<PAGE> 1
IDEX FUND 3
SUPPLEMENT DATED JANUARY 5, 1996
TO PROSPECTUS DATED MARCH 1, 1995
PLEASE READ THIS SUPPLEMENT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
The following information supplements the information on page 8 under
the heading "SUB-ADVISER":
Scott W. Schoelzel has served as co-portfolio manager of IDEX
Fund 3 since 1995, and as of January 1, 1996 will serve as the sole
portfolio manager of the Fund. Mr. Schoelzel also serves as the
portfolio manager of other mutual funds in the IDEX group: IDEX Fund
and IDEX II Series Fund Growth Portfolio. Mr. Schoelzel is Vice
President of Janus Capital, where he has been employed since 1994.
From 1991 to 1993, Mr. Schoelzel was a portfolio manager with Founders
Asset Management, Denver, Colorado. Prior to 1991, he was a general
partner of Ivy Lane Investments, Denver, Colorado (a real estate
investment brokerage).
* * * * * * * * * *
The following supplements the information on page 14 under the heading "CERTAIN
PURCHASES":
Shares of the Fund may also be sold at NAV per share without a
sales charge to "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.
* * * * * * * * * *
In addition, certain operational changes have been implemented as
follows. These changes apply to every reference thereto in the Prospectus.
1. Shareholders may now make monthly automatic purchases
through an IDEX Automatic Investment Plan on any dates
between the 3rd and 28th day of the month; previously this
option was only available on the 5th and 20th day of the
month.
2. Shareholders will receive statements only on a quarterly
basis which will reflect automatic transactions. In
addition, the $15 service charge has been waived for
automatic purchases that have been returned or rejected by
the paying bank because of insufficient or uncollected
funds. However, automatic transaction privileges will be
revoked after a draft has been returned or rejected by the
paying bank for the second consecutive time because of
insufficient or uncollected funds.
3. Payment of redemption proceeds will normally be made within
three business days (instead of seven business days) of the
Transfer Agent's receipt of a valid redemption request.
4. Shareholders will be given a sixty day written notice of
intent to automatically redeem an account if the balance
falls below $500, unless the account is less than 24 months
old.
5. The annual maintenance fee for retirement plan accounts will
be waived if the Investors Fiduciary Trust Company ("IFTC")
trusteed retirement plan account balances combined per tax
identification number are greater than $50,000 as of a
valuation date determined by the Transfer Agent. Accounts
that are not retirement plan accounts trusteed by IFTC are
not counted toward the $50,000 limit.
6. The minimum exchange amount has been lowered from $1,000 to
$500.
7. The $5 service fee for each exchange transaction under $500
(previously $1,000) has been waived.
8. The redemption amount which requires a signature guarantee
has been raised from $50,000 to $100,000.
9. The maximum amount for telephone and expedited redemptions
has been raised from $25,000 to $50,000.
10. The $10 fee to research the history of a shareholder's
account beyond the two most current years has been waived.
<PAGE> 2
IDEX FUND 3
201 HIGHLAND AVENUE, LARGO, FLORIDA 34640
CUSTOMER SERVICE: (800) 851-9777
PROSPECTUS DATED MARCH 1, 1995
IDEX FUND 3 (the "Fund") is a diversified open-end management investment
company whose only investment objective is growth of capital. The Fund pursues
its objective primarily by investing in common stocks listed on a national
securities exchange or on NASDAQ and which the Fund's sub-adviser believes have
a good potential for capital growth.
This Prospectus sets forth concise information which investors should
consider before investing in the Fund. Investors should read and retain this
Prospectus for future reference. Additional and more detailed information is
contained in the Statement of Additional Information dated March 1, 1995 which
is filed with the Securities and Exchange Commission in Washington, D.C. and
incorporated by reference in this Prospectus. A copy of the Statement of
Additional Information may be obtained without charge by calling or writing the
Fund at the address or phone number indicated above.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------
Principal Underwriter
InterSecurities, Inc.
P.O. Box 9015
Clearwater, FL 34618-9015
<PAGE> 3
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
- --------------------------------------------------------------------------------
IDEX FUND 3
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)(1).................... 8.50%
Exchange Fees(2).................................................................................. None
Redemption Fees(3)................................................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees................................................................................... 1.00%
12b-1 Service and Distribution Fees............................................................... None
Other Expenses(4)................................................................................. 0.25%
----
Total Operating Expenses.......................................................................... 1.25%
=====
</TABLE>
EXAMPLE(5): You would pay the following expenses on a $1,000 investment,
assuming
(1) a 5% annual return, and (2) redemption at the end of each period:
<TABLE>
<S> <C>
1 year........................................................................ $ 97
3 years....................................................................... 121
5 years....................................................................... 148
10 years...................................................................... 223
(1) On purchases of $25,000 or more, the sales load may be reduced. (See "Shareholders' Manual -- How to Purchase Shares.")
(2) A $5 service fee is charged for each exchange transaction under $1,000. (See "Shareholders' Manual -- How to Exchange
Shares.")
(3) A $20 service fee is charged for each redemption transaction paid by Federal funds bank wire or for overnight mail delivery
of check redemptions. (See "Shareholders' Manual -- How to Redeem Shares.")
(4) Other Expenses are net of credits earned through use of affiliated broker-dealers, which credits amounted to 0.36% of the
Other Expenses of the Fund.
(5) The Example assumes all dividends and distributions are paid in additional shares and no payment of exchange or redemption
fees.
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses an investor in the Fund may bear directly or
indirectly. These expenses are described in greater detail under "Investment
Advisory and Other Services" and in the Shareholders' Manual section of this
Prospectus.
THE EXPENSES SET FORTH IN THE PRECEDING TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY
BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
1
<PAGE> 4
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
IDEX FUND 3
The information contained in the table below for a share of beneficial interest
outstanding throughout each fiscal year and other periods shown has been audited
by Price Waterhouse LLP, independent accountants, whose report appears in the
Statement of Additional Information. The Statement of Additional Information is
incorporated by reference in this Prospectus and may be obtained without charge
by calling or writing the Fund. Further information about performance of the
Fund is contained in the Fund's Annual Report to shareholders, which may also be
obtained without charge by calling or writing the Fund.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31, PERIOD FROM
------------------------------------------------------------------------------ APR. 20, 1987(1) TO
1994 1993 1992 1991 1990 1989 1988 OCT. 31, 1987
-------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 17.45 $ 17.32 $ 18.74 $ 12.53 $ 14.37 $ 10.17 $ 9.04 $ 10.00
Income from investment
operations:
Net investment
income............... 0.06 .09 .09 .13 .17 .07 .25 .05
Net realized and
unrealized gain
(loss) on
investments.......... (0.44) 2.54 .34 6.87 (1.51) 4.29 1.02 (1.01)
-------- -------- -------- -------- -------- ------- ------- --------
Total income from
investment
operations........... (0.38) 2.63 .43 7.00 (1.34) 4.36 1.27 (.96)
Less distributions:
Dividends from net
investment income.... (0.04) (.09) (.08) (.20) (.08) (.16) (.14) -
Distributions from
realized net capital
gains................ (1.92) (2.41) (1.77) (.59) (.42) - -
-------- -------- -------- -------- -------- ------- ------- --------
Total distributions.... (1.96) (2.50) (1.85) (.79) (.50) (.16) (.14) -
Net asset value, end of
period................. $ 15.11 $ 17.45 $ 17.32 $ 18.74 $ 12.53 $ 14.37 $ 10.17 $ 9.04
========= ========= ========= ========= ========= ======== ======== ===============
Total return(2).......... (3.36)% 16.4% 2.6% 58.6% (9.7)% 43.6% 14.2% (9.6)%
Ratios/Supplemental Data:
Net assets, end of period
(000's)................ $153,676 $201,481 $196,495 $197,498 $130,900 $98,580 $46,556 $27,112
Shares outstanding at end
of period (000's)...... 10,172 11,545 11,346 10,536 10,448 6,859 4,578 3,000
Ratio of expenses to
average net
assets(3).............. 1.25% 1.24% 1.22% 1.28% 1.37% 1.39% 1.50% 1.48%
Ratio of net income to
average net
assets(3).............. 0.28% .52% .50% .84% 1.18% 0.52% 2.60% 1.14%
Portfolio turnover
rate(4)................ 80.92% 123.58% 84.46% 104.97% 186.79% 112.97% 77.01% 260.24%
(1) Commencement of operations.
(2) Total return figures do not reflect any sales charge and assume that all dividends and distributions are paid in additional
shares. Period ended October 31, 1987 is not annualized.
(3) Annualized for 1987. Net of expense reimbursements and/or management fee waivers in 1988, without which the ratio of expenses
to average net assets would be 1.58%.
(4) This rate is calculated by dividing the average value of the Fund's long-term investments during the period into the lesser
of its long-term purchases or sales in the period. Period ended October 31, 1987 is annualized.
</TABLE>
2
<PAGE> 5
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund is a diversified open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"). The only investment
objective of the Fund is growth of capital. As all investments are subject to
inherent market risks and fluctuations in value due to earnings, economic
conditions and other factors, there can be no assurance that the Fund will, in
fact, achieve its investment objective. The Fund's investment objective and
unless otherwise noted, its investment policies and practices, may be changed by
the Board of Trustees without shareholder approval. A change in the investment
objective or policies of the Fund may result in the Fund having an investment
objective or policies different from that which the shareholder deemed
appropriate at the time of investment. The Fund will not change its investment
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 investment objective,
the shareholder may realize a taxable gain or loss.
