GROWTH & INCOME TRUST, POS AMI, 1996-11-27

GROWTH & INCOME TRUST
POS AMI, 1996-11-27

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER

THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 3 X

File No. 811-07393

GROWTH AND INCOME TRUST
(Exact Name of Registrant as Specified in Charter)

IDS Tower 10, Minneapolis, MN 55440-0010
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: 612-671-2772
Eileen J. Newhouse
IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
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PART A

Item 1-3. Responses to Items 1 through 3 have been omitted
pursuant to Paragraph 4 of Instruction F of the
General Instructions to Form N-1A.

Item 4. General Description of Registrant.

Growth and Income Trust (the Trust) is an open-end management
investment company organized as a Massachusetts business trust on
Oct. 2, 1995. The Trust consists of four series: Balanced
Portfolio, Equity Income Portfolio, Total Return Portfolio and
Equity Portfolio (individually, the Portfolio. As used in this
document, "Portfolio" refers to the Portfolios in the Trust). The
Portfolios issue units of beneficial interest without any sales
charge. Units in the Portfolios are issued solely in private
placement transactions that do not involve any public offering
within the meaning of Section 4(2) of the Securities Act of 1933,
as amended (the 1933 Act). Investments in the Portfolios may be
made only by investment companies, common or commingled trust funds
or similar organizations or entities that are accredited investors
within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any security within the meaning of
the 1933 Act. Organizations or entities that become holders of
units of beneficial interest of the Trust are referred to as
unitholders.

Goals and types of Portfolio investments and their risks

Balanced Portfolio seeks to provide unitholders with a balance of
growth of capital and current income. Balanced Portfolio 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 Balanced Portfolio'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.

Equity Income Portfolio seeks to provide unitholders with a high
level of current income and, as a secondary goal, steady growth of
capital. Equity Income Portfolio is a diversified mutual fund that
invests primarily in dividend-paying stocks. Equity Income
Portfolio also invests in other common stocks, foreign securities,
convertible securities, debt securities, derivative instruments and
money market instruments.
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Total Return Portfolio seeks to provide unitholders maximum total
return through a combination of growth of capital and current
income. Total Return Portfolio is a diversified mutual fund that
invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market instruments.
The Portfolio provides diversification among these major investment
categories. The Portfolio has a target mix that represents the way
the Portfolio's investments will be allocated over the long term.
This mix will vary over short-term periods based on the management
team's outlook for the different markets. The Portfolio may also
use derivative instruments. Some of the Portfolio's investments
may be considered speculative and involve additional investment
risks.

Equity Portfolio seeks to provide unitholders with current income
and growth of capital. Equity Portfolio is a diversified mutual
fund that invests primarily in common stocks and securities
convertible into common stock. It also may invest in preferred
stocks, debt securities, foreign securities, derivative instruments
and money market instruments.

Because investments involve risk, the Portfolio cannot guarantee
achieving its goals. Some of the Portfolio's investments may be
considered speculative and involve additional investment risks.

The foregoing investment goals are fundamental policies of the
Portfolio, which may not be changed unless authorized by a majority
of the outstanding voting securities.

Investment policies and risks

Balanced Portfolio - Balanced Portfolio balances its investments
between common stocks and senior securities (preferred stocks and
bonds) issued by U.S. and foreign companies. Balanced Portfolio
buys common stocks that it believes offer both current income and
growth potential. Balanced Portfolio buys senior securities for
stability of value and regular income. No more than 65% of
Balanced Portfolio'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. At least 25%
of the Portfolio's assets will be invested in debt securities and
convertible securities.

Equity Income Portfolio - Equity Income Portfolio will invest at
least 65% of its net assets in dividend-paying common and preferred
stocks under normal market conditions. Often these stocks are
issued by established 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 <PAGE>
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the company will continue to grow. The other assets of Equity
Income Portfolio will be invested in other common stocks, foreign
securities, convertible securities, debt securities, derivative
instruments and money market instruments.

Total Return Portfolio - Total Return Portfolio allocates its
investments generally among four asset classes: U.S. equities,
U.S. and foreign debt securities, foreign equity securities and
cash. It may use derivative instruments and make investments not
in these classes. The portion to be invested in each class is
determined by the investment management team based on its judgment
as to which mix of assets will provide the most favorable total
return. That mix, called the Market Mix, may be reset
periodically, and is expected to be reset at least once every 12 to
18 months.

Day-to-day the asset mix will vary from the Market Mix but will
remain within the ranges described below.

Range Market Mix
U.S. equity securities 25-75% 50%
U.S. and foreign debt securities 10-50 25
foreign equity securities 10-50 25
cash 0-30 0

No more than 15% of the Portfolio's total assets will be invested
in below investment-grade debt securities and no more than 50% will
be invested in foreign securities. The Portfolio seeks to reduce
its overall risk by diversification but its performance will be
affected by many factors. Because of diversification the
Portfolio's investment performance, in certain market conditions,
will not be as great as the Portfolio that invests in only one
class of securities.

Equity Portfolio - Equity Portfolio invests primarily in common
stocks and securities convertible into common stock of U.S. and
foreign companies. Under normal market conditions, at least 65% of
Equity Portfolio's total assets will be so invested. Other
investments will include preferred stocks, debt securities,
derivative instruments and money market instruments.

The various types of investments described above that the portfolio
managers use to achieve investment performance are explained in
more detail in the next section and in Part B of this Registration
Statement.
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Facts about investments and their risks

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

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

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

Debt securities: The prices of bonds generally fall as interest
rates increase and rise as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due than to changes in interest rates. These bonds
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 Portfolio 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 by the Portfolio and will be sold
only when the investment manager believes it is advantageous to do
so.

Balanced Portfolio and Equity Portfolio will not invest more than
5% of the Portfolio's net assets in bonds below investment grade.
Equity Portfolio may purchase securities rated C or better by
Moody's or S&P or non-rated securities of equivalent investment
quality in the judgment of the investment manager. Total Return
Portfolio will not invest more than 15% of the Portfolio's total
assets in bonds below investment grade. No more than 20% of Equity
Income Portfolio's net assets may be invested in bonds below
investment grade unless the bonds are convertible securities.

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 Portfolio has to recognize a computed
amount of interest income and pay dividends to unitholders even
though no cash has been received. In some instances, the Portfolio
may have to sell securities to have sufficient cash to pay the
dividend.
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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 currency
fluctuations and political and economic risks of the countries in
which the investments are made, including the possibility of
seizure or nationalization of companies, imposition of withholding
taxes on income, establishment of exchange controls or adoption of
other restrictions that might affect an investment adversely. If
an investment is made in a foreign market, the local currency may
be purchased using a forward contract in which the price of the
foreign currency in U.S. dollars is established on the date the
trade is made, but delivery of the currency is not made until the
securities are received. As long as the Portfolio holds foreign
currencies or securities valued in foreign currencies, the value of
those assets will be affected by changes in the value of the
currencies relative to the U.S. dollar. Currencies of emerging
countries may be subject to greater volatility than currencies of
developed countries. 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 limited liquidity and price fluctuations in
emerging markets could make investments in developing countries
more volatile.

Balanced, Equity Income and Equity Portfolios may invest up to 25%
of their total assets in foreign investments. Total Return
Portfolio may invest up to 50% of its total assets in foreign
investments.

Derivative instruments: A portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. The Portfolio
will use derivative instruments only to achieve the same investment
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performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolio will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of the
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of the Portfolio's assets at risk to 5%. The
Portfolio is not limited as to the percentage of their assets that
may be invested in permissible investments, including derivatives,
except as otherwise explicitly provided in Part A or Part B of this
Registration Statement. For descriptions of these and other types
of derivative instruments, see "Descriptions of derivative
instruments" and Part B of this Registration Statement.

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

Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally, less than 25% of Balanced, Equity
Income and Equity Portfolios' total assets are in these money
market instruments. Total Return Portfolio may invest up to 30% of
its total assets in these money market instruments to meet daily
cash needs and if the portfolio management team decides that asset
category is most appropriate. 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.

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

Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change, which could
affect its price. Ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.

The following is a compilation of the two agencies' rating
descriptions. For further information, see Part B of this
Registration Statement.

Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.

Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.

A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.

Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.

Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.

B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.

Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.

Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.

C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.

D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
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Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.

Definitions of zero-coupon and pay-in-kind securities

A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.

A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.

Descriptions of derivative instruments

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

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

Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of <PAGE>
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the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.

Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters receive
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inverse floaters
receive less income and a decrease in the price for the inverse
floaters.

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

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

Item 5. Management of the Fund.

The Board

The Trust has a board of trustees (the Board) which has primary
responsibility for the overall management of the Trust. It elects
officers and retains service providers to carry out day-to-day
operations.
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The Advisor

American Express Financial Corporation (the Advisor), a provider of
financial services since 1894, has been retained to serve as the
investment manager for the Portfolio. The Advisor, located at IDS
Tower 10, Minneapolis, MN 55440-0010, 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 Portfolio pays the Advisor for managing its assets. Under the
Investment Management Services Agreement, the Advisor is paid a fee
for these services based on the average daily net assets of each
Portfolio, as follows:

Equity Income Portfolio
Total Return Portfolio
Balanced Portfolio Equity Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.530% First $0.50 0.530%
Next 1.0 0.505 Next 0.50 0.505
Next 1.0 0.480 Next 1.0 0.480
Next 3.0 0.455 Next 1.0 0.455
Over 6.0 0.430 Next 3.0 0.430
Over 6.0 0.400

For Balanced, Total Return and Equity Portfolios, these fees may be
increased or decreased by a performance adjustment based on a
comparison of performance to an Index (the Index). For Balanced
Portfolio the Index is the Lipper Balanced Fund Index. For Total
Return Portfolio this Index is the Lipper Flexible Portfolio Funds
Index. For Equity Portfolio the Index is the Lipper Growth and
Income Fund Index. The maximum adjustment is 0.08% of each
Portfolio's average daily net assets on an annual basis.

Under the agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses. The Portfolio may pay
brokerage commissions to broker-dealer affiliates of the Advisor.

The Advisor also has been retained to provide transfer agent
services (handling unitholder accounts) and administrative
services.
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Portfolio managers

Balanced Portfolio

Edward Labenski joined the Advisor in 1975 and serves as
president -- IDS Fixed-Income Advisors of IDS Advisory Group, Inc.
and senior portfolio manager. He has managed the assets of the
fixed-income portion of Balanced Portfolio and its predecessor fund
since 1987.

Tom Medcalf joined the Advisor in 1977 and serves as vice president
and senior portfolio manager. He has managed the assets of the
equity portion of Balanced Portfolio and its predecessor fund since
1983 and also has served as portfolio manager of IDS Equity Value
Fund since 1989.

Equity Income Portfolio

Keith Tufte joined the Advisor in 1990 and serves as portfolio
manager. He was appointed to manage the assets of Equity Income
Portfolio and its predecessor fund in September 1994. He also
manages IDS Wealth Management yield portfolios.

Total Return Portfolio

To determine the appropriate allocation of assets among U.S.
equities, debt securities, international equities and cash, an
asset allocation team has been established:

Peter J. Anderson has served as leader for the team since December
1995. He joined the Advisor in 1982. He was president of IDS
Advisory Group Inc. from 1985 to 1993 and has been chairman of the
board since 1993.

William Westhoff has served as senior consulting manager for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1971. He has been senior vice
president of global investments since 1994 and was senior vice
president of fixed income management from 1989 to 1994.

Frederick Quirsfeld has served as senior consulting manager for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1985. He serves as vice president
and senior portfolio manager and has managed IDS Bond Fund since
1985.

Day to day portfolio management for Total Return Portfolio is the
responsibility of the following managers:

Guru Baliga has served as U.S. equities specialist for the Total
Return Portfolio and its predecessor fund since Dec. 1995. He
joined the Advisor in 1991 as a research analyst. He became
portfolio manager of IDS Blue Chip Advantage Fund in 1994. He also
is portfolio manager of IDS Advisory accounts.
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Steve Merrell has served as debt securities specialist for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1988 as a quantitative investment
analyst. From 1990 to 1991, he worked for JP Morgan Futures, Inc.
marketing futures-based investment strategies. He rejoined the
Advisor in 1991 as a portfolio manager and currently manages Life
Special Income Fund and a number of IDS Advisory Accounts.

Paul Hopkins has served as international equities specialist for
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1992 as chief investment officer
and executive vice president of IDS International, Inc. He manages
IDS International Fund and IDS Life International Equity Fund.
Prior to joining the Advisor, he had been a director of
international equities for Banker's Trust.

Equity Portfolio

Dick Warden joined the Advisor in 1962 and serves as portfolio
manager. He was appointed to manage the assets of Equity Portfolio
and its predecessor fund in January 1995. He has served as
portfolio manager of IDS Precious Metals Fund since 1991.

Item 5A. Response to Item 5A has been omitted pursuant to
Paragraph 4 of Instruction F of the General
Instructions to Form N-1A.

Item 6. Capital Stock and Other Securities.

The Trust is an open-end, management investment company organized
as a Massachusetts business trust on October 2, 1995 and is
registered under the Investment Company Act of 1940, as amended
(the 1940 Act). The Trust is authorized to issue an unlimited
number of units of beneficial interest. Each unit of the Trust has
one vote, and, when issued, is fully paid, non-assessable, and
redeemable. Units have cumulative voting rights when electing
trustees. Currently, the Trust has four series of units, the
"Portfolios." The assets and liabilities of each series are
separate and distinct from any other series. Additional series may
be added in the future by the board.

