SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Registration No. 33-2659
Pre-Effective Amendment No.
Post-Effective Amendment No. 21
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
1940 Act File No. 811-4556
Amendment No. 23
(Check appropriate box or boxes.)
IDEX II SERIES FUND
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(Exact Name of Registrant as Specified in Charter)
201 HIGHLAND AVENUE, LARGO, FLORIDA 34640
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 585-6565
G. JOHN HURLEY, P.O. BOX 5068, CLEARWATER, FLORIDA 34618-5068
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(Name and Address of Agent for Service)
Approximate date of proposed public offering: It is proposed that this filing
will become effective:
[ ] 60 days after filing pursuant to paragraph (a) (1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a) (2) of Rule 485.
[ ] On (date) pursuant to paragraph (a) (1) of Rule 485.
[ ] On (date) pursuant to paragraph (a) (2) of Rule 485.
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] On February 1, 1996 pursuant to paragraph (b) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2(a) and filed a Rule 24f-2 Notice
on 12/26/95 for the fiscal year ended September 30, 1995.
as filed____________
<PAGE>
IDEX II SERIES FUND
Cross Reference Sheet
Between Prospectus and Statement of
Additional Information and Form N-1A Item
FORM N-1A ITEM CAPTION
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PART A PROSPECTUS
1. Cover Page Cover Page
2. Synopsis The IDEX II Series Fund; Summary of
Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Portfolios: A Summary of Their
Objectives, Investment Practices and
Risks; Securities in Which the
Portfolios Invest; How the Portfolios
Invest; Additional Risk Factors;
Miscellaneous Information
5. Management of Fund Investment Advisory and Other
Services; Miscellaneous Information
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Securities Shareholder Information and
Instructions - How to Buy Shares;
Distributions and Taxes;
Miscellaneous Information
7. Purchase of Securities Being Alternative Purchase Arrangements;
Offered Shareholder Information and
Instructions - Opening an Account;
Shareholder Information and
Instructions - How to Buy Shares;
Shareholder Information and
Instructions How to Exchange Shares;
Shareholder Information and
Instructions - Other Information;
Investment Advisory and Other
Services
8. Redemption or Repurchase Shareholder Information and
Instructions - How to Redeem (Sell)
Shares
9. Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Miscellaneous Information
<PAGE>
13. Investment Objectives and Policies Investment Objectives;
Investment Restrictions; Policies
and Practices; Other Policies and
Practices of the Portfolio
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Principal Shareholders
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services Services; Administrative Services;
Custodian, Transfer Agent and Other
Affiliates
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices
18. Capital Stock and Other Securities Miscellaneous Information
19. Purchase, Redemption and Pricing of Purchase of Shares; Distribution
Securities Being Offered Plans; Net Asset Value Determination;
Dividends and Other Distributions;
Shareholder Accounts; Retirement
Plans; Redemption of Shares
20. Tax Status Taxes
21. Underwriter Distributor
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
<PAGE>
IDEX II SERIES FUND
201 Highland Avenue, Largo, FL 34640
Customer Service: (800) 851-9777
Prospectus dated February 1, 1996
This Prospectus is a legal document provided to you, the investor, which sets
forth concise information about the IDEX II Series Fund that should be
considered carefully before you invest in a Portfolio. Additional and more
detailed information about each Portfolio is contained in the Statement of
Additional Information (the "SAI"), which is incorporated by reference in
this Prospectus. You may obtain a copy of the current SAI, dated February 1,
1996, at no charge by calling or writing IDEX. You should retain this
Prospectus for future reference.
The investment objective of each Portfolio is set forth on the following
page. There can be, of course, no assurance that a Portfolio will achieve its
investment objective. For further information about the Portfolios, please
read The Portfolios: A Summary of Their Objectives, Investment Practices, and
Risks; Securities in Which the Portfolios Invest; How the Portfolios Invest;
and Additional Risk Factors.
PORTFOLIO 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.
THE FLEXIBLE INCOME PORTFOLIO MAY INVEST WITHOUT LIMIT, AND THE INCOME PLUS
PORTFOLIO MAY INVEST 50% OF ITS ASSETS, IN LOWER RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS." BONDS OF THIS TYPE ARE CONSIDERED TO BE
SPECULATIVE WITH REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL.
INVESTMENTS IN THESE TYPES OF SECURITIES HAVE GREATER RISKS, INCLUDING THE
RISK OF DEFAULT, THAN HIGHER RATED BONDS AND THEREFORE MAY NOT BE SUITABLE
FOR ALL INVESTORS. THESE RISKS ARE DESCRIBED IN ADDITIONAL RISK FACTORS --
HIGH YIELD/HIGH RISK BONDS. INVESTORS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH INVESTMENTS IN THOSE PORTFOLIOS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") 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.
This Prospectus does not constitute an offer to sell securities in any state
to any person to whom it is unlawful to make an offer in such state.
<PAGE>
<TABLE>
<CAPTION>
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TABLE OF CONTENTS
<S> <C>
THE IDEX II SERIES FUND ........................... 1
Summary of Expenses ............................... 2
Financial Highlights .............................. 4
The Portfolios: A Summary of Their Objectives,
Investment Practices, and Risks ................. 9
Introduction to the Portfolios .................... 9
Securities in Which the Portfolios Invest ........ 13
How the Portfolios Invest ......................... 15
Additional Risk Factors ........................... 17
Investment Advisory and Other Services ............ 19
Distributor and Distribution and Service Plans ... 23
Miscellaneous Information ......................... 24
Distributions and Taxes ........................... 25
Shareholder Information and Instructions ......... 27
</TABLE>
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<PAGE>
THE IDEX II SERIES FUND
The IDEX II Series Fund consists of eleven Portfolios. Each Portfolio is a
separate series of IDEX II Series Fund (the "Fund"), an open-end management
investment company offering a selection of separate investment portfolios.