TYPES OF SECURITIES
The Fund seeks to achieve its investment objective primarily through
investment in common stocks listed on a national securities exchange or on
NASDAQ and which the Fund's sub-adviser believes have a good potential for
capital growth. The Fund seeks to invest substantially all of its assets in
common stocks when its portfolio manager believes that the relevant market
environment favors profitable investing in those securities. Common stock
investments are selected from industries and companies that the portfolio
manager believes are experiencing favorable demand for their products and
services, and which operate in a favorable competitive environment and
regulatory climate. The portfolio manager's analysis and selection process
focuses on stocks with earnings growth potential that may not be recognized by
the market. These securities are selected solely for their capital growth
potential; investment income is not a consideration.
Although the Fund's assets will be invested primarily in common stocks at
most times, the cash position of the Fund may increase when the portfolio
manager is unable to locate investment opportunities with desirable risk/reward
characteristics. The Fund may also invest in U.S. government securities, high
grade commercial paper, corporate bonds and debentures, warrants, preferred
stocks, certificates of deposit of commercial banks, other debt securities or
repurchase agreements when its portfolio manager perceives an opportunity for
capital growth from such securities, or so that the Fund may receive a return on
its uninvested cash. When the Fund invests in such securities, investment income
will likely increase and may constitute a larger portion of the return on the
Fund's investments than if the Fund were fully invested in common stocks. (See
"Distributions and Taxes.")
The Fund may invest in both domestic and foreign companies, although the
Fund will not invest more than 25% of its net assets at the time of purchase in
the securities of foreign issuers and obligors. (See "Additional Investment
Practices -- Foreign Securities.") Investments in foreign securities involve
risks that are different in some respects from investments in securities of U.S.
issuers. (See "Risk Factors -- Foreign Securities.")
The Fund may also invest in futures, options and other derivative
instruments. (See "Additional Investment Practices -- Futures, Options and Other
Derivative Instruments" and "Risk Factors -- Futures, Options and Other
Derivative Instruments.") For further information about the Fund's investment
policies, see "Additional Investment Practices" and the Statement of Additional
Information.
SIZE OF THE FUND
In order to preserve its ability to achieve its investment objective by
maintaining flexibility in making investments and in effecting portfolio
changes, and to preserve its identity as a small fund, the Fund discontinued the
sale of its shares to new investors effective June 15, 1990. Only existing
shareholders as of June 15, 1990 are permitted to purchase shares and to receive
any dividends or capital gain distributions in additional Fund shares. However,
the Fund reserves the right to reopen sales of shares to new investors in the
future if its management determines that to do so would be in the best interest
of the Fund and its shareholders.
ADDITIONAL INVESTMENT PRACTICES
FOREIGN SECURITIES
The Fund may invest up to 25% of its assets, directly or indirectly, in
foreign securities. The Fund may invest directly in foreign securities
denominated in a foreign currency and not publicly traded in the United States.
If appropriate and available, in addition to investing directly in foreign
securities, the Fund may also purchase foreign securities through American
Depositary Receipts ("ADRs") or American Depositary Shares ("ADSs"), which are
dollar-denominated receipts that are issued by domestic banks or securities
firms, are publicly traded in the United States, and may not involve the same
direct currency and liquidity risks as securities denominated in foreign
currency. The Fund may also indirectly invest in foreign securities through
European Depositary Receipts ("EDRs"), which are typically issued by European
banks, Global Depositary Receipts ("GDRs"), which may be issued by either
domestic or foreign banks, and other types of receipts evidencing ownership of
the underlying foreign securities. Investments in foreign securities involve
risks that are different in some respects from investments in securities of U.S.
issuers. (See "Risk Factors -- Foreign Securities.")
3
<PAGE> 6
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Subject to certain limitations described in the Statement of Additional
Information, the Fund may write and purchase options on securities as well as
engage in transactions involving options on securities or foreign currencies,
futures contracts, options on futures contracts, forward currency contracts, and
interest rate swaps, caps and floors for hedging and other appropriate purposes.
The Fund may engage in such strategies to attempt to reduce the overall level of
investment risk that normally would be expected to be associated with the Fund's
securities and, in particular, to attempt to manage the Fund's foreign currency
exposure and to attempt to protect the Fund against market movements that might
adversely affect the value of the Fund's securities or the price of securities
that the Fund is considering purchasing. The Fund will limit its use of futures
contracts and related options for purposes other than bona fide hedging such
that the aggregate initial margin and premiums required to establish any
non-hedging positions will not exceed 5% of the fair market value of its net
assets.
There can be no assurance that the use of these instruments by the Fund
will assist it in achieving its investment objective. The use of futures
contracts, options and other derivative instruments also involves certain risks.
(See "Risk Factors -- Futures, Options and Other Derivative Instruments.")
Further information on these instruments, hedging strategies and risk
considerations relating to them is set forth in the Statement of Additional
Information.
MORTGAGE-AND OTHER ASSET-BACKED SECURITIES
The Fund may invest up to 25% of its net assets in mortgage-and other
asset-backed securities. These securities are subject to prepayment risk, that
is, the possibility that prepayments on the underlying mortgages or other loans
will cause the principal and interest on the securities to be paid prior to
their stated maturities. Unscheduled prepayments are more likely to accelerate
during periods of declining long-term interest rates. In the event of a
prepayment during a period of declining interest rates, the Fund may be required
to invest the unanticipated proceeds at a lower interest rate. Prepayments
during such periods will also limit the Fund's ability to participate in as
large a market gain as may be experienced with a comparable government security
not subject to prepayment.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed delivery basis
and may enter into contracts to purchase securities for a fixed price at a
future date beyond normal settlement time ("forward commitments"). However, the
Fund does not intend to invest more than 20% of its assets in when-issued
securities. The Fund bears the risk that the value of such securities may change
prior to delivery of the security and the risk that the seller may not complete
the transaction.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its assets in securities that are
considered illiquid because of the absence of a readily available market or due
to legal or contractual restrictions on resale. 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.
The Fund may be restricted in its ability to sell such securities at a time when
its sub-adviser deems it advisable to do so. In addition, in order to meet
redemption requests, the Fund may have to sell other assets, rather than such
illiquid securities, at a time which is not advantageous. Certain restricted
securities that are not registered for sale to the general public but that can
be resold to institutional investors ("Rule 144A Securities") may not be
considered illiquid, provided that a dealer or institutional trading market
exists. Securities eligible for resale under Rule 144A of the Securities Act of
1933 may be determined to be liquid by the sub-adviser pursuant to procedures
adopted by the Board of Trustees of the Fund. Securities previously determined
to be liquid pursuant to these procedures may be subsequently deemed to be
illiquid, and investment in Rule 144A securities could have the effect of
increasing portfolio illiquidity.
BORROWING AND LENDING
The Fund may borrow money from banks for temporary or emergency purposes in
an amount not to exceed 25% of its total assets. To secure borrowings, the Fund
may not mortgage or pledge its securities in amounts that exceed 15% of its net
assets. In addition, the Fund may borrow money from or lend money to other funds
that permit such transactions and are advised or sub-advised by Janus Capital
Corporation ("Janus Capital"), the Fund's sub-adviser, provided that the Fund
seeks and obtains permission to do so from the Securities and Exchange
Commission ("SEC"). There is no assurance that such permission will be sought or
granted.
The Fund may also lend its portfolio securities to broker-dealers and
financial institutions for the purpose of realizing additional income. As a
fundamental policy, the Fund will not lend securities or other assets if, as a
result, more than 25% of its total assets would be lent to other parties,
although the Fund does not presently intend to lend securities or make any other
loans valued at more than 5% of its total assets. Securities lending may involve
some credit risk to the Fund if the borrower defaults and the Fund is delayed or
prevented from recovering the collateral or is otherwise required to cover a
transaction in the security loaned. If portfolio securities are loaned,
collateral values will be continuously maintained at no less than 100% by
marking to market daily. If a material event is to be voted upon affecting the
Fund's investment in securities which are on loan, the Fund will take such
action as may be appropriate in order to vote its shares. For further informa-
4
<PAGE> 7
tion about the Fund's policies relating to borrowing and lending, see the
Statement of Additional Information.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
The Fund may invest in repurchase and reverse repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement by the seller (generally a bank or broker-dealer) to
repurchase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to repurchase
the securities as agreed, which may cause the Fund to suffer a loss if the
market value of such securities declines before they can be liquidated on the
open market. In the event of bankruptcy of the seller, the Fund may encounter
delays and incur costs in liquidating the underlying security. Repurchase
agreements maturing in more than seven days are subject to the previously stated
limit on illiquid securities.
When the Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests or for other temporary or emergency purposes without
the necessity of selling portfolio securities or to earn additional income on
portfolio securities, such as treasury bills and notes.
SHORT SALES
The Fund may sell securities "short against the box". While a short sale is
the sale of a security that the Fund does not own, it is "against the box" if at
all times when the short position is open, the Fund owns an equal amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities sold short.
OTHER INVESTMENT POLICIES AND RESTRICTIONS
The Fund may in the future seek to achieve its investment objective by
investing all of its assets in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. Shareholders of the Fund will be
given at least 30 days prior notice of any such investment. Such investment
would be made only if the Board of Trustees of the Fund determines it to be in
the best interests of the Fund and its shareholders. In making that
determination, the Board of Trustees will consider, among other things, the
benefits to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies.
The Fund is subject to investment restrictions, certain of which are
fundamental policies of the Fund and as such may not be changed without approval
of the Fund's shareholders. Non-fundamental investment restrictions and
operating policies may be changed by the Board of Trustees without shareholder
approval. The Fund's investment restrictions are described in the Statement of
Additional Information.
The securities and financial instruments markets in the United States and
worldwide have been characterized in recent years by rapid change and innovation
in the creation of new instruments and securities. The sub-advisers reserve the
right to evaluate new financial instruments as they are developed and become
actively traded, and subject to the investment restrictions of the Fund, the
Fund may invest in any such investment products that its portfolio manager
believes will further its particular investment objective.