A unitholder's interest in the Trust cannot be transferred, but the
unitholder may withdraw all or any portion of its investment at any
time at net asset value. Under the terms of the Declaration of
Trust on file with the Secretary of State of the Commonwealth of
Massachusetts, all persons having any claim against the Portfolio
shall look only to the assets of that Portfolio for payment and no
unitholder, trustee, officer or agent shall be personally liable
therefor.
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The Portfolio is a partnership that is not subject to any federal
income tax. However, each unitholder in a Portfolio is taxable on
its share (as determined in accordance with the governing
instruments of the Trust) of the Portfolio's ordinary income and
capital gain pursuant to the rules governing the unitholders. The
determination of each unitholder's share will be made in accordance
with the Internal Revenue Code of 1986, as amended (the Code),
regulations promulgated thereunder and the Declaration of Trust.

The Portfolio's taxable year-ends are September 30. It is intended
that the Portfolios' assets, income and distributions will be
managed to satisfy the requirements of Subchapter M of the Code
assuming that a unitholder invests all its assets in the Portfolio.

There are tax issues that are relevant to unitholders who purchase
units with assets rather than cash. Such purchases will not be
taxable provided certain requirements are met. Unitholders are
advised to consult their own tax advisors about the tax
consequences of investing in the Portfolio.

Item 7. Purchase of Securities Being Offered.

The Portfolio's units are not registered under the 1933 Act and may
not be sold publicly. Instead, units are offered pursuant to
exemptions from that Act in private transactions.

Units are offered only to other investment companies and certain
institutional investors. All units are sold without a sales
charge. All investments in the Portfolio are credited to the
unitholder's account in the form of full and fractional units of
the Portfolio (rounded to the nearest 1/1000 of a unit). The
Portfolio does not issue stock certificates.

The minimum initial investment is $5,000,000 with no minimum on
subsequent investments.

Net asset value (NAV) is the total value of the Portfolio's
investments and other assets less any liabilities. Each unit has a
value of $1.00. Each Portfolio is deemed to have outstanding the
number of units equal to its NAV and each unitholder is deemed to
hold the number of units equal to its proportionate investment in
the Portfolio. NAV 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).

American Express Financial Advisors Inc. (the Placement Agent), a
wholly owned subsidiary of the Advisor, serves as the Placement
Agent for the Trust. The Placement Agent is located at IDS Tower
10, Minneapolis, MN 55440-0010.
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Item 8. Redemption or Repurchase.

Redemptions are processed on any date on which the Portfolio is
open for business and are effected at the Portfolios' net asset
value next determined after the Portfolio receives a redemption
request in good form.

Payment for redeemed units will be made promptly, but in no event
later than seven days after receipt of the redemption request in
good form. However, the right of redemption may be suspended or
the date of payment postponed in accordance with the rules under
the 1940 Act. Each Portfolio reserves the right upon 30-days'
written notice to redeem, at net asset value, the units of any
unitholder whose account has a value of less than $1,000,000 as
result of voluntary redemptions. Redemptions are taxable events,
and the amount received upon redemption may be more or less than
the amount paid for the units depending upon the fluctuations in
the market value of the assets owned by the Portfolio.

Item 9. Pending Legal Proceedings.

Not Applicable.
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PART B
Item 10: Cover Page
Not applicable.

Item 11: Table of Contents
Not applicable.

Item 12: General Information and History
Not applicable.

Item 13: Investment Objectives and Policies

Please refer to Item 4 of Part A for the objectives of the
Portfolio.

Investment policies applicable to Balanced Portfolio:

These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of the
Portfolio and may be changed only with unitholder approval. Unless
holders of a majority of the outstanding units agree to make the
change, the Portfolio will not:

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

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

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

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

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

<PAGE>
PAGE 17
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.

'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.

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

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

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

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

The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:

'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.

'Invest in a company to control or manage it.

'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
PAGE 18
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.

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

'Invest more than 10% of its total assets in securities of
investment companies. Under one state's law, the Portfolio is
limited to investments in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or when the purchase is part of
a plan or merger consideration, reorganization or acquisition.

'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.

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

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

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

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

The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
PAGE 19
affect the Portfolio's total assets the same as owned securities.

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

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

Investment policies applicable to Equity Portfolio:

'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including <PAGE>
PAGE 20
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.

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

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

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

'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.

'Invest in securities of investment companies except by purchase in
the open market where the dealer's or sponsor's profit is the
regular commission. The Advisor may wish to invest in another
investment company if, for example, that is the only way to invest
in a foreign market. If any such investment is ever made, not more
than 10% of the Portfolio's net assets will be so invested. To the
extent the Portfolio were to make such investments, the shareholder
may be subject to duplicate advisory, administrative and
distribution fees.

<PAGE>
PAGE 21
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.

The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:

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

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

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

'Invest in a company to control or manage it.

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

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

In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors <PAGE>
PAGE 22
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.

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

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

Investment policies applicable to Equity Income Portfolio:
PAGE 23

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

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

'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the <PAGE>
PAGE 24
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.

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

The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:

'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.

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

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

'Invest in a company to control or manage it.

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

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

'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed <PAGE>
PAGE 25
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.

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

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

<PAGE>
PAGE 26

Investment policies applicable to Total Return Portfolio:

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

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

'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.

'Issue senior securities, except this restriction shall not be
deemed to prohibit the Portfolio from borrowing from banks, using
options or futures contracts, lending its securities or entering
into repurchase agreements.

The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:

'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
<PAGE>
PAGE 28

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

'Invest in a company to control or manage it.

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

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

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

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

For a discussion on additional information on investment policies,
foreign currency transactions, options and futures contracts and
mortgage-backed securities, see descriptions below.
<PAGE>
PAGE 30

ADDITIONAL INFORMATION ON INVESTMENT POLICIES FOR BALANCED
PORTFOLIO, TOTAL RETURN PORTFOLIO AND EQUITY PORTFOLIO

Definitions of Zero-Coupon and Pay-In-Kind Securities

Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.

FOREIGN CURRENCY TRANSACTIONS

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

Spot Rates and Forward Contracts. A Portfolio conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
<PAGE>
PAGE 31

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

A Portfolio also may enter into forward contracts when management
of a Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.

It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of a Portfolio's securities denominated in such foreign
currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since
the future value of such securities in foreign currencies more than
likely will change between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency market movements is extremely difficult and successful
execution of a short-term hedging strategy is highly uncertain. A
Portfolio will not enter into such forward contracts or maintain a
net exposure to such contracts when consummating the contracts
would obligate a Portfolio to deliver an amount of foreign currency
in excess of the value of a Portfolio's securities or other assets
denominated in that currency.

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

At maturity of a forward contract, a Portfolio may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
<PAGE>
PAGE 32

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

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

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

Although a Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a
lesser rate of exchange should a Portfolio desire to resell that
currency to the dealer.
<PAGE>
PAGE 33

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

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

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

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

All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if a Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
<PAGE>
PAGE 34

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

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

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign <PAGE>
PAGE 35

currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.

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

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

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

OPTIONS AND FUTURES CONTRACTS FOR BALANCED PORTFOLIO, EQUITY INCOME
PORTFOLIO AND TOTAL RETURN PORTFOLIO

A Portfolio may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. A Portfolio may enter
into interest rate futures contracts and stock index futures
contracts traded on any U.S. or foreign exchange. A Portfolio also
may buy or write put and call options on these futures and on stock
<PAGE>
PAGE 36

indexes. Bond options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.

In that case, or if a liquid secondary market does not exist, a
Portfolio could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.

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

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

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

Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, a Portfolio pays a premium and a commission. It then <PAGE>
PAGE 37

pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.

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

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

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

'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with a
Portfolio's goals.

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

'A Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by a Portfolio, it will conform to the requirements of those
states. For example, Arkansas limits the aggregate investment in
options to 5% of a Portfolio's total assets. California limits the
writing of options to 50% of the assets of a Portfolio.

Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
<PAGE>
PAGE 38

If a covered call option is exercised, the security is sold by a
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. A
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.

Options on many securities are listed on options exchanges. If the
fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, CBOE or NASDAQ
will be valued at the last quoted sales price or, if such a price
is not readily available, at the mean of the last bid and ask
prices.

Options on certain securities are not actively traded on any
exchange, but may be entered into directly with a dealer. When a
Portfolio writes such an option, the Custodian will segregate
assets as appropriate to cover the option. These options may be
more difficult to close. If a Portfolio is unable to effect a
closing purchase transaction, it will not be able to sell the
underlying security until the call written by a Portfolio expires
or is exercised.

FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. Futures contracts trade in a manner similar to the way a
stock trades on a stock exchange and the commodity exchanges,
through their clearing corporations, guarantee performance of the
contracts. Futures contracts are commodity contracts listed on
commodity exchanges. They include contracts based on U.S. Treasury
bonds and on Standard and Poor's 500 Index (S&P 500 Index). In the
case of S&P 500 index futures contracts, the specified multiple is
$500. Thus, if the value of the S&P 500 Index were 150, the value
of one contract would be $75,000 (150 x $500).

Unlike other futures contracts, a stock index futures contract
specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the
termination of the contract. For example, excluding any
transaction costs, if a Portfolio enters into one futures contract
to buy the S&P 500 Index at a specified future date at a contract
value of 150 and the S&P 500 Index is at 154 on that future date,
the fund will gain $500 x (154-150) or $2,000. If a Portfolio
enters into one futures contract to sell the S&P 500 Index at a
specified future date at a contract value of 150 and the S&P 500
Index is at 152 on that future date, a Portfolio will lose $500 x
(152-150) or $1,000.
<PAGE>
PAGE 39

Generally, a futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction is effected by a
Portfolio taking an opposite position. At the time a futures
contract is made, a good faith deposit called initial margin is set
up within a segregated account at a Portfolio's custodian bank.
Daily thereafter, the futures contract is valued and the payment of
variation margin is required so that each day a Portfolio would pay
out cash in an amount equal to any decline in the contract's value
or receive cash equal to any increase. At the time a futures
contract is closed out, a nominal commission is paid, which is
generally lower than the commission on a comparable transaction in
the cash markets.

The purpose of a futures contract is to allow a Portfolio to gain
rapid exposure to or protect itself from changes in the market
without actually buying or selling securities. For example, if a
Portfolio owned long-term bonds and interest rates were expected to
increase, it might enter into futures contracts to sell securities
which would have much the same effect as selling some of the long-
term bonds it owned. If interest rates did increase, the value of
the debt securities in a portfolio would decline, but the value of
a Portfolio's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of a Portfolio from
declining as much as it otherwise would have. If, on the other
hand, a Portfolio held cash reserves and interest rates were
expected to decline, a Portfolio might enter into interest rate
futures contracts for the purchase of securities. If short-term
rates were higher than long-term rates, the ability to continue
holding these cash reserves would have a very beneficial impact on
a Portfolio's earnings. Even if short-term rates were not higher,
a Portfolio would still benefit from the income earned by holding
these short-term investments. At the same time, by entering into
futures contracts for the purchase of securities, a Portfolio could
take advantage of the anticipated rise in the value of long-term
bonds without actually buying them until the market had stabilized.
At that time, the futures contracts could be liquidated and a
Portfolio's cash reserves could then be used to buy long-term bonds
on the cash market. A Portfolio could accomplish similar results
by selling bonds with long maturities and investing in bonds with
short maturities when interest rates are expected to increase or by
buying bonds with long maturities and selling bonds with short
maturities when interest rates are expected to decline. But by
using futures contracts as an investment tool, given the greater
liquidity in the futures market than in the cash market, it might
be possible to accomplish the same result more easily and more
quickly.

Risks of Transactions in Futures Contracts

A Portfolio may elect to close some or all of its contracts prior
to expiration. Although a Portfolio intends to enter into futures
contracts only on exchanges or boards of trade where there appears
to be an active secondary market, there is no assurance that a
liquid secondary market will exist for any particular contract at <PAGE>
PAGE 40

any particular time. In such event, it may not be possible to
close a futures contract position, and in the event of adverse
price movements, a Portfolio would have to make daily cash payments
of variation margin. Such price movements, however, will be offset
all or in part by the price movements of the securities owned by a
Portfolio. Of course, there is no guarantee the price of the
securities will correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures
contract.

Another risk in employing futures contracts to protect against the
price volatility of securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of a Portfolio's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.

In addition, a Portfolio's investment manager could be incorrect in
its expectations as to the direction or extent of various interest
rate or market movements or the time span within which the
movements take place. For example, if a Portfolio sold futures
contracts for the sale of securities in anticipation of an increase
in interest rates, and interest rates declined instead, a Portfolio
would lose money on the sale.

OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Further, because the value of the option is fixed at the
point of sale, there are not daily payments of cash to reflect the
change in the value of the underlying contract. However, since an
option gives the buyer the right to enter into a contract at a set
price for a fixed period of time, its value does change daily and
that change is reflected in the net asset value of a Portfolio.

The risk a Portfolio assumes when it buys an option is the loss of
the premium paid for the option. The risk involved in writing
options on futures contracts the fund owns, or on securities held
in a Portfolio, is that there could be an increase in the market
value of such contracts or securities. If that occurred, the
option would be exercised and the asset sold at a lower price than
the cash market price. To some extent, the risk of not realizing a
gain could be reduced by entering into a closing transaction. A
Portfolio could enter into a closing transaction by purchasing an <PAGE>
PAGE 41

option with the same terms as the one it had previously sold. The
cost to close the option and terminate a Portfolio's obligation,
however, might be more or less than the premium received when it
originally wrote the option. Further, a Portfolio might not be
able to close the option because of insufficient activity in the
options market. Purchasing options also limits the use of monies
that might otherwise be available for long-term investments.

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

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

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

The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. A
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
<PAGE>
PAGE 42

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

MORTGAGE-BACKED SECURITIES

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

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

Mortgage-Backed Security Spread Options. A Portfolio may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed <PAGE>
PAGE 43

security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. A Portfolio would buy or sell covered MBS call
spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.