All Portfolios other than the Capital Appreciation Portfolio are diversified.
The Capital Appreciation Portfolio is non-diversified. Each Portfolio has its
own distinct investment objective and policies, which are summarized below.
Either Idex Management, Inc. or InterSecurities, Inc. serves as investment
adviser to each of the Portfolios. All investments involve risks. For
information on specific Portfolio investment risks, see Additional Risk
Factors. For detailed information about how to purchase, redeem or exchange
shares, see Shareholder Information and Instructions.
IDEX II AGGRESSIVE GROWTH PORTFOLIO
OBJECTIVE: Long-term capital appreciation.
INVESTMENT POLICY: The Aggressive Growth Portfolio is a diversified, actively
managed portfolio primarily composed of equity securities.
SUB-ADVISER: Fred Alger Management, Inc.
IDEX II CAPITAL APPRECIATION PORTFOLIO
OBJECTIVE: Long-term growth of capital in a manner consistent with
preservation of capital.
INVESTMENT POLICY: The Capital Appreciation Portfolio is a nondiversified
Portfolio that pursues its objective by normally investing at least 50% of
its equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall within the
range of companies in the S&P MidCap 400 Index (the "MidCap Index").
Companies whose capitalization falls outside this range after the Fund's
initial purchase continue to be considered medium-sized companies for
purposes of this policy. As of September 29, 1995, the MidCap Index included
companies with capitalizations between approximately $120 million and $7.4
billion. The range of the MidCap Index is expected to change on a regular
basis. Subject to the above policy, the Portfolio may also invest in smaller
or larger issuers.
SUB-ADVISER: Janus Capital Corporation
IDEX II GLOBAL PORTFOLIO
OBJECTIVE: Long-term growth of capital in a manner consistent with
preservation of capital primarily through investments in common stocks of
foreign and domestic issuers.
INVESTMENT POLICY: The Global Portfolio invests primarily in common stocks of
foreign and domestic issuers. It also invests in securities issued by
domestic or foreign governments, government agencies, and other government
entities. The Portfolio is designed for long-term investors who can accept
the special risks involved in foreign investing.
SUB-ADVISER: Janus Capital Corporation
IDEX II GROWTH PORTFOLIO
OBJECTIVE: Growth of capital.
INVESTMENT POLICY: The Growth Portfolio invests primarily in common stocks
listed on a national securities exchange or on NASDAQ, which the Portfolio's
sub-adviser believes have a good potential for capital growth.
SUB-ADVISER: Janus Capital Corporation
IDEX II C.A.S.E. PORTFOLIO
OBJECTIVE: Annual growth of capital through investment in companies whose
management, financial resources and fundamentals appear attractive on a scale
measured against each company's present value.
INVESTMENT POLICY: The C.A.S.E. Portfolio seeks a diversified portfolio with
investments in companies that are perceived to have below market risk
characteristics, but which the sub-adviser believes exhibit superior products
and above average growth rates along with sound management and financial
stability. The Portfolio invests in common, preferred and convertible stocks
listed on national securities exchanges or on domestic over-the-counter markets.
SUB-ADVISER: C.A.S.E. Management, Inc.
IDEX II EQUITY-INCOME PORTFOLIO
OBJECTIVE: Current income, long-term growth of income, and capital
appreciation.
INVESTMENT POLICY: The Equity-Income Portfolio seeks to invest primarily in
common stocks offering above-average dividend yields, income producing
securities convertible into common stocks, and fixed-income securities.
SUB-ADVISER: Luther King Capital Management Corporation
IDEX II TACTICAL ASSET ALLOCATION PORTFOLIO
OBJECTIVE: Preservation of capital and competitive investment returns.
INVESTMENT POLICY: The Tactical Asset Allocation Portfolio invests primarily
in stocks, U.S. Treasury bonds, notes and bills, and money market funds.
Models are used in determining when the Portfolio's assets are "tactically"
allocated among these groups of investments.
SUB-ADVISER: Dean Investment Associates
IDEX II BALANCED PORTFOLIO
OBJECTIVE: Long-term capital growth, consistent with preservation of capital
and balanced by current income.
INVESTMENT POLICY: The Balanced Portfolio normally invests 40-60% of its
assets in equity securities selected primarily for growth potential and
40-60% of its assets in fixed income securities.
SUB-ADVISER: Janus Capital Corporation
IDEX II FLEXIBLE INCOME PORTFOLIO
OBJECTIVE: Maximum total return for shareholders, consistent with
preservation of capital, by actively managing a portfolio of income-producing
securities.
INVESTMENT POLICY: The Flexible Income Portfolio seeks to maximize total
return from a combination of current income and capital appreciation, with
the emphasis on income. The Portfolio may invest in all types of
income-producing securities; it may invest without limit in securities rated
below investment grade. Its overall level of risk may make it unsuitable for
investors who do not have alternate sources of income or other, diversified
investments.
SUB-ADVISER: Janus Capital Corporation
IDEX II INCOME PLUS PORTFOLIO
OBJECTIVE: As high a level of current income as is consistent with the
avoidance of excessive risk.
