IDS INVESTMENT SERIES INC, 485BPOS, 1995-02-28

IDS INVESTMENT SERIES INC
485BPOS, 1995-02-28

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<PAGE>
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- --------------------------------------------------------------------------------

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. 94 (File No. 2-11328) /X/and/or

REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 38 (File No. 811-54) /X/

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

IDS INVESTMENT SERIES, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010

Leslie L. Ogg
901 S. Marquette Avenue, Suite 2810
Minneapolis, MN 55402-3268
(612) 330-9283
------------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

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

/ / immediately upon filing pursuant to paragraph (b)

/X/ on March 20, 1995 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:

/X/ 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 NOV. 29, 1994.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IDS MUTUAL
CROSS REFERENCE SHEET SHOWING LOCATION IN THE 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.

<TABLE>
<CAPTION>
PART A
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN PROSPECTUS
- ------------ ------------------------------------------------------------------
<C> <S>
1 Cover page of prospectus
2 The fund in brief; Sales charge and fund expenses
3(a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4(a) The fund in brief; Investment policies and risks; How the fund is
organized
(b) Investment policies and risks
(c) Investment policies and risks
5(a) Directors and officers; Directors and officers of the fund
(listing)
(b) How the fund is organized; About American Express Financial
Corporation
(b)(i) About American Express Financial Corporation -- General
information
(b)(ii) Investment manager and transfer agent
(b)(iii) Investment manager and transfer agent
(c) Portfolio manager
(d) The fund in brief
(e) Investment manager and transfer agent
(f) Distributor
(g) Investment manager and transfer agent
5A(a) *
(b) *
6(a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividends and capital gain distributions; Reinvestments
(g) Taxes
7(a) Distributor
(b) Key terms; Valuing assets
(c) How to buy, exchange or sell shares
(d) How to buy shares
(e) NA
(f) Distributor
8(a) How to sell shares
(b) NA
(c) How to buy shares: Three ways to invest
(d) How to buy, exchange or sell shares: Redemption policies --
"Important..."
9 None
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PART B
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN SAI
- ------------ ------------------------------------------------------------------
<C> <S>
10 Cover page of SAI
11 Table of Contents
12 NA
13(a) Additional Investment Policies; all appendices except Dollar-Cost
Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Portfolio Transactions
14(a) Directors and officers of the fund;** Directors and Officers
(b) Directors and Officers
(c) Directors and Officers
15(a) NA
(b) NA
(c) Directors and Officers
16(a)(i) How the fund is organized; About American Express Financial
Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder Service
Agreement
(e) NA
(f) Agreements: Distribution Agreement
(g) NA
(h) Custodian; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian
17(a) Portfolio Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American
Express Financial Corporation
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18(a) Shares and Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) NA
20 Taxes
21(a) Agreements: Distribution Agreement
(b) Agreements: Distribution Agreement
(c) NA
22(a) Performance Information (for money market funds only)
(b) Performance Information (for all funds except money market funds)
23 Financial Statements
<FN>
- ------------------------
*Designates information is located in annual report.
**Designates page number in prospectus which is hereby incorporated in this SAI.
</TABLE>

<PAGE>
IDS DIVERSIFIED EQUITY INCOME FUND
CROSS REFERENCE SHEET
SHOWING LOCATION IN THE 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.

<TABLE>
<CAPTION>
PART A
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN PROSPECTUS
- ------------ ------------------------------------------------------------------
<C> <S>
1 Cover page of prospectus
2 The fund in brief; Sales charge and fund expenses
3(a) Financial highlights
(b) NA
(c) Performance
3(d) Financial highlights
4(a) The fund in brief; Investment policies and risks; How the fund is
organized
(b) Investment policies and risks
(c) Investment policies and risks
5(a) Directors and officers; Directors and officers of the fund
(listing)
(b) How the fund is organized; About American Express Financial
Corporation
(b)(i) About American Express Financial Corporation -- General
information
(b)(ii) Investment manager and transfer agent
(b)(iii) Investment manager and transfer agent
(c) Portfolio manager
(d) The fund in brief
(e) Investment manager and transfer agent
(f) Distributor
(g) Investment manager and transfer agent
5A(a) *
(b) *
6(a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividends and capital gain distributions; Reinvestments
(g) Taxes
7(a) Distributor
(b) Key terms; Valuing assets
(c) How to buy, exchange or sell shares
(d) How to buy shares
(e) NA
(f) Distributor
8(a) How to sell shares
(b) NA
(c) How to buy shares: Three ways to invest
(d) How to buy, exchange or sell shares: Redemption policies --
"Important..."
9 None
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PART B
- ---------------------------------------------------------------------------------
ITEM NO. SECTION IN SAI
- ------------ ------------------------------------------------------------------
<C> <S>
10 Cover page of SAI
11 Table of Contents
12 NA
13(a) Additional Investment Policies; all appendices except Dollar-Cost
Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Portfolio Transactions
14(a) Directors and officers of the fund;** Directors and Officers
(b) Directors and Officers
(c) Directors and Officers
15(a) NA
(b) NA
(c) Directors and Officers
16(a)(i) How the fund is organized; About American Express Financial
Corporation**
16(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution
16(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) None
(e) NA
(f) Agreements: Distribution Agreement
(g) NA
(h) Custodian; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian
17(a) Portfolio Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American
Express Financial Corporation
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18(a) Shares and Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) NA
20 Taxes
21(a) Agreements: Distribution Agreement
(b) Agreements: Distribution Agreement
(c) NA
22(a) Performance Information (for money market funds only)
(b) Performance Information (for all funds except money market funds)
23 Financial Statements
<FN>
- ------------------------
*Designates information is located in annual report.
**Designates page number in prospectus which is hereby incorporated in this SAI.
</TABLE>

<PAGE>

This prospectus IDS
contains facts that can MUTUAL
help you decide if the
fund is the right PROSPECTUS
investment for you. NOV. 29, 1994
Read it before you AS REVISED MARCH 20,
invest and keep it for 1995
future reference. [GRAPHIC]
Additional facts about
the fund are in a THE GOAL OF IDS MUTUAL,
Statement of Additional A PART OF IDS
Information (SAI), INVESTMENT SERIES,
filed with the INC., IS TO PROVIDE A
Securities and Exchange BALANCE OF GROWTH OF
Commission. The SAI, CAPITAL AND CURRENT
dated Nov. 29, 1994 as INCOME. THE FUND
revised March 20, 1995, DIVIDES ITS INVESTMENTS
is incorporated here by BETWEEN COMMON STOCKS
reference. For a free AND SENIOR SECURITIES
copy, contact American (BONDS AND PREFERRED
Express Shareholder STOCKS).
Service. American Express
THESE SECURITIES HAVE Shareholder Service
NOT BEEN APPROVED OR P.O. Box 534
DISAPPROVED BY THE Minneapolis, MN
SECURITIES AND EXCHANGE 55440-0534
COMMISSION OR ANY STATE 612-671-3733
SECURITIES COMMISSION, TTY: 800-846-4852
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.
SHARES IN THE FUND
ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR
GUARANTEED OR
ENDORSED BY, ANY
BANK, AND SHARES ARE
NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION,
THE FEDERAL RESERVE
BOARD, OR ANY
OTHER AGENCY.