Portfolio turnover rates:

For the fiscal periods 1996 and 1995, the portfolio turnover rates
were 45% and 38% for Balanced Portfolio, 71% and 69% for Equity
Portfolio, 84% and 98% for Equity Income Portfolio and 142% and 90%
for Total Return Portfolio. Higher turnover rates may result in
higher brokerage expenses. The variation in turnover rates for
Total Return Portfolio can be attributed to a change in investment
policy and management style.

For periods prior to the commencement of operations of Balanced
Portfolio, Equity Portfolio, Equity Income Portfolio and Total
Return Portfolio, turnover rates are based on the turnover rates of
the corresponding IDS funds which transferred all of their assets
to the Portfolios on May 13, 1996.

Item 14: Management of the Fund

BOARD MEMBERS AND OFFICERS

The following is a list of the Trust's board members and officers,
who are board members and officers of all five Trusts in the
Preferred Master Trust Group and, except for Mr. Dudley, all 47
funds in the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member
of all IDS funds except the nine life funds. All units have
cumulative voting rights with respect to the election of board
members.

Trustees and Officers of the Preferred Master Trust Group

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

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

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

Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
<PAGE>
PAGE 44

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

Executive vice president and director of the Advisor.

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

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

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

President, chief executive officer and director of the Advisor.
Previously, senior vice president, finance and chief financial
officer of the Advisor.

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

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

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

Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
<PAGE>
PAGE 45

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

Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).

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

President of all Trusts in the Preferred Master Trust Group since
April 1996 and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).

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

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

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

Senior vice president and director of the Advisor.

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

Chairman, Whitney Management Company (manages family assets).
<PAGE>
PAGE 46

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

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

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

The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.

In addition to Mr. Pearce, who is president, the Trust's other
officers are:

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

Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.

Officers who also are officers and/or employees of the Advisor.

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

Vice president-investments of all Trusts in the Preferred Master
Trust Group. Director and senior vice president-investments of the
Advisor.

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

Treasurer of all Trusts in the Preferred Master Trust Group.
Director, senior vice president and chief financial officer of the
Advisor. Director and executive vice president and controller of
IDS Life Insurance Company.
<PAGE>
PAGE 47

Members of the board who are not officers of a Portfolio or of the
Advisor receive an annual fee of $2400 for Balanced Portfolio,
$1800 for Equity Portfolio, $600 for Equity Income Portfolio and
$1800 for Total Return Portfolio. The chair of the Contracts
Committee receives an additional $90. Board members receive a $50
per day attendance fee for board meetings. The attendance fee for
meetings of the Contracts and Investment Review Committees is $50;
for meetings of the Audit Committee and Personnel Committee $25 and
for traveling from out-of-state $8. Expenses for attending
meetings are reimbursed.

During the fiscal period from May 13, 1996 to Sept. 30, 1996, the
members of the board, for attending up to 23 meetings, received the
following compensation:
<TABLE><CAPTION>
Compensation Table
for Balanced Portfolio

Pension or Estimated Total cash
Aggregate Retirement annual comepensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $613 $0 $0 $69,300
Robert F. Froehlke 615 0 0 69,100
Heinz F. Hutter 593 0 0 69,300
Anne P. Jones 613 0 0 70,800
Melvin R. Laird 625 0 0 72,900
Edson W. Spencer 635 0 0 75,100
Wheelock Whitney 635 0 0 70,300
C. Angus Wurtele 603 0 0 66,800

Compensation Table
for Equity Portfolio

Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP

Compensation Table
for Equity Income Portfolio

Lynne V. Cheney $230 $0 $0 $69,300
Robert F. Froehlke 232 0 0 69,100
Heinz F. Hutter 210 0 0 69,300
Anne P. Jones 230 0 0 70,800
Melvin R. Laird 242 0 0 72,900
Edson W. Spencer 252 0 0 75,100
Wheelock Whitney 252 0 0 70,300
C. Angus Wurtele 220 0 0 66,800
<PAGE>
PAGE 48

Compensation Table
for Total Return Portfolio

Lynne V. Cheney $513 $0 $0 $69,300
Robert F. Froehlke 515 0 0 69,100
Heinz F. Hutter 493 0 0 69,300
Anne P. Jones 513 0 0 70,800
Melvin R. Laird 525 0 0 72,900
Edson W. Spencer 535 0 0 75,100
Wheelock Whitney 535 0 0 70,300
C. Angus Wurtele 503 0 0 66,800
</TABLE>
During the fiscal period from May 13, 1996 to Sept. 30, 1996 no
board member or officer earned more than $60,000 from the Balanced
Portfolio, Equity Portfolio, Equity Income Portfolio or Total
Return Portfolio. All board members and officers as a group earned
$140,836 from Balanced Portfolio, $4,500 from Equity Portfolio,
$3,125 from Equity Income Portfolio and $4,915 from Total Return
Portfolio.

Item 15: Control Persons and Principal Holder of Securities

As of Sept. 30, 1996, the following entities held more than 5% of
the outstanding units of the Portfolios:
<TABLE><CAPTION>
Portfolio Unitholder Percentage of ownership
<S> <C> <C>
Balanced IDS Mutual 99.99
Equity IDS Stock Fund 99.98
Equity Income IDS Diversified Equity Income Fund 99.96
Total Return IDS Managed Allocation Fund 99.98
</TABLE>

Item 16: Investment Advisory and Other Services

AGREEMENTS

Investment Management Services Agreement

The trust, on behalf of the Portfolio, has an Investment Management
Services Agreement with the Advisor. For managing the assets of
the Portfolios, the Advisor is paid a fee from the assets of each
Portfolio, based upon the following schedule:
<TABLE><CAPTION>
Equity Portfolio
Equity Income Portfolio
Balanced Portfolio Total Return Portfolio

Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
<S> <C> <C> <C>
First $1.0 0.530% First $0.50 0.530%
Next 1.0 0.505 Next 0.50 0.505
Next 1.0 0.480 Next 1.0 0.480
Next 3.0 0.455 Next 1.0 0.455
Over 6.0 0.430 Next 3.0 0.430
Over 6.0 0.400
/TABLE
<PAGE>
PAGE 49

On Sept. 30, 1996, the daily rates applied to the Portfolios' net
assets on an annual basis were equal to 0.530% for Balanced
Portfolio, 0.528% for Equity Portfolio, 0.528% for Equity Income
Portfolio and 0.529% for Total Return Portfolio. The fee is
calculated for each calendar day on the basis of net assets as of
the close of business two days prior to the day for which the
calculation is made.

For Balanced, Equity and Total Return Portfolios, before the fee
based on the asset charge is paid, it is increased or decreased
based on investment performance compared to an index. For Balanced
Portfolio, the Index is the Lipper Balanced Fund Index. For Equity
Portfolio and Total Return Portfolio, the Index is the Lipper
Growth and Income Fund Index. Solely for purposes of calculating
the performance incentive adjustment, the Index is compared to the
performance of Class A shares of a fund that invests in the
Portfolio (the comparison fund). For Balanced Portfolio, the
comparison fund is IDS Mutual, for Equity and Total Return
Portfolios, the comparison funds are IDS Stock Fund and IDS Managed
Retirement Fund.

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

Where the comparison fund's performance exceeds that of the Index,
the base fee will be increased. Where the performance of the Index
exceeds the performance of the comparison fund, the base fee will
be decreased. The maximum monthly increase or decrease will be
0.12% of average net assets on an annual basis.
<PAGE>
PAGE 50

The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustement is being computed. For the
fiscal period from May 13, 1996 to Sept. 30, 1996 the adjustment
decreased the fee by $37,226 for Balanced Portfolio, by $153,555
for Equity Portfolio and by $979,878 for Total Return Portfolio.
The amounts are allocated among the funds investing in the
Portfolios.

The management fee is paid monthly. For the fiscal period from May
13, 1996 to Sept. 30, 1996 the total amount paid was $7,488,292 for
Balanced Portfolio, $5,772,345 for Equity Portfolio, $2,737,194 for
Equity Income Portfolio and $4,327,857 for Total Return Portfolio.

Under the Agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; office expenses; consultants' fees; compensation of
board members, officers and employees; corporate filing fees;
organizational expenses; expenses incurred in connection with
lending portfolio securities; and expenses properly payable by the
Portfolio, approved by the board. For the fiscal period from May
13, 1996 to Sept. 30, 1996, the Portfolios paid nonadvisory
expenses of $263,420 for Balanced Portfolio, $55,974 for Equity
Portfolio, $65,943 for Equity Income Portfolio and $385,758 for
Total Return Portfolio.

Transfer Agency and Administration Agreement

The Trust, on behalf of the Portfolio, has a Transfer Agency and
Administration Agreement with the Advisor. This Agreement governs
the responsibility for administering and/or performing transfer
agent functions, for acting as service agent in connection with
dividend and distribution functions and for performing unitholder
account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Portfolios'
units. The fee is determined by multiplying the number of
unitholder accounts at the end of the day by a rate of $1 per year
and dividing by the number of days in that year. For the fiscal
period from May 13, 1996 to Sept. 30, 1996, the Portfolios paid
fees of $9,118 for Balanced Portfolio, $1,658 for Equity Portfolio,
$1,108 for Equity Income Portfolio and $1,621 for Total Return
Portfolio.

Placement Agency Agreement

Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 51

Custodian

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

Item 17: Brokerage Allocations and Other Practices

SECURITY TRANSACTIONS

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

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

Because some of Balanced Portfolio's investments are in bonds
traded in the over-the-counter market, the Advisor, for the
investments, generally will deal through a dealer acting as
principal. The price usually includes a dealer's mark-up without a
separate broker charge. When the Advisor believes that dealing
through a broker as agent for a commission will produce the best
results, it will do so. Balanced Portfolio also may buy securities
directly from an issuing company that may be resold only privately
to other institutional investors.

Normally, the Portfolio's securities are traded on a principal
rather than an agency basis. In other words, the Advisor will
trade directly with the issuer or with a dealer who buys or sells
for its own account, rather than acting on behalf of another
client. The Advisor does not pay the dealer commissions. Instead,
the dealer's profit, if any, is the difference, or spread, between
the dealer's purchase and sale price for the security.
<PAGE>
PAGE 52

On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing the Advisor to do so to the extent authorized by
law, if the Advisor determines, in good faith, that such commission
is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or the Advisor's overall responsibilities to
the Portfolios advised by the Advisor.

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

When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some Portfolio
transactions may not be effected at the lowest commission, but the
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust that under all three procedures the
amount of commission paid will be reasonable and competitive in
relation to the value of the brokerage services performed or
research provided.<PAGE>
PAGE 53

All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.

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

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

For the fiscal period from May 13, 1996, to Sept. 30, 1996,
Balanced Portfolio, Equity Portfolio, Equity Income Portfolio and
Total Return Portfolio paid total brokerage commissions of
$3,836,080, $3,197,700, $2,585,347 and $7,372,053, respectively.
The Portfolios began operations on May 13, 1996. Substantially all
firms through whom transactions were executed provide research
services.

Transactions amounting to $62,799,000, on which $99,240 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Balanced Portfolio.
Transactions amounting to $212,022,000, on which $285,531 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Equity Portfolio.
Transactions amounting to $8,729,000, on which $13,500 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Equity Income
Portfolio. Transactions amounting to $37,135,000, on which $60,618
in commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Total Return Portfolio.
<PAGE>
PAGE 54

As of the fiscal period ended Sept. 30, 1996, each Portfolio held
securities if its regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities as presented below:

Value of Securities
Owned at End of
Name of Issuer Fiscal Period

Balanced Portfolio

BankAmerica $ 5,991,100
Dean Witter 34,449,384
Goldman Sachs 9,964,200
J.P. Morgan 28,884,375
Merrill Lynch 12,573,687
Morgan Stanley Group 12,586,917
NationsBank 34,734,375
Salomon Brothers 6,484,870

Equity Portfolio

BankAmerica $ 2,693,580
Merrill Lynch 20,857,500
J.P. Morgan 17,775,000
First Chicago 18,100,000
NationsBank 43,437,500
Morgan Stanley 6,992,718

Equity Income Portfolio

First Chicago $ 7,918,750
J.P. Morgan 18,663,750
NationsBank 20,415,625
Dean Witter 7,268,774
Goldman Sachs 11,866,691
Merrill Lynch 3,592,510

Total Return Portfolio

First Chicago $16,858,508
NationsBank 50,648,125
Alex Brown 410,913
Dean Witter 3,366,000
Inter-Regional Financial Group 19,425
Legg Mason 252,800
Quick & Reilly 262,500
Raymond James 164,900
<PAGE>
PAGE 55

BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR

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

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

Information about brokerage commissions paid by Balanced Portfolio,
Equity Portfolio, Equity Income Portfolio and Total Return
Portfolio to brokers affiliated with the Advisor for the fiscal
period from May 13, 1996 to Sept. 30, 1996 is contained in the
following table:
<TABLE><CAPTION>
For the Fiscal Period from May 13, 1996 to Sept. 30, 1996.

Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Portfolio Broker Affiliation Broker Commissions of Commissions
<S> <C> <C> <C> <C> <C>
Balanced American (1) $13,249 1.05% N/A
Enterprise
Investment
Services Inc.

Equity American (1) 45,119 3.89 N/A
Enterprise
Investment
Services Inc.

Equity Income American (1) 44,672 6.17 N/A
Enterprise
Investment
Services Inc.

Total Return American (1) 103,248 5.59 N/A
Enterprise
Investment
Services Inc.

(1) Wholly owned subsidiary of the Advisor

/TABLE
<PAGE>
PAGE 56

Item 18: Capital Stock and Other Securities

The information in response to this item is provided in addition to
information provided in Item 6 of Part A.

