portfolio - Bond Fund (Bond)
AXP Variable Portfolio - Capital Resource Fund (Capital Resource)
AXP Variable Portfolio - Cash Management Fund (Cash Management)
AXP Variable Portfolio - Diversified Equity Income Fund (Diversified Equity
Income)
AXP Variable Portfolio - Extra Income Fund (Extra Income)
AXP Variable Portfolio - Federal Income Fund (Federal)
AXP Variable Portfolio - Global Bond Fund (Global Bond)
AXP Variable Portfolio - Growth Fund (Growth)
AXP Variable Portfolio - International Fund (International)
AXP Variable Portfolio - Managed Fund (Managed)
AXP Variable Portfolio - New Dimensions Fund (New Dimensions)
AXP Variable Portfolio - Small Cap Advantage Fund (Small Cap Advantage)
AXP Variable Portfolio - Strategy Aggressive Fund (Strategy Aggressive)

Fundamental investment policies adopted by the Fund cannot be changed without
the approval of a majority of the outstanding voting securities of the Fund as
defined in the Investment Company Act of 1940, as amended (the 1940 Act).

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.

The policies below are fundamental policies that apply to 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:

Blue Chip Advantage

o 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.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more than 25%
of the Fund's total assets, based on current market value at time of
purchase, can be invested in any one industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o 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.

<PAGE>

o 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.

o 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 futures contracts or from investing in
securities or other instruments backed by, or whose value is derived from,
physical commodities.

o Issue senior securities, except as permitted under the 1940 Act.

o Lend Fund securities in excess of 30% of its net assets.

o 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.

Bond

o Invest more than 5% of its total assets, at market value, 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. Up to 25% of the Fund's
total assets may be invested without regard to this 5% limitation.

o 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 the Fund's total assets (including borrowings) less liabilities
(other than borrowings) immediately after the borrowing. The Fund will not
purchase additional securities at any time borrowing for temporary purposes
exceeds 5%.

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o 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. It
may be considered an underwriter under securities laws when it sells
restricted securities.

o Concentrate in any one industry. According to the present interpretation by
the SEC, this means no more than 25% of a Fund's total assets, based on
current market value at time of purchase, can be invested in any one
industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

<PAGE>

Capital Resource

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

Cash Management

o Buy on margin or sell short.

o Invest in a company to control or manage it.

o 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 the fund's total assets (including borrowings) less liabilities
(other than borrowings) immediately after the borrowing. The Fund will not
purchase additional securities at any time borrowing for temporary purposes
exceeds 5%.

<PAGE>

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal bonds, or
industrial revenue bonds.

o Make cash loans. However, the Fund does make short-term investments which
it may have an agreement with the seller to reacquire

o Buy or sell real estate, commodities or commodity contracts.

o Intentionally invest more than 25% of the Fund's assets taken at market
value in any particular industry, except with respect to investing in U.S.
government or agency securities and bank obligations. Investments are
varied according to what is judged advantageous under different economic
conditions.

Diversified Equity Income

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Concentrate in any one industry. According to the present interpretation by
the SEC, this means no more than 25% of the Fund's total assets, based on
current market value at time of purchase, can be invested in any one
industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

<PAGE>

o Issue senior securities, except as permitted under the 1940 Act.

o Lend Fund securities in excess of 30% of its net assets.

Extra Income

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the Investment Company
Act of 1940.

o Concentrate in any one industry. According to the present interpretation by
the SEC, this means no more than 25% of the Fund's total assets, based on
current market value at the time of purchase, can be invested in any one
industry.

Federal Income

<PAGE>

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Issue senior securities, except as permitted under the 1940 Act.

o Lend Fund securities in excess of 30% of its net assets.

o 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.

Global Bond

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

<PAGE>

o Make a loan of any part of its assets to AEFC, to the directors and
officers of AEFC or to its own directors and officers.

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the Investment Company
Act of 1940.

Growth

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Issue senior securities, except as permitted under the 1940 Act.

o Lend Fund securities in excess of 30% of its net assets.

o 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.

<PAGE>

International

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Make a loan of any part of its assets to AEFC, to its directors and
officers or to its own directors and officers.

o Issue senior securities, except as permitted under the Investment Company
Act of 1940.

Managed

<PAGE>

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Make a loan of any part of its assets to AEFC, to its directors and
officers or to its own directors and officers.

o Issue senior securities, except as permitted under the Investment Company
Act of 1940.

