[IDEX LOGO]
[GRAPHICS OMITTED]
Prospectus cover dated June 15, 2000 as revised August 10, 2000
This Prospectus is only for use in Germany.
<PAGE>
IDEX MUTUAL FUNDS
<TABLE>
<S> <C>
TABLE OF CONTENTS
ALL ABOUT THE IDEX FUNDS
o JANUS CAPITAL CORPORATION
(Sub-Adviser)
IDEX JCC Growth ....................... 2
IDEX JCC Global ....................... 4
IDEX JCC Capital Appreciation ......... 6
o FRED ALGER MANAGEMENT, INC.
(Sub-Adviser)
IDEX Alger Aggressive Growth .......... 8
EXPLANATION OF STRATEGIES
AND RISKS ................................ 10
HOW THE IDEX FUNDS ARE
MANAGED AND ORGANIZED .................... 14
SHAREHOLDER INFORMATION .................. 17
o Opening an Account ..................... 17
o How to Sell Shares ..................... 17
o How to Exchange Shares ................. 17
o Other Account Information .............. 18
PERFORMANCE INFORMATION .................. 26
o Yield .................................. 26
o Total Return ........................... 26
DISTRIBUTION ARRANGEMENTS ................ 27
FINANCIAL HIGHLIGHTS ..................... 28
APPENDIX A ............................... A-1
</TABLE>
IDEX Mutual Funds (Fund) consists of 26 individual funds. This prospectus
includes 4 of those funds. Each fund invests in a range of securities, such as
stocks and/or bonds. Please read this prospectus carefully before you invest or
send money. It has been written to provide information and assist you in making
an informed decision. If you would like additional information, please request a
copy of the Statement of Additional Information (SAI) (see back cover).
In addition, we suggest you contact your financial professional or an IDEX
customer service representative, who will assist you.
ATTENTION: Non-U.S. Investors
Non-Resident Alien Withholding
If you are a non-U.S. investor, your financial professional should determine
whether Fund shares may be sold in your jurisdiction. Shareholders that are
not U.S. persons under the Internal Revenue Code are subject to different
tax rules. Dividends and capital gains distributions may be subject to
non-resident alien withholding.
TO HELP YOU UNDERSTAND...
In this prospectus, you'll see symbols like the ones below. These are "icons,"
graphic road signs that let you know at a glance the subject of the nearby
paragraphs. The icons serve as tools for your convenience as you read this
prospectus.
/target/ The target directs you to a fund's goal or objective.
/chess piece/ The chess piece indicates discussion about a fund's
strategies.
/warning sign/ The warning sign indicates the risks of investing in a
fund.
/graph/ The graph indicates investment performance.
/question mark/ The question mark provides additional information about the Fund
or may direct you on how to obtain further information.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
<PAGE>
IDEX JCC GROWTH
SUMMARY OF RISKS AND RETURNS
/target/ OBJECTIVE
THE OBJECTIVE OF IDEX JCC GROWTH IS GROWTH OF CAPITAL.
This fund may be appropriate for investors who want capital growth in a broadly
diversified stock portfolio, and who can tolerate significant fluctuations in
the value of their investment.
[GRAPHIC OMITTED]
/chess piece/ PRINCIPAL STRATEGIES
AND POLICIES
The fund's sub-adviser, Janus Capital Corporation (JCC), seeks to achieve this
objective by investing principally in:
o common stocks listed on national exchanges or on NASDAQ which JCC believes
have a good potential for capital growth, some of which may be of foreign
issuers
The fund's main strategy is to invest almost all of its assets in common stocks
at times when JCC believes the market environment favors such investing.
JCC builds the fund one company at a time, emphasizing growth of capital by
investing in companies JCC believes to have the greatest earnings growth
potential.
While investments are focused on earnings growth, JCC also searches for
companies that it believes are trading at reasonable prices relative to their
future earnings growth. To locate these opportunities, JCC subjects each
company to a rigorous "bottom up" fundamental analysis, carefully researching
each potential investment before and after it is incorporated into the fund.
Although themes may emerge in the fund, securities are generally selected
without regard to any defined industry sector or other similarly defined
selection procedure. Realization of income is not a significant investment
consideration for the fund, and any income realized on the fund's investments
is incidental to its objective.
JCC may sell stocks when its expectations regarding earnings growth change,
there is an earnings surprise, or the earnings change.
While the fund invests principally in common stocks, JCC may, to a lesser
extent, invest in futures and foreign securities, or other securities and
investment strategies in pursuit of its investment objective, which are
explained beginning on page 10 and in the SAI.
WHAT IS A "BOTTOM UP" ANALYSIS?
When a sub-adviser uses a "bottom up" approach, it looks primarily at
individual companies against the context of broad market factors. It seeks
to identify individual companies with earnings growth potential that may
not be recognized by the market at large.
/warning sign/ PRINCIPAL RISKS
The fund is subject to the following principal investment risks:
o STOCKS
While stocks have historically outperformed other investments over the long
term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities markets as a whole.
Because the stocks the fund holds fluctuate in price, the value of your
investment in the fund will go up and down.
o FOREIGN STOCKS
Investments in foreign securities (including American Depositary Receipts
(ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts
(EDRs)) involve risks relating to political, social and economic developments
abroad, as well as risks resulting from the differences between the regulations
to which U.S. and foreign issuer markets are subject. These risks include:
o changes in currency values
o currency speculation
o currency trading costs
o different accounting and reporting practices
o less information available to the public
o less (or different) regulation of securities markets
o more complex business negotiations
o less liquidity
o more fluctuations in prices
o delays in settling foreign securities transactions
o higher costs for holding shares (custodial fees)
o higher transaction costs
o vulnerability to seizure and taxes
o political instability and small markets
o different market trading days
o forward foreign currency contracts for hedging
YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND.
These and other risks are fully described in the section entitled "Explanation
of Strategies and Risks," beginning on page 10.
2
<PAGE>
/graph/ PAST PERFORMANCE
The bar chart and the table below show the fund's annual returns and its
long-term performance. The bar chart and table indicate the risks of investing
in the fund by showing you how the fund's performance has varied from year to
year. The bar chart does not reflect the impact of sales charges, which lower
the fund's return. The table, which includes applicable sales charges, compares
how the fund's average annual returns for different calendar periods compare to
the returns of the S&P 500 Composite Stock Price Index (S&P 500), a widely
recognized unmanaged index of stock performance. The bar chart and table assume
reinvestment of dividends and capital gains distributions. As with all mutual
funds, past performance is not a prediction of future results.
--------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN as of 12/31 each year (%) (1)
CLASS A SHARES
[GRAPH OMITTED]
(0.49) 58.62 1.17 3.81 (8.47) 47.12 17.06 16.82 63.98 58.46
--------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
(1) AS OF MARCH 31, 2000, THE END OF THE MOST RECENT CALENDAR QUARTER, THE
FUND'S YEAR-TO-DATE RETURN FOR CLASS A WAS 10.16%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED RETURN
CLASS A SHARES: --------------- ---------
<S> <C> <C>
Best Quarter: 12/31/99 31.77%
Worst Quarter: 9/30/99 (17.64)%
</TABLE>
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE
ONE YEAR 5 YEARS 10 YEARS INCEPTION
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
A Shares 49.75% 37.64% 22.32% 21.60%
------------ ----- ----- ----- -----
B Shares 53.43% N/A N/A 35.90%
------------ ----- ----- ----- -----
M Shares* 55.85% 38.72% N/A 27.83%
------------ ----- ----- ----- -----
T Shares 58.49% 39.46% 23.44% 22.35%
------------ ----- ----- ----- -----
S&P 500** 21.04% 28.51% 18.17% 14.33%
------------ ----- ----- ----- -----
</TABLE>
*ALL SHARES DESIGNATED AS CLASS C SHARES PRIOR TO MARCH 1, 1999 WERE RENAMED AS
CLASS M SHARES ON THAT DATE. EFFECTIVE NOVEMBER 1, 1999 THE FUND BEGAN OFFERING
A NEW CLASS C SHARE THAT HAS DIFFERENT FEES AND EXPENSES THAN THE PREVIOUS
CLASS C SHARE.
**SINCE INCEPTION OF CLASS A SHARES (5/08/86). SINCE INCEPTION OF CLASS B
SHARES
(10/01/95) IS 24.22%; CLASS M SHARES (10/01/93) IS 20.46%; AND CLASS T SHARES
(6/04/85) IS 15.08%.
/dollar sign/ FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the fund.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M T*
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases
(AS A % OF OFFERING
PRICE) 5.50% None None 1.00% 8.50%
Maximum deferred
sales charge (load) None(a) 5.00% None 1.00%(b) None(a)
</TABLE>
(AS A PERCENTAGE OF PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LOWER)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
(d)
<TABLE>
<CAPTION>
% OF AVERAGE DAILY NET ASSETS
CLASS OF SHARES
A B C M T*
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Management fees 0.90% 0.90% 0.90% 0.90% 0.90%
Distribution and service
(12b-1) fees 0.35% 1.00% 1.00% 0.90% 0.00%
Other expenses 0.18% 0.18% 0.18% 0.18% 0.18%
---- ---- ---- ---- ----
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.43% 2.08% 2.08% 1.98% 1.08%
EXPENSE REDUCTION (C) 0.03% 0.03% 0.03% 0.03% 0.03%
---- ---- ---- ---- ----
NET OPERATING EXPENSES 1.40% 2.05% 2.05% 1.95% 1.05%
-------------------------- ---- ---- ---- ---- ----
</TABLE>
(a) Certain purchases of Class A or Class T shares in amounts greater than $1
million are subject to a 1% contingent deferred sales charge for 24 months
after purchase.
(b) Purchases of Class M shares are subject to a 1% contingent deferred sales
charge if redeemed within 18 months of purchase.
(c) Contractual arrangement with Idex Management, Inc. through 4/30/2001.
(d) Annual fund operating expenses are estimated based on the fund's expenses
for the fiscal year ended 10/31/99.
A $10 semi-annual fee is imposed on accounts open for over 2 years that are
below a minimum balance due to redemptions. See page 18.
*Not available to new investors.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLE
This example is here to help you compare the cost of investing in this fund
with that of other mutual funds. It shows the cumulative expenses you would pay
if you invested $10,000 and held your shares for various time periods, with a
5% annual return and fund operating expenses remaining the same. This return is
for illustration purposes and is not guaranteed. Actual costs may be higher or
lower.
If the shares are redeemed at the end of each period:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $685 $ 975 $1,286 $2,166
B* $708 $ 949 $1,216 $2,242
C $208 $ 649 $1,116 $2,408
M $395 $ 712 $1,154 $2,381
T $948 $1,162 $1,392 $2,053
------------- ---- ------ ------ ------
</TABLE>
If the shares are not redeemed:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $685 $ 975 $1,286 $2,166
B* $208 $ 649 $1,116 $2,242
C $208 $ 649 $1,116 $2,408
M $296 $ 712 $1,154 $2,381
T $948 $1,162 $1,392 $2,053
------------- ---- ------ ------ ------
</TABLE>
* EXAMPLES FOR CLASS B SHARES ASSUME THEY WILL CONVERT TO CLASS A SHARES EIGHT
YEARS AFTER YOU PURCHASE THEM.
3
<PAGE>
IDEX JCC GLOBAL
SUMMARY OF RISKS AND RETURNS
/target/ OBJECTIVE
THE OBJECTIVE OF IDEX JCC GLOBAL IS LONG-TERM GROWTH OF CAPITAL IN A MANNER
CONSISTENT WITH PRESERVATION OF CAPITAL.
The fund may be appropriate for investors who want capital growth without being
limited to investments in U.S. securities, and who can stand the risks
associated with foreign investing.
/chess piece/ PRINCIPAL STRATEGIES AND
POLICIES
The sub-adviser, Janus Capital Corporation (JCC), seeks to achieve this
objective by investing principally in:
o common stocks of foreign and domestic issuers
o depositary receipts including ADRs, GDRs and EDRs
The fund may invest on a worldwide basis in companies and securities issued by
foreign or domestic governments, government agencies or other government
entities of any size, regardless of country of organization or place of
principal business activity.
JCC's main strategy is to use a "bottom up" approach to build the fund's
portfolio. Foreign stocks are generally selected on a stock-by-stock basis
without regard to defined allocation among countries or geographic regions.
When evaluating foreign investments, JCC (in addition to looking at individual
companies) considers such factors as:
o expected levels of inflation in various countries
o government policies that might affect business conditions
o the outlook for currency relationships
o prospects for economic growth among countries, regions or geographic areas
JCC sells the fund's securities when its expectations regarding growth
potential change.
While the fund invests principally in common stocks of foreign and domestic
issuers and depositary receipts, JCC may, to a lesser extent, invest in forward
foreign currency contracts and futures for hedging, or other securities and
investment strategies in pursuit of the fund's investment objective, which are
explained beginning on page 10 and in the SAI.
WHAT IS A "BOTTOM UP" ANALYSIS?
When a sub-adviser uses a "bottom up" approach, it looks primarily at
individual companies against the context of broad market factors. It seeks
to identify individual companies with earnings growth potential that may
not be recognized by the market at large.
/warning sign/ PRINCIPAL RISKS
The fund is subject to the following principal investment risks:
o STOCKS
While stocks have historically outperformed other investments over the long
term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
Because the stocks the fund holds fluctuate in price, the value of your
investment in the fund will go up and down.
o FOREIGN STOCKS
Investments in foreign securities (including ADRs, GDRs and EDRs) involve risks
relating to political, social and economic developments abroad, as well as
risks resulting from the differences between the regulations to which U.S. and
foreign issuer markets are subject. These risks include:
o changes in currency values
o currency speculation
o currency trading costs
o different accounting and reporting practices
o less information available to the public
o less (or different) regulation of securities markets
o more complex business negotiations
o less liquidity
o more fluctuations in prices
o delays in settling foreign securities transactions
o higher costs for holding shares (custodial fees)
o higher transaction costs
o vulnerability to seizure and taxes
o political instability and small markets
o different market trading days
o forward foreign currency contracts for hedging
YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND.
These and other risks are fully described in the section entitled "Explanation
of Strategies and Risks," beginning on page 10.
4
<PAGE>
/graph/ PAST PERFORMANCE
The bar chart and the table below show the fund's annual returns and its
long-term performance. The bar chart and table indicate the risks of investing
in the fund by showing you how the fund's performance has varied from year to
year. The bar chart does not reflect the impact of sales charges, which lower
the fund's return. The table, which includes applicable sales charges, compares
how the fund's average annual returns for different calendar periods compare to
the returns of the Morgan Stanley Capital International World Index (MSCIW), a
widely recognized unmanaged index of market performance. The bar chart and
table assume reinvestment of dividends and capital gains distributions. As with
all mutual funds, past performance is not a prediction of future results.
--------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN as of 12/31 each year (%) (1)
CLASS A SHARES
[GRAPHIC OMITTED]
31.28 0.62 20.03 26.76 20.44 24.86 63.31
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
(1) AS OF MARCH 31, 2000, THE END OF THE MOST RECENT CALENDAR QUARTER, THE
FUND'S YEAR-TO-DATE RETURN FOR CLASS A WAS 11.84%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED RETURN
CLASS A SHARES: --------------- ---------
<S> <C> <C>
Best Quarter: 12/31/99 43.29%
Worst Quarter: 9/30/98 (16.02)%
</TABLE>
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE
ONE YEAR 5 YEARS INCEPTION
---------- --------- ----------
<S> <C> <C> <C>
A Shares 54.33% 28.70% 26.64%
------------ ----- ----- -----
B Shares 57.75% N/A 30.86%
------------ ----- ----- -----
M Shares* 60.23% 29.68% 26.08%
------------ ----- ----- -----
MSCIW** 25.06% 20.19% 17.73%
------------ ----- ----- -----
</TABLE>
*ALL SHARES DESIGNATED AS CLASS C SHARES PRIOR TO MARCH 1, 1999 WERE RENAMED AS
CLASS M SHARES ON THAT DATE. EFFECTIVE NOVEMBER 1, 1999 THE FUND BEGAN OFFERING
A NEW CLASS C SHARE THAT HAS DIFFERENT FEES AND EXPENSES THAN THE PREVIOUS
CLASS C SHARE.
**SINCE INCEPTION OF CLASS A SHARES (10/01/92). SINCE INCEPTION OF CLASS B
SHARES
(10/01/95) IS 20.04% AND CLASS M SHARES (10/01/93) IS 17.23%.
[dollar sign/ FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the fund.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M
------- ----- ---- --------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases
(AS A % OF OFFERING PRICE) 5.50% None None 1.00%
Maximum deferred sales
charge (load) None(a) 5.00% None 1.00%(b)
------- ----- ---- --------
</TABLE>
(AS A PERCENTAGE OF PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LOWER)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)(c)
% OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M
------- ------- ------- ------
<S> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% 1.00%
Distribution and service
(12b-1) fees 0.35% 1.00% 1.00% 0.90%
Other expenses 0.38% 0.38% 0.38% 0.38%
---- ---- ---- ----
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.73% 2.38% 2.38% 2.28%
--------------------------
</TABLE>
(a) Certain purchases of Class A shares in amounts greater than $1 million are
subject to a 1% contingent deferred sales charge for 24 months after
purchase.
(b) Purchases of Class M shares are subject to a 1% contingent deferred sales
charge if redeemed within 18 months of purchase.
(c) Annual fund operating expenses are estimated based on the fund's expenses
for the fiscal year ended 10/31/99.
A $10 semi-annual fee is imposed on accounts open for over 2 years that are
below a minimum balance due to redemptions. See page 18.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLE
This example is here to help you compare the cost of investing in this fund
with that of other mutual funds. It shows the cumulative expenses you would pay
if you invested $10,000 and held your shares for various time periods, with a
5% annual return and fund operating expenses remaining the same. This return is
for illustration purposes and is not guaranteed. Actual costs may be higher or
lower.
If the shares are redeemed at the end of each period:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $716 $1,065 $1,437 $2,479
B* $741 $1,042 $1,370 $2,555
C $241 $ 742 $1,270 $2,716
M $428 $ 805 $1,308 $2,689
------------- ---- ------ ------ ------
</TABLE>
If the shares are not redeemed:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $716 $1,065 $1,437 $2,479
B* $241 $ 742 $1,270 $2,555
C $241 $ 742 $1,270 $2,716
M $329 $ 805 $1,308 $2,689
------------- ---- ------ ------ ------
</TABLE>
* EXAMPLES FOR CLASS B SHARES ASSUME THEY WILL CONVERT TO CLASS A SHARES EIGHT
YEARS AFTER YOU PURCHASE THEM.
5
<PAGE>
IDEX JCC CAPITAL APPRECIATION
SUMMARY OF RISKS AND RETURNS
/target/ OBJECTIVE
THE OBJECTIVE OF IDEX JCC CAPITAL APPRECIATION IS LONG-TERM GROWTH OF CAPITAL.
This fund may be appropriate for investors who want capital growth and who can
stand the risks associated with common stock investments.
/chess piece/ PRINCIPAL STRATEGIES AND
POLICIES
The fund's sub-adviser, Janus Capital Corporation (JCC), seeks to achieve the
fund's objective by investing principally in:
o common stocks of medium-sized companies
Medium-sized companies are those whose market capitalizations, at the time of
purchase, fall within the range of the S&P Mid Cap 400 Index. As of February,
2000, this range was $170 million to $57 billion.
This fund invests in industries and stocks of companies that JCC believes are
experiencing favorable demand for their products and services, and are
operating in favorable competitive and regulatory environments.
JCC uses a "bottom up" approach when choosing securities for the fund's
portfolio. JCC makes this assessment by looking at companies one at a time,
regardless of size, country of organization, place of principal business
activity, or other similar selection criteria.
Although themes may emerge in the fund, stocks are usually selected without
regard to any defined industry sector or other similarly defined selection
procedure. Though income is not an objective of the fund, some holdings might
produce incidental income.
JCC may sell the fund's securities when its expectations regarding growth
potential change.
While the fund invests principally in common stocks of medium-sized companies,
JCC may, to a lesser extent, invest in stocks of smaller to larger companies,
including some foreign companies, or other securities and investment strategies
in pursuit of the fund's investment objective, which are explained beginning on
page 10 and in the SAI.
WHAT IS A "BOTTOM UP" ANALYSIS?
When a sub-adviser uses a "bottom up" approach, it looks primarily at
individual companies against the context of broad market factors. It seeks
to identify individual companies with earnings growth potential that may
not be recognized by the market at large.
/warning sign/ PRINCIPAL RISKS
The fund is subject to the following principal investment risks:
o STOCKS
While stocks have historically outperformed other investments over the long
term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
Because the stocks the fund holds fluctuate in price, the value of your
investment in the fund will go up and down.
o MEDUIUM-SIZED COMPANIES
These companies present additional risks because their earnings are less
predictable, their share prices more volatile, and their securities less liquid
than larger, more established companies.
THIS FUND IS NON-DIVERSIFIED.
YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND.
These and other risks are fully described in the section entitled "Explanation
of Strategies and Risks," beginning on page 10.
WHAT IS A NON-DIVERSIFIED FUND?
A "non-diversified" fund has the ability to take larger positions in a
smaller number of issuers. To the extent a fund invests a greater portion
of its assets in the securities of a smaller number of issuers, it may be
more susceptible to any single economic, political or regulatory
occurrence than a diversified fund and may be subject to greater loss with
respect to its portfolio securities. However, to meet federal tax
requirements, at the close of each quarter the fund may not have more than
25% of its total assets invested in any one issuer, and, with respect to
50% of its total assets, not more than 5% of its total assets invested in
any one issuer.
6
<PAGE>
/graph/ PAST PERFORMANCE
The bar chart and the table below show the fund's annual returns and its
long-term performance. The bar chart and table indicate the risks of investing
in the fund by showing you how the fund's performance has varied from year to
year. The bar chart does not reflect the impact of sales charges, which lower
the fund's return. The table, which includes applicable sales charges, compares
how the fund's average annual returns for different calendar periods compare to
the returns of the S&P MidCap 400 Index (S&P 400), a widely recognized
unmanaged index of stock performance. The bar chart and table assume
reinvestment of dividends and capital gains distributions. As with all mutual
funds, past performance is not a prediction of future results.
--------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN as of 12/31 each year (%) (1)
CLASS A SHARES
[GRAPHIC OMITTED]
36.62 13.00 12.18 31.32 119.22
---------------------------------------
1995 1996 1997 1998 1999
(1) AS OF MARCH 31, 2000, THE END OF THE MOST RECENT CALENDAR QUARTER, THE
FUND'S YEAR-TO-DATE RETURN FOR CLASS A WAS 2.89%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED RETURN
CLASS A SHARES: --------------- ---------
<S> <C> <C>
Best Quarter: 12/31/99 56.94%
Worst Quarter: 9/30/98 (15.64)%
----------------- -------- ------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE
ONE YEAR 5 YEARS INCEPTION
---------- --------- ----------
<S> <C> <C> <C>
A Shares 107.17% 36.34% 36.88%
------------------ ------ ----- -----
B Shares 113.76% N/A 36.73%
------------------ ------ ----- -----
M Shares* 115.65% 37.14% 37.66%
------------------ ------ ----- -----
S&P MidCap 400** 14.66% 22.97% 21.08%
------------------ ------ ----- -----
</TABLE>
*ALL SHARES DESIGNATED AS CLASS C SHARES PRIOR TO MARCH 1, 1999 WERE RENAMED AS
CLASS M SHARES ON THAT DATE. EFFECTIVE NOVEMBER 1, 1999 THE FUND BEGAN OFFERING
A NEW CLASS C SHARE THAT HAS DIFFERENT FEES AND EXPENSES THAN THE PREVIOUS
CLASS C SHARE.
**SINCE INCEPTION OF CLASS A SHARES AND CLASS M SHARES (12/02/94). SINCE
INCEPTION OF CLASS B SHARES (10/01/95) IS 18.56%.
/dollar sign/ FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the fund.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M
--------- ------- ------ ---------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases
(AS A % OF OFFERING
PRICE) 5.50% None None 1.00%
Maximum deferred
sales charge (load) None(a) 5.00% None 1.00%(b)
</TABLE>
(AS A PERCENTAGE OF PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LOWER)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)(d)
<TABLE>
<CAPTION>
% OF AVERAGE DAILY NET ASSETS
CLASS OF SHARES
A B C M
------- ------- ------- ------
<S> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% 1.00%
Distribution and service
(12b-1) fees 0.35% 1.00% 1.00% 0.90%
Other expenses 0.67% 0.67% 0.67% 0.67%
---- ---- ---- ----
TOTAL ANNUAL FUND
OPERATING EXPENSES 2.02% 2.67% 2.67% 2.57%
EXPENSE REDUCTION (C) 0.17% 0.17% 0.17% 0.17%
---- ---- ---- ----
NET OPERATING EXPENSES 1.85% 2.50% 2.50% 2.40%
------------------------- ---- ---- ---- ----
</TABLE>
(a) Certain purchases of Class A shares in amounts greater than $1 million are
subject to a 1% contingent deferred sales charge for 24 months after
purchase.
(b) Purchases of Class M shares are subject to a 1% contingent deferred sales
charge if redeemed within 18 months of purchase.
(c) Contractual arrangement with Idex Management, Inc. through 4/30/2001, for
expenses that exceed 1.50%, excluding 12b-1 fees.
(d) Annual fund operating expenses are estimated based on the fund's expenses
for the fiscal year ended 10/31/99.
A $10 semi-annual fee is imposed on accounts open for over 2 years that are
below a minimum balance due to redemptions. See page 18.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLE
This example is here to help you compare the cost of investing in this fund
with that of other mutual funds. It shows the cumulative expenses you would pay
if you invested $10,000 and held your shares for various time periods, with a
5% annual return and fund operating expenses remaining the same. This return is
for illustration purposes and is not guaranteed. Actual costs may be higher or
lower.
If shares are redeemed at the end of each period:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $728 $1,133 $1,563 $2,756
B* $753 $1,113 $1,500 $2,833
C $253 $ 813 $1,400 $2,990
M $440 $ 876 $1,437 $2,963
------------- ---- ------ ------ ------
</TABLE>
If the shares are not redeemed:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $728 $1,133 $1,563 $2,756
B* $253 $ 813 $1,400 $2,833
C $253 $ 813 $1,400 $2,990
M $341 $ 876 $1,437 $2,963
------------- ---- ------ ------ ------
</TABLE>
*EXAMPLES FOR CLASS B SHARES ASSUMES THEY WILL CONVERT TO CLASS A SHARES EIGHT
YEARS AFTER YOUR PURCHASE THEM.
7
<PAGE>
IDEX ALGER AGGRESSIVE GROWTH
SUMMARY OF RISKS AND RETURNS
/target/ OBJECTIVE
THE OBJECTIVE OF IDEX ALGER AGGRESSIVE GROWTH IS LONG-TERM CAPITAL
APPRECIATION.
This fund may be appropriate for investors who seek capital growth
aggressively, and who can tolerate wide swings in the value of their
investment.
/chess piece/ PRINCIPAL STRATEGIES AND
POLICIES
The fund's sub-adviser, Fred Alger Management, Inc. (Alger), seeks to achieve
the fund's objective by investing fund assets principally in:
o equity securities such as common or preferred stocks
o convertible securities (convertible securities can be exchanged for, or
converted into, common stock of such companies)
Under normal market conditions, the fund invests at least 85% of its assets in
common stocks, which may include stocks of developing companies, of older
companies that are entering a new stage of growth, and of companies whose
products or services have a high unit volume growth rate. Alger may also invest
in rights, warrants, options and futures.
When selecting stocks for the fund, Alger considers the following factors:
o insiders' activity
o market style leadership (market dominance of a particular company)
o institutional activity
o relative strength price change (price performance relative to an index)
o price-to-declining U.S. dollar
o earnings to projected change
o quarterly earnings per-share growth rate
Alger selects convertible securities for the fund that can be converted, or
exchanged, for stock of the issuer. Convertible securities are often rated
below investment grade (I.E., considered to be "junk bonds"), or not rated
because they fall below debt obligations and just above common stock in order
of preference or priority on the issuer's balance sheet. Alger invests in
convertible securities which are rated at or above invesment grade.
Alger may take a temporary defensive position when the securities trading
markets or the economy are experiencing excessive volatility or a prolonged
general decline, or other adverse conditions exist (which is inconsistent with
the fund's principal investment strategies). During this time, the fund may
invest up to 100% of its assets in money market instruments and cash
equivalents. Under these circumstances, the fund will be unable to achieve its
investment objective.
Alger may sell a security in order to buy shares of another company expected to
have greater potential for growth or to meet redemptions.
While the fund invests principally in equity and convertible securities, Alger
may, to a lesser extent, invest in ADRs, money market instruments, repurchase
agreements, or other securities and investment strategies in pursuit of its
investment objective, which are explained beginning on page 10 and in the SAI.
/warning sign/ PRINCIPAL RISKS
The fund is subject to the following principal investment risks:
o STOCKS
While stocks have historically outperformed other investments over the long
term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
Because the stocks the fund holds fluctuate in price, the value of your
investment in the fund will go up and down.
o INVESTING AGGRESSIVELY
o The value of developing-company stocks may be very volatile, and can drop
significantly in a short period of time.
o Rights, options and futures contracts may not be exercised and may expire
worthless.
o Warrants and rights may be less liquid than stocks.
o CONVERTIBLE SECURITIES
Convertible securities may include corporate notes or preferred stock, but
ordinarily are a long-term debt obligation of the issuer convertible at a
stated exchange rate into common stock of the issuer. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price
of the common stock underlying a convertible security exceeds the conversion
price, the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield
basis, and thus may not depreciate to the same extent as the underlying stock.
YOU MAY LOSE MONEY IF YOU INVEST IN THIS FUND.
These and other risks are fully described in the section entitled "Explanation
of Strategies and Risks," beginning on page 10.
8
<PAGE>
/graph/ PAST PERFORMANCE
The bar chart and the table below show the fund's annual returns and its
long-term performance. The bar chart and table indicate the risks of investing
in the fund by showing you how the fund's performance has varied from year to
year. The bar chart does not reflect the impact of sales charges, which lower
the fund's return. The table, which includes applicable sales charges, compares
how the fund's average annual returns for different calendar periods compare to
the returns of the S&P 500 Composite Stock Price Index (S&P 500), a widely
recognized unmanaged index of market performance. The bar chart and table
assume reinvestment of dividends and capital gains distributions. As with all
mutual funds, past performance is not a prediction of future results.
--------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN as of 12/31 each year (%) (1)
CLASS A SHARES
[GRAPHIC OMITTED]
55.00 5.99 23.27 48.92 69.14
-------------------------------------
1995 1996 1997 1998 1999
(1) AS OF MARCH 31, 2000, THE END OF THE MOST RECENT CALENDAR QUARTER, THE
FUND'S YEAR-TO-DATE RETURN FOR CLASS A WAS 10.74%.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED RETURN
CLASS A SHARES: --------------- --------
<S> <C> <C>
Best Quarter: 12/31/99 43.38%
Worst Quarter: 9/30/98 (9.47)%
</TABLE>
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE
ONE YEAR 5 YEARS INCEPTION
---------- --------- ----------
<S> <C> <C> <C>
A Shares 59.83% 38.24% 38.63%
----------- ----- ----- -----
B Shares 63.67% N/A 29.07%
----------- ----- ----- -----
M Shares* 66.05% 39.19% 39.56%
----------- ----- ----- -----
S&P 500** 21.04% 28.51% 26.01%
----------- ----- ----- -----
</TABLE>
*ALL SHARES DESIGNATED AS CLASS C SHARES PRIOR TO MARCH 1, 1999 WERE RENAMED AS
CLASS M SHARES ON THAT DATE. EFFECTIVE NOVEMBER 1, 1999, THE FUND BEGAN
OFFERING A NEW CLASS C SHARE THAT HAS DIFFERENT FEES AND EXPENSES THAN THE
PREVIOUS CLASS C SHARE.
**SINCE INCEPTION OF CLASS A SHARES AND CLASS M SHARES (12/02/94). SINCE
INCEPTION OF CLASS B SHARES (10/01/95) IS 24.22%.