INVESTMENT POLICY: The Income Plus Portfolio invests in a diversified
portfolio of fixed-income and convertible debt securities and dividend-paying
common, preferred and convertible preferred stocks. Because the Portfolio
avoids excessive risk, its income may not be as high as possible.
Nonetheless, the Portfolio may invest in below investment grade debt
securities. Its overall level of risk may make it unsuitable for investors
who do not have alternate sources of income or other, diversified
investments.
SUB-ADVISER: AEGON USA Investment Management, Inc.
IDEX II TAX-EXEMPT PORTFOLIO
OBJECTIVE: Maximum current interest income exempt from federal income tax,
consistent with preservation of capital.
INVESTMENT POLICY: At least 80% of the Tax-Exempt Portfolio's net assets will
ordinarily be invested in a diversified portfolio of municipal bonds and
notes, including industrial development bonds.
SUB-ADVISER: AEGON USA Investment Management, Inc.
1
<PAGE>
SUMMARY OF EXPENSES
Before investing in IDEX II Series Fund, please read this section carefully
to understand the cost of investing in the Portfolios. When you buy Class A,
Class B or Class C shares of any of the Portfolios, you will incur certain
expenses. The section titled Shareholder Transaction Expenses shows the
expenses involved in owning shares of the Portfolios. The section titled
Examples of Expenses shows the expenses you might pay when making a
hypothetical $1,000 investment.
<TABLE>
<CAPTION>
AGGRESSIVE CAPITAL
GROWTH APPRECIATION GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- ---------------------
CLASS CLASS CLASS
---------------------- --------------------- ---------------------
A B C A B C A B C
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as percentage of offering price) (1) ...... 5.50% None None 5.50% None None 5.50% None None
Exchange Fees (2) ............................ None None None None None None None None None
Redemption Fees (3) .......................... None None None None None None None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) (4) .......... None 5% None None 5% None None 5% None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .............................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Service and Distribution Fees (5) ..... .35% 1.00% .90% .35% 1.00% .90% .35% 1.00% .90%
Other Expenses (net of expense reimbursements
and/or fee waivers, if any) (6) ............ 1.50% 1.50% 1.50% 1.55% 1.55% 1.55% 0.75% 0.75% 0.75%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Operating Expenses (net of expense
reimbursements and/or fee waivers, if any)
(6) ........................................ 2.85% 3.50% 3.40% 2.90% 3.55% 3.45% 2.10% 2.75% 2.65%
EXAMPLES OF EXPENSES: (7)
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:
1 year ...................................... $ 82 $ 85 $ 34 $ 83 $ 86 $ 35 $ 75 $ 78 $ 27
3 years ..................................... 138 137 104 140 139 106 117 115 82
5 years ..................................... 197 192 177 199 194 179 162 155 141
10 years .................................... 355 363 368 360 367 373 285 292 298
You would pay the following expenses on the same
investment, assuming no redemption and
therefore no deferred sales charge:
1 year ...................................... $ 82 $ 35 $ 34 $ 83 $ 36 $ 35 $ 75 $ 28 $ 27
3 years ..................................... 138 107 104 140 109 106 117 85 82
5 years ..................................... 197 182 177 199 184 179 162 145 141
10 years .................................... 355 363 368 360 367 373 285 292 298
<CAPTION>
GROWTH C.A.S.E.
PORTFOLIO PORTFOLIO
---------------------- ---------------------
CLASS CLASS
---------------------- ---------------------
A B C A B C
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as percentage of offering price) (1) ...... 5.50% None None 5.50% None None
Exchange Fees (2) ............................ None None None None None None
Redemption Fees (3) .......................... None None None None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) (4) .......... None 5% None None 5% None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .............................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Service and Distribution Fees (5) ..... .35% 1.00% .90% .35% 1.00% .90%
Other Expenses (net of expense reimbursements
and/or fee waivers, if any) (6) ............ 0.51% 0.51% 0.51% 1.50% 1.50% 1.50%
----- ----- ----- ----- ----- -----
Total Operating Expenses (net of expense
reimbursements and/or fee waivers, if any)
(6) ........................................ 1.86% 2.51% 2.41% 2.85% 3.50% 3.40%
EXAMPLES OF EXPENSES: (7)
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:
1 year ...................................... $ 73 $ 75 $ 24 $ 82 $ 85 $ 34
3 years ..................................... 110 108 75 138 137 104
5 years ..................................... 150 144 129 * * *
10 years .................................... 261 268 275 * * *
You would pay the following expenses on the same
investment, assuming no redemption and
therefore no deferred sales charge:
1 year ...................................... $ 73 $ 25 $ 24 $ 82 $ 35 $ 34
3 years ..................................... 110 78 75 138 107 104
5 years ..................................... 150 134 129 * * *
10 years .................................... 261 268 275 * * *
<FN>
(1) On certain purchases of Class A shares, the sales load may be reduced or
waived. Certain Class A Shares may be subject to a 1% deferred sales
charge. See Note 4. See also Shareholder Information and Instructions -
Class A Shares: Sales Charges, Available Discounts and Dealer
Reallowances.
(2) Exchanges must be made in amounts of $500 or more. No service fees are
currently charged for exchanges.
(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 Shareholder Information and Instructions - How to Redeem
(Sell) Shares.
(4) The deferred sales charge for Class B shares is 5% during the first year,
4% during the second year, 3% during the third year, 2% during the fourth
year, 1% during the fifth and sixth years and 0% during the seventh year
and later. No deferred sales charge is assessed on Class B shares
acquired through the reinvestment of dividends or capital gain
distributions. On purchases of Class A shares in amounts greater than
$1,000,000, a contingent deferred sales charge of 1% applies for twelve
months.