The Declaration of Trust dated October 2, 1995, a copy of which is
on file in the office of the Secretary of the Commonwealth of
Massachusetts, authorizes the issuance of units of beneficial
interest in the Trust without par value. Each unit of a Portfolio
has one vote and shares equally in dividends and distributions,
when and if declared by the board, and in each Portfolio's net
assets upon liquidation. All units, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or
exchange rights.

The board may classify or reclassify any unissued units of the
Trust into units of any series by setting or changing in any one or
more respect, from time to time, prior to the issuance of such
units, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, or qualifications, of
such units. Any such classification or reclassification will
comply with the provisions of the Investment Company Act of 1940
(the 1940 Act).

The overall management of the business of the Portfolio is vested
with the board members. The board members approve all significant
agreements between the Portfolio and persons or companies
furnishing services to the Portfolio. The day-to-day operations of
the Portfolio are delegated to the officers of the Trust subject to
the investment objective and policies of the Portfolio, the general
supervision of the board members and the applicable laws of The
Commonwealth of Massachusetts.

Generally, there will not be annual meetings of unitholders.
Unitholders may remove board members from office by votes cast at a
meeting of unitholders or by written consent.

Under Massachusetts law, unitholders could, under certain
circumstances, be held liable for the obligations of the Trust.
However, the Declaration of Trust disclaims unitholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust. The Declaration
of Trust provides for indemnification out of the Trust property for
all loss and expense of any unitholder of the Trust held liable on
account of being or having been a unitholder. Thus, the risk of a
unitholder incurring financial loss on account of unitholder
liability is limited to circumstances in which the Trust would be
unable to meet its obligations wherein the complaining party was
held not to be bound by the disclaimer.
<PAGE>
PAGE 57

The Declaration of Trust further provides that the board members
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a board
member against any liability to which the board member would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the
conduct of his or her office. The Declaration of Trust provides
for indemnification by the Trust of the board members and officers
of the Trust except with respect to any matter as to which any such
person did not act in good faith in the reasonable belief that his
or her action was in or not opposed to the best interests of the
Trust. Such person may not be indemnified against any liability to
the Trust or the Trust unitholders to which he or she would
otherwise be subjected by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his or her office. The Declaration of Trust also
authorizes the purchase of liability insurance on behalf of board
members and officers.

Item 19: Purchase, Redemption and Pricing of Securities Being
Offered

The information in response to this item is provided in addition to
information provided in Items 7 and 8 in Part A.

REDEEMING UNITS

Unitholders have a right to redeem units at any time. For an
explanation of redemption procedures, please see Item 8 in Part A.

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

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

'Disposal of the Portfolio's securities is not reasonably
practicable or it is not reasonably practicable for the Portfolio
to determine the fair value of its net assets, or
<PAGE>
PAGE 58

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

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

REDEMPTIONS BY THE PORTFOLIO

The Portfolio reserves the right to redeem, involuntarily, the
units of any unitholder whose account has a value of less than a
minimum amount but only where the value of such account has been
reduced by voluntary redemption of units. Until further notice, it
is the policy of the Portfolio not to exercise this right with
respect to any unitholder whose account has a value of $1,000,000
or more. In any event, before the Portfolio redeems such units and
sends the proceeds to the unitholder, it will notify the unitholder
that the value of the units in the account is less than the minimum
amount and allow the unitholder 30 days to make an additional
investment in an amount which will increase the value of the
accounts to at least $1,000,000.

REDEMPTIONS IN KIND

The Trust has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Portfolio to redeem units in cash, with
respect to any one unitholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of the Portfolio at the
beginning of such period. Although redemptions in excess of this
limitation would normally be paid in cash, the Portfolio reserves
the right to make payments in whole or in part in securities or
other assets in case of an emergency, or if the payment of such
redemption in cash would be detrimental to the existing unitholders
of the Trust as determined by the board. In such circumstances,
the securities distributed would be valued as set forth in Item 8
of Part A. Should the Portfolio distribute securities, a
unitholder may incur brokerage fees or other transaction costs in
converting the securities to cash.

Despite its right to redeem units through a redemption-in-kind,
each Portfolio does not expect to exercise this option unless the
Portfolio has an unusually low level of cash to meet redemptions
and/or is experiencing unusually strong demands for cash.

VALUING PORTFOLIO INTERESTS

The number of units held by each unitholder is equal to the value
in dollars of that unitholder's interest in the Portfolio. The
dollar value of a unitholder's interest in the Portfolio is
determined by multiplying the unitholder's proportionate interest
by the net asset value of that Portfolio.
<PAGE>
PAGE 59

On October 1, 1996, the first business day following the end of the
fiscal period, the computation looked like this:
<TABLE><CAPTION>
Net assets before Units outstanding Net asset value
Portfolio unitholder transactions at end of previous day of one unit
<S> <C> <C> <C> <C> <C>
Balanced $4,034,937,743 divided by 291,079,047 equals $13.862
Equity 3,296,168,752 144,413,787 22.824
Equity Income 1,461,183,662 159,517,867 9.160
Total Return 2,809,769,584 226,850,443 12.386
</TABLE>
In determining net assets before unitholder transactions, the
securities held by the Portfolio are valued as follows as of the
close of business of the New York Stock Exchange (the Exchange):

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

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

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

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

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

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

'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at <PAGE>
PAGE 60

amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.

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

The Exchange, American Express Financial Advisors Inc. and the
Portfolio will be closed on the following holidays: New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

Item 20: Tax Status

The information in response to this item is provided in addition to
information provided in Item 6 of Part A.

Item 21: Underwriters

The information in response to this item is provided in Item 7 of
Part A and Item 16 of Part B.

Item 22: Calculation of Performance Data
Not Applicable.

Item 23: Financial Statements
<PAGE>
<PAGE>
PAGE 61
PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS:

Financial Statements filed as part of this amendment:

Balanced Portfolio
o Independent Auditors' Report dated November 1, 1996
o Statement of assets and liabilities, September 30, 1996
o Statement of operations, for the period from May 13, 1996 to
September 30, 1996
o Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
o Notes to financial statements
o Investments in securities, September 30, 1996
o Notes to investments in securities

Equity Portfolio
o Independent Auditors' Report dated November 1, 1996
o Statement of assets and liabilities, September 30, 1996
o Statement of operations, for the period from May 13, 1996 to
September 30, 1996
o Statement of changes in net asssets, for the period from May
13, 1996 to September 30, 1996
o Notes to financial statements
o Investments in securities, September 30, 1996
o Notes to investments in securities

Equity Income Portfolio
o Independent Auditors' Report dated November 1, 1996
o Statement of assets and liabilities, September 30, 1996
o Statement of operations, for the period from May 13, 1996 to
September 30, 1996
o Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
o Notes to financial statements
o Investments in securities, September 30, 1996
o Notes to investments in securities

Total Return Portfolio
o Independent Auditors' Report dated November 1, 1996
o Statement of assets and liabilities, September 30, 1996
o Statement of operations, for the period from May 13, 1996 to
September 30, 1996
o Statement of changes in net asssets, for the period from May
13, 1996 to September 30, 1996
o Notes to financial statements
o Investments in securities, September 30, 1996
o Notes to investments in securities
<PAGE>
PAGE 62
(b) EXHIBITS:

1. Declaration of Trust, filed electronically on Nov. 1, 1995 as
Exhibit 1 to Registrant's initial Registration Statement No.
811-7393, is incorporated herein by reference.

2. Form of By-laws, filed electronically on or about April 18,
1996 as Exhibit 2 to Registrant's Amendment No. 2, is
incorporated herein by reference.

3. Not Applicable.

4. Not Applicable.

5. Copy of Investment Management Services Agreement is filed
electronically herewith as Exhibit 5.

6. Not Applicable.

7. Not Applicable.

8(a). Copy of Custodian Agreement is filed electronically herewith
as Exhibit 8.

8(b). Copy of Custody Agreement between Morgan Stanley Trust
Company and IDS Bank & Trust dated May 1993 is filed
electronically herewith as Exhibit 8(b).

9(a). Copy of Transfer Agency and Administration Agreement is filed
electronically herewith as Exhibit 9(a).

9(b) Copy of Placement Agent Agreement is filed electronically
herewith as Exhibit 9(b).

10. Not Applicable.

11. Not Applicable.

12. Not Applicable.

13. Copy of Subscription Agreement is filed electronically
herewith as Exhibit 13.

14. Not Applicable.

15. Not Applicable.

16. Not Applicable.

17. Financial Data Schedules are filed electronically herewith as
Exhibit 17.

18. Not Applicable.
<PAGE>
PAGE 63

19(a) Trustees Power of Attorney, dated April 11, 1996, filed
electronically on or about April 18, 1996 as Exhibit 19(a) to
Registrant's Amendment No. 2, is incorporated herein by
reference.

19(b) Officers Power of Attorney, dated April 11, 1996, filed
electronically on or about April 18, 1996 as Exhibit 19(b) to
Registrant's Amendment No. 2, is incorporated herein by
reference.

Item 25.Persons Controlled by or Under Common Control with
Registrant

None.

Item 26.Number of Holders of Securities

(1) (2)
Title of Class Number of Record Holders
Units of as of November 25, 1996
Beneficial Interest

Balanced Portfolio 2
Equity Portfolio 2
Equity Income Portfolio 2
Total Return Portfolio 2

Item 27. Indemnification

Reference is hereby made to Article 8 of Registrant's Declaration
of Trust filed electronically on Nov. 1, 1995 as Exhibit 1 to
Registrant's initial Registration Statement No. 811-7393.

<PAGE>
PAGE 64
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<PAGE>
Item 29(c). Not applicable.

Item 30. Location of Accounts and Records

American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440

Item 31. Management Services

Not Applicable.

Item 32. Undertakings

(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.

<PAGE>
PAGE 65
SIGNATURES

Pursuant to the requirement of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota,
on the 27th day of November, 1996.

GROWTH AND INCOME TRUST

By /s/ William R. Pearce**
William R. Pearce, President

By /s/ Melinda S. Urion
Melinda S. Urion, Treasurer

Pursuant to the requirements of the Investment Company Act of 1940,
this Amendment to its Registration Statement has been signed below
by the following persons in the capacities indicated on the 27th
day of November, 1996.

Signatures Capacity

/s/ William R. Pearce* Trustee
William R. Pearce

Trustee
H. Brewster Atwater,Jr.

/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney

/s/ William H. Dudley* Trustee
William H. Dudley

/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke

/s/ David R. Hubers* Trustee
David R. Hubers

/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter

/s/ Anne P. Jones* Trustee
Anne P. Jones<PAGE>
PAGE 66
Signatures Capacity

/s/ Melvin R. Laird* Trustee
Melvin R. Laird

Trustee
Edson W. Spencer

/s/ John R. Thomas* Trustee
John R. Thomas

Trustee
Wheelock Whitney

/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele

* Signed pursuant to Trustees Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(a) to Registrant's
Amendment No. 2, by:

Leslie L. Ogg

** Signed pursuant to Officers Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(b) to Registrant's
Amendment No. 2, by:

Leslie L. Ogg

<PAGE>
PAGE 1
GROWTH AND INCOME TRUST
Registration Number 811-07393

EXHIBIT INDEX

Exhibit 5: Copy of Investment Management Services Agreement is
filed electronically herewith as Exhibit 5.

Exhibit 8(a): Copy of Custodian Agreement is filed electronically
herewith as Exhibit 8.

Exhibit 8(b): Copy of Custody Agreement between Morgan Stanley
Trust Company and IDS Bank & Trust dated May 1993 is
filed electronically herewith as Exhibit 8(b).

Exhibit 9(a): Copy of Transfer Agency and Administration Agreement
is filed electronically herewith as Exhibit 9(a).

Exhibit 9(b): Copy of Placement Agent Agreement is filed
electronically herewith as Exhibit 9(b).

Exhibit 13: Copy of Subscription Agreement is filed
electronically herewith as Exhibit 13.

Exhibit 17: Financial Data Schedules are filed electronically
herewith as Exhibit 17.

<PAGE>
PAGE 1
INVESTMENT MANAGEMENT SERVICES AGREEMENT

AGREEMENT made the 13th day of May 1996, by and between
Growth and Income Trust (the "Trust"), a Massachusetts business
trust, on behalf of its underlying series portfolios, Balanced
Portfolio, Equity Income Portfolio, Total Return Portfolio, and
Equity Portfolio (individually, a "Portfolio" and collectively the
"Portfolios"), and American Express Financial Corporation (the
"Advisor"), a Delaware corporation.

Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES

(1) The Trust hereby retains the Advisor, and the Advisor
hereby agrees, for the period of this Agreement and under the terms
and conditions hereinafter set forth, to furnish the Portfolios
continuously with suggested investment planning; to determine,
consistent with the Portfolios' investment objectives and policies,
which securities in the Advisor's discretion shall be purchased,
held or sold and to execute or cause the execution of purchase or
sell orders; to prepare and make available to the Portfolios all
necessary research and statistical data in connection therewith; to
furnish all services of whatever nature required in connection with
the management of the Portfolios as provided under this Agreement;
and to pay such expenses as may be provided for in Part Three;
subject always to the direction and control of the Board of
Trustees (the "Board"), the Executive Committee and the authorized
officers of the Trust. The Advisor agrees to maintain an adequate
organization of competent persons to provide the services and to
perform the functions herein mentioned. The Advisor agrees to meet
with any persons at such times as the Board deems appropriate for
the purpose of reviewing the Advisor's performance under this
Agreement.

(2) The Advisor agrees that the investment planning and
investment decisions will be in accordance with general investment
policies of the Portfolios as disclosed to the Advisor from time to
time by the Portfolios and as set forth in their prospectuses and
registration statements filed with the United States Securities and
Exchange Commission (the "SEC").