New Dimensions

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

<PAGE>

o Make a loan of any part of its assets to AEFC, to the directors and
officers of AEFC or to its own directors and officers.

o Lend Fund securities in excess of 30% of its net assets.

Small Cap Advantage

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Issue senior securities, except as permitted under the 1940 Act.

o Lend Fund securities in excess of 30% of its net assets.

<PAGE>

Strategy Aggressive

o Lend Fund securities in excess of 30% of the Fund's net assets, at
market value.

o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more than 25%
of a Fund's total assets, based on current market value at time of
purchase, can be invested in any one industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Make a loan of any part of its assets to AEFC, to its directors and
officers or to its own directors and officers.

Except for the fundamental investment policies listed above, the other
investment policies described in the prospectus and in this SAI are not
fundamental and may be changed by the board at any time.

<PAGE>

INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
- -------------------------------------------------------------------------------

This table shows various investment strategies and investments that many funds
are allowed to engage in and purchase. It also lists certain percentage
guidelines that are generally followed by the Fund's investment manager. This
table is intended to show the breadth of investments that the investment manager
may make on behalf of the Fund. For a description of principal risks, please see
the prospectus. Notwithstanding the Fund's ability to utilize these strategies
and techniques, the investment manager is not obligated to use them at any
particular time. For example, even though the investment manager is authorized
to adopt temporary defensive positions and is authorized to attempt to hedge
against certain types of risk, these practices are left to the investment
manager's sole discretion.
<TABLE>
<CAPTION>

- ----------------------------------------------- ----------------------------------------------------------------------
Investment strategies & types of investments: Allowable for
the Fund?

- ----------------------------------------------- ----------------------------------------------------------------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Diversified
Blue Chip Capital Cash Equity
Advantage Bond Fund Resource Management Income
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Agency and Government Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Borrowing yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Cash/Money Market Instruments yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Collateralized Bond Obligations yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Commercial Paper yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Common Stock yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Convertible Securities yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Corporate Bonds yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Debt Obligations yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Depositary Receipts yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Derivative Instruments yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Currency Transactions yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
High-Yield (High-Risk) Securities (Junk Bonds) no yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Illiquid and Restricted Securities yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Indexed Securities yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Inverse Floaters no yes no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Investment Companies yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Lending of Portfolio Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Loan Participations yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage- and Asset-Backed Securities no yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage Dollar Rolls no yes no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Municipal Obligations yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Preferred Stock yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Real Estate Investment Trusts yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Repurchase Agreements yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Reverse Repurchase Agreements yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Short Sales no no no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Sovereign Debt yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Structured Products yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Variable- or Floating-Rate Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Warrants yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
When-Issued Securities yes yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Zero-Coupon, Step-Coupon, and Pay-in-Kind yes yes yes no yes
Securities

- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------

<PAGE>

- ----------------------------------------------- ----------------------------------------------------------------------
Investment strategies & types of investments: Allowable for
the Fund?

- ----------------------------------------------- ----------------------------------------------------------------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Federal
Extra Income Income Global Bond Growth International
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Agency and Government Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Borrowing yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Cash/Money Market Instruments yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Collateralized Bond Obligations yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Commercial Paper yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Common Stock yes no yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Convertible Securities yes no yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Corporate Bonds yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Debt Obligations yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Depositary Receipts yes no yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Derivative Instruments yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Currency Transactions yes no yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
High-Yield (High-Risk) Securities (Junk Bonds) yes no yes no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Illiquid and Restricted Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Indexed Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Inverse Floaters yes yes yes no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Investment Companies yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Lending of Portfolio Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Loan Participations yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage- and Asset-Backed Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage Dollar Rolls yes yes yes no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Municipal Obligations yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Preferred Stock yes no yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Real Estate Investment Trusts yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Repurchase Agreements yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Reverse Repurchase Agreements yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Short Sales no no no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Sovereign Debt yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Structured Products yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Variable- or Floating-Rate Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Warrants yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
When-Issued Securities yes yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Zero-Coupon, Step-Coupon, and Pay-in-Kind yes yes yes yes yes
Securities

- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------

<PAGE>

- ----------------------------------------------- ----------------------------------------------------------------------
Investment strategies & types of investments: Allowable for
the Fund?