/dollar sign/ FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the fund.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M
---- ---- ------ ----
<S> <C> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
(AS A % OF OFFERING PRICE) 5.50% None None 1.00%
Maximum deferred sales
charge (load) None(a) 5.00% None 1.00%(b)
</TABLE>
(AS A PERCENTAGE OF PURCHASE PRICE OR
REDEMPTION PROCEEDS, WHICHEVER IS LOWER)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (d)
% OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
CLASS OF SHARES
A B C M
------- ------- ------- ------
<S> <C> <C> <C> <C>
Management fees 0.80% 0.80% 0.80% 0.80%
Distribution and service
(12b-1) fees 0.35% 1.00% 1.00% 0.90%
Other expenses 0.71% 0.71% 0.71% 0.71%
---- ---- ---- ----
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.86% 2.51% 2.51% 2.41%
EXPENSE REDUCTION (C) 0.31% 0.31% 0.31% 0.31%
---- ---- ---- ----
NET OPERATING EXPENSES 1.55% 2.20% 2.20% 2.10%
------------------------- ---- ---- ---- ----
</TABLE>
(a) Certain purchases of Class A shares in amounts greater than $1 million are
subject to a 1% contingent deferred sales charge for 24 months after
purchase.
(b) Purchases of Class M shares are subject to a 1% contingent deferred sales
charge if redeemed within 18 months of purchase.
(c) Contractual arrangement with Idex Management, Inc. through 4/30/2001, for
expenses that exceed 1.20%, excluding 12b-1 fees.
(d) Annual fund operating expenses are estimated based on the fund's expenses
for the fiscal year ended 10/31/99.
A $10 semi-annual fee is imposed on accounts open for over 2 years that are
below a minimum balance due to redemptions. See page 18.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLE
This example is here to help you compare the cost of investing in this fund
with that of other mutual funds. It shows the cumulative expenses you would pay
if you invested $10,000 and held your shares for various time periods, with a
5% annual return and fund operating expenses remaining the same. This return is
for illustration purposes and is not guaranteed. Actual costs may be higher or
lower.
If the shares are redeemed at the end of each period:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $699 $1,074 $1,473 $2,586
B* $723 $1,052 $1,408 $2,663
C $223 $ 752 $1,308 $2,823
M $410 $ 815 $1,345 $2,796
------------- ---- ------ ------ ------
</TABLE>
If the shares are not redeemed:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
A $699 $1,074 $1,473 $2,586
B* $223 $ 752 $1,308 $2,663
C $223 $ 752 $1,308 $2,823
M $311 $ 815 $1,345 $2,796
------------- ---- ------ ------ ------
</TABLE>
*EXAMPLES FOR CLASS B SHARES ASSUME THEY WILL CONVERT TO CLASS A SHARES EIGHT
YEARS AFTER YOU PURCHASE THEM.
9
<PAGE>
EXPLANATION OF STRATEGIES AND RISKS
HOW TO USE THIS SECTION
In the discussions of the individual funds on pages 2 through 9, you found
descriptions of the principal strategies and risks associated with each fund.
In those pages, you were referred to this section for a more complete
description of the risks of both principal and non-principal investments. For
best understanding, first read the description of the fund you are interested
in. Then refer to this section and read about the risks particular to that
fund. For even more discussions of strategies and risks, see the SAI, which is
available upon request. See the back cover of this prospectus for information
on how to order the SAI.
/chess piece/ DIVERSIFICATION. The 1940 Act classifies
investment companies as either diversified or
non-diversified.
Diversification is the practice of spreading a fund's assets over a number of
issuers to reduce risk. A non-diversified fund has the ability to take larger
positions in fewer issuers. Because the appreciation or depreciation of a
single security may have a greater impact on the net asset value of a
non-diversified fund, its share price can be expected to fluctuate more than a
diversified fund.
The funds, except IDEX JCC Capital Appreciation, qualify as diversified funds
under the 1940 Act. The diversified funds are subject to the following
diversification requirements (which are set forth in full in the SAI):
o As a fundamental policy, with respect to 75% of the total assets of a fund,
the fund may not own more than 10% of the outstanding voting shares of any
issuer (other than U.S. government securities) as defined in the 1940 Act
and, with respect to some funds, in other types of cash items.
o As a fundamental policy with respect to 75% of the total assets of a fund,
the fund will not purchase a security of any issuer if such would cause the
portfolio's holdings of that issuer to amount to more than 5% of the fund's
total assets. IDEX JCC Capital Appreciation reserves the right to become a
diversified investment company (as defined by the 1940 Act).
/chess piece/ CONCENTRATION. Unless otherwise stated in a fund's objective or
its principal strategies and policies, as a fundamental policy governing
concentration, no fund will invest more than 25% of its total assets in any one
particular industry, other than U.S. government securities. Unless otherwise
stated in a fund's objective or its principal strategies and policies, as an
operating policy, no fund will invest 25% of its total assets in any one
particular industry, other than U.S. government securities.
/warning sign/ INVESTING IN COMMON STOCKS. Many factors cause common stocks to
go up and down in price. A major factor is the financial performance of the
company that issues the stock. Other factors include the overall economy,
conditions in a particular industry, and monetary factors like interest rates.
When your fund holds stocks, there is a risk that some or all of them may be
down in price when you choose to sell fund shares, causing you to lose money.
This is called market risk.
/warning sign/ INVESTING IN PREFERRED STOCKS. Because these stocks come with a
promise to pay a stated dividend, their price depends more on the size of the
dividend than on the company's performance. But if a company fails to pay the
dividend, its preferred stock is likely to drop in price. Changes in interest
rates can also affect their price. (See "Investing in bonds," below.)
/warning sign/ INVESTING IN "CONVERTIBLES," PREFERRED STOCKS, AND BONDS. Since
preferred stocks and corporate bonds pay a stated return, their prices usually
do not depend on the price of the company's common stock. But some companies
issue preferred stocks and bonds that are convertible into their common stocks.
Linked to the common stock in this way, convertible securities go up and down in
price inversely to interest rates as the common stock does, adding to their
market risk.
/warning sign/ VOLATILITY. The more an investment goes up and down in price, the
more volatile it is said to be. Volatility increases the market risk because
even though your fund may go up more than the market in good times, it may also
go down more than the market in bad times. If you decide to sell when a volatile
fund is down, you could lose more. Price changes may be temporary and for
extended periods.
/warning sign/ INVESTING IN BONDS. Like common stocks, bonds fluctuate in value,
though the factors causing this are different, including:
o CHANGES IN INTEREST RATES. Bond prices tend to move the opposite of
interest rates. Why? Because when interest rates on new bond issues go up,
rates on existing bonds stay the same and they become less desirable. When
rates go down, the reverse happens. This is also true for most preferred
stocks and some convertibles.
o LENGTH OF TIME TO MATURITY. When a bond matures, the issuer must pay the
owner its face value. If the maturity date is a long way off, many things
can affect its value, so a bond is more volatile the farther it is from
maturity. As that date approaches, fluctuations usually become smaller and
the price gets closer to face value.
o DEFAULTS. All bond issuers make at least two promises: (1) to pay interest
during the bond's term and (2) to return principal when it matures. If an
issuer fails to keep one or both of these promises, the bond will probably
drop in price dramatically, and may even become worthless.
o DECLINES IN RATINGS. At the time of issue, most bonds are rated by
professional rating services, such as Moody's and S&P. The stronger the
financial backing behind the bond, the higher the rating. If this backing
is weakened or lost, the rating service may downgrade the bond's rating.
This is virtually certain to cause the bond to drop in price.
10
<PAGE>
o LOW RATING. High-yield/high-risk securities (commonly known as "junk bonds")
have greater credit risk, are more sensitive to interest rate movements,
are considered more speculative, have a greater vulnerability to economic
changes, subject to greater price volatility and are less liquid.
o LACK OF RATING. Some bonds are considered speculative, or for other reasons
are not rated. Such bonds must pay a higher interest rate in order to
attract investors. They're considered riskier because of the higher
possibility of default or loss of liquidity.
o LOSS OF LIQUIDITY. If a bond is downgraded, or for other reasons drops in
price, the market demand for it may "dry up." In that case, the bond may
be hard to sell or "liquidate" (convert to cash).
Please see Appendix A for a description of bond ratings.
/warning sign/ INVESTING IN FOREIGN SECURITIES. Foreign securities are
investments offered by non-U.S. companies, governments and government agencies.
They involve risks not usually associated with U.S. securities, including:
CHANGES IN CURRENCY VALUES. Foreign securities are sold in currencies other
than U.S. dollars. If a currency's value drops, the value of your fund
shares could drop too, even if the securities are strong. Dividend and
interest payments may be lower. Factors affecting exchange rates are:
differing interest rates among countries; balances of trade; amount of a
country's overseas investments; and any currency manipulation by banks.
o CURRENCY SPECULATION. The foreign currency market is largely unregulated and
subject to speculation.
o CURRENCY TRADING COSTS. Some funds also invest in American Depository
Receipts (ADRs) and American Depositary Shares (ADSs). They represent
securities of foreign companies traded on U.S. exchanges, and their values
are expressed in U.S. dollars. Changes in the value of the underlying
foreign currency will change the value of the ADR or ADS. The fund incurs
costs when it converts other currencies into dollars, and vice-versa.
o EURO CONVERSION. On January 1, 1999, certain participating countries in the
European Economic Monetary Union (EU) adopted the "Euro" as their official
currency. Other EU member countries may convert to the Euro at a later
date. As of January 1, 1999, governments in participating countries are
issuing debt and redenominate existing debt in Euros; corporations may
choose to issue stocks or bonds in Euros or national currency. The new
European Central Bank, (the "ECB") will assume responsibility for a
uniform monetary policy in participating countries. Euro conversion risks
that could affect a fund's foreign investments include: (1) the readiness
of Euro payment, clearing, and other operational systems; (2) the legal
treatment of debt instruments and financial contracts in existing national
currencies rather than the Euro; (3) exchange-rate fluctuations between
the Euro and non-Euro currencies during the transition period of January
1, 1999 through December 31, 2001 and beyond; (4) potential U.S. tax
issues with respect to fund securities; and (5) the ECB's ability to
manage monetary policies among the participating countries.
o DIFFERING ACCOUNTING AND REPORTING PRACTICES. Foreign tax laws are
different, as are laws, practices and standards for accounting, auditing
and reporting data to investors.
o LESS INFORMATION AVAILABLE TO THE PUBLIC. Foreign companies usually make
far less information available to the public.
o LESS REGULATION. Securities regulations in many foreign countries are more
lax than in the U.S.
o MORE COMPLEX NEGOTIATIONS. Because of differing business and legal
procedures, a fund might find it hard to enforce obligations or negotiate
favorable brokerage commission rates.
o LESS LIQUIDITY/MORE VOLATILITY. Some foreign securities are harder to
convert to cash than U.S. securities, and their prices may fluctuate more
dramatically.
o SETTLEMENT DELAYS. "Settlement" is the process of completing payment and
delivery of a securities transaction. In many countries, this process takes
longer than it does in the U.S.
o HIGHER CUSTODIAL CHARGES. Fees charged by the fund's custodian for holding
shares are higher for foreign securities than those of domestic securities.
o VULNERABILITY TO SEIZURE AND TAXES. Some governments can seize assets. They
may also limit movement of assets from the country. Fund interest,
dividends and capital gains may be subject to foreign withholding taxes.
o POLITICAL INSTABILITY AND SMALL MARKETS. Developing countries can be
politically unstable. Economies can be dominated by a few industries, and
markets may trade a small number of securities. Regulation of banks and
capital markets can be weak.
o DIFFERENT MARKET TRADING DAYS. Foreign markets may not be open for trading
the same days as U.S. markets are open and asset values can change before
your transaction occurs.
o HEDGING. A fund may enter into forward currency contracts to hedge against
declines in the value of securities denominated in, or whose value is tied
to, a currency other than the U.S. dollar or to reduce the impact of
currency fluctuation on purchases and sales of such securities. Shifting a
fund's currency exposure from one currency to another removes the fund's
opportunity to profit from the original currency and involves a risk of
increased losses for the fund if the sub-adviser's projection of future
exchange rates is inaccurate.
o EMERGING MARKET RISK. Investing in the securities of issuers located in or
principally doing business in emerging markets bear foreign exposure risks
as discussed above. In addition, the risks associated with investing in
emerging markets are often greater than investing in developed foreign
markets. Specifically,
11
<PAGE>
EXPLANATION OF STRATEGIES AND RISKS
the economic structures in emerging market countries are less diverse and
mature than those in developed countries, and their political systems are
less stable. Investments in emerging market countries may be affected by
national policies that restrict foreign investments. Emerging market
countries may have less developed legal structures, and the small size of
their securities markets and low trading volumes can make investments
illiquid and more volatile than investments in developed countries. As a
result, a fund investing in emerging market countries may be required to
establish special custody or other arrangements before investing.
/warning sign/ INVESTING IN FUTURES, OPTIONS AND DERIVATIVES. Besides
conventional securities, your fund may seek to increase returns by investing in
financial contracts related to its primary investments. Such contracts involve
additional risks and costs. Risks include:
o Inaccurate market predictions. If the sub-adviser is wrong in its
expectation, for example, with respect to interest rates, securities prices
or currency markets, the contracts could produce losses instead of gains.
o Prices may not match. Movements in the price of the financial contracts may
be used to offset movements in the price of other securities included in
the fund's portfolio. If those prices don't correlate or match closely
(I.E., imperfect correlation), the benefits of the transaction might be
diminished and the fund may lose money which may result in substantial
losses.
o Illiquid markets. If there is no market for the contracts, the fund may not
be able to control losses.
o Tax consequences. A fund may have to delay closing out certain derivative
positions to avoid adverse tax consequences.
/warning sign/ INVESTING IN STOCK INDEX FUTURES. Futures involve additional
investment risks and transactional costs, and draw upon skills and experience
which are different than those needed to pick other securities. Special risks
include:
o inaccurate market predictions
o imperfect correlation
o illiquidity
o tax consequences
o potential unlimited loss
o volatile net asset value due to substantial fluctuations in the value of
these futures
/warning sign/ INVESTING IN FORWARD FOREIGN CURRENCY CONTRACTS. A forward
foreign currency contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate. These
contracts are used as a hedge against fluctuations in foreign exchange rates.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of securities, or prevent losses if the prices of
the fund's securities decline.
Such hedging transactions preclude the opportunity for a gain if the value of
the hedging currency should rise. Forward contracts may, from time to time, be
considered illiquid, in which case they would be subject to the fund's
limitations on investing in illiquid securities. If a fund's manager makes the
incorrect prediction, the opportunity for loss can be magnified.
/warning sign/ ZERO COUPON SECURITIES. Zero coupon securities do not pay
interest or principal until final maturity unlike debt securities that provide
periodic payments of interest (referred to as coupon payment). Investors buy
zero coupon securities at a price below the amount payable at maturity. The
difference between the purchase price and the amount paid at maturity represents
interest on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which exposes investors to risks of payment
default and volatility.
/warning sign/ GENERAL OBLIGATION BONDS. General obligation bonds are supported
by the issuer's power to exact property or other taxes. The issuer must impose
and collect taxes sufficient to pay principal and interest on the bonds.
However, the issuer's authority to impose additional taxes may be limited by its
charter or state law.
/warning sign/ SPECIAL REVENUE BONDS. Special revenue bonds are payable solely
from specific revenues received by the issuer such as specific taxes,
assessments, tolls, or fees. Bondholders may not collect from the municipality's
general taxes or revenues. For example, a municipality may issue bonds to build
a toll road, and pledge the tolls to repay the bonds. Therefore, a shortfall in
the tolls normally would result in a default on the bonds. Investors in these
bonds are exposed to the credit standing of the municipality. If the
municipality defaults on the bonds, there may be a loss on the investment.
/warning sign/ PRIVATE ACTIVITY BONDS. Private activity bonds are special
revenue bonds used to finance private entities. For example, a municipality may
issue bonds to finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient to repay
the bonds. The bonds would be payable solely from the company's loan payments,
not from any other revenues of the municipality. Therefore, any default on the
loan normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to Alternate
Minimum Tax (AMT).
/warning sign/ TAX INCREMENT FINANCING BONDS. Tax increment financing (TIF)
bonds are payable from increases in taxes or other revenues attributable to
projects financed by the bonds. For example, a municipality may issue TIF bonds
to redevelop a commercial area. The TIF bonds would be payable solely from any
increase in sales taxes collected from merchants in the area. The bonds could
default if merchants' sales, and related tax collections, failed to increase as
anticipated.
12
<PAGE>
/warning sign/ VARIABLE RATE DEMAND INSTRUMENTS. Variable rate demand
instruments are tax exempt securities that require the issuer or a third party,
such as a dealer or bank, to repurchase the security for its face value upon
demand. Investors in these securities are subject to the risk that the dealer or
bank may not repurchase the instrument. The securities also pay interest at a
variable rate intended to cause the securities to trade at their face value. The
Fund treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 13 months.
/warning sign/ CREDIT ENHANCEMENT. Credit enhancement consists of an arrangement
in which a company agrees to pay amounts due on a fixed income security if the
issuer defaults. In some cases the company providing credit enhancement makes
all payments directly to the security holders and receives reimbursement from
the issuer. Normally, the credit enhancer has greater financial resources and
liquidity than the issuer. For this reason, the Adviser usually evaluates the
credit risk of a fixed income security based solely upon its credit enhancement.
/warning sign/ INVESTING IN TAX-EXEMPT SECURITIES. Some municipal obligations
pay interest that, while tax-exempt, may be considered a "preference item" for
determining the federal alternative minimum tax. This may result in your paying
more tax than you would have otherwise. Also, Congress periodically threatens to
limit or do away with the tax exemption on municipal obligations. If that
happened, it could substantially reduce the value of your fund's assets.
/warning sign/ INVESTING IN SPECIAL SITUATIONS. Each fund may invest in "special
situations" from time to time. Special situations arise when, in the opinion of
a fund manager, a company's securities may be undervalued, then increase
considerably in price, due to:
o a new product or process
o a management change
o a technological breakthrough
o an extraordinary corporate event
o a temporary imbalance in the supply of, and demand for, the securities of an
issuer
Investing in a special situation carries an additional risk of loss if the
expected development does not happen or does not attract the expected
attention. The impact of special situation investing to a fund will depend on
the size of the fund's investment in a situation.
/warning sign/ PORTFOLIO TURNOVER. A fund may engage in a significant number of
short-term transactions, which may lower fund performance. High turnover rate
will not limit a manager's ability to buy or sell securities for these funds,
although certain tax rules may restrict a fund's ability to sell securities when
the security has been held for less than three months. Increased turnover (100%
or more) results in higher brokerage costs or mark-up charges for a fund. The
funds ultimately pass these charges on to shareholders. Short-term trading may
also result in short-term capital gains, which are taxed as ordinary income to
shareholders. IDEX JCC Global had turnover rates greater than 100% for the
fiscal year ended October 31, 1999.
/question mark/ INVESTMENT STRATEGIES. A fund is permitted to use other
securities and investment strategies in pursuit of its investment objective,
subject to limits established by the Fund's Board of Trustees. No fund is under
any obligation to use any of the techniques or strategies at any given time or
under any particular economic condition. Certain instruments and investment
strategies may expose the funds to other risks and considerations, which are
discussed in the Fund's SAI.
/warning sign/ GROWTH INVESTING. Securities with different characteristics tend
to shift in and out of favor depending upon market and economic conditions as
well as investor sentiment. A fund may underperform other funds that employ a
different style. Growth stocks may be more volatile than other stocks because
they are more sensitive to investor perceptions of the issuing company's growth
potential. Growth-oriented funds typically will underperform when value
investing is in favor.
/warning sign/ VARIOUS INVESTMENT TECHNIQUES. Various investment techniques are
utilized to increase or decrease exposure to changing security prices, interest
rates, currency exchange rates, commodity prices or other factors that affect
security values. These techniques may involve derivative securities and
transactions such as buying and selling options and futures contracts, entering
into currency exchange contracts or swap agreements and purchasing indexed
securities. These techniques are designed to adjust the risk and return
characteristics of the fund's portfolio of investments and are not used for
leverage.
13
<PAGE>
HOW THE IDEX FUNDS ARE MANAGED AND ORGANIZED
IDEX Mutual Funds is run by a Board of Trustees.
The assets of each fund are managed by an investment adviser, who in turn
selects sub-advisers, who have hired fund managers. All such advisers to the
funds are supervised by the Board of Trustees. You can find information about
the Trustees and officers of the Fund in the SAI.
IDEX MANAGEMENT, INC. (IMI), located at 570 Carillon Parkway, St. Petersburg,
Florida 33716, serves as investment adviser to the Fund. IMI has been serving
as an investment adviser since 1985.
The investment adviser hires sub-advisers to furnish investment advice and
recommendations and has entered into sub-advisory agreements with each
sub-adviser. The investment adviser also monitors the sub-advisers' buying and
selling of securities and administration of the funds. For these services, it
is paid an advisory fee. This fee is based on the average daily net assets of
each fund, and is paid at the rates shown in the table below.
IMI is a wholly-owned direct subsidiary of AUSA Holding Company ("AUSA"). AUSA
is a holding company which is wholly-owned by AEGON USA, Inc. ("AEGON USA"), a
financial services holding company whose primary emphasis is on life and health
insurance, and annuity and investment products. AEGON USA is a wholly-owned
indirect subsidiary of AEGON N.V., a Netherlands corporation and publicly
traded international insurance group.
Here is a listing of the sub-advisers and the funds they manage:
<TABLE>
<CAPTION>
SUB-ADVISER FUND NAME
----------- ------------------------------
<S> <C>
JCC IDEX JCC Growth
IDEX JCC Global
IDEX JCC Capital Appreciation
Alger IDEX Alger Aggressive Growth
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
ADVISORY FEE SCHEDULE--ANNUAL RATES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IDEX
JCC* IDEX IDEX
CAPITAL JCC JCC*
AVERAGE DAILY NET ASSETS APPRECIATION GLOBAL GROWTH
-------------------------- ------------ -------- -------
<S> <C> <C> <C>
First $750 million 1.00% 1.00% 1.00%
-------------------------- ---- ---- ----
the next $250 million 0.90% 0.90% 0.90%
-------------------------- ---- ---- ----
over $1 billion 0.85% 0.85% 0.85%
-------------------------- ---- ---- ----
</TABLE>
*IMI has contractually agreed to waive a portion of its advisory fee for this
fund as follows: 0.0250% of average daily net assets from $100 - $500 million
(net 0.9750%); 0.0750% of assets from $500 - $750 million (net 0.9250%);
0.0250% of assets from $750 million - $1 billion (net 0.8750%); and 0.0250% of
assets above $1 billion (net 0.8250%).
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IDEX
ALGER
AVERAGE DAILY AGGRESSIVE
NET ASSETS GROWTH
-------------------- -----------
<S> <C>
First $500 million 0.80%
-------------------- ----
over $500 million 0.70%
-------------------- ----
</TABLE>
For the fiscal year ended October 31, 1999, each fund paid the following
management fee as a percentage of the fund's average daily net assets, after
reimbursement and/or fee waivers (if applicable):
<TABLE>
<S> <C>
IDEX JCC Capital Appreciation 0.82%
IDEX JCC Global 1.00%
IDEX JCC Growth 0.87%
IDEX Alger Aggressive Growth 0.56%
</TABLE>
15
<PAGE>
HOW THE IDEX FUNDS ARE MANAGED AND ORGANIZED
Day-to-day management of the investments in each fund is the responsibility of
the fund manager. The fund managers for IDEX Mutual Funds are:
IDEX JCC GROWTH
EDWARD KEELY, vice president, serves as manager of this fund.
Mr. Keely has been sole manager of this fund since January, 2000. He served as
co-manager of the fund since January, 1999. Prior to joining JCC in 1998, he
was a senior vice president of investments at Founders.
JCC has provided investment advisory services to various clients since 1978.
IDEX JCC GLOBAL
HELEN YOUNG HAYES, CFA, executive vice president, and LAURENCE CHANG, CFA,
executive vice president, serve as co-managers of this fund. Ms. Hayes has
served as manager or co-manager of this fund since inception. She has been
employed by JCC since 1987. Laurence Chang has served as co-manager of this
fund since January 2000. Before joining JCC in 1993, Mr. Chang was a project
director at the National Security Archive.
IDEX JCC CAPITAL APPRECIATION
JAMES P. GOFF, executive vice president, has managed this fund since its
inception. He joined JCC in 1988.
IDEX ALGER AGGRESSIVE GROWTH
DAVID D. ALGER has been employed by Alger since 1971 and has served as
president since 1995. He has managed this fund since inception.
DAVID HYUN has served as co-manager of this fund since February 1998. He has
been employed by Alger as a senior research analyst since 1991, as a portfolio
manager since 1997 and as a senior vice president since 1998.
Alger has provided investment advisory services to various clients since 1964.
16
<PAGE>
SHAREHOLDER INFORMATION
/question mark/ OPENING AN ACCOUNT
If you are opening a fund through a registered representative, he or she can
assist you with all phases of your investment.
If you are investing through an authorized dealer, the dealer is responsible
for opening your account and providing your taxpayer ID number. If you already
have an IDEX account, you do not need additional documentation.
The Fund or its agents may reject a request for purchase of shares at any time,
including any purchase under the exchange privilege.
NEW ACCOUNT APPLICATION
Fill out the New Account Application form which is included in this prospectus.
IRAs and other retirement accounts require a different application, which you
can request by calling 1-888-233-IDEX (4339) or writing IDEX Customer Service.
You can avoid future inconvenience by signing up for any services you think you
may later use.
Note: On your application, be sure to include your social security number or
taxpayer identification number. If you don't, your account may be subject to
backup withholding, or be closed.
There are many ways that you can pay for your shares. The minimum initial
purchase is $500 for Class A, B and T shares, and $1,000 for Class C and Class
M shares and shares purchased through authorized dealers. There is a $50
minimum on additional purchases. Purchases through regular investment plans,
like the Automatic Investment Plan, have no minimum to open an account, but you
must invest at least $50 monthly per account.
/question mark/ SHARE TRANSACTIONS
Depending on privileges established on your account, you may buy, sell or
exchange shares in several ways. You may do so in writing, by phone request or
you may access your account through the internet. You may make payments, or
receive payment for your redemptions, via an electronic funds transfer or by
check.
/question mark/ HOW TO SELL SHARES
Your request to sell your shares and receive payment may be subject to:
o the privileges or features established on your account
o the type of account you have, and if there is more than one owner
o the dollar amount you are requesting
o if there have been recent changes made to your account (such as an address
change) or other circumstances that may require a written request or
signature guarantees
There are several ways to request redemption of your shares:
o in writing (by mail or fax)
o by internet access to your account(s) at www.idexfunds.com
o by telephone request using our touch-tone automated system, IDEX InTouch(SM),
or by a person-to-person verbal request
The proceeds of your redemption may be paid by check, or by direct deposit to
your bank account subject to any restrictions that may be applicable. Purchases
may be held at IDEX up to 15 calendar days (or until your funds have cleared)
before they are eligible for redemption. Certain exceptions may apply.
/question mark/ HOW TO EXCHANGE SHARES
You can exchange $500 or more of one fund for shares in the same class of
another fund. As explained below, you may be able to exchange your shares into
any one of the three portfolios of the Cash Equivalent Fund (CEF) without a
sales charge. Any CDSC will be calculated from the date you bought your
original shares. This means your new shares will be the same age as your old
shares, so your sales charge will not increase because of the exchange. The
minimum exchange to a new account is $500 unless an automatic investment plan
is established on the new account.
Prior to making exchanges into a fund that you do not own, read this prospectus
carefully. You can request share exchanges over the telephone unless you have
declined the privilege on your application. You can also exchange shares of the
same class automatically at regular intervals, from one fund to another.
MONEY MARKET EXCHANGE PRIVILEGE
You can exchange Class A, C and T shares for any of the three CEF portfolios.
You may exchange Class B and M shares only into the CEF's Money Market
Portfolio.
SPECIAL RULES FOR CLASS B OR M SHARES IN MONEY MARKET FUND EXCHANGES
When exchanging Class B or M shares for shares of the CEF Money Market
Portfolio, you will not be charged a CDSC. If you later sell the Class B or M
shares of the CEF, you will be charged the sales charge, but the time that you
held those Class B or M shares of the CEF will not count toward calculating the
sales charge.
The Fund may restrict the number of times that you may exchange your shares.
Please see the section below titled "Excessive Trading."
SPECIAL SITUATIONS FOR EXCHANGING SHARES
o Class T shares may be exchanged for only Class A shares of any IDEX fund,
other than IDEX JCC
17
<PAGE>
SHAREHOLDER INFORMATION
Growth. Class A shares of all IDEX funds are subject to distribution and
service (12b-1) fees.
o You may not exchange other classes of shares of the IDEX funds for Class T
shares.
o The Fund reserves the right to modify or terminate the exchange privilege at
any time.
EXCESSIVE TRADING
The exchange privilege is not intended as a vehicle for short-term or excessive
trading. The Fund does not permit excessive trading/market-timing. Excessive
purchases, redemptions or exchanges of fund shares disrupt portfolio management
and drive fund expenses higher. The Fund may limit or terminate your exchange
privileges or may not accept future investments from you if you engage in
excessive trading. In determining excessive trading, we consider frequent
purchases and redemptions having similar effects as exchanges to be excessive
trading. Four or more exchanges in a quarter (3 months) is considered excessive
trading, though the Fund reserves the right to impose restrictions if there are
less frequent transactions.
/question mark/ OTHER ACCOUNT INFORMATION
MINIMUM PURCHASES
o $500 for Class A, B and T shares; $1,000 for Class C and M shares; additional
purchases are a minimum of $50.
If your check, draft or electronic transfer is returned unpaid by your bank,
the Fund may charge a $15 fee.
PRICING OF SHARES
Each fund's price (NAV) is calculated on each day the New York Stock Exchange
(NYSE) is open for business. The NAV of each class is calculated by dividing
its assets less liabilities by the number of its shares outstanding.
If the Fund receives your order by regular closing time of the NYSE (usually 4
p.m. New York time), you will pay or receive that day's NAV plus any applicable
sales charges. If later, it will be priced based on the next day's NAV. Share
prices may change when a fund holds shares in companies traded on foreign
exchanges that are open on days the NYSE is closed.
In determining NAV, each fund's portfolio investments are valued at market
value. Investments for which quotations are not readily available are valued at
fair value determined in good faith under the supervision of the Board of
Trustees.
MINIMUM ACCOUNT BALANCE
Due to the proportionately higher cost of maintaining customer accounts with
balances below the stated minimums for each class of shares, the Fund reserves
the right to close such accounts. However, the Fund will provide a 60-day
notification to you prior to assessing a minimum account fee, or closing, any
account. The following describes the fees assessed to accounts with low
balances:
No fees will be charged on:
o accounts opened within the preceding 24 months
o accounts with an active monthly Automatic Investment Plan ($50 minimum per
account)
o accounts owned by individuals which, combined, have a balance of $5,000 or
more
<TABLE>
<CAPTION>
ACCOUNT BALANCE FEE ASSESSMENT
<S> <C>
If your balance is $10 fee assessed every
below $500 due to 6 months, until
redemptions (Class A, balance reaches $500
B & T shares) ($1,000 for Class A, B & T
for Class C & M and $1,000 for Class
shares) C & M shares
If your balance is Your account will be
below $250, due to charged a fee and be
redemptions liquidated; any
applicable CDSC will
be deducted, and a
check will be mailed
to the address of
record
</TABLE>
TELEPHONE TRANSACTIONS
The Fund, InterSecurities, Inc. (ISI) and Idex Investor Services, Inc. (IIS)
are not liable for complying with telephone instructions which are deemed by
them to be genuine. The Fund, ISI and IIS will employ reasonable procedures to
make sure telephone instructions are genuine. In situations where the Fund, ISI
or IIS reasonably believe they were acting on genuine telephone instructions,
you bear the risk of loss. These procedures may include requiring personal
identification, providing written confirmation of transactions, and tape
recording conversations. The Fund has the right to modify the telephone
redemption privilege at any time.
Telephone redemption with payment by check is not allowed within 10 days of a
change of registration/
address. Call IDEX Customer Service (1-888-233-IDEX (4339)) or see the SAI for
details. You may redeem up to $50,000 worth of shares by phone and get your
money by direct deposit to a pre-authorized bank account. No fee is charged.
PROFESSIONAL FEES
Your financial professional may charge a fee for his or her services. This fee
will be in addition to any fees charged by IDEX. Your financial professional
will answer any questions that you may have regarding such fees.
18
<PAGE>
WIRE TRANSACTIONS
In most cases, the Fund can send your redemption money via a federal funds bank
wire. The Fund charges a $10 fee for this service, in addition to any fee your
bank may charge. For more details, call IDEX Customer Service (1-888-233-IDEX
(4339)) or see the SAI.