RISK FACTORS
FOREIGN SECURITIES
Investments in foreign securities involve risks that are different in some
respects from investments in securities of U.S. issuers. For example, changes in
currency exchange rates and exchange rate controls may affect the value of
foreign securities and the value of their dividend or interest payments, and
therefore, the Fund's share price and returns. Foreign companies generally are
subject to tax laws and accounting, auditing, and financial reporting standards,
practices and requirements that differ from those applicable to U.S. companies.
There is generally less publicly available information about foreign companies
and less securities and other governmental regulation and supervision of foreign
companies, stock exchanges and securities brokers and dealers. The Fund may
encounter difficulties in enforcing obligations in foreign countries and in
negotiating favorable brokerage commission rates. Securities of some foreign
companies are less liquid, and their prices more volatile, than securities of
comparable U.S. companies. Delays may be encountered in settling securities
transactions in certain foreign markets and the Fund will incur costs in
converting foreign currencies into U.S. dollars. Custody charges are generally
higher for foreign securities than for domestic securities. In addition, with
respect to some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of securities, property or
other assets of the Fund, political or social instability or war, or diplomatic
developments, any or all of which could affect U.S. investments in those
countries. ADRs do not involve the same direct currency and liquidity risks as
securities denominated in foreign currency.
The considerations noted above may be intensified in the case of investment
in developing countries or countries with limited or developing capital markets.
In particular, developing countries may have relatively unstable governments,
economies based on only a few industries and securities markets that trade a
small number of securities. Securities of issuers located in developing
countries may have limited marketability and may be subject to more abrupt or
erratic price fluctuations.
5
<PAGE> 8
At times, securities held by the Fund may be listed on foreign exchanges or
traded in foreign markets which are open on days (such as Saturday) when the
Fund does not compute a price or accept orders for the purchase, redemption or
exchange of shares. As a result, the net asset value of the Fund may be affected
by trading on days when shareholders cannot make transactions.
To the extent that the Fund invests in foreign securities, its share price
reflects the movements of both the prices of securities in which it is invested
and the currencies in which the investments are denominated. Since the Fund may
invest in both U.S. and foreign securities markets, changes in the Fund's share
price may have a low correlation with movements in the U.S. markets. If most of
the foreign securities in which the Fund invests are denominated in foreign
currencies, or otherwise have values that depend on the performance of foreign
currencies relative to the U.S. dollar, the relative strength of the U.S. dollar
may be an important factor in the performance of the Fund.
To the extent that it invests in foreign securities, the Fund may employ
certain strategies in order to manage exchange rate risks. For example, it may
seek to hedge some or all of its investments denominated in a foreign currency
against a decline in the value of that currency. The Fund may exchange foreign
currencies for U.S. dollars and for other foreign currencies in the normal
course of business, and may buy or sell securities through forward currency
contracts in order to fix a price for securities it has agreed to buy or sell
("transaction hedge"). The Fund may also enter into contracts to sell that
foreign currency for U.S. dollars (not exceeding the value of the Fund's assets
denominated in that currency), or by participating in options or futures
contracts with respect to such currency ("position hedge"). The Fund could also
seek to hedge that position by selling a second currency, which is expected to
perform similarly to the currency in which portfolio investments are
denominated, for U.S. dollars ("proxy hedge"). The Fund may also enter into a
forward contract to sell the currency in which the security is denominated for a
second currency that is expected to perform better relative to the U.S. dollar
if the portfolio manager believes there is a reasonable degree of correlation
between movements in the two currencies ("cross-hedge"). As an operating policy,
the Fund will not commit more than 10% of its assets to the consummation of
cross-hedge contracts and will either cover such transactions with liquid
portfolio securities denominated in the applicable currency or segregate
high-grade, liquid assets in the amount of such commitments. In addition, when
the Fund anticipates purchasing securities denominated in a particular currency,
it may enter into a forward contract to purchase such currency in exchange for
the dollar or another currency ("anticipatory hedge").
These strategies seek to minimize the effect of currency appreciation as
well as depreciation, but do not protect against a decline in the underlying
value of the hedged security. In addition, such strategies may reduce or
eliminate the opportunity to profit from increases in the value of the original
currency and may adversely impact the Fund's performance if the portfolio
manager's projection of future exchange rates is inaccurate.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Generally, the use of strategies involving options, futures contracts,
forward contracts and swap-related products ("derivative instruments") involves
additional investment risks and transaction costs, and draws upon skills and
experience which are different from those needed to select the other instruments
in which the Fund invests. If the portfolio manager seeks to protect the Fund
against potential adverse movements in the securities, foreign currency or
interest rate markets using these instruments, and if such markets do not move
in a direction adverse to the Fund, the Fund may not achieve the desired
benefits of the foregoing instruments, and could be left in a less favorable
position than if such strategies had not been used. The use of such strategies
involves special risks, which include: 1) the risk that interest rates,
securities prices and currency markets will not move in the directions
anticipated by the portfolio manager, and thus may fail and/or losses may
result; 2) imperfect correlation between the price of the instruments and
movements in the prices of the securities, interest rates or currencies being
hedged; 3) the fact that there are not 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; 4) the possible absence
of a liquid secondary market for any particular instrument at any time, and thus
the Fund being unable to control losses by closing out a position; and 5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences. The loss from investing in futures is potentially unlimited. See
the Statement of Additional Information for further information concerning the
use of options, futures and other derivative instruments, and the associated
risks.
SPECIAL SITUATIONS
The Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the portfolio manager, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
management change, a technological breakthrough or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention. The impact of this strategy on the Fund will depend on the
extent of the holdings of the special situation company relative to the Fund's
total assets.
6
<PAGE> 9
OTHER PORTFOLIO POLICIES
Although it is the policy of the Fund to purchase and hold securities for
capital growth, changes in the Fund's holdings will generally be made whenever
the portfolio manager believes they are advisable. Changes may result from
liquidity needs, securities having reached a price or yield objective,
anticipated changes in interest rates or the credit standing of an issuer or by
reason of developments not foreseen at the time of the investment decision. To a
limited extent, the Fund may engage in short-term transactions if such
transactions further its investment objective. Because investment changes
ordinarily will be made without reference to the length of time a security has
been held, a significant number of short-term transactions may result, and the
rate of portfolio turnover will not be a limiting factor when changes are deemed
to be appropriate.
Certain tax rules may restrict the Fund's ability to sell securities in
some circumstances when the security has been held for less than three months.
Increased portfolio turnover necessarily results in correspondingly higher
brokerage costs or mark-up charges for the Fund which are ultimately borne by
the shareholders and may also result in short-term capital gains which are taxed
as ordinary income to the shareholders. (See "Distribution and Taxes -- Tax
Information.") For annual portfolio turnover rates, see "Financial Highlights"
and the Statement of Additional Information.
PERFORMANCE
The Fund's performance may be measured in terms of average annual total
return which is calculated by finding the average annual compounded rates of
return over a period of time that would equate the initial amount invested to
the ending redeemable value. The calculation assumes the deduction of the
maximum sales load from the initial investment and the payment of all dividends
and other distributions in additional shares on the reinvestment dates during
the period. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative return if the
Fund's performance had been constant over the entire period. Because average
annual returns for more than one year tend to smooth out variations in the
Fund's performance, such figures are not the same as actual year-by-year
results. The Statement of Additional Information contains a description of the
method used to compute the average annual total return of the Fund.
The Fund may also advertise non-standardized performance information which
is for periods in addition to those required to be presented, or which provides
cumulative total return, actual year-by-year return, or any combination thereof.
The Fund may also advertise non-standardized performance which does not reflect
deduction of the maximum sales charge.
From time to time in advertisements or sales material, the Fund may present
and discuss its performance rankings and/or ratings or other information as
published by recognized mutual fund statistical services, such as Lipper
Analytical Services, Inc., or by publications of general interest such as
Forbes, Money, The Wall Street Journal, Business Week, Barron's, Changing Times,
Fortune, Institutional Investor or Morningstar Mutual Fund Values. Ratings may
include criteria relating to portfolio characteristics in addition to
performance information. In connection with a ranking, the Fund will also
provide additional information with respect to the ranking, including the
particular category to which it relates, the number of funds in the category,
the period and criteria on which the ranking is based, and the effect of sales
charges, fee waivers and/or expense reimbursements. The Fund may compare its
performance to that of other selected mutual funds or recognized market
indicators, including the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average. In addition, the Fund may as appropriate compare its
performance to that of other types of investments such as certificates of
deposit, savings accounts, and U.S. Treasury securities, or to certain interest
rate and inflation indices, such as the Consumer Price Index.
All performance figures are based upon historical results and are not
intended to indicate future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
INVESTMENT ADVISORY AND OTHER SERVICES
TRUSTEES
The Board of Trustees is responsible for managing the business and affairs
of the Fund, and it oversees the operation of the Fund by its officers.
Information concerning the Trustees and officers of the Fund is contained in the
Statement of Additional Information.
INVESTMENT ADVISER
The Fund has entered into a Management and Investment Advisory Agreement
("Advisory Agreement") with Idex Management, Inc. ("IMI"), whose address is 201
Highland Avenue, Largo, Florida 34640, to act as its investment adviser. IMI has
served as investment adviser to the Fund and to IDEX Fund, IDEX II Series Fund
Growth, Global, Flexible Income (and its predecessor, IDEX Total Income Trust),
Balanced and Capital Appreciation Portfolios since inception of each fund or
portfolio. Fifty percent (50%) of the outstanding stock of IMI and 100% of the
outstanding stock of InterSecurities, Inc., principal underwriter of the Fund's
shares, is owned by 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 nv, a Netherlands corporation and publicly traded international
insurance group. Janus Capital owns the remaining 50% of the
7
<PAGE> 10
outstanding shares of IMI. Kansas City Southern Industries, Inc., a
publicly-owned holding company whose primary subsidiaries are engaged in
transportation and financial services, owns approximately 83% of Janus Capital.
