IDS GROWTH FUND INC, 485BPOS, 1997-09-29

IDS GROWTH FUND INC
485BPOS, 1997-09-29

Previous: IDS MONEY MARKET SERIES INC, NSAR-B, 1997-09-29

Next: IDS GROWTH FUND INC, NSAR-B, 1997-09-29

<PAGE>

PAGE 1
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _____

Pre-Effective Amendment No. ______ _____

Post-Effective Amendment No. 61 (File No. 2-38355) X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 37 (File No. 811-2111) X
------ ---

IDS GROWTH FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440
(612) 330-9283
Leslie L. Ogg - 901 Marquette Ave. So., Suite 2810,
Minneapolis, MN 55402-3268

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check
appropriate box)

immediately upon filing pursuant to paragraph (b)
X on Sept. 29, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i) on (date) pursuant to
paragraph (a)(i) 75 days after filing pursuant to paragraph (a)(ii) on
(date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Section 24f of the Investment Company Act of
1940. Registrant's Rule 24f-2 Notice for its most recent fiscal year was filed
on or about Sept.
24, 1997.

IDS Growth Fund and IDS Research Opportunities Fund, series of the Registrant,
have adopted a master/feeder operating structure. This Post-Effective Amendment
includes a signature page for Growth Trust, the master fund.

<PAGE>

PAGE 2

Cross reference sheet showing the location in its prospectus and the Statement
of Additional Information of the information called for by the items enumerated
in Parts A and B of Form N-1A.

Negative answers omitted from prospectus are so indicated.

PART A PART B
<TABLE>
<CAPTION>

Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI

2(a) Sales charge and Fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA

3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Security Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Board members and officers of the Fund;**
(b) Investment policies and risks Board members and officers
(c) Investment policies and risks (b) Board members and Officers
(c) Board members and Officers
5(a) Board members and officers; Board members
and officers of the Fund (listing) 15(a) NA
(b)(i) Investment manager; (b) NA
About American Express Financial (c) Board members and Officers
Corporation -- General Information
(b)(ii) Investment manager 16(a)(i) How the Fund is organized; About American
(b)(iii) Investment manager Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Administrator and transfer agent Agreement, Plan and Supplemental
(e) Administrator and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Security Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Security Transactions
(g) Taxes (d) Security Transactions
(h) Alternative sales arrangements; Special (e) Security Transactions
considerations regarding master/feeder
structure 18(a) Shares; Voting rights**
(b) NA
7(a) Distributor
(b) Valuing Fund shares 19(a) Investing in the Fund
(c) How to purchase, exchange or redeem shares (b) Valuing Fund Shares; Investing in the Fund
(d) How to purchase shares (c) NA
(e) NA
(f) Distributor 20 Taxes

8(a) How to redeem shares 21(a) Agreements: Distribution Agreement
(b) NA (b) Agreements: Distribution Agreement
(c) How to purchase shares: Three ways to invest (c) NA
(d) How to purchase, exchange or redeem shares:
Redemption policies -- "Important..." 22(a) Performance Information (for money market
funds only)
9 None (b) Performance Information (for all funds except
money market funds)

23 Financial Statements
*Designates information is located in annual report.
**Designates location in prospectus.

</TABLE>

<PAGE>

PAGE 3

IDS Growth Fund

Prospectus
Sept. 29, 1997

The goal of IDS Growth Fund, a part of IDS Growth Fund, Inc., is long-term
growth of capital.

The Fund seeks to achieve its goal by investing all of its assets in Growth
Portfolio of Growth Trust. The Portfolio is managed by American Express
Financial Corporation and has the same goal as the Fund. This arrangement is
commonly known as a master/feeder
structure.

This prospectus contains facts that can help you decide if the Fund is the right
investment for you. Read it before you invest and keep it for future reference.

Additional facts about the Fund are in a Statement of Additional Information
(SAI), filed with the Securities and Exchange Commission (SEC) and available for
reference, along with other related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated here by reference. For a free
copy, contact American Express Shareholder Service.

Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.

Please note that the Fund:

o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal

American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors

<PAGE>

PAGE 4

Table of contents

The Fund in brief
Goal
Investment policies and risks
Structure of the Fund
Manager and distributor
Portfolio manager
Alternative purchase arrangements

Sales charge and Fund expenses

Performance
Financial highlights
Total returns

Investment policies and risks
Facts about investments and their risks
Valuing Fund shares

How to purchase, exchange or redeem shares Alternative purchase arrangements
How to purchase shares How to exchange shares How to redeem shares
Reductions and waivers of the sales charge

Special shareholder services
Services
Quick telephone reference

Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN

How the Fund and Portfolio are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure Board members
and officers Investment manager Administrator and transfer agent
Distributor

About American Express Financial Corporation
General information

Appendix
Descriptions of derivative instruments

<PAGE>

PAGE 5

The Fund in brief

Goal

IDS Growth Fund (the Fund) seeks to provide shareholders with long-term growth
of capital. It does so by investing all of its assets in Growth Portfolio (the
Portfolio) of Growth Trust (the Trust) rather than by directly investing in and
managing its own portfolio of securities. Both the Fund and the Portfolio are
diversified investment companies that have the same goal. Because any investment
involves risk, achieving this goal cannot be guaranteed. The goal can be changed
only by holders of a majority of outstanding securities.

The Fund may withdraw its assets from the Portfolio at any time if the board
determines that it is in the best interests of the Fund to do so. In that event,
the Fund would consider what action should be taken, including whether to retain
an investment advisor to manage the Fund's assets directly or to reinvest all of
the Fund's assets in another pooled investment entity.

Investment policies and risks

Both the Fund and the Portfolio have the same investment policies. Accordingly,
the Portfolio invests primarily in stocks of U.S. and foreign companies that
appear to offer growth opportunities. The Portfolio also may invest in preferred
stocks, convertible securities, debt securities, derivative instruments and
money market instruments. Some of the securities the Portfolio invests in may be
considered speculative and involve additional investment risks. For further
information, refer to the later section in the prospectus titled "Investment
policies and risks."

Structure of the Fund

This Fund uses what is commonly known as a master/feeder structure. This means
that the Fund (the feeder fund) invests all of its assets in the Portfolio (the
master fund). The Portfolio invests in and manages the securities and has the
same goal and investment policies as the Fund. This structure is described in
more detail in the section captioned "Special considerations regarding
master/feeder structure." Here is an illustration of the structure:

Investors buy
shares in the Fund

The Fund invests
in the Portfolio

The Portfolio invests
in securities, such
as stocks or bonds

<PAGE>

PAGE 6

Manager and distributor

The Portfolio is managed by American Express Financial Corporation (AEFC), a
provider of financial services since 1894. AEFC currently manages more than $69
billion in assets for the IDS MUTUAL FUND GROUP. Shares of the Fund are sold
through American Express Financial Advisors Inc., a wholly-owned subsidiary of
AEFC.

Portfolio manager

Mitzi Malevich joined AEFC in 1983 and serves as vice president and senior
portfolio manager. She has managed the assets of the Fund since 1992 and serves
as portfolio manager of the Portfolio. She also serves as portfolio manager of
IDS Life Funds A and B.

Alternative purchase arrangements

The Fund offers its shares in three classes. Class A shares are subject to a
sales charge at the time of purchase. Class B shares are subject to a contingent
deferred sales charge (CDSC) on redemptions made within six years of purchase
and an annual distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.

Sales charge and Fund expenses

Shareholder transaction expenses are incurred directly by an investor on the
purchase or redemption of Fund shares. Fund operating expenses are paid out of
Fund assets for each class of shares and include expenses charged by both the
Fund and the Portfolio. Operating expenses are reflected in the Fund's daily
share price and dividends, and are not charged directly to shareholder accounts.

Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%

Annual Fund and allocated Portfolio operating expenses (as a percentage of
average daily net assets):

Class A Class B Class Y
Management fee** 0.61% 0.61% 0.61%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses*** 0.36% 0.38% 0.29%
Total**** 0.97% 1.74% 0.90%

<PAGE>

PAGE 7

***Other expenses include an administrative services fee, a shareholder services
fee, a transfer agency fee and other nonadvisory expenses. Class Y expenses have
been restated to reflect the 0.10% shareholder services fee that commenced on
May 9, 1997. ****The Fund changed to a master/feeder structure on May 13, 1996.
The board considered whether the aggregate expenses of the Fund and the
Portfolio would be more or less than if the Fund invested directly in the type
of securities being held by the Portfolio. AEFC has agreed to pay the small
additional costs required to use a master/feeder structure to manage the
investment portfolio during the first year of its operation and half of such
costs in the second year. These additional costs may be more than offset in
subsequent years if the assets being managed increase.

Example: Suppose for each year for the next 10 years, Fund expenses are as above
and annual return is 5%. If you sold your shares at the end of the following
years, for each $1,000 invested, you would pay total expenses of:

1 year 3 years 5 years 10 years
Class A $59 $79 $101 $163
Class B $68 $95 $114 $185**
Class B* $18 $55 $ 94 $185**
Class Y $ 9 $29 $ 50 $111

*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.

This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown. Because Class B pays annual
distribution (12b-1) fees, long-term shareholders of Class B may indirectly pay
an equivalent of more than a 6.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.

<PAGE>

PAGE 8

Performance

Financial highlights

IDS Growth Fund

Performance
Financial highlights
<TABLE>
<CAPTION>

Fiscal period ended July 31,
Per share income and capital changes(a)

Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $23.16 $21.50 $17.39 $17.99 $18.57 $17.62 $24.05 $23.24 $17.17 $25.88
beginning of period

Income from investment operations:
Net investment (.05) -- .03 .02 -- .08 .19 .34 .27 .23
income (loss)

Net gains (losses) (both 13.04 2.81 5.63 1.24 2.40 2.66 .69 2.89 5.90 (6.87)
realized and unrealized)

Total from investment 12.99 2.81 5.66 1.26 2.40 2.74 .88 3.23 6.17 (6.64)
operations

Less distributions:
Dividends from net -- (.01) (.04) -- -- (.18) (.33) (.27) (.10) (.23)
investment income

Distributions from (.68) (1.14) (1.51) (1.86) (2.98) (1.61) (6.98) (2.15) -- (1.84)
realized gains

Total distributions (.68) (1.15) (1.55) (1.86) (2.98) (1.79) (7.31) (2.42) (.10) (2.07)

Net asset value, $35.47 $23.16 $21.50 $17.39 $17.99 $18.57 $17.62 $24.05 $23.24 $17.17
end of period

Ratios/supplemental data

Class A
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988

Net assets, end of $3,215 $1,871 $1,380 $952 $933 $863 $780 $756 $732 $633
period (in millions)

Ratio of expenses .97% 1.04% .93% .83% .87% .88% .87% .73% .64% .66%
to average daily net
assets(b)

Ratio of net income (.18%) --% .18% .11% --% .41% 1.36% 1.40% 1.39% 1.17%
(loss) to average
daily net assets

Total return(c) 57.0% 13.3% 35.2% 7.0% 13.0% 15.1% 12.4% 15.3% 36.2% (25.4%)

Portfolio turnover rate 24% 22% 30% 56% 44% 83% 75% 49% 23% 28%
(excluding short-term
securities)

Average brokerage $ .0463 $-- $-- $-- $-- $-- $-- $-- $-- $--
commission rate(d)

(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances. (c) Total return
does not reflect payment of a sales charge.
(d) Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the
fact that commission rates per share vary significantly among foreign
countries.

</TABLE>

<PAGE>

PAGE 9

IDS Growth Fund
<TABLE>
<CAPTION>

Fiscal period ended July 31,
Per share income and capital changes(a)

Class B Class Y
1997 1996 1995(b) 1997 1996 1995(b)

<S> <C> <C> <C> <C> <C> <C>
Net asset value, $22.92 $21.45 $17.85 $23.21 $21.51 $17.85
beginning of period

Income from investment operations:
Net investment (.22) (.02) (.03) (.01) .01 .03
income (loss)

Net gains (both 12.80 2.63 3.63 13.08 2.85 3.63
realized and unrealized)

Total from investment 12.58 2.61 3.60 13.07 2.86 3.66
operations

Less distributions:
Dividends from net -- -- -- -- (.02) --
investment income

Distributions from (.68) (1.14) -- (.68) (1.14) --
realized gains

Total distributions (.68) (1.14) -- (.68) (1.16) --

Net asset value, $34.82 $22.92 $21.45 $35.60 $23.21 $21.51
end of period

Ratios/supplemental data
Class B Class Y
1997 1996 1995(b) 1997 1996 1995(b)
Net assets, end of $713 $281 $38 $179 $29 $8
period (in millions)

Ratio of expenses 1.74% 1.82% 1.76%(d) .85% .88% .85%(d)
to average daily net assets(c)

Ratio of net income (loss) (.94%) (.80%) (.70%)(d) (.07%) .13% .26%(d)
to average daily net assets

Total return(e) 55.8% 12.4% 20.2% 57.2% 13.4% 20.5%

Portfolio turnover rate 24% 22% 30% 24% 22% 30%
(excluding short-term
securities)

Average brokerage $ .0463 $-- $-- $ .0463 $-- $--
commission rate(f)

(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 20, 1995.
(c) Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the
fact that commission rates per share vary significantly among foreign
countries.
</TABLE>

The information in these tables has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the Fund's annual
report which, if not included with this prospectus, may be obtained without
charge.

<PAGE>

PAGE 10

Total returns

Total return is the sum of all of your returns for a given period, assuming you
reinvest all distributions. It is calculated by taking the total value of shares
you own at the end of the period (including shares acquired by reinvestment),
less the price of shares you purchased at the beginning of the period.

Average annual total return is the annually compounded rate of return over a
given time period (usually two or more years). It is the total return for the
period converted to an equivalent annual figure.

Average annual total returns as of July 31, 1997

Purchase 1 year Since 5 years 10 years
made ago inception ago ago
IDS Growth Fund:
Class A +49.15% --% +22.49% +15.37%
Class B +51.81% +35.73%* --% --%
Class Y +57.23% +38.13%* --% --%

S&P 500 +52.10% +34.06%** +20.61% +14.94%

Lipper Growth
Fund Index +43.76% +29.14%** +18.31% +13.28%

*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.

Cumulative total returns as of July 31, 1997

Purchase 1 year Since 5 years 10 years
made ago inception ago ago
IDS Growth Fund:
Class A +49.15% --% +175.88% +318.11%
Class B +51.81% +106.10%* --% --%
Class Y +57.23% +114.81%* --% --%

S&P 500 +52.10% +100.36%** +155.27% +302.43%

Lipper Growth
Fund Index +43.76% + 81.62%** +131.82% +248.09%

*Inception date was March 20, 1995.
**Measurement period started April 1, 1995.

These examples show total returns from hypothetical investments in Class A,
Class B and Class Y shares of the Fund. These returns are compared to those of
popular indexes for the same periods. The performance of Class B and Class Y
will vary from the performance of Class A based on differences in sales charges
and fees. March 20, 1995 was the inception date for Class B and Class Y. Past
performance for Class Y for the periods prior to March 20, 1995 may be
calculated based on the performance of Class A, adjusted to reflect differences
in sales charges although not for other differences in expenses.

<PAGE>

PAGE 11

For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.

Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of common stocks,
is frequently used as a general measure of market performance. However, the S&P
500 companies are generally larger than those in which the Fund invests. The
index reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.

Lipper 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.

Investment policies and risks

The policies described below apply both to the Fund and the Portfolio. The
Portfolio invests primarily in common stocks and securities convertible into
common stocks of U.S. and foreign corporations. The Portfolio will invest in
companies that appear to offer growth opportunities; companies that, because of
new management, markets or other factors, show promise of substantially improved
results; and companies whose future may be dependent upon maintaining
technological superiority over their competitors. Other investments include
preferred stocks, convertible securities, debt securities, derivative
instruments or money market instruments.

The various types of investments the portfolio manager uses to achieve
investment performance are described in more detail in the next section and in
the SAI.

Facts about investments and their risks

Common stocks: Stock prices are subject to market fluctuations. Stocks of
larger, established companies that pay dividends may be less volatile than the
stock market as a whole.

Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.

Convertible securities: These securities generally are preferred stocks or bonds
that can be exchanged for other securities, usually common stock, at prestated
prices. When the trading price of the common stock makes the exchange likely,
convertible securities trade more like common stock.

<PAGE>

PAGE 12

Debt securities: The price of bonds generally falls as interest rates increase,
and rises as interest rates decrease. The price of bonds also fluctuates if the
credit rating is upgraded or downgraded. The Portfolio invests in bonds given
the four highest ratings by Moody's Investors Service, Inc. or by Standard &
Poor's Corporation or in bonds of comparable quality in the judgment of the
portfolio manager. Securities that are subsequently downgraded in quality may
continue to be held by the Portfolio and will be sold only when the investment
manager believes it is advantageous to do so.

Foreign investments: Securities of foreign companies and governments may be
traded in the United States, but often they are traded only on foreign markets.
Frequently, there is less information about foreign companies and less
government supervision of foreign markets. Foreign investments are subject to
political and economic risks of the countries in which the investments are made,
including the possibility of seizure or nationalization of companies, imposition
of withholding taxes on income, establishment of exchange controls or adoption
of other restrictions that might affect an investment adversely. If an
investment is made in a foreign market, the local currency may be purchased
using a forward contract in which the price of the foreign currency in U.S.
dollars is established on the date the trade is made, but delivery of the
currency is not made until the securities are received. As long as the Portfolio
holds foreign currencies or securities valued in foreign currencies, the value
of those assets will be affected by changes in the value of the currencies
relative to the U.S. dollar. Because of the limited trading volume in some
foreign markets, efforts to buy or sell a security may change the price of the
security, and it may be difficult to complete the transaction. The Portfolio may
invest up to 25% of its total assets in foreign investments.

Derivative instruments: The portfolio manager may use derivative instruments in
addition to securities to achieve investment performance. Derivative instruments
include futures, options and forward contracts. Such instruments may be used to
maintain cash reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce transaction
costs or to pursue higher investment returns. Derivative instruments are
characterized by requiring little or no initial payment and a daily change in
price based on or derived from a security, a currency, a group of securities or
currencies, or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance characteristics. A
small change in the value of the underlying security, currency or index will
cause a sizable gain or loss in the price of the derivative instrument.
Derivative instruments allow the portfolio manager to change the investment
performance characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other parties and
inability to close such instruments. The Portfolio will use derivative
instruments only to achieve the same investment performance characteristics it
could achieve by directly holding those securities and currencies permitted
under the investment policies. The Portfolio will designate cash or appropriate
liquid

<PAGE>

PAGE 13

assets to cover its portfolio obligations. No more than 5% of the Portfolio's
net assets can be used at any one time for good faith deposits on futures and
premiums for options on futures that do not offset existing investment
positions. This does not, however, limit the portion of the Portfolio's assets
at risk to 5%. The Portfolio is not limited as to the percentage of its assets
that may be invested in permissible investments, including derivatives, except
as otherwise explicitly provided in this prospectus or the SAI. For descriptions
of these and other types of derivative instruments, see the Appendix to this
prospectus and the SAI.