(5) After eight years, Class B shares will automatically convert to Class A
shares. For the current fiscal year, 12b-1 service and distribution fees
for the Tax-Exempt Portfolio's Class C shares will not exceed 0.60%,
rather than the maximum 0.90% authorized pursuant to its 12b-1 plan.
(6) Other Expenses and Total Operating Expenses for the Class A and Class C
shares of the Growth, Global, Flexible Income, Tax-Exempt, Income Plus,
Balanced, Capital Appreciation, Aggressive Growth and Equity-Income
Portfolios are based on actual expenses for the fiscal year ended
September 30, 1995, while Other Expenses and Total Operating Expenses for
the Class B shares of those Portfolios and the Class A, B and C shares of
the Tactical Asset Allocation and C.A.S.E. Portfolios are based on
annualized estimates of other expenses for the fiscal year ending
September 30, 1996. For Aggressive Growth, Capital Appreciation,
C.A.S.E., Equity-Income, Tactical Asset Allocation, Balanced, Flexible
Income and Tax-Exempt Portfolios, Other Expenses and Total Operating
Expenses are stated net of expense reimbursements and/or fee waivers. For
the period ended September 30, 1995, Total Operating Expenses for
Aggressive Growth Class A and Class C, Capital Appreciation Class A and
Class C, Equity-Income Class A and Class C, Balanced Class A and Class C,
Flexible Income Class A and Class C and Tax-Exempt Class A and Class C
would have been 3.35% and 3.91%, 4.17% and 4.72%, 4.57% and 5.12%, 4.48%
and 5.03%, 1.94% and 2.49%, and 1.35% and 1.60%, respectively, without
expense reimbursement by investment advisers. For the period ended
September 30, 1995, Other Expenses for Aggressive Growth Class A and
Class C, Capital Appreciation Class A and Class C, Equity-Income Class A
and Class C, Balanced Class A and Class C, Flexible Income Class A and
Class C and Tax-Exempt Class A and Class C would have been 2.00% and
2.01%, 2.82% and 2.82%, 3.22% and 3.22%, 3.13% and 3.13%, 0.69% and 0.69%
and 0.40% and 0.40%, respectively, without expense reimbursement by
investment advisers. For the period ended September 30, 1996, Total
Operating Expenses for C.A.S.E. Class A, Class B and Class C, Tactical
Asset Allocation Class A, Class B and Class C, Flexible Income Class B
and Tax-Exempt Class B are expected to be 4.50%, 5.15% and 5.05%, 3.50%,
4.15% and 4.05%, 2.59% and 2.00%, respectively, without reimbursement by
investment advisors. For the period ended September 30, 1996, Other
Expenses for C.A.S.E. Class A, Class B and Class C, Tactical Asset
Allocation Class A, Class B and Class C, Flexible Income Class B and
Tax-Exempt Class B are expected to be 3.15%, 3.15% and 3.15%, 2.15%,
2.15% and 2.15%, 0.69% and 0.40%, respectively, without reimbursement by
investment advisers. Expense reimbursements and/or fee waivers are not
anticipated for Class B of Aggressive Growth, Capital Appreciation,
Global, Growth, Equity-Income and Balanced for the year ended September
30, 1996. For the period ended September 30, 1995, the annualized expense
ratios for Capital Appreciation Class A and Class C, Global Class A and
Class C, Growth Class A and Class C, Equity-Income Class A and Class C,
Balanced Class A and Class C, Flexible Income Class A and Class C, Income
Plus Class A and Class C and Tax-Exempt Class A and Class C would be
2.85% and 3.40%, 1.97% and 2.52%, 1.84% and 2.38%, 2.85% and 3.40%, 2.85%
and 3.40%, 1.85% and 2.40%, 1.26% and 1.81%, and 1.00% and 1.25%,
respectively, after reduction in expenses by affiliated brokerage and
custody earnings credits.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TACTICAL ASSET
EQUITY-INCOME ALLOCATION BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- ---------------------
CLASS CLASS CLASS
---------------------- --------------------- ---------------------
A B C A B C A B C
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as percentage of offering price) (1) ...... 5.50% None None 5.50% None None 5.50% None None
Exchange Fees (2) ............................ None None None None None None None None None
Redemption Fees (3) .......................... None None None None None None None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) (4) .......... None 5% None None 5% None None 5% None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .............................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Service and Distribution Fees (5) ..... .35% 1.00% .90% .35% 1.00% .90% .35% 1.00% .90%
Other Expenses (net of expense reimbursements
and/or fee waivers, if any) (6) ............ 1.64% 1.64% 1.64% 1.50% 1.50% 1.50% 1.57% 1.57% 1.57%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Operating Expenses (net of expense
reimbursements and/or fee waivers, if any)
(6) ........................................ 2.99% 3.64% 3.54% 2.85% 3.50% 3.40% 2.92% 3.57% 3.47%
EXAMPLES OF EXPENSES: (7)
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:
1 year ...................................... $ 84 $ 87 $ 36 $ 82 $ 85 $ 34 $ 83 $ 86 $ 35
3 years ..................................... 142 141 109 138 137 104 140 139 107
5 years ..................................... 204 198 184 * * * 200 195 180
10 years .................................... 368 375 381 * * * 361 369 375
You would pay the following expenses on the same
investment, assuming no redemption and
therefore no deferred sales charge:
1 year ...................................... $ 84 $ 37 $ 36 $ 82 $ 35 $ 34 $ 83 $ 36 $ 35
3 years ..................................... 142 111 109 138 107 104 140 109 107
5 years ..................................... 204 188 184 * * * 200 185 180
10 years .................................... 368 375 381 * * * 361 369 375
<CAPTION>
FLEXIBLE INCOME INCOME PLUS TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------------- ---------------------
CLASS CLASS CLASS
---------------------- --------------------- ---------------------
A B C A B C A B C
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as percentage of offering price) (1) ...... 4.75% None None 4.75% None None 4.75% None None
Exchange Fees (2) ............................ None None None None None None None None None
Redemption Fees (3) .......................... None None None None None None None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) (4) .......... None 5% None None 5% None None 5% None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .............................. .90% .90% .90% .60% .60% .60% .60% .60% .60%
12b-1 Service and Distribution Fees (5) ..... .35% 1.00% .90% .35% 1.00% .90% .35% 1.00% .60%
Other Expenses (net of expense reimbursements
and/or fee waivers, if any) (6) ............ 0.62% 0.62% 0.62% 0.34% 0.34% 0.34% 0.07% 0.07% 0.07%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Operating Expenses (net of expense
reimbursements and/or fee waivers, if any)
(6) ........................................ 1.87% 2.52% 2.42% 1.29% 1.94% 1.84% 1.02% 1.67% 1.27%
EXAMPLES OF EXPENSES: (7)
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:
1 year ...................................... $ 73 $ 76 $ 25 $ 67 $ 70 $ 19 $ 65 $ 64 $ 13
3 years ..................................... 111 108 75 94 91 58 86 73 40
5 years ..................................... 151 144 129 122 115 100 108 85 70
10 years .................................... 262 269 276 202 209 216 173 155 153
You would pay the following expenses on the same
investment, assuming no redemption and
therefore no deferred sales charge:
1 year ...................................... $ 73 $ 26 $ 25 $ 67 $ 20 $ 19 $ 65 $ 14 $ 13
3 years ..................................... 111 78 75 94 61 58 86 43 40
5 years ..................................... 151 134 129 122 105 100 108 75 70
10 years .................................... 262 269 276 202 209 216 173 155 153
<FN>
(7) The Examples assume all dividends and distributions are paid in
additional shares and no payment of exchange or redemption fees. With
respect to Class B shares, the examples reflect conversion to Class A
shares eight years after purchase and are calculated based upon the
assumption that the shareholder was an owner of the shares on the first
day of the first year. The contingent deferred sales charge was applied
as follows: 1 year (5%), 3 years (3%), 5 years (1%) and 10 years (0%).
(See Shareholder Information and Instructions - Class B Shares: Sales
Charges, Dealer Reallowances and Possible Waivers.)
* Note: Pursuant to applicable rules, Portfolios that have been in operation for
less than 10 months complete only one- and three-year period portions of the
Examples.
</FN>
</TABLE>
The purpose of the preceding table is to help you understand the various
costs and expenses you might bear, directly or indirectly, if you invest in
the Portfolios. For more information about these expenses, please read
Investment Advisory and Other Services and Shareholder Information and
Instructions.
Long-term shareholders may pay more in 12b-1 service and distribution fees
than the economic equivalent of the maximum front-end sales charge permitted
under the Rules of Fair Practice adopted by the National Association of
Securities Dealers, Inc. ("NASD").
EXPENSES SHOWN IN THE ABOVE EXAMPLES DO NOT REPRESENT ACTUAL PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS ALSO HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OR PREDICTION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN 5%.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table below shows the actual earnings, capital gains or losses, and
expenses of a share of each class of shares in each of the Portfolios.
The information contained in the table for each fiscal year and for other
periods shown through September 30, 1995 has been audited by Price Waterhouse
LLP, independent accountants, whose report is incorporated by reference into
the SAI. Previous periods ended on or before November 30, 1991 for the
Tax-Exempt and Income Plus Portfolios were audited by other independent
accountants.
No financial information is shown for Class B shares of the Portfolios for
the fiscal year ended September 30, 1995, as Class B shares were not offered
by any Portfolio until October 1, 1995. No financial information is shown for
Class A, Class B or Class C shares of the Tactical Asset Allocation and
C.A.S.E. Portfolios for the fiscal year ended September 30, 1995, as those
Portfolios had not commenced operations at that time.
The SAI is incorporated by reference in this Prospectus. You may obtain it
without charge by calling or writing the Fund. Further information about
performance of the Fund Portfolios is contained in the Fund's Annual Report
to shareholders, which you may also obtain without charge by calling or
writing to the Fund.