IMI is responsible for furnishing or causing to be furnished to the Fund
investment advice and recommendations and supervising the purchase and sale of
securities as directed by appropriate Fund officers. In addition, IMI is
responsible for the administration of the Fund. For its services, IMI receives
an annual fee, computed daily and paid monthly, equal to 1.00% of the Fund's
average daily net assets. The investment advisory fees paid by the Fund are
higher than those paid by many other funds.
For the fiscal year ended October 31, 1994, the investment advisory fee
incurred by the Fund was 1.00% of the Fund's average daily net assets.
In addition to the investment advisory fee, under its Advisory Agreement,
the Fund pays most of its operating costs, including administrative, bookkeeping
and clerical expenses, legal fees, auditing and accounting fees, shareholder
services and transfer agent fees, custodian fees, costs of complying with
federal and state regulations, preparing, printing and distributing reports to
shareholders, non-interested trustees' fees and expenses, interest, insurance,
dues for trade associations and taxes. The Fund also pays all brokers'
commissions in connection with its portfolio transactions. IMI will reimburse
the Fund or waive fees, or both, to the extent that the Fund's normal operating
expenses, including investment advisory fees but excluding interest, taxes and
brokerage commissions, exceed on an annual basis the lesser of the most
restrictive expense limitation imposed by any state in which its shares are
offered or 1.5% of the Fund's average daily net assets.
For the fiscal year ended October 31, 1994, the total expenses of the Fund,
including the investment advisory fee, amounted to 1.25% of the Fund's average
daily net assets.
SUB-ADVISER
IMI has entered into an Investment Counsel Agreement with Janus Capital,
whose address is 100 Fillmore Street, Suite 300, Denver, CO 80206-4923. Janus
Capital is a registered investment adviser which serves as the investment
adviser or sub-adviser to other mutual funds and private accounts. Janus Capital
provides IMI with investment advice and recommendations for the Fund consistent
with the Fund's investment objective, policies and restrictions, and supervises
the purchase and sale of all security transactions on behalf of the Fund,
including the negotiation of commissions and the allocation of principal
business and portfolio brokerage. In allocating such portfolio transactions,
Janus Capital may consider research and other services furnished to it and may
place portfolio transactions with broker-dealers that are affiliated with IMI or
Janus Capital. In placing portfolio business with all dealers, Janus Capital
seeks the best execution of each transaction and all brokerage placement must be
consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. While Janus Capital carries out most of IMI's advisory
functions, IMI retains responsibility for the performance of such functions. For
its services, Janus Capital receives 50% of the fees received by IMI under the
Advisory Agreement, less 50% of any amount reimbursed to the Fund or waived by
IMI pursuant to the Fund's expense limitation. IMI may pay additional
compensation to Janus Capital under certain circumstances depending on the level
of the aggregate net assets of certain mutual funds in the IDEX Group of Mutual
Funds, as described in the Statement of Additional Information. Janus Capital
may be referred to herein as the "sub-adviser".
Thomas F. Marsico has served as portfolio manager of IDEX Fund 3 since its
inception. Mr. Marsico also serves as portfolio manager of other mutual funds in
the IDEX Group: IDEX Fund and IDEX II Growth Portfolio. Mr. Marsico is an
Executive Vice President of Janus Investment Fund and has been a Vice President
of Janus Capital since 1986.
ADMINISTRATOR AND DISTRIBUTOR
IMI has entered into an Administrative Services Agreement ("Administrative
Agreement") pursuant to which InterSecurities, Inc. ("ISI"), whose address is
201 Highland Avenue, Largo, Florida 34640, serves as Administrator to the Fund.
Under the Administrative Agreement, ISI provides all services required to carry
on the Fund's general administrative and corporate affairs. These services
include furnishing all executive and managerial personnel, office space and
equipment, arrangements for and supervision of all shareholder services, federal
and state regulatory compliance and responsibility for accounting and
recordkeeping. For its services under the Administrative Agreement, ISI receives
50% of the fees received by IMI under the Advisory Agreement. Under certain
circumstances, the amounts payable to ISI under the Administrative Agreement
will be reduced by any additional compensation payable by IMI to Janus Capital,
as described in the Statement of Additional Information.
The Fund has entered into an Underwriting Agreement with ISI pursuant to
which ISI serves as principal underwriter and performs services and bears
expenses relating to the offering of Fund shares for sale to the public. ISI
also serves as principal underwriter of IDEX Fund and IDEX II Series Fund. As
compensation for the expenses borne by ISI and the distribution services
provided, ISI receives the sales charges imposed on Fund shares and reallows a
portion of such charges to brokers or dealers that have sold Fund shares. See
"Shareholders' Manual -- How to Purchase Shares" for a more complete description
of the sales charges for Fund shares.
8
<PAGE> 11
DISTRIBUTIONS AND TAXES
DISTRIBUTION PAYMENT POLICY
The Fund ordinarily declares and pays semi-annual dividends from its net
investment income available for distribution, and makes annual distributions of
any net realized short-term capital gains, net gains from certain foreign
currency transactions and net capital gain (the excess of net long-term capital
gain over net short-term capital loss). Capital gain distributions realized
during each fiscal year (ending on October 31) normally will be declared and
paid in the subsequent fiscal year. To avoid a 4% excise tax on undistributed
amounts of ordinary income and capital gains, as described in the Statement of
Additional Information, the Fund may, to the extent permitted by applicable
rules adopted by the SEC, pay additional distributions of capital gain in any
year and make additional dividend distributions.
All dividends and capital gain distributions, if any, will be paid
automatically in additional shares of the Fund at the net asset value per share
determined as of the next business day following the record date, unless the
shareholder elects on his or her New Account Application or by written request
to ISI, one of the following options:
1. to receive or direct to another payee all dividends and capital gain
distributions in cash;
2. to receive or direct to another payee all dividends in cash and to receive
all capital gain distributions in additional shares at net asset value; or
3. to invest all dividends and capital gain distributions in the shares of
another IDEX fund or portfolio on which an initial sales charge is imposed
held by the shareholder in the same type of account (either retirement or
non-retirement).
Checks for cash distributions and distribution confirmations are usually
mailed to shareholders within ten days of the record date. Checks for cash
distributions will be made payable to the shareholder of record and sent by
first class mail to the shareholder's address of record unless otherwise
requested by the shareholder on the New Account Application or by a separate
written request. Any checks which are unable to be delivered and are returned to
the Fund or Idex Investor Services, Inc. (the "Transfer Agent") will be
reinvested into the shareholder's account in full or fractional shares at the
net asset value next computed after the check has been received by the Transfer
Agent. To reduce costs to the Fund, checks outstanding and uncashed for over 180
days may be "stop-paid" and reinvested back into the shareholder/payee's account
at the discretion of the Transfer Agent. Also at the discretion of the Transfer
Agent, cash distribution checks less than $5.00 may be reinvested back into the
account and the distribution option changed to automatic payment of
distributions in additional shares of the Fund.
Further information concerning dividends and distributions may be obtained
by calling Customer Service at (800) 851-9777. Shareholders may change their
dividend or distribution options any time before the record date of any dividend
or distribution by calling Customer Service or writing to Idex Investor
Services, Inc., P.O. Box 9015, Clearwater, Florida 34618-9015.
TAX INFORMATION
The Fund has qualified, and intends to continue to qualify each year, for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, so as to avoid paying federal income tax on
that portion of its investment company taxable income (consisting generally of
net investment income and net short-term capital gain) and net capital gain
distributed to its shareholders. Dividends paid from the Fund's investment
company taxable income are taxable to its shareholders (other than those exempt
from income tax) as ordinary income, whether received in cash or in additional
shares, to the extent of the Fund's earnings and profits. Distributions paid
from net capital gain, when designated as such by the Fund, are taxable to
shareholders (other than those exempt from income tax) as long-term capital
gains, whether received in cash or in additional shares and regardless of how
long shareholders have held their shares. If the Fund declares a dividend or
other distribution in October, November or December payable to shareholders of
record on a specified date in such a month, and if the Fund pays the
distribution to the shareholders during January of the following year, then each
shareholder will be treated as receiving the distribution on December 31 of that
year, and the Fund will be treated as having paid the distribution on that date.
As a general rule, a shareholder's gain or loss on a sale (redemption or
exchange out of the Fund) of his or her shares will be a long-term capital gain
or loss if the shares have been held for more than one year and a short-term
capital gain or loss if held for one year or less. Individuals are subject to a
maximum tax rate of 28% on net capital gain. The maximum rate of 28% applies to
both capital gain distributions from the Fund to individual shareholders and to
net long-term capital gains on the disposition of shares by individual
shareholders. For most accounts (other than retirement plan accounts which will
receive Form 1099-B), the Transfer Agent will provide basis information
incorporated within Form 1099-B on the gain or loss on sale of Fund shares based
upon the Internal Revenue Service single category average cost method.
Shareholders are encouraged to keep regular account statements to use in
conjunction with average cost information (if received) in order to determine
gain or loss on the sale of Fund shares for tax purposes.
To the extent that dividends paid by the Fund are attributable to
qualifying dividend income received from U.S. corporations, dividends paid by
the Fund will qualify for the dividends-received deduction for corporations.