Securities and other instruments that are illiquid: A security or other
instrument is illiquid if it cannot be sold quickly in the normal course of
business. Some investments cannot be resold to the U.S. public because of their
terms or government regulations. Securities and instruments, however, can be
sold in private sales, and many may be sold to other institutions and qualified
buyers or on foreign markets. The portfolio manager will follow guidelines
established by the board and consider relevant factors such as the nature of the
security and the number of likely buyers when determining whether a security is
illiquid. No more than 10% of the Portfolio's net assets will be held in
securities and other instruments that are illiquid.

Money market instruments: Short-term debt securities rated in the top two grades
or the equivalent are used to meet daily cash needs and at various times to hold
assets until better investment opportunities arise. Generally, less than 25% of
the Portfolio's total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that amount for a
limited period of time.

The investment policies described above may be changed by the boards.

Lending portfolio securities: The Portfolio may lend its securities to earn
income so long as borrowers provide collateral equal to the market value of the
loans. The risks are that borrowers will not provide collateral when required or
return securities when due. Unless a majority of the outstanding voting
securities approve otherwise, loans may not exceed 30% of the Portfolio's net
assets.

Valuing Fund shares

The public offering price is the net asset value (NAV) adjusted for the sales
charge for Class A. It is the NAV for Class B and Class Y.

The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business, normally 3 p.m. Central time, each
business day (any day the New York Stock Exchange is open).

<PAGE>

PAGE 14

To establish the net assets, all securities held by the Portfolio are valued as
of the close of each business day. In valuing assets:

o Securities (except bonds) and assets with available market
values are valued on that basis

o Securities maturing in 60 days or less are valued at amortized
cost

o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board

How to purchase, exchange or redeem shares

Alternative purchase arrangements

The Fund offers three different classes of shares - Class A, Class B and Class
Y. The primary differences among the classes are in the sales charge structures
and in their ongoing expenses. These differences are summarized in the table
below. You may choose the class that best suits your circumstances and
objectives.

Sales charge and
distribution
(12b-1)fee Service fee Other information

Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases

Class B No initial sales 0.175% of average Shares convert to
change;maximum CDSC daily net assets Class A in the ninth
of 5% declines to 0% year of ownership; CDSC
after six years; 12b-1 waived in certain
fee of 0.75% of average circumstances
daily net assets

Class Y None 0.10% of average Available only to
daily net assets certain qualifying
institutional
investors

Conversion of Class B shares to Class A shares - During the ninth calendar year
of owning your Class B shares, Class B shares will convert to Class A shares and
will no longer be subject to a distribution fee. Class B shares that convert to
Class A shares are not subject to a sales charge or distribution fee. Class B
shares purchased through reinvested dividends and distributions also will
convert to Class A shares in the same proportion as the other Class B shares.
This means more of your money will be put to work for you.

<PAGE>

PAGE 15

Considerations in determining whether to purchase Class A or Class B shares -
You should consider the information below in determining whether to purchase
Class A or Class B shares. The distribution fee (included in "Ongoing expenses")
and sales charges are structured so that you will have approximately the same
total return at the end of eight years regardless of which class you chose.

Sales charges on purchase or redemption

If you purchase Class A If you purchase Class B
shares shares

o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.

o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.

If your investments in IDS funds that are subject to a sales charge total
$250,000 or more, you are better off paying the reduced sales charge in Class A
than paying the higher fees in Class B. If you qualify for a waiver of the sales
charge, you should purchase Class A shares.

Ongoing expenses

If you purchase Class A If you purchase Class B
shares shares

o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and you
than Class B shares. will no longer be
subject to higher fees.

You should consider how long you plan to hold your shares and whether the
accumulated higher fees and CDSC on Class B shares prior to conversion would be
less than the initial sales charge on Class A shares. Also consider to what
extent the difference would be offset by the lower expenses on Class A shares.
To help you in this analysis, the example in the "Sales charge and Fund
expenses"

<PAGE>

PAGE 16

section of the prospectus illustrates the charges applicable to
each class of shares.

Class Y shares - Class Y shares are offered to certain institutional investors.
Class Y shares are sold without a front-end sales charge or a CDSC and are not
subject to a distribution fee. The following investors are eligible to purchase
Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in
plan assets or - 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.

o Trust companies or similar institutions, and charitable organizations
that meet the definition in Section 501(c)(3) of the Internal Revenue
Code.* These must have at least $10 million invested in funds of the IDS
MUTUAL FUND GROUP.

o Nonqualified deferred compensation plans* whose participants are
included in a qualified employee benefit plan described above.

* Eligibility must be determined in advance by American Express Financial
Advisors. To do so, contact your financial advisor.

How to purchase shares

If you're investing in this Fund for the first time, you'll need to set up an
account. Your financial advisor will help you fill out and submit an
application. Once your account is set up, you can choose among several
convenient ways to invest.

Important: When opening an account, you must provide your correct
Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."

When you purchase shares for a new or existing account, the price you pay per
share is determined at the close of business on the day your investment is
received and accepted at the Minneapolis headquarters.

Purchase policies:

o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to be included
in your account that day and to receive that day's share price.
Otherwise, your purchase will be processed the next business day and you
will pay the next day's share price.

o The minimums allowed for investment may change from time to
time.

<PAGE>

PAGE 17

o Wire orders can be accepted only on days when your bank, AEFC, the Fund
and Norwest Bank Minneapolis are open for business.

o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.

o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.

o You must pay any fee the bank charges for wiring.

o The Fund reserves the right to reject any application for any
reason.

o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.

<TABLE>
<CAPTION>
Three ways to invest
<S> <C> <C>

1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74 Qualified retirement
Minneapolis, MN 55440-0074 accounts: none

Your financial advisor will help
you with this process.

2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/each payment
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)

o direct deposit of If account balance is below $2,000,
Social Security check frequency of payments must be at
least monthly.
o other plan approved by the Fund

3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.

Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
</TABLE>

*If your account balance falls below $300, you will be asked in writing to bring
it up to $300 or establish a scheduled investment plan. If you don't do so
within 30 days, your shares can be redeemed and the proceeds mailed to you.

<PAGE>

PAGE 18

How to exchange shares

You can exchange your shares of the Fund at no charge for shares of the same
class of any other publicly offered fund in the IDS MUTUAL FUND GROUP available
in your state. Exchanges into IDS Tax-Free Money Fund must be made from Class A
shares. For complete information on any other fund, including fees and expenses,
read that fund's prospectus carefully.

If your exchange request arrives at the Minneapolis headquarters before the
close of business, your shares will be redeemed at the net asset value set for
that day. The proceeds will be used to purchase new fund shares the same day.
Otherwise, your exchange will take place the next business day at that day's net
asset value.

For tax purposes, an exchange represents a redemption and purchase and may
result in a gain or loss. However, you cannot use the sales charge imposed on
the purchase of Class A shares to create or increase a tax loss (or reduce a
taxable gain) by exchanging from the Fund within 91 days of your purchase. For
further explanation, see the SAI.

How to redeem shares

You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request.

When you redeem shares, the amount you receive may be more or less than the
amount you invested. Your shares will be redeemed at net asset value, minus any
applicable sales charge, at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives after the
close of business, the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next business day.

A redemption is a taxable transaction. If your proceeds from your redemption are
more or less than the cost of your shares, you will have a gain or loss, which
can affect your tax liability. Redeeming shares held in an IRA or qualified
retirement account may subject you to certain federal taxes, penalties and
reporting requirements. Consult your tax advisor.

<PAGE>

PAGE 19
<TABLE>
<CAPTION>

Two ways to request an exchange or redemption of shares
<S> <C>

1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges,
both funds must be registered in the same
ownership)
o your Taxpayer Identification
Number (TIN)
o the dollar amount or number
of shares you want to exchange or redeem o
signature of all registered account owners
o for redemptions, indicate how you want
certificates of shares you hold

Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534

Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402

2
By phone
American Express Financial o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Advisors Telephone authentic and will use reasonable procedures to confirm that they are. This includes
TransactionService: asking identifying questions and tape recording calls. If reasonable
800-437-3133 or procedures are not followed, the Fund or AEFC will be liable for any loss resulting from
612-671-3800 fraudulent requests.
o Phone exchange and redemption privileges
automatically apply to all accounts except
custodial, corporate or qualified
retirement accounts unless you request
these privileges NOT apply by writing
American Express Shareholder Service. Each
registered owner must sign the request. o
AEFC answers phone requests promptly, but
you may experience delays when call volume
is high. If you are unable to get through,
use mail procedure as an alternative. o
Acting on your instructions, your financial
advisor may conduct telephone transactions
on your behalf. o Phone privileges may be
modified or discontinued at any time.

Minimum amount
Redemption: $100

Maximum amount
Redemption: $50,000
</TABLE>

Exchange policies:

o You may make up to three exchanges within any 30-day period, with each limited
to $300,000. These limits do not apply to scheduled exchange programs and
certain employee benefit plans or other arrangements through which one
shareholder represents the interests of several. Exceptions may be allowed with
pre-approval of the Fund.

o Exchanges must be made into the same class of shares of the new
fund.

o If your exchange creates a new account, it must satisfy the minimum investment
amount for new purchases.

o Once we receive your exchange request, you cannot cancel it.

o Shares of the new fund may not be used on the same day for
another exchange.

<PAGE>

PAGE 20

o If your shares are pledged as collateral, the exchange will be delayed until
written approval is obtained from the secured party.

o AEFC and the Fund reserve the right to reject any exchange, limit the amount,
or modify or discontinue the exchange privilege, to prevent abuse or adverse
effects on the Fund and its shareholders. For example, if exchanges are too
numerous or too large, they may disrupt the Fund's investment strategies or
increase its costs.

Redemption policies:

o A "change of mind" option allows you to change your mind after requesting a
redemption and to use all or part of the proceeds to purchase new shares in the
same account from which you redeemed. If you reinvest in Class A, you will
purchase the new shares at net asset value rather than the offering price on the
date of a new purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take advantage of this
option, send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this option. This
privilege may be limited or withdrawn at any time, and it may have tax
consequences.

o A telephone redemption request will not be allowed within 30 days of a
phoned-in address change.

Important: If you request a redemption of shares you recently purchased by a
check or money order that is not guaranteed, the Fund will wait for your check
to clear. It may take up to 10 days from the date of purchase before a check is
mailed to you. (A check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
<TABLE>
<CAPTION>

Three ways to receive payment when you redeem shares
<S> <C>

1
By regular or express mail o Mailed to the address on record
o Payable to names listed on the account

NOTE: You will be charged a fee if you
request express mail delivery.

2
By wire o Minimum wire redemption: $1,000
o Request that money be wired to your bank
o Bank account must be in the same
ownership as the IDS fund account

NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.

3
By scheduled payout plan o Minimum payment: $50
o Contact your financial
advisor or American
Express Shareholder
Service to set up regular
payments to you on a
monthly, bimonthly,
quarterly, semiannual or
annual basis
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges

</TABLE>

<PAGE>

PAGE 21

Reductions and waivers of the sales charge

Class A - initial sales charge alternative

On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:

Total investment Sales charge as a
percent of:*

Public Net
offering amount
price invested

Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00

* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.

Reductions of the sales charge on Class A shares

Your sales charge may be reduced, depending on the totals of:

o the amount you are investing in this Fund now,

o the amount of your existing investment in this Fund, if any, and

o the amount you and your primary household group are investing or have in other
funds in the IDS MUTUAL FUND GROUP that carry a sales charge. (The primary
household group consists of accounts in any ownership for spouses or domestic
partners and their unmarried children under 21. Domestic partners are
individuals who maintain a shared primary residence and have joint property or
other insurable interests.)

Other policies that affect your sales charge:

o IDS Tax-Free Money Fund and Class A shares of IDS Cash Management Fund do not
carry sales charges. However, you may count investments in these funds if you
acquired shares in them by exchanging shares from IDS funds that carry sales
charges.

o IRA purchases or other employee benefit plan purchases made through a payroll
deduction plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be added together
to reduce sales charges for all shares purchased through that plan.

<PAGE>

PAGE 22

o If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a letter of intent.

For more details, see the SAI.

Waivers of the sales charge for Class A shares

Sales charges do not apply to:

o Current or retired board members, officers or employees of the Fund or AEFC or
its subsidiaries, their spouses and unmarried children under 21.

o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.

o Investors who have a business relationship with a newly associated financial
advisor who joined AEFA from another investment firm provided that (1) the
purchase is made within six months of the advisor's appointment date with AEFA,
(2) the purchase is made with proceeds of a redemption of shares that were
sponsored by the financial advisor's previous broker-dealer, and (3) the
proceeds must be the result of a redemption of an equal or greater value where a
sales load was previously assessed.

o Qualified employee benefit plans* using a daily transfer recordkeeping system
offering participants daily access to IDS funds.

(Participants in certain qualified plans for which the initial sales charge is
waived may be subject to a deferred sales charge of up to 4% on certain
redemptions. For more information, see the SAI.)

o Shareholders who have at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP. If the investment is redeemed in the first year after purchase, a
CDSC of 1% will be charged on the redemption. The CDSC will be waived only in
the circumstances described for waivers for Class B shares.

o Purchases made within 30 days after a redemption of shares (up to the amount
redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred sales
charge or
- in a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment servicing
relationship.

Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.

o Purchases made with dividend or capital gain distributions from the same class
of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.

<PAGE>

PAGE 23

o Purchases made through or under a "wrap fee" product sponsored by American
Express Financial Advisors Inc. (total amount of all investments must be
$50,000); the University of Texas System ORP; or a segregated separate account
offered by Nationwide Life Insurance Company or Nationwide Life and Annuity
Insurance Company.

o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders through December 31, 1997.

*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.

Class B - contingent deferred sales charge alternative

Where a CDSC is imposed on a redemption, it is based on the amount of the
redemption and the number of calendar years, including the year of purchase,
between purchase and redemption. The following table shows the declining scale
of percentages that apply to redemptions during each year after a purchase:

If a redemption is The percentage rate
made during the for the CDSC is:

First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%

If the amount you are redeeming reduces the current net asset value of your
investment in Class B shares below the total dollar amount of all your purchase
payments during the last six years (including the year in which your redemption
is made), the CDSC is based on the lower of the redeemed purchase payments or
market value.

The following example illustrates how the CDSC is applied. Assume you had
invested $10,000 in Class B shares and that your investment had appreciated in
value to $12,000 after 15 months, including reinvested dividend and capital gain
distributions. You could redeem any amount up to $2,000 without paying a CDSC
($12,000 current value less $10,000 purchase amount). If you redeemed $2,500,
the CDSC would apply only to the $500 that represented part of your original
purchase price. The CDSC rate would be 4% because a redemption after 15 months
would take place during the second year after purchase.

Because the CDSC is imposed only on redemptions that reduce the total of your
purchase payments, you never have to pay a CDSC on any amount you redeem that
represents appreciation in the value of your shares, income earned by your
shares or capital gains. In addition, when determining the rate of any CDSC,
your redemption will be made from the oldest purchase payment you made. Of
course, once a purchase payment is considered to have been redeemed, the next
amount redeemed is the next oldest purchase payment. By redeeming the oldest
purchase payments first, lower CDSCs are imposed than would otherwise be the
case.

<PAGE>

PAGE 24

Waivers of the contingent deferred sales charge

The CDSC on Class B shares will be waived on redemptions of shares:

o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan, o Held in IRAs or certain qualified
plans for which American Express Trust Company acts as custodian, such as Keogh
plans, tax-sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part of a
transfer to an IRA or qualified plan in a product distributed by
American Express Financial Advisors, or a custodian-to-custodian
transfer to a product not distributed by American Express Financial
Advisors, the CDSC will not be waived), or - redeeming under an approved
substantially equal periodic payment arrangement.

For investors in Class A shares who have over $1 million invested in one year,
the 1% CDSC on redemption of those shares will be waived in the same
circumstances described for Class B.

Special shareholder services

Services

To help you track and evaluate the performance of your investments, AEFC
provides these services:

Quarterly statements listing all of your holdings and transactions during the
previous three months.

Yearly tax statements featuring average-cost-basis reporting of capital gains or
losses if you redeem your shares along with distribution information which
simplifies tax calculations.

A personalized mutual fund progress report detailing returns on your initial
investment and cash-flow activity in your account. It calculates a total return
to reflect your individual history in owning Fund shares. This report is
available from your financial advisor.

Quick telephone reference

American Express Financial Advisors Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800

<PAGE>

PAGE 25

TTY Service
For the hearing impaired
800-846-4852

American Express Financial Advisors Easy Access Line Automated account
information (TouchToneR phones only), including current Fund prices and
performance, account values and recent account transactions 800-862-7919

Distributions and taxes

As a shareholder you are entitled to your share of the Fund's net income and any
net gains realized on its investments. The Fund distributes dividends and
capital gain distributions to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes. Dividend and capital gain
distributions will have tax consequences you should know about.

Dividend and capital gain distributions

The Portfolio allocates investment income from dividends and interest and net
realized capital gains or losses, if any, to the Fund. The Fund deducts direct
and allocated expenses from the investment income. The Fund's net investment
income is distributed to you by the end of the calendar year as dividends.
Short-term capital gains are included in net investment income. Long-term
capital gains are realized whenever a security held for more than one year is
sold for a higher price than was paid for it. The Fund will offset any net
realized capital gains by any available capital loss carryovers. Net realized
long-term capital gains, if any, are distributed at the end of the calendar year
as capital gain distributions. Before they are distributed, both net investment
income and net long-term capital gains are included in the value of each share.
After they are distributed, the value of each share drops by the per-share
amount of the distribution. (If your distributions are reinvested, the total
value of your holdings will not change.)

Dividends for each class will be calculated at the same time, in the same manner
and will be the same amount prior to deduction of expenses. Expenses
attributable solely to a class of shares will be paid exclusively by that class.

Reinvestments

Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:

o you request the Fund in writing or by phone to pay
distributions to you in cash, or

o you direct the Fund to invest your distributions in the same class of
another publicly available IDS fund for which you've previously opened
an account.

<PAGE>

PAGE 26

The reinvestment price is the net asset value at close of business on the day
the distribution is paid. (Your quarterly statement will confirm the amount
invested and the number of shares purchased.)

If you choose cash distributions, you will receive only those declared after
your request has been processed.

If the U.S. Postal Service cannot deliver the checks for the cash distributions,
we will reinvest the checks into your account at the then-current net asset
value and make future distributions in the form of additional shares. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.

Taxes

The Fund has received a Private Letter Ruling from the Internal Revenue Service
stating that, for purposes of the Internal Revenue Code, the Fund will be
regarded as directly holding its allocable share of the income and gain realized
by the Portfolio.

Distributions are subject to federal income tax and also may be subject to state
and local taxes. Distributions are taxable in the year the Fund declares them
regardless of whether you take them in cash or reinvest them.

Each January, you will receive a tax statement showing the kinds and total
amount of all distributions you received during the previous year. You must
report distributions on your tax returns, even if they are reinvested in
additional shares.

Buying a dividend creates a tax liability. This means buying shares shortly
before a net investment income or a capital gain distribution. You pay the full
pre-distribution price for the shares, then receive a portion of your investment
back as a distribution, which is taxable.

Redemptions and exchanges subject you to a tax on any capital gain. If you sell
shares for more than their cost, the difference is a capital gain. Your gain may
be either short term (for shares held for one year or less) or long term (for
shares held for more than one year).

