Innovations
1998 annual report


From the chairman

If you're an experienced investor, you know that the past 12 months was a highly
volatile period in many financial markets. But history tells us that substantial
market moves are nothing new. Though they're often unpredictable, declines -
whether they're brief or long-lasting, moderate or substantial - are always a
possibility.

That potential for such volatility reinforces the need for investors to review
periodically their long-term goals and examine whether their investment program
remains on track to achieving them. Your quarterly investment statements are one
part of that monitoring process. The other is a meeting with your American
Express financial advisor. That becomes even more important if there's a major
change in your financial situation or in the financial markets.

From the portfolio manager

A major, late-period downturn in the U.S. stock market, especially for
technology-related stocks, eroded much of IDS Innovation Fund's gain for the
past fiscal year. Still, the Fund did produce a gain of 2.7% for the period,
which ran from November 1997 through October 1998.

The stock market was on shaky ground when the period began last fall, as
investors worried that a financial meltdown in many Asian markets would hurt the
earnings potential of American companies. Of particular concern was the
technology sector, for which Asia is a major market. As a result, the Fund could
manage only a slight advance through January.

The situation changed dramatically at that point. Buoyed by ongoing reports of
low inflation and still-strong corporate earnings, the stock market mounted a
two-month surge that was led largely by technology stocks. Naturally, the Fund
greatly benefited from the trend, which pushed the Fund's return well into
double digits by spring.

"Asian flu" spreads

The rally slowed down, then petered out in mid-summer, by which time the worries
about Asia's future had spread to Russia and Latin America. Again, the stock
market reacted with characteristic volatility, falling nearly 20% by the end of
August. To the Fund's detriment, technology stocks were especially hard hit. The
fiscal year did end on a positive note, however, as the market and the Fund
rebounded strongly during October.

I made only minor changes to the portfolio during the period - essentially
trimming some stocks that had experienced substantial run-ups in price and
replacing them with stocks that appeared to have greater potential for gain.
Among the biggest winners for the 12 months were Internet-related issues, some
of which made spectacular advances during the fall. Overall, I took an
aggressive investment approach by keeping cash reserves quite low. While this
makes the Fund's performance more volatile, I believe it allows for greater
long-term appreciation potential.

I expect the volatility to continue during the current fiscal year, but I think
the ups should ultimately outweigh the downs. Therefore, I continue to keep the
Fund fully invested in what I believe are the most promising stocks in the
technology sector.

Louis Giglio




The Fund's Long-term Performance

How $10,000 has grown in IDS Innovations Fund


$20,000

                               Standard & Poor's
                               500 Stock Index

                                            Lipper Science &
                                       Technology Fund Index



                                                                         $10,279
$10,000                                                              Innovations
                                                                    Fund Class A
$9,500

12/1/96    1/97    4/97     7/97     10/97      1/98     4/98     7/98     10/98

Average annual total return (as of Oct. 31, 1998)

                             1 year           Since inception*

Class A                      -2.52%           +1.44%
Class B                      -2.09%           +1.33%
Class Y                      +2.68%           +4.09%

*Inception date was Nov. 13, 1996.

Assumes:  Holding period from 12/1/96 to 10/31/98.  Returns do not reflect taxes
payable  on   distributions.   Reinvestment  of  all  income  and  capital  gain
distributions  for the Fund, with a value of $0. Also see "Past  Performance" in
the Fund's current prospectus.

On the graph  above you can see how the  Fund's  total  return  compared  to two
widely  cited  unmanaged  performance  indexes,  the Standard & Poor's 500 Stock
Index (S&P 500) Index and the Lipper Science & Technology Funds Index.  This was
a period of widely fluctuating security prices. Past performance is no guarantee
of future results.

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

Lipper  Science  &  Technology  Funds  Index,  published  by  Lipper  Analytical
Services,  Inc.,  includes  10 funds  that are  generally  similar  to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.  The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.



The financial statements contained in Post-Effective Amendment #31 to 
Registration Statement No. 33-25824 filed on or about December 24, 1998, are
incorporated herein by reference.