REINVESTMENT PRIVILEGE
Within a 90 day period after you sell your shares, you have the right to
"reinvest" your money in any fund of the same class. You will not incur a new
sales charge if you use this privilege within the allotted time frame. Any CDSC
you paid on your shares will be credited to your account. You may reinvest the
proceeds of a Class B share sale (less the CDSC) in Class A shares without
paying the up-front sales charge. Send your written request to the Fund along
with your check for your reinvestment privileges.
STATEMENTS AND REPORTS
The Fund will send you a confirmation statement after every transaction that
affects your account balance or registration. Please review the confirmation
statement carefully and promptly notify IDEX in writing of any error or you
will be deemed to have ratified the transaction as reported to you. If you are
enrolled in the Automatic Investment Plan and invest on a monthly basis, you
will receive a quarterly confirmation. Information about the tax status of
income dividends and capital gains distributions will be mailed to shareholders
early each year.
Financial reports for the funds, which include a list of the holdings, will be
mailed twice a year to all shareholders.
A Historical Statement may be ordered for transactions of prior years.
SHARE CERTIFICATES
The majority of shareholders prefer their shares to be recorded on the Fund's
books and no certificates issued.
If you would like certificates representing your shares, call or write IDEX
Customer Service (1-888-233-IDEX (4339)) to request them. You may return share
certificates to the Fund for re-deposit at any time. If your share certificates
are lost or stolen, notify IDEX Customer Service immediately. There may be a
charge for canceling and replacing lost or stolen share certificates. Remember,
if you ask for a certificate for your shares, you will not be able to redeem or
exchange your shares by telephone. You will have to send your share
certificates to the Fund in order to redeem or exchange your shares. Share
certificates can be issued with the following limitations:
o no certificates issued for fractional shares
o no certificates issued for less than 30 shares
o no certificates issued for retirement plan accounts with State-Street Bank &
Trust Co. as custodian
o certificates are issued to the owner of the account on file only
PERSONAL SECURITIES TRADING
The Fund permits "Access Persons" as defined by Rule 17j-1 under the 1940 Act
to engage in personal securities transactions, subject to the terms of the Code
of Ethics and Insider Trading Policy that has been adopted by the Board of
Trustees of the Fund. Access Persons must use the guidelines established by
this Policy for all personal securities transactions and are subject to certain
prohibitions on personal trading. The Fund's sub-advisers, pursuant to Rule
17j-1 and other applicable laws, and pursuant to the terms of the Policy, must
adopt and enforce their own Code of Ethics and Insider Trading Policies
appropriate to their particular business needs. Each sub-adviser must report to
the Board of Trustees on a quarterly basis with respect to the administration
and enforcement of such Policy, including any violations thereof which may
potentially affect the Fund.
/question mark/ DISTRIBUTIONS AND TAXES
Each of our funds intends to elect and qualify as a regulated investment
company under the Internal Revenue Code. As a regulated investment company, a
fund will not be subject to federal income tax on ordinary income and capital
gains, if any, that it distributes to its shareholders.
TAXES ON DISTRIBUTIONS FROM THE FUNDS
The following summary does not apply to:
o qualified retirement accounts
o tax-exempt investors
Fund distributions are taxable to you as ordinary income to the extent they are
attributable to a fund's net investment income, certain net realized foreign
exchange gains, and net short-term capital gains. They are taxable to you as
long-term capital gain (at the federal rate of 20%) to the extent they are
attributable to the fund's excess of net long-term capital gains over net
short-term capital losses. The tax status of any distribution is the same
regardless of how long you have been a shareholder of the fund and whether you
elect to reinvest distributions or receive cash. Certain distributions paid by
a fund in January may be taxable to shareholders as if they were received on
the prior December 31. The tax status of dividends and distributions for each
calendar year will be detailed in your annual tax statement or tax forms from
the Fund.
TAXES ON THE SALE OF SHARES
Any sale or exchange or redemption of fund shares may generate tax liability
(unless you are a tax-exempt investor or your investment is in a qualified
retirement or other tax- advantaged account). You will generally
19
<PAGE>
SHAREHOLDER INFORMATION
recognize taxable gain or loss on a sale, exchange or redemption of your shares
based upon the difference between your cost (basis) in the shares and the
amount you receive for them. Any loss recognized on shares held for six months
or less will be treated as long-term capital loss to the extent of any capital
gains dividends that were received with respect to the shares.
If you receive an exempt-interest dividend on shares that are held by you for
six months or less, any loss on the sale or exchange of the shares will be
disallowed to the extent of such dividend amount.
WITHHOLDING TAXES
The Fund will be required to withhold 31% of any reportable income payments
made to a shareholder (which may include dividends, capital gains
distributions, and share redemption proceeds) if the shareholder has not
provided an accurate taxpayer identification number to the Fund in the manner
required by IRS regulations.
UNCASHED CHECKS ISSUED ON YOUR ACCOUNT
If any check we issue related to your account is returned by the Post Office as
undeliverable, or remains outstanding (uncashed) for six months, we reserve the
right to reinvest check proceeds back into your account at the net asset value
next calculated after reinvestment. We will then also change your account
distribution option from CASH to REINVEST. Interest does not accrue on amounts
represented by uncashed checks.
MINIMUM DIVIDEND CHECK AMOUNTS
To control costs associated with issuing and administering dividend checks, we
reserve the right to not issue checks under a specified amount. For accounts
with the CASH BY CHECK dividend distribution option, if the dividend payment
total is less than $10, the distribution will be reinvested into the account
and no check will be issued, though the account option for future distributions
will remain unchanged.
NON-RESIDENT ALIEN WITHHOLDING
If you are a non-U.S. investor, your financial professional should determine
whether Fund shares may be sold in your jurisdiction. Shareholders that are not
U.S. persons under the Internal Revenue Code are subject to different tax
rules. Dividends and capital gains distributions may be subject to non-resident
alien withholding.
OTHER TAX INFORMATION
This tax discussion is for general information only. In addition to federal
income taxes, you may be subject to state, local or foreign taxes on payments
received from the Fund. More information is provided in the SAI. You should
also consult your own tax advisor for information regarding all tax
consequences applicable to your investments in the Fund.
20
<PAGE>
<TABLE>
<S> <C>
HOW TO BUY SHARES TO OPEN A NEW ACCOUNT (FIRST-TIME IDEX INVESTORS)
BY MAIL Send your completed application and check payable to:
[GRAPHIC OMITTED] Idex Investor Services, Inc., P.O. Box 9015, Clearwater, Florida 33758-9015;
For Overnight Delivery: 570 Carillon Parkway, St. Petersburg, Florida 33716
THROUGH AN AUTHORIZED DEALER The dealer is responsible for opening your account and providing IDEX with your
[GRAPHIC OMITTED] Taxpayer ID Number. The minimum order from an authorized dealer is $1,000.
BY AUTOMATIC INVESTMENT PLAN Send your completed application, along with a check for your initial investment (if
[GRAPHIC OMITTED] any), payable to Idex Investor Services, Inc., P.O. Box 9015, Clearwater, Florida
33758-9015.
TO ADD TO YOUR EXISTING ACCOUNT
BY CHECK Make your check payable to Idex Investor Services Inc. and mail it to:
[GRAPHIC OMITTED] P.O. Box 9015, Clearwater, FL 33758-9015; or, for overnight delivery: 570 Carillon
Parkway, St. Petersburg, FL 33716. Third party checks, or checks endorsed to IDEX,
will not be accepted. All checks must be made payable to Idex Investor Services, Inc.
BY AUTOMATIC INVESTMENT PLAN With an Automatic Investment Plan (AIP), a level dollar amount is invested monthly
[GRAPHIC OMITTED] and payment is deducted electronically from your bank account. Call or write IDEX
Customer Service to establish an AIP.
BY TELEPHONE The electronic funds transfer privilege must be established in advance, when you open
[GRAPHIC OMITTED] your account, or by adding this feature to your existing account. Select "Electronic
Bank Link" on the Application or write to the Fund. Funds can then be transferred
electronically from your bank to the Fund. Call IDEX Customer Service to invest by
phone, either through our automated IDEX InTouchSM system (1-888-233-IDEX
(4339)), or by speaking directly with your representative. Shares will be purchased via
electronic funds when the money is received by IDEX, usually 2-4 business days after
the request.
THROUGH AUTHORIZED DEALERS If your dealer has already established your account for you, no additional
[GRAPHIC OMITTED] documentation is needed. Call your dealer to place your order. The dealer's bank may
charge you for a wire transfer. (The Fund currently does not charge for this service.)
The Fund must receive your payment within three business days after your order is
accepted.
BY THE INTERNET You may request a transfer of funds from your bank account to the Fund. Visit our
[GRAPHIC OMITTED] website at www.idexfunds.com. Payment will be transferred from your bank account
electronically. Shares will be purchased via electronic funds when the money is received
by IDEX, usually 2-4 business days after the request.
BY PAYROLL DEDUCTION You may have money transferred regularly from your payroll to your IDEX account.
[GRAPHIC OMITTED] Please instruct your employer's payroll department to do so. Call IDEX Customer
Service (1-888-233-IDEX (4339)) to establish this deduction.
BY WIRE TRANSFER Request that your bank wire funds to the Fund. You must have an existing account to
[GRAPHIC OMITTED] make a payment by wire transfer. Ask your bank to send your payment to:
Bank of America, NA, Tampa, FL, ABA# 063100277,
Credit: Idex Investor Services Acct #: 3601194554,
Ref: Shareholder name, IDEX fund and account numbers.
</TABLE>
21
<PAGE>
SHAREHOLDER INFORMATION
<TABLE>
<S> <C>
TO RECEIVE PAYMENT BY HOW TO REQUEST YOUR REDEMPTION
DIRECT DEPOSIT - ACH Call IDEX Customer Service (1-888-233-IDEX (4339)) to verify that this feature is in
(ONLY FOR ACCOUNTS THAT ARE NOT place on your account. Maximum amount per day is the lesser of your balance or
QUALIFIED RETIREMENT PLANS) $50,000. Request an "ACH redemption" in writing, by phone (automated IDEX
[GRAPHIC OMITTED] InTouch(SM) system (1-888-233-IDEX (4339)) or person-to-person), or by internet
access to your account. Payment should usually be received by your bank account 3-5
banking days after your request. The Fund does not charge for this payment option.
Certain IRAs and Qualified Plans may not be eligible for ACH redemptions.
DIRECT DEPOSIT Call IDEX Customer Service (1-888-233-IDEX (4339)) to be sure this feature is in
(ELECTRONIC FUNDS TRANSFER-FEDERAL place on your account. Maximum amount per day is the lesser of your available
FUNDS BANK WIRE) balance or $50,000 (with a minimum of $1,000). Request an "Expedited Wire
[GRAPHIC OMITTED] Redemption" in writing, or by phone (person-to-person request). Payment should be
received by your bank account the next banking day after your request. The Fund
charges $10 for this service. Your bank may charge a fee as well.
CHECK TO THE ADDRESS OF RECORD WRITTEN REQUEST:
[GRAPHIC OMITTED] Send a letter requesting a withdrawal to the Fund and include any share certificates
you may have. Specify the fund, account number, and dollar amount or number of
shares you wish to redeem. Mail to: Idex Investor Services, P.O. Box 9015, Clearwater,
FL 33758-9015. Attention: Redemptions. Be sure to include all account owners'
signatures and any additional documents, as well as a signature guarantee(s) if required
(see "How To Sell Shares").
TELEPHONE OR INTERNET REQUEST:
If your request is not required to be in writing (see "How To Sell Shares"), you may
call IDEX Customer Service (1-888-233-IDEX (4339)) and make your request using
the automated IDEX InTouchSM system (1-888-233-IDEX (4339)), by person-to-person,
or by accessing your account on the internet. Maximum amount per day is the lesser
of your available balance or $50,000.
If an address change was made in the last 10 days, the check will not be mailed until
after the 10 day period following the address change. To avoid this, IDEX requires a
redemption request in writing signed and signature guaranteed by all shareholders.
CHECK TO ANOTHER PARTY/ADDRESS This request must be in writing, regardless of amount, with all account owners'
[GRAPHIC OMITTED] signatures guaranteed. Mail to: Idex Investor Services, P.O. Box 9015, Clearwater, FL
33758-9015. Attention: Redemptions.
PERIODIC AUTOMATIC PAYMENT You can establish a Systematic Withdrawal Plan (SWP) either at the time you open
(BY DIRECT DEPOSIT-ACH OR CHECK) your account or at a later date. Call IDEX Customer Service (1-888-233-IDEX (4339))
for assistance. You must have a minimum balance of $10,000 in your account.
BY EXCHANGE You may request an exchange in writing, by phone (automated IDEX InTouch(SM)
[GRAPHIC OMITTED] system (1-888-233-IDEX (4339)) or person-to-person), or by accessing your account
through the internet.
THROUGH AN AUTHORIZED DEALER You may redeem your shares through an authorized dealer. (They may impose a service
[GRAPHIC OMITTED] charge.) Contact your Registered Representative or call IDEX Customer Service
(1-888-233-IDEX (4339)) for assistance.
NOTE: Purchases must be held at IDEX up to 15 calendar days (or until the funds
have cleared) before they are eligible for redemption. Certain exceptions may
apply.
</TABLE>
22
<PAGE>
CHOOSING A SHARE CLASS
The Fund offers four share classes, each with its own sales charge and expense
structure. (An additional class, Class T, is offered through IDEX JCC Growth,
but Class T shares are not available to new investors.) Also, effective March
1, 1999, shares that were designated as Class C shares became Class M shares.
They have an initial sales charge of 1.00% and a contingent deferred sales
charge (CDSC) of 1.00% if you sell within 18 months of purchase. The sales
charge and CDSC only apply to shares purchased after February 28, 1999.
The Fund began offering a new Class C share on November 1, 1999. This new Class
C share has no initial or deferred sales charges. All shares that were
designated as Class C shares prior to March 1, 1999, which then converted to
Class M shares on that date, will continue as Class M shares.
The amount of your investment and the amount of time that you plan to hold your
shares will determine which class of shares you should choose. You should make
this decision carefully because all of your future investments in your account
will be in the same share class that you designate when you open your account.
Your financial professional can help you choose the share class that makes the
best sense for you.
If you are investing a large amount and plan to hold your shares for a long
period, Class A or Class M shares may make the most sense for you. If you are
investing a lesser amount, you may want to consider Class B shares (if you plan
to invest for a period of at least 6 years) or Class C shares (if you plan to
invest for a period of less than 6 years).
The Fund may, at any time and in its sole discretion, add, delete, or change
the sales charges for any share class.
CLASS A SHARES -- FRONT LOAD
With Class A shares, you pay an initial sales charge only when you buy shares.
(The offering price includes the sales charge.)
If you are investing $1 million or more (either as a lump sum or through any of
the methods described above), you can purchase Class A shares without any sales
charge. However, if you redeem any of those shares within the first 24 months
after buying them, you will pay a 1.00% CDSC, unless they were purchased through
a qualified retirement plan.
Also, the Fund will treat Class A share purchases in an amount of less than $1
million by defined contribution plans, other than 403(b) plans, that are
sponsored by employers with 100 or more eligible employees as if such purchases
were equal to an amount more than $1 million.
<TABLE>
<CAPTION>
CLASS T SHARES
CLASS A SHARES - CLASS B SHARES - CLASS C SHARES - CLASS M SHARES - (CLOSED TO NEW
FRONT LOAD BACK LOAD LEVEL LOAD LEVEL LOAD INVESTORS)
------------------------------- ----------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
o Initial sales o No up-front sales o No up-front sales o Initial sales o Initial sales
charge of 5.50% charge charge charge of 1.00% charge of 8.50%
(see Class A Share or less
Quantity Discounts Table) o Deferred sales o No deferred sales o 12b-1 distribution
charge of 5.00% or charge and service o No 12b-1
o Discounts of sales less on shares you fees of 0.90% per distribution and
charge for larger sell within 6 years o 12b-1 distribution year service fees
investments (see deferred sales and service fees
charge table of 1.00% o Deferred sales o Sales charge
o 12b-1 distribution below) charge of 1.00% if percentage can be
and service fees o No conversion to you sell within 18 reduced in the
of 0.35% o 12b-1 distribution Class A shares; months of purchase same four ways as
and service fees expenses do not Class A Shares
o Lower annual of 1.00% decrease o Automatic (see Class A Share
expenses conversion to Quantity
than Class B, C o Automatic Class A Shares Discounts Table)
or M shares due conversion to after 10 years,
to lower 12b-1 Class A shares reducing future
and service fees after 8 years, annual expenses
reducing future
annual expenses
</TABLE>
23
<PAGE>
SHAREHOLDER INFORMATION
CLASS B SHARES -- BACK LOAD
Class B shares are sold in amounts up to $250,000. With Class B shares, you pay
no initial sales charge when you invest, but you are charged a CDSC when you
sell shares you have held for six years or less, as described in the table
below.
Class B shares automatically convert to Class A shares after 8 years, lowering
annual expenses from that time on.
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES
<TABLE>
<CAPTION>
AS A % OF DOLLAR AMOUNT
YEAR AFTER PURCHASING (SUBJECT TO CHANGE)
----------------------- ------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth and Sixth 1%
Seventh and Later 0%
</TABLE>
CLASS C SHARES -- LEVEL LOAD
With Class C shares, you pay no initial sales charge or CDSC. There are 12b-1
distribution and service fees of up to 1.00% per year.
CLASS M SHARES -- LEVEL LOAD
Class M shares are sold in amounts up to $1 million. With Class M shares, you
pay an initial sales charge of 1.00% based on offering price. (The offering
price includes the sales charge.) There are 12b-1 distribution and service fees
of 0.90% per year. If you redeem within 18 months from the date of purchase,
you may incur a CDSC of 1.00%.
Class M shares purchased on or after November 1, 1999 automatically convert to
Class A shares after 10 years, lowering annual expenses from that time on.
CLASS T SHARES (IDEX JCC GROWTH ONLY)
(Closed to new investors)
When you buy Class T shares of IDEX JCC Growth, you pay an up-front sales
charge. You can reduce the sales charge percentage in the same four ways that
are described under Class A shares. Class T shares are not subject to annual
12b-1 distribution and service fees.
You pay no sales charge when you redeem Class T shares. As with Class A shares,
if you pay no up-front sales charge because you are purchasing $1 million or
more of Class T shares, you will pay a deferred sales charge of 1.00% if you
redeem any of those shares within the first 24 months after buying them, unless
they were purchased through a qualified retirement plan. The charge is assessed
on an amount equal to the lesser of the then current market value or the
original cost of the shares being redeemed. No sales charge is imposed on net
asset value above the initial purchase.
Waivers of the sales charges are granted under certain conditions. Persons
eligible to buy Class T shares at NAV may not impose a sales charge when they
re-sell those shares.
CONTINGENT DEFERRED SALES CHARGE
Your shares may be subject to a CDSC. Dividends and capital gains are not
subject to the sales charge. There is no charge on any increase in the value of
your shares. To ensure that you pay the lowest CDSC possible, the Fund will
always use the shares with the lowest CDSC to fill your redemption requests. If
your shares are worth less than when you bought them, the charge will be
assessed on their current, lower value. In some cases, the sales charge may be
waived.
CLASS A SALES CHARGE REDUCTIONS
You can lower the sales charge percentage in four ways:
o Substantial investments receive lower sales charge rates. Please see the SAI
for details on these reductions.
o The "right of accumulation" allows you to include your existing Class A
Shares (or Class T shares of IDEX JCC Growth) as part of your current
investments for sales charge purposes.
o A "letter of intent" allows you to count all Class A share investments in an
IDEX fund over the next 13 months, as if you were making them all at once,
to qualify for reduced sales charges.
o By investing as part of a qualified group.
24
<PAGE>
Class A Share Quantity Discounts
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS % OF AS % OF
OFFERING AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------- -------------- -------------
<S> <C> <C>
Under $50,000 5.50% 5.82%
$50,000 to under $100,000 4.75% 4.99%
$100,000 to under $250,000 3.50% 3.63%
$250,000 to under $500,000 2.75% 2.83%
$500,000 to under $1,000,000 2.00% 2.04%
$1,000,000 and over 0.00% 0.00%
</TABLE>
Class T Share Quantity Discounts
(IDEX JCC Growth)
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS % OF AS % OF
OFFERING AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
---------------------------------- -------------- -------------
<S> <C> <C>
Under $10,000 8.50% 9.29%
$10,000 to under $25,000 7.75% 8.40%
$25,000 to under $50,000 6.25% 6.67%
$50,000 to under $75,000 5.75% 6.10%
$75,000 to under $100,000 5.00% 5.26%
$100,000 to under $250,000 4.25% 4.44%
$250,000 to under $500,000 3.00% 3.09%
$500,000 to under $1,000,000 1.25% 1.27%
$1,000,000 and over 0.00% 0.00%
</TABLE>
WAIVERS OF SALES CHARGES
WAIVER OF CLASS A AND T SALES CHARGES
Class A and Class T shares may be purchased without a sales charge by:
o Current or former trustees, directors, officers, full-time employees or sales
representatives of the Fund, IMI, ISI, any of the sub-advisers or any of
their affiliates.
o directors, officers, full-time employees and sales representatives of dealers
having a sales agreement with ISI.
o any trust, pension, profit-sharing or other benefit plan for any of the
foregoing persons.
o "wrap" accounts for the benefit of clients of certain broker-dealers,
financial institutions or financial planners, who have entered into
arrangements with the Fund or ISI.
Persons eligible to buy Class A and Class T shares at NAV may not impose a sales
charge when they re-sell those shares.
-----------------------------------------------------------------------------
WAIVER OF CLASS A, CLASS B, CLASS M, AND CLASS T REDEMPTION CHARGES
-----------------------------------------------------------------------------
You will not be assessed a sales charge for shares if you sell in the following
situations:
o Following the death of the shareholder.
o Following the total disability of the shareholder (as determined by the
Social Security Administration - applies only to shares held at the time the
disability is determined).
o On redemptions made under the Fund's systematic withdrawal plan (may not
exceed 12% of the account value on the day the systematic withdrawal plan was
established). NOTE: The amount redeemed under this waiver does not need to be
under a systematic withdrawal plan. If it is not under a systematic
withdrawal plan, it is limited to one redemption per calendar year up to 12%
of your account balance at the time of redemption.
o If you redeem your shares and reinvest the proceeds in the same class of any
fund within 90 days of redeeming, the sales charge on the first redemption is
waived.
25
<PAGE>
PERFORMANCE INFORMATION
PERFORMANCE
IDEX may include quotations of a fund's total return or yield in
advertisements, sales literature or reports to shareholders or to prospective
investors. Total return and yield quotations for a fund reflect only the
performance of a hypothetical investment in the fund during the particular time
period shown as calculated based on the historical performance of the fund
during that period. SUCH QUOTATIONS DO NOT IN ANY WAY INDICATE OR PROJECT
FUTURE PERFORMANCE.
YIELD
Yield quotations for a fund refer to the income generated by a hypothetical
investment in the fund over a specified thirty-day period expressed as a
percentage rate of return for that period. The yield is calculated by dividing
the net investment income per share for the period by the price per share on
the last day of that period.
TOTAL RETURN
Total return refers to the average annual percentage change in value of an
investment in a fund held for a stated period of time as of a stated ending
date. When a fund has been in operation for the stated period, the total return
for such period will be provided if performance information is quoted. Total
return quotations are expressed as average annual compound rates of return for
each of the periods quoted. They also reflect the deduction of a proportionate
share of a fund's investment advisory fees and direct fund expenses, and assume
that all dividends and capital gains distributions during the period are
reinvested in the fund when made.
26
<PAGE>
DISTRIBUTION ARRANGEMENTS
/question mark/ /dollar sign/ UNDERWRITING
AGREEMENT
The Fund has an Underwriting Agreement with ISI, a registered broker/dealer.
Under this agreement, ISI underwrites and distributes all classes of fund
shares and bears the expenses of offering these shares to the public. The funds
pay ISI fees for its services. Of the distribution and service fees it receives
for Class A and B shares, ISI reallows, or pays, to brokers or dealers who sold
them, 0.25% of the average daily net assets of those shares. In the case of
Class C or M shares, ISI reallows its entire fee to those sellers.
/dollar sign/ DISTRIBUTION PLANS
The Fund has adopted a 12b-1 Plan for each class of shares in each fund in the
series.
DISTRIBUTION OF CLASS A SHARES. ISI receives the sales fees or loads imposed on
these shares (up to 5.50% of the offering price, which includes the sales load)
and reallows a portion of those fees to the sellers of the shares. ISI also
receives fees under a Rule 12b-1 Plan of Distribution. Under its Plan for Class
A shares, the funds may pay ISI a distribution fee of up to 0.35% annually
which includes a service fee of 0.25%. Fees are based on the average daily net
assets of Class A shares. However, if the service fees rise, the distribution
fee is lowered so that the total fees payable don't exceed 0.35% annually.
DISTRIBUTION OF CLASS B SHARES. For these shares, the funds may pay ISI an
annual distribution fee of up to 1.00% which includes an annual service fee of
0.25%.
DISTRIBUTION OF CLASS C SHARES. For these shares, the funds may pay ISI an
annual distribution fee of up to 1.00% which includes an annual service fee of
0.25%.
DISTRIBUTION OF CLASS M SHARES. The fees paid to ISI for these shares may go as
high as the Class B and C shares fees, but the total annual fee may not exceed
0.90% of the average daily net assets of the funds.
CLASS T SHARES (IDEX JCC GROWTH ONLY). This class of shares does not have a
12b-1 Plan of Distribution, and is closed to new shareholders.
THE EFFECT OF RULE 12B-1. Because the funds have 12b-1 Plans, even though Class
B and C shares do not carry an up-front sales load, the higher distribution and
service fees payable by those shares may, over time, be higher than the total
fees paid by owners of Class A and M shares. For a complete description of the
funds' 12b-1 Plans, see the SAI.
27
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU TO UNDERSTAND EACH
FUND'S PERFORMANCE FOR AS LONG AS IT HAS BEEN OPERATING, OR FOR FIVE YEARS,
WHICHEVER IS SHORTER. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A
SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE AN
INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN THE FUND FOR THE
PERIOD SHOWN, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. THIS
INFORMATION THROUGH OCTOBER 31, 1999 HAS BEEN DERIVED FROM FINANCIAL STATEMENTS
AUDITED BY PRICEWATERHOUSECOOPERS LLP, WHOSE REPORT, ALONG WITH THE FUND'S
FINANCIAL STATEMENTS, IS INCLUDED IN THE 1999 ANNUAL REPORT, WHICH IS AVAILABLE
TO YOU UPON REQUEST.