<PAGE>
- ------------------------------------------
TABLE OF CONTENTS

- ------------------------------------------
THE FUND IN BRIEF
Goal 3P
Types of fund investments 3P
Manager and distributor 3P
Portfolio managers 3P
Alternative sales arrangements 4P

- ------------------------------------------
SALES CHARGE AND FUND EXPENSES

- ------------------------------------------
PERFORMANCE
Financial highlights 7P
Total returns 8P
Key terms 9P

- ------------------------------------------
INVESTMENT POLICIES AND RISKS
Facts about investments and their risks 10P
Alternative investment option 13P
Valuing assets 13P

- ------------------------------------------
HOW TO BUY, EXCHANGE OR SELL SHARES
Alternative sales arrangements 14P
How to buy shares 16P
How to exchange shares 19P
How to sell shares 19P
Reductions and waivers of the sales charge 23P

- ------------------------------------------
SPECIAL SHAREHOLDER SERVICES
Services 27P
Quick telephone reference 27P

- ------------------------------------------
DISTRIBUTIONS AND TAXES
Dividend and capital gain distributions 28P
Reinvestments 28P
Taxes 29P

- ------------------------------------------
HOW THE FUND IS ORGANIZED
Shares 32P
Voting rights 33P
Shareholder meetings 33P
Directors and officers 33P
Investment manager and transfer agent 35P
Distributor 36P

- ------------------------------------------
ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION
General information 37P

- ------------------------------------------
APPENDIX
Descriptions of derivative instruments 38P

2P
<PAGE>
----------------------------------------------------------
The fund in brief

GOAL

IDS Mutual seeks to provide shareholders with a balance of growth
of capital and current income. Because any investment involves
risk, achieving this goal cannot be guaranteed. Only shareholders
can change the goal.

TYPES OF FUND INVESTMENTS

The fund is a diversified mutual fund that balances its
investments between common stocks and senior securities
(preferred stocks and debt securities) issued by U.S. and foreign
companies. No more than 65% of the fund's total assets will be
invested in common stocks and no less than 35% in senior
securities, convertible securities, derivative instruments and
money market instruments. Some of the fund's investments may be
considered speculative and involve additional investment risks.

MANAGER AND DISTRIBUTOR

The fund is managed by American Express Financial Corporation, a
provider of financial services since 1894. American Express
Financial Corporation currently manages more than $37 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 American Express Financial Corporation.

PORTFOLIO MANAGERS

Edward Labenski joined American Express Financial Corporation in
1975 and serves as president -- IDS Fixed-Income Advisors of IDS
Advisory Group, Inc. and senior portfolio manager. He has managed
the fixed income portfolio of this fund since 1987.

Tom Medcalf joined American Express Financial Corporation in 1977
and serves as vice president and senior portfolio manager. He has
managed the equity portfolio of this fund since 1977. He also
serves as portfolio manager of IDS Equity Value Fund.

3P
<PAGE>
- ---------------------------------------------------------------------------
The fund in brief

ALTERNATIVE SALES 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 6 years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors. Other differences
between the classes include the fees paid by each class. The fund
offers these alternatives so you may choose the method of
purchasing shares that is most beneficial given the amount of
purchase, length of time you expect to hold the shares and other
circumstances.

4P
<PAGE>
----------------------------------------------------------
Sales charge and fund expenses

When you buy Class A shares, you pay a maximum sales charge of 5%
of the public offering price. This charge can be reduced,
depending on your total investments in IDS funds. See "Reductions
of the sales charge." No sales charge applies at the time of
purchase of Class B shares, although Class B shares may be
subject to a CDSC on redemptions made within 6 years and are
subject to annual distribution (12b-1) fees. Class Y shares are
sold without a sales charge to qualifying institutional
investors. Shareholder transaction expenses are incurred directly
by an investor on the purchase or redemption of fund shares. Fund
operating expenses are paid out of fund assets for each class of
shares. Operating expenses are reflected in the fund's daily
share price and dividends, and are not charged directly to
shareholder accounts.

-------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
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%
-----------------------------------------------------------
</TABLE>

-------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES*
(% OF AVERAGE DAILY NET ASSETS):

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
-----------------------------------------------------------
Management fee............... 0.51% 0.51% 0.51%

-----------------------------------------------------------
12b-1 fee.................... 0.00% 0.75% 0.00%

-----------------------------------------------------------
Other expenses**............. 0.41% 0.42% 0.24%

-----------------------------------------------------------
Total........................ 0.92% 1.68% 0.74%
<FN>
*Expenses for Class A are based on actual expenses for the last
fiscal year, restated to reflect current fees. Expenses for
Class B and Class Y are estimated based on the restated
expenses for Class A, except that the 12b-1 fee and transfer
agent fee (under other expenses) for Class B are based on
agreements for that class.
**Other expenses include an administrative services fee, a
shareholder services fee, a transfer agent fee and other
non-advisory expenses.
</TABLE>

5P
<PAGE>
- ---------------------------------------------------------------------------
Sales charge and fund expenses

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

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years**
<S> <C> <C> <C> <C>

------------------------------------------------------------------------
Class A...................... $59 $78 $98 $158

------------------------------------------------------------------------
Class B...................... $67 $93 $111 $179

------------------------------------------------------------------------
Class B*..................... $17 $53 $91 $179

------------------------------------------------------------------------
Class Y...................... $8 $24 $41 $92
<FN>
*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
8 years.
</TABLE>

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.

6P
<PAGE>
----------------------------------------------------------
Performance

FINANCIAL HIGHLIGHTS
FISCAL YEAR ENDED SEPT. 30,

- --------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES*

INCOME FROM INVESTMENT OPERATIONS:
------------------------------------------------------------------------------
Net investment income .56 .55 .61 .66 .72 .73 .76 .76 .87 .94
------------------------------------------------------------------------------
Net gains (losses) (both realized and (.56) 1.39 .91 2.01 (2.01) 1.58 (.70) 2.12 2.13 .90
unrealized)
------------------------------------------------------------------------------
Total from investment -- 1.94 1.52 2.67 (1.29) 2.31 .06 2.88 3.00 1.84
operations

LESS DISTRIBUTIONS:
------------------------------------------------------------------------------
Dividends from net investment income (.56) (.55) (.60) (.67) (.73) (.73) (.76) (.77) (.86) (.95 )
------------------------------------------------------------------------------
Distributions from realized gains (.68) (.88) (.30) (.39) (.74) -- (.44) (1.19) (1.14) (.54 )
------------------------------------------------------------------------------
Total distributions (1.24) (1.43) (.90) (1.06) (1.47) (.73) (1.20) (1.96) (2.00) (1.49 )
------------------------------------------------------------------------------
Net asset value, end of year $11.89 $13.13 $12.62 $12.00 $10.39 $13.15 $11.57 $12.71 $11.79 $10.79
</TABLE>

- --------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Net assets, end of year (in millions) $2,999 $2,788 $2,222 $1,889 $1,496 $1,687 $1,441 $1,544 $1,242 $1,069
-------------------------------------------------------------------------------
Ratio of expenses to average daily net assets .79% .79% .78% .71% .69% .67% .63% .63% .59% .61%
-------------------------------------------------------------------------------
Ratio of net income to average daily net 4.57% 4.41% 4.99% 5.81% 6.04% 5.94% 6.49% 5.78% 6.91% 8.29%
assets
-------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term 69% 48% 50% 47% 37% 46% 60% 52% 91% 83%
securities)
-------------------------------------------------------------------------------
Total return** (0.1%) 16.7% 13.3% 26.9% (10.8%) 20.5% 0.8% 24.7% 28.2% 18.0%
<FN>
* For a share outstanding throughout the year. Rounded to the
nearest cent.
** Total return does not reflect payment of a sales charge.
</TABLE>

The information in this table 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.
Information on Class B and Class Y shares is not included because
no shares of those classes were outstanding for the periods
shown.