(3) The Advisor agrees that it will maintain all required
records, memoranda, instructions or authorizations relating to the
acquisition or disposition of securities for the Portfolios.

(4) The Trust agrees that it will furnish to the Advisor
any information that the latter may reasonably request with respect
to the services performed or to be performed by the Advisor under
this Agreement.

(5) The Advisor is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio
securities for the Portfolios and is directed to use its best
efforts to obtain the best available price and most favorable
execution, except as prescribed herein. Subject to prior
authorization by the Board of appropriate policies and procedures,
and subject to termination at any time by the Board, the Advisor
may also be authorized to effect individual securities transactions
at commission rates in excess of the minimum commission rates <PAGE>
PAGE 2
available, to the extent authorized by law, if the Advisor
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Advisor's overall
responsibilities with respect to the Portfolios and other funds for
which it acts as investment advisor.

(6) It is understood and agreed that in furnishing the
Portfolios with the services as herein provided, neither the
Advisor nor any officer, director or agent thereof shall be held
liable to the Trust, a Portfolio or its creditors or unitholders
for errors of judgment or for anything except willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms
of this Agreement. It is further understood and agreed that the
Advisor may rely upon information furnished to it reasonably
believed to be accurate and reliable.

Part Two: COMPENSATION TO INVESTMENT MANAGER

(1) The Trust agrees to pay to the Advisor, and the Advisor
covenants and agrees to accept from each Portfolio in full payment
for the services furnished, a fee composed of an asset charge and a
performance incentive adjustment for all Portfolios except for
Equity Income Portfolio.

(a) The asset charge

(i) The asset charge for each calendar day of each year
equal to the total of 1/365th (1/366th in each leap year) of the
amount computed as shown below. The computation shall be made for
each day on the basis of net assets as of the close of business of
the full business day two (2) business days prior to the day for
which the computation is being made. In the case of the suspension
of the computation of net asset value, the asset charge for each
day during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. Net assets as of the close of a full business day shall
include all transactions in shares of the Portfolio recorded on the
books of the Portfolio for that day.

The asset charge shall be based on the net assets of each
Portfolio as set forth in the following table.

Equity Income Portfolio Total Return Portfolio
Balanced Portfolio Equity Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.530% First $0.50 0.530%
Next 1.0 0.505 Next 0.50 0.505
Next 1.0 0.480 Next 1.0 0.480
Next 3.0 0.455 Next 1.0 0.455
Over 6.0 0.430 Next 3.0 0.430
Over 6.0 0.400

(b) The performance incentive adjustment for Balanced,
Total Return and Equity Portfolios.<PAGE>
PAGE 3
(i) The performance incentive adjustment, determined
monthly, shall be computed by measuring the percentage point
difference between the performance of one Class A share of a fund
that invests in the Portfolio (the "comparison fund") and the
performance of an Index (the "Index"). For Balanced Portfolio, the
comparison fund is IDS Mutual and the Index is the Lipper Balanced
Fund Index. For Total Return and Equity Portfolios, the comparison
funds are IDS Managed Retirement Fund and IDS Stock Fund,
respectively and the Index is the Lipper Growth and Income Fund
Index. The performance of one Class A share of the comparison fund
shall be measured by computing the percentage difference, carried
to two decimal places, between the opening net asset value of one
Class A share of the comparison fund and the closing net asset
value of such share as of the last business day of the period
selected for comparison, adjusted for dividends or capital gain
distributions treated as reinvested at the end of the month during
which the distribution was made but without adjustment for expenses
related to a particular class of shares. The performance of the
Index will then be established by measuring the percentage
difference, carried to two decimal places, between the beginning
and ending Index for the comparison period, with dividends or
capital gain distributions on the securities which comprise the
Index being treated as reinvested at the end of the month during
which the distribution was made.

(ii) In computing the adjustment, one percentage point shall
be deducted from the difference, as determined in (b)(i) above. The
result shall be converted to a decimal value (e.g., 2.38% to
0.0238), multiplied by .01 and then multiplied by the comparison
fund's average net assets for the comparison period. This product
next shall be divided by 12 to put the adjustment on a monthly
basis. Where the Class A performance of the comparison fund
exceeds the Index, the amount so determined shall be an increase in
fees as computed under paragraph (a). Where the comparison fund
Class A performance is exceeded by the Index, the amount so
determined shall be a decrease in such fees. The percentage point
difference between the Class A performance of the comparison fund
and that of the Index, as determined above, is limited to a maximum
of 0.0008 per year.

(iii)The 12 month comparison period will roll over with each
succeeding month, so that it always equals 12 months, ending with
the month for which the performance adjustment is being computed.

(iv) If the Index ceases to be published for a period of
more than 90 days, changes in any material respect or otherwise
becomes impracticable to use for purposes of the adjustment, no
adjustment will be made under this paragraph (b) until such time as
the Board approves a substitute index.

(2) The fee shall be paid on a monthly basis and, in the
event of the termination of this Agreement, the fee accrued shall
be prorated on the basis of the number of days that this Agreement
is in effect during the month with respect to which such payment is
made.

<PAGE>
PAGE 4
(3) The fee provided for hereunder shall be paid in cash by
the Portfolios to the Advisor within five business days after the
last day of each month.

Part Three: ALLOCATION OF EXPENSES

(1) The Trust agrees to pay:

(a) Fees payable to the Advisor for its services under the
terms of this Agreement.

(b) Taxes.

(d) Custodian fees and charges.

(e) Fees and charges of its independent certified public
accountants for services the Trust or Portfolios request.

(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940.

(g) Fees and expenses of attorneys (i) it employs in
matters not involving the assertion of a claim by a third party
against the Trust, its trustees and officers, (ii) it employs in
conjunction with a claim asserted by the Board against the Advisor
except that the Advisor shall reimburse the Trust for such fees
and expenses if it is ultimately determined by a court of competent
jurisdiction, or the Advisor agrees, that it is liable in whole or
in part to the Trust, and (iii) it employs to assert a claim
against a third party.

(h) Fees paid for the qualification and registration for
public sale of the securities of the Portfolios under the laws of
the United States and of the several states in which such
securities shall be offered for sale.

(i) Fees of consultants employed by the Trust or
Portfolios.

(j) Trustees, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel, seminars,
pension, profit sharing, and all other benefits paid to or provided
for trustees, officers and employees, trustees and officers
liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable to
the trustees, officers and employees, except the Trust will not pay
any fees or expenses of any person who is an officer or employee of
the Advisor or its affiliates.

(k) Filing fees and charges incurred by the Trust in
connection with filing any amendment to its agreement or
declaration of Trust, or incurred in filing any other document with
the State of Massachusetts or its political subdivisions.

(l) Organizational expenses of the Trust.
<PAGE>
PAGE 5
(m) Expenses incurred in connection with lending portfolio
securities of the Portfolios.

(n) Expenses properly payable by the Trust or Portfolios,
approved by the Board.

(2) The Advisor agrees to pay all expenses associated with
the services it provides under the terms of this Agreement.

Part Four: MISCELLANEOUS

(1) The Advisor shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act for or represent the
Trust or Portfolios.

(2) A "full business day" shall be as defined in the
By-laws.

(3) The Trust and each Portfolio recognize that the Advisor
now renders and may continue to render investment advice and other
services to other investment companies and persons which may or may
not have investment policies and investments similar to those of
the Portfolios and that the Advisor manages its own investments
and/or those of its subsidiaries. The Advisor shall be free to
render such investment advice and other services and the Trust and
each Portfolio hereby consent thereto.

(4) Neither this Agreement nor any transaction made
pursuant hereto shall be invalidated or in any way affected by the
fact that trustees, officers, agents and/or unitholders of the
Trust are or may be interested in the Advisor or any successor or
assignee thereof, as directors, officers, stockholders or
otherwise; that directors, officers, stockholders or agents of the
Advisor are or may be interested in the Trust or Portfolios as
trustees, officers, unitholders, or otherwise; or that the Advisor
or any successor or assignee, is or may be interested in the
Portfolios as unitholder or otherwise, provided, however, that
neither the Advisor nor any officer, trustee or employee thereof or
of the Trust, shall sell to or buy from the Portfolios any property
or security other than units issued by the Portfolios, except in
accordance with applicable regulations or orders of the SEC.

(5) Any notice under this Agreement shall be given in
writing, addressed, and delivered, or mailed postpaid, to the party
to this Agreement entitled to receive such, at such party's
principal place of business in Minneapolis, Minnesota, or to such
other address as either party may designate in writing mailed to
the other.

(6) The Advisor agrees that no officer, director or
employee of the Advisor will deal for or on behalf of the Trust or
Portfolios with himself as principal or agent, or with any
corporation or partnership in which he may have a financial
interest, except that this shall not prohibit:

(a) Officers, directors or employees of the Advisor from
having a financial interest in the Portfolios or in the Advisor.
<PAGE>
PAGE 6
(b) The purchase of securities for the Portfolios, or the
sale of securities owned by the Portfolios, through a security
broker or dealer, one or more of whose partners, officers,
directors or employees is an officer, director or employee of the
Advisor provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed
customary brokerage charges for such services.

(c) Transactions with the Portfolios by a broker-dealer
affiliate of the Advisor as may be allowed by rule or order of the
SEC, and if made pursuant to procedures adopted by the Board.

(7) The Advisor agrees that, except as herein otherwise
expressly provided or as may be permitted consistent with the use
of a broker-dealer affiliate of the Advisor under applicable
provisions of the federal securities laws, neither it nor any of
its officers, directors or employees shall at any time during the
period of this Agreement, make, accept or receive, directly or
indirectly, any fees, profits or emoluments of any character in
connection with the purchase or sale of securities (except shares
issued by the Portfolios) or other assets by or for the Trust or
Portfolios.

Part Five: RENEWAL AND TERMINATION

(1) This Agreement shall continue in effect for each
Portfolio until May 12, 1998, or until a new agreement is approved
by a vote of the majority of the outstanding units of each
Portfolio and by vote of the Trust's Board, including the vote
required by (b) of this paragraph, and if no new agreement is so
approved, this Agreement shall continue from year to year
thereafter unless and until terminated by either party as
hereinafter provided, except that such continuance shall be
specifically approved at least annually (a) by the Board or by a
vote of the majority of the outstanding units of the relevant
Portfolios and (b) by the vote of a majority of the trustees who
are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting
on such approval. As used in this paragraph, the term "interested
person" shall have the same meaning as set forth in the Investment
Company Act of 1940, as amended (the "1940 Act").

(2) This Agreement may be terminated by either the Trust on
behalf of a Portfolio or the Advisor at any time by giving the
other party 60 days' written notice of such intention to terminate,
provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected
either by the Board or by a vote of the majority of the outstanding
voting units of the Portfolio. The vote of the majority of the
outstanding voting units of a Portfolio for the purpose of this
Part Five shall be the vote at a unitholders' regular meeting, or a
special meeting duly called for the purpose, of 67% or more of the
Portfolio's shares present at such meeting if the holders of more
than 50% of the outstanding voting units are present or represented
by proxy, or more than 50% of the outstanding voting units of the
Portfolio, whichever is less.

<PAGE>
PAGE 7
(3) This Agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the 1940 Act.

IN WITNESS THEREOF, the parties hereto have executed the
foregoing Agreement as of the day and year first above written.

GROWTH AND INCOME TRUST
Balanced Portfolio
Equity Income Portfolio
Total Return Portfolio
Equity Portfolio

By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President

AMERICAN EXPRESS FINANCIAL CORPORATION

By: /s/ Richard W. Kling
Richard W. Kling
Senior Vice President

<PAGE>
PAGE 1
CUSTODIAN AGREEMENT

THIS CUSTODIAN AGREEMENT dated May 13, 1996, between Growth and
Income Trust, a Massachusetts business trust, (the "Trust"), on
behalf of its underlying series portfolios, and American Express
Trust Company, a corporation organized under the laws of the State
of Minnesota with its principal place of business at Minneapolis,
Minnesota (the "Custodian").

WHEREAS, the Trust desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Custodian agree as follows:

Section 1. Definitions

The word "securities" as used herein shall be construed to
include, without being limited to, units, stocks, treasury stocks,
including any stocks of this Trust, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable units, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include other instruments in which the Trust may invest
including currency forward contracts and commodities such as
interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.

The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Trust by any two individuals designated in the
current certified list referred to in Section 2.

The word "facsimile" shall mean an exact copy or likeness which
is electronically transmitted for instant reproduction.

Section 2. Names, Titles and Signatures of Authorized Persons

The Trust will certify to the Custodian the names and signatures
of its present officers and other designated persons authorized on
behalf of the Trust to direct the Custodian by custodian order as
herein before defined. The Trust agrees that whenever any change
occurs in this list it will file with the Custodian a copy of a
resolution certified by the Secretary or an Assistant Secretary of
the Trust as having been duly adopted by the<PAGE>
PAGE 2
Board of Trustees (the "Board") or the Executive Committee of the
Board designating those persons currently authorized on behalf of
the Trust to direct the Custodian by custodian order, as herein
before defined, and upon such filing (to be accompanied by the
filing of specimen signatures of the designated persons) the
persons so designated in said resolution shall constitute the
current certified list. The Custodian is authorized to rely and
act upon the names and signatures of the individuals as they appear
in the most recent certified list from the Trust which has been
delivered to the Custodian as herein above provided.

Section 3. Use of Subcustodians

The Custodian may make arrangements, where appropriate, with
other banks having not less than two million dollars aggregate
capital, surplus and undivided profits for the custody of
securities. Any such bank selected by the Custodian to act as
subcustodian shall be deemed to be the agent of the Custodian.