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS
----------------------------------------
NET ASSET NET
YEAR OR VALUE INVESTMENT NET REALIZED
PERIOD BEGINNING INCOME & UNREALIZED TOTAL
ENDED OF PERIOD (LOSS)(9) GAIN (LOSS) OPERATIONS
-------------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
IDEX JCC CAPITAL Class A 10/31/99 $16.97 $ 0.05 $ 15.88 $ 15.93
APPRECIATION 10/31/98 15.90 0.01 1.51 1.52
10/31/97 15.49 0.04 0.58 0.62
10/31/96 (2) 15.75 (0.02) (0.24) (0.26)
09/30/96 (3) 13.54 (0.02) 3.12 3.10
09/30/95 (4) 10.00 (0.03) 3.57 3.54
------------- ------ -------- ------- -------
Class B 10/31/99 16.72 (0.28) 15.88 15.60
10/31/98 15.74 (0.08) 1.51 1.43
10/31/97 15.42 (0.05) 0.58 0.53
10/31/96 (2) 15.69 (0.03) (0.24) (0.27)
09/30/96 13.49 (0.10) 3.12 3.02
-------- ------ -------- ------- -------
Class M 10/31/99 (1) 16.76 (0.23) 15.88 15.65
10/31/98 15.77 (0.07) 1.51 1.44
10/31/97 15.43 (0.03) 0.58 0.55
10/31/96 (2) 15.70 (0.03) (0.24) (0.27)
09/30/96 (3) 13.49 (0.08) 3.12 3.04
09/30/95 (4) 10.00 (0.08) 3.57 3.49
------------- ------ -------- ------- -------
IDEX ALGER Class A 10/31/99 $22.24 $ 0.17 $ 11.82 $ 11.99
AGGRESSIVE 10/31/98 18.77 0.03 4.02 4.05
GROWTH 10/31/97 15.70 0.05 3.69 3.74
10/31/96 (2) 15.75 (0.01) (0.04) (0.05)
09/30/96 (3) 17.68 (0.15) (0.76) (0.91)
09/30/95 (4) 10.00 (0.14) 7.82 7.68
------------- ------ -------- ------- -------
Class B 10/31/99 21.93 (0.13) 11.82 11.69
10/31/98 18.58 (0.09) 4.02 3.93
10/31/97 15.58 (0.02) 3.69 3.67
10/31/96 (2) 15.63 (0.01) (0.04) (0.05)
09/30/96 (3) 17.64 (0.23) (0.76) (0.99)
------------- ------ -------- ------- -------
Class M 10/31/99 (1) 21.98 (0.09) 11.82 11.73
10/31/98 18.61 (0.07) 4.02 3.95
10/31/97 15.60 (0.01) 3.69 3.68
10/31/96 (2) 15.65 (0.01) (0.04) (0.05)
09/30/96 (3) 17.64 (0.21) (0.76) (0.97)
09/30/95 (4) 10.00 (0.18) 7.82 7.64
------------- ------ -------- ------- -------
<CAPTION>
DISTRIBUTIONS
---------------------------------------
FROM NET
FROM NET REALIZED
INVESTMENT CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
------------ ----------- --------------
<S> <C> <C> <C>
IDEX JCC CAPITAL $ -- $ (1.81) $ (1.81)
APPRECIATION -- (0.45) (0.45)
-- (0.21) (0.21)
-- -- --
(0.07) (0.82) (0.89)
-- -- --
-------- ------- -------
-- (1.81) (1.81)
-- (0.45) (0.45)
-- (0.21) (0.21)
-- -- --
-- (0.82) (0.82)
-------- ------- -------
-- (1.81) (1.81)
-- (0.45) (0.45)
-- (0.21) (0.21)
-- -- --
(0.01) (0.82) (0.83)
-- -- --
-------- ------- -------
IDEX ALGER $ -- $ (1.18) $ (1.18)
AGGRESSIVE -- (0.58) (0.58)
GROWTH -- (0.67) (0.67)
-- -- --
-- (1.02) (1.02)
-- -- --
-------- ------- -------
-- (1.18) (1.18)
-- (0.58) (0.58)
-- (0.67) (0.67)
-- -- --
-- (1.02) (1.02)
-------- ------- -------
-- (1.18) (1.18)
-- (0.58) (0.58)
-- (0.67) (0.67)
-- -- --
-- (1.02) (1.02)
-- -- --
-------- ------- -------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET
ASSETS(9)(10) NET INVESTMENT
NET ASSET NET ASSETS ----------------------------------- INCOME (LOSS) PORTFOLIO
VALUE AT END TOTAL AT END OF EXCLUDING INCLUDING TO AVERAGE TURNOVER
OF PERIOD RETURN(8) PERIOD (000'S) CREDITS GROSS CREDITS NET ASSETS(9)(10) RATE
-------------- ----------- ---------------- ----------- ------- ----------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$31.09 102.19% $ 74,614 1.84% 2.02% 1.84% (1.55)% 93.54%
16.97 9.87 23,798 1.85 2.24 1.85 (1.37) 136.59
15.90 4.09 20,605 1.85 2.66 1.85 (1.27) 130.48
15.49 (1.59) 19,350 1.85 2.48 1.85 (1.41) 10.11
15.75 24.35 18,713 1.85 2.72 1.85 (0.35) 160.72
13.54 35.40 6,241 2.90 4.17 2.85 0.75 262.97
------ ------ -------- ---- ---- ---- ----- ------
30.51 101.72 36,467 2.49 2.67 2.49 (2.20) 93.54
16.72 9.35 3,734 2.50 2.89 2.50 (2.02) 136.59
15.74 3.56 2,866 2.50 3.31 2.50 (1.92) 130.48
15.42 (1.66) 2,132 2.50 3.13 2.50 (2.06) 10.11
15.69 23.63 2,022 2.50 3.37 2.50 (1.00) 160.72
------ ------ -------- ---- ---- ---- ----- ------
30.60 101.79 10,062 2.39 2.57 2.39 (2.10) 93.54
16.76 9.43 1,382 2.40 2.79 2.40 (1.92) 136.59
15.77 3.64 1,751 2.40 3.21 2.40 (1.82) 130.48
15.43 (1.66) 2,243 2.40 3.03 2.40 (1.96) 10.11
15.70 23.81 2,369 2.40 3.27 2.40 (0.90) 160.72
13.49 34.90 2,565 3.45 4.72 3.40 0.20 262.97
------ ------ -------- ---- ---- ---- ----- ------
33.05 55.49 100,078 1.61 1.90 1.61 (1.15) 96.25
22.24 22.48 46,413 1.85 2.18 1.85 (1.11) 142.08
18.77 24.71 31,260 1.85 2.44 1.85 (1.07) 120.96
15.70 (0.32) 21,938 1.85 2.62 1.85 (1.06) 9.40
15.75 (4.91) 22,078 1.85 2.60 1.85 (1.15) 127.49
17.68 76.80 16,747 2.85 3.35 2.85 (2.39) 88.28
------ ------ -------- ---- ---- ---- ----- ------
32.44 54.88 47,399 2.26 2.55 2.26 (1.80) 96.25
21.93 22.04 10,564 2.50 2.83 2.50 (1.76) 142.08
18.58 24.47 4,880 2.50 3.09 2.50 (1.71) 120.96
15.58 (0.32) 1,992 2.50 3.27 2.50 (1.71) 9.40
15.63 (5.33) 1,800 2.50 3.25 2.50 (1.80) 127.49
------ ------ -------- ---- ---- ---- ----- ------
32.53 54.97 18,538 2.16 2.45 2.16 (1.70) 96.25
21.98 22.11 5,573 2.40 2.73 2.40 (1.66) 142.08
18.61 24.50 3,468 2.40 2.99 2.40 (1.62) 120.96
15.60 (0.32) 2,129 2.40 3.17 2.40 (1.62) 9.40
15.65 (5.22) 2,250 2.40 3.15 2.40 (1.70) 127.49
17.64 76.40 1,736 3.40 3.91 3.40 (2.94) 88.28
------ ------ -------- ---- ---- ---- ----- ------
</TABLE>
Please see notes to financial highlights on page 32
29
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS DISTRIBUTIONS
---------------------------------------- -------------------------------------
NET ASSET NET FROM NET
YEAR OR VALUE INVESTMENT NET REALIZED FROM NET REALIZED
PERIOD BEGINNING INCOME & UNREALIZED TOTAL INVESTMENT CAPITAL TOTAL
ENDED OF PERIOD (LOSS)(9) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS
----------------- ----------- ------------ -------------- ------------ ------------ --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IDEX JCC CLASS A 10/31/99 (7) $24.09 $ 0.22 $ 9.49 $ 9.71 $ -- $ -- $ --
GLOBAL 10/31/98 (3) 23.74 0.08 2.34 2.42 -- (2.07) (2.07)
10/31/97 21.39 0.07 4.38 4.45 -- (2.10) (2.10)
10/31/96 (2) 21.40 (0.02) 0.01 (0.01) -- -- --
09/30/96 17.73 (0.09) 4.38 4.29 -- (0.62) (0.62)
09/30/95 15.93 (0.06) 2.42 2.36 -- (0.56) (0.56)
-------- ------ ------- ------- ------- ------- ------- -------
CLASS B 10/31/99 (7) 23.62 (0.13) 9.49 9.36 -- -- --
10/31/98 (3) 23.38 (0.03) 2.34 2.31 -- (2.07) (2.07)
10/31/97 21.13 (0.03) 4.38 4.35 -- (2.10) (2.10)
10/31/96 (2) 21.14 (0.02) 0.01 (0.01) -- -- --
09/30/96 17.57 (0.19) 4.38 4.19 -- (0.62) (0.62)
-------- ------ ------- ------- ------- ------- ------- -------
CLASS M 10/31/99 (1)(7)23.56 (0.14) 9.49 9.35 -- -- --
10/31/98 (3) 23.30 (0.01) 2.34 2.33 -- (2.07) (2.07)
10/31/97 21.03 (0.01) 4.38 4.37 -- (2.10) (2.10)
10/31/96 (2) 21.04 (0.02) 0.01 (0.01) -- -- --
09/30/96 17.46 (0.18) 4.38 4.20 -- (0.62) (0.62)
09/30/95 15.74 (0.14) 2.42 2.28 -- (0.56) (0.56)
-------- ------ ------- ------- ------- ------- ------- -------
IDEX JCC CLASS A 10/31/99 29.35 0.06 17.70 17.76 -- (0.39) (0.39)
GROWTH 10/31/98 25.04 (0.02) 7.64 7.62 -- (3.31) (3.31)
10/31/97 21.97 (0.02) 3.56 3.54 -- (0.47) (0.47)
10/31/96 (2) 22.21 -- (0.24) (0.24) -- -- --
09/30/96 22.84 (0.11) 4.66 4.55 -- (5.18) (5.18)
09/30/95 16.78 (0.05) 6.18 6.13 -- (0.07) (0.07)
-------- ------ ------- ------- ------- ------- ------- -------
CLASS B 10/31/99 28.63 (0.56) 17.70 17.14 -- (0.39) (0.39)
10/31/98 24.55 (0.25) 7.64 7.39 -- (3.31) (3.31)
10/31/97 21.60 (0.14) 3.56 3.42 -- (0.47) (0.47)
10/31/96 (2) 21.85 (0.01) (0.24) (0.25) -- -- --
09/30/96 22.64 (0.27) 4.66 4.39 -- (5.18) (5.18)
-------- ------ ------- ------- ------- ------- ------- -------
CLASS M 10/31/99 (1) 28.74 (0.47) 17.70 17.23 -- (0.39) (0.39)
10/31/98 24.62 (0.21) 7.64 7.43 -- (3.31) (3.31)
10/31/97 21.65 (0.12) 3.56 3.44 -- (0.47) (0.47)
10/31/96 (2) 21.91 (0.02) (0.24) (0.26) -- -- --
09/30/96 22.64 (0.21) 4.66 4.45 -- (5.18) (5.18)
09/30/95 16.68 (0.15) 6.18 6.03 -- (0.07) (0.07)
-------- ------ ------- ------- ------- ------- ------- -------
CLASS T 10/31/99 29.74 0.40 17.70 18.10 -- (0.39) (0.39)
10/31/98 (3) 25.31 0.13 7.64 7.77 (0.03) (3.31) (3.34)
10/31/97 22.17 0.05 3.56 3.61 -- (0.47) (0.47)
10/31/96 (2) 22.41 -- (0.24) (0.24) -- -- --
09/30/96 (6) 22.23 -- 0.18 0.18 -- -- --
---------------- ------ ------- ------- ------- ------- ------- -------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET
ASSETS(9)(10) NET INVESTMENT
NET ASSET NET ASSETS ----------------------------------- INCOME (LOSS) PORTFOLIO
VALUE AT END TOTAL AT END OF EXCLUDING INCLUDING TO AVERAGE TURNOVER
OF PERIOD RETURN(8) PERIOD (000'S) CREDITS GROSS CREDITS NET ASSETS(9)(10) RATE
-------------- ----------- ---------------- ----------- ------- ----------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$33.80 40.31% $ 487,787 1.73% --% 1.73% (0.22)% 145.40%
24.09 11.30 296,450 1.82 -- 1.82 (0.45) 87.68
23.74 22.72 218.681 1.91 -- 1.91 (0.50) 91.02
21.39 (0.05) 135,837 2.08 -- 2.07 (1.15) 2.59
21.40 25.04 131,347 2.09 -- 2.06 (0.67) 97.94
17.73 15.47 89,397 2.10 -- 1.97 (0.43) 161.48
------ ----- ---------- ---- -- ---- ------------ ------
32.98 39.62 283,847 2.38 -- 2.38 (0.87) 145.40
23.62 10.93 110,630 2.47 -- 2.47 (1.10) 87.68
23.38 22.53 43,951 2.56 -- 2.56 (1.15) 91.02
21.13 (0.05) 5,966 2.73 -- 2.72 (1.80) 2.59
21.14 24.70 5,000 2.74 -- 2.71 (1.32) 97.94
------ ----- ---------- ---- -- ---- ------------ ------
32.91 39.73 155,147 2.28 -- 2.28 (0.77) 145.40
23.56 11.08 63,552 2.37 -- 2.37 (1.00) 87.68
23.30 22.72 27,210 2.46 -- 2.46 (1.05) 91.02
21.03 (0.05) 8,624 2.63 -- 2.62 (1.70) 2.59
21.04 24.91 8,081 2.64 -- 2.61 (1.22) 97.94
17.46 15.14 3,567 2.65 -- 2.52 (0.98) 161.48
------ ----- ---------- ---- -- ---- ------------ ------
46.72 61.00 1,467,595 1.40 1.43 1.40 (0.60) 70.97
29.35 35.21 817,749 1.51 -- 1.51 (0.55) 27.19
25.04 16.40 614,544 1.61 -- 1.61 (0.10) 91.52
21.97 (1.09) 565,032 1.68 -- 1.68 (0.13) 9.40
22.21 22.41 567,564 1.83 -- 1.82 (0.22) 57.80
22.84 36.70 485,935 1.86 -- 1.84 (0.26) 123.26
------ ----- ---------- ---- ---- ---- ------------ ------
45.38 60.36 327,926 2.05 2.08 2.05 (1.25) 70.97
28.63 34.96 40,809 2.16 -- 2.16 (1.20) 27.19
24.55 16.11 13,046 2.26 -- 2.26 (0.75) 91.52
21.60 (1.14) 5,242 2.32 -- 2.32 (0.78) 9.40
21.85 21.87 4,536 2.46 -- 2.45 (0.86) 57.80
------ ----- ---------- ---- ---- ---- ------------ ------
45.58 60.45 141,586 1.95 1.98 1.95 (1.15) 70.97
28.74 35.00 58,265 2.06 -- 2.06 (1.10) 27.19
24.62 16.19 14,295 2.16 -- 2.16 (0.65) 91.52
21.65 (1.19) 11,016 2.23 -- 2.23 (0.68) 9.40
21.91 22.15 11,167 2.34 -- 2.33 (0.77) 57.80
22.64 36.32 5,593 2.41 -- 2.38 (0.81) 123.26
------ ----- ---------- ---- ---- ---- ------------ ------
47.45 61.34 1,166,965 1.05 1.08 1.05 (0.25) 70.97
29.74 35.53 755,770 1.16 -- 1.16 (0.20) 27.19
25.31 16.54 603,129 1.26 -- 1.26 (0.25) 91.52
22.17 (1.03) 573,884 1.33 -- 1.33 (0.20) 9.40
22.41 0.81 585,505 1.18 -- 1.17 (0.36) 57.80
------ ----- ---------- ---- ---- ---- ------------ ------
</TABLE>
Please see notes to financial highlights on page 32
31
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
(1) On March 1, 1999, the Fund changed the load and expense structure of C
Shares and renamed them M Shares.
(2) For the month ended October 31, 1996. On October 1, 1996, each Fund changed
its fiscal year end from September 30 to October 31.
(3) Distributions from net realized capital gains include distributions in
excess of current net realized capital gains for IDEX Alger Aggressive
Growth Classes A, B and M, for the period ended 9/30/96, in the amount of
$1.02 and for IDEX JCC Global Classes A, B and M, for the period ended
10/31/98 in the amount of $0.17. Dividends from net investment income
include distributions in excess of current net investment income for IDEX
JCC Capital Appreciation Classes A and M, for the period ended 9/30/96 in
the amount of $0.01 and for IDEX JCC Growth Class T for the period ended
10/31/98 in the amount of $0.03.
(4) From commencement of investment operations, December 2, 1994.
(5) From commencement of investment operations, February 1, 1997.
(6) From commencement of investment operations, September 20, 1996.
(7) Net investment income, the ratio of net investment income to average net
assets and the portfolio turnover rate reflect activity relating to a non
recurring initiative to invest in dividend producing securities.
(8) Total return has been calculated for the applicable period without
deduction of a sales load, if any, on an initial purchase for Class A or
Class T Shares. Periods of less than one year are not annualized.
(9) Ratio of expenses to average net assets shows: Excluding Credits (total
expenses less fee waivers and reimbursemenbts by the investment adviser).
Gross (total expenses not taking into account fee waivers and
reimbursements by the investment adviser or affiliated brokerage and
custody earnings credits, if any). Including Credits (expenses less fee
waivers and reimbursements by the investment adviser and reduced by
affiliated brokerage and custody earnings credits, if any). Net Investment
Income (Loss) Net Investment Income prior to certain reclassifications for
Federal income or excise taxes.
(10) Periods of less than one year are annualized. The ratio of Net Investment
Income (Loss) to Average Net Assets is based upon Net Investment Income
(Loss) prior to certain reclassifications as discussed in Note 1 of the
Notes to the Financial Statements.
32
<PAGE>
BOND RATINGS
APPENDIX A
BRIEF EXPLANATION OF RATING CATEGORIES
<TABLE>
<CAPTION>
BOND RATING EXPLANATION
------------- ----------------------------------------------------------------------------
<S> <C> <C>
STANDARD & POOR'S CORPORATION AAA Highest rating; extremely strong capacity to pay principal and interest.
AA High quality; very strong capacity to pay principal and interest.
A Strong capacity to pay principal and interest; somewhat more susceptible
to the adverse effects of changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest; normally exhibit adequate
protection parameters, but adverse economic conditions or changing
circumstances more likely to lead to a weakened capacity to pay principal
and interest than for higher rated bonds.
Predominantly speculative with respect to the issuer's capacity to meet
BB,B, and
CC,CC,C required interest and principal payments. BB - lowest degree of
speculation; C - the highest degree of speculation. Quality and protective
characteristics outweighed by large uncertainties or major risk exposure to
adverse conditions.
D In default.
</TABLE>
PLUS (+) OR MINUS (-) -The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to
show relative standing within the major rating categories.
UNRATED - Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
<TABLE>
<S> <C> <C>
MOODY'S INVESTORS SERVICE, INC. Aaa Highest quality, smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the high-grade bond
group.
A Upper-medium grade obligations; many favorable investment attributes.
Baa Medium-grade obligations; neither highly protected nor poorly secured.
Interest and principal appear adequate for the present but certain
protective elements may be lacking or may be unreliable over any great
length of time.
Ba More uncertain, with speculative elements. Protection of interest
and principal payments not well safeguarded during good and bad
times.
B Lack characteristics of desirable investment; potentially low assurance of
timely interest and principal payments or maintenance of other contract
terms over time.
Caa Poor standing, may be in default; elements of danger with respect to
principal or interest payments.
Ca Speculative in a high degree; could be in default or have other marked
short- comings.
C Lowest-rated; extremely poor prospects of ever attaining investment
standing.
</TABLE>
UNRATED - Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if
a bond is called for redemption; or for other reasons.
A-1
<PAGE>
IDEX MUTUAL FUNDS
570 Carillon Parkway
St. Petersburg, Florida, 33716-1202
<TABLE>
<CAPTION>
INVESTMENT ADVISER: CUSTODIAN:
<S> <C>
IDEX Management, Inc. State Street Bank & Trust Co.
570 Carillon Parkway
St. Petersburg, Forida 33716-1202
</TABLE>
<TABLE>
<CAPTION>
INDEPENDENT CERTIFIED PUBLIC
DISTRIBUTOR: ACCOUNTANTS:
<S> <C>
InterSecurities, Inc. PricewaterhouseCoopers LLP
570 Carillon Parkway 400 N. Ashley Street, Suite 2800
St. Petersburg, Florida, 33716-1201 Tampa, Florida 33602-4319
</TABLE>
SUB-ADVISERS:
<TABLE>
<S> <C>
FRED ALGER MANAGEMENT, INC. JANUS CAPITAL CORPORATION
One World Trade Center, Suite 9333 100 Fillmore Street,
New York, New York 10048-9301 Denver, Colorado 80206-4928
</TABLE>
<TABLE>
<CAPTION>
SEND YOUR CORRESPONDENCE TO: CUSTOMER SERVICE:
<S> <C>
Idex Investor Services, Inc. (888) 233-IDEX (4339) toll free call
P.O. Box 9015 Hours: 8 a.m. to 8 p.m. Monday - Friday
Clearwater, Florida 33758-9015
</TABLE>
IDEX WEBSITE: WWW.IDEXFUNDS.COM
<PAGE>
ADDITIONAL INFORMATION about these funds is contained in the Funds annual and
semi-annual reports to shareholders, and in the Statement of Additional
Information, dated March 1, 2000 which is incorporated by reference into this
prospectus. Other information about these funds has been filed with and is
available from the U.S. Securities and Exchange Commission. Information about
the Funds (including the Statement of Additional Information) can be reviewed
and copied at the Securities and Exchange Commissions Public Reference Room in
Washington, D.C. Information on the operation of the public reference room may
be obtained by calling the Commission at 1-202-942-8090. Copies of this
information may be obtained, upon payment of a duplicating fee, by writing the
Public Reference Section of the Commission, Washington, D.C. 20549-6009. Reports
and other information about the funds are also available on the Commissions
Internet site at http://www.sec.gov. (IDEX Mutual Funds File No. 811-4556) To
obtain a copy of the Statement of Additional Information or the Annual and
Semi-Annual Reports, without charge, or to make other inquiries about these
funds, call or write to IDEX Mutual Funds at the phone number or address at the
bottom of this page. In the Funds annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Funds performance during the last fiscal year.
Visit our website at www.idexfunds.com
IDEX Mutual Funds o P. O. Box 9015 o Clearwater, FL o 33758-9015
Customer Service 1-888-233-4339 o Investment Professionals 1-800-624-4339
Distributor: InterSecurities, Inc.
ISF00002-3/2000 2000 InterSecurities, Inc.
<PAGE>
IDEX MUTUAL FUNDS
IDEX JCC GROWTH
IDEX JCC GLOBAL
IDEX JCC CAPITAL APPRECIATION
IDEX ALGER AGGRESSIVE GROWTH
STATEMENT OF ADDITIONAL INFORMATION
JUNE 15, 2000
AS REVISED AUGUST 10, 2000
IDEX MUTUAL FUNDS
570 Carillon Parkway
St. Petersburg, Florida 33716
Customer Service (888) 233-4339 (toll free)
The funds listed above are series of IDEX Mutual Funds (the "Fund"), an
open-end management investment company that offers a selection of investment
funds. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). All funds, other than the IDEX JCC Capital
Appreciation, are diversified.
This Statement of Additional Information is not a prospectus, and should be read
in conjunction with the Fund's prospectus dated June 15, 2000, as revised August
10, 2000, which may be obtained free of charge by writing or calling the Fund at
the above address or telephone number. This Statement of Additional Information
("SAI") contains additional and more detailed information about the Fund's
operations and activities than that set forth in the prospectus. The Fund's
annual report and semi-annual report to shareholders are incorporated by
reference into this SAI.
This Statement of Additional Information is only for use in Germany.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
INVESTMENT OBJECTIVES ..................................................... 1
Investment Restrictions, Policies and Practices ........................... 1
Investment Restrictions of IDEX JCC Growth ............................... 1
Investment Restrictions of IDEX JCC Global ............................... 2
Investment Restrictions of IDEX JCC Capital Appreciation ................. 3
Investment Restrictions of IDEX Alger Aggressive Growth .................. 5
OTHER POLICIES AND PRACTICES OF THE FUND .................................. 6
Futures, Options and Other Derivative Instruments ........................ 6
Futures Contracts ....................................................... 6
Options on Futures Contracts ............................................ 9
Options on Securities ................................................... 9
Options on Foreign Currencies ........................................... 12
Forward Contracts ....................................................... 13
Swaps and Swap-Related Products ......................................... 14
Index Options ........................................................... 15
WEBS and Other Index-Related Securities ................................. 16
Euro Instruments ........................................................ 16
Special Investment Considerations and Risks ............................. 16
Additional Risks of Options on Foreign Currencies,
Forward Contracts and Foreign Instruments ............................. 17
Other Investment Companies ............................................... 18
When-Issued, Delayed Settlement and Forward Delivery Securities .......... 18
Zero Coupon, Pay-In-Kind and Step Coupon Securities ...................... 18
Lending of Fund Securities ............................................... 19
Joint Trading Accounts ................................................... 19
Illiquid Securities ...................................................... 19
Repurchase and Reverse Repurchase Agreements ............................. 20
Pass-Through Securities .................................................. 20
High-Yield/High-Risk Bonds ............................................... 21
Warrants and Rights ...................................................... 22
U.S. Government Securities ............................................... 22
Temporary Defensive Position ............................................. 22
Turnover Rate ............................................................ 22
Investment Advisory and Other Services ................................... 23
DISTRIBUTOR ............................................................... 25
ADMINISTRATIVE SERVICES ................................................... 25
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES ............................ 25
FUND TRANSACTIONS AND BROKERAGE ........................................... 27
TRUSTEES AND OFFICERS ..................................................... 29
PURCHASE OF SHARES ........................................................ 32
DEALER REALLOWANCES ....................................................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
------------------
<S> <C>
DISTRIBUTION PLANS .................................................. 34
DISTRIBUTION FEES ................................................... 35
NET ASSET VALUE DETERMINATION ....................................... 35
DIVIDENDS AND OTHER DISTRIBUTIONS ................................... 36
SHAREHOLDER ACCOUNTS ................................................ 36
RETIREMENT PLANS .................................................... 36
REDEMPTION OF SHARES ................................................ 37
TAXES ............................................................... 38
PRINCIPAL SHAREHOLDERS .............................................. 39
MISCELLANEOUS ....................................................... 39
Organization ....................................................... 39
Shares of Beneficial Interest ...................................... 40
Legal Counsel and Auditors ......................................... 40
Registration Statement ............................................. 40
PERFORMANCE INFORMATION ............................................. 40
FINANCIAL STATEMENTS ................................................ 42
APPENDIX A-CERTAIN SECURITIES IN WHICH THE FUNDS MAY INVEST ......... A-1
</TABLE>
ii
<PAGE>
INVESTMENT OBJECTIVES
The prospectus discusses the investment objective of each fund of the IDEX
Mutual Funds, the principal types of securities in which each fund will invest,
and the policies and practices of each fund. The following discussion of
Investment Restrictions, Policies and Practices supplements that set forth in
the prospectus.
There can be no assurance that a fund will, in fact, achieve its objective. A
fund's investment objective may be changed by the Board of Trustees without
shareholder approval. A change in the investment objective of a fund may result
in the fund having an investment objective different from that which the
shareholder deemed appropriate at the time of investment. A fund will not
change its objective without 30 days prior notice to its shareholders, nor will
it charge shareholders an exchange fee or redemption fee after such notice and
prior to the expiration of such 30-day notice period. However, should a
shareholder decide to redeem fund shares because of a change in the objective,
the shareholder may realize a taxable gain or loss.
INVESTMENT RESTRICTIONS, POLICIES
AND PRACTICES
As indicated in the prospectus, each fund is subject to certain fundamental
policies and restrictions which as such may not be changed without shareholder
approval. Shareholder approval would be the approval by the lesser of (i) more
than 50% of the outstanding voting securities of a fund, or (ii) 67% or more of
the voting securities present at a meeting if the holders of more than 50% of
the outstanding voting securities of a fund are present or represented by
proxy.
INVESTMENT RESTRICTIONS OF
IDEX JCC GROWTH
IDEX JCC Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than cash items and "government securities"
as defined under the 1940 Act), if immediately after and as a result of such
purchase (a) the value of the holdings of the fund in the securities of such
issuer exceeds 5% of the value of the fund's total assets, or (b) the fund owns
more than 10% of the outstanding voting securities of such issuer;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the fund from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of portfolio securities of the fund;
6. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements or deposits of
assets to provide margin or guarantee positions in connection with transactions
in options, futures contracts, swaps, forward contracts, and other derivative
instruments or the segregation of assets in connection with such transactions;
and
8. Issue senior securities, except as permitted by the 1940 Act.
As a fundamental policy governing concentration, the fund will not invest 25%
or more of its total assets in any one particular industry, other than U.S.
government securities.
Furthermore, each fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) A fund may not: (i) enter into any futures contracts or options on
futures contracts for purposes other
1
<PAGE>
than bona fide hedging transactions within the meaning of Commodity Futures
Trading Commission regulations if the aggregate initial margin deposits and
premiums required to establish positions in futures contracts and related
options that do not fall within the definition of bona fide hedging
transactions would exceed 5% of the fair market value of the fund's net assets,
after taking into account unrealized profits and losses on such contracts it
has entered into; and (ii) enter into any futures contracts or options on
futures contracts if the aggregate amount of the fund's commitments under
outstanding futures contracts positions and options on futures contracts would
exceed the market value of its total assets;
(B) A fund may not mortgage or pledge any securities owned or held by the
fund in amounts that exceed, in the aggregate, 15% of the fund's net assets,
provided that this limitation does not apply to reverse repurchase agreements
or in the case of assets deposited to provide margin or guarantee positions in
options, futures contracts, swaps, forward contracts or other derivative
instruments or the segregation of assets in connection with such transactions;
(C) A fund may not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts, and other derivative instruments are not deemed to
constitute selling securities short;
(D) A fund may not purchase securities on margin, except that each fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits made in
connection with transactions in options, futures contracts, swaps, forward
contracts, and other derivative instruments shall not be deemed to constitute
purchasing securities on margin;
(E) A fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 (the "1933 Act"), or any successor
to such Rule, Section 4(2) commercial paper or any securities which the Board
of Trustees or the investment sub-adviser, as appropriate, has made a
determination of liquidity, as permitted under the 1940 Act;
(F) A fund may not invest in companies for the purpose of exercising
control or management;
(G) A fund may not (i) purchase securities of other investment companies,
except in the open market where no commission except the ordinary broker's
commission is paid, or (ii) purchase or retain securities issued by other
open-end investment companies. Limitations (i) and (ii) do not apply to money
market funds or to securities received as dividends, through offers of
exchange, or as a result of consolidation, merger or other reorganization; and
(H) A fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
INVESTMENT RESTRICTIONS OF
IDEX JCC GLOBAL
IDEX JCC Global may not, as a matter of fundamental policy:
1. Own more than 10% of the outstanding voting securities of any one
issuer and, as to seventy-five percent (75%) of the value of its total assets,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the 1940 Act), if immediately after and as a
result of such purchase, (a) the value of the holdings of the fund in the
securities of such issuer exceeds 5% of the value of the fund's total assets;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Invest directly in real estate or interests in real estate; however,
the fund may own debt or equity securities issued by companies engaged in those
businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the fund from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities);
5. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
2
<PAGE>
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities;
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements or deposits of
assets to margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such contracts; and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not (i) enter into any futures contracts or options on
futures contracts for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the fund's net assets, after taking into account unrealized profits and losses
on such contracts it has entered into; and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the fund's
commitments under outstanding futures contracts positions and options on
futures contracts would exceed the market value of its total assets;
(B) The fund may not sell securities short, unless it owns or has the
right, without the payment of any additional compensation, to obtain securities
equivalent in kind and amount to the securities sold short, and provided that
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short;
(C) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in options, futures, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(E) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions;
(F) The fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(G) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees have
made a determination as to liquidity, as permitted under the 1940 Act; and
(H) The fund may not invest in companies for the purpose of exercising
control or management.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX JCC CAPITAL APPRECIATION
IDEX JCC Capital Appreciation may not, as a matter of fundamental policy:
1. With respect to 50% of its total assets, purchase the securities of
any one issuer (except cash items and
3
<PAGE>
"government securities" as defined under the 1940 Act), if immediately after
and as a result of such purchase (a) the value of the holdings of the fund in
the securities of such issuer exceeds 5% of the value of such fund's total
assets, or (b) the fund owns more than 10% of the outstanding voting securities
of such issuer. With respect to the remaining 50% of the value of its total
assets, IDEX JCC Capital Appreciation may invest in the securities of as few as
two issuers;
2. Invest more than 25% of the value of its assets in any particular
industry (other than U.S. government securities);
3. Invest directly in real estate or interests in real estate; however, a
fund may own debt or equity securities issued by companies engaged in those
businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent a fund from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed
by physical commodities);
5. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or repurchase
agreements);
6. Act as underwriter of securities issued by others, except to the
extent that a fund may be deemed an underwriter in connection with the
disposition of portfolio securities of that fund;
7. The fund may borrow money for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 25% of the value of the
fund's total assets (including the amount borrowed) less liabilities (other
than borrowings). Borrowings that exceed 25% of the value of the fund's total
assets by reason of a decline in net assets will reduce within three business
days to the extent necessary to comply with the 25% limitation. This policy
shall not prohibit reverse repurchase agreements, or deposits of assets to
margin or guarantee positions in futures, options, swaps or forward contracts,
and the segregation of assets in connection with such contracts; and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the funds have adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) A fund may not: (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission regulations if the aggregate
initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of a fund's
net assets, after taking into account unrealized profits and unrealized losses
on any such contracts it has entered into; and (ii) enter into any futures
contracts if the aggregate amount of such fund's commitments under outstanding
futures contracts positions of that fund's would exceed the market value of its
total assets;
(B) A fund may not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold short
without the payment of any additional consideration therefore, and provided
that transactions in futures, options, swaps and forward contracts are not
deemed to constitute selling securities short;
(C) A fund may not purchase securities on margin, except that a fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in futures, options, contracts, swaps, and forward
contracts, shall not be deemed to constitute purchasing securities on margin;
(D) A fund may not (i) purchase securities of other investment companies,
except in the open market where no commission except the ordinary broker's
commission is paid, or (ii) purchase or retain securities issued by other
open-end investment companies. Limitations
(i) and (ii) do not apply to money market funds or to securities received as
dividends, through offers of exchange, or as a result of consolidation, merger
or other reorganization;
(E) A fund may not mortgage or pledge any securities owned or held by a
fund in amounts that exceed, in the aggregate, 15% of that fund's net asset
value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options, swaps or forward contracts or segregation of assets in connection with
such contracts;
(F) A fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(G) A fund may not purchase any security or enter into a repurchase
agreement, if as a result, more than
4
<PAGE>
15% of its net assets would be invested in repurchase agreements not entitling
the holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees, or the
fund's investment adviser or sub-adviser acting pursuant to authority delegated
by the Trustees, may determine that a readily available market exists for
securities eligible for resale pursuant to Rule 144A under the 1933 Act, or any
successor to such Rule, Section 4(2) commercial paper and municipal lease
obligations. Accordingly, such securities may not be subject to the foregoing
limitation; and
(H) A fund may not invest in companies for the purpose of exercising
control or management.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
INVESTMENT RESTRICTIONS OF
IDEX ALGER AGGRESSIVE GROWTH
IDEX Alger Aggressive Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act), if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
2. Purchase any securities that would cause more than 25% of the value of
the fund's total assets to be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that there
shall be no limit on the purchase of U.S. government securities;
3. Purchase or sell real estate or real estate limited partnerships,
except that the fund may purchase and sell securities secured by real estate,
mortgages or interests therein and securities that are issued by companies that
invest or deal in real estate;
4. Invest in commodities, except that the fund may purchase or sell stock
index futures contracts and related options thereon if thereafter no more than
5% of its total assets are invested in aggregate initial margin and premiums;
5. Make loans to others, except through purchasing qualified debt
obligations, lending fund securities or entering into repurchase agreements;
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its fund securities;
7. Borrow money, except that the fund may borrow from banks for
investment purposes as set forth in the prospectus and may also engage in
reverse repurchase agreements. Immediately after any borrowing, including
reverse repurchase agreements, the fund will maintain asset coverage of not
less than 300% with respect to all borrowings; and
8. Issue senior securities, except that the fund may borrow from banks
for investment purposes so long as the fund maintains the required coverage.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees of the funds without
shareholder approval:
(A) The fund may not sell securities short or purchase securities on
margin, except that the fund may obtain any short-term credit necessary for the
clearance of purchases and sales of securities. These restrictions shall not
apply to transactions involving selling securities "short against the box";
(B) The fund may not pledge, hypothecate, mortgage or otherwise encumber
more than 15% of the value of the fund's total assets except in connection with
borrowings described in number 7 above. These restrictions shall not apply to
transactions involving reverse repurchase agreements or the purchase of
securities subject to firm commitment agreements or on a when-issued basis;
(C) The fund may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to
5
<PAGE>
securities received as dividends, through offers of exchange, or as a result of
consolidation, merger or other reorganization;
(E) The fund may not invest in companies for the purpose of exercising
control or management; and
(F) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees has
made a determination as to liquidity, as permitted under the 1940 Act.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
Shares of IDEX JCC Global, IDEX JCC Growth, IDEX JCC Capital Appreciation and
IDEX Alger Aggressive Growth funds are registered for sale in Germany. As long
as IDEX JCC Global, IDEX JCC Growth, IDEX JCC Capital Appreciation and IDEX
Alger Aggressive Growth funds are registered in Germany, these funds may not
without prior approval of their sharesholders:
(1) Borrow money except for a short period of time and in an amount not
exceeding the aggregate of ten percent of a Portfolio's net asset value.