7P
<PAGE>
- ---------------------------------------------------------------------------
Performance

TOTAL RETURNS

-------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPT. 30, 1994

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
PURCHASE MADE AGO AGO AGO
<S> <C> <C> <C>
Mutual:
------------------------------------------------------------
Class A -5.12% +7.26% +12.53%

------------------------------------------------------------
S&P 500 +3.70% +9.17% +14.60%

------------------------------------------------------------
Lipper Balanced Fund Index +0.04% +8.52% +12.09%
</TABLE>

-------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
AS OF SEPT. 30, 1994

<TABLE>
<CAPTION>
10
1 YEAR 5 YEARS YEARS
PURCHASE MADE AGO AGO AGO
<S> <C> <C> <C>
Mutual:
-----------------------------------------------------------
Class A -5.12% +41.96% +225.55%

-----------------------------------------------------------
S&P 500 +3.70% +55.06% +290.67%

-----------------------------------------------------------
Lipper Balanced Fund Index +0.04% +50.48% +212.98%
</TABLE>

These examples show total returns from hypothetical investments
in Class A shares of the fund. These returns are compared to
those of popular indexes for the same periods. No shares for
Class B and Class Y were outstanding during the periods
presented.

For purposes of calculation, information about the fund assumes:

- a sales charge of 5% for Class A shares

- no adjustments for taxes an investor may have paid on the
reinvested income and capital gains

- a period of widely fluctuating securities prices. Returns shown
should not be considered a representation of the fund's future
performance.

The fund invests in common stocks that may be different from
those in the indexes. The indexes reflect reinvestment of all
distributions and changes in market prices, but exclude brokerage
commissions or other fees.

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.

Lipper Balanced Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to
the fund, although some funds in the index may have somewhat
different investment policies or objectives.

8P
<PAGE>
- --------------------------------------------------------------------------------

-------------------------------------------------------------
KEY TERMS
NET ASSET VALUE (NAV)
Value of a single fund share. For each class, it is the total
market value of all of a fund's investments and other assets
attributable to that class, less any liabilities attributable to
that class, divided by the number of shares of that class
outstanding.

When you buy shares, you pay the NAV plus any applicable sales
charge. When you sell shares, the price you receive is the NAV
minus any applicable sales charge. 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).
PUBLIC
OFFERING PRICE

Price at which you buy shares. It is the NAV plus the sales
charge for Class A. It is the NAV for Class B and Class Y. NAVs
and public offering prices of IDS funds are listed each day in
major newspapers and financial publications for classes of funds
large enough to be listed.

INVESTMENT INCOME
Dividends and interest earned on securities held by the fund.
CAPITAL GAINS OR LOSSES
Increase or decrease in value of the securities the fund holds.
Gains or losses are realized when securities that have increased
or decreased in value are sold. A fund also may have unrealized
gains or losses when securities increase or decrease in value but
are not sold.
DISTRIBUTIONS
Payments to shareholders of two types: investment income
(dividends) and realized net long-term capital gains (capital
gains distributions).
TOTAL RETURN
Sum of all of your returns for a given period, assuming you
reinvest all distributions. 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
The annually compounded rate of return over a given time period
(usually two or more years) -- total return for the period
converted to an equivalent annual figure.

9P
<PAGE>
----------------------------------------------------------
Investment policies and risks

The fund balances its investments between common stocks and
senior securities (preferred stocks and bonds). The fund buys
common stocks that it believes offer both current income and
growth potential. The fund buys senior securities for stability
of value and regular income. No more than 65% of the fund's total
assets will be invested in common stocks and no less than 35% in
senior securities, convertible securities, derivative instruments
and money market instruments. Common stocks comprised 53% of the
fund's total assets on Sept. 30, 1994.

The various types of investments the portfolio managers use 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: Common stocks 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, the convertible
securities trade more like common stock.

DEBT SECURITIES: The price of an investment-grade bond fluctuates
as interest rates change or if its credit rating is upgraded or
downgraded. Prices of bonds below investment grade may react more
to the ability of the issuing company to pay interest and
principal when due. These bonds have greater price fluctuations
and are more likely to experience a default. The fund will not
invest more than 5% of its assets in bonds below investment
grade.

10P
<PAGE>
- --------------------------------------------------------------------------------

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 must
be purchased. This is done by using a forward contract in which
the price of the foreign currency in U.S. dollars is established
on the date the trade is made, but delivery of the currency is
not made until the securities are received. As long as the fund
holds foreign currencies or securities valued in foreign
currencies, the price of a fund share 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 fund may invest up to 25% of its total assets in foreign
investments.

11P
<PAGE>
- ---------------------------------------------------------------------------
Investment policies and risks

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 fund will use derivative instruments only to
achieve the same investment performance characteristics it could
achieve by directly holding those securities and currencies
permitted under the investment policies. The fund will designate
cash or appropriate liquid assets to cover its portfolio
obligations. No more than 5% of the fund's net assets can be used
at any one time for good faith deposits on futures and premiums
for options on futures that do not offset existing investment
positions. For further information, see the Appendix to this
prospectus.

12P
<PAGE>
- --------------------------------------------------------------------------------

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

The investment policies described above may be changed by the
board of directors.

LENDING PORTFOLIO SECURITIES: The fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless shareholders approve otherwise, loans may not exceed 30%
of the fund's net assets.

ALTERNATIVE INVESTMENT OPTION

In the future, the board of the fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the fund's investment portfolio would be managed by
another investment company with the same goal as the fund, rather
than investing directly in a portfolio of securities.

VALUING ASSETS

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

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

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

13P
<PAGE>
----------------------------------------------------------
How to buy, exchange or sell shares

ALTERNATIVE SALES ARRANGEMENTS

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

<TABLE>
<CAPTION>
SERVICE FEE
SALES CHARGE AND DISTRIBUTION (AS A % OF AVERAGE
(12B-1) FEE DAILY NET ASSETS) OTHER INFORMATION
<S> <C> <C> <C>
----------------------------------------------------------
Class A Maximum initial sales charge Service fee of 0.175% Initial sales charge waived or
of 5% reduced for certain purchases
----------------------------------------------------------
Class B No initial sales charge; Service fee of 0.175% Shares convert to Class A
distribution fee of 0.75% of after 8 years; CDSC waived in
daily net assets; maximum CDSC certain circumstances
of 5% declines to 0% after 6
years
----------------------------------------------------------
Class Y None None Available only to certain
qualifying institutional
investors
</TABLE>

CONVERSION OF CLASS B SHARES TO CLASS A SHARES -- Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be
subject to a distribution fee. The conversion will be on the
basis of relative net asset values of the two classes, without
the imposition of any sales charge. Class B shares purchased
through reinvested dividends and distributions will convert to
Class A shares in a pro-rata portion as the Class B shares
purchased other than through reinvestment.

14P
<PAGE>
- --------------------------------------------------------------------------------

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.

SALES CHARGES ON PURCHASE OR REDEMPTION

IF YOU PURCHASE CLASS A SHARES IF YOU PURCHASE CLASS B SHARES
- - You will not have all of your purchase - All of your money is invested in
price invested. Part of your purchase shares of stock. However, you
price will go to pay the sales charge. will pay a sales charge if you
You will not pay a sales charge when redeem your shares within 6 years
you redeem your shares. of purchase.
- - You will be able to take advantage of - No reductions of the sales charge
reductions in the sales charge. If are available for large
your investments in IDS funds total purchases.
$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.

- - The sales charges and distribution fee are structured so that you will have
approximately the same total return at the end of 8 years regardless of which
class you chose.
ONGOING EXPENSES
- - Your shares will have a lower expense - The distribution and transfer
ratio than Class B shares because agent fees for Class B will cause
Class A does not pay a distribution your shares to have a higher
fee and the transfer agent fee for expense ratio and to pay lower
Class A is lower than the fee for dividends than Class A shares.
Class B. As a result, Class A shares After 8 years, Class B shares
will pay higher dividends than Class B will convert to Class A shares
shares. and will no longer be subject to
higher fees.