Your Taxpayer Identification Number (TIN) is important. As with any financial
account you open, you must list your current and correct Taxpayer Identification
Number (TIN) -- either your Social Security or Employer Identification number.
The TIN must be certified under penalties of perjury on your application when
you open an account.

If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of taxable

<PAGE>

PAGE 27

distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:

o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information

You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.

How to determine the correct TIN

Use the Social Security or
For this type of account: Employer Identification number
of:

Individual or joint account The individual or individuals
listed on the account

Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)

A living trust The grantor-trustee (the person
who puts the money into the
trust)

An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)

Sole proprietorship The owner

Partnership The partnership

Corporate The corporation

Association, club or The organization
tax-exempt organization

For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."

Important: This information is a brief and selective summary of certain federal
tax rules that apply to this Fund. Tax matters are highly individual and
complex, and you should consult a qualified tax advisor about your personal
situation.

<PAGE>

PAGE 28

How the Fund and Portfolio are organized

IDS Growth Fund, Inc. currently is composed of two funds, each issuing its own
series of capital stock: IDS Growth Fund and IDS Research Opportunities Fund.
Each fund is owned by its shareholders. Each fund issues shares in three classes
- - Class A, Class B and Class Y. Each class has different sales arrangements and
bears different expenses. Each class represents interests in the assets of a
fund. Par value is one cent per share. Both full and fractional shares can be
issued.

The shares of each fund making up IDS Growth Fund, Inc. represent an interest in
that fund's assets only (and profits or losses), and, in the event of
liquidation, each share of a fund would have the same rights to dividends and
assets as every other share of that fund.

The Fund no longer issues stock certificates.

Voting rights

As a shareholder, you have voting rights over the Fund's management and
fundamental policies. You are entitled to one vote for each share you own.
Shares of the Fund have cumulative voting rights. Each class has exclusive
voting rights with respect to the provisions of the Fund's distribution plan
that pertain to a particular class and other matters for which separate class
voting is appropriate under applicable law.

Shareholder meetings

The Fund does not hold annual shareholder meetings. However, the board members
may call meetings at their discretion, or on demand by holders of 10% or more of
the outstanding shares, to elect or remove board members.

Special considerations regarding master/feeder structure

The Fund pursues its goal by investing its assets in a master fund called the
Portfolio. This means that the Fund does not invest directly in securities;
rather the Portfolio invests in and manages its portfolio of securities. The
Portfolio is a separate investment company, but it has the same goal and
investment policies as the Fund. The goal and investment policies of the
Portfolio are described under the captions "Investment policies and risks" and
"Facts about investments and their risks." Additional information on investment
policies may be found in the SAI.

<PAGE>

PAGE 29

terminate its investment in the Portfolio, it would consider hiring an
investment advisor to manage the Fund's assets, or other appropriate options.
The Fund would terminate its investments if the Portfolio changed its goals,
investment policies or restrictions without the same change being approved by
the Fund.

Other feeders: The Portfolio sells securities to other affiliated mutual funds
and may sell securities to non-affiliated investment companies and institutional
accounts (known as feeders). These feeders buy the Portfolio's securities on the
same terms and conditions as the Fund and pay their proportionate share of the
Portfolio's expenses. However, their operating costs and sales charges are
different from those of the Fund. Therefore, the investment returns for other
feeders are different from the returns of the Fund. Information about other
feeders may be obtained by calling American Express Financial Advisors at
1-800-AXP-SERV.

Each feeder that invests in the Portfolio is different and activities of its
investors may adversely affect all other feeders, including the Fund. For
example, if one feeder decides to terminate its investment in the Portfolio, the
Portfolio may elect to redeem in cash or in kind. If cash is used, the Portfolio
will incur brokerage, taxes and other costs in selling securities to raise the
cash. This may result in less investment diversification if entire investment
positions are sold, and it also may result in less liquidity among the remaining
assets. If in-kind distribution is made, a smaller pool of assets remains that
may affect brokerage rates and investment options. In both cases, expenses may
rise since there are fewer assets to cover the costs of managing those assets.

Shareholder meetings: Whenever the Portfolio proposes to change a fundamental
investment policy or to take any other action requiring approval of its security
holders, the Fund will hold a shareholder meeting. The Fund will vote for or
against the Portfolio's proposals in proportion to the vote it receives for or
against the same proposals from its shareholders.

Board members and officers

Shareholders elect a board that oversees the operations of the Fund and chooses
its officers. Its officers are responsible for day-to-day business decisions
based on policies set by the board. The board has named an executive committee
that has authority to act on its behalf between meetings. Board members and
officers serve 47 IDS and IDS Life funds and 15 Master Trust portfolios, except
for William H. Dudley, who does not serve the nine IDS Life funds. The board
members also serve as members of the board of the Trust which manages the
investments of the Fund and other accounts. Should any conflict of interest
arise between the interests of the shareholders of the Fund and those of the
other accounts, the board will follow written procedures to address the
conflict.

<PAGE>

PAGE 30

Board members and officers of the Fund

President and interested board member

William R. Pearce
Chairman of the board, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).

Independent board members

H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills, Inc.

Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.

Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.

Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.

Anne P. Jones
Attorney and telecommunications consultant.

Melvin R. Laird
Senior counsellor for national and international affairs, The Reader's Digest
Association, Inc.

Alan K. Simpson
Former United States senator for Wyoming.

Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.

Wheelock Whitney
Chairman, Whitney Management Company.

C. Angus Wurtele
Chairman of the board, The Valspar Corporation.

Interested board members who are officers and/or employees of AEFC

William H. Dudley
Senior advisor to the chief executive officer, AEFC.

David R. Hubers
President and chief executive officer, AEFC.

John R. Thomas
Senior vice president, AEFC.

<PAGE>

PAGE 31

Officers who also are officers and/or employees of AEFC

Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.

Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the Fund.

Other officer

Leslie L. Ogg
President, treasurer and corporate secretary of Board Services Corporation. Vice
president, general counsel and secretary for the Fund.

Refer to the SAI for the board members' and officers' biographies.

Investment manager

The Portfolio pays AEFC for managing its assets. The Fund pays its proportionate
share of the fee. Under the Investment Management Services Agreement, AEFC is
paid a fee for these services based on the average daily net assets of the
Portfolio, as follows:

Assets Annual rate
(billions) at each asset level

First $1.0 0.600%
Next 1.0 0.575
Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500

This fee may be increased or decreased by a performance adjustment based on a
comparison of performance of Class A shares of the Fund to the Lipper Growth
Fund Index. The maximum adjustment is 0.12% of the Portfolio's average daily net
assets on an annual basis.

For the fiscal year ended July 31, 1997, the Portfolio paid AEFC a total
investment management fee of 0.61% of its average daily net assets. Under the
Agreement, the Portfolio also pays taxes, brokerage commissions and nonadvisory
expenses.

Administrator and transfer agent

The Fund pays AEFC for shareholder accounting and transfer agent services under
two agreements. The first agreement, the Administrative Services Agreement, has
a declining annual rate beginning at 0.05% and decreasing to 0.03% as assets
increase. The second agreement, the Transfer Agency Agreement, has an annual fee
per shareholder account as follows:

o Class A $15
o Class B $16
o Class Y $15

<PAGE>

PAGE 32

Distributor

The Fund has an exclusive distribution agreement with American Express Financial
Advisors, a wholly-owned subsidiary of AEFC. Financial advisors representing
American Express Financial Advisors provide information to investors about
individual investment programs, the Fund and its operations, new account
applications, and exchange and redemption requests. The cost of these services
is paid partially by the Fund's sales charges.

Persons who buy Class A shares pay a sales charge at the time of purchase.
Persons who buy Class B shares are subject to a contingent deferred sales charge
on a redemption in the first six years and pay an asset-based sales charge (also
known as a 12b-1 fee) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based sales charge.

Financial advisors may receive different compensation for selling Class A, Class
B and Class Y shares. Portions of the sales charge also may be paid to
securities dealers who have sold the Fund's shares or to banks and other
financial institutions. The amounts of those payments range from 0.8% to 4% of
the Fund's offering price depending on the monthly sales volume.

Under a Shareholder Service Agreement, the Fund also pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of average daily net assets for Class A
and Class B shares and 0.10% for Class Y shares.

Total expenses paid by the Fund's Class A shares for the fiscal year ended July
31, 1997, were 0.97% of its average daily net assets. Expenses for Class B and
Class Y were 1.74% and 0.85%, respectively.

About American Express Financial Corporation

General information

The AEFC family of companies offers not only mutual funds but also insurance,
annuities, investment certificates and a broad range of financial management
services.

Besides managing investments for all funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on July
31, 1997 were more than $170 billion.

American Express Financial Advisors serves individuals and businesses through
its nationwide network of more than 175 offices and more than 8,500 advisors.

Other AEFC subsidiaries provide investment management and related services for
pension, profit sharing, employee savings and endowment funds of businesses and
institutions.

<PAGE>

PAGE 33

AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is a
wholly-owned subsidiary of American Express Company (American Express), a
financial services company with headquarters at American Express Tower, World
Financial Center, New York, NY 10285. The Portfolio may pay brokerage
commissions to broker-dealer affiliates of AEFC.

<PAGE>

PAGE 34

Appendix

Descriptions of derivative instruments

What follows are brief descriptions of derivative instruments the Portfolio may
use. At various times the Portfolio may use some or all of these instruments and
is not limited to these instruments. It may use other similar types of
instruments if they are consistent with the Portfolio's investment goal and
policies. For more information on these instruments, see the SAI.

Options and futures contracts. An option is an agreement to buy or sell an
instrument at a set price during a certain period of time. A futures contract is
an agreement to buy or sell an instrument for a set price on a future date. The
Portfolio may buy and sell options and futures contracts to manage its exposure
to changing interest rates, security prices and currency exchange rates. Options
and futures may be used to hedge the Portfolio's investments against price
fluctuations or to increase market exposure.

Indexed securities. The value of indexed securities is linked to currencies,
interest rates, commodities, indexes or other financial indicators. Most indexed
securities are short- to intermediate- term fixed income securities whose values
at maturity or interest rates rise or fall according to the change in one or
more specified underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.

Structured products. Structured products are over-the-counter financial
instruments created specifically to meet the needs of one or a small number of
investors. The instrument may consist of a warrant, an option or a forward
contract embedded in a note or any of a wide variety of debt, equity and/or
currency combinations. Risks of structured products include the inability to
close such instruments, rapid changes in the market and defaults by other
parties.

<PAGE>

PAGE 35

IDS Research Opportunities Fund

Prospectus
Sept. 29, 1997

The goal of IDS Research Opportunities Fund, a part of IDS Growth Fund, Inc., is
long-term growth of capital.

The Fund seeks to achieve its goal by investing all of its assets in Aggressive
Growth Portfolio of Growth Trust. The Portfolio is managed by American Express
Financial Corporation and has the same goal as the Fund. This arrangement is
commonly known as a
master/feeder structure.

This prospectus contains facts that can help you decide if the Fund is the right
investment for you. Read it before you invest and keep it for future reference.

Please note that the Fund:

o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal

American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors

<PAGE>

PAGE 36

Table of contents

The Fund in brief
Goal
Investment policies and risks
Structure of the Fund
Manager and distributor
Portfolio manager
Alternative purchase arrangements

Sales charge and Fund expenses

Performance
Financial highlights
Total returns

Investment policies and risks
Facts about investments and their risks
Valuing Fund shares

How to purchase, exchange or redeem shares Alternative purchase arrangements
How to purchase shares How to exchange shares How to redeem shares
Reductions and waivers of the sales charge

Special shareholder services
Services
Quick telephone reference

Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN

About American Express Financial Corporation
General information

Appendix

Descriptions of derivative instruments

<PAGE>

PAGE 37

The Fund in brief

Goal

IDS Research Opportunities Fund (the Fund) seeks to provide shareholders
long-term capital growth. It does so by investing all of its assets in
Aggressive Growth Portfolio (the Portfolio) of Growth Trust (the Trust) rather
than by directly investing in and managing its own portfolio of securities. Both
the Fund and the Portfolio are diversified investment companies that have the
same goal. Because any investment involves risk, achieving this goal cannot be
guaranteed. The goal can be changed only by holders of a majority of outstanding
securities.

Investment policies and risks

Both the Fund and the Portfolio have the same investment policies. Accordingly,
the Portfolio invests primarily in the equity securities of companies that
comprise the Standard & Poor's 500 Composite Stock Price Index (S&P 500). The
Portfolio does not seek to replicate the S&P 500. Rather, it invests in those
securities within the universe of S&P 500 stocks that the Portfolio's advisor
believes are undervalued or that offer potential for long-term capital growth.
Ordinarily, at least 65% of the Portfolio's total assets will be invested in
equity securities. The Portfolio will be managed using a research methodology
developed by the Research Department of American Express Financial Corporation
(AEFC) that is designed to achieve a return in excess of the return of the S&P
500. The Portfolio also may invest in convertible securities, debt securities,
derivative instruments and money market instruments.

Undervalued stocks and stock of companies with above-average growth rates can
provide higher returns to investors than stocks of other companies, although the
prices of these stocks can fluctuate more. Some of the Portfolio's investments
may be considered speculative and involve additional investment risks. For
further information, refer to the later section in the prospectus titled
"Investment policies and risks."

Structure of the Fund

<PAGE>

PAGE 38

Investors buy
shares in the Fund

The Fund invests
in the Portfolio

The Portfolio invests
in securities, such
as stocks or bonds

Manager and distributor

Portfolio manager

Guru Baliga joined AEFC in 1991 and serves as senior portfolio manager. He
became portfolio manager of the Portfolio and IDS Small Company Index Fund in
August 1996. He has been portfolio manager of IDS Blue Chip Advantage Fund since
1994. He was appointed to the portfolio management team of Total Return
Portfolio in 1995, and is also a portfolio manager of American Express Asset
Management Group accounts that are managed similarly to the Portfolio.

Alternative purchase arrangements

Sales charge and Fund expenses

<PAGE>

PAGE 39

Annual Fund and allocated Portfolio operating expenses (as a percentage of
average daily net assets):

Class A Class B Class Y
Management fee** 0.65% 0.65% 0.65%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses*** 0.87% 0.85% 0.80%
Total**** 1.52% 2.25% 1.45%

*This charge may be reduced depending on your total investments in IDS funds.
See "Reductions of the sales charge." **The management fee is paid by the Trust
on behalf of the Portfolio. ***Other expenses include an administrative services
fee, a shareholder services fee, a transfer agency fee and other nonadvisory
expenses. Class Y expenses have been restated to reflect the 0.10% shareholder
services fee which commenced on May 9, 1997. ****The board considered whether
the aggregate expenses of the Fund and the Portfolio would be more or less than
if the Fund invested directly in the type of securities being held by the
Portfolio. AEFC has agreed to pay the small additional costs required to use a
master/feeder structure to manage the investment portfolio during the first year
of its operation and half of such costs in the second year. These additional
costs may be more than offset in subsequent years if the assets being managed
increase.

1 year 3 years 5 years 10 years
Class A $65 $ 96 $129 $223
Class B $73 $110 $141 $241**
Class B* $23 $ 70 $121 $241**
Class Y $15 $ 46 $ 79 $174

*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.

<PAGE>

PAGE 40

Performance

Financial highlights

IDS Research Opportunities Fund
Financial highlights
Fiscal period ended
July 31,
Per share income and capital changes(a)

Class A Class B Class Y
1997(b) 1997(b) 1997(b)

Net asset value, $5.00 $5.00 $5.00
beginning of period

Income from investment operations:

Net investment income (loss) .01 (.02) .01

Net gains (losses) 1.86 1.85 1.88
(both realized
and unrealized)

Total from investment 1.87 1.83 1.89
operations

Less distributions:

Distributions from (.01) (.01) (.01)
realized gains

Net asset value, $6.86 $6.82 $6.88
end of period

Ratios/supplemental data
Class A Class B Class Y
1997(b) 1997(b) 1997(b)

Net assets, end of $205 $96 --
period (in millions)

Ratio of expenses to 1.52%(d) 2.25%(d) 1.45%(d)
average daily net assets(c)

Ratio of net income (loss) .20%(d) (.53%)(d) .33%(d)
to average daily net assets

Portfolio turnover rate 171% 171% 171%
(excluding short-term
securities)

Total return(e) 37.4% 36.5% 37.7%

Average brokerage $0.0405 $0.0405 $0.0405
commission rate(f)

(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date. Period from Aug. 19, 1996 to July 31, 1997.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) The Fund is required to disclose an average brokerage commission rate per
share for security trades on which commissions are charged. The
comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.

<PAGE>

PAGE 41

Total returns

Average annual total returns as of July 31, 1997

Purchase Since
made inception
Research Opportunities:
Class A +30.64%*
Class B +32.48%*
Class Y +37.66%*

S&P 500 +48.97%**

Cumulative total returns as of July 31, 1997

Purchase Since
made inception
Research Opportunities:
Class A +30.64%*
Class B +32.48%*
Class Y +37.66%*

S&P 500 +48.97%**

*Inception date for the Fund was Aug. 19, 1996. AEFC also manages a group of
accounts known as the American Express Asset Management Group Accounts (Asset
Management Accounts). AEFC employs the same strategy used to manage the Fund.
The combined average annual total returns of the Asset Management Accounts as of
July 31, 1997 were +50.17% for 1 year, +23.32% for 5 years and +22.60% since
inception, Oct. 11, 1988. Cumulative total returns as of July 31, 1997 were
+50.17% for 1 year, +185.20% for 5 years and +501.61%

<PAGE>

PAGE 42

since inception. The Asset Management Accounts' performance reflects
reinvestment of dividends and is calculated net of brokerage commissions and
management fees. At July 31, 1997, the composite included all 26 fully
discretionary, equity Asset Management Accounts under management using this
strategy with total assets of $1.1 billion, which is 3% of total assets under
management by American Express Asset Management Group. Terminated accounts are
not purged from the composite. Expenses and fees associated with registering a
mutual fund have not been deducted from these returns. Returns shown should not
be considered a representation of the Fund's future performance.

**Measurement period started Sept. 1, 1996.

These examples show total returns from hypothetical investments in Class A,
Class B and Class Y shares of the Fund. These returns are compared to those of a
popular index for the same period. The performance of Class B and Class Y will
vary from the performance of Class A based on differences in sales charges and
fees.

S&P 500, an unmanaged index of common stocks, is frequently used as a general
measure of market performance. The Advisory Accounts, like the Portfolio, invest
in those stocks included in the S&P 500 that AEFC believes will outperform the
S&P 500 within the 6- to 12- month period following investment because, in
AEFC's opinion, such stocks are undervalued or have above-average growth
potential. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.

Investment policies and risks

The policies described below apply both to the Fund and the Portfolio. The
Portfolio invests primarily in equity securities of companies comprising the S&P
500 that, in the opinion of AEFC, are undervalued in relation to their long-term
earning power or the asset value of their issuers or that have above-average
growth potential. Ordinarily, at least 65% of the Portfolio's total assets will
be invested in equity securities consisting of common stocks, preferred stocks,
securities convertible into common stocks, securities having common stock
characteristics such as rights and warrants and foreign equity securities.