<TABLE>
<CAPTION>
IDEX II IDEX II
AGGRESSIVE GROWTH CAPITAL APPRECIATION
CLASS A CLASS C CLASS A CLASS C
9/30/95(1) 9/30/95(1) 9/30/95(1) 9/30/95(1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Net investment income (loss) (.14) (.18) (.03) (0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency 7.82 7.82 3.57 3.57
Total income (loss) from investment operations 7.68 7.64 3.54 3.49
Dividends from net investment income -- -- -- --
Distributions from realized net capital gains and
foreign currency -- -- -- --
Distributions in excess of net realized capital
gains and foreign currency -- -- -- --
Total distributions -- -- -- --
Net asset value at end of period $ 17.68 $ 17.64 $ 13.54 $ 13.49
Total return (7) 76.80% 76.40% 35.40% 34.90%
Net assets at end of period (000's) $ 16,747 $ 1,736 $ 6,241 $ 2,565
Ratio of expenses to average net assets (8) 2.85% 3.40% 2.90% 3.45%
Ratio of net investment income (loss) to average
net assets (2.39%) (2.94%) 0.75% 0.20%
Portfolio turnover rate (9) 107.41% 107.41% 319.95% 319.95%
<CAPTION>
IDEX II
GLOBAL
CLASS A CLASS C
9/30/95 1994 1993(1) 9/30/95 1994(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 15.93 $ 13.35 $ 10.00 $ 15.74 $ 13.35
Net investment income (loss) (.06) (0.04) (0.04) (.14) (0.23)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.42 2.62 3.39 2.42 2.62
Total income (loss) from investment operations 2.36 2.58 3.35 2.28 2.39
Dividends from net investment income -- -- -- -- --
Distributions from realized net capital gains and
foreign currency (.56) -- -- (.56) --
Distributions in excess of net realized capital
gains and foreign currency -- -- -- -- --
Total distributions (.56) -- -- (.56) --
Net asset value at end of period $ 17.73 $ 15.93 $ 13.35 $ 17.46 $ 15.74
Total return (7) 15.47% 19.33% 33.52% 15.14% 17.90%
Net assets at end of period (000's) $ 89,397 $ 81,241 $ 17,430 $ 3,567 $ 3,571
Ratio of expenses to average net assets (8) 2.10% 2.14% 2.84% 2.65% 4.04%
Ratio of net investment income (loss) to average
net assets (0.43%) (0.55%) (0.87%) (0.98%) (2.46%)
Portfolio turnover rate (9) 161.48% 148.01% 116.98% 161.48% 148.01%
</TABLE>
<TABLE>
<CAPTION>
IDEX II GROWTH (2)
CLASS A
9/30/95 1994(3) 1993 1992 1991(3) 1990 1989
-------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 16.78 $ 18.46 $ 16.46 $ 16.22 $ 13.77 $ 17.52 $ 11.48
Net investment income (loss) (.05) 0.01 0.04 0.08 0.14 0.12 0.09
Net realized and unrealized gain (loss) on
investments and foreign currency 6.18 (1.22) 2.42 0.88 5.32 (2.21) 6.18
Total income (loss) from investment
operations 6.13 (1.21) 2.46 0.96 5.46 (2.09) 6.27
Dividends from net investment income -- -- (0.07) (0.07) (0.17) (0.09) (0.23)
Distributions from realized net capital gains
and foreign currency (.07) (0.33) (0.39) (0.65) (2.84) (1.57) --
Distributions in excess of net realized
capital gains and foreign currency -- (0.14) -- -- -- -- --
Total distributions (.07) (0.47) (0.46) (0.72) (3.01) (1.66) (0.23)
Net asset value at end of period $ 22.84 $ 16.78 $ 18.46 $ 16.46 $ 16.22 $ 13.77 $ 17.52
Total return (7) 36.70% (6.72%) 15.13% 6.10% 48.00% (12.50%) 55.70%
Net assets at end of period (000's) $485,935 $431,207 $548,564 $403,361 $126,436 $ 74,594 $89,494
Ratio of expenses to average net assets (8) 1.86% 1.76% 1.61% 1.61% 1.48% 1.35% 1.41%
Ratio of net investment income (loss) to
average net assets (.26%) 0.04% 0.29% 0.69% 0.88% 0.75% 0.67%
Portfolio turnover rate (9) 123.26% 63.73% 97.40% 56.21% 102.16% 127.79% 98.88%
<CAPTION>
CLASS C
1988 1987 1986(1) 9/30/95 1994(1)
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 14.08 $ 9.90 $ 10.00 $ 16.68 $ 18.46
Net investment income (loss) 0.25 0.14 0.07 (.15) (0.09)
Net realized and unrealized gain (loss) on
investments and foreign currency (1.59) 4.11 (0.17) 6.18 (1.22)
Total income (loss) from investment
operations (1.34) 4.25 (0.10) 6.03 (1.31)
Dividends from net investment income (0.16) (0.07) -- -- --
Distributions from realized net capital gains
and foreign currency (1.10) -- -- (.07) (0.33)
Distributions in excess of net realized
capital gains and foreign currency -- -- -- -- (0.14)
Total distributions (1.26) (0.07) -- (.07) (0.47)
Net asset value at end of period $ 11.48 $ 14.08 $ 9.90 $ 22.64 $ 16.68
Total return (7) (8.00%) 44.10% (1.70%) 36.32% (7.72%)
Net assets at end of period (000's) $ 65,463 $ 78,979 $19,745 $ 5,593 $ 3,423
Ratio of expenses to average net assets (8) 1.47% 1.32% 2.02% 2.41% 3.48%
Ratio of net investment income (loss) to
average net assets 2.45% 0.94% 2.35% (.81%) (1.68%)
Portfolio turnover rate (9) 133.28% 167.58% 19.57% 123.26% 63.73%
</TABLE>
See Notes to Financial Highlights on Page 7.