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

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<PAGE>
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How to buy, exchange or sell shares

CLASS Y SHARES -- Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a
front-end sales charge or a CDSC and are not subject to either a
service fee or a distribution fee. The following investors are
eligible to purchase Class Y shares:

- 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.

- 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.

- 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.

Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.

HOW TO BUY 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.

16P
<PAGE>
- --------------------------------------------------------------------------------

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 buy 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:
- 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.

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

- Wire orders can be accepted only on days when your bank,
American Express Financial Corporation, the fund and Norwest
Bank Minneapolis are open for business.

- Wire purchases are completed when wired payment is received and
the fund accepts the purchase.

- American Express Financial Corporation and the fund are not
responsible for any delays that occur in wiring funds, including
delays in processing by the bank.

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

- The fund reserves the right to reject any application for any
reason.

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

17P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares

THREE WAYS TO INVEST

- --------------------------------------------------------------
- --
1

BY REGULAR Send your check and MINIMUM AMOUNTS
ACCOUNT application (or your name and Initial investment: $2,000
account number if you have an Additional investments: $100
established account) to: Account balances: $300 *
American Express Qualified retirement
Financial Advisors Inc. accounts: none
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will
help you with this process.

- --------------------------------------------------------------
- --
2

BY Contact your financial advisor MINIMUM AMOUNTS
SCHEDULED to set up one of the following Initial investments: $100
INVESTMENT scheduled plans: Additional investments: $100 /mo.
PLAN - automatic payroll deduction Account balances: none
- bank authorization (on active plans of
- direct deposit of Social monthly payments)
Security check
- other plan approved by the
fund

- --------------------------------------------------------------
- --
3

BY WIRE If you have an established If this information is not
account, you may wire money included, the order may be
to: rejected and all money
Norwest Bank Minneapolis received by the fund, less any
Routing No. 091000019 costs the fund or American
Minneapolis, MN Express Financial Corporation
Attn: Domestic Wire Dept. incurs, will be returned
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).

*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.

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<PAGE>
- --------------------------------------------------------------------------------

HOW TO EXCHANGE SHARES

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

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

For tax purposes, an exchange represents a sale and purchase and
may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the fund
within 91 days of your purchase. For further explanation, see the
SAI.

HOW TO SELL SHARES

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

When you sell 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 the fund's net asset
value when you sell shares is 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.

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<PAGE>
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How to buy, exchange or sell shares

TWO WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES

- --------------------------------------------------------------
- --
1

BY LETTER Include in your letter: - any paper certificates of
- the name of the fund(s) shares you hold
- the class of shares to be REGULAR MAIL:
exchanged or redeemed American Express Shareholder
- your account number(s) (for Service
exchanges, both funds must be Attn: Redemptions
registered in the same P.O. Box 534
ownership) Minneapolis, MN 55440-0534
- your Taxpayer Identification EXPRESS MAIL:
Number (TIN) American Express Shareholder
- the dollar amount or number Service
of shares you want to Attn: Redemptions
exchange or sell 733 Marquette Ave.
- signature of all registered Minneapolis, MN 55402
account owners
- for redemptions, indicate how
you want your sales proceeds
delivered to you

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

- --
2

BY PHONE - The fund and American Express American Express Shareholder
American Financial Corporation will Service. Each registered owner
Express honor any telephone exchange must sign the request.
Telephone or redemption request - American Express Financial
Transaction believed to be authentic and Corporation answers phone
Service: will use reasonable requests promptly, but you
800-437-3133 procedures to confirm that may experience delays when
or they are. This includes call volume is high. If you
612-671-3800 asking identifying questions are unable to get through,
and tape recording calls. So use mail procedure as an
long as reasonable procedures alternative.
are followed, neither the - Phone privileges may be
fund nor American Express modified or discontinued at
Financial Corporation will be any time.
liable for any loss resulting MINIMUM AMOUNT
from fraudulent requests. Redemption: $100
- Phone exchange and redemption MAXIMUM AMOUNT
privileges automatically Redemption: $50,000
apply to all accounts except
custodial, corporate or
qualified retirement accounts
unless you request these
privileges NOT apply by
writing

20P

<PAGE>
- --------------------------------------------------------------------------------

EXCHANGE POLICIES:
- 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.
- Exchanges must be made into the same class in the new fund.
- If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
- Once we receive your exchange request, you cannot cancel it.
- Shares of the new fund may not be used on the same day for
another exchange.
- If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured
party.

- American Express Financial Corporation 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:
- 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 buy new shares in the same account at the net asset value,
rather than the offering price on the date of a new purchase. If
you reinvest in this manner, any CDSC you paid on the amount you
are reinvesting also will be reinvested in the fund. 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.
- 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. Please expect a minimum
of 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 American Express Financial
Corporation that your check has cleared.)

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<PAGE>
- --------------------------------------------------------------------------------
How to buy, exchange or sell shares

THREE WAYS TO RECEIVE PAYMENT WHEN YOU SELL SHARES

- --------------------------------------------------------------
- --
1

BY REGULAR - Mailed to the address on record.
OR EXPRESS - Payable to names listed on the account.
MAIL
NOTE: The express mail delivery charges you pay will vary
depending on the courier you select.

- --------------------------------------------------------------
- --
2

BY WIRE - Minimum wire redemption: $1,000.
- Request that money be wired to your bank.
- 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 - Minimum payment: $50.
SCHEDULED - Contact your financial advisor or American Express Shareholder
PAYOUT Service to set up regular payments to you on a monthly,
PLAN bimonthly, quarterly, semiannual or annual basis.
- Buying new shares while under a payout plan may be
disadvantageous because of the sales charges.

22P
<PAGE>
- --------------------------------------------------------------------------------

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:*

<TABLE>
<CAPTION>
PUBLIC OFFERING NET AMOUNT
PRICE INVESTED
<S> <C> <C> <C>
----------------------------------------------------------------------------------
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

----------------------------------------------------------------------------------
More than $1,000,000 0.0 0.00

<FN>
*To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
</TABLE>

REDUCTIONS OF THE SALES CHARGE ON CLASS A SHARES

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

- the amount you are investing in this fund now,

- the amount of your existing investment in this fund, if any,
and

- the amount you and your immediate family (spouse or unmarried
children under 21) are investing or have in other funds in the
IDS MUTUAL FUND GROUP that carry a sales charge.

Other policies that affect your sales charge:

- 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.

- 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.

For more details, see the SAI.

23P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares

WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES

Sales charges do not apply to:

- Current or retired trustees, directors, officers or employees
of the fund or American Express Financial Corporation or its
subsidiaries, their spouses and unmarried children under 21.

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

- 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.)

- 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.

- 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 acts
as trustee or recordkeeper.

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

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

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

24P
<PAGE>
- --------------------------------------------------------------------------------

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:

<TABLE>
<CAPTION>
IF A REDEMPTION THE PERCENTAGE
IS MADE RATE FOR THE
DURING THE CDSC IS:
<S> <C>
-----------------------------------------------------------------
First year 5%

-----------------------------------------------------------------
Second year 4%

-----------------------------------------------------------------
Third year 4%

-----------------------------------------------------------------
Fourth year 3%

-----------------------------------------------------------------
Fifth year 2%

-----------------------------------------------------------------
Sixth year 1%

-----------------------------------------------------------------
Seventh year 0%
</TABLE>

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 6 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.