The Research Department of AEFC has designed a proprietary research rating
system that is used as the basis for rating securities of issuers listed on the
S&P 500. The research ratings range from a "strong buy" to "strong sell." The
Portfolio will invest primarily in equity securities that the Research
Department rates highly and

<PAGE>

PAGE 43

expects to outperform the S&P 500. The securities in which the Portfolio invests
will not correspond entirely to the S&P 500 securities recommended by the
Research Department because some of these recommendations may not be appropriate
investments for the Portfolio due to diversification, liquidity or other
requirements that apply to registered investment companies. In addition, some of
the recommendations may not be appropriate for the Portfolio under its
investment objective or investment limitations. Moreover, other AEFC clients who
receive the Research Department's recommendations may place purchase or sale
orders that make it more difficult for the Portfolio to implement its own orders
to buy or sell the same securities.

The Portfolio may invest more than 25% of its total assets in equity securities
of companies included in the S&P 500 that are primarily engaged in either the
utilities or the energy industry. If the Portfolio concentrates its investments
in one or both of these industries, the value of its shares will be especially
affected by factors peculiar to these industries, and may fluctuate more widely
than the value of shares of a fund that invests in a broader range of
industries. The Portfolio will concentrate its investments in either of these
industries only to the extent that the S&P 500 becomes heavily weighted in that
industry. The Portfolio's concentration policy can be changed only if holders of
a majority of the outstanding voting securities agree to make the change. See
"Utilities industry" and "Energy industry" below.

Securities may be undervalued because of several factors, including the
following: market decline, poor economic conditions, tax-loss selling or actual
or anticipated unfavorable developments affecting the issuer of the security.
Companies also may be undervalued because they are part of an industry that is
out of favor with investors even though the individual companies may be
financially sound and have high rates of earning growth. Any or all of these
factors may provide buying opportunities at attractive prices relevant to the
long-term prospects for the companies in question. Companies with above average
growth potential generally will have steady earnings and cash flow growth, good
and/or improving balance sheets, strong positions in their market niches and the
ability to perform well in a stagnant economy.

The various types of investments the portfolio manager uses to achieve
investment performance are described in more detail in the next section and in
the SAI.

Facts about investments and their risks

Common stocks: Stock prices are subject to market fluctuations. Stocks of
larger, established companies that pay dividends may be less volatile than the
stock market as a whole. Stocks of smaller companies or companies experiencing
significant growth and operating in areas of financial and technological change
may be subject to more abrupt or erratic price movements than stocks of larger,
established companies or the stock market as a whole. Also, small companies
often have limited product lines, smaller

<PAGE>

PAGE 44

markets or fewer financial resources. Therefore, securities in which the
Portfolio invests involve substantial risk and may be considered speculative.

Preferred stocks: If a company earns a profit, it generally must pay its
preferred stockholders a dividend at a pre-established rate.

Utilities industry: Utility stocks, including electric, gas, telephone and other
energy-related (e.g., nuclear) utilities stocks, generally offer dividend yields
that exceed those of industrial companies and their prices tend to be less
volatile than stocks of industrial companies. However, utility stocks can still
be affected by the risks of the stock market in general, as well as factors
specific to public utilities companies. Many utility companies, especially
electric utility companies, historically have been subject to the risk of
increases in fuel and other operating costs, changes in interest rates on
borrowing for capital improvement programs, changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations. In addition, because securities issued by utility
companies are particularly sensitive to movements in interest rates, the equity
securities of these companies are more affected by movements in interest rates
than the equity securities of other companies. Each of these risks could
adversely affect the ability of public utilities companies to declare or pay
dividends and the ability of holders of common stock, such as the Portfolio, to
realize any value from the assets of the company upon liquidation or bankruptcy.

Energy industry: Energy companies include the conventional areas of oil, gas,
electricity and coal, as well as newer sources of energy such as geothermal,
nuclear, oil shale and solar power. These companies include those that produce,
transmit, market or measure energy, as well as those companies involved in
exploring for new sources of energy. Securities of companies in the energy field
are subject to changes in value and dividend yield which depend largely on the
price and supply of energy fuels. Swift price and supply fluctuations may be
caused by events relating to international politics, energy conservation, the
success of exploration projects and tax or other governmental regulatory
policies.

Technology sector: Stocks of companies that have, or are likely to develop,
products, processes or services that will provide or benefit significantly from
technological advances and improvements are subject to volatility and price
fluctuations as the technology market sector increases or decreases in favor
with the investing public. Technology-based issues are exposed to risks
associated with economic conditions in that market sector. Due to competition, a
less diversified product line and other factors, companies that develop and/or
rely on technology could become increasingly sensitive to down swings in the
economy.

<PAGE>

PAGE 45

Debt securities: The price of bonds generally falls as interest rates increase,
and rises as interest rates decrease. The price of an investment-grade bond also
fluctuates if its credit rating is upgraded or downgraded. The Portfolio invests
in bonds given the four highest ratings by Moody's Investors Service, Inc. or by
Standard & Poor's Corporation or in bonds of comparable quality in the judgment
of the investment manager. Securities that are subsequently downgraded in
quality may continue to be held by the Portfolio, and will be sold only when the
investment manager believes it is advantageous to do so.

Foreign investments: The Portfolio may invest only in foreign securities that
are included in the S&P 500 (or that will be included in the S&P 500 in the near
future) or in Canadian money market instruments. Foreign investments are subject
to political and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of companies,
imposition of withholding taxes on income, establishment of exchange controls or
adoption of other restrictions that might affect an investment adversely. The
Portfolio may invest up to 20% of its total assets in foreign investments
included in the S&P 500.

<PAGE>

PAGE 46

may be invested in permissible investments, including derivatives, except as
otherwise explicitly provided in this prospectus or the SAI. For descriptions of
these and other types of derivative instruments, see the Appendix to this
prospectus and the SAI.

The investment policies described above may be changed by the boards.

Valuing Fund shares

The public offering price is the net asset value (NAV) adjusted for the sales
charge for Class A. It is the NAV for Class B and Class Y.

To establish the net assets, all securities held by the Portfolio are valued as
of the close of each business day. In valuing assets:

o Securities (except bonds) and assets with available market
values are valued on that basis

o Securities maturing in 60 days or less are valued at amortized
cost

<PAGE>

PAGE 47

o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board

How to purchase, exchange or redeem shares

Alternative purchase arrangements

Sales charge and
distribution
(12b-1) fee Service fee Other information

Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases

Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None 0.10% of average Available only to
daily net assets certain qualifying
institutional
investors
Conversion of Class B shares to Class A shares - During the ninth calendar year
of owning your Class B shares, Class B shares will convert to Class A shares and
will no longer be subject to a distribution fee. Class B shares that convert to
Class A shares are not subject to a sales charge or distribution fee. Class B
shares purchased through reinvested dividends and distributions also will
convert to Class A shares in the same proportion as the other Class B shares.
This means more of your money will be put to work for you.

<PAGE>

PAGE 48

Sales charges on purchase or redemption

If you purchase Class A If you purchase Class B
shares shares

o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.

Ongoing expenses

If you purchase Class A If you purchase Class B
shares shares

<PAGE>

PAGE 49

o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has - at least $10 million in
plan assets or - 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or - 500 or more participants.

o Nonqualified deferred compensation plans* whose participants are
included in a qualified employee benefit plan described above.

* Eligibility must be determined in advance by American Express Financial
Advisors. To do so, contact your financial advisor.

How to purchase shares

Important: When opening an account, you must provide your correct
Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."

Purchase policies:

o The minimums allowed for investment may change from time to
time.

o Wire orders can be accepted only on days when your bank, AEFC, the Fund
and Norwest Bank Minneapolis are open for business.

<PAGE>

PAGE 50

o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.

o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.

o You must pay any fee the bank charges for wiring.

o The Fund reserves the right to reject any application for any
reason.

o If your application does not specify which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.

<TABLE>
<CAPTION>
Three ways to invest
<S> <C> <C>

Your financial advisor will help you with this process.

o direct deposit of If account balance is below $2,000,
Social Security check frequency of payments must be at
least monthly.
o other plan approved by the Fund

Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
</TABLE>

<PAGE>

PAGE 51

How to exchange shares

How to redeem shares

You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request.

<PAGE>

PAGE 52

Two ways to request an exchange or redemption of shares

1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or
redeemed
o your account number(s) (for exchanges,
both funds must be registered in the same
ownership) o your Taxpayer Identification
Number (TIN) o the dollar amount or number
of shares you want to exchange or redeem o
signature of all registered account owners
o for redemptions, indicate how you want
your money delivered to you o any paper
certificates of shares you hold

Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534

Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402

2
By phone
American Express Financial o The Fund and AEFC will honor any telephone exchange
or redemption request believed to be Advisors Telephone authentic and will use
reasonable procedures to confirm that they are. This includes Transaction
Service: asking identifying questions and tape recording calls. If reasonable
800-437-3133 or procedures are not followed, the Fund or AEFC will be liable for
any loss resulting from 612-671-3800 fraudulent requests.
o Phone exchange and redemption privileges
automatically apply to all accounts except
custodial, corporate or qualified
retirement accounts unless you request
these privileges NOT apply by writing
American Express Shareholder Service. Each
registered owner must sign the request. o
AEFC answers phone requests promptly, but
you may experience delays when call volume
is high. If you are unable to get through,
use mail procedure as an alternative. o
Acting on your instructions, your financial
advisor may conduct telephone transactions
on your behalf. o Phone privileges may be
modified or discontinued at any time.

Minimum amount
Redemption: $100

Maximum amount
Redemption: $50,000

Exchange policies:

o Exchanges must be made into the same class of shares of the new
fund.

o If your exchange creates a new account, it must satisfy the minimum investment
amount for new purchases.

o Once we receive your exchange request, you cannot cancel it.

o Shares of the new fund may not be used on the same day for
another exchange.

<PAGE>

PAGE 53

o If your shares are pledged as collateral, the exchange will be delayed until
written approval is obtained from the secured party.

Redemption policies:

o A telephone redemption request will not be allowed within 30 days of a
phoned-in address change.

Three ways to receive payment when you redeem shares

1
By regular or express mail o Mailed to the address on record
o Payable to names listed on the account
NOTE: You will be charged a fee if you
request express mail delivery.

By wire o Minimum wire redemption: $1,000
o Request that money be wired to your bank
o Bank account must be in the same
ownership as the IDS fund account

NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.

By scheduled payout plan o Minimum payment: $50
o Contact your financial
advisor or American Express Shareholder
Service to set up regular payments to you on
a monthly, bimonthly, quarterly, semiannual or
annual basis
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges

<PAGE>

PAGE 54

Reductions and waivers of the sales charge
Class A - initial sales charge alternative

On purchases of Class A shares, you pay a 5% sales charge on the first $50,000
of your total investment and less on investments after the first $50,000:

Total investment Sales charge as a
percent of:*

Public Net
offering amount
price invested

Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00

* To calculate the actual sales charge on an investment greater than $50,000 and
less than $1,000,000, amounts for each applicable increment must be totaled. See
the SAI.

Reductions of the sales charge on Class A shares

Your sales charge may be reduced, depending on the totals of:

o the amount you are investing in this Fund now,

o the amount of your existing investment in this Fund, if any, and

Other policies that affect your sales charge:

o If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a letter of intent.

For more details, see the SAI.

<PAGE>

PAGE 55

Waivers of the sales charge for Class A shares

Sales charges do not apply to:

o Current or retired board members, officers or employees of the Fund or AEFC or
its subsidiaries, their spouses and unmarried children under 21.

o Current or retired American Express financial advisors, their spouses and
unmarried children under 21.

o Qualified employee benefit plans* using a daily transfer recordkeeping system
offering participants daily access to IDS funds.

(Participants in certain qualified plans for which the initial sales charge is
waived may be subject to a deferred sales charge of up to 4% on certain
redemptions. For more information, see the SAI.)

Send the Fund a written request along with your payment, indicating the amount
of the redemption and the date on which it occurred.

o Purchases made with dividend or capital gain distributions from the same class
of another fund in the IDS MUTUAL FUND GROUP that has a sales charge.

<PAGE>

PAGE 56

o Purchases made with the proceeds from IDS Life Real Estate Variable Annuity
surrenders through December 31, 1997.

*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.

Class B - contingent deferred sales charge alternative

If a redemption is The percentage rate
made during the for the CDSC is:

First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%

<PAGE>

PAGE 57

Waivers of the contingent deferred sales charge

The CDSC on Class B shares will be waived on redemptions of shares:

For investors in Class A shares who have over $1 million invested in one year,
the 1% CDSC on redemption of those shares will be waived in the same
circumstances described for Class B.

Special shareholder services

Services

To help you track and evaluate the performance of your investments, AEFC
provides these services:

Quarterly statements listing all of your holdings and transactions during the
previous three months.

Yearly tax statements featuring average-cost-basis reporting of capital gains or
losses if you redeem your shares along with distribution information which
simplifies tax calculations.

Quick telephone reference

TTY Service
For the hearing impaired
800-846-4852

<PAGE>

PAGE 58

Distributions and taxes

Dividend and capital gain distributions

Reinvestments

Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:

o you request the Fund in writing or by phone to pay
distributions to you in cash, or

o you direct the Fund to invest your distributions in the same class of
another publicly available IDS fund for which you've previously opened
an account.

The reinvestment price is the net asset value at close of business on the day
the distribution is paid. (Your quarterly statement will confirm the amount
invested and the number of shares purchased.)

<PAGE>

PAGE 59

If you choose cash distributions, you will receive only those declared after
your request has been processed.

Taxes

If you don't provide the TIN, or the TIN you report is incorrect, you could be
subject to backup withholding of 31% of taxable distributions and proceeds from
certain sales and exchanges. You also could be subject to further penalties,
such as:

<PAGE>

PAGE 60

You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.

How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:

Individual or joint account The individual or individuals
listed on the account

Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)

A living trust The grantor-trustee (the person
who puts the money into the
trust)

An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)

Sole proprietorship The owner

Partnership The partnership

Corporate The corporation

Association, club or The organization
tax-exempt organization

For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."

How the Fund and Portfolio are organized

<PAGE>

PAGE 61

Voting rights

Shareholder meetings

Special considerations regarding master/feeder structure

Board considerations: The board considered the advantages and disadvantages of
investing the Fund's assets in the Portfolio. The board believes that the
master/feeder structure can be in the best interest of the Fund and its
shareholders since it offers the opportunity for economies of scale. The Fund
may redeem all of its assets from the Portfolio at any time. Should the board
determine that it is in the best interest of the Fund and its shareholders to
terminate its investment in the Portfolio, it would consider hiring an
investment advisor to manage the Fund's assets, or other appropriate options.
The Fund would terminate its investments if the Portfolio changed its goals,
investment policies or restrictions without the same change being approved by
the Fund.

<PAGE>

PAGE 62

investment returns for other feeders are different from the returns of the Fund.
Information about other feeders may be obtained by calling American Express
Financial Advisors at 1-800-AXP-SERV.

Board members and officers

Board members and officers of the Fund

President and interested board member

William R. Pearce
Chairman of the board, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).

Independent board members

H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills, Inc.

Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.

<PAGE>

PAGE 63

Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.

Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.

Anne P. Jones
Attorney and telecommunications consultant.

Melvin R. Laird
Senior counsellor for national and international affairs, The Reader's Digest
Association, Inc.

Alan K. Simpson
Former United States senator for Wyoming.

Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.

Wheelock Whitney
Chairman, Whitney Management Company.

C. Angus Wurtele
Chairman of the board, The Valspar Corporation.

Interested board members who are officers and/or employees of AEFC

William H. Dudley
Senior advisor to the chief executive officer, AEFC.

David R. Hubers
President and chief executive officer, AEFC.

John R. Thomas
Senior vice president, AEFC.

Officers who also are officers and/or employees of AEFC

Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.

Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the Fund.

Other officer

Leslie L. Ogg
President, treasurer and corporate secretary of Board Services Corporation. Vice
president, general counsel and secretary for the Fund.

Refer to the SAI for the board members' and officers' biographies.

<PAGE>

PAGE 64

Investment manager

Assets Annual rate
(billions) at each asset level

First $0.25 0.650%
Next 0.25 0.625
Next 0.50 0.600
Next 1.0 0.575
Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500

For the fiscal year ended July 31, 1997, the Portfolio paid AEFC a total
investment management fee of 0.65% of its average daily net assets. Under the
Agreement, the Portfolio also pays taxes, brokerage commissions and nonadvisory
expenses.

Administrator and transfer agent

The Fund pays AEFC for shareholder accounting and transfer agent services under
two agreements. The first agreement, the Administrative Services Agreement, has
a declining annual rate beginning at 0.06% and decreasing to 0.03% as assets
increase. The second agreement, the Transfer Agency Agreement, has an annual fee
per shareholder account as follows:

o Class A $15
o Class B $16
o Class Y $15

Distributor

<PAGE>

PAGE 65

of those payments range from 0.8% to 4% of the Fund's offering price depending
on the monthly sales volume.

Total expenses paid by the Fund's Class A shares for the fiscal year ended July
31, 1997, were 1.52% of its average daily net assets. Expenses for Class B and
Class Y were 2.25% and 1.45%, respectively.

About American Express Financial Corporation

General information

The AEFC family of companies offers not only mutual funds but also insurance,
annuities, investment certificates and a broad range of financial management
services.

American Express Financial Advisors serves individuals and businesses through
its nationwide network of more than 175 offices and more than 8,500 advisors.

Other AEFC subsidiaries provide investment management and related services for
pension, profit sharing, employee savings and endowment funds of businesses and
institutions.

<PAGE>

PAGE 66

Appendix

Descriptions of derivative instruments

<PAGE>

PAGE 67

IDS GROWTH FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

FOR

IDS GROWTH FUND

Sept. 29, 1997

This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus and the financial statements contained in the
Annual Report which may be obtained from your American Express financial advisor
or by writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534.

This SAI is dated Sept. 29, 1997, and it is to be used with the
prospectus dated Sept. 29, 1997, and the Annual Report for the
fiscal year ended July 31, 1997.

<PAGE>

PAGE 68

TABLE OF CONTENTS

Goal and Investment Policies............See Prospectus

Additional Investment Policies.......................p.3

Security Transactions................................p.6

Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation...............p.9

Performance Information..............................p.10

Valuing Fund Shares..................................p.11

Investing in the Fund................................p.12

Redeeming Shares.....................................p.16

Pay-out Plans........................................p.17

Taxes................................................p.18

Agreements...........................................p.20

Organizational Information...........................p.23

Board Members and Officers...........................p.23

Compensation for Board Members.......................p.27

Independent Auditors.................................p.29

Financial Statements.................See Annual Report

Prospectus...........................................p.29

Appendix A: Foreign Currency Transactions...........p.30

Appendix B: Options and Stock Index Futures
Contracts...............................p.35

Appendix C: Mortgage-Backed Securities..............p.42

Appendix D: Dollar-Cost Averaging...................p.43

<PAGE>

PAGE 69

ADDITIONAL INVESTMENT POLICIES

The Fund pursues its goals by investing all of its assets in Growth Portfolio
(the "Portfolio") of Growth Trust (the "Trust"), a separate investment company,
rather than by directly investing in and managing its own portfolio of
securities. The Portfolio has the same investment objectives, policies and
restrictions as the Fund.