- ----------------------------------------------- ----------------------------------------------------------------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
New Small Cap Strategy
Managed Dimensions Advantage Aggressive
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Agency and Government Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Borrowing yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Cash/Money Market Instruments yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Collateralized Bond Obligations yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Commercial Paper yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Common Stock yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Convertible Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Corporate Bonds yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Debt Obligations yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Depositary Receipts yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Derivative Instruments yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Currency Transactions yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Foreign Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
High-Yield (High-Risk) Securities (Junk Bonds) yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Illiquid and Restricted Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Indexed Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Inverse Floaters yes no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Investment Companies yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Lending of Portfolio Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Loan Participations yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage- and Asset-Backed Securities yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Mortgage Dollar Rolls yes no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Municipal Obligations yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Preferred Stock yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Real Estate Investment Trusts yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Repurchase Agreements yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Reverse Repurchase Agreements yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Short Sales no no no no
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Sovereign Debt yes yes no yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Structured Products yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Variable- or Floating-Rate Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Warrants yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
When-Issued Securities yes yes yes yes
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
- ----------------------------------------------- ------------- ------------- -------------- ------------- -------------
Zero-Coupon, Step-Coupon, and Pay-in-Kind yes yes yes yes
Securities
</TABLE>

<PAGE>

The following are guidelines that may be changed by the board at any time:

Blue Chip Advantage

o The Fund may invest up to 20% of its total assets in foreign investments
included in the market index.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in stock index futures
contracts.

o The Fund will not invest in a company to control or manage it.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o Under normal market conditions, the Fund does not intend to commit more
than 5% of its total assets to when-issued securities or forward
commitments.

Bond Fund

o Under normal market conditions, at least 65% of the Fund's total assets
will be invested in bonds.

o At least 50% of the Fund's net assets will be invested in bonds rated
investment - grade, unrated corporate bonds that are believed to be of
investment grade quality, and government bonds.

o The Fund may invest up to 25% of its total assets in foreign investments.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested i
money market instruments.

o The Fund will not buy on margin or sell short, except the Fund may enter
into interest rate futures contracts.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

Capital Resource

o The Fund may invest up to 25% of its total assets in foreign investments.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

<PAGE>

o Ordinarily, less than 25% of the Fund's total assets are invested in
money market instruments.

o The Fund will not buy on margin or sell short, except the Fund may enter
into stock index futures contracts.

o The Fund will not invest in a company to control or manage it.

o The Fund will not invest more than 10% of its total assets in securities
of investment companies.

Cash Management

o The Fund may invest up to 25% of its total assets in foreign investments.

o The Fund will not invest in securities that are not readily marketable.

o The Fund may invest in commercial paper rated in the highest rating
category by at least two nationally recognized statistical rating
organizations (or by one, if only one rating is assigned) and in unrated
paper determined by the board of directors to be of comparable quality. The
Fund also may invest up to 5% of its assets in commercial paper receiving
the second highest rating or in unrated paper determined to be of
comparable quality.

o Invest in an investment company beyond 5% of its total assets taken at
market and then only on the open market where the dealer's or sponsor's
profit is limited to the regular commission. However, the Fund will not
purchase or retain the securities of other open-end investment companies.

Diversified Equity Income

o Under normal market conditions, the Fund will invest at least 65% of its
net assets in dividend-paying common and preferred stocks.

o No more than 20% of the Fund's net assets may be invested in bonds below
investment grade unless the bonds are convertible securities.

o The Fund may invest up to 25% of its total assets in foreign investments.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in
money market instruments.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in futures contracts.

o The Fund will not invest in a company to control or manage it.

o The Fund will not invest more than 10% of its total assets in securities o
investment companies.

o Under normal market conditions, the Fund does not intend to commit more
than 5% of its total assets to when-issued securities or forward
commitments.

<PAGE>

Extra Income

o The Fund may invest up to 10% of its total assets in common stocks,
preferred stocks that do not pay dividends and warrants to purchase common
stocks.

o The Fund may invest up to 25% of its total assets in foreign investments.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

o The Fund will not buy on margin or sell short, except the Fund may enter
into interest rate future contracts.

Federal Income

o Under normal market conditions, at least 65% of the Fund's total assets
will be invested in securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities.

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, except the Fund may enter
into interest rate futures contracts.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

Global Bond

o Under normal market conditions, at least 80% of the Fund's net assets will
be investment - grade corporate or government debt securities, including
money market instruments, of issuers located in at least three different
countries.

o The Fund may not purchase debt securities rated lower than B by Moody's
Investors Service Inc. or the equivalent.

<PAGE>

o 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.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, but the Fund may make margin
payments in connection with transactions in futures contracts.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

Growth

o The Fund will not invest in bonds rated below investment grade.