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<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares

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

WAIVERS OF THE SALES CHARGE FOR CLASS B SHARES

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

- In the event of the shareholder's death,

- Purchased by any trustee, director, officer or employee of a
fund or American Express Financial Corporation or its
subsidiaries,

- Purchased by any American Express financial advisor,

- Held in a trusteed employee benefit plan,

- 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.

26P
<PAGE>
----------------------------------------------------------
Special shareholder services

SERVICES

To help you track and evaluate the performance of your
investments, American Express Financial Corporation 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 Redemptions and exchanges, National/Minnesota:
EXPRESS dividend payments or 800-437-3133
TELEPHONE reinvestments and automatic Mpls./St. Paul area:
TRANSACTION payment arrangements 671-3800
SERVICE
----------------------------------------------------
AMERICAN Fund performance, objectives and 612-671-3733
EXPRESS account inquiries
SHAREHOLDER
SERVICE

----------------------------------------------------
TTY SERVICE For the hearing impaired 800-846-4852

----------------------------------------------------
AMERICAN Automated account information National/Minnesota:
EXPRESS (TouchTone-Registered Trademark- 800-272-4445
INFOLINE phones only), including current Mpls./St. Paul area:
fund prices and performance, 671-1630
account values and recent
account transactions

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

27P
<PAGE>
----------------------------------------------------------
Distributions and taxes

The fund distributes to shareholders investment income and net
capital gains. It does so to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes.
Dividend and capital gains distributions will have tax
consequences you should know about.

DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS

The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders of record at the end of each calendar
quarter. Short-term capital gains distributed are included in net
investment income. Net realized capital gains, if any, from
selling securities are distributed at the end of the calendar
year. Before they're distributed, both net investment income and
net capital gains are included in the value of each share. After
they're 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 paid by each class will be calculated at the same time,
in the same manner and in the same amount, except the expenses
attributable solely to Class A, Class B and Class Y will be paid
exclusively by that class. Class B shareholders will receive
lower per share dividends than Class A and Class Y shareholders
because expenses for Class B are higher than for Class A or Class
Y. Class A shareholders will receive lower per share dividends
than Class Y shareholders because expenses for Class A are higher
than for Class Y.

REINVESTMENTS

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

- you request the fund in writing or by phone to pay
distributions to you in cash, or

- you direct the fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased through
reinvestment from this fund into any IDS fund.

28P
<PAGE>
- --------------------------------------------------------------------------------

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.

TAXES

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

Each January, you will receive a statement showing the kinds and
total amount of all distributions you received during the
previous year. You must report all 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).

29P
<PAGE>
- ---------------------------------------------------------------------------
Distributions and taxes

YOUR TAXPAYER IDENTIFICATION NUMBER (TIN) IS IMPORTANT. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your
Social Security or Employer Identification number. The TIN must
be certified under penalties of perjury on your application when
you open an account at American Express Financial Corporation.

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:

- a $50 penalty for each failure to supply your correct TIN

- a civil penalty of $500 if you make a false statement that
results in no backup withholding

- 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.

30P
<PAGE>
- --------------------------------------------------------------------------------

-------------------------------------------------------------
HOW TO DETERMINE THE CORRECT TIN

FOR THIS TYPE OF ACCOUNT: USE THE SOCIAL SECURITY
OR
EMPLOYER IDENTIFICATION
NUMBER OF:
----------------------------------------------------
Individual or joint The individual or first
account person listed on the
account

----------------------------------------------------
Custodian account of a The minor
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, The legal entity (not the
pension trust or estate personal representative
or trustee, unless no
legal entity is
designated in the account
title)
----------------------------------------------------
Sole proprietorship or The owner or partnership
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.

31P
<PAGE>
----------------------------------------------------------
How the fund is organized

IDS Investment Series, Inc., of which IDS Mutual is a part, is an
open-end management company, as defined in the Investment Company
Act of 1940. Originally incorporated on Jan. 18, 1940 in Nevada,
IDS Investment Series, Inc. changed its state of incorporation on
June 13, 1986 by merging into a Minnesota corporation
incorporatedon April 7, 1986. The fund headquarters are at 901 S.
Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268.

IDS Investment Series, Inc. currently is composed of two funds,
each issuing its own series of capital stock: IDS Diversified
Equity Income Fund and IDS Mutual. The 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 the fund. Par value is 1 cent per
share. Both full and fractional shares can be issued.

The shares of each fund making up IDS Investment Series, 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.

IDS Mutual no longer issues stock certificates.

32P
<PAGE>
- --------------------------------------------------------------------------------

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. 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
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.

DIRECTORS AND OFFICERS

Shareholders elect a board of directors 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. The
directors also serve on the boards of all of the other funds in
the IDS MUTUAL FUND GROUP, except for Mr. Dudley, who is a
director of all publicly offered funds.

33P
<PAGE>
- ---------------------------------------------------------------------------
How the fund is organized

- ------------------------------------------------------------------
DIRECTORS AND OFFICERS OF THE FUND

President and WILLIAM R. PEARCE
interested director President of all funds in the IDS MUTUAL FUND GROUP.

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

Independent LYNNE V. CHENEY
directors 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.

DONALD M. KENDALL
Former chairman and chief executive officer, PepsiCo,
Inc.

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

LEWIS W. LEHR
Former chairman and chief executive officer, Minnesota
Mining and Manufacturing Company (3M).

EDSON W. SPENCER
Former chairman and chief executive officer, Honeywell,
Inc.

WHEELOCK WHITNEY
Chairman, Whitney Management Company.

C. ANGUS WURTELE
Chairman of the board and chief executive officer,
The Valspar Corporation.

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

Interested directors WILLIAM H. DUDLEY
who are officers Executive vice president, American Express Financial
and/or employees Corporation.
of American Express DAVID R. HUBERS
Financial President and chief executive officer, American Express
Corporation Financial Corporation.
JOHN R. THOMAS
Senior vice president, American Express Financial
Corporation.
- ------------------------------------------------------------------

Other officer LESLIE L. OGG
Vice president of all funds in the IDS MUTUAL FUND
GROUP and general counsel and treasurer of the publicly
offered funds.

Refer to the SAI for the directors' and officers' biographies.

34P
<PAGE>
- --------------------------------------------------------------------------------

INVESTMENT MANAGER AND TRANSFER AGENT

The fund pays American Express Financial Corporation for managing
its portfolio, providing administrative services and serving as
transfer agent (handling shareholder accounts).

Under its Investment Management Services Agreement, American
Express Financial Corporation determines which securities will be
purchased, held or sold (subject to the direction and control of
the fund's board of directors). Effective March 1995, the fund
pays American Express Financial Corporation a fee for these
services based on the average daily net assets of the fund, as
follows:

<TABLE>
<CAPTION>
ASSETS ANNUAL RATE
(BILLIONS) AT EACH ASSET LEVEL
<S> <C> <C>
----------------------------------------
First $ 1.0 0.530%

----------------------------------------
Next 1.0 0.505

----------------------------------------
Next 1.0 0.480

----------------------------------------
Next 3.0 0.455

----------------------------------------
Over 6.0 0.430
</TABLE>

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 Balanced Fund Index. The maximum
adjustment is 0.08% of the fund's average daily net assets on an
annual basis.

For the fiscal year ended Sept. 30, 1994, under a prior
agreement, the fund paid American Express Financial Corporation a
total investment management fee of 0.54% of its average daily net
assets. Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses.

Under an Administrative Services Agreement, the fund pays
American Express Financial Corporation for administration and
accounting services at an annual rate of 0.04% decreasing in
gradual percentages to 0.02% as assets increase.