(2) Create any hypothecate, mortgage, charge, pledge or security interest
in or over any assets of a Portfolio other than for the purposes of securing a
borrowing arrangement permitted under number 1 or for the purpose of complying
with initial and additional margin requirements in connection with transactions
in security and currency options, financial and currency futures, options on
financial and currency futures, options on securities indices, and swaps.
(3) Acquire any investments in any mutual fund or collective investment
scheme or other pool of assets which is invested according to the principle of
risk-spreading irrespective of the legal structure of such pool of assets
(collectively referred to as "pools fo assets"), except in conection with a
plan of merger or consolidation with or acquisition of substantially all the
assets of such pool of assets and with the further exception that up to 5% of
the net asset value of a Portfolio may be invested in such pools of assets
provided it offers its units to the public without limitation on the number of
units and further provided the holders of these units have the right to redeem
their units.
(4) Sell securities short or sell call options on securities unless the
underlying securities of the call option form part of the Portfolio's assets at
the time of selling the call option.
(5) Acquire any investments in any real or immovable property or any
interest therein on any loans secured on any such property or interest provided
that this shall not prevent the acquisition or holding of securities either of
issuers whose holding of such property is merely incidental to their principal
business or of corporate or government entities secured by such property.
These funds will comply with the more restrictive policies required by the
German regulatory authorities, as stated above, as long as such funds are
registered in Germany.
OTHER POLICIES AND PRACTICES OF THE FUNDS
FUTURES, OPTIONS AND OTHER
DERIVATIVE INSTRUMENTS
The following investments are subject to limitations as set forth in each
fund's investment restrictions and policies.
FUTURES CONTRACTS. A fund may enter into futures contracts. Futures contracts
are for the purchase or sale, for future delivery, of equity or fixed-income
securities, foreign currencies or contracts based on financial indices,
including indices of U.S. government securities, foreign government securities
and equity or fixed-income securities. U.S. futures contracts are traded on
exchanges which have been designated "contract markets" by the Commodity
Futures Trading Commission ("CFTC") and must be executed through a Futures
Trading Commission merchant ("FTCM"), or brokerage firm, which is a member of
the relevant contract market. Through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing
members of the exchange.
When a fund buys or sells a futures contract, it must receive or deliver the
underlying instrument (or a cash
6
<PAGE>
payment based on the difference between the underlying instrument's closing
price and the price at which the contract was entered into) at a specified
price on a specified date. Transactions in futures contracts may be made to
attempt to hedge against potential changes in interest or currency exchange
rates, or the price of a security or a securities index which might correlate
with, or otherwise adversely affect, either the value of the fund's securities
or the prices of securities which the fund is considering buying at a later
date.
The buyer or seller of a futures contract is not required to deliver or pay for
the underlying instrument unless the contract is held until the delivery date.
However, both the buyer and seller are required to deposit "initial margin" for
the benefit of the FTCM when the contract is entered into. Initial margin
deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
liquid assets by the fund's custodian for the benefit of the FTCM. Initial
margin payments are similar to good faith deposits or performance bonds.
Unlike margin extended by a securities broker, initial margin payments do not
constitute purchasing securities on margin for purposes of a fund's investment
limitations. If the value of either party's position declines, that party will
be required to make additional "variation margin" payments with the FTCM to
settle the change in value on a daily basis. The party that has a gain may be
entitled to receive all or a portion of this amount. In the event of the
bankruptcy of the FTCM that holds margin on behalf of a fund, that fund may be
entitled to return of the margin owed to such fund only in proportion to the
amount received by the FTCM's other customers. The fund's sub-adviser will
attempt to minimize the risk by careful monitoring of the creditworthiness of
the FTCMs with which a fund does business and by segregating margin payments
with the custodian.
Although a fund would segregate with the custodian cash and liquid assets in an
amount sufficient to cover its open futures obligations, the segregated assets
would be available to that fund immediately upon closing out the futures
position, while settlement of securities transactions could take several days.
However, because a fund's cash that may otherwise be invested would be held
uninvested or invested in liquid assets so long as the futures position remains
open, such fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.
The acquisition or sale of a futures contract may occur, for example, when a
fund holds or is considering purchasing equity or debt securities and seeks to
protect itself from fluctuations in prices or interest rates without buying or
selling those securities. For example, if stock or debt prices were expected to
decrease, a fund might sell equity index futures contracts, thereby hoping to
offset a potential decline in the value of equity securities in the fund by a
corresponding increase in the value of the futures contract position held by
that fund and thereby preventing the fund's net asset value from declining as
much as it otherwise would have.
Similarly, if interest rates were expected to rise, a fund might sell bond
index futures contracts, thereby hoping to offset a potential decline in the
value of debt securities in the fund by a corresponding increase in the value
of the futures contract position held by the fund. A fund also could seek to
protect against potential price declines by selling fund securities and
investing in money market instruments. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an investment
technique allows a fund to maintain a defensive position without having to sell
fund securities.
Likewise, when prices of equity securities are expected to increase, or
interest rates are expected to fall, futures contracts may be bought to attempt
to hedge against the possibility of having to buy equity securities at higher
prices. This technique is sometimes known as an anticipatory hedge. Since the
fluctuations in the value of futures contracts should be similar to those of
equity securities, a fund could take advantage of the potential rise in the
value of equity or debt securities without buying them until the market has
stabilized. At that time, the futures contracts could be liquidated and such
fund could buy equity or debt securities on the cash market. To the extent a
fund enters into futures contracts for this purpose, the segregated assets
maintained to cover such fund's obligations (with respect to futures contracts)
will consist of liquid assets from its portfolio in an amount equal to the
difference between the contract price and the aggregate value of the initial
and variation margin payments made by that fund.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets.
Second, the liquidity of the futures market depends on participants entering
into offsetting transactions rather
7
<PAGE>
than making or taking delivery. To the extent participants decide to make or
take delivery, liquidity in the futures market could be reduced and prices in
the futures market distorted.
Third, from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions.
Due to the possibility of the foregoing distortions, a correct forecast of
general price trends by the fund manager still may not result in a successful
use of futures contracts.
Futures contracts entail risks. Although each of the funds that invests in such
contracts believes that their use will benefit the fund, if the fund
sub-adviser's investment judgment proves incorrect, the fund's overall
performance could be worse than if the fund had not entered into futures
contracts.
For example, if a fund has hedged against the effects of a possible decrease in
prices of securities held in its fund and prices increase instead, that fund
may lose part or all of the benefit of the increased value of the securities
because of offsetting losses in the fund's futures positions. In addition, if a
fund has insufficient cash, it may have to sell securities from its fund to
meet daily variation margin requirements. Those sales may, but will not
necessarily, be at increased prices which reflect the rising market and may
occur at a time when the sales are disadvantageous to the fund.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
a fund will not exactly match that fund's current or potential investments. A
fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests.
For example, by hedging investments in fund securities with a futures contract
based on a broad index of securities may involve a risk that the futures
position will not correlate precisely with such performance of the fund's
investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments correlate with a fund's
investments. Futures prices are affected by factors such as: current and
anticipated short-term interest rates; changes in volatility of the underlying
instruments; and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices.
Imperfect correlations between a fund's investments and its futures positions
may also result from: differing levels of demand in the futures markets and the
securities markets; from structural differences in how futures and securities
are traded; and from imposition of daily price fluctuation limits for futures
contracts.
A fund may buy or sell futures contracts with a greater or lesser value than
the securities it wishes to hedge or is considering purchasing in order to
attempt to compensate for differences in historical volatility between the
futures contract and the securities. This may not be successful in all cases.
If price changes in a fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
may result in losses that are not offset by the gains in that fund's other
investments.
Because futures contracts are generally settled within a day from the date they
are closed out, compared with a settlement period of seven days for some types
of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time.
In addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, such fund's access to other assets held to cover its futures positions
also could be impaired.
Although futures contracts by their terms call for the delivery or acquisition
of the underlying commodities, or a cash payment based on the value of the
underlying commodities, in most cases the contractual obligation is offset
before the delivery date of the contract. This is accomplished by buying, in
the case of a contractual obligation to sell, or selling, in the case of a
contractual obligation to buy, an identical futures contract on a commodities
exchange. Such a transaction cancels the obligation to make or take delivery of
the commodities.
8
<PAGE>
If applicable, each fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the
futures markets. The funds will use futures contracts and related options
primarily for bona fide hedging purposes within the meaning of CFTC
regulations. In addition, the funds may hold positions in futures contracts and
related options that do not fall within the definition of bona fide hedging
transactions, provided that the aggregate initial margin and premiums required
to establish such positions will not exceed 5% of the fair market value of a
fund's net assets, after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into.
IDEX Alger Aggressive Growth may not enter into a futures contract or related
option (except for closing transactions) if, immediately thereafter, the sum of
the amount of its initial margin and premiums on open futures contracts and
options thereon would exceed 5% of IDEX Alger Aggressive Growth's total assets
(taken at current value); however, in the case of an option that is
"in-the-money" at the time of the purchase, the "in-the-money" amount may be
excluded in calculating the 5% limitation. An "in-the-money" call option is any
whose strike price is lower than the current price of the underlying stock.
(The strike price per share for which the underlying stock may be purchased (in
the case of a call) by the option buyer upon exercise of the option contract.)
OPTIONS ON FUTURES CONTRACTS. A fund may buy and write put and call options on
futures contracts. An option on a futures contract gives a fund the right (but
not the obligation) to buy or sell the contract at a specified price on or
before a specified date. Transactions in options on futures contracts may be
made to attempt to hedge against potential changes in interest rates or
currency exchange rates, or the price of a security or a securities index which
might correlate with, or otherwise adversely affect, either the value of the
fund's securities or the prices of securities which the fund is considering
buying at a later date. Transactions in options on future contracts will not be
made for speculation.
The purchase of a call option on a futures contract is similar in some respects
to the purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership of the
option may or may not be less risky than ownership of the futures contract or
the underlying instrument. As with the purchase of futures contracts, when a
fund is not fully invested it may buy a call option on a futures contract to
hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in such fund's holdings.
The writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at expiration of the option is higher than the exercise price, a
fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which that fund is
considering buying.
If a call or put option a fund has written is exercised, such fund will incur a
loss which will be reduced by the amount of the premium it received. Depending
on the degree of correlation between the change in the value of its fund
securities and changes in the value of the futures positions, that fund's
losses from existing options on futures may to some extent be reduced or
increased by changes in the value of fund securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on fund securities. For example, a
fund may buy a put option on a futures contract to hedge its fund securities
against the risk of falling prices or rising interest rates.
The amount of risk a fund assumes when it buys an option on a futures contract
is the premium paid for the option plus related transaction costs. In addition
to the correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the options bought.
OPTIONS ON SECURITIES. In an effort to increase current income and to reduce
fluctuations in net asset value, each of the funds may write covered put and
call options and buy put and call options on securities that are traded on
United States and foreign securities exchanges, and over-the-counter. A fund
also may write call options that are not covered for cross-hedging purposes. A
fund may
9
<PAGE>
write and buy options on the same types of securities that the fund may
purchase directly. There are no specific limitations on a fund's writing and
buying of options on securities.
A put option gives the holder the right, upon payment of a premium, to deliver
a specified amount of a security to the writer of the option on or before a
fixed date at a predetermined price. A call option gives the holder the right,
upon payment of a premium, to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined price.
A put option written by a fund is "covered" if the fund: (i) segregates cash
not available for investment or other liquid assets with a value equal to the
exercise price with its custodian; or (ii) continues to own an equivalent
number of puts of the same "series" (that is, puts on the same underlying
securities having the same exercise prices and expiration dates as those
written by the fund), or an equivalent number of puts of the same "class" (that
is, puts on the same underlying securities) with exercise prices greater than
those it has written (or if the exercise prices of the puts it holds are less
than the exercise prices of those it has written, the difference is segregated
with the custodian).
The premium paid by the buyer of an option will reflect, among other things,
the relationship of the exercise price to the market price and the volatility
of the underlying security, the remaining term of the option, supply and demand
and interest rates.
A call option written by a fund is "covered" if the fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or has segregated
additional cash with its custodian) upon conversion or exchange of other
securities held in its fund. A call option written by a fund is also deemed to
be covered: (i) if that fund holds a call at the same exercise price for the
same exercise period and on the same securities as the call written; (ii) in
the case of a call on a stock index, if the fund owns a fund of securities
substantially replicating the movement of the index underlying the call option;
or (iii) if at the time the call is written an amount of cash, U.S. government
securities or other liquid assets equal to the fluctuating market value of the
optioned securities is segregated with the custodian.
A fund may also write call options that are not covered for cross-hedging
purposes. A fund collateralizes its obligation under a written call option for
cross-hedging purposes by segregating cash or other liquid assets in an amount
not less than the market value of the underlying security, marked-to-market
daily. A fund would write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received from the
cross-hedge transaction would exceed that which would be received from writing
a covered call option and the fund manager believes that writing the option
would achieve the desired hedge.
If a put or call option written by a fund were exercised, the fund would be
obligated to buy or sell the underlying security at the exercise price. Writing
a put option involves the risk of a decrease in the market value of the
underlying security, in which case the option could be exercised and the
underlying security would then be sold by the option holder to the fund at a
higher price than its current market value. Writing a call option involves the
risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the fund to the option holder at a lower price than its current market
value. Those risks could be reduced by entering into an offsetting transaction.
A fund retains the premium received from writing a put or call option whether
or not the option is exercised.
The writer of an option may have no control when the underlying security must
be sold, in the case of a call option, or bought, in the case of a put option,
since with regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation. Whether or not
an option expires unexercised, the writer retains the amount of the premium.
This amount, of course, may, in the case of a covered call option, be offset by
a decline in the market value of the underlying security during the option
period. If a call option is exercised, the writer experiences a profit or loss
from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by
10
<PAGE>
selling an option of the same series as the option previously bought. There is
no guarantee that either a closing purchase or a closing sale transaction can
be effected.
In the case of a written call option, effecting a closing transaction will
permit a fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit the fund to write another put
option to the extent that the exercise price thereof is secured by other
deposited liquid assets. Effecting a closing transaction also will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other fund investments. If a fund desires to sell a
particular security on which the fund has written a call option, such fund will
effect a closing transaction prior to or concurrent with the sale of the
security.
A fund will realize a profit from a closing transaction if the price of a
purchase transaction is less than the premium received from writing the option
or the price received from a sale transaction is more than the premium paid to
buy the option. The fund will realize a loss from a closing transaction if the
price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the fund.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, a fund
may not be able to effect closing transactions in particular options and that
fund would have to exercise the options in order to realize any profit. If a
fund is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market may include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by a national securities exchange on which the option is traded
("Exchange") on opening or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; (v)
the facilities of an Exchange or the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume; or (vi) one or
more Exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class
or series of options). In that case, the secondary market on that Exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
A fund may, subject to its investment restrictions, write options in connection
with buy-and-write transactions. In other words, the fund may buy a security
and then write a call option against that security. The exercise price of such
call will depend upon the expected price movement of the underlying security.
The exercise price of a call option may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current value of the
underlying security at the time the option is written.
Buy-and-write transactions using "in-the-money" call options may be used when
it is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
"at-the-money" call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately during the
option period. Buy-and-write transactions using "out-of-the-money" call options
may be used when it is expected that the premiums received from writing the
call option plus the appreciation in the market price of the underlying
security up to the exercise price will be greater than the appreciation in the
price of the underlying security alone.
If the call options are exercised in such transactions, the fund's maximum gain
will be the premium received by it for writing the option, adjusted upwards or
downwards by the difference between that fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset by the
amount of premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option
11
<PAGE>
will expire worthless and a fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, a fund may elect to close the position or take
delivery of the security at the exercise price and that fund's return will be
the premium received from the put options minus the amount by which the market
price of the security is below the exercise price.
A fund may buy put options to hedge against a decline in the value of its fund.
By using put options in this way, a fund will reduce any profit it might
otherwise have realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.
A fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any, realized by such
fund upon exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to that fund.
In purchasing an option, a fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid. The fund would realize a loss if the price of the
underlying security did not increase (in the case of a call) or decrease (in
the case of a put) during the period by more than the amount of the premium. If
a put or call option purchased by a fund were permitted to expire without being
sold or exercised, the fund would lose the amount of the premium.
Although they entitle the holder to buy equity securities, warrants on and
options to purchase equity securities do not entitle the holder to dividends or
voting rights with respect to the underlying securities, nor do they represent
any rights in the assets of the issuer of those securities.
In addition to options on securities, a fund may also purchase and sell call
and put options on securities indexes. A stock index reflects in a single
number the market value of many different stocks. Relative values are assigned
to the stocks included in an index and the index fluctuates with changes in the
market values of the stocks. The options give the holder the right to receive a
cash settlement during the term of the option based on the difference between
the exercise price and the value of the index. By writing a put or call option
on a securities index, a fund is obligated, in return for the premium received,
to make delivery of this amount. A fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. A fund will not purchase these options unless a fund's
sub-adviser is satisfied with the development, depth and liquidity of the
market and believes the options can be closed out.
Price movements in a fund's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
indexes cannot serve as a complete hedge and will depend, in part, on the
ability of its sub-adviser to predict correctly movements in the direction of
the stock market generally or of a particular industry. Because options on
securities indexes require settlement in cash, a fund's sub-adviser may be
forced to liquidate fund securities to meet settlement obligations.
The amount of risk a fund assumes when it buys an option on a futures contract
is the premium paid for the option plus related transaction costs. In addition
to the correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the options bought.
OPTIONS ON FOREIGN CURRENCIES. Subject to any investment restrictions, a fund
may buy and write options on foreign currencies in a manner similar to that in
which futures contracts or forward contracts on foreign currencies will be
utilized. For example, a decline in the U.S. dollar value of a foreign currency
in which fund securities are denominated will reduce the U.S. 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 fund securities, a
fund may buy put options on the foreign currency. If the value of the currency
declines, such fund will have the right to sell such currency for a fixed
amount in U.S. dollars and will offset, in whole or in part, the adverse effect
on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a fund may buy call options thereon. The purchase of
such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to a fund from purchases of foreign currency options will be
reduced by the amount of the premium and
12
<PAGE>
related transaction costs. In addition, if currency exchange rates do not move
in the direction or to the extent desired, a fund could sustain losses on
transactions in foreign currency options that would require such fund to forego
a portion or all of the benefits of advantageous changes in those rates. In
addition, in the case of other types of options, the benefit to the fund from
purchases of foreign currency options will be reduced by the amount of the
premium and related transaction costs.
A fund may also write options on foreign currencies. For example, in attempting
to hedge against a potential decline in the U.S. dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates,
a fund 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 fund securities will be offset
by the amount of the premium received.
Similarly, instead of purchasing a call option to attempt to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired, a fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow that fund to hedge the
increased cost up to the amount of premium. 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. If exchange rates do not move
in the expected direction, the option may be exercised and a fund 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 fund also may lose all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.
A fund may write covered call options on foreign currencies. A call option
written on a foreign currency by a fund is "covered" if that fund owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration that is segregated by its
custodian) upon conversion or exchange of other foreign currency held in its
fund. A call option is also covered if: (i) the fund holds a call at the same
exercise price for the same exercise period and on the same currency as the
call written; or (ii) at the time the call is written, an amount of cash, U.S.
government securities or other liquid assets equal to the fluctuating market
value of the optioned currency is segregated with the custodian.
A fund may write call options on foreign currencies for cross-hedging purposes
that would not be deemed to be covered. A call option on a foreign currency is
for cross-hedging purposes if it is not covered but is designed to provide a
hedge against a decline due to an adverse change in the exchange rate in the
U.S. dollar value of a security which the fund owns or has the right to acquire
and which is denominated in the currency underlying the option. In such
circumstances, a fund collateralizes the option by segregating cash or other
liquid assets in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
FORWARD CONTRACTS. A forward contract is an agreement between two parties in
which one party is obligated to deliver a stated amount of a stated asset at a
specified time in the future, and the other party is obligated to pay a
specified invoice amount for the assets at the time of delivery. A fund may
enter into forward contracts to purchase and sell government securities,
foreign currencies or other financial instruments. Forward contracts generally
are traded in an interbank market conducted directly between traders (usually
large commercial banks) and their customers. Unlike futures contracts, which
are standardized contracts, forward contracts can be specifically drawn to meet
the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.
The following discussion summarizes a fund's principal uses of forward foreign
currency exchange contracts ("forward currency contracts").
A fund may enter into forward currency contracts with stated contract values of
up to the value of that fund's assets. A forward currency contract is an
obligation to buy or sell an amount of a specified currency for an agreed upon
price (which may be in U.S. dollars or another currency). A fund will exchange
foreign currencies for U.S. dollars and for other foreign currencies in the
normal course of business.
They may buy and sell currencies through forward currency contracts in order to
fix a price for securities it has agreed to buy or sell ("transaction hedge").
A fund also may hedge some or all of its investments denominated in foreign
currency, or exposed to foreign currency fluctuations against a decline in the
value of that currency
13
<PAGE>
relative to the U.S. dollar. This is accomplished by entering into forward
currency contracts to sell an amount of that currency (or a proxy currency
whose performance is expected to replicate or exceed the performance of that
currency relative to the U.S. dollar) approximating the value of some or all of
its fund securities denominated in that currency ("position hedge"), or by
participating in options or futures contracts with respect to the currency.
A fund also may enter into a forward currency contract with respect to a
currency where such fund is considering the purchase or sale of investments
denominated in that currency but has not yet selected the specific investments
("anticipatory hedge"). In any of these circumstances a fund may,
alternatively, enter into a forward currency contract to purchase or sell one
foreign currency for a second currency that is expected to perform more
favorably relative to the U.S. dollar if the fund's sub-adviser believes there
is a reasonable degree of correlation between movements in the two currencies
("cross-hedge").
These types of hedging seek to minimize the effect of currency appreciation as
well as depreciation, but do not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the proceeds of, or rates of return on, a fund's
foreign currency denominated fund securities.
The matching of the increase in value of a forward currency contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. Shifting
a fund's currency exposure from one foreign currency to another removes that
fund's opportunity to profit from increases in the value of the original
currency and involves a risk of increased losses to such fund if the fund's
sub-adviser's position projection of future exchange rates is inaccurate. Proxy
hedges and cross-hedges may result in losses if the currency used to hedge does
not perform similarly to the currency in which hedged securities are
denominated. Unforeseen changes in currency prices may result in poorer overall
performance for a fund than if it had not entered into such contracts.
A fund will cover outstanding forward currency contracts by maintaining liquid
fund securities denominated in the currency underlying the forward contract or
the currency being hedged. To the extent that a fund is not able to cover its
forward currency positions with underlying fund securities, its custodian will
segregate cash or other liquid assets having a value equal to the aggregate
amount of such fund's commitments under forward contracts entered into with
respect to position hedges, cross-hedges and anticipatory hedges. If the value
of the securities used to cover a position or the value of segregated assets
declines, the fund will find alternative cover or segregate additional cash or
other liquid assets on a daily basis so that the value of the covered and
segregated assets will be equal to the amount of a fund's commitments with
respect to such contracts.
As an alternative to segregating assets, a fund may buy call options permitting
the fund to buy the amount of foreign currency being hedged by a forward sale
contract, or a fund may buy put options permitting it to sell the amount of
foreign currency subject to a forward buy contract.
While forward currency contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward currency contracts.
In such event, a fund's ability to utilize forward currency contracts may be
restricted. In addition, a fund may not always be able to enter into forward
currency contracts at attractive prices and may be limited in its ability to
use these contracts to hedge its assets.
SWAPS AND SWAP-RELATED PRODUCTS. In order to attempt to protect the value of
its investments from interest rate or currency exchange rate fluctuations, a
fund may, subject to its investment restrictions, enter into interest rate and
currency exchange rate swaps, and may buy or sell interest rate and currency
exchange rate caps and floors. A fund's sub-adviser may enter into these
transactions primarily to attempt to preserve a return or spread on a
particular investment or portion of its portfolio. A fund also may enter into
these transactions to attempt to protect against any increase in the price of
securities the fund may consider buying at a later date.
The funds do not intend to use these transactions as a speculative investment.
Interest rate swaps involve the exchange by a fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different currencies.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually based
principal amount from the party selling the interest rate floor.
14
<PAGE>
A fund, subject to its investment restrictions, enters into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with a fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of a fund's obligations over its entitlements with respect to each interest
rate swap, will be calculated on a daily basis. An amount of cash or other
liquid assets having an aggregate net asset at least equal to the accrued
excess will be segregated by its custodian.
If a fund enters into an interest rate swap on other than a net basis, it will
maintain a segregated account in the full amount accrued on a daily basis of
its obligations with respect to the swap. A fund will not enter into any
interest rate swap, cap or floor transaction unless the unsecured senior debt
or the claims-paying ability of the other party thereto is rated in one of the
three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
A fund's sub-adviser will monitor the creditworthiness of all counterparties on
an ongoing basis. If there is a default by the other party to such a
transaction, the fund will have contractual remedies pursuant to the agreements
related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. The sub-advisers have determined
that, as a result, the swap market has become relatively liquid. Caps and
floors are more recent innovations for which standardized documentation has not
yet been developed and, accordingly, they are less liquid than swaps. To the
extent a fund sells (i.e., writes) caps and floors, it will segregate cash or
other liquid assets having an aggregate net asset value at least equal to the
full amount, accrued on a daily basis, of its obligations with respect to any
caps or floors.
There is no limit on the amount of interest rate swap transactions that may be
entered into by a fund, unless so stated in its investment objectives, although
none of the funds presently intends to engage in such transactions in excess of
5% of its total assets. These transactions may in some instances involve the
delivery of securities or other underlying assets by a fund or its counterparty
to collateralize obligations under the swap.
Under the documentation currently used in those markets, the risk of loss with
respect to interest rate swaps is limited to the net amount of the interest
payments that a fund is contractually obligated to make. If the other party to
an interest rate swap that is not collateralized defaults, a fund would risk
the loss of the net amount of the payments that it contractually is entitled to
receive. A fund may buy and sell (i.e., write) caps and floors without
limitation, subject to the segregation requirement described above.
In addition to the instruments, strategies and risks described in this SAI and
in the prospectus, there may be additional opportunities in connection with
options, futures contracts, forward currency contracts and other hedging
techniques that become available as a fund's sub-adviser develops new
techniques, as regulatory authorities broaden the range of permitted
transactions, and as new instruments are developed. The funds' sub-advisers may
use these opportunities to the extent they are consistent with each fund's
investment objective and as are permitted by a fund's investment limitations
and applicable regulatory requirements.
INDEX OPTIONS. In seeking to hedge all or a portion of its investments, a fund
may purchase and write put and call options on securities indices listed on
U.S. or foreign securities exchanges or traded in the over-the-counter market,
which indices include securities held in the funds. The funds with such option
writing authority may write only covered options. A fund may also use
securities index options as a means of participating in a securities market
without making direct purchases of securities.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Options on
securities indices are generally similar to options on specific securities.
Unlike options on securities, however, options on securities indices do not
involve the delivery on an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date. A fund
may purchase and write put and call options on securities indices or securities
index futures contracts that are traded on a U.S. exchange or board of trade or
a foreign exchange, to the extent permitted under rules and interpretations of
the CFTC, as a hedge against changes in market conditions and interest rates,
and for duration management, and may enter into closing transactions with
respect to those options to terminate existing positions. A securities index
fluctuates with changes
15
<PAGE>
in the market values of the securities included in the index. Securities index
options may be based on a broad or narrow market index or on an industry or
market segment.
The delivery requirements of options on securities indices differ from options
on securities. Unlike a securities option, which contemplates the right to take
or make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (i) the amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in the case of a call)
the closing value of the underlying index on the date of exercise, multiplied
by (ii) a fixed "index multiplier." Receipt of this cash amount will depend
upon the closing level of the securities index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option. The amount of cash received will be equal to
the difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. The writer may offset its position in securities index options
prior to expiration by entering into a closing transaction on an exchange or it
may allow the option to expire unexercised.
The effectiveness of purchasing or writing securities index options as a
hedging technique will depend upon the extent to which price movements in the
portion of a securities portfolio being hedged correlate with price movements
of the securities index selected. Because the value of an index option depends
upon movements in the level of the index rather than the price of a particular
security, whether a fund realizes a gain or loss from the purchase of writing
of options on an index depends upon movements in the level of prices in the
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular security. As a
result, successful use by a fund of options on securities indices is subject to
the sub-adviser's ability to predict correctly movements in the direction of
the market generally or of a particular industry. This ability contemplates
different skills and techniques from those used in predicting changes in the
price of individual securities.
Securities index options are subject to position and exercise limits and other
regulations imposed by the exchange on which they are traded. The ability of a
fund to engage in closing purchase transactions with respect to securities
index options depends on the existence of a liquid secondary market. Although a
fund will generally purchase or write securities index options only if a liquid
secondary market for the options purchased or sold appears to exist, no such
secondary market may exist, or the market may cease to exist at some future
date, for some options. No assurance can be given that a closing purchase
transaction can be effected when the sub-adviser desires that a fund engage in
such a transaction.
WEBS AND OTHER INDEX-RELATED SECURITIES. A fund may invest in shares of an
investment company whose shares are known as "World Equity Benchmark Shares" or
"WEBS." WEBS have been listed for trading on the American Stock Exchange, Inc.
The funds also may invest in the CountryBaskets Index Fund, Inc., or another
fund the shares of which are the substantial equivalent of WEBS. A fund may
invest in S&P Depositary Receipts, or "SPDRs." SPDRs are securities that
represent ownership in a long-term unit investment trust that holds a portfolio
of common stocks designed to track the performance of the S&P 500 Index. A fund
investing in a SPDR would be entitled to the dividends that accrue to the S&P
500 stocks in the underlying portfolio, less trust expenses. Investing in these
securities may result in duplication of certain fees and expenses.
EURO INSTRUMENTS. The funds may each make investments in Euro instruments. Euro
instruments are U.S. dollar-denominated futures contracts, or options thereon,
which are linked to the London Interbank Offered Rate (the "LIBOR"), although
foreign currency-denominated instruments are available from time to time. Euro
futures contracts enable purchasers to obtain a fixed rate for the lending of
funds, and sellers to obtain a fixed rate for borrowings. A fund might use Euro
futures contracts and options thereon to hedge against changes in LIBOR, which
may be linked to many interest rate swaps and fixed income instruments.
SPECIAL INVESTMENT CONSIDERATIONS AND RISKS. The successful use of the
investment practices described above with respect to futures contracts, options
on futures contracts, forward contracts, options on securities, options on
foreign currencies and swaps and swap-related products draws upon skills and
experience which are different from those needed to select the other
instruments in which a fund may invest. Should interest or exchange rates, or
the prices of securities or financial indices move in an unexpected manner, a
fund may not achieve the desired benefits of the foregoing instruments or may
realize losses and thus be in a worse position than if such strategies had not
been used. Unlike many exchange-traded futures contracts and options on
16
<PAGE>
futures contracts, there are no daily price fluctuation limits with respect to
options on currencies, forward contracts and other negotiated or
over-the-counter instruments, and adverse market movements could therefore
continue to an unlimited extent over a period of time. In addition, the
correlation between movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.
A fund's ability to dispose of its positions in the foregoing instruments will
depend on the availability of liquid markets in the instruments. Markets in a
number of the instruments are relatively new and still developing, and it is
impossible to predict the amount of trading interest that may exist in those
instruments in the future.
Particular risks exist with respect to the use of each of the foregoing
instruments and could result in such adverse consequences to a fund as: the
possible loss of the entire premium paid for an option bought by a fund; the
inability of the fund, as the writer of a covered call option, to benefit from
the appreciation of the underlying securities above the exercise price of the
option; and the possible need to defer closing out positions in certain
instruments to avoid adverse tax consequences. As a result, no assurance can be
given that a fund will be able to use those instruments effectively for their
intended purposes.
In connection with certain of its hedging transactions, a fund must segregate
assets with the fund's custodian bank to ensure that such fund will be able to
meet its obligations pursuant to these instruments. Segregated assets generally
may not be disposed of for so long as a fund maintains the positions giving
rise to the segregation requirement. Segregation of a large percentage of a
fund's assets could impede implementation of that fund's investment policies or
its ability to meet redemption requests or other current obligations.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND
FOREIGN INSTRUMENTS. Unlike transactions entered into by a fund in futures
contracts, options on foreign currencies and forward contracts are not traded
on contract markets regulated by the CFTC or (with the exception of certain
foreign currency options) by the SEC. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation.