4
<PAGE>
<TABLE>
<CAPTION>
IDEX II EQUITY-INCOME IDEX II BALANCED
CLASS A CLASS C CLASS A CLASS C
9/30/95(1) 9/30/95(1) 9/30/95(1) 9/30/95(1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Net investment income (loss) .09 .03 .05 .01
Net realized and unrealized gain (loss) on
investments and foreign currency 1.75 1.75 1.47 1.47
Total income (loss) from investment operations 1.84 1.78 1.52 1.48
Dividends from net investment income (.10) (.05) (.05) (.01)
Distributions from realized net capital gains and
foreign currency -- -- -- --
Distributions in excess of net realized capital
gains and foreign currency -- -- -- --
Total distributions (.10) (.05) (.05) (.01)
Net asset value at end of period $ 11.74 $ 11.73 $ 11.47 $ 11.47
Total return (7) 18.43% 17.95% 15.27% 14.77%
Net assets at end of period (000's) $ 5,167 $ 281 $ 3,670 $ 3,365
Ratio of expenses to average net assets (8) 2.99% 3.54% 2.92% 3.47%
Ratio of net investment income (loss) to average
net assets .85% .30% .56% .01%
Portfolio turnover rate (9) 42.18% 42.18% 100.35% 100.35%
</TABLE>
<TABLE>
<CAPTION>
IDEX II FLEXIBLE INCOME(2)(4)
CLASS A
9/30/95 1994(3) 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 8.83 $ 9.59 $ 8.95 $ 8.73 $ 7.74 $ 9.55
Net investment income (loss) .61 0.65 0.70 0.80 0.82 0.90
Net realized and unrealized gain (loss) on
investments and foreign currency .37 (0.81) 0.60 0.22 1.10 (1.80)
Total income (loss) from investment operations .98 (0.16) 1.30 1.02 1.92 (0.90)
Dividends from net investment income (.64) (0.60) (0.66) (0.80) (0.80) (0.91)
Distributions from realized net capital gains
and foreign currency -- -- -- -- (0.13) --
Distributions in excess of net realized
capital gains and foreign currency -- -- -- -- -- --
Total distributions (.64) (0.60) (0.66) (0.80) (0.93) (0.91)
Net asset value at end of period $ 9.17 $ 8.83 $ 9.59 $ 8.95 $ 8.73 $ 7.74
Total return (7) 11.57% (1.54%) 13.66% 12.17% 26.38% (10.22%)
Net assets at end of period (000's) $ 19.786 $ 21,527 $ 29,232 $ 26,676 $ 18,696 $ 18,760
Ratio of expenses to average net assets (8) 1.87% 1.85% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income (loss) to
average net assets 7.03% 6.57% 7.76% 8.55% 9.84% 10.51%
Portfolio turnover rate (9) 149.58% 105.40% 138.86% 140.23% 130.73% 72.40%
<CAPTION>
CLASS C
1989 1988 1987(1) 9/30/95 1994(1)
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.15 $ 9.60 $ 10.00 $ 8.83 $ 9.59
Net investment income (loss) 0.95 0.91 0.25 .56 0.60
Net realized and unrealized gain (loss) on
investments and foreign currency (0.46) 0.55 (0.40) .37 (0.81)
Total income (loss) from investment operations 0.49 1.46 (0.15) .93 (0.21)
Dividends from net investment income (0.93) (0.91) (0.25) (.59) (0.55)
Distributions from realized net capital gains
and foreign currency (0.16) -- -- -- --
Distributions in excess of net realized
capital gains and foreign currency -- -- -- -- --
Total distributions (1.09) (0.91) (0.25) (.59) (0.55)
Net asset value at end of period $ 9.55 $ 10.15 $ 9.60 $ 9.17 $ 8.83
Total return (7) 5.17% 15.62% (1.93%) 10.95% (2.15%)
Net assets at end of period (000's) $27,645 $20,469 $ 4,676 $ 558 $ 691
Ratio of expenses to average net assets (8) 1.29% 1.00% 1.14% 2.42% 2.40%
Ratio of net investment income (loss) to
average net assets 9.63% 9.22% 7.88% 6.48% 6.03%
Portfolio turnover rate (9) 71.44% 54.42% 68.21% 149.58% 105.40%
</TABLE>
See Notes to Financial Highlights on Page 7.