In addition, under a separate Transfer Agency Agreement, American
Express Financial Corporation maintains shareholder accounts and
records. The fund pays American Express Financial Corporation an
annual fee per shareholder account for this service as follows:

- Class A $15

- Class B $16

- Class Y $15

35P
<PAGE>
- ---------------------------------------------------------------------------
How the fund is organized

DISTRIBUTOR

The fund sells shares through American Express Financial
Advisors, a wholly owned subsidiary of American Express Financial
Corporation, under a Distribution Agreement. Financial advisors
representing American Express Financial Advisors provide
information to investors about individual investment programs,
the fund and its operations, new account applications, exchange
and redemption requests. The cost of these services is paid
partially by the fund's sales charge.

Portions of sales charges may be paid to securities dealers who
have sold the fund's shares, or to banks and other financial
institutions. The proceeds paid to others range from 0.8% to 4%
of the fund's offering price depending on the monthly sales
volume.

For Class B shares, to help defray costs not covered by sales
charges, including costs for marketing, sales administration,
training, overhead, direct marketing programs, advertising and
related functions, the fund pays American Express Financial
Advisors a distribution fee, also known as a 12b-1 fee. This fee
is paid under a Plan and Agreement of Distribution that follows
the terms of Rule 12b-1 of the Investment Company Act of 1940.
Under this Agreement, the fund pays a distribution fee at an
annual rate of 0.75% of the fund's average daily net assets
attributable to Class B shares for distribution-related services.
The total 12b-1 fee paid by the fund under a prior agreement for
the fiscal year ended Sept. 30, 1994 was 0.06% of its average
daily net assets. This fee will not cover all of the costs
incurred by American Express Financial Advisors.

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

Total expenses paid by the fund in the fiscal year ended Sept.
30, 1994 were 0.79% of its average daily net assets.

Total fees and expenses (excluding taxes and brokerage
commissions) cannot exceed the most restrictive applicable state
expense limitation.

36P
<PAGE>

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

About American Express Financial Corporation

GENERAL INFORMATION

The American Express Financial Corporation 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 publicly offered funds in
the IDS MUTUAL FUND GROUP, American Express Financial Corporation
also manages investments for itself and its subsidiaries, IDS
Certificate Company and IDS Life Insurance Company. Total assets
under management on Sept. 30, 1994 were more than $104 billion.

American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175
offices and more than 7,800 advisors.

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

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

37P
<PAGE>

This prospectus IDS
contains facts that can DIVERSIFIED
help you decide if the EQUITY
fund is the right INCOME
investment for you. FUND
Read it before you
invest and keep it for PROSPECTUS
future reference. NOV. 29, 1994
AS REVISED
Additional facts about MARCH 20, 1995
the fund are in a
Statement of Additional [GRAPHIC]
Information (SAI),
filed with the THE PRIMARY GOAL OF IDS
Securities and Exchange DIVERSIFIED EQUITY
Commission. The SAI, INCOME FUND, A PART OF
dated Nov. 29, 1994 as IDS INVESTMENT SERIES,
revised March 20, 1995, INC., IS TO PROVIDE A
is incorporated here by HIGH LEVEL OF INCOME.
reference. For a free ITS SECONDARY GOAL IS
copy, contact American TO PROVIDE CAPITAL
Express Shareholder GROWTH. THE FUND
Service. INVESTS MAINLY IN
THESE SECURITIES HAVE DIVIDEND-PAYING STOCKS.
NOT BEEN APPROVED OR American Express
DISAPPROVED BY THE Shareholder Service
SECURITIES AND EXCHANGE P.O. Box 534
COMMISSION OR ANY STATE Minneapolis, MN
SECURITIES COMMISSION, 55440-0534
NOR HAS THE SECURITIES 612-671-3733
AND EXCHANGE COMMISSION TTY: 800-846-4852
OR ANY STATE SECURITIES
COMMISSION PASSED UPON
THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES IN THE FUND
ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR
GUARANTEED OR
ENDORSED BY, ANY
BANK, AND SHARES ARE
NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION,
THE FEDERAL RESERVE
BOARD, OR ANY
OTHER AGENCY.

<PAGE>
- ------------------------------------------
TABLE OF CONTENTS

- ------------------------------------------
THE FUND IN BRIEF
Goals 3P
Types of fund investments 3P
Manager and distributor 3P
Portfolio manager 3P
Alternative sales arrangements 3P

- ------------------------------------------
SALES CHARGE AND FUND EXPENSES

- ------------------------------------------
PERFORMANCE
Financial highlights 6P
Total returns 7P
Key terms 8P

- ------------------------------------------
INVESTMENT POLICIES AND RISKS
Facts about investments and their risks 9P
Alternative investment option 13P
Valuing assets 13P

- ------------------------------------------
HOW TO BUY, EXCHANGE OR SELL SHARES
Alternative sales arrangements 14P
How to buy shares 17P
How to exchange shares 19P
How to sell shares 19P
Reductions and waivers of the sales charge 23P

- ------------------------------------------
SPECIAL SHAREHOLDER SERVICES
Services 27P
Quick telephone reference 27P

- ------------------------------------------
DISTRIBUTIONS AND TAXES
Dividend and capital gain distributions 28P
Reinvestments 28P
Taxes 29P

- ------------------------------------------
HOW THE FUND IS ORGANIZED
Shares 31P
Voting rights 31P
Shareholder meetings 31P
Directors and officers 31P
Investment manager and transfer agent 33P
Distributor 34P

- ------------------------------------------
ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION
General information 35P

- ------------------------------------------
APPENDICES
A: Description of corporate bond ratings 36P
B: Descriptions of derivative instruments 38P

2P
<PAGE>
----------------------------------------------------------
The fund in brief

GOALS

IDS Diversified Equity Income Fund seeks to provide shareholders
with a high level of current income and, as a secondary goal,
steady growth of capital. Because any investment involves risk,
achieving these goals cannot be guaranteed. Only shareholders can
change the goals.

TYPES OF FUND INVESTMENTS

The fund is a diversified mutual fund that invests primarily in
dividend-paying U.S. and foreign stocks. The fund also invests in
convertible securities, debt securities, derivative instruments
and money market instruments. Some of the fund's investments may
be considered speculative and involve additional investment
risks.

MANAGER AND DISTRIBUTOR

PORTFOLIO MANAGER

Keith Tufte joined American Express Financial Corporation in 1990
and serves as portfolio manager. He was appointed to manage this
fund in September 1994. He also manages IDS Wealth Management
yield portfolios and serves as associate portfolio manager of IDS
Equity Value Fund. Prior to joining American Express Financial
Corporation, he was vice president and analyst at J.P. Morgan
Investment Management.