Options on currencies may be traded over-the-counter. 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 buyer of an option cannot lose more
than the amount of the premium plus related transaction costs, this entire
amount could be lost. Moreover, an option writer and a buyer or seller of
futures or forward contracts could lose amounts substantially in excess of any
premium received or initial margin or collateral posted due to the potential
additional margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the 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 fund 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 the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events.
In addition, exchange-traded options on foreign currencies involve certain
risks not presented by the over-the-counter market. For example, exercise and
settlement of such options must be made exclusively through the OCC, which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign government
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its
17
<PAGE>
clearing member, impose special procedures on exercise and settlement. These
include such things as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts, options
on futures contracts, forward contracts and options on foreign currencies may
be traded on foreign exchanges and over-the-counter in foreign countries. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) less availability than that available in
the United States of data on which to make trading decisions; (iii) delays in a
fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in
the United States; and (v) low trading volume.
OTHER INVESTMENT COMPANIES
Subject to its investment restrictions, a fund may invest in securities issued
by other investment companies as permitted. A fund may indirectly bear a
portion of any investment advisory fees and expenses paid by funds in which it
invests, in addition to the advisory fees and expenses paid by the fund.
WHEN-ISSUED, DELAYED SETTLEMENT AND
FORWARD DELIVERY SECURITIES
Securities may be purchased and sold on a "when-issued," "delayed settlement,"
or "forward (delayed) delivery" basis.
"When-issued" or "forward delivery" refers to securities whose terms are
available, and for which a market exists, but which are not available for
immediate delivery. When-issued or forward delivery transactions may be
expected to occur a month or more before delivery is due.
A fund may engage in when-issued transactions to obtain what is considered to
be an advantageous price and yield at the time of the transaction. When a fund
engages in when-issued or forward delivery transactions, it will do so for the
purpose of acquiring securities consistent with its investment objective and
policies and not for the purpose of investment leverage.
"Delayed settlement" is a term used to describe settlement of a securities
transaction in the secondary market which will occur sometime in the future. No
payment or delivery is made by a fund until it receives payment or delivery
from the other party for any of the above transactions.
The fund will segregate with its custodian cash, U.S. government securities or
other liquid assets at least equal to the value or purchase commitments until
payment is made. The segregated securities will either mature or, if necessary,
be sold on or before the settlement date. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery of
the securities is made, although a fund may earn income on securites it has
segregated to collateralize its delayed delivery purchases.
New issues of stocks and bonds, private placements and U.S. government
securities may be sold in this manner.
RISK FACTORS
At the time of settlement, the market value of the security may be more or less
than the purchase price. A fund bears the risk of such market value
fluctuations. These transactions also involve the risk that the other party to
the transaction may default on its obligation to make payment or delivery. As a
result, the fund may be delayed or prevented from completing the transaction
and may incur additional costs as a consequence of the delay.
ZERO COUPON, PAY-IN-KIND AND
STEP COUPON SECURITIES
Subject to its investment restrictions, a fund may invest in zero coupon,
pay-in-kind and step-coupon securities. Zero-coupon bonds are issued and traded
at a discount from their face value. They do not entitle the holder to any
periodic payment of interest prior to maturity. Step coupon bonds trade at a
discount from their face value and pay coupon interest. The coupon rate is low
for an initial period and then increases to a higher coupon rate thereafter.
The discount from the face amount or par value depends on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the security
and the perceived credit quality of the issuer. Pay-in-kind bonds give the
issuer an option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal to the
amount of the coupon payment that would have been made.
Current federal income tax law requires holders of zero-coupon securities and
step-coupon securities to report
18
<PAGE>
the portion of the original issue discount on such securities that accrues that
year as interest income, even though the holders receive no cash payments of
interest during the year. In order to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986 ("Code"), a fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero-coupon or step-coupon bonds. Because it will not
receive cash payments on a current basis in respect of accrued original-issue
discount on zero-coupon bonds or step-coupon bonds during the period before
interest payments begin, in some years a fund may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. A fund might obtain such cash from selling other portfolio
holdings. These actions may reduce the assets to which fund expenses could be
allocated and may reduce the rate of return for such fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for a fund to sell the securities at the time.
Generally, the market prices of zero-coupon bonds and strip securities are more
volatile than the prices of securities that pay interest periodically in cash
and they are likely to respond to changes in interest rates to a greater degree
than other types of debt securities having similar maturities and credit
quality.
LENDING OF FUND SECURITIES
Subject to any applicable investment restriction relating to lending, a fund
may lend securities from its portfolio. Under applicable regulatory
requirements (which are subject to change), the following conditions apply to
securities loans: a) the loan must be continuously secured by liquid assets
maintained on a current basis in an amount at least equal to the market value
of the securities loaned; b) a fund must receive any dividends or interest paid
by the issuer on such securities; c) a fund must have the right to call the
loan and obtain the securities loaned at any time upon notice of not more than
five business days, including the right to call the loan to permit voting of
the securities; and d) a fund must receive either interest from the investment
of collateral or a fixed fee from the borrower. Securities loaned by a fund
remain subject to fluctuations in market value. A fund may pay reasonable
finders, custodian and administrative fees in connection with a loan.
Securities lending, as with other extensions of credit, involves the risk that
the borrower may default. Although securities loans will be fully
collateralized at all times, a fund may experience delays in, or be prevented
from, recovering the collateral. During a period that a fund seeks to enforce
its rights against the borrower, the collateral and the securities loaned
remain subject to fluctuations in market value. A fund may also incur expenses
in enforcing its rights. If a fund has sold the loaned security, it may not be
able to settle the sale of the security and may incur potential liability to
the buyer of the security on loan for its costs to cover the purchase. A fund
will not lend securities to any adviser or sub-adviser to the funds or their
affiliates. By lending its securities, a fund can increase its income by
continuing to receive interest or dividends on the loaned securities as well as
by either investing the cash collateral in short-term securities or by earning
income in the form of interest paid by the borrower when U.S. government
securities are used as collateral.
JOINT TRADING ACCOUNTS
IDEX JCC Growth, IDEX JCC Global, and IDEX JCC Capital Appreciation, and other
clients of Janus and its affiliates, may place assets in joint trading accounts
for the purpose of making short-term investments in money market instruments.
The Board of Trustees must approve the participation of each of these funds in
these joint trading accounts and procedures pursuant to which the joint
accounts will operate. The joint trading accounts are to be operated pursuant
to an exemptive order issued to Janus and certain of its affiliates by the SEC.
All joint account participants, including these funds, will bear the expenses
of the joint trading accounts in proportion to their investments. Financial
difficulties of other participants in the joint accounts could cause delays or
other difficulties for the funds in withdrawing their assets from joint trading
accounts.
ILLIQUID SECURITIES
Subject to its investment restrictions, a fund may invest its assets in
illiquid securities (i.e., securities that are not readily marketable). The
Board of Trustees has authorized the sub-advisers to make liquidity
determinations with respect to its securities, including Rule 144A securities,
commercial paper and municipal lease obligations in accordance with the
guidelines established by the Board of Trustees. Under the guidelines, the sub-
adviser will consider the following factors in determining whether a Rule 144A
security or a municipal lease obligation is liquid: 1) the frequency of trades
and quoted prices for the security; 2) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; 3)
the willingness of dealers to undertake to make a market in the security; and
4) the nature of the marketplace trades, including the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer. With
19
<PAGE>
respect to municipal lease obligations, the sub-adviser of IDEX Federated Tax
Exempt and IDEX JCC Flexible Income will also consider factors unique to
municipal lease obligations including the general creditworthiness of the
municipality, the importance of the property covered by the lease obligation
and the likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by the fund. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the
over-the-counter markets. A fund may be restricted in its ability to sell such
securities at a time when the sub-adviser deems it advisable to do so. In
addition, in order to meet redemption requests, a fund may have to sell other
assets, rather than such illiquid securities, at a time which is not
advantageous.
REPURCHASE AND REVERSE REPURCHASE
AGREEMENTS
Subject to its investment restrictions, a fund may enter into repurchase and
reverse repurchase agreements. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller at an
agreed upon price on an agreed upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value (at least equal to the amount of
the agreed upon resale price and marked-to-market daily) of the underlying
security or collateral. A fund may engage in a repurchase agreement with
respect to any security in which it is authorized to invest. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to a fund in connection with
bankruptcy proceedings), it is the policy of each fund to limit repurchase
agreements to those parties whose creditworthiness has been reviewed and found
satisfactory by the sub-adviser for that fund and approved by the Board of
Trustees. In addition, the funds currently intend to invest primarily in
repurchase agreements collateralized by cash, U.S. government securities, or
money market instruments whose value equals at least 100% of the repurchase
price, marked-to-market daily.
In a reverse repurchase agreement, a fund sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees
to repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, a fund will segregate with its custodian
cash and appropriate liquid assets with the funds' custodian to cover its
obligation under the agreement. The funds will enter into reverse repurchase
agreements only with parties the investment sub-adviser for each fund deems
creditworthy and that have been reviewed by the Board of Trustees.
Repurchase agreements involve the risk that the seller will fail to repurchase
the security, as agreed. In that case, a fund will bear the risk of market
value fluctuations until the security can be sold and may encounter delays and
incur costs in liquidating the security. In the event of bankruptcy or
insolvency of the seller, delays and costs are incurred.
Reverse repurchase agreements may expose a fund to greater fluctuations in the
value of its assets.
PASS-THROUGH SECURITIES
Each of the funds may, in varying degrees, invest in various types of
pass-through securities, such as mortgage-backed securities, asset-backed
securities and participation interests. A pass-through security is a share or
certificate of interest in a pool of debt obligations that has been repackaged
by an intermediary, such as a bank or broker-dealer. The purchaser receives an
undivided interest in the underlying pool of securities. The issuers of the
underlying securities make interest and principal payments to the intermediary
which are passed through to purchasers, such as the funds.
The most common type of pass-through securities are mortgage-backed securities.
Government National Mortgage Association ("GNMA") Certificates are mortgage-
backed securities that evidence an undivided interest in a pool of mortgage
loans. GNMA Certificates differ from traditional bonds in that principal is
paid back monthly by the borrowers over the term of the loan rather than
returned in a lump sum at maturity. A fund will generally purchase "modified
pass-through" GNMA Certificates, which entitle the holder to receive a share of
all interest and principal payments paid and owned on the mortgage pool, net of
fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment. GNMA Certificates are backed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through
20
<PAGE>
securities: mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made and
owned on the underlying pool. FHLMC guarantees timely payments of interest on
PCs and the full return of principal. GMCs also represent a pro rata interest
in a pool of mortgages. However, these instruments pay interest semi-annually
and return principal once a year in guaranteed minimum payments. This type of
security is guaranteed by FHLMC as to timely payment of principal and interest,
but is not backed by the full faith and credit of the U.S. government.
The Federal National Mortgage Association ("FNMA") issues guaranteed mortgage
pass-through certificates ("FNMA Certificates"). FNMA Certificates resemble
GNMA Certificates in that each FNMA Certificate represents a pro rata share of
all interest and principal payments made and owned on the underlying pool. This
type of security is guaranteed by FNMA as to timely payment of principal and
interest, but it is not backed by the full faith and credit of the U.S.
government.
Each of the mortgage-backed securities described above is characterized by
monthly payments to the holder, reflecting the monthly payments made by the
borrowers who received the underlying mortgage loans. The payments to the
security holders (such as a fund), like the payments on the underlying loans,
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 20 or 30 years, the borrowers can,
and typically do, pay them off sooner. Thus, the security holders frequently
receive prepayments of principal in addition to the principal that is part of
the regular monthly payments. A borrower is more likely to prepay a mortgage
that bears a relatively high rate of interest. This means that in times of
declining interest rates, some of a fund's higher yielding mortgage-backed
securities may be converted to cash. That fund will then be forced to accept
lower interest rates when that cash is used to purchase additional securities
in the mortgage-backed securities sector or in other investment sectors.
Mortgage and asset-backed securities may have periodic income payments or may
pay interest at maturity (as is the case with Treasury bills or zero-coupon
bonds).
Asset-backed securities represent interests in pools of consumer loans and are
backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and
interest and principal payments ultimately depend upon payment of the
underlying loans by individuals. Tax-exempt asset-backed securities include
units of beneficial interests in pools of purchase contracts, financing leases,
and sales agreements that may be created when a municipality enters into an
installment purchase contract or lease with a vendor. Such securities may be
secured by the assets purchased or leased by the municipality; however, if the
municipality stops making payments, there generally will be no recourse against
the vendor. The market for tax-exempt asset-backed securities is still
relatively new. These obligations are likely to involve unscheduled prepayments
of principal.
HIGH YIELD/HIGH-RISK BONDS
High-yield/high-risk bonds, below investment grade securities (commonly known
as "junk bonds") involve significant credit and liquidity concerns and
fluctuating yields, and are not suitable for short-term investing. Higher
yields are ordinarily available on fixed-income securities which are unrated or
are rated in the lower rating categories of recognized rating services such as
Moody's and Standard & Poor's.
Lower rated bonds also involve the risk that the issuer will not make interest
or principal payments when due. In the event of an unanticipated default, a
fund owning such bonds would experience a reduction in its income, and could
expect a decline in the market value of the securities so affected. Such funds,
furthermore, may incur additional costs in seeking the recovery of the
defaulted securities. More careful analysis of the financial condition of each
issuer of lower rated securities is therefore necessary. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payments obligations, to meet
projected business goals and to obtain additional financing.
The market prices of lower grade securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or individual developments specific to
the issuer. Periods of economic or political uncertainty and change can be
expected to result in volatility of prices of these securities. Past experience
with high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods. Lower rated
securities also may have less liquid markets than higher rated securities, and
their liquidity as well as their value may be more severely affected by adverse
economic conditions. Adverse publicity and investor perceptions as well
21
<PAGE>
as new or proposed laws may also have a greater negative impact on the market
for lower rated bonds.
Unrated securities are not necessarily of lower quality than rated securities,
but the markets for lower rated and nonrated securities are more limited than
those in which higher rated securities are traded. In addition, an economic
downturn or increase in interest rates is likely to have a greater negative
effect on: (i) the market for lower rated and nonrated securities; (ii) the
value of high yield debt securities held by a fund; (iii) the new asset value
of a fund holding such securities; and (iv) the ability of the bonds' issuers
to repay principal and interest, meet projected business goals and obtain
additional financing than on higher rated securities.
WARRANTS AND RIGHTS
Subject to its investment restrictions, a fund may invest in warrants and
rights. A warrant is a type of security that entitles the holder to buy a
proportionate amount of common stock at a specified price, usually higher than
the market price at the time of issuance, for a period of years or to
perpetuity. In contrast, rights, which also represent the right to buy common
shares, normally have a subscription price lower than the current market value
of the common stock and a life of two to four weeks.
U.S. GOVERNMENT SECURITIES
Examples of the types of U.S. government securities that a fund may hold
include, in addition to those described in the prospectus and direct
obligations of the U.S. Treasury, the obligations of the Federal Housing
Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Bank, Federal Intermediate Credit Banks,
Federal Land Banks and Maritime Administration. U.S. government securities may
be supported by the full faith and credit of the U.S. government (such as
securities of the Small Business Administration); by the right of the issuer to
borrow from the Treasury (such as securities of the Federal Home Loan Bank); by
the discretionary authority of the U.S. government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association);
or only by the credit of the issuing agency.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, a portfolio may, at times, choose to hold
some portion of its net assets in cash, or to invest that cash in a variety of
debt securities. This may be done as a defensive measure at times when
desirable risk/reward characteristics are not available in stocks or to earn
income from otherwise uninvested cash. When a fund increases its cash or debt
investment position, its income may increase while its ability to participate
in stock market advances or declines decrease. Furthermore, when a fund assumes
a temporary defensive position it may not be able to achieve its investment
objective.
TURNOVER RATE
-------------
<TABLE>
<CAPTION>
FUND OCTOBER 31, 1999 OCTOBER 31,1998
------------------------------- ------------------ ----------------
<S> <C> <C>
IDEX Alger Aggressive Growth 96.25% 142.08%
IDEX JCC Capital Appreciation 93.54% 136.59%
IDEX JCC Global 145.40% 87.68%
IDEX JCC Growth 70.97% 27.19%
</TABLE>
------------------------------
As stated in the prospectus, each of the funds generally intends to purchase
and sell securities as deemed appropriate by the fund's sub-adviser to further
a fund's stated investment objective, and the rate of fund turnover is not
expected to be a limiting factor when changes are deemed to be appropriate.
These percentages are calculated by dividing the lesser of purchases or sales
of fund securities during the fiscal year by the monthly average of the value
of such securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less). For
example, a fund turnover rate of 100% would mean that all of a fund's
securities (except those excluded from the calculation) were replaced once in a
period of one year. A high rate of fund turnover generally involves
correspondingly greater brokerage commission expenses.
Turnover rates may vary greatly from year to year, as well as within a
particular year, and may also be affected by cash requirements for redemptions
of a fund's shares and by requirements, the satisfaction of which enable the
fund to receive favorable tax treatment. Because the rate of fund turnover is
not a limiting factor, particular holdings may be sold at any time if
investment judgment
22
<PAGE>
or fund operations make a sale advisable. As a result, the annual fund turnover
rate in future years may exceed the percentage shown above.
INVESTMENT ADVISORY AND OTHER SERVICES
IDEX Mutual Funds has entered into a Management and Investment Advisory
Agreement ("Advisory Agreement") on behalf of each fund with Idex Management,
Inc. ("IMI"), located at 570 Carillon Parkway, St. Petersburg, Florida 33716.
IMI supervises each respective fund's investments and conducts its investment
program.
The Advisory Agreement provides that IMI will perform the following services or
cause them to be performed by others: (i) furnish to the fund investment advice
and recommendations; (ii) supervise the purchase and sale of securities as
directed by appropriate fund officers, and (iii) be responsible for the
administration of each fund. For services to IDEX JCC Capital Appreciation,
IDEX JCC Global and IDEX JCC Growth, IMI receives an annual fee, computed daily
and paid monthly, equal to 1.00% of the first $750 million of each fund's
average daily net assets, 0.90% of the next $250 million of each fund's average
daily net assets, and 0.85% of the average daily net assets of that fund in
excess of $1 billion; and for IDEX Alger Aggressive Growth, IMI receives 0.80%
of the first $500 million of each fund's average daily net assets and 0.70% of
each fund's average daily net assets over $500 million.
The duties and responsibilities of the investment adviser are specified in the
Advisory Agreement. The Advisory Agreement was approved by the Board of
Trustees (including a majority of trustees who are not parties to the Advisory
Agreement or interested persons, as defined by the 1940 Act, of any such
party). The Advisory Agreement is not assignable and may be terminated without
penalty upon 60 days' written notice at the option of either the Fund, IMI or
by a vote of shareholders of each fund. The Advisory Agreement provides that it
can be continued from year to year so long as such continuance is specifically
approved annually (a) by the Board of Trustees or by a majority of the
outstanding shares of each fund and (b) by a majority vote of the Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party cast in person at a special meeting called for such purposes.
The Advisory Agreement also provides that IMI shall not be liable to the funds
or to any shareholder for any error of judgment or mistake of law or for any
loss suffered by a fund or by any shareholder in connection with matters to
which the Advisory Agreement relates, except for a breach of fiduciary duty or
a loss resulting from willful misfeasance, bad faith, gross negligence, or
reckless disregard on the part of IMI in the performance of its duties
thereunder.
The Advisory Agreement became effective as follows: IDEX Alger Aggressive
Growth - September 30, 1994; IDEX JCC Capital Appreciation, IDEX JCC Global and
IDEX JCC Growth - June 23, 1998.
Each fund pays its allocable share of the fees and expenses of a fund's
non-interested trustees, custodian and transfer agent fees, brokerage
commissions and all other expenses in connection with the execution of its
portfolio transactions, administrative, clerical, recordkeeping, bookkeeping,
legal, auditing and accounting expenses, interest and taxes, expenses of
preparing tax returns, expenses of shareholders' meetings and preparing,
printing and mailing proxy statements (unless otherwise agreed to by the funds
or IMI, expenses of preparing and typesetting periodic reports to shareholders
(except for those reports the funds permit to be used as sales literature), and
the costs, including filing fees, of renewing or maintaining registration of
fund shares under federal and state law. The investment adviser will reimburse
a fund, or waive fees, or both, whenever, in any fiscal year, the total cost to
a fund of normal operating expenses chargeable to its income account, including
the investment advisory fee but excluding brokerage commissions, interest,
taxes and 12b-1 fees, exceeds, in the case of the IDEX JCC Capital Appreciation
and IDEX JCC Growth, 1.50% of each fund's average daily net assets; and 1.20%
of IDEX Alger Aggressive Growth's average daily net assets for all other funds.
The IDEX JCC Global does not have an expense limitation.
<TABLE>
<CAPTION>
ADVISORY FEE AFTER REIMBURSEMENT ADVISORY FEE REIMBURSEMENTS
----------------------------------------- -----------------------------------
OCTOBER 31 OCTOBER 31
----------------------------------------- -----------------------------------
FUND ADVISER 1999 1998 1997 1999 1998 1997
------------------------------- --------- ------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
IDEX Alger Aggressive Growth IMI $ 617,922 $ 344,018 $ 130,896 $318,097 $173,443 $192,695
IDEX JCC Capital Appreciation IMI $ 466,930 $ 167,150 $ 45,071 $ 94,449 $107,861 $193,491
IDEX JCC Global IMI $ 6,949,268 $3,907,062 $ 2,224,062 $ 0 0 0
IDEX JCC Growth IMI $21,381,062 $1,352,188 $11,676,637 $713,062 0 0
</TABLE>
--------------
23
<PAGE>
Janus Capital Corporation ("JCC"), 100 Fillmore Street, Denver, CO 80206,
serves as sub-adviser to IDEX JCC Capital Appreciation, IDEX JCC Global and
IDEX JCC Growth pursuant to an Investment Counsel Agreement dated June 25, 1998
with IMI.
Fred Alger Management, Inc. ("Alger"), 1 World Trade Center, Suite 9333, New
York, NY 10048, serves as sub-adviser to IDEX Alger Aggressive Growth pursuant
to an Investment Counsel Agreement dated September 30, 1994 with IMI.
The sub-advisers also serve as sub-advisers to certain portfolios of the WRL
Series Fund, Inc., a registered investment company. They may be referred to
herein collectively as the "sub-advisers" and individually as a "sub-adviser."
<TABLE>
<CAPTION>
FUND SUB-ADVISER SUB-ADVISORY FEE
------------------------------- ----------------------------- -------------------------------------------------
<S> <C> <C>
IDEX JCC Global Janus Capital Corporation 0.50% of the first $750 million of average daily
net assets; 0.45% of the next $250 million in
assets; and 0.4250% of assets in excess of $1
billion
IDEX JCC Capital Appreciation Janus Capital Corporation 0.50% of the first $750 million of average daily
net assets; 0.45% of the next $250 million in
assets; and 0.4250% of assets in excess of $1
billion, less 50% of any amount reimbursed
pursuant to the fund's expense limitation*
IDEX Alger Aggressive Growth Fred Alger Management, Inc. 50% of the fees received by IMI under the
Advisory Agreement, less 40% of any amount
reimbursed pursuant to its expense limitation
IDEX JCC Growth Janus Capital Corporation 0.50% of the first $750 million of average daily
net assets; 0.45% of the next $250 million; and
0.4250% of assets in excess of $1 billion, less
50% of any amount reimbursed pursuant to the
fund's expense limitation*
</TABLE>
------------------------------
* Janus has contractually agreed to reduce each sub-advisory fee as follows:
IDEX JCC Growth and IDEX JCC Capital Appreciation: first $100 million -
none, next $400 million ($100 - $500 million) 0.0125%, next $250 million
($500 - $750 million) 0.0625%, next $250 million ($750 million - $1 billion)
0.0125%, above $1 billion 0.0125%. This agreement will terminate on June 25,
2000.
SUB-ADVISORY FEES PAID
(NET OF FEES REIMBURSED)
<TABLE>
<CAPTION>
OCTOBER 31
---------------------------------------------
FUND 1999 1998 1997
------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
IDEX Alger Aggressive Growth $ 342,362 $ 137,607 $ 52,325
IDEX JCC Capital Appreciation $ 233,465 $ 83,575 $ 22,536
IDEX JCC Global $ 3,480,875 $1,953,531 $1,112,031
IDEX JCC Growth $11,063,717 $6,769,684 $5,838,319
</TABLE>
------------------------------
AUSA Holding Company ("AUSA") owns 100% of the outstanding stock of IMI. AUSA
also owns 100% of the outstanding shares of the Fund's distributor and transfer
agent. AUSA is wholly-owned by AEGON USA, Inc., a financial services holding
company located at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. AEGON
USA, Inc. is a wholly-owned indirect subsidiary of AEGON N.V., a Netherlands
corporation and publicly traded international insurance group.
Janus Capital has agreed that it will, until June 25, 2000, provided that it
continues to serve as sub-adviser to the funds it currently sub-advises and
compensate ISI for its services in connection with promotion, marketing, and
distribution in an amount equal to 0.0375% of the average daily net assets of
each of IDEX JCC Capital Appreciation and IDEX JCC Growth at certain levels.
This agreement will terminate on that date.
24
<PAGE>
Each of the sub-advisers also serves as investment adviser or sub-adviser to
other funds and/or private accounts which may have investment objectives
identical or similar to that of the funds. Securities frequently meet the
investment objectives of one or all of these funds, the other funds and the
private accounts. In such cases, a sub-adviser's decision to recommend a
purchase to one fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amounts available for
investment by each fund or account, the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Another
factor considered in the investment recommendations is other investments which
each fund or account presently has in a particular industry.
It is possible that at times identical securities will be held by more than one
fund or account. However, positions in the same issue may vary and the length
of time that any fund or account may choose to hold its investment in the same
issue may likewise vary. To the extent that more than one of the funds or
private accounts served by a sub-adviser seeks to acquire or sell the same
security at about the same time, either the price obtained by the funds or the
amount of securities that may be purchased or sold by a fund at one time may be
adversely affected. On the other hand, if the same securities are bought or
sold at the same time by more than one fund or account, the resulting
participation in volume transactions could produce better executions for the
funds. In the event more than one fund or account purchases or sells the same
security on a given date, the purchase and sale transactions are allocated
among the fund(s), the other funds and the private accounts in a manner
believed by the sub-advisers to be equitable to each.
DISTRIBUTOR
IDEX Mutual Funds has entered into an Underwriting Agreement with
InterSecurities, Inc. ("ISI"), located at 570 Carillon Parkway, St. Petersburg,
Florida 33716 to act as the principal underwriter of the shares of the funds.
The Underwriting Agreement will continue from year to year so long as its
continuance is approved at least annually in the same manner as the Investment
Advisory Agreements discussed above. A discussion of ISI's responsibilities and
charges as principal underwriter of fund shares is set forth in the prospectus.
UNDERWRITING COMMISSIONS
<TABLE>
<CAPTION>
COMMISSIONS RETAINED FOR THE PERIOD
COMMISSIONS RECEIVED FOR THE PERIOD ENDED ENDED
--------------------------------------------- ---------------------------------------
OCTOBER 31 OCTOBER 31
--------------------------------------------- ---------------------------------------
FUND 1999 1998 1997 1999 1998 1997
------------------------------- ------------- ------------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
IDEX Alger Aggressive Growth $ 1,519,511 $ 449,078 $ 330,689 $1,321,658 $ 64,099 $ 47,828
IDEX JCC Capital Appreciation $ 882,472 $ 164,358 $ 271,016 $ 772,645 $ 26,358 $ 42,668
IDEX JCC Global $ 4,132,880 $2,784,651 $2,336,372 $3,671,479 $401,257 $353,015
IDEX JCC Growth $11,290,051 $2,848,238 $2,541,907 $9,851,566 $424,803 $396,160
</TABLE>
For the Period Ended October 31, 1999:
<TABLE>
<CAPTION>
NET UNDERWRITING COMPENSATION ON
DISCOUNTS AND REDEMPTIONS AND BROKERAGE OTHER
FUND COMMISSIONS REPURCHASES COMMISSIONS COMPENSATION
------------------------------- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
IDEX Alger Aggressive Growth $1,321,658 $ 16,561 0 $ 265,092
IDEX JCC Capital Appreciation $ 772,645 $ 36,013 0 $ 121,878
IDEX JCC Global $3,671,479 $ 56,276 0 $1,836,360
IDEX JCC Growth $9,851,566 $199,755 0 $2,358,409
</TABLE>
------------------------------
ADMINISTRATIVE SERVICES
IMI is responsible for the supervision all of the administrative functions,
providing office space, and paying its allocable portion of the salaries, fees
and expenses of all Fund officers and of those trustees who are affiliated with
IMI. The costs and expenses, including legal and accounting fees, filing fees
and printing costs in connection with the formation of a fund and the
preparation and filing of a fund's initial registration statements under the
1933 Act and 1940 Act are also paid by the adviser. IMI has entered into
Administrative Services Agreements
25
<PAGE>
("Administrative Agreement") with ISI applicable to each fund. Under each
Administrative Agreement, ISI carries out and supervises all of the
administrative functions of the funds and incurs IMI's expenses related to such
functions.
The administrative duties of ISI with respect to each fund include: providing
the fund with office space, telephones, office equipment and supplies; paying
the compensation of the Fund's officers for services rendered as such;
supervising and assisting in preparation of annual and semi-annual reports to
shareholders, notices of dividends, capital gain distributions and tax
information; supervising compliance by the Fund with the recordkeeping
requirements under the 1940 Act and regulations thereunder and with the state
regulatory requirements; maintaining books and records of the Fund (other than
those maintained by the Fund's custodian and transfer agent); preparing and
filing tax returns and reports; monitoring and supervising relationships with
the Fund's custodian and transfer agent; monitoring the qualifications of tax
deferred retirement plans providing for investment in shares of each fund;
authorizing expenditures and approving bills for payment on behalf of each
fund; and providing executive, clerical and secretarial help needed to carry
out its duties.
ADMINISTRATIVE FEES
<TABLE>
<CAPTION>
FUND
------------------------------- 1998 1999
<S> <C> <C>
IDEX JCC Capital Appreciation $ 137,506 $ 227,137
IDEX JCC Global $1,953,531 $ 3,468,393
IDEX JCC Growth $6,812,504 $10,317,345
IDEX Alger Aggressive Growth $ 310,477 $ 275,560
</TABLE>
--------------
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES
State Street Bank & Trust, 801 Pennsylvania, Kansas City, Missouri 64105-1307,
is custodian for the fund. The custodian is not responsible for any of the
investment policies or decisions of a fund, but holds its assets in
safekeeping, and collects and remits the income thereon subject to the
instructions of the funds.
Idex Investor Services, Inc. ("IIS"), P. O. Box 9015, Clearwater, Florida
33758-9015, is the transfer agent for each fund, withholding agent and dividend
disbursing agent. IIS is a wholly-owned subsidiary of AUSA Holding Company and
thus is an affiliate of IMI and AIMI. Each fund pays the transfer agent an
annual per-account charge of $15.70 for each of its shareholder accounts in
existence, $2.79 for each new account opened and $1.67 for each closed account.
DST Systems Inc. ("DST"), provider of data processing and recordkeeping
services for the Fund's transfer agent, is a partially-owned subsidiary of
Kansas City Southern Industries ("KCSI") and, thus, is an affiliate of Janus
Capital. Each fund may use another affiliate of DST as introducing broker for
certain portfolio transactions as a means to reduce expenses through a credit
against transfer agency fees with regard to commissions earned by such
affiliate. (See "Fund Transactions and Brokerage.") There were no brokerage
credits received for the periods ended October 31, 1999, 1998 and 1997.
TRANSFER AGENCY FEES
<TABLE>
<CAPTION>
FEES AND EXPENSES NET OF BROKERAGE CREDITS FOR
THE PERIOD ENDED
---------------------------------------------
OCTOBER 31
FUND 1999 1998 1997
------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
IDEX Alger Aggressive Growth $ 592,015 $ 311,310 $ 217,941
IDEX JCC Capital Appreciation $ 209,550 $ 128,201 $ 133,515
IDEX JCC Global $1,662,198 $1,032,225 $ 628,833
IDEX JCC Growth $3,525,633 $2,628,305 $2,811,027
</TABLE>
--------------
26
<PAGE>
FUND TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of fund business for each of the funds and
negotiation of commission rates are made by a fund's sub-adviser, whose policy
is to obtain the "best execution" (prompt and reliable execution at the most
favorable security price) of all fund transactions. The Advisory Agreement and
Investment Counsel Agreement for each fund specifically provide that in placing
portfolio transactions for a fund, the fund's sub-adviser may agree to pay
brokerage commissions for effecting a securities transaction in an amount
higher than another broker or dealer would have charged for effecting that
transaction as authorized, under certain circumstances, by the Securities
Exchange Act of 1934.