However, dividends received by a corporate shareholder and deducted by it
9
<PAGE> 12
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
If shares of the Fund are redeemed at a loss after being held for six
months or less, the loss will be disallowed to the extent of any exempt-interest
dividends received with respect to those shares; any portion of the loss that is
allowed will be treated as long-term capital loss to the extent of any capital
gain distributions on those shares.
Generally, shareholders should be aware that if shares of a non-retirement
plan account are purchased on or shortly before the record date for a dividend
or other taxable distribution, the shareholder will pay full price for the
shares and receive some portion of the price back as a taxable distribution.
Generally, a redemption of Fund shares will result in taxable gain or loss
to the redeeming shareholder, depending on whether the redemption proceeds are
more or less than the shareholder's adjusted basis for the redeemed shares
(which normally includes any sales charge paid). An exchange of Fund shares for
shares of any other IDEX fund or portfolio generally will have similar tax
consequences. However, special rules apply when a shareholder (1) disposes of
Fund shares through a redemption or exchange within 90 days after his or her
purchase thereof, and (2) subsequently acquires shares of the Fund, or another
IDEX portfolio or fund on which an initial sales charge normally is imposed,
without paying a sales charge due to the exchange privilege or 90-day
reinvestment privilege. (See "Shareholders' Manual -- How to Exchange Shares"
and "Shareholders' Manual -- How to Redeem Shares -- Reinvestment Privilege.")
In these cases, any gain on the disposition of Fund shares would be increased,
or loss decreased, by the amount of the sales charge paid when those shares were
acquired, and that amount will increase the adjusted basis of the shares
subsequently acquired. In addition, if Fund shares are purchased (whether
pursuant to the reinvestment privilege or otherwise) within 30 days before or
after redeeming other shares of the Fund at a loss, that loss ("wash sale loss")
will be deferred rather than currently deductible, and thus will increase the
basis of the newly purchased shares. The Transfer Agent currently is able to
calculate and track for shareholders' wash sale adjustments, but is unable to
adjust shareholders' basis information for any applicable 90 day sales load
deferral adjustment as described above.
Statements as to the tax status of the dividends and other distributions
paid by the Fund are mailed annually. For most types of accounts, the Transfer
Agent will report the proceeds of any redemptions to shareholders and the
Internal Revenue Service annually. Average cost basis information on non-
retirement plan account redemptions is not currently reported to the IRS.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds paid on behalf of any individuals and
certain other noncorporate shareholders who do not furnish the Fund with a
correct taxpayer identification number. Withholding from dividends and capital
gain distributions also is required for shareholders who otherwise are subject
to backup withholding.
The foregoing is only a summary of some of the important federal tax
considerations under current tax law generally affecting the Fund and its
shareholders; see the Statement of Additional Information for further
discussion. Because there may be other federal, state or local tax
considerations applicable to a particular shareholder, shareholders are urged to
consult their own tax advisers.
MISCELLANEOUS INFORMATION
ORGANIZATION
The Fund is a series of IDEX Fund 3, a Massachusetts business trust (the
"Trust"), that was formed by a Declaration of Trust dated December 1, 1986. The
Fund currently is the only series of the Trust and its operations are governed
by a Restatement of Declaration of Trust ("Declaration of Trust") dated as of
August 30, 1991, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts. The Fund is managed by its Board of Trustees
pursuant to the Declaration of Trust. The Declaration of Trust permits the Board
of Trustees to issue an unlimited number of shares of beneficial interest in the
Fund. Each share of the Fund is entitled to equal voting, dividend, liquidation
and redemption rights.
The Fund does not intend to hold annual meetings of shareholders, unless
required to do so by the Declaration of Trust or the 1940 Act. 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. Shareholders have neither
preemptive nor cumulative voting rights.
CERTAIN LIABILITIES
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the trust. The Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Declaration of Trust also provides for indemnification out of Fund
assets for all loss and expense of any shareholder held personally liable by
reason of being or having been a shareholder. Liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations,
a possibility that the Adviser believes is remote.
TRANSFER AGENT
Idex Investor Services, Inc., P.O. Box 9015, Clearwater, Florida
34618-9015, an affiliate of IMI and ISI, is the Fund's Transfer Agent,
withholding agent and dividend paying agent. All written correspondence relating
to a shareholder's account should be sent to the Transfer Agent.
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<PAGE> 13
CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, is custodian of the Fund's assets and serves as custodian or
trustee for qualified retirement plans and individual retirement plan accounts.
However, correspondence regarding a shareholder's account should be sent to the
Transfer Agent at the address shown above.
SHAREHOLDER INQUIRIES
Any inquiries by shareholders relating to the Fund or requests for forms
for establishing or changing shareholder accounts or plans should be made by
calling Customer Service at (800) 851-9777 or writing the Transfer Agent at P.O.
Box 9015, Clearwater, Florida 34618-9015.
SHAREHOLDER REPORTS, PROSPECTUSES AND CONSOLIDATED
STATEMENTS
The Fund sends annual and semi-annual reports and updated prospectuses to
shareholders. The annual reports contain audited financial statements. To reduce
costs, a shareholder who has more than one account in the Fund, each with the
same taxpayer identification number, will be sent only one copy (rather than
multiple copies) of certain shareholder mailings and will receive a consolidated
statement with respect to such accounts. Further, two or more shareholders may
elect to receive a consolidated statement and only one copy (rather than
multiple copies) of certain shareholder mailings for their accounts as long as
the shareholders have the same surname and address of record and each of the
affected shareholders so elects on the New Account Application or by written
request to the Transfer Agent. Additional copies of shareholder reports and
prospectuses may be obtained by calling Customer Service at (800) 851-9777.
SHAREHOLDERS' MANUAL
OPENING AN ACCOUNT
To open an account, complete and sign the New Account Application. You can
buy shares of the Fund in several ways which are described below. Additional
documentation may be required for corporations, associations and certain
fiduciaries. A special application is required for IDEX IRA's and other
retirement plans. If you have an account in another IDEX fund or portfolio, you
may open an account in this Fund with the same features by sending a written
request to the Transfer Agent. If you have any questions or need extra forms,
please call Customer Service at (800) 851-9777 or write the Transfer Agent.
TAX IDENTIFICATION NUMBER. To avoid being subject to a 31% federal
withholding tax on dividends, capital gain distributions and proceeds of
redemption, an individual or other non-exempt investor must furnish the Fund
with the investor's taxpayer identification number and certify in writing that
the number furnished is correct and that the investor is not subject to backup
withholding. The appropriate number may be furnished and certified on the
application to purchase shares or on IRS Form W-9. To avoid the additional
expense of withholding taxes on dividends and other distributions, the Fund may
involuntarily redeem any accounts for which certified taxpayer identification
numbers have not been furnished within 60 days of the initial purchase of shares
in those accounts. Foreign shareholders ordinarily must recertify their foreign
status to the Transfer Agent every three years on IRS Form W-8.
HOW TO PURCHASE SHARES
Shares may be purchased at the public offering price through ISI or through
dealers who have sales agreements with ISI. Investments by checks should be
payable in dollars and drawn on U.S. institutions. Ordinarily, the minimum
initial investment in shares of the Fund, inclusive of the sales charge, is
$500. Purchases through plans for regular investment, such as the Automatic
Investment Plan, payroll deduction plans or comparable plans, ordinarily do not
require a minimum initial investment. Subsequent investments must ordinarily be
at least $50. The minimum initial and subsequent investment for military
allotment programs and for shares purchased along with other products offered by
an affiliate of ISI is $10. A $15 service charge will be charged (through a
redemption of shares) when a check, pre-authorized draft or an electronic
transfer of monies through Automated Clearing House ("ACH") (or other similar
means of purchasing shares) is returned or rejected by the paying bank because
of insufficient or uncollected funds or because of a stop payment order.
All orders to purchase shares are subject to acceptance by the Fund and are
not binding until so accepted, and are subject to ultimate collectibility of
funds. The Fund may decline to accept a purchase order when in the judgment of
management the acceptance of an order is not in the best interest of existing
shareholders. All orders are processed at the offering price based on the net
asset value of the Fund's shares next computed after receipt and acceptance of
the order.
BY MAIL
Once an account is established, shareholders may purchase additional shares
at any time by sending checks for subsequent investments directly to the
Transfer Agent:
Idex Investor Services, Inc.
P.O. Box 9015
Clearwater, FL 34618-9015
Make your check payable to IDEX Mutual Funds. Please note your account
number on the check.
BY AUTOMATIC INVESTMENT PLAN
Shareholders may purchase shares through an IDEX Automatic Investment Plan
under which investments may be made periodically by means of a pre-authorized
charge on their bank accounts on approximately the 5th and/or the 20th day of
the month. The monies are electronically transferred through
11
<PAGE> 14
ACH or through a pre-authorized draft. Such transactions will be confirmed on
the shareholder's bank statement as an ACH debit or a pre-authorized withdrawal.
The shareholder's IDEX confirmation will reflect the shares so purchased. A
shareholder may change the amount of the shareholder's regular investment or
discontinue investments under the Automatic Investment Plan without penalty by
calling Customer Service at (800) 851-9777 or writing the Transfer Agent. A
shareholder may also request that the amount of his or her regular investment
under the Automatic Investment Plan be automatically adjusted monthly,
quarterly, semi-annually or annually. The period adjustments may be stated as a
percentage of the automatic investment amount or as a specified dollar amount.
Shareholders may participate in an Automatic Investment Plan by completing the
appropriate section on the New Account Application or by written request to the
Transfer Agent. Forms for establishing an Automatic Investment Plan may be
obtained by calling Customer Service or writing the Transfer Agent.
BY TELEPHONE
Once an account is established, shareholders may purchase additional shares
by telephone request and make payment by means of a pre-authorized charge on
their bank accounts. The shareholder may elect this additional purchase option
on the New Account Application or by written request to the Transfer Agent.