ALTERNATIVE SALES ARRANGEMENTS

3P
<PAGE>
----------------------------------------------------------
Sales charge and fund expenses

-------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES

-------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES*
(% OF AVERAGE DAILY NET ASSETS):

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
-----------------------------------------------------------
Management fee............... 0.52% 0.52% 0.52%

-----------------------------------------------------------
12b-1 fee.................... 0.00% 0.75% 0.00%

-----------------------------------------------------------
Other expenses**............. 0.48% 0.49% 0.31%

-----------------------------------------------------------
Total........................ 1.00% 1.76% 0.83%
<FN>
*Expenses for Class A are based on actual expenses for the last
fiscal year, restated to reflect current fees. Expenses for
Class B and Class Y are estimated based on the restated
expenses for Class A, except that the 12b-1 fee and transfer
agent fee (under other expenses) for Class B are based on
agreements for that class.
**Other expenses include an administrative services fee, a
shareholder services fee, a transfer agent fee and other
non-advisory expenses.
</TABLE>

4P
<PAGE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years**
<S> <C> <C> <C> <C>

------------------------------------------------------------------------
Class A...................... $60 $80 $103 $167

------------------------------------------------------------------------
Class B...................... $68 $95 $116 $188

------------------------------------------------------------------------
Class B*..................... $18 $55 $96 $188

------------------------------------------------------------------------
Class Y...................... $8 $27 $46 $103
<FN>
*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
8 years.
</TABLE>

5P
<PAGE>
----------------------------------------------------------
Performance

FINANCIAL HIGHLIGHTS

FISCAL PERIOD ENDED SEPT. 30,

- --------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES*

<TABLE>
<CAPTION>
1994 1993 1992 1991**
<S> <C> <C> <C> <C>
---------------------------------------
Net asset value, $7.73 $6.48 $5.98 $5.00
beginning of period
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------
Net investment income .27 .28 .31 .30
---------------------------------------
Net gains on securities (both realized and .20 1.31 .58 .98
unrealized)
---------------------------------------
Total from investment .47 1.59 .89 1.28
operations
LESS DISTRIBUTIONS:
---------------------------------------
Dividends from net investment income (.27) (.28) (.30) (.30)
---------------------------------------
Distributions from realized gains (.27) (.06) (.09) --
---------------------------------------
Total distributions (.54) (.34) (.39) (.30)
---------------------------------------
Net asset value, end of period $7.66 $7.73 $6.48 $5.98
</TABLE>

- --------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

<TABLE>
<CAPTION>
1994 1993 1992 1991**
<S> <C> <C> <C> <C>
---------------------------------------
Net assets, end of period (in millions) $936 $487 $162 $23
---------------------------------------
Ratio of expenses to average daily net assets .88% .96% 1.08%++ .90%++
---------------------------------------
Ratio of net income to average daily net assets 3.75% 3.94% 4.79%++ 5.97%***++
---------------------------------------
Portfolio turnover rate (excluding short-term 95% 73% 34% 74%
securities)
---------------------------------------
Total return+ 6.3% 25.0% 15.4% 25.9%+++

<FN>
*For a share outstanding throughout the period. Rounded to the
nearest cent.
**Commencement of operations. Period from Oct. 15, 1990 to
Sept. 30, 1991.
***Adjusted to an annual basis.
+Total return does not reflect payment of a sales charge.
++During the periods ended Sept. 30, 1991 and 1992, IDS
reimbursed the fund for expenses in excess of 0.9% of its
average daily net assets, on an annual basis. Had IDS not
done so, the ratios of expenses and net investment income
would have been 1.34% and 5.53% for 1991 and 1.13% and 4.74%
for 1992.
+++For the fiscal period ended Sept. 30, 1991, the annualized
total return is 27.2%.
</TABLE>

The information in this table 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. Information on Class B and Class Y shares is not included because no
shares of those classes were outstanding for the periods shown.

6P
<PAGE>
- --------------------------------------------------------------------------------

TOTAL RETURNS
-------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF SEPT. 30, 1994

<TABLE>
<CAPTION>
1 YEAR SINCE
PURCHASE MADE AGO INCEPTION*
<S> <C> <C>
Diversified Equity Income:
--------------------------------------------------
Class A +0.98% +16.54%

--------------------------------------------------
S&P 500 +3.70% +14.46%

--------------------------------------------------
Lipper Equity Income Fund
Index +2.68% +14.55%
<FN>
*Oct. 15, 1990
</TABLE>

-------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
AS OF SEPT. 30, 1994

<TABLE>
<CAPTION>
1 YEAR SINCE
PURCHASE MADE AGO INCEPTION*
<S> <C> <C>
Diversified Equity Income:
--------------------------------------------------
Class A +0.98% +83.35%

--------------------------------------------------
S&P 500 +3.70% +70.75%

--------------------------------------------------
Lipper Equity Income Fund
Index +2.68% +71.20%
<FN>
*Oct. 15, 1990
</TABLE>

For purposes of calculation, information about the fund assumes:

- a sales charge of 5% for Class A shares

- no adjustments for taxes an investor may have paid on the
reinvested income and capital gains

- a period of widely fluctuating securities prices. Returns shown
should not be considered a representation of the fund's future
performance.

The fund includes primarily common stocks that may be different
from those in the indexes. The indexes reflect reinvestment of
all distributions and changes in market prices, but exclude
brokerage commissions or other fees.

Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the fund invests. Lipper Equity Income Fund
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.

7P
<PAGE>
- ---------------------------------------------------------------------------
Performance

8P
<PAGE>
----------------------------------------------------------
Investment policies and risks

Under normal market conditions, the fund will invest at least 65%
of its net assets in dividend-paying common and preferred stocks.
Often these stocks are issued by established U.S. and foreign
companies in the utilities, financial, consumer and energy
sectors of the economy. In selecting stocks, the investment
manager will look at factors such as the current dividend, the
present price of the security, the ability of the company to
maintain and increase the dividend, and the likelihood the
company will continue to grow.

The other assets of the fund will be invested in convertible
securities, debt securities, derivative instruments and 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: Common stocks 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.

INVESTMENT-GRADE BONDS: The price of an investment-grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded.

9P
<PAGE>
- ---------------------------------------------------------------------------
Investment policies and risks

DEBT SECURITIES BELOW INVESTMENT GRADE: The price of bonds below
investment grade may react more to the ability of a company to
pay interest and principal when due than to changes in interest
rates. They have greater price fluctuations, are more likely to
experience a default, and sometimes are referred to as "junk
bonds." Reduced market liquidity for these bonds may occasionally
make it more difficult to value them. In valuing bonds the fund
relies both on independent rating agencies and the investment
manager's credit analysis. Securities that are subsequently
downgraded in quality may continue to be held and will be sold
only when the fund's investment manager believes it is
advantageous to do so. No more than 20% of the fund's net assets
may be invested in bonds below investment grade unless the bonds
are convertible securities.

-------------------------------------------------------------
BOND RATINGS AND HOLDINGS FOR FISCAL 1994

<TABLE>
<CAPTION>
AMERICAN
EXPRESS
FINANCIAL
CORPORATION'S
S&P RATING PROTECTION ASSESSMENT
PERCENT OF (OR MOODY'S OF PRINCIPAL OF UNRATED
NET ASSETS EQUIVALENT) AND INTEREST SECURITIES
<S> <C> <C> <C>
-----------------------------------------------------------------
0.15% AAA Highest quality 1.50%

-----------------------------------------------------------------
0.03 AA High quality 0.36

-----------------------------------------------------------------
2.72 A Upper medium grade 1.40

-----------------------------------------------------------------
3.13 BBB Medium grade 2.74

-----------------------------------------------------------------
Moderately
5.38 BB speculative 0.06

-----------------------------------------------------------------
4.65 B Speculative 1.54

-----------------------------------------------------------------
0.89 CCC Highly speculative --

-----------------------------------------------------------------
0.08 CC Poor quality --

-----------------------------------------------------------------
-- C Lowest quality --

-----------------------------------------------------------------
-- D In default --

-----------------------------------------------------------------
14.71 Unrated Unrated securities 7.11
</TABLE>

(See Appendix to this prospectus describing corporate bond
ratings for further information.)

10P
<PAGE>
- --------------------------------------------------------------------------------

DEBT SECURITIES SOLD AT A DEEP DISCOUNT: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, the fund has to recognize a computed amount
of interest income and pay dividends to shareholders even though
no cash has been received. In some instances, the fund may have
to sell securities to have sufficient cash to pay the dividends.