In selecting brokers and dealers and in negotiating commissions, a fund's
sub-adviser considers a number of factors, including but not limited to:
The sub-adviser's knowledge of currently available negotiated commission
rates or prices of securities and other current transaction costs;
The nature of the security being traded;
The size and type of the transaction;
The nature and character of the markets for the security to be purchased
or sold;
The desired timing of the trade;
The activity existing and expected in the market for the particular
security;
The quality of the execution, clearance and settlement services;
Financial stability;
The existence of actual or apparent operational problems of any broker or
dealer; and
Research products and services provided.
In recognition of the value of the foregoing factors, the sub-adviser may place
portfolio transactions with a broker with whom it has negotiated a commission
that is in excess of the commission another broker would have charged for
effecting that transaction. This is done if the sub-adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research provided by such broker viewed in terms of either
that particular transaction or of the overall responsibilities of the
sub-adviser. Research provided may include:
Furnishing advice, either directly or through publications or writings,
as to the value of securities, the advisability of purchasing or selling
specific securities and the availability of securities or purchasers or
sellers of securities;
Furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and
trends and portfolio strategy;
Access to research analysts, corporate management personnel, industry
experts, economists and government officials; and
Comparative performance evaluation and technical measurement services and
quotation services, and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment,
software, information and accessories that deliver process or otherwise
utilize information, including the research described above) that assist
the sub-adviser in carrying out its responsibilities.
Most of the brokers and dealers used by the funds' sub-advisers provide
research and other services described above.
A sub-adviser may use research products and services in servicing other
accounts in addition to the funds. If a sub-adviser determines that any
research product or service has a mixed use, such that it also serves functions
that do not assist in the investment decision-making process, a sub-adviser may
allocate the costs of such service or product accordingly. The portion of the
product or service that a sub-adviser determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may be a conflict of interest for a sub-adviser.
When a fund purchases or sells a security in the over-the-counter market, the
transaction takes place directly with a principal market-maker without the use
of a broker, except in those circumstances where better prices and executions
will be achieved through the use of a broker.
A sub-adviser may also consider the sale or recommendation of a fund's shares
by a broker or dealer to its customers as a factor in the selection of brokers
or dealers to execute portfolio transactions. In placing portfolio business
with brokers or dealers, a sub-adviser will seek the best execution of each
transaction, and all such brokerage placement must be consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
27
<PAGE>
A sub-adviser may place transactions for the purchase or sale of portfolio
securities with affiliates of IMI, ISI or the sub-adviser, including DST
Securities, Inc., or Fred Alger & Company, Incorporated. It is anticipated that
Fred Alger & Company, Incorporated, an affiliate of Alger, will serve as IDEX
Alger Aggressive Growth's broker in effecting substantially all of IDEX Alger
Aggressive Growth's transactions on securities exchanges and will retain
commissions in accordance with certain regulations of the SEC. A sub-adviser
may place transactions if it reasonably believes that the quality of the
transaction and the associated commission are fair and reasonable, and if
overall the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Other Affiliates," are lower than those
that would otherwise be incurred. Under rules adopted by the SEC, the Fund's
Board of Trustees will conduct periodic compliance reviews of such brokerage
allocations and review certain procedures adopted by the Board of Trustees to
ensure compliance with these rules and to determine their continued
appropriateness.
For the fiscal year ended October 31, 1999, IDEX Alger Aggressive Growth paid
the following commissions to Fred Alger & Company, Incorporated:
<TABLE>
<CAPTION>
COMMISSIONS PAID:
-------------------------------------
<S> <C>
Fiscal 1999 $ 136,631
Fiscal 1999 Percentages:
Commissions with affiliates to
total commissions 99%
Value of brokerage transactions
with affiliates to value of total
brokerage transactions 99%
</TABLE>
As of October 31, 1999, IDEX JCC Capital Appreciation owned $1,263,133 of the
common stock of Charles Schwab Corp. Charles Schwab Corp. is one of the ten
brokers or dealers that received the greatest dollar amount of brokerage
commissions from IDEX JCC Capital Appreciation during the fiscal year ended
October 31, 1999.
As of October 31, 1999, IDEX Alger Aggressive Growth owned $1,831,188 of the
common stock of Morgan Stanley, Dean Witter, Discover and Company. Morgan
Stanley, Dean Witter, Discover and Company is one of the ten brokers or dealers
that received the greatest dollar amount of brokerage commissions from IDEX
Alger Aggressive Growth during the fiscal year ended October 31, 1999.
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
IDEX ALGER IDEX JCC
BROKERAGE COMMISSIONS PAID AGGRESSIVE CAPITAL IDEX JCC IDEX JCC
(INCLUDING AFFILIATED BROKERAGE) GROWTH APPRECIATION GLOBAL GROWTH
---------------------------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
October 31, 1999 $136,673 $179,054 $2,189,777 $2,668,652
October 31, 1998 $155,668 $ 89,687 $ 954,707 $ 843,937
October 31, 1997 $ 79,346 $108,748 $ 119,665 $1,301,654
AFFILIATED BROKERAGE PAID
----------------------------------
October 31, 1999 $136,631 $ 0 $ 0 $ 0
October 31, 1998 $154,866 $ 0 $ 0 $ 0
October 31, 1997 $ 78,761 $ 0 $ 0 $ 0
</TABLE>
IDEX JCC Global, IDEX JCC Growth and IDEX JCC Capital Appreciation all
experienced a significant increase in brokerage commissions paid as a result of
the increased volume of sales of the respective funds for fiscal year ended
10/31/99.
IDEX JCC Growth, IDEX JCC Global and IDEX JCC Capital Appreciation had
brokerage commissions in the amounts of $53,372, $2,442 and $882, respectively,
that were directed to brokers for brokerage and research services provided.
TRUSTEES AND OFFICERS
DIRECTORS AND OFFICERS
The fund is governed by a Board of Trustees. Subject to the supervision of the
Board of Trustees, the assets of each fund are managed by an investment adviser
and sub-advisers, and by fund managers. The Board of Trustees is responsible
for managing the business and affairs of the Fund. It oversees the operation of
the Fund by its officers. It also reviews the management of the funds' assets
by the investment adviser and sub-advisers. Information about the Directors and
officers of the Fund is as follows:
28
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
NAME, ADDRESS AND AGE HELD WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
-------------------------------- -------------------- --------------------------------------------------------------
<S> <C> <C>
PETER R. BROWN TRUSTEE Currently Retired, (January, 2000 - present); Chairman of
(DOB 05/10/28), the Board, Peter Brown Construction Company (construc-
11180 6th Street East tion contractors and engineers), Largo, Florida (1963 -
Treasure Island, Florida 33706 2000); Director of WRL Series Fund, Inc. (investment
company); Rear Admiral (Ret.) U.S. Navy Reserve, Civil
Engineer Corps.
DANIEL CALABRIA TRUSTEE Trustee (1993 - present) and President (1993 - 1995) of
(DOB 03/05/36) The Florida Tax Free Funds (mutual funds); currently
7068 S. Shore Drive S., South retired; formerly President and Director (1995) of Sun
Pasadena, FL 33707-4605 Chiropractic Clinics, Inc. (medical services); Executive Vice
President (1993 - 1995) of William R. Hough & Co.
(investment adviser, municipal bond and underwriting firm);
President/CEO (1986 - 1992) of Templeton Funds Manage-
ment, Inc. (investment advisers); and Vice President
(1986 - 1992) of all U.S. Templeton Funds (mutual funds).
JAMES L. CHURCHILL TRUSTEE Currently retired (1990 - present).
(DOB 07/15/30)
15 Hawthorne Road,
Bluffington, SC 29910-4901
CHARLES C. HARRIS TRUSTEE Director (March 1994 - present), of WRL Series Fund, Inc.
(DOB 07/15/30), (investment company); currently retired (1988 - present).
35 Winston Drive,
Clearwater, Florida 33756
WILLIAM W. SHORT, JR. TRUSTEE President and sole shareholder of Shorts, Inc. (men's retail
(DOB 02/25/36), apparel); Chairman of Southern Apparel Corporation and
12420 73rd Court, S.A.C. Apparel Corporation and S.A.C. Distributors
Largo, FL 33773 (nationwide wholesale apparel distributors), Largo, Florida;
Member of Advisory Board of Nations Banks of Pinellas
County; Trustee of Morton Plant Hospital Foundation;
Former Chairman of Advisory Board of First Florida Bank,
Pinellas County, Florida.
JACK E. ZIMMERMAN TRUSTEE Director (1987 - present), Western Reserve Life Assurance
(DOB 02/03/28), Co. of Ohio (life insurance); currently retired; formerly,
507 Saint Michael Circle, Director, Regional Marketing (September, 1986 - January,
Kettering, OH 45429 1993) Martin Marietta Corporation, Dayton, OH (aerospace
industry). Mr. Zimmerman is also the brother-in-law of John
Kenney, Chairman and CEO of the Fund.
PATRICK S. BAIRD PRESIDENT AND President and Director (June 2000 - present), Director
(DOB 01/19/54), TRUSTEE (December 1999 - June 2000), WRL Series Fund, Inc.;
4333 Edgewood Road, NE, Executive Vice President, Chief Operating Officer (Febru-
Cedar Rapids, Iowa 52499 ary, 1996 - present), Executive Vice President and CFO
(February, 1995 - February, 1996), Vice President and
Chief Financial Officer (May, 1992 - February, 1995)
AEGON USA.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
NAME, ADDRESS AND AGE HELD WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
------------------------- ------------------------ ------------------------------------------------------------
<S> <C> <C>
JOHN E. KENNEY(1,2) CHAIRMAN, TRUSTEE Chairman of the Board (1986 - present), of WRL Series
(DOB 02/8/38) AND CHIEF EXECUTIVE Fund, Inc. (investment company); Director (December,
OFFICER 1990 - present) of IDEX Management, Inc. (investment
adviser); Chairman (1988 - July, 1999) of InterSecurities,
Inc. (broker-dealer); Director (October, 1992 - present) of
ISI Insurance Agency, Inc.; Chairman, and Chief Executive
Officer (1992 - present) and President (1992 - 1999) of
Western Reserve Life Assurance Co. of Ohio (life insur-
ance); Senior Vice President (May, 1992 - present) of
AEGON USA, Inc. (financial services holding company).
Mr. Kenney is also the brother-in-law of Jack Zimmerman,
a trustee of the Fund.
THOMAS R. MORIARTY(1,2) SENIOR VICE PRESIDENT, Director, Chief Executive Officer and President (July,
(DOB 05/03/51) TREASURER AND 1999 - present); Senior Vice President (June, 1991 - July,
PRINCIPAL FINANCIAL 1999) of InterSecurities, Inc. (broker-dealer); Director,
OFFICER Chairman and President (November 1999 - present),
Senior Vice President (September, 1992 - November,
1999) of ISI Insurance Agency, Inc.; President (November,
1990 - present) of PW Securities, Inc. (broker-dealer);
Senior Vice President (June, 1991 - November, 1999) of
IDEX Investor Services, Inc. (transfer agent); Vice
President (June, 1993 - present) of Western Reserve Life
Assurance Co. of Ohio (life insurance); President and CFO
(November, 1999 - present) of AEGON Asset Management
Services, Inc.
DAVID BULLOCK(1,2) EXECUTIVE VICE Executive Vice President (December, 1998 - present),
(DOB 04/25/56) PRESIDENT IDEX Mutual Funds; Executive Vice President (September,
1998 - present), AEGON Equity Group; President
(September, 1998 - present), AEGON Distributors;
President and CEO (September, 1999 - present)
Transamerica Capital, Inc. (formerly Endeavor Group);
prior to 1998, Senior Vice President, National Sales
Manager and Division Vice President of GE Financial
Assurance.
JOHN K. CARTER(1,2) VICE PRESIDENT, Assistant Secretary (June, 1999 - December, 1999) of
(DOB 04/24/61) SECRETARY AND IDEX Mutual Funds; Vice President, Secretary and
COUNSEL Counsel (June, 2000 - present), Assistant Vice President,
Secretary and Counsel (December, 1999 - June, 2000)
WRL Series Fund, Inc.; Vice President and Counsel
(March, 1997 - May, 1999), Salomon Smith Barney;
Assistant Vice President, Associate Corporate Counsel and
Trust Officer (September, 1993 - March, 1997) Franklin
Templeton Mutual Funds; Assistant Vice President and
Counsel (September, 1999 - present ) of Western Reserve
Life Assurance Co. of Ohio.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
NAME, ADDRESS AND AGE HELD WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
----------------------------- --------------------- ---------------------------------------------------------------
<S> <C> <C>
THOMAS E. PIERPAN(1,2) VICE PRESIDENT AND Vice President, Associate General Counsel and Secretary
(DOB 10/18/43) ASSISTANT SECRETARY (December, 1997 - December, 1999) of IDEX Mutual
Funds; Vice President, Associate General Counsel and
Secretary (December, 1997 - December, 1999), Assistant
Secretary (March, 1995 - December, 1997) of WRL Series
Fund, Inc. (investment company); Assistant Vice President,
Counsel and Assistant Secretary (November, 1997 -
present) of InterSecurities, Inc. (broker-dealer); Senior Vice
President and General Counsel (December, 1999 -
present), Associate General Counsel and Assistant
Secretary (February, 1995 - December, 1999), Assistant
Vice President (November, 1992 - November, 1993) of
Western Reserve Life Assurance of Ohio (life insurance).
CHRISTOPHER G. ROETZER(1,2) VICE PRESIDENT, Principal Accounting Officer (March, 1995 - March, 1997),
(DOB 01/11/63) ASSISTANT TREASURER and Assistant Vice President (November, 1990 - March,
AND PRINCIPAL 1997) of IDEX Mutual Funds; Assistant Vice President and
ACCOUNTING OFFICER Controller (May, 1998 - present) of InterSecurities, Inc.
(broker-dealer); Assistant Vice President (September, 1992
- present) of ISI Insurance Agency, Inc.; Assistant Vice
President and Controller (May, 1988 - present) of IDEX
Investor Services, Inc. (transfer agent); Assistant Vice
President (November, 1990 - present) of IDEX Manage-
ment, Inc. (investment adviser).
JULIAN LERNER TRUSTEE EMERITUS Currently retired; Trustee of American Skandia Trust;
(DOB 11/12/24), Director of American Skandia Advisory Funds; Trustee of
One Spurling Plaza, American Skandia Master Trust; formerly Investment
Suite 208, Consultant (1995 - 1996) and Sr. Vice President (1987 -
12850 Spurling Road, 1995) of Aim Capital Management (investment adviser).
Dallas, Texas 75230
</TABLE>
------------------------------
(1) The principal address of each person listed, unless otherwise indicated, is
P.O. Box 9015, Clearwater, FL 33758-9015.
(2) Interested Person (as defined in the 1940 Act) of the Fund.
The Fund pays no salaries or compensation to any of its officers, all of whom
are officers or employees of either ISI, IMI or their affiliates. Disinterested
Trustees (i.e., Trustees who are not affiliated with ISI, IMI or any of the
sub-advisers) receive for each regular Board meeting: (a) a total annual
retainer fee of $20,000 from the funds, of which the funds pay a pro rata share
allocable to each fund based on the relative assets of the fund; plus (b)
$4,000 and incidental expenses per meeting attended. Three of the Disinterested
Trustees have been elected to serve on the Fund's Audit Committee, which meets
twice annually. Each Audit Committee member receives a total of $2,500 per
Audit Committee meeting attended in addition to the regular meetings attended.
In the case of a Special Board Meeting, each of the Disinterested Trustees
receives a fee of $2,500 plus incidental expenses per special meeting attended,
in addition to the regular meetings attended. Any fees and expenses paid to
Trustees who are affiliates of IMI or ISI are paid by IMI and/or ISI and not by
the funds.
Commencing on January 1, 1996, a non-qualified deferred compensation plan (the
"Plan") became available to Trustees who are not interested persons of the
Fund. Under the Plan, compensation may be deferred that would otherwise be
payable by the Fund and/or WRL Series Fund, Inc., to a Disinterested Trustee or
Director on a current basis for services rendered as Trustee or Director.
Deferred compensation amounts will accumulate based on the value of Class A
shares of a fund (without imposition of sales charge), as elected by the
Trustee. It is not anticipated that the Plan will have any impact on the funds.
The following table provides compensation amounts paid to Disinterested
Trustees of the Fund for the fiscal year ended October 31, 1999.
31
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT TOTAL COMPENSATION PAID TO
COMPENSATION FROM BENEFITS ACCRUED AS PART OF TRUSTEES FROM FUND
NAME OF PERSON, POSITION IDEX MUTUAL FUNDS * FUND EXPENSES COMPLEX**
-------------------------------- ------------------------- ----------------------------- ---------------------------
FOR YEAR ENDED 10/31/99 AS OF 10/31/99 10/31/99
<S> <C> <C> <C>
Peter R. Brown, Trustee $ 28,250 $28,750 $ 41,000
Daniel Calabria, Trustee $ 25,500 $ 6,375 $ 25,500
James L. Churchill, Trustee $ 25,500 $16,400 $ 25,500
Charles C. Harris, Trustee $ 28,250 $ 0 $ 41,000
Julian A. Lerner, Trustee*** $ 25,500 $ 0 $ 25,500
William W. Short, Jr., Trustee $ 28,250 $22,750 $ 28,250
Jack E. Zimmerman, Trustee $ 25,500 $ 5,500 $ 25,500
-------- ------- --------
Total $186,750 $79,775 $212,250
</TABLE>
------------------------------
* Of this aggregate compensation, the total amounts deferred (including
earnings) and accrued for the benefit of the participating Trustees for the
year ended October 31, 1999 were as follows: Peter R. Brown, $30,961;
Daniel Calabria, $7,542; James L. Churchill, $19,425; William W. Short,
Jr., $22,750; and Jack E. Zimmerman, $5,500.
** The Fund Complex consists of IDEX Mutual Funds and WRL Series Fund, Inc.
*** Effective January 1, 2000, Mr. Lerner became a Trustee Emeritus.
The Board of Trustees has adopted a policy whereby any Disinterested Trustee of
the Fund in office on September 1, 1990 who has served at least three years as
a trustee may, subject to certain limitations, elect upon his resignation to
serve as a trustee emeritus for a period of two years. A trustee emeritus has
no authority, power or responsibility with respect to any matter of the Fund.
While serving as such, a trustee emeritus is entitled to receive from the Fund
an annual fee equal to one-half the fee then payable per annum to Disinterested
Trustees of the Fund, plus reimbursement of expenses incurred for attendance at
Board meetings.
The Fund has an Executive Committee whose members currently are John R. Kenney,
Pat Baird and Peter R. Brown. The Executive Committee may perform all of the
functions which may be performed by the Board of Trustees, except as set forth
in the Declaration of Trust and By-Laws of the Fund or as prohibited by
applicable law.
During the fiscal year ended October 31, 1999, the Fund paid $266,525 in
trustees fees and expenses, and no trustee emeritus fees or expenses. As of
January 30, 2000, the trustees and officers held in the aggregate less than 1%
of the outstanding shares of each of the funds.
PURCHASE OF SHARES
As stated in the prospectus, each fund offers investors a choice of four
classes of shares. (IDEX JCC Growth also includes a fifth class, Class T
shares, which are not available for new investors.) Class A, Class B, Class C
or Class M shares of a fund can be purchased through ISI or through
broker-dealers or other financial institutions that have sales agreements with
ISI. Shares of each fund are sold at the net asset value per share as
determined at the close of the regular session of business on the New York
Stock Exchange next occurring after a purchase order is received and accepted
by the fund. (The applicable sales charge is added in the case of Class A,
Class M and Class T shares.) The prospectus contains detailed information about
the purchase of fund shares.
32
<PAGE>
DEALER REALLOWANCES
IDEX sells shares of its funds both directly and through authorized dealers.
When you buy shares, your fund receives the entire NAV of the shares you
purchase. ISI keeps the sales charge, then "reallows" a portion to the dealers
through which shares were purchased. This is how dealers are compensated.
From time to time, ISI will create special promotions in which dealers earn
larger reallowances in return for selling significant amounts of shares or for
certain training services. Sometimes, these dealers may earn virtually the
entire sales charge; at those times, they may be deemed underwriters as
described in the 1933 Act.
Promotions may also involve non-cash incentives such as prizes or merchandise.
Non-cash compensation may also be in the form of attendance at seminars
conducted by ISI, including lodging and travel expenses, in accordance with the
rules of the NASD.
Reallowances may also be given to financial institutions to compensate them for
their services in connection with Class A share sales and servicing of
shareholder accounts.
ISI may also pay dealers or financial institutions from its own funds or
administrative services for larger accounts.
CLASS A SHARE DEALER REALLOWANCES
<TABLE>
<CAPTION>
REALLOWANCE TO DEALERS AS A %
AMOUNT OF PURCHASE OF OFFERING PRICE
-------------------------------- ------------------------------
<S> <C>
Under $50,000 4.75%
$50,000 to under $100,000 4.00%
$100,000 to under $250,000 2.75%
$250,000 to under $500,000 2.25%
$500,000 to under $1,000,000 1.75%
$1,000,000 to under $2,500,000 1.00%
$2,500,000 to under $4,000,000 0.75%
$4,000,000 to under $5,000,000 0.50%
$5,000,000 and over 0.25%
</TABLE>
CLASS B SHARE DEALER REALLOWANCES
<TABLE>
<CAPTION>
DEALER REALLOWANCE %
-----------------------------------------
<S> <C>
All purchases 5.00%*
* From time to time, ISI may reallow to
a dealer an amount less than 5% on
sales of Class B shares. In such
circumstances, ISI will benefit directly
to the extent the reallowance
percentage is reduced below 5% on
any purchase of Class B shares.
</TABLE>
CLASS T SHARE DEALER REALLOWANCES
(IDEX JCC Growth)
<TABLE>
<CAPTION>
REALLOWANCE TO DEALERS AS A %
AMOUNT OF PURCHASE OF OFFERING PRICE
--------------------- ------------------------------
<S> <C>
$1,000,000 and over 1.00%
</TABLE>
33
<PAGE>
DISTRIBUTION PLANS
As stated in the prospectus under "Investment Advisory and Other Services," each
fund has adopted a separate Distribution Plan pursuant to Rule 12b-1 under the
1940 Act (individually, a "Plan" and collectively, the "Plans"), applicable to
Class A, Class B, Class C and Class M shares of the fund. This Plan is
structured as a Compensation Plan. CLASS T SHARES OF IDEX JCC GROWTH ARE NOT
SUBJECT TO ANNUAL DISTRIBUTION AND SERVICE FEES.
In determining whether to approve the Distribution Plan and the Distribution
Agreements, the Trustees considered the possible advantages afforded
shareholders from adopting the Distribution Plans and Distribution Agreements.
The Trustees were informed by representatives of ISI that reimbursements of
distribution-related expenses by the Fund under the Distribution Plans would
provide incentives to ISI to establish and maintain an enhanced distribution
system whereby new investors will be attracted to the funds. The Trustees
believe that improvements in distribution services should result in increased
sales of shares in the funds. In turn, increased sales are expected to lead to
an increase in a fund's net asset levels, which would enable the funds to
achieve economies of scale and lower their per-share operating expenses. In
addition, higher net asset levels could enhance the investment management of
the funds, for net inflows of cash from new sales may enable a fund's
investment adviser and sub-adviser to take advantage of attractive investment
opportunities. Finally, reduced redemptions could eliminate the potential need
to liquidate attractive securities positions in order to raise the capital
necessary to meet redemption requests.
Under the Plans for Class A shares (the "Class A Plans"), a fund may pay ISI an
annual distribution fee of up to 0.35% and an annual service fee of up to 0.25%
of the average daily net assets of a fund's Class A shares; however, to the
extent that a fund pays service fees, the amount which a fund may pay as a
distribution fee is reduced accordingly so that the total fees payable under
the Class A Plan may not exceed on an annualized basis 0.35% of the average
daily net assets of a fund's Class A shares.
Under the Plans for Class B shares (the "Class B Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class B shares.
Under the Plans for Class C shares (the "Class C Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class C shares.
Under the Plans for Class M shares (the "Class M Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class M shares; however, the
total fee payable pursuant to the Class M Plan may not, on an annualized basis,
exceed 0.90% of the average daily net assets of the fund's Class M shares.
ISI may use the fees payable under the Class A, Class B, Class C and Class M
Plans as it deems appropriate to pay for activities or expenses primarily
intended to result in the sale of the Class A, Class B, Class C or Class M
shares, respectively, or in personal service to and/or maintenance of these
shareholder accounts. For each class, these activities and expenses may
include, but are not limited to:
Compensation to employees of ISI;
Compensation to and expenses of ISI and other
selected dealers who engage in or otherwise support the distribution of
shares or who service shareholder accounts;
The costs of printing and distributing prospectuses,
statements of additional information and reports for other than existing
shareholders; and
The cost of preparing, printing and distributing sales
literature and advertising materials.
Under the Plans, as required by Rule 12b-1, the Board of Trustees will review,
at least quarterly, a written report provided by ISI of the amounts expended by
ISI in distributing and servicing Class A, Class B, Class C or Class M shares
of the funds and the purpose for which such expenditures were made. For so long
as the Plans are in effect, selection and nomination of the Trustees who are
not interested persons of the Fund shall be committed to the discretion of the
Trustees who are not interested persons of the Fund.
A Plan may be terminated as to a class of shares of a fund at any time by vote
of a majority of the Disinterested Trustees, or by vote of a majority of the
outstanding voting securities of the applicable class. A Plan may be amended by
vote of the Trustees, including a majority of the Disinterested Trustees of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or any agreement relating thereto, cast in person at a meeting called for
that purpose. Any amendment of a Plan that would materially increase the costs
to a particular class of shares of a fund requires approval by the shareholders
of that class. A Plan will remain in effect for successive one year periods, so
long as such continuance is approved annually by vote of the Fund's Trustees,
including a majority of the Disinterested Trustees, cast in person at a meeting
called for the purpose of voting on such continuance.
34
<PAGE>
DISTRIBUTION FEES
Distribution related expenses incurred by ISI for the fiscal year ended October
31, 1999 are listed in the table below. These expenses have been partially
reimbursed to ISI by a 12b-1 arrangement with the funds.
<TABLE>
<CAPTION>
IDEX ALGER IDEX JCC
AGGRESSIVE GROWTH CAPITAL APPRECIATION
------------------------------------------ -----------------------------------------
A B M** A B M**
SHARES SHARES SHARES Shares Shares Shares
-------------- -------------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 9,595.00 $ 3,772.00 $ 1,921.00 $ 2,890.00 $ 398.00 $ 202.00
Printing/mailing prospectuses to other
than current shareholders $ 61,356.00 $ 35,263.00 $14,239.00 $ 35,743.00 $21,964.00 $ 6,143.00
Compensation to
underwriters $ 82,159.00 $ 10,650.00 $ 9,908.00 $ 57,551.00 $ 4,255.00 $ 2,636.00
Compensation to dealers $ 90,221.00 $ 10,388.00 $10,669.00 $ 34,182.00 $ 4,710.00 $ 2,142.00
Compensation to sales personnel $ 96,459.00 $ 60,562.00 $23,724.00 $ 66,949.00 $44,328.00 $11,597.00
Interest or other finance charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 16,087.00 $ 9,885.00 $ 3,905.00 $ 10,767.00 $ 7,017.00 $ 1,860.00
Office expenses $ 38,951.00 $ 21,915.00 $ 9,011.00 $ 22,185.00 $13,106.00 $ 3,612.00
Administrative processing costs $ 7,707.00 $ 3,345.00 $ 1,432.00 $ 2,922.00 $ 1,461.00 $ 716.00
TOTAL $402,535.00 $155,780.00 $74,809.00 $233,189.00 $97,239.00 $28,908.00
</TABLE>
<TABLE>
<CAPTION>
IDEX JCC GLOBAL
--------------------------------------------
A B M**
SHARES SHARES SHARES
---------------- ------------- -------------
<S> <C> <C> <C>
Advertising $ 60,768.00 $ 40,576.00 $ 19,900.00
Printing/mailing prospectuses to other
than current shareholders $ 206,007.00 $174,040.00 $ 96,475.00
Compensation to
underwriters $ 372,477.00 $ 33,054.00 $ 37,174.00
Compensation to dealers $ 571,972.00 $125,943.00 $173,332.00
Compensation to sales personnel $ 306,976.00 $267,195.00 $146,338.00
Interest or other finance charges $ 0.00 $ 0.00 $ 0.00
Travel $ 52,291.00 $ 45,010.00 $ 24,637.00
Office expenses $ 147,920.00 $118,752.00 $ 63,977.00
Administrative processing costs $ 18,930.00 $ 10,701.00 $ 5,475.00
TOTAL $1,737,341.00 $815,271.00 $567,308.00
<CAPTION>
IDEX JCC GROWTH*
-----------------------------------------------
A B M**
SHARES SHARES SHARES hares
---------------- ---------------- -------------
<S> <C> <C> <C>
Advertising $ 120,362.00 $ 38,742.00 $ 35,590.00
Printing/mailing prospectuses to other
than current shareholders $ 709,903.00 $ 321,350.00 $160,177.00
Compensation to
underwriters $1,226,914.00 $ 36,618.00 $ 56,341.00
Compensation to dealers $1,594,500.00 $ 33,541.00 $ 85,572.00
Compensation to sales personnel $1,099,234.00 $ 532,917.00 $247,632.00
Interest or other finance charges $ 0.00 $ 0.00 $ 0.00
Travel $ 183,902.00 $ 87,694.00 $ 41,623.00
Office expenses $ 455,525.00 $ 199,947.00 $106,804.00
Administrative processing costs $ 42,263.00 $ 10,518.00 $ 4,740.00
TOTAL $5,432,603.00 $1,261,327.00 $736,479.00
</TABLE>
------------------------------
* Class T shares of IDEX JCC Growth are not subject to annual distribution
and service fees.
** All shares designated as Class C shares prior to March 1, 1999 were renamed
as Class M shares on that date. Effective November 1, 1999, each fund
began offering a new Class C share that has different fees and expenses
than the previous Class C share. Information is not included for the new
Class C share because the Fund began offering those shares on November 1,
1999.
NET ASSET VALUE DETERMINATION
Net asset value is determined separately for each class of shares of a fund on
each day as of the close of the regular session of business on the New York
Stock Exchange (the "Exchange"), currently 4:00 p.m. Eastern Time, Monday
through Friday, except on: (i) days on which changes in the value of portfolio
securities will not materially affect the net asset value of a particular class
of shares of the funds; (ii) days during which no shares of a fund are tendered
for redemption and no orders to purchase shares of that fund are received; or
(iii) customary national holidays on which the Exchange is closed. The per
share net asset value of each class of shares of a fund is determined by adding
the fund's total assets, subtracting liabilities and dividing by the number of
shares outstanding. The public offering price of a Class A, Class B, Class C,
Class M or Class T share of a fund is the net asset value per share plus, the
applicable sales charge in the case of Class A, Class M or Class T shares.
Investment securities are valued at the closing price for securities traded on
a principal securities exchange (U.S. or foreign), or on the NASDAQ National
35
<PAGE>
Market. Investment securities traded on the over-the-counter market and listed
securities for which no sales are reported for the trading period immediately
preceding the time of determination are valued at the last bid price. Foreign
currency denominated assets and liabilities are converted into U.S. dollars at
the closing exchange rate each day. Other securities for which quotations are
not readily available are valued at fair values determined in such manner as a
fund's sub-adviser, under the supervision of the Board of Trustees, decides
in good faith.