Fundamental investment policies adopted by the Fund or Portfolio cannot be
changed without the approval of a majority of the outstanding voting securities
of the Fund or Portfolio, respectively, as defined in the Investment Company Act
of 1940 (the 1940 Act). Whenever the Fund is requested to vote on a change in
the investment policies of the corresponding Portfolio, the Fund will hold a
meeting of Fund shareholders and will cast the Fund's vote as instructed by the
shareholders.

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.

These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies that apply to both the Fund and the
Portfolio 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
and Portfolio will not:

'Act as an underwriter (sell securities for others). However, under the
securities laws, the Portfolio may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.

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

'Borrow money or property, except as a temporary measure for extraordinary or
emergency purposes, in an amount not exceeding one-third of the market value of
its total assets (including borrowings) less liabilities (other than borrowings)
immediately after the borrowing. The Portfolio has not borrowed in the past and
has no present intention to borrow.

'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
Portfolio's total assets, based on current market value at time of purchase, can
be invested in any one industry.

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

<PAGE>

PAGE 70

'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 Portfolio's total assets
may be invested without regard to this 5% limitation.

'Buy or sell real estate, unless acquired as a result of ownership of securities
or other instruments, except this shall not prevent the Portfolio 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.

'Buy or sell physical commodities unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Portfolio
from buying or selling financial instruments (such as options and futures
contracts) or from investing in securities or other instruments backed by, or
whose value is derived from, physical commodities.

'Make a loan of any part of its assets to American Express Financial Corporation
(AEFC), to the board members and officers of AEFC or to its own board members
and officers.

'Purchase securities of an issuer if the board members and officers of the Fund,
the Portfolio and AEFC hold more than a certain percentage of the issuer's
outstanding securities. If the holdings of all board members and officers of the
Fund, the Portfolio and of AEFC who own more than 0.5% of an issuer's securities
are added together, and if in total they own more than 5%, the Portfolio will
not purchase securities of that issuer.

'Lend Portfolio securities in excess of 30% of its net assets. The current
policy of the Portfolio's board is to make these loans, either long- or
short-term, to broker-dealers. In making loans, the Portfolio receives the
market price in cash, U.S. government securities, letters of credit or such
other collateral as may be permitted by regulatory agencies and approved by the
board. If the market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the securities when
due. During the existence of the loan, the Portfolio receives cash payments
equivalent to all interest or other distributions paid on the loaned securities.
A loan will not be made unless the investment manager believes the opportunity
for additional income outweighs the risks.

Unless changed by the board, the Fund and Portfolio will not:

'Buy on margin or sell short, except the Portfolio may make margin payments in
connection with transactions in stock index futures contracts.

<PAGE>

PAGE 71

'Pledge or mortgage its assets beyond 15% of total assets. If the Portfolio were
ever to do so, valuation of the pledged or mortgaged assets would be based on
market values. For purposes of this policy, collateral arrangements for margin
deposits on a futures contract are not deemed to be a pledge of assets.

'Invest more than 5% of its total assets in securities of companies, including
any predecessors, that have a record of less than three years continuous
operations.

'Invest more than 10% of its total assets in securities of
investment companies.

'Invest in a company to control or manage it.

'Invest in exploration or development programs, such as oil, gas or
mineral leases.

'Invest more than 5% of its net assets in warrants.

'Invest more than 10% of its net assets in securities and other instruments that
are illiquid. For purposes of this policy illiquid securities include some
privately placed securities, public securities and Rule 144A securities that for
one reason or another may no longer have a readily available market, repurchase
agreements with maturities greater than seven days, non-negotiable fixed-time
deposits and over-the-counter options.

In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S.
government or its agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to purchase or
sell the security and the nature of marketplace trades.

In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of 1933,
the investment manager, under guidelines established by the board, will evaluate
relevant factors such as the issuer and the size and nature of its commercial
paper programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and settlement procedures
for the paper.

The Portfolio may make contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities or forward
commitments). Under normal market conditions, the Portfolio does not intend to
commit more than 5% of its total assets to these practices. The Portfolio does
not pay for the securities or receive dividends or interest on them until the
contractual settlement date. The Portfolio will designate cash or liquid
high-grade debt securities at least equal in value to its commitments to
purchase the securities. When-issued securities or

<PAGE>

PAGE 72

forward commitments are subject to market fluctuations and they may affect the
Portfolio's total assets the same as owned securities.

The Portfolio may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the Portfolio may use are
short-term U.S. and Canadian government securities and negotiable certificates
of deposit, non-negotiable fixed-time deposits, bankers' acceptances and letters
of credit of banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published annual
financial statements) in excess of $100 million (or the equivalent in the
instance of a foreign branch of a U.S. bank) at the date of investment. Any
cash-equivalent investments in foreign securities will be subject to the
limitations on foreign investments described in the prospectus. The Portfolio
also may purchase short-term corporate notes and obligations rated in the top
two classifications by Moody's Investors Service, Inc. (Moody's) or Standard &
Poor's Corporation (S&P) or the equivalent and may use repurchase agreements
with broker-dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. A risk of a repurchase agreement is that if the seller
seeks the protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.

The Portfolio may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.

For a discussion about foreign currency transactions, see Appendix A. For a
discussion on options and stock index futures contracts see Appendix B. For a
discussion on mortgage-backed securities, see Appendix C.

SECURITY TRANSACTIONS

Subject to policies set by the board, AEFC is authorized to determine,
consistent with the Fund's and Portfolio's investment goal and policies, which
securities will be purchased, held or sold. In determining where the buy and
sell orders are to be placed, AEFC has been directed to use its best efforts to
obtain the best available price and the most favorable execution except where
otherwise authorized by the board. In selecting broker-dealers to execute
transactions, AEFC may consider the price of the security, including commission
or mark-up, the size and difficulty of the order, the reliability, integrity,
financial soundness and

<PAGE>

PAGE 73

general operation and execution capabilities of the broker, the broker's
expertise in particular markets, and research services provided by the broker.

AEFC has a strict Code of Ethics that prohibits its affiliated personnel from
engaging in personal investment activities that compete with or attempt to take
advantage of planned portfolio transactions for any fund or trust for which it
acts as investment manager. AEFC carefully monitors compliance with its Code of
Ethics.

On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing AEFC to do so to the extent authorized by
law, if AEFC determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage or research services provided by a broker
or dealer, viewed either in the light of that transaction or AEFC's overall
responsibilities to the funds in the IDS MUTUAL FUND GROUP and other accounts
for which it acts as investment advisor.

Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making
purposes, which include the research, portfolio management and trading functions
and other services to the extent permitted under an interpretation by the SEC.

When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, AEFC must follow procedures
authorized by the board. To date, three procedures have been authorized. One
procedure permits AEFC to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research services it has
provided. The second procedure permits AEFC, in order to obtain research, to
direct an order on an agency basis to buy or sell a security traded in the
over-the-counter market to a firm that does not make a market in that security.
The commission paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Portfolio to pay a commission in excess of

<PAGE>

PAGE 74

the amount another broker might have charged. AEFC has advised the Portfolio it
is necessary to do business with a number of brokerage firms on a continuing
basis to obtain such services as the handling of large orders, the willingness
of a broker to risk its own money by taking a position in a security, and the
specialized handling of a particular group of securities that only certain
brokers may be able to offer. As a result of this arrangement, some portfolio
transactions may not be effected at the lowest commission, but AEFC believes it
may obtain better overall execution. AEFC has assured the Fund that under all
three procedures the amount of commission paid will be reasonable and
competitive in relation to the value of the brokerage services performed or
research provided.

All other transactions shall be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given by such person to those firms offering research
services. Such services may be used by AEFC in providing advice to all the funds
in the IDS MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund or account.

Each investment decision made for the Portfolio is made independently from any
decision made for another portfolio, fund or other account advised by AEFC or
any of its subsidiaries. When the Portfolio buys or sells the same security as
another portfolio, fund or account, AEFC carries out the purchase or sale in a
way the Portfolio agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or sold by the
Portfolio, the Portfolio hopes to gain an overall advantage in execution. AEFC
has assured the Fund it will continue to seek ways to reduce brokerage costs. On
a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.

The Portfolio paid total brokerage commissions of $1,548,321 for the fiscal year
ended July 31, 1997, $1,117,268 for the fiscal year ended 1996, and $794,917 for
the fiscal year ended 1995. Substantially all firms through whom transactions
were executed provide research services.

No transactions were directed to brokers because of research services they
provided to the Portfolio except for the affiliates as noted below.

<PAGE>

PAGE 75

As of the fiscal year ended July 31, 1997, the Portfolio held securities of its
regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:

Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Bank of America $ 6,385,099
Goldman Sachs 6,979,533
Merrill Lynch 112,700,000
Morgan Stanley 15,642,433
Travelers Group 143,875,000

The portfolio turnover rate was 24% in the fiscal year ended July 31, 1997, and
22% in fiscal year 1996.

BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION

Affiliates of American Express Company (American Express) (of which AEFC is a
wholly-owned subsidiary) may engage in brokerage and other securities
transactions on behalf of the Portfolio according to procedures adopted by the
board and to the extent consistent with applicable provisions of the federal
securities laws. AEFC will use an American Express affiliate only if (i) AEFC
determines that the Portfolio will receive prices and executions at least as
favorable as those offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the affiliate charges
the Portfolio commission rates consistent with those the affiliate charges
comparable unaffiliated customers in similar transactions and if such use is
consistent with terms of the Investment Management Services Agreement.

AEFC may direct brokerage to compensate an affiliate. AEFC will receive research
on South Africa from New Africa Advisors, a wholly-owned subsidiary of Sloan
Financial Group. AEFC owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send research to AEFC and
in turn AEFC will direct trades to a particular broker. The broker will have an
agreement to pay New Africa Advisors. All transactions will be on a best
execution basis. Compensation received will be reasonable for the services
rendered.

<PAGE>

PAGE 76

Information about brokerage commissions paid by the Portfolio for the last three
fiscal years to brokers affiliated with AEFC is contained in the following
table:
<TABLE>
<CAPTION>

For the Fiscal Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C>

1997 1996 1995
------------------------------------------------- ----------- -------
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
American (1) $193,510 12.50% 21.24% $213,016 $74,584
Enterprise
Investment
Services
Inc.
</TABLE>

(1) Wholly-owned subsidiary of AEFC.

PERFORMANCE INFORMATION

The Fund may quote various performance figures to illustrate past performance.
Average annual total returns quotations used by the Fund are based on
standardized methods of computing performance as required by the SEC. An
explanation of the methods used by the Fund to compute performance follows
below.

Average annual total return

The Fund may calculate average annual total return for a class for certain
periods by finding the average annual compounded rates of return over the period
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:

P(1+T)
n
= ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment, made
at the beginning of a period, at the end of the period (or
fractional portion thereof)

Aggregate total return

The Fund may calculate aggregate total return for a class for certain periods
representing the cumulative change in the value of an investment in the Fund
over a specified period of time according to the following formula:

ERV - P
P

where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)

<PAGE>

PAGE 77

In its sales material and other communications, the Fund may quote, compare or
refer to rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial
Services Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.

VALUING FUND SHARES

Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
Class A $3,211,503,421 divided by 90,643,619 equals $35.43
Class B 712,153,403 20,481,835 34.77
Class Y 178,535,274 5,020,677 35.56
</TABLE>

In determining net assets before shareholder transactions, the Portfolio's
securities are valued as follows as of the close of business of the New York
Stock Exchange (the Exchange):

'Securities, except bonds other than convertibles, traded on a securities
exchange for which a last-quoted sales price is readily available are valued at
the last-quoted sales price on the exchange where such security is primarily
traded.

'Securities traded on a securities exchange for which a last-quoted sales price
is not readily available are valued at the mean of the closing bid and asked
prices, looking first to the bid and asked prices on the exchange where the
security is primarily traded and, if none exist, to the over-the-counter market.

'Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.

'Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities traded
over-the-counter but not included in the NASDAQ National Market System are
valued at the mean of the closing bid and asked prices.

'Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.

<PAGE>

PAGE 78

the current rate of exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange that will
not be reflected in the computation of the Portfolio's net asset value. If
events materially affecting the value of such securities occur during such
period, these securities will be valued at their fair value according to
procedures decided upon in good faith by the board.

'Short-term securities maturing more than 60 days from the valuation date are
valued at the readily available market price or approximate market value based
on current interest rates. Short- term securities maturing in 60 days or less
that originally had maturities of more than 60 days at acquisition date are
valued at amortized cost using the market value on the 61st day before maturity.
Short-term securities maturing in 60 days or less at acquisition date are valued
at amortized cost. Amortized cost is an approximation of market value determined
by systematically increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,so that the
carrying value is equal to maturity value on the maturity date.

'Securities without a readily available market price, bonds other than
convertibles and other assets are valued at fair value as determined in good
faith by the board. The board is responsible for selecting methods it believes
provide fair value. When possible, bonds are valued by a pricing service
independent from the Portfolio. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable about the
bond if such a dealer is available.

The Exchange, AEFC and the Fund will be closed on the following
holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

INVESTING IN THE FUND

Sales Charge

Shares of the Fund are sold at the public offering price determined at the close
of business on the day an application is accepted. The public offering price is
the net asset value of one share plus a sales charge, if applicable. For Class B
and Class Y, there is no initial sales charge so the public offering price is
the same as the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made Aug. 1, 1997, was determined by dividing
the net asset value of one share, $35.43, by 0.95 (1.00-0.05 for a maximum 5%
sales charge) for a public offering price of $37.29. The sales charge is paid to
American Express Financial Advisors by the person buying the shares.

Class A - Calculation of the Sales Charge

<PAGE>

PAGE 79

Sales charges are determined as follows:

Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested

First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00

Sales charges on an investment greater than $50,000 and less than $1,000,000 are
calculated for each increment separately and then totaled. The resulting total
sales charge, expressed as a percentage of the public offering price and of the
net amount invested, will vary depending on the proportion of the investment at
different sales charge levels.

For example, compare an investment of $60,000 with an investment of $85,000. The
$60,000 investment is composed of $50,000 that incurs a sales charge of $2,500
(5.0% x $50,000) and $10,000 that incurs a sales charge of $450 (4.5% x
$10,000). The total sales charge of $2,950 is 4.92% of the public offering price
and 5.17% of the net amount invested.

In the case of the $85,000 investment, the first $50,000 also incurs a sales
charge of $2,500 (5.0% x $50,000) and $35,000 incurs a sales charge of $1,575
(4.5% x $35,000). The total sales charge of $4,075 is 4.79% of the public
offering price and 5.04% of the net amount invested.

The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.

On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:

First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00

<PAGE>

PAGE 80

participant's death, disability, retirement, attaining age 59 1/2, loans or
hardship withdrawals. The deferred sales charge varies depending on the number
of participants in the qualified plan and total plan assets as follows:

Deferred Sales Charge
Number of Participants

Total Plan Assets 1-99 100 or more

Less than $1 million 4% 0%

$1 million or more 0% 0%
- ---------------------------------------------------------

Class A - Reducing the Sales Charge

Sales charges are based on the total amount of your investments in the Fund. The
amount of all prior investments plus any new purchase is referred to as your
"total amount invested." For example, suppose you have made an investment of
$20,000 and later decide to invest $40,000 more. Your total amount invested
would be $60,000. As a result, $10,000 of your $40,000 investment qualifies for
the lower 4.5% sales charge that applies to investments of more than $50,000 and
up to $100,000. The total amount invested includes any shares held in the Fund
in the name of a member of your primary household group. (The primary household
group consists of accounts in any ownership for spouses or domestic partners and
their unmarried children under 21. Domestic partners are individuals who
maintain a shared primary residence and have joint property or other insurable
interests.) For instance, if your spouse already has invested $20,000 and you
want to invest $40,000, your total amount invested will be $60,000 and therefore
you will pay the lower charge of 4.5% on $10,000 of the $40,000.

Until a spouse remarries, the sales charge is waived for spouses and unmarried
children under 21 of deceased board members, officers or employees of the Fund
or AEFC or its subsidiaries and deceased advisors.

The total amount invested also includes any investment you or your immediate
family already have in the other publicly offered funds in the IDS MUTUAL FUND
GROUP where the investment is subject to a sales charge. For example, suppose
you already have an investment of $30,000 in another IDS fund. If you invest
$40,000 more in this Fund, your total amount invested in the funds will be
$70,000 and therefore $20,000 of your $40,000 investment will incur a 4.5% sales
charge.

Finally, Individual Retirement Account (IRA) purchases, or other employee
benefit plan purchases made through a payroll deduction plan or through a plan
sponsored by an employer, association of employers, employee organization or
other similar entity, may be added together to reduce sales charges for shares
purchased through that plan.

<PAGE>

PAGE 81

Class A - Letter of Intent (LOI)

If you intend to invest $1 million over a period of 13 months, you can reduce
the sales charges in Class A by filing a LOI. The agreement can start at any
time and will remain in effect for 13 months. Your investment will be charged
normal sales charges until you have invested $1 million. At that time, your
account will be credited with the sales charges previously paid. Class A
investments made prior to signing an LOI may be used to reach the $1 million
total, excluding Cash Management Fund and Tax-Free Money Fund. However, we will
not adjust for sales charges on investments made prior to the signing of the
LOI. If you do not invest $1 million by the end of 13 months, there is no
penalty, you'll just miss out on the sales charge adjustment. A LOI is not an
option (absolute right) to buy shares.

Here's an example. You file a LOI to invest $1 million and make an investment of
$100,000 at that time. You pay the normal 5% sales charge on the first $50,000
and 4.5% sales charge on the next $50,000 of this investment. Let's say you make
a second investment of $900,000 (bringing the total up to $1 million) one month
before the 13-month period is up. On the date that you bring your total to $1
million, AEFC makes an adjustment to your account. The adjustment is made by
crediting your account with additional shares, in an amount equivalent to the
sales charge previously paid.

Systematic Investment Programs

After you make your initial investment of $2,000 or more, you can arrange to
make additional payments of $100 or more on a regular basis. These minimums do
not apply to all systematic investment programs. You decide how often to make
payments - monthly, quarterly, or semiannually. You are not obligated to make
any payments. You can omit payments or discontinue the investment program
altogether. The Fund also can change the program or end it at any time. If there
is no obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have a goal to
work for.

How does this work? Your regular investment amount will purchase more shares
when the net asset value per share decreases, and fewer shares when the net
asset value per share increases. Each purchase is a separate transaction. After
each purchase your new shares will be added to your account. Shares bought
through these programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is not an option
or an absolute right to buy shares.

The systematic investment program itself cannot ensure a profit, nor can it
protect against a loss in a declining market. If you decide to discontinue the
program and redeem your shares when their net asset value is less than what you
paid for them, you will incur a loss.

<PAGE>

PAGE 82

For a discussion on dollar-cost averaging, see Appendix D.

Automatic Directed Dividends

Dividends, including capital gain distributions, paid by another fund in the IDS
MUTUAL FUND GROUP subject to a sales charge, may be used to automatically
purchase shares in the same class of this Fund without paying a sales charge.
Dividends may be directed to existing accounts only. Dividends declared by a
fund are exchanged to this Fund the following day. Dividends can be exchanged
into the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:

Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;

Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);

Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).

Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.

The Fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you should read that fund's prospectus. You will receive a
confirmation that the automatic directed dividend service has been set up for
your account.