The Custodian also may enter into arrangements for the custody of
securities entrusted to its care through foreign branches of United
States banks; through foreign banks, banking institutions or trust
companies; through foreign subsidiaries of United States banks or
bank holding companies, or through foreign securities depositories
or clearing agencies (hereinafter also called, collectively, the
"Foreign Subcustodian" or indirectly through an agent, established
under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940
and the rules promulgated by the Securities and Exchange Commission
thereunder, any order issued by the Securities and Exchange
Commission, or any "no-action" letter received from the staff of
the Securities and Exchange Commission. To the extent the existing
provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter,
they shall apply to all such foreign custodianships. To the extent
such provisions are inconsistent with or additional requirements
are established by such Section, rules, order or no-action letter,
the requirements of such Section, rules, order or no-action letter
will prevail and the parties will adhere to such requirements;
provided, however, in the absence of notification from the Trust of
any changes or additions to such requirements, the Custodian shall
have no duty or responsibility to inquire as to any such changes or
additions.

Section 4. Receipt and Disbursement of Money

(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Trust or cause its agent to open and
maintain such account or accounts subject only to checks, drafts or
directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Trust. The Custodian or its
agent shall make payments of cash to or for the account of the
Trust from such cash only:
<PAGE>
PAGE 3
(a) for the purchase of securities for the portfolio of the
Trust upon the receipt of such securities by the Custodian or its
agent unless otherwise instructed on behalf of the Trust;

(b) for the purchase or redemption of units of capital stock of
the Trust;

(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without limitation thereto,
fees for legal, accounting and auditing services);

(d) for payment of distribution fees, commissions, or redemption
fees, if any;

(e) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust held by
or to be delivered to the Custodian;

(f) for payments in connection with the return of securities
loaned by the Trust upon receipt of such securities or the
reduction of collateral upon receipt of proper notice;

(g) for payments for other proper corporate purposes;

(h) or upon the termination of this Agreement.

Before making any such payment for the purposes permitted under
the terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph
(1) of this section, the Custodian shall receive and may rely upon
a custodian order directing such payment and stating that the
payment is for such a purpose permitted under these items (a), (b),
(c), (d), (e), (f) or (g) and that in respect to item (g), a copy
of a resolution of the Board or of the Executive Committee of the
Board signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is
made. Notwithstanding the above, for the purposes permitted under
items (a) or (f) of paragraph (1) of this section, the Custodian
may rely upon a facsimile order.

(2) The Custodian is hereby appointed the attorney-in-fact of the
Trust to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of
the Trust and drawn on or to the order of the Trust and to deposit
same to the account of the Trust pursuant to this Agreement.

Section 5. Receipt of Securities

Except as permitted by the second paragraph of this section, the
Custodian or its agent shall hold in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
hereof, all securities received by it for the account of the Trust.
The Custodian shall record and maintain a record of all certificate
<PAGE>
PAGE 4
numbers. Securities so received shall be held in the name of the
Trust, in the name of an exclusive nominee duly appointed by the
Custodian or in bearer form, as appropriate.

Subject to such rules, regulations or guidelines as the
Securities and Exchange Commission may adopt, the Custodian may
deposit all or any part of the securities owned by the Trust in a
securities depository which includes any system for the central
handling of securities established by a national securities
exchange or a national securities association registered with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934, or such other person as may be permitted by the
Commission, pursuant to which system all securities of any
particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities.

All securities are to be held or disposed of by the Custodian
for, and subject at all times to the instructions of, the Trust
pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities, except pursuant to the directive of
the Trust and only for the account of the Trust as set forth in
Section 6 of this Agreement.

Section 6. Transfer Exchange, Delivery, etc. of Securities

The Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver securities held
by it or its agent hereunder only:

(a) for sales of such securities for the account of the Trust,
upon receipt of payment therefor;

(b) when such securities are called, redeemed, retired or
otherwise become payable;

(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;

(d) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to any plan of

(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;

(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;

(g) upon conversion of such securities pursuant to their terms
into other securities;

<PAGE>
PAGE 5
(h) upon exercise of subscription, purchase or other similar
rights represented by such securities; for loans of such securities
by the Trust receipt of collateral; or

(i) for other proper corporate purposes.

As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Trust requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Trust will also deliver an original signed custodian order) and, in
respect to item (i), a copy of a resolution of the Board or of the
Executive Committee of the Board signed by an officer of the Trust
and certified by its Secretary or an Assistant Secretary,
specifying the securities, setting forth the purpose for which such
payment, transfer, exchange or delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom such transfer, exchange or delivery of
such securities shall be made.

Section 7. Custodian's Acts Without Instructions

Unless and until the Custodian receives a contrary custodian
order from the Trust, the Custodian shall or shall cause its agent
to:

(a) present for payment all coupons and other income items held
by the Custodian or its agent for the account of the Trust which
call for payment upon presentation and hold all cash received by it
upon such payment for the account of the Trust;

(b) present for payment all securities held by it or its agent
which mature or when called, redeemed, retired or otherwise become
payable;

(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities held by the Custodian
or its agent hereunder, and to collect and hold for the account of
the Trust all such securities; and

(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by the
Custodian or its agent, and to collect and hold such interest and
cash dividends for the account of the Trust.

Section 8. Voting and Other Action

Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Trust. The Custodian shall promptly deliver to the Trust all
notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the <PAGE>
PAGE 6
registered holder of such securities (if registered otherwise than
in the name of the Trust), but without indicating the manner in
which such proxies are to be voted.

Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Trust. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Trust all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer.

Section 9. Transfer Taxes

The Trust shall pay or reimburse the Custodian for any transfer
taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.

Section 10. Custodian's Reports

The Custodian shall furnish the Trust as of the close of business
each day a statement showing all transactions and entries for the
account of the Trust. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement and
securities held hereunder by the Custodian shall be open to
inspection and audit by officers of the Trust, internal auditors
employed by the Trust's investment advisor, and independent
auditors employed by the Trust. The Custodian shall furnish the
Trust in such form as may reasonably be requested by the Trust a
report, including a list of the securities held by it in custody
for the account of the Trust, identification of any subcustodian,
and identification of such securities held by such subcustodian, as
of the close of business of the last business day of each month,
which shall be certified by a duly authorized officer of the
Custodian. It is further understood that additional reports may
from time to time be requested by the Trust. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Trust with a copy of that report.

The Custodian also shall furnish such reports on its systems of
internal accounting control as the Trust may reasonably request
from time to time.

Section 11. Concerning Custodian

For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
<PAGE>
PAGE 7
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board or of the Executive
Committee of the Board, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly
executed.

The Trust agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against
it or its nominee in connection with the performance of this
Agreement, except such as may arise from the Custodian's or its
nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the
Trust for such items. In the event of any advance of cash for any
purpose made by Custodian resulting from orders or instructions of
the Trust, or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Trust shall be
security therefor.

The Custodian shall maintain a standard of care equivalent to
that which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Trust resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.

Section 12. Termination and Amendment of Agreement

The Trust and the Custodian mutually may agree from time to time
in writing to amend, to add to, or to delete from any provision of
this Agreement.

The Custodian may terminate this Agreement by giving the Trust
ninety days' written notice of such termination by registered mail
addressed to the Trust at its principal place of business.

The Trust may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board authorizing such termination and certified by the
Secretary of the Trust, by registered mail to the Custodian.

Upon such termination of this Agreement, assets of the Trust held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Trust, upon receipt by
the Custodian of a copy of the resolution of the Board certified by
the Secretary, showing appointment of the successor <PAGE>
PAGE 8
custodian, and provided that such successor custodian is a bank or
trust company, organized under the laws of the United States or of
any State of the United States, having not less than two million
dollars aggregate capital, surplus and undivided profits. Upon the
termination of this Agreement as a part of the transfer of assets,
either to a successor custodian or otherwise, the Custodian will
deliver securities held by it hereunder, when so authorized and
directed by resolution of the Board, to a duly appointed agent of
the successor custodian or to the appropriate transfer agents for
transfer of registration and delivery as directed. Delivery of
assets on termination of this Agreement shall be effected in a
reasonable, expeditious and orderly manner; and in order to
accomplish an orderly transition from the Custodian to the
successor custodian, the Custodian shall continue to act as such
under this Agreement as to assets in its possession or control.
Termination as to each security shall become effective upon
delivery to the successor custodian, its agent, or to a transfer
agent for a specific security for the account of the successor
custodian, and such delivery shall constitute effective delivery by
the Custodian to the successor under this Agreement.

In addition to the means of termination herein before authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding units of the Trust and after written
notice of such action to the Custodian.

Section 13. Limitations of Liability of the Trustees and
Unitholders of Trust

A copy of the Declaration of Trust, dated October 2, 1995,
together with all amendments, is on file in the office of the
Secretary of State of the Commonwealth of Massachusetts. The
execution and delivery of this Agreement have been authorized by
the Trustees and the Agreement has been signed by an authorized
officer of the Trust. It is expressly agreed that the obligations
of the Trust under this Agreement shall not be binding upon any of
the Trustees, unitholders, nominees, officers, agents or employees
of the Trust, personally, but bind only the assets and property of
the Trust, as provided in the Declaration of Trust.

Section 14. General

Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
PAGE 9

This Agreement shall be governed by the laws of the State of
Minnesota.

GROWTH AND INCOME TRUST
Balanced Portfolio
Equity Income Portfolio
Total Return Portfolio
Equity Portfolio

By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President

AMERICAN EXPRESS TRUST COMPANY

By: /s/ Chandrakant A. Patel
Chandrakant A. Patel
Vice President

<PAGE>
PAGE 1
CUSTODY AGREEMENT

This Custody Agreement is dated May, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the
"Custodian"), and IDS Bank & Trust (the "Customer").

1. The Customer hereby appoints the Custodian as a custodian of
securities and other property owned or under the control of the
Customer which are delivered to the Custodian, or any Subcustodian
as appointed below, from time to time to be held in custody for the
benefit of the Customer. The Customer instructs the Custodian to
establish on the books and records of the Custodian an account (the
"Account") in the name of the Customer. The Custodian shall record
in the Account and shall have general responsibility for the
safekeeping of all securities ("Securities"), cash and other
property (all such Securities, cash and other Property being
collectively the "Property") of the Customer so delivered for
custody. It is understood that the specific procedures the
Custodian will use in carrying out its responsibilities under this
Agreement are set forth in the procedures manual (the "Procedures
Manual") prepared by the Custodian and delivered to the Customer,
as such Procedures Manual may be amended from time to time by the
Custodian by 90 days prior written notice to the Customer (unless
the Customer agrees to a shorter period). The Customer acknowledges
that the Procedures Manual constitutes an integral part of this
Agreement.

2. The Property may be held in custody and deposit accounts that
have been established by the Custodian with one or more domestic or
foreign banks, or through the facilities of one or more clearing
agencies or central securities depositories, as listed on Exhibit A
hereto (the "Subcustodians"), as such Exhibit may be amended from
time to time by the Custodian by written notice to the Customer.
The Custodian shall deliver to the Customer such information as is
necessary or appropriate for the Customer to determine that the
Customer is in compliance with Rule 17f-5 promulgated under the
Investment Company Act of 1940, as amended. The Custodian may hold
Property for all of its customers with a Subcustodian in a single
account that is identified-as belonging to the Custodian for the
benefit of its customers. Any Subcustodian may hold Property in a
securities depository and may utilize a clearing agency. The
Customer agrees that the Property may be physically held outside
the United States. The Custodian shall not be liable for any loss
resulting directly from the physical presence of any Property in a
foreign country (and not by virtue of the actions of the Custodian
or any Subcustodian) including, but not limited to, losses
resulting from nationalization, expropriation, exchange controls or
acts of war or terrorism. Except as provided in the previous
sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Securities shall not be affected by the
Custodian's use of Subcustodians.
<PAGE>
PAGE 2
3. With respect to Property held by a Subcustodian pursuant to
Section 2:

(a) The Custodian will identify on its books as belonging to the
Customer any Property held by a Subcustodian for the Custodian's
account;

(b) The Custodian will hold Property through a Subcustodian only
if (i) such Subcustodian and any securities depository or
clearing agency in which such Subcustodian holds Property, or any
of their creditors, may not assert any right, charge security
interest, lien, encumbrance or other claim of any kind to such
Property except a claim of payment for its safe custody or
administration and (ii) beneficial ownership of such Property may
be freely transferred without the payment of money or value other
than for safe custody or administration;

(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by the
Subcustodian other than property of the Custodian's customers and
as held solely for the benefit of customers of the Custodian; and

(d) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian will
be required by its agreement with the Custodian to identify on
its books such Property as being held for the account of the
Custodian as a custodian for its customers.

4. The Custodian shall allow the Customer's accountants reasonable
access to the Custodian's records relating to the Property held by
the Custodian as such accountants may reasonably require in
connection with their examination of the Customer's affairs. The
Custodian shall also obtain from any Subcustodian (and will require
each Subcustodian to use reasonable efforts to obtain from any
securities depository or clearing agency in which it deposits
Property) an undertaking, to the extent consistent with local
practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is
subject, to permit independent public accountants such reasonable
access to the records of such Subcustodian, securities depository
or clearing agency as may be reasonably required in connection with
the examination of the Customer's affairs or to take such other
action as the Custodian in its judgment may deem sufficient to
ensure such reasonable access.