OFFERING PRICE PER SHARE CALCULATED AS FOLLOWS:
<TABLE>
<CAPTION>
NET ASSET VALUE PER SHARE ADD MAXIMUM AMOUNT OF SALES OFFERING PRICE
AS OF OCTOBER 31, 1999 (NET ASSETS/SHARES OUTSTANDING) SELLING COMMISSION CHARGE PER SHARE
------------------------------ --------------------------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
IDEX Alger Aggressive Growth
Class A $33.05 5.50% $1.92 $34.97
Class B $32.44 0.00% $ -- $32.44
Class M* $32.53 1.00% $0.33 $32.86
IDEX JCC Capital Appreciation
Class A $31.09 5.50% $1.81 $32.90
Class B $30.51 0.00% $ -- $30.51
Class M* $30.60 1.00% $0.31 $30.91
IDEX JCC Global
Class A $33.80 5.50% $1.97 $35.77
Class B $32.98 0.00% $ -- $32.98
Class M* $32.91 1.00% $0.33 $33.24
IDEX JCC Growth
Class A $46.72 5.50% $2.72 $49.44
Class B $45.38 0.00% $ -- $45.38
Class M* $45.58 1.00% $0.46 $46.04
Class T $47.45 8.50% $4.41 $51.86
</TABLE>
------------------------------
* All shares designated as Class C shares prior to March 1, 1999 were renamed
as Class M shares on that date. Effective November 1, 1999, each fund began
offering a new Class C share that has different fees and expenses than the
previous Class C share. Information is not included for the NEW Class C
share because the Fund began offering those shares on November 1, 1999.
DIVIDENDS AND OTHER DISTRIBUTIONS
An investor may choose among several options with respect to dividends and
capital gains distributions payable to the investor. Dividends or other
distributions will be paid in full and fractional shares at the net asset value
determined as of the ex-dividend date unless the shareholder has elected
another distribution option as described in the prospectus. Transaction
confirmations and checks for payments designated to be made in cash generally
will be mailed on the payable date. The per share income dividends on Class B,
Class C and Class M shares of a fund are anticipated to be lower than the per
share income dividends on Class A shares of that fund (and Class T shares of
IDEX JCC Growth), as a result of higher distribution and service fees
applicable to the Class B, Class C and Class M shares.
SHAREHOLDER ACCOUNTS
Detailed information about general procedures for Shareholder Accounts and
specific types of accounts isset forth in the prospectus.
RETIREMENT PLANS
The Fund offers several types of retirement plans that an investor may
establish to invest in shares of a fund with tax deductible dollars. Prototype
retirement plans for both corporations and self-employed individuals, and for
Individual Retirement Accounts, Code Section 401(k) Plans and Simplified
Employee Pension Plans are available by calling or writing IDEX Customer
Service. These plans require the completion of separate applications which are
also available from IDEX Customer Service. State Street Bank & Trust, Kansas
City, Missouri, acts as the custodian or trustee under these plans for which it
charges an annual fee of up to $15.00 on each such account with a maximum of
$30.00 per tax identification number. However, if your retirement plan is under
custody of State Street and your combined retirement account balances per
taxpayer identification number are more than $50,000, there is generally no
fee. Shares of
36
<PAGE>
a fund are also available for investment by Code Section 403(b)(7) retirement
plans for employees of charities, schools, and other qualifying employers. To
receive additional information or forms on these plans, please call IDEX
Customer Service at 1-888-233-4339 (toll free) or write to Idex Investor
Services, Inc. at P.O. Box 9015, Clearwater, Florida 33758-9015. No
contribution to a retirement plan can be made until the appropriate forms to
establish the plan have been completed. It is advisable for an investor
considering the funding of any retirement plan to consult with an attorney,
retirement plan consultant or financial or tax advisor with respect to the
requirements of such plans and the tax aspects thereof.
REDEMPTION OF SHARES
Shareholders may redeem their shares at any time at any price equal to the net
asset value per share next determined following receipt of a valid redemption
order by the transfer agent, in proper form. Payment will ordinarily be made
within three days of the receipt of a valid redemption order. The value of
shares on redemption may be more or less than the shareholder's cost, depending
upon the market value of the fund's net assets at the time of redemption. CLASS
B SHARE AND CLASS M SHARE AND CERTAIN CLASS A AND CLASS T SHARE PURCHASES ARE
ALSO SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE UPON CERTAIN REDEMPTIONS.
THE PROSPECTUS DESCRIBES THE REQUIREMENTS AND PROCEDURES FOR THE REDEMPTION OF
SHARES.
Shares will normally be redeemed for cash, although each fund retains the right
to redeem its shares in kind under unusual circumstances in order to protect
the interests of the remaining shareholders by the delivery of securities
selected from its assets at its discretion. The Fund has, however, elected to
be governed by Rule 18f-1 under the 1940 Act pursuant to which a fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of a fund during any 90-day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, the fund will
have the option of redeeming the excess in cash or in kind. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage costs in
converting the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "Net Asset Value Determination," and such valuation
will be made as of the same time the redemption price is determined. Upon any
distributions in kind, shareholders may appeal the valuation of such securities
by writing to the Fund.
Redemption of shares may be suspended, or the date of payment may be postponed,
whenever: (1) trading on the Exchange is restricted, as determined by the SEC,
or the Exchange is closed except for holidays and weekends; (2) the SEC permits
such suspension and so orders; or (3) an emergency exists as determined by the
SEC so that disposal of securities and determination of net asset value is not
reasonably practicable.
The CDSC is waived on redemptions of Class B and Class M shares (and Class A, C
and T, when applicable) in the circumstances described below:
(a) REDEMPTION UPON TOTAL DISABILITY OR DEATH
A fund will waive the CDSC on redemptions following the death or total
disability (as evidenced by a determination of the Federal Social Security
Administration) of a shareholder, but in the case of total disability only as
to shares owned at the time of the initial determination of disability. The
transfer agent or distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC.
(b) REDEMPTION PURSUANT TO A FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan ("SWP")
with respect to the shareholder's investment in a fund. Under the SWP, a dollar
amount of a participating shareholder's investment in the fund will be redeemed
systematically by the fund on a periodic basis, and the proceeds paid in
accordance with the shareholder's instructions. The amount to be redeemed and
frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the SWP. The CDSC will be waived on
redemptions made under the SWP subject to the limitations described below.
The amount of a shareholder's investment in a fund at the time election to
participate in the SWP is made with respect to the fund is hereinafter referred
to as the "Initial Account Balance." The amount to be systematically withdrawn
from a fund without the imposition of a CDSC may not exceed a maximum of 12%
annually of the shareholder's Initial Account Balance. The funds reserves the
right to change the terms and conditions of the SWP and the ability to offer
the SWP.
Please Note: The amount redeemed under this waiver does not need to be under a
systematic withdrawal plan. If it is not under a systematic withdrawal plan, it
is limited to one redemption per calendar year up to 12% of your account
balance at the time of redemption.
37
<PAGE>
(c) REINVESTMENT PRIVILEGE
The CDSC is also waived on redemption of shares as it relates to the
reinvestment of redemption proceeds in the same class of shares of another fund
within 90 days after redemption.
(d) CERTAIN RETIREMENT PLAN WITHDRAWALS
For accounts opened prior to April 1, 2000, on withdrawals from IRS qualified
and nonqualified retirement plans, individual retirement accounts,
tax-sheltered accounts, and deferred compensation plans, where such withdrawals
are permitted under the terms of the plan or account. (This waiver does not
include transfer of asset redemptions, broker directed accounts or omnibus
accounts.)
TAXES
Each fund has qualified and expects to continue to qualify, for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended (the "Code"). In order to qualify for that treatment, a fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income ("Distribution Requirement") and must meet
several additional requirements. With respect to each fund, these requirements
include the following: (1) the fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
foreign currencies, or other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) at the close of each
quarter of a fund's taxable year, at least 50% of the value of its total assets
must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities that, with respect to any one
issuer, do not exceed 5% of the value of the fund's total assets and that do
not represent more than 10% of the outstanding voting securities of the issuer;
and (3) at the close of each quarter of a fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other than
U.S. government securities or the securities of other RICs) of any one issuer.
If each fund qualifies as a regulated investment company and distributes to its
shareholders substantially all of its net income and net capital gains, then
each fund should have little or no income taxable to it under the Code. If a
fund fails to qualify as a regulated investment company, the fund will be
subject to federal, and possibly state, corporate taxes on its taxable income
and gains, and distributions to its shareholders will constitute ordinary
dividend income to the extent of the fund's available earnings and profits.
A fund will be subject to a nondeductible 4% excise tax to the extent it fails
to distribute by the end of any calendar year substantially all of its ordinary
income for that year and capital gains net income for the one-year period
ending on October 31 of that year, plus certain other amounts. Each fund
intends to distribute annually a sufficient amount of any taxable income and
capital gains so as to avoid liability for this excise tax.
Dividends and interest received by a fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. However, tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes. In
addition, most foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors and most U.S. Tax conventions
preclude the imposition of such taxes.
If more than 50% of the value of IDEX JCC Global's total assets at the close of
its taxable year consists of securities of foreign corporations, it will be
eligible to, and may, file an election with the IRS that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign and U.S. possessions income taxes paid by it. Pursuant
to the election, a fund will treat those taxes as dividends paid to its
shareholders and each shareholder will be required to: (1) include in gross
income, and treat as paid by him, his proportionate share of those taxes; (2)
treat his share of those taxes and of any dividend paid by the fund that
represents income from foreign or U.S. possessions sources as his own income
from those sources; and (3) either deduct the taxes deemed paid by him in
computing his taxable income or, alternatively, use the foregoing information
in calculating the limitation applicable to the foreign tax credit against his
federal income tax. IDEX JCC Global will report to its shareholders shortly
after each taxable year their respective shares of the income from sources
within, and taxes paid to, foreign countries and U.S. possessions if it makes
this election.
Each fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive; or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a fund will be subject to
federal income tax on a portion of any "excess distribution"
38
<PAGE>
received on the stock of a PFIC or of any gain on disposition of that stock
(collectively, "PFIC income"), plus interest thereon, even if the fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. If a fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the fund will be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital
gain over net short-term capital loss). This will occur even if such income and
gains are not distributed to the fund and those amounts would be subject to the
Distribution Requirement described above. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
In addition, another election may be available that would involve marking to
market a fund's PFIC stock at the end of each taxable year (and on certain
other dates prescribed in the Code), with the result that unrealized gains are
treated as though they were realized although any such gains recognized will be
ordinary income rather than capital gain. If this election were made, tax at
the fund level under the excess distribution rules would be eliminated, but a
fund could, in limited circumstances, incur nondeductible interest charges. A
fund's intention to qualify annually as a regulated investment company may
limit a fund's election with respect to PFIC stock.
The use of hedging strategies, such as writing (selling) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the character and timing of
recognition of the income received in connection therewith by a fund. In order
to comply with the diversification and other requirements applicable to RICs, a
fund may not be able to buy or sell certain securities at certain times, so the
investments utilized (and the time at which such investments are purchased and
sold) may be different from what the fund might otherwise believe to be
desirable. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by a fund with respect to its
business of investing in securities or foreign currencies, generally will
qualify as permissible income under the Income Requirement.
The treatment of income dividends and capital gains distributions by a fund to
shareholders under the various state income tax laws may not parallel that
under the federal law. Qualification as a regulated investment company does not
involve supervision of a fund's management or of its investment policies and
practices by any governmental authority.
Shareholders are urged to consult their own tax advisors with specific
reference to their own tax situations, including their state and local tax
liabilities.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Fund, as of February 24, 2000, no shareholders owned
beneficially or 5% or more of the outstanding shares of beneficial interest of
IDEX Alger Aggressive Growth, IDEX JCC Capital Appreciation and IDEX JCC
Global.
<TABLE>
<CAPTION>
% OF SHARES OF
NAME/ADDRESS FUND CLASS BENEFICIAL INTEREST
-------------- ----------------- ------- --------------------
<S> <C> <C> <C>
CONAGRA IDEX JCC Growth T 24%
Boston, MA
</TABLE>
MISCELLANEOUS
ORGANIZATION
Each fund is a series of the IDEX Mutual Funds, a Massachusetts business trust
that was formed by a Declaration of Trust dated January 7, 1986. The Trust
currently is governed by a Restatement of Declaration of Trust ("Declaration of
Trust") dated as of August 30, 1991.
On September 20, 1996 in a tax-free reorganization, IDEX JCC Growth (formerly
IDEX II Growth Fund) acquired all of the assets and assumed all of the
liabilities of IDEX Fund and IDEX Fund 3 in exchange for Class T shares of IDEX
JCC Growth which were then distributed on a pro rata basis to the respective
shareholders of IDEX Fund and IDEX Fund 3. Upon closing of the reorganization,
IDEX II Series Fund changed its name to IDEX Series Fund. IDEX Series Fund
became IDEX Mutual Funds effective March 1, 1999.
39
<PAGE>
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Fund to issue an unlimited number of
shares of beneficial interest. Shares of the Fund are fully paid and
nonassessable when issued. Shares of the Fund have no preemptive, cumulative
voting, conversion or subscription rights. Shares of the Fund are fully
transferable but the Fund is not bound to recognize any transfer until it is
recorded on the books.
The shares of beneficial interest of each fund are divided into four classes,
Class A, Class B, Class C and Class M shares; IDEX JCC Growth includes a fifth
class, Class T shares. Each class represents interests in the same assets of
the fund and differ as follows: each class of shares has exclusive voting
rights on matters pertaining to its plan of distribution or any other matter
appropriately limited to that class; Class A shares are subject to an initial
sales charge and are subject to a CDSC on purchases of $1 million or more if
redeemed within 24 months of purchase; Class B shares are subject to a CDSC, or
back-end load, at a declining rate; Class C shares are not subject to an
initial sales charge or CDSC; Class M shares are subject to an initial sales
charge and are subject to a CDSC if redeemed within 18 months of purchase;
Class B, Class C and Class M shares are subject to higher ongoing distribution
and service fees; each class may bear differing amounts of certain
class-specific expenses; and each class has a separate exchange privilege.
Class T shares of the IDEX JCC Growth are subject to an initial sales charge
and are subject to a CDSC if redeemed with 24 months of purchase. Class T
shares have no annual distribution and service fees. Class T shares are NOT
available to new investors; only existing Class T shareholders (who were
shareholders of IDEX Fund or IDEX Fund 3 on September 20, 1996) may purchase
additional Class T shares. The Fund does not anticipate that there will be any
conflicts between the interests of holders of the different classes of shares
of the same fund by virtue of these classes. On an ongoing basis, the Board of
Trustees will consider whether any such conflict exists and, if so, take
appropriate action. On any matter submitted to a vote of shareholders of a
series or class, each full issued and outstanding share of that series or class
has one vote.
The Declaration of Trust provides that each of the Trustees will continue in
office until the termination of the Trust or his earlier death, resignation,
bankruptcy or removal. A meeting will be called for the election of trustees
upon the written request of holders of 10% or more of the outstanding shares of
the Fund. Vacancies may be filled by a majority of the remaining trustees,
subject to certain limitations imposed by the 1940 Act. Therefore, it is not
anticipated that annual or regular meetings of shareholders normally will be
held, unless otherwise required by the Declaration of Trust or the 1940 Act.
Subject to the foregoing, shareholders have the power to vote for the election
and removal of trustees, to terminate or reorganize the Fund, to amend the
Declaration of Trust, on whether to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Fund's bylaws or the Trustees.
LEGAL COUNSEL AND AUDITORS
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as counsel to the Fund and certain of its affiliates.
PricewaterhouseCoopers LLP, 400 N. Ashley Street, Suite 2800 Tampa, Florida
33602-4319 serves as certified public accountants for the Fund.
REGISTRATION STATEMENT
This SAI and the prospectus for the Fund does not contain all the information
set forth in the registration statement and exhibits relating thereto, which
the Fund has filed with the SEC, Washington, D.C. under the 1933 Act and the
1940 Act, to which reference is hereby made.
PERFORMANCE INFORMATION
Quotations of average annual total return for a particular class of shares of a
fund will be expressed in terms of the average annual compounded rate of return
of a hypothetical investment in the fund over periods of 1, 5, and 10 years.
These are the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value. These rates of return
are calculated pursuant to the following formula:
P(1 + T)n = ERV
(where P = a hypothetical initial investment of $1,000; T = the average annual
total return; N = the number of years; and ERV = the ending redeemable value of
a hypothetical $1,000 investment made at the beginning of the period). All
average annual total return figures reflect the deduction of a proportionate
share of each fund's expenses on an annual basis, and assume that the maximum
sales load (Class A, M and Class T shares)is deducted from the initial $1,000
investment andall dividends and distributions are paid in additional shares.
(No information is included for the new Class C shares as the Fund began
offering those shares on November 1, 1999.)
40
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
IDEX ALGER AGGRESSIVE GROWTH IDEX JCC CAPITAL APPRECIATION
AS OF OCTOBER 31, 1999 CLASS CLASS
-------------------------------------- --------------------------------- ----------------------------------
A B M*** A B M***
--------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 12/2/94 10/1/95 12/2/94 12/2/94 10/1/95 12/2/94
Sales Charge* 5.50% * 1.00% 5.50% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90%
Average Annual Total Return Including
Sales Charges:
1 year 46.93% 49.88% 52.42% 91.07% 96.72% 98.77%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 30.94% 21.43% 31.80% 29.88% 28.28% 30.62%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 55.49% 54.88% 54.97% 102.19% 101.72% 101.79%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 32.45% 21.56% 32.07% 31.38% 28.39% 30.89%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 55.49% 54.88% 54.97% 102.19% 101.72% 101.79%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 298.26% 121.97% 292.59% 282.71% 177.54% 275.67%
</TABLE>
<TABLE>
<CAPTION>
IDEX JCC GLOBAL IDEX JCC GROWTH
AS OF OCTOBER 31, 1999 CLASS CLASS
-------------------------------------- -------------------------------------- -------------------------------------------------
A B M*** A B M*** T**
------------ ------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception Date 10/1/92 10/1/95 10/1/93 5/8/86 10/1/95 10/1/93 6/4/85
Sales Charge* 5.50% * 1.00% 5.50% * 1.00% 8.50%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90% 0%
Average Annual Total Return Including
Sales Charges:
1 year 32.59% 34.62% 37.33% 52.14% 55.36% 57.85% 47.63%
5 years 20.38% N/A 21.26% 30.75% N/A 31.65% 30.23%
10 years N/A N/A N/A 20.11% N/A N/A 20.14%
Inception 22.33% 23.33% 21.06% 20.14% 31.05% 24.56% 20.26%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 40.31% 39.62% 39.73% 61.00% 60.36% 60.45% 61.34%
5 years 21.75% N/A 21.51% 32.24% N/A 31.91% 32.57%
10 years N/A N/A N/A 20.79% N/A N/A 21.21%
Inception 23.31% 23.47% 21.26% 20.65% 31.16% 24.77% 21.01%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 40.31% 39.62% 39.73% 61.00% 60.36% 60.45% 61.34%
5 years 167.54% N/A 164.84% 304.39% N/A 299.42% 309.40%
10 years N/A N/A N/A 561.06% N/A N/A 584.43%
Inception 340.53% 136.54% 222.88% 1155.64% 202.73% 284.04% 1459.51%
</TABLE>
--------------
* The contingent deferred sales charge on redemption of Class B shares is
5% during the first year, 4% during the second year, 3% during the third
year, 2% during the fourth year, 1% during the fifth and sixth years and
0% during the seventh year and later. The contingent deferred sales
charge on Class M shares is 1% during the first 18 months. The Class A
and T shares are subject to a 1% contingent deferred sales charge in
certain circumstances.
** Performance of Class T Shares of IDEX JCC Growth is based on the
historical performance of IDEX Fund from its inception on June 4, 1985
until the reorganization of IDEX Fund and IDEX Fund 3 into Class T Shares
of IDEX Series Fund Growth Portfolio on September 20, 1996; and the
historical performance of Class T Shares of IDEX JCC Growth thereafter.
*** Effective March 1, 1999, Class C shares became Class M shares.
41
<PAGE>
From time to time in advertisements or sales material, a fund may present and
discuss its performance rankings and/or ratings or other information as
published by recognized mutual fund statistical services or by publications of
general interest such as WALL STREET JOURNAL, BOSTON GLOBE, NEW YORK TIMES, LOS
ANGELES TIMES, CHRISTIAN SCIENCE MONITOR, USA TODAY, TAMPA TRIBUNE, ST.
PETERSBURG TIMES, FINANCIAL TIMES, HARTFORD CURRENT, INTERNATIONAL HERALD
TRIBUNE, INVESTOR'S BUSINESS DAILY, BOSTON HERALD, WASHINGTON POST, KIPLINGER'S
WASHINGTON LETTER, KIPLINGER'S TAX REPORT, KIPLINGER'S PERSONAL FINANCE
MAGAZINE, BARRON'S, BUSINESS WEEK, FINANCIAL SERVICES WEEK, NATIONAL
UNDERWRITER, TIME, NEWSWEEK, PENSIONS & INVESTMENTS, U.S. NEWS AND WORLD
REPORT, MORNINGSTAR MUTUAL FUND VALUES, ECONOMIST, BANK LETTER, BOSTON BUSINESS
JOURNAL, RESEARCH RECOMMENDATIONS, FACS OF THE WEEK, MONEY, MODERN MATURITY,
FORBES, FORTUNE, FINANCIAL PLANNER, AMERICAN BANKER, U.S. BANKER, ABA BANKING
JOURNAL, INSTITUTIONAL INVESTOR (U.S./EUROPE), REGISTERED REPRESENTATIVE,
INDEPENDENT AGENT, AMERICAN DEMOGRAPHICS, TRUSTS & ESTATES, CREDIT UNION
MANAGEMENT, PERSONAL INVESTOR, NEW ENGLAND BUSINESS, BUSINESS MONTH,
GENTLEMEN'S QUARTERLY, EMPLOYEE RESEARCH REPORT, EMPLOYEE BENEFIT PLAN REVIEW,
ICI MUTUAL FUND NEWS, SUCCEED, JOHNSON CHARTS, WEISENBERGER INVESTMENT
COMPANIES SERVICE, MUTUAL FUND QUARTERLY, FINANCIAL WORLD MAGAZINE, CONSUMER
REPORTS, BABSON-UNITED MUTUAL FUND SELECTOR AND MUTUAL FUND ENCYCLOPEDIA
(DEARBORN FINANCIAL PUBLISHING). A fund may also advertise non-standardized
performance information which is for a period in addition to those required to
be presented, or which provides actual year-by-year return, or any combination
thereof, or both. For Class A, Class M and Class T shares, non-standardized
performance may also be that which does not reflect deduction of the maximum
sales charge applicable to Class A, Class M and Class T shares or the
contingent deferred sales charge applicable to Class B and under certain
circumstances Class A, Class M and Class T shares. In addition, a fund may, as
appropriate, compare its performance to that of other types of investments such
as certificates of deposit, savings accounts and U.S. Treasuries, or to certain
interest rate and inflation indices, such as the Consumer Price Index. A fund
may also advertise various methods of investing including, among others, dollar
cost averaging, and may use compounding illustrations to show the results of
such investment methods. The Fund or the Distributor may also from time to time
in advertisements or sales material present tables or other information
comparing tax-exempt yields to the equivalent taxable yields.
FINANCIAL STATEMENTS
Audited financial statements for the Funds for the fiscal year ended October 31,
1999 are incorporated by reference from the Fund's Annual Report dated October
31, 1999.
42
<PAGE>
APPENDIX A
CERTAIN SECURITIES IN WHICH THE FUNDS MAY INVEST
I. OBLIGATIONS IN WHICH EACH FUND MAY INVEST
(UNLESS OTHERWISE NOTED)
The funds may invest in the following obligations for temporary defensive
purposes or as otherwise described in the prospectus.
A. U.S. GOVERNMENT OBLIGATIONS
As described in the prospectus, a fund may invest in some or all of the
following types of direct obligations of the federal government, issued by the
Department of the Treasury, and backed by the full faith and credit of the
federal government.
TREASURY BILLS. Treasury bills are issued with maturities of up to one year.
They are issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
TREASURY NOTES. Treasury notes are longer-term interest bearing obligations
with original maturities of one to seven years.
TREASURY BONDS. Treasury bonds are longer-term interest bearing obligations
with original maturities from 5 to 30 years.
B. OBLIGATIONS OF FEDERAL AGENCIES, INSTRUMENTALITIES AND AUTHORITIES
Certain federal agencies have been established as instrumentalities of the
United States government to supervise and finance certain types of activities.
These agencies include, but are not limited to, the Banks for Cooperatives,
Federal Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks
("FHLB"), Federal National Mortgage Association ("FNMA"), Government National
Mortgage Association ("GNMA"), Export-Import Bank of the United States, and
Tennessee Valley Authority ("TVA"). Issues of these agencies, while not direct
obligations of the United States government, are either backed by the full
faith and credit of the United States (e.g., GNMA Certificates or certain TVA
bonds) or are guaranteed by the Treasury (e.g., certain other TVA bonds) or
supported by the issuing agencies' right to borrow from the Treasury (e.g.,
FHLB and FNMA bonds). There can be no assurance that the United States
government itself will pay interest and principal on securities as to which it
is not legally obligated to do so.
C. CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
A time deposit is a non-negotiable interest-bearing deposit with a bank which
generally cannot be withdrawn prior to a specified maturity date without
substantial interest penalties. A certificate of deposit ("CD") is a negotiable
instrument issued by a bank against a time deposit. CDs normally can be traded
in the secondary market prior to maturity, and are thus more liquid than other
forms of time deposits. The funds will only invest in U.S. dollar denominated
time deposits and CDs representing deposits in U.S. banks with assets of $1
billion or more, whose deposits are insured by the Federal Deposit Insurance
Corporation.
D. COMMERCIAL PAPER
Commercial paper refers to short-term unsecured promissory notes issued by
commercial and industrial corporations to finance their current operations.
Commercial paper may be issued at a discount and redeemed at par, or issued at
par with interest added at maturity. The interest or discount rate depends on
general interest rates, the credit standing of the issuer, and the maturity of
the note, and generally moves in tandem with rates on large CDs and Treasury
bills. An established secondary market exists for commercial paper,
particularly that of stronger issuers which are rated by Moody's Investors
Service, Inc. and Standard and Poor's Ratings Group. Investments in commercial
paper are subject to the risks that general interest rates will rise, that the
credit standing and outside rating of the issuer will fall, or that the
secondary market in the issuer's notes will become too limited to permit their
liquidation at a reasonable price.
A-1
<PAGE>
E. BANKERS' ACCEPTANCES
A bankers' acceptance is a negotiable short-term draft, generally arising from
a bank customer's commercial transaction with another party, with payment due
for the transaction on the maturity date of the customer's draft. The draft
becomes a bankers' acceptance when the bank, upon fulfillment of the
obligations of the third party, accepts the draft for later payment at
maturity, thus adding the bank's guarantee of payment to its customer's own
obligation. In effect, a bankers' acceptance is a post-dated certified check
payable to its bearer at maturity. Such acceptances are highly liquid, but are
subject to the risk that both the customer and the accepting bank will be
unable to pay at maturity. A fund may invest in U.S. dollar denominated
bankers' acceptances issued by U.S. banks, their foreign branches, and by U.S.
branches of foreign banks.
F. REPURCHASE AGREEMENTS FOR U.S. GOVERNMENT SECURITIES
Subject to its investment restrictions, a fund may enter into repurchase
agreements with banks and dealers for securities of or guaranteed by the U.S.
government, under which the fund purchases securities and agrees to resell the
securities at an agreed upon time and at an agreed upon price. The difference
between the amount a fund pays for the securities and the amount it receives
upon resale is accrued as interest and reflected in the fund's net investment
income. When a fund enters into repurchase agreements, it relies on the seller
to repurchase the securities. Failure to do so may result in a loss for the
fund if the market value of the securities is less than the repurchase price.
Under the 1940 Act, repurchase agreements may be considered collateralized
loans by a fund.
At the time a fund enters into a repurchase agreement, the value of the
underlying security including accrued interest will be equal to or exceed the
value of the repurchase agreement and, for repurchase agreements that mature in
more than one day, the seller will agree that the value of the underlying
security including accrued interest will continue to be at least equal to the
value of the repurchase agreement.
Although repurchase agreements carry certain risks not associated with direct
investment in securities, a fund intends to enter into repurchase agreements
only with banks and dealers in transactions which the fund's sub-adviser
believes present minimal credit risks in accordance with guidelines adopted by
the Trustees. To the extent that proceeds from any sales of collateral upon a
default in the counterparty's obligation to repurchase were less than the
repurchase price, the fund would suffer a loss. If the counterpart's petitions
for bankruptcy or otherwise becomes subject to bankruptcy or liquidation
proceedings, there might be restrictions on a fund's ability to sell the
collateral and the fund could suffer a loss.
III. OTHER SECURITIES IN WHICH THE FUNDS MAY INVEST
A. CORPORATE DEBT SECURITIES
A fund may invest in corporate bonds, notes and debentures of long and short
maturities and of various grades, including unrated securities. Corporate debt
securities exist in great variety, differing from one another in quality,
maturity, and call or other provisions. Lower grade bonds, whether rated or
unrated, usually offer higher interest income, but also carry increased risk of
default. Corporate bonds may be secured or unsecured, senior to or subordinated
to other debt of the issuer, and, occasionally, may be guaranteed by another
entity. In addition, they may carry other features, such as those described
under "Convertible Securities" and "Variable or Floating Rate Securities," or
have special features such as the right of the holder to shorten or lengthen
the maturity of a given debt instrument, rights to purchase additional
securities, rights to elect from among two or more currencies in which to
receive interest or principal payments, or provisions permitting the holder to
participate in earnings of the issuer or to participate in the value of some
specified commodity, financial index, or other measure of value.
B. INTERNATIONAL AGENCY OBLIGATIONS
A fund may invest in bonds, notes or Eurobonds of international agencies.
Examples are securities issued by the Asian Development Bank, the European
Economic Community, and the European Investment Bank. The funds may also
purchase obligations of the International Bank for Reconstruction and
Development which, while technically not a U.S. government agency or
instrumentality, has the right to borrow from the participating countries,
including the United States.
A-2
<PAGE>
C. BANK OBLIGATIONS OR SAVINGS AND LOAN OBLIGATIONS
Subject to its investment restrictions, a fund may purchase certificates of
deposit, bankers' acceptances and other debt obligations of commercial banks
and certificates of deposit and other debt obligations of savings and loan
associations ("S&L's"). Certificates of deposit are receipts from a bank or an
S&L for funds deposited for a specified period of time at a specified rate of
return. Bankers' acceptances are time drafts drawn on commercial banks by
borrowers, usually in connection with international commercial transactions.
These instruments may be issued by institutions of any size, may be of any
maturity, and may be insured or uninsured. The quality of bank or savings and
loan obligations may be affected by such factors as (a) location -- the
strength of the local economy will often affect financial institutions in the
region, (b) asset mix -- institutions with substantial loans in a troubled
industry may be weakened by those loans, and (c) amount of equity capital --
under-capitalized financial institutions are more vulnerable when loan losses
are suffered. The sub-adviser will evaluate these and other factors affecting
the quality of bank and savings and loan obligations purchased by a fund, but
the fund is not restricted to obligations or institutions which satisfy
specified quality criteria.
D. VARIABLE OR FLOATING RATE SECURITIES
Subject to its investment restrictions, a fund may purchase variable rate
securities that provide for automatic establishment of a new interest rate at
fixed intervals (e.g., daily, monthly, semi-annually, etc.). Floating rate
securities provide for automatic adjustment of the interest rate whenever some
specified interest rate index changes. The interest rate on variable and
floating rate securities is ordinarily determined by reference to, or is a
percentage of, a bank's prime rate, the 90-day U.S. Treasury bill rate, the
rate of return on commercial paper or bank certificates of deposit, an index of
short-term interest rates, or some other objective measure.
E. PREFERRED STOCKS
Subject to a fund's investment restrictions, a fund may purchase preferred
stocks. Preferred stocks are securities which represent an ownership interest
in a corporation and which give the owner a prior claim over common stock on
the corporation's earnings and assets. Preferred stock generally pays quarterly
dividends. Preferred stocks may differ in many of their provisions. Among the
features that differentiate preferred stocks from one another are the dividend
rights, which may be cumulative or non-cumulative and participating or
non-participating, redemption provisions, and voting rights. Such features will
establish the income return and may affect the prospects for capital
appreciation or risks of capital loss.
F. CONVERTIBLE SECURITIES
Subject to its investment restrictions, a fund may invest in debt securities
convertible into or exchangeable for equity securities, or debt securities that
carry with them the right to acquire equity securities, as evidenced by
warrants attached to such securities or acquired as part of units of the
securities. Such securities normally pay less current income than securities
without conversion features, but add the potential opportunity for appreciation
from enhanced value for the equity securities into which they are convertible,
and the concomitant risk of loss from declines in those values.
G. COMMON STOCKS
Common stocks are junior to the debt obligations and preferred stocks of an
issuer. Hence, dividend payments on common stocks should be regarded as less
secure than income payments on corporate debt securities.
A-3