REDEEMING SHARES

You have a right to redeem your shares at any time. For an explanation of
redemption procedures, please see the prospectus.

During an emergency, the board can suspend the computation of net asset value,
stop accepting payments for purchase of shares or suspend the duty of the Fund
to redeem shares for more than seven days. Such emergency situations would occur
if:

'The Exchange closes for reasons other than the usual weekend and holiday
closings or trading on the Exchange is restricted, or 'Disposal of the
Portfolio's securities is not reasonably practicable or it is not reasonably
practicable for the Portfolio to determine the fair value of its net assets, or

<PAGE>

PAGE 83

'The SEC, under the provisions of the 1940 Act, as amended, declares a period of
emergency to exist.

Should the Fund stop selling shares, the board may make a deduction from the
value of the assets held by the Fund to cover the cost of future liquidations of
the assets so as to distribute fairly these costs among all shareholders.

The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the net assets
of the Fund at the beginning of the period. Although redemptions in excess of
this limitation would normally be paid in cash, the Fund reserves the right to
make these payments in whole or in part in securities or other assets in case of
an emergency, or if the payment of a redemption in cash would be detrimental to
the existing shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set forth in the
prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.

PAY-OUT PLANS

You can use any of several pay-out plans to redeem your investment in regular
installments. If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the plans differ on
how the pay-out is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain distributions
will automatically be reinvested, unless you elect to receive them in cash. If
you are redeeming a tax-qualified plan account for which American Express Trust
Company acts as custodian, you can elect to receive your dividends and other
distributions in cash when permitted by law. If you redeem an IRA or a qualified
retirement account, certain restrictions, federal tax penalties and special
federal income tax reporting requirements may apply. You should consult your tax
advisor about this complex area of the tax law.

Applications for a systematic investment in a class of the Fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.

To start any of these plans, please write American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534, or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls./St. Paul). Your authorization must be received in the
Minneapolis headquarters at least five days before the date you want your
payments to begin. The initial payment must be at least $50. Payments will be
made on a monthly, bimonthly, quarterly, semiannual or annual basis. Your choice
is effective until you change or cancel it.

<PAGE>

PAGE 84

The following pay-out plans are designed to take care of the needs of most
shareholders in a way AEFC can handle efficiently and at a reasonable cost. If
you need a more irregular schedule of payments, it may be necessary for you to
make a series of individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves the right to
change or stop any pay-out plan and to stop making such plans available.

Plan #1: Pay-out for a fixed period of time

If you choose this plan, a varying number of shares will be redeemed at regular
intervals during the time period you choose. This plan is designed to end in
complete redemption of all shares in your account by the end of the fixed
period.

Plan #2: Redemption of a fixed number of shares

If you choose this plan, a fixed number of shares will be redeemed for each
payment and that amount will be sent to you. The length of time these payments
continue is based on the number of shares in your account.

Plan #3: Redemption of a fixed dollar amount

If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.

Plan #4: Redemption of a percentage of net asset value

Payments are made based on a fixed percentage of the net asset value of the
shares in the account computed on the day of each payment. Percentages range
from 0.25% to 0.75%. For example, if you are on this plan and arrange to take
0.5% each month, you will get $50 if the value of your account is $10,000 on the
payment date.

TAXES

If you buy shares in the Fund and then exchange into another fund, it is
considered a redemption and subsequent purchase of shares. Under the tax laws,
if this exchange is done within 91 days, any sales charge waived on Class A
shares on a subsequent purchase of shares applies to the new shares acquired in
the exchange. Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91 days.

Retirement Accounts

<PAGE>

PAGE 85

and may result in a gain or loss for tax purposes. In addition, this type of
exchange may result in an excess contribution under IRA or qualified plan
regulations if the amount exchanged plus the amount of the initial sales charge
applied to the amount exchanged exceeds annual contribution limitations. For
example: If you were to exchange $2,000 in Class A shares from a nonqualified
account to an IRA without considering the 5% ($100) initial sales charge
applicable to that $2,000, you may be deemed to have exceeded current IRA annual
contribution limitations. You should consult your tax advisor for further
details about this complex subject.

Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend that is
attributable to dividends the Fund received from domestic (U.S.) securities.

Capital gain distributions received by individual and corporate shareholders, if
any, should be treated as long-term capital gains regardless of how long they
owned their shares. Short-term capital gains earned by the Fund are paid to
shareholders as part of their ordinary income dividend and are taxable. Under
federal tax law, by the end of a calendar year the Fund must declare and pay
dividends representing 98% of ordinary income for that calendar year and 98% of
net capital gains (both long-term and short-term) for the 12-month period ending
Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4%
of the excess, if any, of the amount required to be distributed over the amount
actually distributed. The Fund intends to comply with federal tax law and avoid
any excise tax.

The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or if 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income.

This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state and local income tax laws to Fund distributions.

<PAGE>

PAGE 86

AGREEMENTS

Investment Management Services Agreement

The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC. For its services, AEFC is paid a fee based on the following
schedule. The Fund pays its proportionate share of the fee.

Assets Annual rate at
(billions) each asset level

First $1.0 0.600%
Next 1.0 0.575
Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500

On July 31, 1997, the daily rate applied to the Portfolio's net assets was equal
to 0.561% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made.

Before the fee based on the asset charge is paid, it is adjusted for investment
performance. The adjustment, determined monthly, will be calculated using the
percentage point difference between the change in the net asset value of one
Class A share of the Fund and the change in the Lipper Growth Fund Index
(Index). The performance of one Class A share of the Fund is measured by
computing the percentage difference between the opening and closing net asset
value of one Class A share of the Fund, as of the last business day of the
period selected for comparison, adjusted for dividend or capital gain
distributions which are treated as reinvested at the end of the month during
which the distribution was made. The performance of the Index for the same
period is established by measuring the percentage difference between the
beginning and ending Index for the comparison period. The performance is
adjusted for dividend or capital gain distributions (on the securities which
comprise the Index), which are treated as reinvested at the end of the month
during which the distribution was made. One percentage point will be subtracted
from the calculation to help assure that incentive adjustments are attributable
to AEFC's management abilities rather than random fluctuations and the result
multiplied by 0.01%. That number will be multiplied times the Fund's average net
assets for the comparison period and then divided by the number of months in the
comparison period to determine the monthly adjustment.

Where the Fund's Class A share performance exceeds that of the Index, the base
fee will be increased. Where the performance of the Index exceeds the
performance of Class A shares, the base fee will be decreased. The maximum
monthly increase or decrease will be 0.12% of the Fund's average net assets on
an annual basis.

<PAGE>

PAGE 87

The 12 month comparison period rolls over with each succeeding month, so that it
always equals 12 months, ending with the month for which the performance
adjustment is being computed. The adjustment increased the fee by $1,133,081 for
the fiscal year ended July 31, 1997.

The management fee is paid monthly. Under the agreement, the total amount paid
was $18,360,421 for the fiscal year ended July 31, 1997, $12,041,850 for fiscal
year 1996, and $7,125,802 for fiscal year 1995.

Under the agreement, the Portfolio also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, Portfolio officers and
employees; corporate filing fees; organizational expenses; expenses incurred in
connection with lending securities of the Portfolio; and expenses properly
payable by the Portfolio, approved by the board. Under the agreement,
nonadvisory expenses paid by the Fund and Portfolio were $1,005,611 for the
fiscal year ended July 31, 1997, $807,300 for fiscal year 1996, and $463,700 for
fiscal year 1995.

In this section, prior to May 13, 1996, the fees and expenses described were
paid directly by the Fund. After that date, the management fees were paid by the
Portfolio.

Administrative Services Agreement

The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:

Assets Annual rate
(billions) each asset level

First $1.0 0.050%
Next 1.0 0.045
Next 1.0 0.040
Next 3.0 0.035
Over 6.0 0.030

On July 31, 1997, the daily rate applied to the Fund's net assets was equal to
0.42% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made. Under the agreement, the Fund paid fees
of $1,344,854 for the fiscal year ended July 31, 1997.

Transfer Agency Agreement

<PAGE>

PAGE 88

shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Fund's shares. Under the
agreement, AEFC will earn a fee from the Fund determined by multiplying the
number of shareholder accounts at the end of the day by a rate determined for
each class per year and dividing by the number of days in the year. The rate for
Class A and Class Y is $15 per year and for Class B is $16 per year. The fees
paid to AEFC may be changed from time to time upon agreement of the parties
without shareholder approval. Under the agreement, the Fund paid fees of
$3,324,370 for the fiscal year ended July 31, 1997.

Distribution Agreement

Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to American Express Financial Advisors daily. These charges
amounted to $8,584,940 for the fiscal year ended July 31, 1997. After paying
commissions to personal financial advisors, and other expenses, the amount
retained was $193,564. The amounts were $8,417,998 and $(571,872) for fiscal
year 1996, and $3,627,657 and $608,460 for fiscal year 1995.

Shareholder Service Agreement

The Fund pays a fee for service provided to shareholders by financial advisors
and other servicing agents. The fee is calculated at a rate of 0.175% of average
daily net assets for Class A and Class B and 0.10% for Class Y.

Plan and Agreement of Distribution

For Class B shares, to help American Express Financial Advisors defray the cost
of distribution and servicing, not covered by the sales charges received under
the Distribution Agreement, the Fund and American Express Financial Advisors
entered into a Plan and Agreement of Distribution (Plan). These costs cover
almost all aspects of distributing the Fund's shares except compensation to the
sales force. A substantial portion of the costs are not specifically identified
to any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, American Express
Financial Advisors is paid a fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares.

<PAGE>

PAGE 89

event of its assignment, as that term is defined in the 1940 Act, as amended.
The Plan may not be amended to increase the amount to be spent for distribution
without shareholder approval, and all material amendments to the Plan must be
approved by a majority of the board members, including a majority of the board
members who are not interested persons of the Fund and who do not have a
financial interest in the operation of the Plan or any agreement related to it.
The selection and nomination of disinterested board members is the
responsibility of the other disinterested board members. No board member who is
not an interested person, has any direct or indirect financial interest in the
operation of the Plan or any related agreement. For the fiscal year ended July
31, 1997, under the agreement, the Fund paid fees of $3,545,891.

Custodian Agreement

The Trust's securities and cash are held by American Express Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307, through a
custodian agreement. The Fund also retains the custodian pursuant to a custodian
agreement. The custodian is permitted to deposit some or all of its securities
in central depository systems as allowed by federal law. For its services, the
Portfolio pays the custodian a maintenance charge and a charge per transaction
in addition to reimbursing the custodian's out-of-pocket expenses.

The custodian has entered into a sub-custodian arrangement with the Morgan
Stanley Trust Company (Morgan Stanley), One Pierrepont Plaza, Eighth Floor,
Brooklyn, NY 11201-2775. As part of this arrangement, securities purchased
outside the United States are maintained in the custody of various foreign
branches of Morgan Stanley or in such other financial institutions as may be
permitted by law and by the Fund's sub-custodian agreement.

Total fees and expenses

The Fund paid total fees and nonadvisory expenses, net of earnings credits, of
$32,463,054 for the fiscal year ended July 31, 1997.

ORGANIZATIONAL INFORMATION

IDS Growth Fund, Inc., of which IDS Growth Fund is a part, is an open-end
management investment company, as defined in the Investment Company Act of 1940.
Originally incorporated on May 21, 1970 in Nevada, IDS Growth Fund, Inc. changed
its state of incorporation on June 13, 1986 by merging into a Minnesota
corporation incorporated on April 7, 1986. The Fund headquarters are at 901 S.
Marquette Ave., Suite 2810, Minneapolis, MN 55402- 3268.

BOARD MEMBERS AND OFFICERS

The following is a list of the Fund's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley, who does
not serve on the nine IDS Life fund boards.)

<PAGE>

PAGE 90

All shares have cumulative voting rights with respect to the election of board
members.

H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN

Former chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.

Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.

Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, Union Pacific Resources, and FPL Group, Inc.
(holding company for Florida Power and Light).

William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN

Senior advisor to the chief executive officer, AEFC.

Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN

Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.

David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN

President and chief executive officer of AEFC since August 1993, and director of
AEFC. Previously, senior vice president, finance and chief financial officer of
AEFC.

<PAGE>

PAGE 91

Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN

Former president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).

Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD

Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.

Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.

Senior counsellor for national and international affairs, The Reader's Digest
Association, Inc. Former nine-term U.S. Congressman, U.S. Secretary of Defense
and Presidential Counsellor. Director, Metropolitan Life Insurance Co., The
Reader's Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).

William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN

Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Former vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).

Alan K. Simpson'
Born in 1931
1201 Sunshine Ave.
Cody, WY

Former three-term United States Senator for Wyoming. Former
Assistant Republican Leader, U.S. Senate. Director, PacifiCorp
(electric power).

<PAGE>

PAGE 92

Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN

President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).

John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN

Senior vice president and director of AEFC.

Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN

Chairman, Whitney Management Company (manages family assets).

C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN

Chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and
General Mills, Inc. (consumer foods).

+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of the Fund.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of AEFC or American Express.

The board also has appointed officers who are responsible for day-to-day
business decisions based on policies it has established. In addition to Mr.
Pearce, who is president, the Fund's other officers are:

<PAGE>

PAGE 93

Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN

President, treasurer and corporate secretary of Board Services Corporation. Vice
president, general counsel and secretary for the Fund.

Officers who also are officers and/or employees of AEFC

Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN

Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.

Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN

Director, senior vice president and chief financial officer of AEFC. Director,
executive vice president and controller of IDS Life Insurance Company. Treasurer
for the Fund.

COMPENSATION FOR FUND BOARD MEMBERS

Members of the board who are not officers of the Fund or AEFC receive an annual
fee of $500, and the chair of the Contracts Committee receives an additional
$86. Board members receive a $50 per day attendance fee for board meetings. The
attendance fee for meetings of the Contracts and Investment Review Committees is
$50; for meetings of the Audit Committee and Personnel Committee $25 and for
traveling from out-of-state $5. Expenses for attending meetings are reimbursed.

<PAGE>

PAGE 94

During the fiscal year ended July 31, 1997, the members of the board, for
attending up to 32 meetings, received the following compensation:
<TABLE>
<CAPTION>
Compensation Table

Pension or Estimated Total cash compensation
Aggregate Retirement annual from the IDS MUTUAL FUND
compensation benefits accrued benefit upon GROUP and the Preferred
Board member from the Fund as Fund expenses retirement Master Trust Group
H. Brewster Atwater, Jr. $1,080 $0 $0 $ 78,900
(part of year)
Lynne V. Cheney 1,318 0 0 97,400
Robert F. Froehlke 1,455 0 0 104,600
Heinz F. Hutter 1,490 0 0 106,300
Anne P. Jones 1,553 0 0 111,600
Melvin R. Laird 1,334 0 0 98,600
Alan K. Simpson 766 0 0 58,200
(part of year)
Edson W. Spencer 1,851 0 0 127,800
Wheelock Whitney 1,540 0 0 109,500
C. Angus Wurtele 1,565 0 0 110,700
</TABLE>

On July 31, 1997, the Fund's board members and officers as a group owned less
than 1% of the outstanding shares of any class.

COMPENSATION FOR PORTFOLIO BOARD MEMBERS

Members of the board who are not officers of the Portfolio or of the Advisor
receive an annual fee of $1,500 for Growth Portfolio. They also receive
attendance and other fees. These fees include for each day in attendance at
meetings of the board, $50; for meetings of the Contracts and Investment Review
Committees, $50; meetings of the Audit and Personnel Committees, $25; for
traveling from out-of-state, $15; and as chair of Contracts Committee, $86.
Expenses for attending meetings are reimbursed.

During the fiscal year ended July 31, 1997, the members of the board, for
attending up to 32 meetings, received the following compensation:
<TABLE>
<CAPTION>

Compensation Table
for Growth Portfolio
<S> <C> <C> <C> <C>

Pension or Estimated Total cash
Aggregate Retirement annual compensation from
compensation benefits benefit the PREFERRED MASTER
from the accrued as upon TRUST GROUP and IDS
Board member Portfolio Portfolio expenses retirement MUTUAL FUND GROUP
H. Brewster Atwater, Jr. $1,840 $0 $0 $ 78,900
(part of year)
Lynne V. Cheney 2,201 0 0 97,400
Robert F. Froehlke 2,298 0 0 104,600
Heinz F. Hutter 2,333 0 0 106,300
Anne P. Jones 2,455 0 0 111,600
Melvin R. Laird 2,217 0 0 98,600
Alan K. Simpson 1,399 0 0 58,200
(part of year)
Edson W. Spencer 2,694 0 0 127,800
Wheelock Whitney 2,383 0 0 109,500
C. Angus Wurtele 2,408 0 0 110,700
</TABLE>

<PAGE>

PAGE 95

INDEPENDENT AUDITORS

The Fund's and corresponding Portfolio's financial statements contained in the
Annual Report to shareholders for the fiscal year ended July 31, 1997, were
audited by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest Center, 90
S. Seventh St. Minneapolis, MN 55402-3900. The independent auditors also provide
other accounting and tax-related services as requested by the Fund.

FINANCIAL STATEMENTS

The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the Annual Report to shareholders for the fiscal year ended July
31, 1997, pursuant to Section 30(d) of the Investment Company Act of 1940, as
amended, are hereby incorporated in this SAI by reference. No other portion of
the Annual Report, however, is incorporated by reference.

PROSPECTUS

The prospectus for IDS Growth Fund, dated Sept. 29, 1997, is hereby incorporated
in this SAI by reference.

<PAGE>

PAGE 96

APPENDIX A

FOREIGN CURRENCY TRANSACTIONS

Since investments in foreign countries usually involve currencies of foreign
countries, and since the Portfolio may hold cash and cash-equivalent investments
in foreign currencies, the value of the Portfolio's assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency exchange
rates and exchange control regulations. Also, the Portfolio may incur costs in
connection with conversions between various currencies.

Spot Rates and Forward Contracts. The Portfolio conducts its foreign currency
exchange transactions either at the spot (cash) rate prevailing in the foreign
currency exchange market or by entering into forward currency exchange contracts
(forward contracts) as a hedge against fluctuations in future foreign exchange
rates. A forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days from the
contract date, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged at any stage
for trades.

The Portfolio may enter into forward contracts to settle a security transaction
or handle dividend and interest collection. When the Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency or has been notified of a dividend or interest payment, it may desire
to lock in the price of the security or the amount of the payment in dollars. By
entering into a forward contract, the Portfolio will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between different currencies from the date the security is purchased or sold to
the date on which payment is made or received or when the dividend or interest
is actually received.

The Portfolio also may enter into forward contracts when management of the
Portfolio believes the currency of a particular foreign country may suffer a
substantial decline against another currency. It may enter into a forward
contract to sell, for a fixed amount of dollars, the amount of foreign currency
approximating the value of some or all of the Portfolio's securities denominated
in such foreign currency. The precise matching of forward contract amounts and
the value of securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely will change
between the date the forward contract is entered into and the date it matures.
The projection of short-term currency market movements is extremely difficult
and successful execution of a short-term hedging strategy is highly uncertain.
The Portfolio will not enter into such forward contracts or maintain a net
exposure to such contracts when

<PAGE>

PAGE 97

consummating the contracts would obligate the Portfolio to deliver an amount of
foreign currency in excess of the value of the Portfolio's securities or other
assets denominated in that currency.