Payments for telephone purchases are automatically transferred from the
shareholder's bank account to his or her IDEX account through ACH on
approximately the second bank business day after the purchase request is
effected. The purchase is confirmed on the shareholder's bank statement as a
pre-authorized charge or withdrawal. The shareholder's IDEX confirmation will
reflect the shares purchased. See "Other Information -- Telephone Transactions"
for further information relating to the purchase of shares by telephone request.
PURCHASES THROUGH AUTHORIZED DEALERS
Purchase orders of at least $1,000 may be made by telephone by authorized
dealers ("confirmed purchases"). Confirmed purchases can be paid to the Transfer
Agent by a check or a Federal funds bank wire. Dealers who wish to pay for
orders with a Federal funds bank wire are referred to the wire instructions
described below. If the confirmed purchase is for a new account, registration
instructions including dealer certification of the shareholder's tax
identification number must be mailed to the Transfer Agent. If the confirmed
purchase is for an existing account, no additional documentation is needed. (It
is the dealer's responsibility to transmit such orders promptly.)
As described above, confirmed purchases of at least $1,000 can be paid by
dealers to the Transfer Agent through a Federal funds bank wire. Dealers that
pay for orders with a bank wire should instruct their bank to wire Federal funds
as follows:
NationsBank, N.A.
Tampa, Florida
ABA # 063100277
DDA # 3601194554
ATTN: Idex Investor Services, Inc.
Confirmed purchase order number(s)
Shareholder's account name(s)
There may be a charge by the dealer's bank for sending out a bank wire, but
the Transfer Agent currently does not charge for this convenience.
PUBLIC OFFERING PRICE AND NET ASSET VALUE
The public offering price of a share of the Fund is the net asset value per
share next determined after receipt and acceptance of the order, plus the
applicable sales charge. The net asset value ("NAV") per share refers to the
value of one share of the Fund and is determined by the Fund's custodian once
daily 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, each day the
Exchange is open, and at such other times as the Fund may determine. The per
share NAV of the Fund is determined by dividing the total value of the Fund's
securities and other assets, less liabilities, by the total number of Fund
shares outstanding. In determining NAV, securities and other portfolio
investments are valued at market value. Investments for which quotations are not
readily available are valued at fair value determined in good faith by the
sub-adviser under the supervision of the Board of Trustees.
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<PAGE> 15
SALES CHARGES
The following sales charges are applicable to purchases of Fund shares, and
are reduced as follows:
<TABLE>
<CAPTION>
Reallowance
Sales Charge to Dealers Sales Charge
as % of as a % of as % of
Amount of Purchase Offering Price Offering Price Amount Invested
-------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Less than $25,000................................. 8.50% 7.00% 9.29%
$25,000 but less than $50,000..................... 7.50% 6.00% 8.11%
$50,000 but less than $75,000..................... 6.50% 5.75% 6.95%
$75,000 but less than $100,000.................... 5.50% 4.75% 5.82%
$100,000 but less than $250,000................... 4.25% 3.75% 4.44%
$250,000 but less than $500,000................... 3.00% 2.50% 3.19%
$500,000 but less than $1,000,000................. 1.25% 1.00% 1.27%
$1,000,000 or more................................ 0.00% 0.25%* 0.00%
</TABLE>
* This amount is not a charge incurred by shareholders. ISI, at its own expense,
may make such a payment in accordance with its procedures as may be in effect
from time to time. ISI's procedures currently provide for a payment in the
amount shown.
The Fund receives the entire NAV of all of its shares sold. ISI retains the
sales charge from which it reallows discounts from the applicable public
offering price to dealers which are uniform for all dealers in the United States
and its territories. From time to time, ISI may reallow up to the full
applicable sales charge, as shown in the above table, to selected dealers who
sell or are expected to sell significant amounts of shares during specified time
periods or who render designated training services. During periods when
substantially the entire sales charge is reallowed, such dealers may be deemed
to be underwriters as that term is defined in the Securities Act of 1933, as
amended. In addition, ISI from time to time provides noncash compensation to
dealers that employ registered representatives that sell a minimum dollar amount
of shares of funds in the IDEX Group of Funds. Such noncash compensation is in
the form of merchandise and attendance by registered representatives at seminars
conducted by ISI, including lodging and travel expenses. ISI may also pay
amounts equal to the applicable reallowance, as shown in the above table, to
selected banks and other financial institutions to compensate such institutions
for their services in connection with the purchase of Fund shares and servicing
of shareholder accounts. In addition, ISI may pay fees from its own funds to
certain dealers and financial institutions whose clients maintain significant
account balances in one or more IDEX funds or portfolios to compensate such
dealers and financial institutions for rendering administrative and shareholder
services.
The above sales charge schedule is applicable to purchases of shares of the
Fund by any "purchaser" which includes: (i) an individual, (ii) an individual,
his or her spouse and children under the age of 21, and (iii) a trustee or other
fiduciary of a single trust estate or single fiduciary account (including
pension, profit-sharing and other employee benefit trusts qualified under
Section 401 of the Internal Revenue Code of 1986 ("Code")) although more than
one beneficiary is involved.
RIGHT OF ACCUMULATION
The sales charges described above also apply to current purchases of shares
of the Fund by a purchaser, as defined above, where the aggregate value of
shares of the Fund plus the value of certain shares of other IDEX funds or
portfolios held by the shareholder, as determined at their respective NAVs at
the time of the current purchase of Fund shares, amounts to more than the
specified amounts in the sales charge schedules, provided ISI or the Transfer
Agent is notified by such investor or the investor's dealer that such purchase
is made under the Right of Accumulation privilege. THE FOREGOING RIGHT OF
ACCUMULATION APPLIES ONLY TO SHARES OF THE FUND AND OTHER FUNDS OR PORTFOLIOS IN
THE IDEX GROUP ON WHICH AN INITIAL SALES CHARGE IS IMPOSED.
LETTER OF INTENTION
The above sales charges are also applicable to the total value of purchases
of shares of the Fund (excluding any dividends and capital gain distributions
received in additional shares) made by a purchaser, as defined above, pursuant
to a Letter of Intention ("LOI") to invest a certain amount within a 13-month
period. AN LOI WILL APPLY ONLY TO SHARES OF THE FUND AND TO OTHER FUNDS OR
PORTFOLIOS IN THE IDEX GROUP ON WHICH AN INITIAL SALES CHARGE IS IMPOSED.
Subject to the terms of escrow described below, each purchase made under an LOI
will be made at the current public offering price applicable to the full amount
covered by the LOI. In the event of a change in the sales charges set forth
above, any purchases made under an existing LOI after the effective date of the
change will be subject to the revised sales charge. Should the amount actually
purchased during the 13-month period be more or less than that indicated in the
LOI, an adjustment in the sales charge will be made. A purchase not made
pursuant to an LOI may be included thereunder if the LOI is filed within 90 days
of such purchase and the 13-month period will commence on the date of such
purchase. Any shareholder also may obtain the reduced
13
<PAGE> 16
sales charge by including the value (at the NAV) of all of his or her shares in
the Fund, together with shares of other IDEX funds or portfolios on which an
initial sales charge is imposed, held of record as of the date of his or her LOI
as a credit toward determining the applicable scale of sales charges for the
shares to be purchased under the LOI. If the total purchases made under an LOI
plus any credit under the Right of Accumulation described above, are large
enough to qualify for a lower sales charge category than specified in the LOI,
all transactions will be recomputed on the expiration date of the LOI to effect
the lower sales charge.
An LOI authorizes the Transfer Agent to escrow shares having a purchase
price of 5% of the minimum dollar amount specified in the LOI. All dividends and
capital gain distributions on shares held in escrow will be paid in additional
shares unless the shareholder elects another distribution option on the New
Account Application or by written request to the Transfer Agent. When the
minimum investment specified in the LOI is completed, the shares held in escrow
will remain on deposit unless the shareholder requests a certificate for such
shares. Shares held in escrow can be redeemed by the Transfer Agent to
retroactively adjust upward the sales charge which results when the amount
invested differs from the amount intended to be invested. In any retroactive
reduction in sales charge, the amount of the reduction will be invested in
additional shares at NAV, or remitted to the shareholder if otherwise requested
by the shareholder.
An LOI is not a binding obligation upon the investor to purchase, nor the
Fund to sell, the full amount indicated. To insure that all purchases will
receive a quantity discount, the shareholder or the shareholder's dealer should
notify the Fund or Transfer Agent that an LOI is in effect at the time an
initial investment in shares is made. Forms and other information concerning
LOIs may be obtained by calling Customer Service or writing the Transfer Agent.
CERTAIN GROUPS
An individual who is a member of a qualified group may purchase shares of
the Fund at the reduced sales charge which ISI anticipates will be applicable to
the group as a whole within a specified period. The applicable sales charge is
determined by ISI by taking into account the anticipated aggregate amount of
purchases by members of the group of shares of the Fund and of all other IDEX
funds or portfolios available for sale to the public on which an initial sales
charge is imposed. A "qualified group" is one which (i) has been in existence
for more than six months, (ii) has a purpose other than to acquire shares of the
Fund or similar investments (e.g., investment clubs), and (iii) satisfies
uniform criteria which allows ISI and/or other dealers offering shares of the
Fund to realize economies of scale in distributing such shares. A qualified
group does not include one whose sole organizational nexus, for example, is that
its participants are credit card holders of the same institution. Pension or
other employee benefit plan participants may qualify for group purchases. The
Fund reserves the right to modify this privilege at any time. Further
information about qualifying groups may be obtained by calling Customer Service
at (800) 851-9777.
