Independent Auditors' Report


To the Board of Directors of
AXP Variable Portfolio - Investment Series, Inc.:

We have examined management's assertion, included in the accompanying Management
Statement Regarding Compliance with Certain Provisions of the Investment Company
Act of 1940, that AXP Variable Portfolio - Blue Chip Advantage Fund, AXP
Variable Portfolio - Capital Resource Fund, AXP Variable Portfolio - Growth
Fund, AXP Variable Portfolio - International Fund, AXP Variable Portfolio - New
Dimensions Fund, Variable Portfolio - Small Cap Advantage Fund, AXP Variable
Portfolio - Strategy Aggressive Fund, AXP Variable Portfolio - Emerging Markets
Fund, and AXP Variable Portfolio - S&P 500 Index Fund of AXP Variable Portfolio
- Investment Series, Inc. (the Funds) complied with the provisions of subsection
(b) and (c) of Rule 17f-2 under the Investment Company Act of 1940 as of May 31,
2001 and during the period from January 31, 2001 (the date of our last
examination) through May 31, 2001. Management is responsible for the Funds'
compliance with those provisions. Our responsibility is to express an opinion on
management's assertion about the Funds' compliance based on our examination.

Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Funds' compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of May 31, 2001 and the period from January 31, 2001 through May
31, 2001, with respect to securities transactions:

o    Count and inspection of all securities located in the vault, if any, of
     American Express Trust Company, the Custodian, without prior notice to
     management;

o    Confirmation of all securities,  if any, held by institutions in book entry
     form  (Wells  Fargo Bank  Minnesota,  N.A.,  The Bank of New York,  and The
     Depository Trust Company);

o    Confirmation or examination of underlying documentation of all securities
     purchased but not received, hypothecated, pledged, placed in escrow, or out
     for transfer with brokers, pledges and/or transfer agents;

o    Reconciliation of all such securities to the books and records of the Funds
     and the Custodian; and

o    Test of selected security transactions since the date of our last report.



We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on the Funds' compliance with
the specified requirements.

In our opinion, management's assertion that AXP Variable Portfolio - Blue Chip
Advantage Fund, AXP Variable Portfolio - Capital Resource Fund, AXP Variable
Portfolio - Growth Fund, AXP Variable Portfolio - International Fund, AXP
Variable Portfolio - New Dimensions Fund, Variable Portfolio - Small Cap
Advantage Fund, AXP Variable Portfolio - Strategy Aggressive Fund, AXP Variable
Portfolio - Emerging Markets Fund, and AXP Variable Portfolio - S&P 500 Index
Fund of AXP Variable Portfolio - Investment Series, Inc. was in compliance with
the above mentioned provisions of Rule 17f-2 of the Investment Company Act of
1940 as of May 31, 2001 and for the period from January 31, 2001 through May 31,
2001 is fairly stated in all material respects.

This report is intended solely for the information and use of management of AXP
Variable Portfolio - Blue Chip Advantage Fund, AXP Variable Portfolio - Capital
Resource Fund, AXP Variable Portfolio - Growth Fund, AXP Variable Portfolio -
International Fund, AXP Variable Portfolio - New Dimensions Fund, Variable
Portfolio - Small Cap Advantage Fund, AXP Variable Portfolio - Strategy
Aggressive Fund, AXP Variable Portfolio - Emerging Markets Fund, and AXP
Variable Portfolio - S&P 500 Index Fund of AXP Variable Portfolio - Investment
Series, Inc. and the Securities and Exchange Commission and should not be used
for any other purpose and is not intended to be and should not be used by anyone
other than these specified parties.




/s/ KPMG LLP
------------
    KPMG LLP
    Minneapolis, MN
    August 24, 2001



             Management Statement Regarding Compliance With Certain
                Provisions of the Investment Company Act of 1940

     We, as members of management of AXP Variable Portfolio - Blue Chip
     Advantage Fund, AXP Variable Portfolio - Capital Resource Fund, AXP
     Variable Portfolio - Growth Fund, AXP Variable Portfolio - International
     Fund, AXP Variable Portfolio - New Dimensions Fund, Variable Portfolio -
     Small Cap Advantage Fund, AXP Variable Portfolio - Strategy Aggressive
     Fund, AXP Variable Portfolio - Emerging Markets Fund, and AXP Variable
     Portfolio - S&P 500 Index Fund of AXP Variable Portfolio - Investment
     Series, Inc. (the Funds) are responsible for complying with the
     requirements of subsections (b) and (c) of Rule 17f-2, Custody of
     Investments by Registered Management Investment Companies, of the
     Investment Company Act of 1940. We are also responsible for establishing
     and maintaining effective internal controls over compliance with those
     requirements. We have performed an evaluation of the Funds' compliance with
     the requirements of subsections (b) and (c) of Rule 17f-2 as of May 31,
     2001 and from January 31, 2001 through May 31, 2001.

     Based on this evaluation, we assert that the Funds were in compliance with
     the requirements of subsections (b) and (c) of Rule 17f-2 of the Investment
     Company Act of 1940 as of May 31, 2001 and from January 31, 2001 through
     May 31, 2001, with respect to securities reflected in the investment
     account of the Funds.



     AMERICAN EXPRESS FINANCIAL CORPORATION

By: /s/John M. Knight
    -----------------
       John M. Knight, Vice President-Investment Accounting