The Portfolio will designate cash or securities in an amount equal to the value
of the Portfolio's total assets committed to consummating forward contracts
entered into under the second circumstance set forth above. If the value of the
securities declines, additional cash or securities will be designated on a daily
basis so that the value of the cash or securities will equal the amount of the
Portfolio's commitments on such contracts.

At maturity of a forward contract, the Portfolio may either sell the security
and make delivery of the foreign currency or retain the security and terminate
its contractual obligation to deliver the foreign currency by purchasing an
offsetting contract with the same currency trader obligating it to buy, on the
same maturity date, the same amount of foreign currency.

If the Portfolio retains the security and engages in an offsetting transaction,
the Portfolio will incur a gain or a loss (as described below) to the extent
there has been movement in forward contract prices. If the Portfolio engages in
an offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline between the date the
Portfolio enters into a forward contract for selling foreign currency and the
date it enters into an offsetting contract for purchasing the foreign currency,
the Portfolio will realize a gain to the extent that the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to buy.
Should forward prices increase, the Portfolio will suffer a loss to the extent
the price of the currency it has agreed to buy exceeds the price of the currency
it has agreed to sell.

It is impossible to forecast what the market value of securities will be at the
expiration of a contract. Accordingly, it may be necessary for the Portfolio to
buy additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and a decision is made to sell
the security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Portfolio is obligated to deliver.

The Portfolio's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Portfolio's
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange that can be achieved at some point in time. Although such
forward contracts tend to minimize the risk of loss due to a decline in value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.

<PAGE>

PAGE 98

Although the Portfolio values its assets each business day in terms of U.S.
dollars, it does not intend to convert its foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and shareholders should be
aware of currency conversion costs. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(spread) between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Portfolio
at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer.

Options on Foreign Currencies. The Portfolio may buy put and write covered call
options on foreign currencies for hedging purposes. For example, a decline in
the dollar value of a foreign currency in which securities are denominated will
reduce the dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions in the
value of securities, the Portfolio may buy put options on the foreign currency.
If the value of the currency does decline, the Portfolio will have the right to
sell such currency for a fixed amount in dollars and will thereby offset, in
whole or in part, the adverse effect on its portfolio which otherwise would have
resulted.

As in the case of other types of options, however, the benefit to the Portfolio
derived from purchases of foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, the
Portfolio could sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of advantageous
changes in such rates.

The Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, when the Portfolio anticipates a decline in the
dollar value of foreign-denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call option
on the relevant currency. If the expected decline occurs, the option will most
likely not be exercised and the diminution in value of securities will be fully
or partially offset by the amount of the premium received.

As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Portfolio would be required to buy or
sell the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, the Portfolio
also may be required to forego all or a portion of the benefits which might
otherwise have been obtained from favorable movements on exchange rates.

<PAGE>

PAGE 99

All options written on foreign currencies will be covered. An option written on
foreign currencies is covered if the Portfolio holds currency sufficient to
cover the option or has an absolute and immediate right to acquire that currency
without additional cash consideration upon conversion of assets denominated in
that currency or exchange of other currency held in its portfolio. An option
writer could lose amounts substantially in excess of its initial investments,
due to the margin and collateral requirements associated with such positions.

Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost.

Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in certain foreign countries
for the purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.

<PAGE>

PAGE 100

Foreign Currency Futures and Related Options. The Portfolio may enter into
currency futures contracts to sell currencies. It also may buy put options and
write covered call options on currency futures. Currency futures contracts are
similar to currency forward contracts, except that they are traded on exchanges
(and have margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery in U.S.
dollars. The Portfolio may use currency futures for the same purposes as
currency forward contracts, subject to Commodity Futures Trading Commission
(CFTC) limitations. All futures contracts are aggregated for purposes of the
percentage limitations.

Currency futures and options on futures values can be expected to correlate with
exchange rates, but will not reflect other factors that may affect the values of
the Portfolio's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the
Portfolio against price decline if the issuer's creditworthiness deteriorates.
Because the value of the Portfolio's investments denominated in foreign currency
will change in response to many factors other than exchange rates, it may not be
possible to match the amount of a forward contract to the value of the
Portfolio's investments denominated in that currency over time.

The Portfolio will hold securities or other options or futures positions whose
values are expected to offset its obligations. The Portfolio will not enter into
an option or futures position that exposes the Portfolio to an obligation to
another party unless it owns either (i) an offsetting position in securities or
(ii) cash, receivables and short-term debt securities with a value sufficient to
cover its potential obligations.

<PAGE>

PAGE 101

APPENDIX B

OPTIONS AND STOCK INDEX FUTURES CONTRACTS

The Portfolio may buy or write options traded on any U.S. or foreign exchange or
in the over-the-counter market. The Portfolio may enter into stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio also may buy or
write put and call options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment manager
believes a liquid secondary market exists for the options and only from dealers
and institutions the investment manager believes present a minimal credit risk.
Some options are exercisable only on a specific date. In that case, or if a
liquid secondary market does not exist, the Portfolio could be required to buy
or sell securities at disadvantageous prices, thereby incurring losses.

OPTIONS. An option is a contract. A person who buys a call option for a security
has the right to buy the security at a set price for the length of the contract.
A person who sells a call option is called a writer. The writer of a call option
agrees to sell the security at the set price when the buyer wants to exercise
the option, no matter what the market price of the security is at that time. A
person who buys a put option has the right to sell a security at a set price for
the length of the contract. A person who writes a put option agrees to buy the
security at the set price if the purchaser wants to exercise the option, no
matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.

The price paid by the buyer for an option is called a premium. In addition the
buyer generally pays a broker a commission. The writer receives a premium, less
another commission, at the time the option is written. The cash received is
retained by the writer whether or not the option is exercised. A writer of a
call option may have to sell the security for a below-market price if the market
price rises above the exercise price. A writer of a put option may have to pay
an above-market price for the security if its market price decreases below the
exercise price. The risk of the writer is potentially unlimited, unless the
option is covered.

Options can be used to produce incremental earnings, protect gains and
facilitate buying and selling securities for investment purposes. The use of
options may benefit the Portfolio and its shareholders by improving the
Portfolio's liquidity and by helping to stabilize the value of its net assets.

Buying options. Put and call options may be used as a trading technique to
facilitate buying and selling securities for investment reasons. Options are
used as a trading technique to take advantage of any disparity between the price
of the underlying

<PAGE>

PAGE 102

security in the securities market and its price on the options market. It is
anticipated the trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as good or better
than the price at which the security could be bought or sold directly. When the
option is purchased, the Portfolio pays a premium and a commission. It then pays
a second commission on the purchase or sale of the underlying security when the
option is exercised. For record keeping and tax purposes, the price obtained on
the purchase of the underlying security will be the combination of the exercise
price, the premium and both commissions. When using options as a trading
technique, commissions on the option will be set as if only the underlying
securities were traded.

Put and call options also may be held by the Portfolio for investment purposes.
Options permit the Portfolio to experience the change in the value of a security
with a relatively small initial cash investment.

The risk the Portfolio assumes when it buys an option is the loss of the
premium. To be beneficial to the Portfolio, the price of the underlying security
must change within the time set by the option contract. Furthermore, the change
must be sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.

Writing covered options. The Portfolio will write covered options when it feels
it is appropriate and will follow these guidelines:

'All options written by the Portfolio will be covered. For covered call options
if a decision is made to sell the security, the Portfolio will attempt to
terminate the option contract through a closing purchase transaction.

'The Portfolio will deal only in standard option contracts traded on national
securities exchanges or those that may be quoted on NASDAQ (a system of price
quotations developed by the National Association of Securities Dealers, Inc.)

Net premiums on call options closed or premiums on expired call options are
treated as short-term capital gains. Since the Fund is taxed as a regulated
investment company under the Internal Revenue Code, any gains on options and
other securities held less than three months must be limited to less than 30% of
its annual gross income.

If a covered call option is exercised, the security is sold by the Portfolio.
The premium received upon writing the option is added to the proceeds received
from the sale of the security. The Portfolio will recognize a capital gain or
loss based upon the difference between the proceeds and the security's basis.
Premiums received from writing outstanding call options are included as a

<PAGE>

PAGE 103

deferred credit in the Statement of Assets and Liabilities and adjusted daily to
the current market value. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily available, at
the mean of the last bid and asked prices.

STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are commodity
contracts listed on commodity exchanges. They currently include contracts on the
Standard & Poor's 500 Stock Index (S&P 500 Index) and other broad stock market
indexes such as the New York Stock Exchange Composite Stock Index and the Value
Line Composite Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock Index. A
stock index assigns relative values to common stocks included in the index and
the index fluctuates with the value of the common stocks so included.

A futures contract is a legal agreement between a buyer or seller and the
clearinghouse of a futures exchange in which the parties agree to make a cash
settlement on a specified future date in an amount determined by the stock index
on the last trading day of the contract. The amount is a specified dollar amount
(usually $100 or $500) multiplied by the difference between the index value on
the last trading day and the value on the day the contract was struck.

For example, the S&P 500 Index consists of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index, and the Index
fluctuates with changes in the market values of those stocks. In the case of S&P
500 Index futures contracts, the specified multiple is $500. Thus, if the value
of the S&P 500 Index were 150, the value of one contract would be $75,000 (150 x
$500). Unlike other futures contracts, a stock index futures contract specifies
that no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the contract. For
example, excluding any transaction costs, if the Portfolio enters into one
futures contract to buy the S&P 500 Index at a specified future date at a
contract value of 150 and the S&P 500 Index is at 154 on that future date, the
Portfolio will gain $500 x (154-150) or $2,000. If the Portfolio enters into one
futures contract to sell the S&P 500 Index at a specified future date at a
contract value of 150 and the S&P 500 Index is at 152 on that future date, the
Portfolio will lose $500 x (152-150) or $1,000.

Unlike the purchase or sale of an equity security, no price would be paid or
received by the Portfolio upon entering into futures contracts. However, the
Portfolio would be required to deposit with its custodian, in a segregated
account in the name of the futures broker, an amount of cash or U.S. Treasury
bills equal to approximately 5% of the contract value. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in security transactions in that futures contract
margin does not involve

<PAGE>

PAGE 104

borrowing funds by the Portfolio to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good-faith deposit on
the contract that is returned to the Portfolio upon termination of the contract,
assuming all contractual obligations have been satisfied.

Subsequent payments, called variation margin, to and from the broker would be
made on a daily basis as the price of the underlying stock index fluctuates,
making the long and short positions in the contract more or less valuable, a
process known as marking to market. For example, when the Portfolio enters into
a contract in which it benefits from a rise in the value of an index and the
price of the underlying stock index has risen, the Portfolio will receive from
the broker a variation margin payment equal to that increase in value.
Conversely, if the price of the underlying stock index declines, the Portfolio
would be required to make a variation margin payment to the broker equal to the
decline in value.

How the Portfolio Would Use Stock Index Futures Contracts. The Portfolio intends
to use stock index futures contracts and related options for hedging and not for
speculation. Hedging permits the Portfolio to gain rapid exposure to or protect
itself from changes in the market. For example, the Portfolio may find itself
with a high cash position at the beginning of a market rally. Conventional
procedures of purchasing a number of individual issues entail the lapse of time
and the possibility of missing a significant market movement. By using futures
contracts, the Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then proceed and
once it is completed (or as it proceeds), the contracts can be closed.
Conversely, in the early stages of a market decline, market exposure can be
promptly offset by entering into stock index futures contracts to sell units of
an index and individual stocks can be sold over a longer period under cover of
the resulting short contract position.

The Portfolio may enter into contracts with respect to any stock index or
sub-index. To hedge the Portfolio successfully, however, the Portfolio must
enter into contracts with respect to indexes or sub-indexes whose movements will
have a significant correlation with movements in the prices of the Portfolio's
securities.

Special Risks of Transactions in Stock Index Futures Contracts

1. Liquidity. The Portfolio may elect to close some or all of its contracts
prior to expiration. The purpose of making such a move would be to reduce or
eliminate the hedge position held by the Portfolio. The Portfolio may close its
positions by taking opposite positions. Final determinations of variation margin
are then made, additional cash as required is paid by or to the Portfolio, and
the Portfolio realizes a gain or a loss. Positions in stock index futures
contracts may be closed only on an exchange or board of trade providing a
secondary market for such futures contracts. For example, futures contracts
transactions can currently be entered into with respect to the S&P 500 Stock
Index

<PAGE>

PAGE 105

on the Chicago Mercantile Exchange, the New York Stock Exchange Composite Stock
Index on the New York Futures Exchange and the Value Line Composite Stock Index
on the Kansas City Board of Trade. Although the Portfolio intends to enter into
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there is no assurance that a liquid secondary market
will exist for any particular contract at any particular time. In such event, it
may not be possible to close a futures contract position, and in the event of
adverse price movements, the Portfolio would have to make daily cash payments of
variation margin. Such price movements, however, will be offset all or in part
by the price movements of the securities subject to the hedge. Of course, there
is no guarantee the price of the securities will correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.

2. Hedging Risks. There are several risks in using stock index futures contracts
as a hedging device. One risk arises because the prices of futures contracts may
not correlate perfectly with movements in the underlying stock index due to
certain market distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements. Rather than making
additional variation margin payments, investors may close the contracts through
offsetting transactions which could distort the normal relationship between the
index and futures markets. Second, the margin requirements in the futures market
are lower than margin requirements in the securities market, and as a result the
futures market may attract more speculators than does the securities market.
Increased participation by speculators in the futures market also may cause
temporary price distortions. Because of price distortion in the futures market
and because of imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast of general
market trends may not result in a successful hedging transaction over a short
period.

Another risk arises because of imperfect correlation between movements in the
value of the futures contracts and movements in the value of securities subject
to the hedge. If this occurred, the Portfolio could lose money on the contracts
and also experience a decline in the value of its portfolio securities. While
this could occur, the investment manager believes that over time the value of
the Portfolio will tend to move in the same direction as the market indexes and
will attempt to reduce this risk, to the extent possible, by entering into
futures contracts on indexes whose movements it believes will have a significant
correlation with movements in the value of the Portfolio's securities sought to
be hedged. It also is possible that if the Portfolio has hedged against a
decline in the value of the stocks held in its portfolio and stock prices
increase instead, the Portfolio will lose part or all of the benefit of the
increased value of its stock which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the
Portfolio has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the

<PAGE>

PAGE 106

rising market. The Portfolio may have to sell securities at a time
when it may be disadvantageous to do so.

OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index futures
contracts are similar to options on stock except that options on futures
contracts give the purchaser the right, in return for the premium paid, to
assume a position in a stock index futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the period of the option. If the option is
closed instead of exercised, the holder of the option receives an amount that
represents the amount by which the market price of the contract exceeds (in the
case of a call) or is less than (in the case of a put) the exercise price of the
option on the futures contract. If the option does not appreciate in value prior
to the exercise date, the Portfolio will suffer a loss of the premium paid.

OPTIONS ON STOCK INDEXES. Options on stock indexes are securities traded on
national securities exchanges. An option on a stock index is similar to an
option on a futures contract except all settlements are in cash. A portfolio
exercising a put, for example, would receive the difference between the exercise
price and the current index level. Such options would be used in the same manner
as options on futures contracts.

SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND
OPTIONS ON STOCK INDEXES. As with options on stocks, the holder of an option on
a futures contract or on a stock index may terminate a position by selling an
option covering the same contract or index and having the same exercise price
and expiration date. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid secondary
market. The Portfolio will not purchase options unless the market for such
options has developed sufficiently, so that the risks in connection with options
are not greater than the risks in connection with stock index futures contracts
transactions themselves. Compared to using futures contracts, purchasing options
involves less risk to the Portfolio because the maximum amount at risk is the
premium paid for the options (plus transaction costs). There may be
circumstances, however, when using an option would result in a greater loss to
the Portfolio than using a futures contract, such as when there is no movement
in the level of the stock index.

TAX TREATMENT. As permitted under federal income tax laws, the Portfolio intends
to identify futures contracts as mixed straddles and not mark them to market,
that is, not treat them as having been sold at the end of the year at market
value. Such an election may result in the Portfolio being required to defer
recognizing losses incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.

Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether

<PAGE>

PAGE 107

such option is a section 1256 contract. If the option is a non-equity option,
the Portfolio will either make a 1256(d) election and treat the option as a
mixed straddle or mark to market the option at fiscal year end and treat the
gain/loss as 40% short-term and 60% long-term. Certain provisions of the
Internal Revenue Code may also limit the Portfolio's ability to engage in
futures contracts and related options transactions. For example, at the close of
each quarter of the Fund's taxable year, at least 50% of the value of its assets
must consist of cash, government securities and other securities, subject to
certain diversification requirements. Less than 30% of its gross income must be
derived from sales of securities held less than three months.

The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements. In order to avoid realizing a gain within the
three-month period, the Portfolio may be required to defer closing out a
contract beyond the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale holding period
rules with respect to such underlying securities.

Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Portfolio's agent in acquiring the futures position). During
the period the futures contract is open, changes in value of the contract will
be recognized as unrealized gains or losses by marking to market on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments will be made or received depending upon
whether gains or losses are incurred. All contracts and options will be valued
at the last-quoted sales price on their primary exchange.

<PAGE>

PAGE 108

APPENDIX C

MORTGAGE-BACKED SECURITIES

A mortgage pass-through certificate is one that represents an interest in a
pool, or group, of mortgage loans assembled by the Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) or non-governmental entities. In
pass-through certificates, both principal and interest payments, including
prepayments, are passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield (or total return) to the Portfolio, which is influenced by both stated
interest rates and market conditions, may be different than the quoted yield on
certificates. Some U.S. government securities may be purchased on a when-issued
basis, which means that it may take as long as 45 days after the purchase before
the securities are delivered to the Portfolio.

Stripped Mortgage-Backed Securities. The Portfolio may invest in stripped
mortgage-backed securities. Generally, there are two classes of stripped
mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs
entitle the holder to receive distributions consisting of all or a portion of
the interest on the underlying pool of mortgage loans or mortgage-backed
securities. POs entitle the holder to receive distributions consisting of all or
a portion of the principal of the underlying pool of mortgage loans or
mortgage-backed securities. The cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments (including prepayments) on
the underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. A slow
rate of principal payments may adversely affect the yield to maturity of POs. On
an IO, if prepayments of principal are greater than anticipated, an investor may
incur substantial losses. If prepayments of principal are slower than
anticipated, the yield on a PO will be affected more severely than would be the
case with a traditional mortgage-backed security.

Mortgage-Backed Security Spread Options. The Portfolio may purchase
mortgage-backed security (MBS) put spread options and write covered MBS call
spread options. MBS spread options are based upon the changes in the price
spread between a specified mortgage-backed security and a like-duration Treasury
security. MBS spread options are traded in the OTC market and are of short
duration, typically one to two months. The Portfolio would buy or sell covered
MBS call spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.

<PAGE>

PAGE 109

APPENDIX D

DOLLAR-COST AVERAGING

A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.

While this technique does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many shareholders who
can continue investing on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.

Dollar-cost averaging

- -------------------------------------------------------------------
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
---- ----- -----
$500 $25.00 103.4

Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).