11P
<PAGE>
- ---------------------------------------------------------------------------
Investment policies and risks

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 fund will use derivative instruments only to
achieve the same investment performance characteristics it could
achieve by directly holding those securities and currencies
permitted under the investment policies. The fund will designate
cash or appropriate liquid assets to cover its portfolio
obligations. No more than 5% of the fund's net assets can be used
at any one time for good faith deposits on futures and premiums
for options on futures that do not offset existing investment
positions. For descriptions of derivative instruments, see the
Appendix to this prospectus.

SECURITIES AND DERIVATIVE INSTRUMENTS THAT ARE ILLIQUID: Illiquid
means the security or derivative instrument 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. All securities and derivative 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
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of the fund's
net assets will be held in securities and derivative instruments
that are illiquid.

12P
<PAGE>
- --------------------------------------------------------------------------------

The investment policies described above may be changed by the
board of directors.

ALTERNATIVE INVESTMENT OPTION

VALUING ASSETS

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

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

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

13P
<PAGE>
----------------------------------------------------------
How to buy, exchange or sell shares

ALTERNATIVE SALES ARRANGEMENTS

<TABLE>
<CAPTION>
SALES CHARGE SERVICE FEE
AND DISTRIBUTION (AS A % OF AVERAGE
(12B-1) FEE DAILY NET ASSETS) OTHER INFORMATION
<S> <C> <C> <C>
----------------------------------------------------------
Class A Maximum initial sales charge Service fee of 0.175% Initial sales charge waived or
of 5% reduced for certain purchases
----------------------------------------------------------
Class B No initial sales charge; Service fee of 0.175% Shares convert to Class A
distribution fee of 0.75% of after 8 years; CDSC waived in
daily net assets; maximum CDSC certain circumstances
of 5% declines to 0% after 6
years
----------------------------------------------------------
Class Y None None Available only to certain
qualifying institutional
investors
</TABLE>

14P
<PAGE>
- --------------------------------------------------------------------------------

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.

SALES CHARGES ON PURCHASE OR REDEMPTION
IF YOU PURCHASE CLASS A SHARES IF YOU PURCHASE CLASS B SHARES
- - You will not have all of your purchase - All of your money is invested in
price invested. Part of your purchase shares of stock. However, you will
price will go to pay the sales charge. pay a sales charge if you redeem
You will not pay a sales charge when your shares within 6 years of
you redeem your shares. purchase.
- - You will be able to take advantage of - No reductions of the sales charge
reductions in the sales charge. If are available for large purchases.
your investments in IDS funds 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.

- - The sales charges and distribution fee are structured so that you will have
approximately the same total return at the end of 8 years regardless of which
class you chose.
ONGOING EXPENSES
- - Your shares will have a lower expense - The distribution and transfer
ratio than Class B shares because agent fees for Class B will cause
Class A does not pay a distribution your shares to have a higher
fee and the transfer agent fee for expense ratio and to pay lower
Class A is lower than the fee for dividends than Class A shares.
Class B. As a result, Class A shares After 8 years, Class B shares will
will pay higher dividends than Class B convert to Class A shares and will
shares. no longer be subject to higher
fees.

15P
<PAGE>
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How to buy, exchange or sell shares

- 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.

- 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.

Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.

16P
<PAGE>
- --------------------------------------------------------------------------------

HOW TO BUY SHARES

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

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

- Wire orders can be accepted only on days when your bank,
American Express Financial Corporation, the fund and Norwest
Bank Minneapolis are open for business.

- Wire purchases are completed when wired payment is received and
the fund accepts the purchase.

- American Express Financial Corporation and the fund are not
responsible for any delays that occur in wiring funds, including
delays in processing by the bank.

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

- The fund reserves the right to reject any application for any
reason.

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

17P
<PAGE>
- ---------------------------------------------------------------------------
How to buy, exchange or sell shares

THREE WAYS TO INVEST

- --------------------------------------------------------------
- --
1

BY REGULAR Send your check and MINIMUM AMOUNTS
ACCOUNT application (or your name and Initial
account number if you have an investment: $2,000
established account) to: Additional
American Express investments: $100
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 Contact your financial advisor MINIMUM AMOUNTS
SCHEDULED to set up one of the following Initial investment: $100
INVESTMENT scheduled plans: Additional investments: $100/mo
PLAN - automatic payroll deduction Account balances: none
- bank authorization (on active plans
- direct deposit of Social of monthly payments)
Security check
- other plan approved by the
fund

- --------------------------------------------------------------
- --
3

BY WIRE If you have an established If this information is not
account, you may wire money included, the order may be
to: rejected and all money received
Norwest Bank Minneapolis by the fund, less any costs the
Routing No. 091000019 fund or American Express
Minneapolis, MN Financial Corporation incurs,
Attn: Domestic Wire Dept. will be returned 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).
*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.

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<PAGE>
- --------------------------------------------------------------------------------

HOW TO EXCHANGE SHARES

HOW TO SELL SHARES

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

19P
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How to buy, exchange or sell shares

TWO WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES

- --------------------------------------------------------------
- --
1

BY LETTER Include in your letter: REGULAR MAIL:
- the name of the fund(s) American Express Shareholder
- the class of shares to be Service
exchanged or redeemed Attn: Redemptions
- your account number(s) (for P.O. Box 534
exchanges, both funds must be Minneapolis, MN 55440-0534
registered in the same EXPRESS MAIL:
ownership) American Express Shareholder
- your Taxpayer Identification Service
Number (TIN) Attn: Redemptions
- the dollar amount or number 733 Marquette Ave.
of shares you want to Minneapolis, MN 55402
exchange or sell
- signature of all registered
account owners
- for redemptions, indicate how
you want your sales proceeds
delivered to you
- any paper certificates of
shares you hold

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

- --
2

BY PHONE: - The fund and American Express American Express Shareholder
American Financial Corporation will Service. Each registered owner
Express honor any telephone exchange must sign the request.
Telephone or redemption request - American Express Financial
Transaction believed to be authentic and Corporation answers phone
Service: will use reasonable requests promptly, but you
800-437-3133 procedures to confirm that may experience delays when
or they are. This includes call volume is high. If you
612-437-3800 asking identifying questions are unable to get through,
and tape recording calls. So use mail procedure as an
long as or reasonable alternative.
procedures are followed, - Phone privileges may be
neither the fund nor American modified or discontinued at
Express Financial Corporation any time.
will be liable for any loss MINIMUM AMOUNT
resulting from fraudulent Redemption: $100
requests. MAXIMUM AMOUNT
- Phone exchange and redemption Redemption: $50,000
privileges automatically
apply to all accounts except
custodial, corporate or
qualified retirement accounts
unless you request these
privileges NOT apply by
writing

20P

<PAGE>
- --------------------------------------------------------------------------------

EXCHANGE POLICIES:

- 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.

- Exchanges must be made into the same class in the new fund.

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

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

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

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

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

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How to buy, exchange or sell shares

THREE WAYS TO RECEIVE PAYMENT WHEN YOU SELL SHARES

- --------------------------------------------------------------
- --
1

BY REGULAR - Mailed to the address on record.
OR EXPRESS - Payable to names listed on the account.
MAIL
NOTE: The express mail delivery charges you pay will vary
depending on the courier you select.

- --------------------------------------------------------------
- --
2

BY WIRE - Minimum wire redemption: $1,000
- Request that money be wired to your bank.
- 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

22P
<PAGE>
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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:*

<TABLE>
<CAPTION>
PUBLIC OFFERING NET AMOUNT
PRICE INVESTED
<S> <C> <C> <C>
-------------------------------------------------------------------
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

-------------------------------------------------------------------
More than $1,000,000 0.0 0.00

<FN>

*To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
</TABLE>