CERTAIN PURCHASES
Shares of the Fund may be sold at NAV per share without a sales charge, if
such shares are purchased for investment purposes and may not be resold except
to the Fund, to: (a) current or former trustees, trustees emeriti, directors,
officers, full-time employees or sales representatives of the Fund, IMI, Janus
Capital, ISI or of any of their affiliates; (b) directors, officers, full-time
employees and sales representatives of any dealer having a sales agreement with
ISI; (c) any trust, pension, profit-sharing or other benefit plan for any of the
foregoing persons; (d) any members of the family (e.g., spouse, children,
siblings, parents and parents-in-law) of any of the foregoing persons; or (e)
IMI, Janus Capital, ISI or any of their affiliates. Any person who was eligible
to purchase shares of the Fund at NAV pursuant to (a) through (e) above, who
subsequently becomes ineligible may continue to purchase shares at NAV for
accounts opened prior to such ineligibility. The Fund reserves the right to
modify or eliminate this privilege at any time.
HOW TO EXCHANGE SHARES
EXCHANGE PRIVILEGE
SHARES OF THE FUND MAY BE EXCHANGED ONLY FOR SHARES OF OTHER FUNDS OR
PORTFOLIOS IN THE IDEX GROUP ON WHICH AN INITIAL SALES CHARGE IS IMPOSED. Shares
of the Fund which have been owned by a shareholder for at least 15 days may be
exchanged for shares of any other IDEX fund or portfolio on which an initial
sales charge is imposed and which is then offering shares for sale in the
shareholder's state of residence. Shares of the Fund may also be exchanged for
shares of various portfolios of the Cash Equivalent Fund or the California
Tax-Exempt Money Market Fund, money market mutual funds managed by Kemper
Financial Services, Inc. (See "Money Market Fund Exchange Privilege.")
Any IDEX exchange will be based on the respective NAV's of the shares
involved and may be made in amounts of $1,000 or more. If an exchange
transaction is less than $1,000, a $5 service charge may be deducted from the
shareholder's account through a redemption of Fund shares. There is no sales
commission involved in such an exchange.
A shareholder will automatically have exchange privileges unless the
shareholder gives instructions to the contrary on the shareholder's New Account
Application or by written notice to the Transfer Agent. Exchange requests may be
made by either: 1) submitting written instructions to the Transfer Agent, or 2)
providing telephone exchange instructions to Customer Service. A shareholder may
make a full exchange to a new account by written request and in that case all
special account
14
<PAGE> 17
features such as an Automatic Investment Plan, Letter of Intention or Systematic
Withdrawal/Exchange Plan will be transferred to the new account unless the
Transfer Agent is otherwise instructed. A shareholder may make a partial
exchange to a new account by written request and in that case all special
account features except the Automatic Investment Plan and the Systematic
Withdrawal/Exchange Plan will be transferred to the new account unless the
Transfer Agent is otherwise instructed. Before making an exchange, the investor
should consider the investment objective of the fund or portfolio whose shares
are to be purchased, which can be found in the current prospectus of that fund
or portfolio. A prospectus for any of the IDEX funds may be obtained by calling
Customer Service at (800) 851-9777 or writing the Transfer Agent.
All exchange requests will be processed at the NAV per share next
determined after the request is received. The Fund reserves the right to
establish limitations as to the amounts or frequency of such exchanges, to
change the service charge for such exchanges and to impose such other
restrictions as may be necessary to assure that such exchanges do not
disadvantage the Fund and its shareholders. The Fund reserves the right to
reject any exchange request and to modify or terminate the exchange privilege at
any time. For further information concerning the exchange privilege, or to
obtain appropriate forms, please call Customer Service or write the Transfer
Agent.
TELEPHONE EXCHANGES
To place a telephone exchange request, call Customer Service at (800)
851-9777 before 4:00 p.m. Eastern Time. Shares acquired by telephone exchange
must be registered exactly as the account from which the exchange was made.
Certificated shares are not eligible for the telephone exchange privilege. See
"Other Information -- Telephone Transactions" for further information relating
to the telephone exchange privilege.
SYSTEMATIC EXCHANGES
A shareholder who owns Fund shares worth at least $10,000 at the current
public offering price may elect on his or her New Account Application or by
written request to the Transfer Agent a systematic exchange option providing for
monthly exchanges of shares of the Fund for shares of any other IDEX fund or
portfolio on which an initial sales charge is imposed and which is then offering
shares for sale in the shareholder's state of residence. Shareholders may also
systematically redeem shares of the Fund and invest the proceeds in various
portfolios of the Cash Equivalent Fund or the California Tax-Exempt Money Market
Fund (See "Money Market Fund Exchange Privilege.") Shares acquired by systematic
exchange must be registered exactly as the account from which the exchange is
made. Certificated shares are not eligible for the systematic exchange
privilege.
MONEY MARKET FUND EXCHANGE PRIVILEGE
Shareholders may redeem shares of the Fund having a value of at least
$1,000 and automatically invest the proceeds in various portfolios of the Cash
Equivalent Fund or the California Tax-Exempt Money Market Fund (collectively,
the "Money Market Funds"), which are separately managed, diversified open-end
money market mutual funds. Shareholders may subsequently redeem their shares of
any of the Money Market Funds in minimum amounts of $1,000 and automatically
invest the proceeds of such redemption in shares of the Fund at the then
applicable NAV per share. If an exchange transaction is less than $1,000, a $5
service charge may be deducted from the shareholder's account through a
redemption of Fund shares. The Fund reserves the right to change this service
charge or the amount of such exchanges at any time. Shareholders may also elect
a systematic exchange option providing for monthly exchanges of shares between
the Fund and any of the Money Market Funds.
To the extent that Money Market Fund shares were originally acquired other
than pursuant to an exchange of Fund shares, purchases of shares of the Fund
with the proceeds of Money Market Fund shares will not be considered to be made
in accordance with the exchange privilege described above. Accordingly, the
purchase of shares subsequent to the redemption of Money Market Fund shares not
originally acquired pursuant to an exchange of Fund shares shall be subject to
the otherwise applicable sales charge on such shares.
Redemptions of shares in connection with Money Market Fund exchanges will
be effected as of the end of the day on which an exchange request is received,
if received before 4:00 p.m., Eastern time. This exchange privilege does not
constitute an offering or recommendation of Money Market Fund shares by the
Fund. Before making such an exchange, the investor should consider the
investment objective of the fund or portfolio whose shares are to be purchased,
which can be found in the current prospectus of that fund or portfolio.
Shareholders will receive a Money Market Fund Prospectus with their initial
confirmation statement. Exchanges may be requested by writing the Transfer Agent
or calling Customer Service at (800) 851-9777.
HOW TO REDEEM SHARES
GENERAL INFORMATION
Shareholders may redeem their shares at any time at a price equal to the
NAV per share next determined following receipt of a valid redemption request by
the Transfer Agent. Payment of redemption proceeds will normally be made within
seven days of the Fund's receipt of a valid redemption request, as described
below. IF SHARES HAVE BEEN PURCHASED BY CHECK OR OTHER MEANS THAT ARE SUBJECT TO
FINAL COLLECTION, THE FUND WILL NOT MAKE REDEMPTION PROCEEDS AVAILABLE UNTIL
SUCH PURCHASE(S) HAS CLEARED THE SHAREHOLDER'S BANK, WHICH MAY TAKE UP TO 15
DAYS OR MORE. Redemption proceeds will be sent
15
<PAGE> 18
by regular first class mail, or for a $20 service charge, by overnight mail, if
requested. A shareholder can pay the $20 by check. Otherwise, the charge will be
deducted from the shareholder's account or the proceeds of such redemption. The
Transfer Agent may be unable to provide overnight mail service when mailing to
addresses other than street addresses of if this delivery is not available to a
given location.
The value of Fund shares on redemption may be more or less than the
shareholder's cost or basis, depending upon the Fund's NAV at the time of
redemption. Shares will normally be redeemed for cash, except under unusual
circumstances as described in the Statement of Additional Information under
"Redemption of Shares." Redemption and repurchase of shares may be suspended or
payment postponed during any period in which the Exchange is closed (other than
on weekends or customary holidays) or trading on the Exchange is restricted, or
during periods of an emergency or other periods during which the SEC permits
such suspension.
REDEMPTIONS REQUESTED IN WRITING
To redeem shares in writing, the shareholder must send a written redemption
request, together with any outstanding certificates representing the shares to
be redeemed, to:
Idex Investor Services, Inc.
P.O. Box 9015
Clearwater, Florida 34618-9015
The written request must be signed by the owner(s) of the account (or a
person authorized to act on behalf of such owner(s)) and should specify the name
of the Fund, the number of shares or dollars being redeemed, the account number
and the name(s) on the account. Any outstanding certificates must be endorsed by
the registered owner or owners, with signatures guaranteed, if required. FOR
YOUR PROTECTION, SIGNATURE GUARANTEES ARE REQUIRED IF THE AMOUNT OF THE
REDEMPTION IS MORE THAN $50,000 OR IF THE REDEMPTION PROCEEDS ARE BEING MAILED
TO AN ADDRESS OTHER THAN THE ADDRESS OF RECORD. All required guarantees of
signatures must be made by a national or state bank, a member firm of a national
stock exchange or any other institution which is an eligible guarantor
institution as defined by rules and regulations of the SEC. If shares are held
of record in the name of a corporation, partnership, trust or fiduciary,
evidence of the authority of the person seeking redemption is required before
the request for redemption is accepted, including redemptions under $50,000. For
additional information, call Customer Service at (800) 851-9777.