5. The Custodian shall provide such reports and other information
to the Customer and to such persons as the Customer directs as the
Custodian and the Customer may agree from time to time, including
such reports which are described in the Procedures Manual.
<PAGE>
PAGE 3
6. The Custodian shall make or cause any Subcustodian to make
payments from monies being held in the Account only:

(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which settlement
occurs, upon the delivery of such Securities;

(b) for payments to be made in connection with the conversion,
exchange or surrender of Securities;

(d) upon a request of the Customer that monies be exchanged for
or used to purchase monies denominated in a different currency
and then only upon receipt of such exchanged or purchased monies;

(e) as provided in Section 8 and 12 hereof;

(f) upon termination of this Custody Agreement as hereinafter set
forth; and

(g) for any other purpose upon receipt of explicit instructions
of the Customer accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such payment.

Except as provided in the last two sentences of this Section 6 and
as provided in Section 8, all payments pursuant to this Section 6
will be made only upon receipt by the Custodian of Authorized
Instructions (as hereinafter defined) from the Customer which shall
specify the purpose for which the payment is to be made. In the
event that it is not possible to make a payment in accordance with
Authorized Instructions of the Customer, the Custodian shall
proceed in accordance with the procedures set forth in the
Procedures Manual. Any payment pursuant to subsection (f) of this
Section 6 will be made in accordance with Section 16.

7. The Custodian shall make or cause any Subcustodian to make
transfers, exchanges or deliveries of Securities only:

(a) upon sale of such Securities and then, to the extent
consistent with practice in the jurisdiction in which settlement
occurs, upon receipt of payment therefor;

(b) upon exercise of conversion, subscription, purchase, exchange
or other similar rights pertaining to such Securities and, if
applicable to such exercise and if consistent with practice in
the applicable jurisdiction, only on receipt of substitute or
additional securities to be received upon such exercise;

(d) upon the termination of this Custody Agreement as hereinafter
set forth; and
<PAGE>
PAGE 4
(e) for any other purpose upon receipt of explicit instructions
of the Customer accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such transfer, exchange
or delivery.

Except as provided in the last two sentences of this Section 7 and
as provided in Section 8, all transfers, exchanges or deliveries of
Securities pursuant to this Section 7 will be made only upon
receipt by the Custodian of Authorized Instructions of the Customer
which shall specify the purpose for which the transfer, exchange or
delivery is to be made. In the event that it is not possible to
transfer Securities in accordance with Authorized Instructions of
the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or
delivery pursuant to subsection (d) of this Section 7 will be made
in accordance with Section 16.

8. In the absence of Authorized Instructions from the Customer to
the contrary, the Custodian may, and may authorize any Subcustodian
to:

(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for
to the Customer;

(b) receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Account;

(c) exchange Securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim receipts
or temporary securities for securities in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the securities themselves);

(d) surrender Securities at maturity or when called for
redemption upon receiving payment therefor;

(e) execute in the Customer's name such ownership and other
certificates as may be required to obtain the payment of income
from Securities:

(f) pay or cause to be paid, from the Account, any and all taxes
and levies in the nature of taxes imposed on Property by any
governmental authority in connection with custody of and
transactions in such Property;

(g) endorse for collection, in the name of the Customer, checks,
drafts and other negotiable instruments; and

(h) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and other
dealings with the Property.
<PAGE>
PAGE 5
9. "Authorized Instructions" of the Customer shall mean
instructions received by telecopy, tested telex, electronic link or
other electronic means or by such other means as may be agreed in
writing in advance between the Customer and the Custodian. The
Custodian shall be entitled to act, and shall have no liability for
acting, in accordance with the terms of this Agreement or upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by one or more persons which the Customer has
previously identified to the Custodian as authorized to act on the
Customer's behalf.

10. Securities which must be held in registered form may be
registered in the name of the Custodian's nominee or, in the case
of Securities in the custody of an entity other than the Custodian,
in the name of such entity's nominee. The Customer agrees to hold
the Custodian and Subcustodians and any such nominee harmless from
any liability arising out of any such person acting as a holder of
record of such Securities. The Custodian may without notice to the
Customer cause any Securities to cease to be registered in the name
of any such nominee and to be registered in the name of the
Customer.

11. All cash received by the Custodian for the Account shall be
held by the Custodian as a short-term credit balance in favor of
the Customer and, if the Custodian and the Customer have agreed in
writing in advance that such credit balances shall bear interest,
the Customer shall earn interest at the rates and times as agreed
between the Custodian and the Customer. The Customer understands
that any such credit balances will not be accompanied by the
benefit of any governmental insurance.

12. From time to time, the Custodian may arrange or extend short-
term credit for the Customer which is (i) necessary in connection
with payment and clearance of securities and foreign exchange
transactions or (ii) pursuant to an agreed schedule, as and if set
forth in the Procedures Manual, of credits for dividends and
interest payments on Securities. All such extensions of credit
shall be repayable by the Customer on demand. The Custodian shall
be entitled to charge the Customer interest for any such credit
extension at rates to be agreed upon from time to time. In addition
to any other remedies available, the Custodian shall be entitled to
a right of set-off against the Property to satisfy the repayment of
such credit extensions and the payment of accrued interest thereon.
The Custodian may act as the Customer's agent or act as a principal
in foreign exchange transactions at such rates as are agreed from
time to time between the Customer and the Custodian.

13. The Customer represents that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the
ability to obtain the short-term extensions of credit in accordance
with Section 12) are within the Customer's power and authority and
have been duly authorized by all requisite action (corporate or
otherwise) and (ii) this Agreement and each extension of short-term
credit extended or arranged for the benefit of the Customer in
accordance with Section 12 will at all times constitute a legal,
valid and binding obligation of the Customer and be enforceable
<PAGE>
PAGE 6
against the Customer in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).

The Custodian represents that the execution, delivery and
performance of this Agreement is within the Custodian's power and
authority and has been duly authorized by all requisite action of
the Custodian. This Agreement constitutes the legal, valid and
binding obligation of the Custodian enforceable against the
Custodian in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the
effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).

14. The Custodian shall be responsible for the performance of only
such duties as are set forth in this Agreement or the Procedures
Manual or contained in Authorized Instructions given to the
Custodian which are not contrary to the provisions of any relevant
law or regulation. The Custodian shall not be liable to the
Customer or to any other person for any action taken or omitted to
be taken by it in connection with this Agreement in the absence of
negligence or willful misconduct on the part of the Custodian. Upon
Custodian, the Customer agrees to deliver to the Custodian a duly
executed power of attorney, in form and substance satisfactory to
the Custodian, authorizing the Custodian to take any action or
execute any instrument on behalf of the Customer as necessary or
advisable to accomplish the purposes of this Agreement.

15. The Customer agrees to pay to the Custodian from time to time
such compensation for its services pursuant to this Agreement as
may be mutually agreed upon from time to time and the Custodian's
out-of-pocket or incidental expenses. The Customer hereby agrees to
hold the Custodian harmless from any liability or loss resulting
from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed or assessed with respect to
the Account or any Property held therein. The Custodian is and any
Subcustodians are authorized to charge the Account for such items
and the Custodian shall have a lien, charge and security interest
on any and all Property for any amount owing to the Custodian from
time to time under this Agreement. Except as set forth in the
previous sentence, or otherwise permitted pursuant to the terms of
this agreement, the Custodian shall not pledge, assign, hypothecate
or otherwise encumber Property without Authorized Instructions; it
being understood that a Subcustodian will generally retain a lien
against securities which the Subcustodian has purchased for the
Account but for which the Customer has not yet paid. If the
Customer is a U.S. person as defined in Rule 902 promulgated by the
Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), the Customer recognizes that, in
connection with the Customer's election from time to time to
participate in distributions of securities (whether pursuant to
rights offerings, warrant subscriptions, mergers, reorganizations
or otherwise) which have not been registered pursuant to the Act,
the Custodian may inform the issuer and its agents that the acquire
<PAGE>
PAGE 7
of the securities is a U.S. person. The Custodian shall not be
responsible to the Customer for the consequences of any issuer's or
agent's refusal to permit the Customer to acquire such securities,
and the Customer shall hold the Custodian harmless from liability
to the issuer and its agents in connection with any such election
by the Customer.

16. This Agreement may be terminated by the Customer or the
Custodian by 90 days written notice to the other, sent by
registered mail. If notice of termination is given, the Customer
shall, within 60 days following the giving of such notice, deliver
to the Custodian a statement in writing specifying the successor
custodian or other person to whom the Custodian shall transfer the
Property. In either event the Custodian, subject to the
satisfaction of any lien it may have, will transfer the Property to
the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property
to a bank or trust company established under the laws of the United
States or any state thereof to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold the
Property until such a statement is delivered to the Custodian. In
such event the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian remains in
possession of any Property and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall
remain in full force and effect; provided, however, that the
Custodian shall no longer settle any transactions in securities for
the Account.

17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the
Account, including in dealings with affiliates of the Custodian. In
the event the Custodian or any Subcustodian is requested or
required to disclose any confidential information concerning the
Property, the Custodian shall to the extent practicable and legally
permissible, promptly notify the Customer of such request or
requirement so that the Customer may seek a protective order or
waive the Custodian's or such Subcustodian's compliance with this
Section 17. In the absence of such a waiver, if the Custodian or
such Subcustodian is compelled, in the opinion of its counsel, to
disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in
the opinion of counsel, is so required.

18. Any notice or other communication from the Customer to the
Custodian, unless otherwise provided by this Agreement, shall be
sent by certified or registered mail to Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York, 11201,
Attention: President, and any notice from the Custodian to the
Customer is to be mailed postage prepaid, addressed to the Customer
at the address appearing below, or as it may hereafter be changed
on the Custodian's records in accordance with notice from the
Customer.
<PAGE>
PAGE 8
19. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as
custodian under the terms of this Agreement and majority-owned,
directly or indirectly, by Morgan Stanley Group Inc., and upon the
assumption of the rights and obligations hereunder by such entity,
such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity
had been originally named as custodian herein. The Custodian shall
give prompt written notice to the Customer upon the effectiveness
of any such assignment.

This Agreement shall bind the successors and assigns of the
Customer and the Custodian and shall be governed by the laws of the
State of New York applicable to contracts executed in and to be
performed in that state.

________________________

By /s/ Mark Ellis
Name: Mark Ellis
Title: Vice President

Address for record: IDS Trust
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
________________________

Accepted:

MORGAN STANLEY TRUST COMPANY

By /s/ David P. Roccato
Authorized Signature
Roccato

<PAGE>
PAGE 1
TRANSFER AGENCY AND ADMINISTRATIVE SERVICES AGREEMENT

AGREEMENT dated as of May 13, 1996, between Growth and Income
Trust, a Massachusetts business trust, (the "Trust"), on behalf of
its underlying series portfolios, and American Express Financial
Corporation (the "Transfer Agent"), a Delaware corporation.

In consideration of the mutual promises set forth below, the Trust
and the Transfer Agent agree as follows:

1. Appointment of the Transfer Agent. The Trust hereby appoints the
Transfer Agent, as transfer agent for its units and as
administrator for the Trust, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.

2. Compensation. The Trust will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of- pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Trust separately.

The Transfer Agent will bill the Trust annually. The fee provided
for hereunder shall be paid in cash by the Trust to the Transfer
Agent within five (5) business days after the last day of each
calendar year.

Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the Trust
for expenses incurred by the Transfer Agent in any month shall be
made as soon as practicable after the receipt of an itemized bill
from the Transfer Agent.

Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.

3. Documents. The Trust will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.

4. Representations of the Trust and the Transfer Agent.

(a) The Trust represents to the Transfer Agent that all outstanding
units are validly issued, fully paid and non-assessable by the
Trust. When units are hereafter issued in accordance with the
terms of the Trust's Declaration of Trust and its Registration
Statement, such units shall be validly issued, fully paid and non-
assessable by the Trust.

(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.

<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:

(a) Sale of Trust Units.

(1) On receipt of payment, wired instructions and payment, or
payment identified as being for the account of a unitholder, the
Transfer Agent will deposit the payment, prepare and present the
necessary report to the Custodian and record the purchase of units
in a timely fashion in accordance with the terms of the prospectus.
All units shall be held in book entry form and no certificate shall
be issued unless the Trust is permitted to do so by the prospectus
and the purchaser so requests.

(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all units owned by the purchaser
related to that payment and take such other action as it deems
appropriate.

(b) Redemption of Trust Units. On receipt of instructions to redeem
units in accordance with the terms of the Trust's Registration
Statement, the Transfer Agent will record the redemption of units
of the Trust, prepare and present the necessary report to the
Custodian and pay the proceeds of the redemption to the unitholder,
an authorized agent or legal representative upon the receipt of the
monies from the Custodian.

(c) Transfer or Other Change Pertaining to Trust Units. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the units to the name of a new owner, change the name or
address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.

(d) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem units of the Trust or take any action
requested by a unitholder until it is satisfied that the requested
transaction or action is legally authorized or until it is
satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Trust shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem units
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.

(e) Unitholder Records, Reports and Services.

(1) The Transfer Agent shall maintain all unitholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide unitholders, and file with
federal and state agencies, all required tax and other reports
pertaining to unitholder accounts; shall prepare unitholder mailing
lists; shall cause to be delivered all required prospectuses,
annual reports, semiannual reports, statements of additional
information (upon request), proxies and other mailings to
unitholders; and shall cause proxies to be tabulated.<PAGE>
PAGE 3
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.

(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.

(f) Distributions. The Transfer Agent shall prepare and present the
necessary report to the Custodian and shall cause to be prepared
and transmitted the payment of income dividends and capital gains
distributions or cause to be recorded the investment of such
dividends and distributions in additional units of the Trust or as
directed by instructions or forms acceptable to the Transfer Agent.

(g) Confirmations and Statements. The Transfer Agent shall confirm
each transaction through periodic reports as may be legally
permitted.

(h) Reports to the Trust. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Trust may request to ascertain the quality and level of services
being provided or as required by law.