<PAGE>

PAGE 110

IDS GROWTH FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

FOR

IDS RESEARCH OPPORTUNITIES FUND

Sept. 29, 1997

This SAI is dated Sept. 29, 1997, and it is to be used with the
prospectus dated Sept. 29, 1997, and the Annual Report for the
fiscal period ended July 31, 1997.

<PAGE>

PAGE 111
TABLE OF CONTENTS

Goal and Investment Policies......................See Prospectus

Additional Investment Policies...............................p. 3

Security Transactions........................................p. 6

Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation.......................p. 9

Performance Information......................................p. 9

Valuing Fund Shares..........................................p. 10

Investing in the Fund........................................p. 12

Redeeming Shares.............................................p. 16

Pay-out Plans................................................p. 16

Taxes........................................................p. 18

Agreements...................................................p. 19

Organizational Information...................................p. 22

Board Members and Officers...................................p. 22

Compensation for Board Members...............................p. 26

Independent Auditors.........................................p. 27

Financial Statements..........................See Annual Report

Prospectus...................................................p. 27

Appendix A: Description of Bond Ratings.....................p. 28

Appendix B: Options and Stock Futures Contracts.............p. 31

Appendix C: Dollar-Cost Averaging...........................p. 38

<PAGE>

PAGE 112

ADDITIONAL INVESTMENT POLICIES

The Fund pursues its goals by investing all of its assets in Aggressive Growth
Portfolio (the "Portfolio") of Growth Trust (the "Trust"), a separate investment
company, rather than by directly investing in and managing its own portfolio of
securities. The Portfolio has the same investment objectives, policies and
restrictions as the Fund.

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

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

<PAGE>

PAGE 113

'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.

'Concentrate in any industry except in either or both the energy or utilities
industries. According to the present interpretation by the SEC, this means no
more than 25% of the Portfolio's total assets, based on current market value,
can be invested in any one industry other than the energy and/or utility
industries.

Unless changed by the board, the Fund and the Portfolio will not:

'Buy on margin or sell short, except the Portfolio may make margin payments in
connection with transactions in options, futures contracts and other financial
instruments.

'Invest more than 5% of its total assets in securities of companies, including
any predecessors, that have a record of less than three years continuous
operations.

<PAGE>

PAGE 114

'Invest more than 10% of its total assets in securities of
investment companies.

'Invest in a company to control or manage it.

'Invest in exploration or development programs such as oil, gas or
mineral leases.

'Purchase securities of an issuer if the board members and officers of the Fund,
the Portfolio and AEFC hold more than a certain percentage of the issuer's
outstanding securities. If the holdings of all board members and officers of the
Fund, the Portfolio and AEFC who own more than 0.5% of an issuer's securities
are added together, and if in total they own more than 5%, the Portfolio will
not purchase securities of that issuer.

'Invest more than 5% of its net assets in warrants.

In determining the liquidity of Rule 144A securities, which are unregistered
securities offered to qualified institutional buyers, and interest-only and
principal-only, fixed mortgage-backed securities (IOs and POs) issued by the
U.S. government or its agencies and instrumentalities, the investment manager,
under guidelines established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to purchase or
sell the security and the nature of marketplace trades.

The Portfolio may make contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities or forward
commitments). Under normal market conditions, the Portfolio does not intend to
commit more than 5% of its total assets to these practices. The Portfolio does
not pay for the securities or receive dividends or interest on them until the
contractual settlement date. The Portfolio will designate cash or liquid
high-grade debt securities at least equal in value to its forward commitments to
purchase the securities. When-issued

<PAGE>

PAGE 115

securities or forward commitments are subject to market fluctuations and they
may affect the Portfolio's total assets the same as owned securities.

The Portfolio may maintain a portion of its assets in cash and cash-equivalent
investments. The cash-equivalent investments the Portfolio may use are
short-term U.S. and Canadian government securities and negotiable certificates
of deposit, non-negotiable fixed-time deposits, bankers' acceptances and letters
of credit of banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published annual
financial statements) in excess of $100 million (or the equivalent in the
instance of a foreign branch of a U.S. bank) at the date of investment. Any
cash-equivalent investment in foreign securities will be subject to the
limitations on foreign investments described in the prospectus. The Portfolio
also may purchase short-term corporate notes and obligations rated in the top
two classifications by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P") or the equivalent and may use repurchase agreements
with broker-dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. A risk of a repurchase agreement is that if the seller
seeks the protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.

The Portfolio may invest in foreign securities included in the S&P 500 or which
are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying securities of foreign issuers. European Depositary Receipts (EDRs)
and Global Depositary Receipts (GDRs) are receipts typically issued by foreign
banks or trust companies, evidencing ownership of underlying securities issued
by either a foreign or U.S. issuer. Generally Depositary Receipts in registered
form are designed for use in the U.S. securities market and Depositary Receipts
in bearer form are designed for use in securities markets outside the U.S.
Depositary Receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary Receipts
also involve the risks of other investments in foreign securities.

For a discussion of bond ratings, see Appendix A. For a discussion on options
and stock index futures contracts, see Appendix B.

SECURITY TRANSACTIONS

<PAGE>

PAGE 116

general operation and execution capabilities of the broker, the broker's
expertise in particular markets, and research services provided by the broker.

Research provided by brokers supplements AEFC's own research activities. Such
services include economic data on, and analysis of, U.S. and foreign economies;
information on specific industries; information about specific companies,
including earnings estimates; purchase recommendations for stocks and bonds;
portfolio strategy services; political, economic, business and industry trend
assessments; historical statistical information; market data services providing
information on specific issues and prices; and technical analysis of various
aspects of the securities markets, including technical charts. Research services
may take the form of written reports, computer software or personal contact by
telephone or at seminars or other meetings. AEFC has obtained, and in the future
may obtain, computer hardware from brokers, including but not limited to
personal computers that will be used exclusively for investment decision-making,
which include the research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the SEC.

<PAGE>

PAGE 117

brokerage firms on a continuing basis to obtain such services as the handling of
large orders, the willingness of a broker to risk its own money by taking a
position in a security, and the specialized handling of a particular group of
securities that only certain brokers may be able to offer. As a result of this
arrangement, some portfolio transactions may not be effected at the lowest
commission, but AEFC believes it may obtain better overall execution. AEFC has
assured the Fund that under all three procedures the amount of commission paid
will be reasonable and competitive in relation to the value of the brokerage
services performed or research provided.

Each investment decision made for the Portfolio is made independently from any
decision made for another Portfolio or other account advised by AEFC or any of
its subsidiaries. When the Portfolio buys or sells the same security as another
portfolio, fund or account, AEFC carries out the purchase or sale in a way the
Portfolio agrees in advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by the Portfolio, the
Portfolio hopes to gain an overall advantage in execution. AEFC has assured the
Fund it will continue to seek ways to reduce brokerage costs.

On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and
the overall reasonableness of their commissions. The review evaluates execution,
operational efficiency and research services.

The Portfolio paid total brokerage commissions of $532,703 for the fiscal period
ended July 31, 1997. Substantially all firms through whom transactions were
executed provide research services.

No transactions were directed to brokers because of research services they
provided to the Portfolio except for the affiliates as noted below.

As of the fiscal period ended July 31, 1997, the Portfolio held securities of
its regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:

Value of Securities
Owned at End of
Name of Issuer Fiscal Period
Bank of America $2,492,389
Morgan Stanley 3,387,533

<PAGE>

PAGE 118

The portfolio turnover rate was 171% in the fiscal period ended July 31, 1997.
Higher turnover rates may result in higher brokerage expenses.

BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION

Information about brokerage commissions paid by the Portfolio for the fiscal
period ended July 31, 1997 to brokers affiliated with AEFC is contained in the
following table:

For the Fiscal Period Ended July 31, 1997.

Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Broker Affiliation Broker Commissions of Commissions
- ------ ----------- ----------- ----------- --------------
American (1) $33,072 6.21% 8.83%
Enterprise
Investment
Services
Inc.

(1) Wholly-owned subsidiary of AEFC.

PERFORMANCE INFORMATION

The Fund may quote various performance figures to illustrate past performance.
Average annual total return quotations used by the Fund are based on
standardized methods of computing performance as required by the SEC. An
explanation of these and any other methods used by the Fund to compute
performance follows below.

<PAGE>

PAGE 119

Average annual total return

P(1+T)
n
= ERV

Aggregate total return

ERV - P
P

VALUING FUND SHARES

The value of an individual share for each class is determined by
using the net asset value before shareholder transactions for the
day. On Aug. 1, 1997, the first business day following the end of
the fiscal period, the computation looked like this:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
Class A $202,893,878 divided by 29,793,521 equals $6.81
Class B 95,828,084 14,154,813 6.77
Class Y 1,366 200 6.83

</TABLE>

<PAGE>

PAGE 120

In determining net assets before shareholder transactions, the Portfolio's
securities are valued as follows as of the close of business of the New York
Stock Exchange (the Exchange):

'Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.

'Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.

'Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the current rate of exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the board.

'Short-term securities maturing more than 60 days from the valuation date are
valued at the readily available market price or approximate market value based
on current interest rates. Short- term securities maturing in 60 days or less
that originally had maturities of more than 60 days at acquisition date are
valued at amortized cost using the market value on the 61st day before maturity.
Short-term securities maturing in 60 days or less at acquisition date are valued
at amortized cost. Amortized cost is an approximation of market value determined
by systematically increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium, so that the
carrying value is equal to maturity value on the maturity date.

'Securities without a readily available market price, bonds other than
convertibles and other assets are valued at fair value as determined in good
faith by the board. The board is responsible

<PAGE>

PAGE 121

for selecting methods it believes provide fair value. When possible, bonds are
valued by a pricing service independent from the Portfolio. If a valuation of a
bond is not available from a pricing service, the bond will be valued by a
dealer knowledgeable about the bond if such a dealer is available.

The Exchange, AEFC and the Fund will be closed on the following
holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

INVESTING IN THE FUND

Sales Charge

Shares of the Fund are sold at the public offering price determined at the close
of business on the day an application is accepted. The public offering price is
net asset value of one share plus a sales charge, if applicable. For Class B and
Class Y, there is no initial sales charge so the public offering price is the
same as the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made Aug. 1, 1997, was determined by dividing
the net asset value of one share, $6.81, by 0.95 (1.00- 0.05 for a maximum 5%
sales charge) for a public offering price of $7.17. The sales charge is paid to
American Express Financial Advisors by the person buying the shares.

Class A - Calculation of the Sales Charge

Sales charges are determined as follows:

Within each increment,
sales charge as a
percentage of:

Public Net
Amount of Investment Offering Price Amount Invested

First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00

<PAGE>

PAGE 122

The following table shows the range of sales charges as a percentage of the
public offering price and of the net amount invested on total investments at
each applicable level.

On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:

The initial sales charge is waived for certain qualified plans that meet the
requirements described in the prospectus. Participants in these qualified plans
may be subject to a deferred sales charge on certain redemptions. The deferred
sales charge on certain redemptions will be waived if the redemption is a result
of a participant's death, disability, retirement, attaining age 59 1/2, loans or
hardship withdrawals. The deferred sales charge only applies to plans with less
than $1 million in assets and fewer than 100 participants.

Class A - Reducing the Sales Charge

The total amount invested includes any shares held in the Fund in the name of a
member of your immediate family (spouse and unmarried children under 21). For
instance, if your spouse already has invested $20,000 and you want to invest
$40,000, your total amount invested will be $60,000 and therefore you will pay
the lower charge of 4.5% on $10,000 of the $40,000.

Until a spouse remarries, the sales charge is waived for spouses and unmarried
children under 21 of deceased trustees, board members, officers or employees of
the Fund or AEFC or its subsidiaries and of deceased advisors.

<PAGE>

PAGE 123

The total amount invested also includes any investment you or your immediate
family already have in the other publicly offered funds in the IDS MUTUAL FUND
GROUP where the investment is subject to a sales charge. For example, suppose
you already have an investment of $30,000 in another IDS Fund. If you invest
$40,000 more in this Fund, your total amount invested in the Funds will be
$70,000 and therefore $20,000 of your $40,000 investment will incur a 4.5% sales
charge.

Class A - Letter of Intent (LOI)

Systematic Investment Programs

After you make your initial investment of $2,000 or more, you can arrange to
make additional payments of $100 or more on a regular basis. These minimums do
not apply to all systematic investment programs. You decide how often to make
payments - monthly, quarterly or semiannually. You are not obligated to make any
payments. You can omit payments or discontinue the investment program
altogether. The Fund also can change the program or end it at any time. If there
is no obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have a goal to
work for.

<PAGE>

PAGE 124

For a discussion on dollar-cost averaging, see Appendix C.

Automatic Directed Dividends

Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;

Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);

<PAGE>

PAGE 125

REDEEMING SHARES

You have a right to redeem your shares at any time. For an explanation of
redemption procedures, please see the prospectus.

'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or

'Disposal of the Portfolio's securities is not reasonably
practicable or it is not reasonably practicable for the Portfolio
to determine the fair value of its net assets, or

'The SEC, under the provisions of the 1940 Act, as amended, declares a period of
emergency to exist.

PAY-OUT PLANS

<PAGE>

PAGE 126

Plan #1: Pay-out for a fixed period of time

Plan #2: Redemption of a fixed number of shares

Plan #3: Redemption of a fixed dollar amount

If you decide on a fixed dollar amount, whatever number of shares is necessary
to make the payment will be redeemed in regular installments until the account
is closed.

Plan #4: Redemption of a percentage of net asset value

<PAGE>

PAGE 127

TAXES

Retirement Accounts

If you have a nonqualified investment in the Fund and you wish to move part or
all of those shares to an IRA or qualified retirement account in the Fund, you
can do so without paying a sales charge. However, this type of exchange is
considered a redemption of shares and may result in a gain or loss for tax
purposes. In addition, this type of exchange may result in an excess
contribution under IRA or qualified plan regulations if the amount exchanged
plus the amount of the initial sales charge applied to the amount exchanged
exceeds annual contribution limitations. For example: If you were to exchange
$2,000 in Class A shares from a nonqualified account to an IRA without
considering the 5% ($100) initial sales charge applicable to that $2,000, you
may be deemed to have exceeded current IRA annual contribution limitations. You
should consult your tax advisor for further details about this complex subject.

Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.

<PAGE>

PAGE 128

AGREEMENTS

Investment Management Services Agreement

Assets Annual rate at
(billions) each asset level

First $0.25 0.650%
Next 0.25 0.625
Next 0.50 0.600
Next 1.0 0.575
Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500

On July 31, 1997, the daily rate applied to the Portfolio's net assets was equal
to 0.646% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made.

The management fee is paid monthly. Under the agreement, the total amount paid
was $905,559 for the fiscal period ended July 31, 1997.

Under the agreement, the Portfolio also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; office expenses;
consultants' fees; compensation of board members, Portfolio officers and
employees; corporate filing fees; organizational expenses; expenses incurred in
connection with lending securities of the Portfolio; and expenses properly
payable by the Portfolio, approved by the board. Under the agreement, the
nonadvisory expenses paid by the Fund and Portfolio were $548,597 for the fiscal
period ended July 31, 1997.

Administrative Services Agreement

The Fund has an Administrative Services Agreement with AEFC. Under this
agreement, the Fund pays AEFC for providing administration and accounting
services. The fee is calculated as follows:

<PAGE>

PAGE 129

Assets Annual rate
(billions) each asset level
- ---------- ----------------
First $0.25 0.060%
Next 0.25 0.055
Next 0.50 0.050
Next 1.0 0.045
Next 1.0 0.040
Next 3.0 0.035
Over 6.0 0.030

On July 31, 1997, the daily rate applied to the Fund's net assets was equal to
0.060% on an annual basis. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days prior to the
day for which the calculation is made. Under the agreement, the Fund paid fees
of $82,047 for the fiscal period ended July 31, 1997.

Transfer Agency Agreement

The Fund has a Transfer Agency Agreement with AEFC. This agreement governs
AEFC's responsibility for administering and/or performing transfer agent
functions, for acting as service agent in connection with dividend and
distribution functions and for performing shareholder account administration
agent functions in connection with the issuance, exchange and redemption or
repurchase of the Fund's shares. Under the agreement, AEFC will earn a fee from
the Fund determined by multiplying the number of shareholder accounts at the end
of the day by a rate determined for each class per year and dividing by the
number of days in the year. The rate for Class A and Class Y is $15 per year and
for Class B is $16 per year. The fees paid to AEFC may be changed from time to
time upon agreement of the parties without shareholder approval. Under the
agreement, the Fund paid fees of $314,021 for the fiscal period ended July 31,
1997.

Distribution Agreement

Under a Distribution Agreement, sales charges deducted for distributing Fund
shares are paid to American Express Financial Advisors daily. These charges
amounted to $2,503,847 for the fiscal period ended July 31, 1997. After paying
commissions to personal financial advisors, and other expenses, the amount
retained was $(405,920).

Shareholder Service Agreement

<PAGE>

PAGE 130

Plan and Agreement of Distribution

The Plan must be approved annually by the board, including a majority of the
disinterested board members, if it is to continue for more than a year. At least
quarterly, the board must review written reports concerning the amounts expended
under the Plan and the purposes for which such expenditures were made. The Plan
and any agreement related to it may be terminated at any time by vote of a
majority of board members who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the outstanding
voting securities of the Fund's Class B shares or by American Express Financial
Advisors. The Plan (or any agreement related to it) will terminate in the event
of its assignment, as that term is defined in the 1940 Act, as amended. The Plan
may not be amended to increase the amount to be spent for distribution without
shareholder approval, and all material amendments to the Plan must be approved
by a majority of the board members, including a majority of the board members
who are not interested persons of the Fund and who do not have a financial
interest in the operation of the Plan or any agreement related to it. The
selection and nomination of disinterested board members is the responsibility of
the other disinterested board members. No board member who is not an interested
person, has any direct or indirect financial interest in the operation of the
Plan or any related agreement. For the fiscal period ended July 31, 1997, under
the agreement, the Fund paid fees of $307,021.

Custodian Agreement

The Portfolio's securities and cash are held by American Express Trust Company,
1200 Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307,
through a custodian agreement. The Portfolio also retains the custodian pursuant
to a custodian agreement. The custodian is permitted to deposit some or all of
its securities in central depository systems as allowed by federal law. For its
services, the Portfolio pays the custodian a maintenance charge and a charge per
transaction in addition to reimbursing the custodian's out-of-pocket expenses.

Total fees and expenses

The Fund paid total fees and nonadvisory expenses, net of earnings credits, of
$2,380,042 for the fiscal period ended July 31, 1997.

<PAGE>

PAGE 131

ORGANIZATIONAL INFORMATION

IDS Growth Fund, Inc., of which IDS Research Opportunities Fund is a part, is an
open-end management investment company, as defined in the Investment Company Act
of 1940. Originally incorporated on May 21, 1970 in Nevada, IDS Growth Fund,
Inc. changed its state of incorporation on June 13, 1986 by merging into a
Minnesota corporation incorporated on April 7, 1986. The Fund headquarters are
at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402- 3268.

BOARD MEMBERS AND OFFICERS

All shares have cumulative voting rights with respect to the election of board
members.

H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN

Former chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.

Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.

William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN

Senior advisor to the chief executive officer, AEFC.

<PAGE>

PAGE 132