TELEPHONE AND EXPEDITED REDEMPTIONS
Shareholders may automatically redeem Fund shares by telephone and have
redemption proceeds paid by check or wired to a bank account unless instructions
to the contrary are indicated on the shareholder's New Account Application or by
written request to the Transfer Agent. These privileges are not available for
newly purchased shares (within the prior 15 days), retirement plan accounts or
for shares represented by certificate. The Fund reserves the right to modify or
eliminate these privileges without prior notice to shareholders at any time. If
an account has multiple owners, the Transfer Agent may rely on the instructions
of any one owner. See "Other Information -- Telephone Transactions" for further
information relating to the telephone redemption privilege.
TELEPHONE REDEMPTIONS. Shareholders may redeem Fund shares in amounts up
to $25,000 by telephone by calling Customer Service at (800) 851-9777 if this
privilege is in effect for your account. Redemption proceeds paid by check will
be made payable to the shareholder(s) of record and may only be sent to the
address of record for the account. A redemption requested by telephone and
payable by check will not be made if the address of record has been changed
within 30 days of a telephone redemption request. Only one telephone redemption
is permitted in each 30-day period.
EXPEDITED REDEMPTIONS. Shareholders may elect to have the privilege of
receiving redemption proceeds by ACH or Federal funds bank wire to a designated
bank account by completing the appropriate section of the New Account
Application. This privilege may be added to an existing account by mailing a
signature guaranteed request with complete bank information (usually a voided
check) to the Transfer Agent. Redemption proceeds of up to $25,000 may be
electronically transferred through ACH whereby the redemption proceeds are
credited directly to the shareholder's pre-designated bank account on
approximately the third bank business day after the redemption request is
effected. The Transfer Agent currently does not charge for the convenience of
paying redemptions electronically through ACH.
If the expedited redemption privilege has been elected, redemption proceeds
up to $25,000 may also be electronically transferred to a pre-designated bank
account through a Federal funds bank wire for a $20 service charge. The charge
will be deducted from the shareholder's account through a redemption of Fund
shares. The minimum redemption amount for a Federal funds bank wire is $1,000.
The bank wire for the redemption proceeds normally will be transmitted by the
Transfer Agent to the designated bank account on the next bank business day
after the redemption request is effected. The bank routing and account numbers
for standing expedited redemption privileges must be provided on the New Account
Application or by written request to the Transfer Agent and may be changed only
by signature guaranteed instructions by all registered owners. Expedited
redemption requests may be made by calling Customer Service or by writing the
Transfer Agent. Shareholder accounts without standing expedited redemption
privileges can request redemptions to be sent by Federal funds bank wire for a
$20 charge to a U.S. bank account by submitting an original, written request to
the
16
<PAGE> 19
Transfer Agent with all Fund account owners' signatures guaranteed. The request
must specify the necessary bank routing and account numbers and the names on the
bank account.
REDEMPTIONS THROUGH AN AUTHORIZED DEALER
Shareholders may also request dealers to place confirmed redemption orders
(including those through the National Securities Clearing Corporation ("NSCC")
electronic order system). It is the responsibility of dealers to transmit such
orders promptly. For shareholders redeeming through dealers, payment will be
made directly to the dealer within seven days after receipt by the Transfer
Agent of the written settlement instructions and certificates for shares,
properly endorsed and with signatures guaranteed as described above. Redemptions
through NSCC are settled after review by the Transfer Agent for good order.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own Fund shares worth at least $10,000 at the current
public offering price may establish a Systematic Withdrawal Plan ("SWP")
providing for monthly, quarterly or annual payments of at least $50. Under an
SWP, sufficient shares of the Fund are in most instances redeemed to provide the
amount of the periodic payment. Such payments may be paid through ACH, whereby
the redemption proceeds are credited directly to the shareholder's bank account
or, upon request, paid by a check from the Fund. Redemptions of shares in
connection with an SWP are normally effected approximately seven to ten days
prior to the first day of the month; however, the Fund cannot guarantee that
payment will be received by the date selected. Dividends and capital gain
distributions on shares in an account with an active SWP are usually paid in
additional shares only of the Fund. If the requested payments under an SWP
require redemption of more shares than have been credited through the payment of
dividends and capital gain distributions in additional shares, the shareholder's
original investment may be depleted and ultimately exhausted. The amounts
received by a shareholder under an SWP cannot be considered an actual yield or
income on investment since such payments may include a return of the
shareholder's original investment. It may be disadvantageous to an investor to
maintain an SWP concurrently with the additional purchase of shares because a
sales charge may apply to such purchases. An SWP may be amended or terminated at
any time upon written notice to the Transfer Agent, and will be terminated when
all shares in an account with an active SWP have been redeemed or upon
notification of the shareholder's death. Forms for establishing an SWP may be
obtained by calling Customer Service.
REINVESTMENT PRIVILEGE
A shareholder who has redeemed shares of the Fund may reinvest in shares of
the Fund or in IDEX Fund or the Class A shares of any of the Portfolios of IDEX
II Series Fund, an amount not to exceed the amount of redemption proceeds,
without a sales commission, if the shareholder sends a written request to the
Fund or the Transfer Agent within 90 days after the redemption. The redemption
proceeds will be reinvested on the basis of the NAV of the shares in effect
immediately after receipt of the written request. This reinvestment privilege
may be exercised only once by a shareholder upon redemption of Fund shares.
MINIMUM ACCOUNT BALANCE
The Fund may redeem shares in any account and pay the proceeds to the
shareholder if, due to redemptions, the account balance falls below $500, and
the account reflects no purchases of shares, other than through the payment of
dividends or capital gains in additional shares, during the sixty days prior to
the mailing of the notice of intent to redeem. The Fund will give the
shareholder sixty days written notice of intent to redeem prior to any such
redemption. During the sixty-day period following mailing of the notice, the
shareholder may increase the value of his or her account through additional
purchases and avoid involuntary redemption. A notice of intent to redeem will
usually not be sent to shareholders within 24 months of establishment of an
account.
REPURCHASE
For the convenience of shareholders, the Fund has authorized ISI to act as
its agent in the repurchase of Fund shares. The Fund reserves the right to
terminate this procedure at any time. Offers to sell shares to the Fund may be
communicated to ISI by wire or telephone from dealers for their customers. The
Fund's practice will be to repurchase shares offered to it at the NAV per share
determined as of the close of the regular session of business on the Exchange on
the day the offer for repurchase is received and accepted by the dealer, if the
offer is received by the dealer before the close of the regular session of
business on the Exchange and is received by ISI before the close of ISI's
business on that day. The dealer will be responsible for the prompt transmission
of orders.
Payment of the repurchase proceeds will be made in cash to the dealer
placing the order. Neither the Fund nor ISI charges any fee or commission upon
such repurchase which is then settled as an ordinary transaction with the dealer
delivering the shares repurchased. However, dealers may charge a fee. Payment
will normally be made within seven days after receipt of an order to repurchase
provided that the certificates, or stock powers if no certificates have been
issued, have been delivered to the Transfer Agent in proper form as described
above.
OTHER INFORMATION
RETIREMENT PLANS. Shares of the Fund may be purchased in conjunction with
individual retirement accounts, Simplified Employee Pension Plans, 401(k) Plans,
corporate and self-employed pension and profit sharing plans and 403(b)(7)
17
<PAGE> 20
programs. These plans require the completion of a separate application and a
prototype agreement which are available without charge upon request to the
Transfer Agent. Ordinarily, the annual maintenance fee for retirement plan
accounts is $12 per account with a maximum of $24 per tax identification number.
However, this annual fee will be waived if the account balances per tax
identification number are greater than $50,000. Additional information about
retirement plans is included in the Statement of Additional Information, and may
also be obtained by calling Customer Service at (800) 851-9777. With respect to
plans intended to provide tax deferred benefits, investors may wish to consult
with their own tax counsel or advisors.
TELEPHONE TRANSACTIONS. As described above under "How to Purchase Shares,"
"How to Exchange Shares," and "How to Redeem Shares", shareholders may purchase,
exchange and/or redeem shares by telephone request. The registered
representative of record may also purchase, exchange and/or redeem shares on a
shareholder's behalf pursuant to a shareholder's instructions. The Fund, ISI and
the Transfer Agent will not be liable for complying with telephone instructions
they reasonably believe to be authentic nor for any loss, damage, cost or
expense in acting on such telephone instructions, and investors will bear the
risk of any such loss. The Fund, ISI and/or the Transfer Agent will employ
reasonable procedures to determine that telephone instructions are genuine. If
the Fund, ISI and/or the Transfer Agent do not employ such procedures, they may
be liable for losses due to unauthorized or fraudulent instructions. Such
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
such transactions and/or tape recording telephone instructions.
CONFIRMATIONS, HISTORICAL STATEMENTS AND CERTIFICATES. After every account
transaction, except the automatic payment of dividends and distributions in
shares, a shareholder will receive a statement showing the details of the
transaction, the number of shares held, and a record of transactions since the
beginning of the year. For shareholders who request a historical transcript of
their accounts, the Fund charges a fee based upon the number of years
researched, currently $10 per year researched beyond the two most current years.
The shareholder can pay the fee by check. Otherwise, the charge will be deducted
from the shareholder's account. The Fund reserves the right to make other
charges to investors to cover administrative costs.
Shares purchased are ordinarily in non-certificated form. Certificates
representing shares owned will not be delivered to the shareholder unless
requested in writing from the Transfer Agent. No certificate will be issued for
fractional shares and no certificate will be issued to a shareholder who would
thereafter hold a certificate or certificates representing in the aggregate less
than 30 shares (except in connection with sales or transfers of shares
represented by certificates already outstanding). Certificates are issued only
in like registration to that of the account. Certificates may be returned to the
Transfer Agent at any time. No charge is made for this safekeeping service. If
certificates have been lost or stolen, notify the Transfer Agent immediately.
There may be a charge for cancelling and replacing certificates.
18
<PAGE> 21
NOTES
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