(i) Administrative Services. The Transfer Agent will provide all
administrative, accounting, clerical, statistical, correspondence,
corporate and all other services of whatever nature required in
connection with the administration of the Trust.

(j) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.

6. Ownership of Records. The Transfer Agent agrees that all records
prepared or maintained by it relating to the services to be
performed by it under the terms of this Agreement are the property
of the Trust and may be inspected by the Trust or any person
retained by the Trust at reasonable times.

7. Action by Board of Trustees (the "Board") and Opinion of the
Trust's Counsel. The Transfer Agent may rely on resolutions of the
Board or the Executive Committee of the Board and on opinion of
counsel for the Trust.

8. Duty of Care. It is understood and agreed that, in furnishing
the Trust with the services as herein provided, neither the
Transfer Agent, nor any officer, trustee or agent thereof shall be
held liable for any loss arising out of or in connection with
their actions under this Agreement so long as they act in good
faith and with due diligence, and are not negligent or guilty of
any willful misconduct. It is further understood and agreed that
the Transfer Agent may rely upon information furnished to it
reasonably believed to be accurate and reliable. In the event the
Transfer Agent is unable to perform its obligations under the terms
of this Agreement because of an act of God, strike or equipment or
transmission failure reasonably beyond its control, the Transfer
Agent shall not be liable for any damages resulting from such
failure.<PAGE>
PAGE 4
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Trust, it shall be accompanied by a vote of the
Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Trust, the
Transfer Agent will deliver to such successor a certified list of
unitholders of the Trust (with name, address and taxpayer
identification or Social Security number), a historical record of
the account of each unitholder and the status thereof, and all
other relevant books, records, correspondence, and other data
established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Trust, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.

10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.

11. Subcontracting. The Trust agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.

12. Limitations of Liability of the Trustees and Unitholders of
Trust

A copy of the Declaration of Trust, dated October 2, 1995, together
with all amendments, is on file in the office of the Secretary of
State of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement have been authorized by the Trustees and
the Agreement has been signed by an authorized officer of the
Trust. It is expressly agreed that the obligations of the Trust
under this Agreement shall not be binding upon any of the
Trustees, unitholders, nominees, officers, agents or employees of
the Trust, personally, but bind only the assets and property of the
Trust, as provided in the Declaration of Trust.

13. Miscellaneous.

(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.

<PAGE>
PAGE 5
(b) This Agreement shall be governed by the laws of the State of
Minnesota.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.

GROWTH AND INCOME TRUST
Balanced Portfolio
Equity Income Portfolio
Total Return Portfolio
Equity Portfolio

By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President

AMERICAN EXPRESS FINANCIAL CORPORATION

By: /s/ Richard W. Kling
Richard W. Kling
Senior Vice President

<PAGE>
PAGE 6

Schedule A

GROWTH AND INCOME TRUST

FEE

Effective the 13th day of May, 1996 the annual fee for services
under this agreement is $1 per year for each Portfolio.

<PAGE>
PAGE 7
Schedule B

OUT-OF-POCKET EXPENSES

The Trust shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:

o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs

o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
unitholders

o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
unitholders

o stop orders

o outgoing wire charges

o other expenses incurred at the request or with the consent of the
Trust.

<PAGE>
PAGE 1
PLACEMENT AGENT AGREEMENT

THIS AGREEMENT dated May 13, 1996 between Growth and Income Trust,
a Massachusetts business trust (the "Trust"), on behalf of its
underlying series portfolios and American Express Financial
Advisors Inc., a Delaware corporation, the placement agent (the
"Placement Agent") of units in the Trust ("Trust Units").

Part One: SERVICES AS PLACEMENT AGENT

(1) Placement Agent will act as placement agent of the Trust
Units covered by the Trust's registration statement then in effect
under the Investment Company Act of 1940 (the "1940 Act"). Under
this Agreement, neither the Placement Agent nor its employees or
any of its agents will make any offer or sale of Trust Units in a
manner which would require the Trust Units to be registered under
the Securities Act of 1933, as amended (the "1933 Act").

(2) The Placement Agent will act as placement agent for each
class of units issued and to be issued by the Trust during the
period of this agreement and agrees to offer for sale those units
as long as those units remain available for sale, unless the
Placement Agent is unable or unwilling to make such offer for sale
or sales or solicitations therefor legally because of any federal,
state, provincial or governmental law, rule or agency or for any
financial reason.

(3) Nothing in this Agreement requires the Trust to accept any
offer to purchase any Trust units; all offers are subject to
approval by the Board of Trustees (the "Board").

(4) The Trust represents to the Placement Agent that all
registration statements filed by the Trust with the Commission
under the Investment Company Act of 1940 with respect to Trust
units have been and will be prepared in conformity with the
requirements of the Investment Company Act of 1940 and the rules
and regulations of the Commission.

(5) The Trust agrees to make prompt and reasonable effort to do
any and all things necessary, in the opinion of the Placement
Agent, to have and to keep the Trust and the units properly
registered or qualified in all appropriate jurisdictions.

(6) The Trust agrees that it will furnish the Placement Agent
with information with respect to the affairs and accounts of the
Trust, and in such form, as the Placement Agent may from time to
time reasonably require and further agrees that the Placement
Agent, at all reasonable times, shall be permitted to inspect the
books and records of the Trust.

(7) The Placement Agent and the Trust agree to use their best
efforts to conform with all applicable state and federal laws and
regulations relating to any rights or obligations under the terms
of this agreement.
<PAGE>
PAGE 2

Part Two: ALLOCATION OF EXPENSES

Except as provided by any other agreements between the parties, the
Placement Agent covenants and agrees that during the period of this
agreement it will pay or cause or be paid all expenses incurred by
the Placement Agent or any of its affiliates, in the offering for
sale or sale of each class of the Trust's units.

Part Three: MISCELLANEOUS

(1) The Placement Agent shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this
agreement, shall have no authority to act for or represent the
Trust.

(2) The Placement Agent shall be free to render to others
services similar to those rendered under this agreement.

(3) Neither this agreement nor any transaction pursuant hereto
shall be invalidated or in any way affected by the fact that
trustees, officers, agents and/or unitholders of the Trust are or
may be interested in the Placement Agent as trustees, officers,
unitholders or otherwise; that directors, officers, shareholders or
agents of the Placement Agent are or may be interested in the Trust
as trustees, officers, or otherwise; or that the Placement Agent is
or may be interested in the Trust as unitholder or otherwise;
provided, however, that neither the Placement Agent nor any officer
or director of the Placement Agent or any officers or trustees of
the Trust shall sell to or buy from the Trust any property or
security other than a security issued by the Trust, except in
accordance with a rule, regulation or order of the Securities and
Exchange Commission.

(4) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.

(5) The Placement Agent agrees that no officer, director or
employee of the Placement Agent will deal for or on behalf of the
Trust with himself or herself as principal or agent, or with any
corporation or partnership in which he or she may have a financial
interest, except that this shall not prohibit:

(a) Officers, directors and employees of the Placement Agent
from having a financial interest in the Trust or in the Placement
Agent.

(b) The purchase of securities for the Trust, or the sale of
securities owned by the Trust, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of the Placement Agent provided
such transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
<PAGE>
PAGE 3
(c) Transactions with the Trust by a broker-dealer affiliate of
the Placement Agent if allowed by rule or order of the Securities
and Exchange Commission and if made pursuant to procedures adopted
by the Trust's Board of Trustees (the "Board").

(7) The Placement Agent agrees that, except as otherwise
provided in this agreement, or as may be permitted consistent with
the use of a broker-dealer affiliate of the Placement Agent under
applicable provisions of the federal securities laws, neither it
nor any of its officers, directors or employees shall at any time
during the period of this agreement make, accept or receive,
directly or indirectly, any fees, profits or emoluments of any
character in connection with the purchase or sale of securities
(except securities issued by the Trust) or other assets by or for
the Trust.

(8) A copy of the Declaration of Trust, dated October 2, 1995,
together with all amendments, is on file in the office of the
Secretary of State of the Commonwealth of Massachusetts. The
execution and delivery of this Agreement have been authorized by
the Trustees and the Agreement has been signed by an authorized
officer of the Trust. It is expressly agreed that the obligations
of the Trust under this Agreement shall not be binding upon any of
the Trustees, unitholders, nominees, officers, agents or employees
of the Trust, personally, but bind only the assets and property of
the Trust, as provided in the Declaration of Trust.

Part Five: TERMINATION

(1) This agreement shall continue from year to year unless and
until terminated by the Placement Agent or the Trust, except that
such continuance shall be specifically approved at least annually
by a vote of a majority of the Board of Trustees who are not
parties to this agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on
such approval, and by a majority of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the
Trust. As used in this paragraph, the terms "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meaning as set forth in the Investment Company Act of
1940, as amended.

(2) This agreement may be terminated by either party at any time
by giving the other party sixty (60) days written notice of such
intention to terminate.

(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.

<PAGE>
PAGE 4
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.

GROWTH AND INCOME TRUST
Balanced Portfolio
Equity Income Portfolio
Total Return Portfolio
Equity Portfolio

By /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President

AMERICAN EXPRESS FINANCIAL ADVISORS INC.

By /s/ Richard W. Kling
Richard W. Kling
Senior Vice President

<PAGE>
PAGE 1
SUBSCRIPTION AGREEMENT

April 16, 1996

Growth and Income Trust
IDS Tower 10
Minneapolis, Minnesota 55440

Dear Trustees:

The Growth and Income Trust (the "Trust") proposes to issue and
sell in private placements, units of beneficial interest (the
"Units") in certain series of Units (each a "Portfolio" and
together, the "Portfolios") pursuant to a registration statement on
Form N-1A filed with the Securities and Exchange Commission (the
"SEC"). The Trust currently consists of four Portfolios as
follows:
Equity Income Portfolio
Total Return Portfolio
Balanced Portfolio
Equity Portfolio

In order to provide the Trust with a net worth of at least
$100,000, we hereby offer to purchase $100,000 worth of Units,
divided between the Portfolios.

We represent and warrant to the Trust that the Units are being
acquired by us for investment and not with a view to the resale or
further distribution thereof and that we have no present intention
to redeem the Units.

Please confirm that the foregoing correctly sets forth our
agreement with the Trust.

Sincerely,

STRATEGIST GROWTH AND INCOME FUND, INC.

By /s/ William H. Dudley
William H. Dudley
President

Confirmed, as of the date first above mentioned.

GROWTH AND INCOME TRUST

By /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President and General Counsel
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>
<ARTICLE> 6
<NAME> BALANCED PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3700449612
<INVESTMENTS-AT-VALUE> 4063475830
<RECEIVABLES> 29367074
<ASSETS-OTHER> 155892116
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4248735030
<PAYABLE-FOR-SECURITIES> 45820736
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184821522
<TOTAL-LIABILITIES> 230642258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4018092772
<DIVIDEND-INCOME> 36661206
<INTEREST-INCOME> 40340578
<OTHER-INCOME> 0
<EXPENSES-NET> 7750583
<NET-INVESTMENT-INCOME> 69251201
<REALIZED-GAINS-CURRENT> 58304995
<APPREC-INCREASE-CURRENT> 26384443
<NET-CHANGE-FROM-OPS> 153940639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4018067772
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7488292
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7750583
<AVERAGE-NET-ASSETS> 3848662941
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<PAGE>
<ARTICLE> 6
<NAME> EQUITY PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 2689414898
[INVESTMENTS-AT-VALUE] 3336846402
[RECEIVABLES] 18242796
[ASSETS-OTHER] 60475431
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3415564629
[PAYABLE-FOR-SECURITIES] 51858331
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 78658203
[TOTAL-LIABILITIES] 130516534
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3285048095
[DIVIDEND-INCOME] 37820029
[INTEREST-INCOME] 626784
[OTHER-INCOME] 0
[EXPENSES-NET] 5837164
[NET-INVESTMENT-INCOME] 38250649
[REALIZED-GAINS-CURRENT] (4205188)
[APPREC-INCREASE-CURRENT] 140669806
[NET-CHANGE-FROM-OPS] 174715267
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3285023095
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5772345
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5842452
[AVERAGE-NET-ASSETS] 3021206280
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> EQUITY INCOME PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 1288544391
[INVESTMENTS-AT-VALUE] 1447675951
[RECEIVABLES] 14145979
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1461821930
[PAYABLE-FOR-SECURITIES] 4967278
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 700280
[TOTAL-LIABILITIES] 5667558
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1456154372
[DIVIDEND-INCOME] 20331540
[INTEREST-INCOME] 4643319
[OTHER-INCOME] 0
[EXPENSES-NET] 2792039
[NET-INVESTMENT-INCOME] 22182820
[REALIZED-GAINS-CURRENT] 16088401
[APPREC-INCREASE-CURRENT] 40690701
[NET-CHANGE-FROM-OPS] 78961922
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1456129372
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2737194
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2797265
[AVERAGE-NET-ASSETS] 1295122732
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> TOTAL RETURN PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 2616865050
[INVESTMENTS-AT-VALUE] 2838262532
[RECEIVABLES] 12121713
[ASSETS-OTHER] 31338366
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2881722611
[PAYABLE-FOR-SECURITIES] 27715903
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 54816843
[TOTAL-LIABILITIES] 82532746
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 2799189865
[DIVIDEND-INCOME] 16652461
[INTEREST-INCOME] 19235249
[OTHER-INCOME] 0
[EXPENSES-NET] 4712433
[NET-INVESTMENT-INCOME] 31175277
[REALIZED-GAINS-CURRENT] 26015535
[APPREC-INCREASE-CURRENT] 75342945
[NET-CHANGE-FROM-OPS] 132533757
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2799164865
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4327857
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4716546
[AVERAGE-NET-ASSETS] 2787207211
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

</TABLE>