5
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
IDEX II INCOME PLUS(5)
CLASS A
9/30/95 1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.75 $ 10.98 $ 10.55 $ 10.04 $ 9.20 $ 9.99 $ 9.89
Net investment income (loss) .75 0.76 0.83 0.76 0.98 1.04 1.04
Net realized and unrealized gain (loss) on
investments and foreign currency .71 (1.10) 0.46 0.64 0.87 (0.79) 0.10
Total income (loss) from investment operations 1.46 (0.34) 1.29 1.40 1.85 0.25 1.14
Dividends from net investment income (.75) (0.75) (0.81) (0.76) (0.98) (1.04) (1.04)
Distributions from realized net capital gains and
foreign currency (.10) (0.14) (0.05) (0.13) (0.03) -- --
Distributions in excess of net realized capital
gains and foreign currency -- -- -- -- -- -- --
Total distributions (.85) (0.89) (0.86) (0.89) (1.01) (1.04) (1.04)
Net asset value at end of period $ 10.36 $ 9.75 $ 10.98 $ 10.55 $ 10.04 $ 9.20 $ 9.99
Total return (7) 15.85% (3.28%) 12.80% 14.40% 21.00% 2.50% 12.10%
Net assets at end of period (000's) $68,746 $63,995 $72,401 $54,647 $47,334 $33,182 $23,416
Ratio of expenses to average net assets (8) 1.29% 1.33% 1.33% 1.17% 1.15% 0.69% 0.70%
Ratio of net investment income (loss) to average
net assets 7.53% 7.35% 7.73% 8.79% 10.20% 11.12% 10.59%
Portfolio turnover rate (9) 25.07% 48.12% 54.51% 91.01% 52.79% 18.54% 57.50%
<CAPTION>
CLASS C
1988 1987 1986 1985(1) 9/30/95 1994(1)
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.85 $ 10.94 $ 10.28 $ 10.00 $ 9.74 $ 10.98
Net investment income (loss) 1.04 1.08 1.06 0.44 .69 0.66
Net realized and unrealized gain (loss) on
investments and foreign currency 0.06 (1.03) 0.73 0.29 .71 (1.10)
Total income (loss) from investment operations 1.10 0.05 1.79 0.73 1.40 (0.44)
Dividends from net investment income (1.04) (1.08) (1.06) (0.44) (.69) (0.66)
Distributions from realized net capital gains and
foreign currency (0.02) (0.06) (0.07) (0.01) (.10) (0.14)
Distributions in excess of net realized capital
gains and foreign currency -- -- -- -- -- --
Total distributions (1.06) (1.14) (1.13) (0.45) (.79) (0.80)
Net asset value at end of period $ 9.89 $ 9.85 $ 10.94 $ 10.28 $ 10.35 $ 9.74
Total return (7) 11.50% 0.30% 17.90% 8.80% 15.08% (4.55%)
Net assets at end of period (000's) $17,078 $11,349 $ 4,221 $ 2,282 $ 1,980 $ 2,112
Ratio of expenses to average net assets (8) 0.68% 0.64% 1.29% 0.60% 1.84% 3.52%
Ratio of net investment income (loss) to average
net assets 10.55% 10.82% 9.93% 10.80% 6.98% 5.16%
Portfolio turnover rate (9) 34.29% 34.13% 29.80% 25.08% 25.07% 48.12%
</TABLE>
<TABLE>
<CAPTION>
IDEX II TAX-EXEMPT(6)
CLASS A
9/30/95 1994 1993 1992 1991 1990 1989
-------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 11.10 $ 12.07 $ 11.62 $ 11.46 $ 11.27 $ 11.39 $ 10.97
Net investment income (loss) .55 0.56 0.56 0.54 0.75 0.78 0.78
Net realized and unrealized gain (loss) on
investments .29 (0.60) 0.45 0.28 0.26 (0.12) 0.42
Total income (loss) from investment operations .84 (0.04) 1.01 0.82 1.01 0.66 1.20
Dividends from net investment income (.56) (0.54) (0.54) (0.54) (0.75) (0.78) (0.78)
Distributions from realized net capital gains (.04) (0.39) (0.02) (0.12) (0.07) -- --
Distributions in excess of net realized capital
gains -- -- -- -- -- -- --
Total distributions (.60) (0.93) (0.56) (0.66) (0.82) (0.78) (0.78)
Net asset value at end of period $ 11.34 $ 11.10 $ 12.07 $ 11.62 $ 11.46 $ 11.27 $ 11.39
Total return (7) 7.75% (0.41%) 8.97% 7.20% 9.20% 6.00% 11.20%
Net assets at end of period (000's) $ 27,401 $29,096 $30,717 $ 28,363 $ 28,242 $22,708 $15,916
Ratio of expenses to average net assets (8) 1.02% 1.00% 1.00% 1.00% 0.95% 0.68% 0.70%
Ratio of net investment income (loss) to average
net assets 4.83% 4.83% 4.83% 5.49% 6.67% 6.92% 6.98%
Portfolio turnover rate (9) 126.48% 59.84% 91.03% 106.89% 117.92% 81.17% 67.45%
<CAPTION>
CLASS C
1988 1987 1986 1985(1) 9/30/95 1994(1)
-------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.44 $ 11.81 $ 10.56 $ 10.00 $ 11.10 $ 12.07
Net investment income (loss) 0.79 0.77 0.79 0.60 .52 0.53
Net realized and unrealized gain (loss) on
investments 0.53 (1.37) 1.42 0.56 .29 (0.60)
Total income (loss) from investment operations 1.32 (0.60) 2.21 1.16 .81 (0.07)
Dividends from net investment income (0.79) (0.77) (0.79) (0.60) (.53) (0.51)
Distributions from realized net capital gains -- -- (0.17) -- (.04) (0.39)
Distributions in excess of net realized capital
gains -- -- -- -- -- --
Total distributions (0.79) (0.77) (0.96) (0.60) (.57) (0.90)
Net asset value at end of period $ 10.97 $ 10.44 $ 11.81 $ 10.56 $ 11.34 $ 11.10
Total return (7) 12.90% (5.20%) 21.40% 7.80% 7.48% (0.73%)
Net assets at end of period (000's) $11,805 $ 8,833 $ 3,112 $ 1,294 $ 454 $ 277
Ratio of expenses to average net assets (8) 0.70% 0.64% 1.21% 0.93% 1.27% 1.25%
Ratio of net investment income (loss) to average
net assets 7.28% 7.16% 6.89% 8.18% 4.58% 4.58%
Portfolio turnover rate (9) 35.44% 87.03% 38.00% 20.15% 126.48% 59.84%
</TABLE>
See Notes to Financial Highlights on Page 7.
6
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
(1) Commencement of operations for Growth Class A, Global Class A, IDEX Total
Income Trust (predecessor to Flexible Income Class A), AEGON USA
Tax-Exempt Portfolio (predecessor to Tax-Exempt Class A) and AEGON USA
High Yield Portfolio (predecessor to Income Plus Class A) was May 8,
1986, October 1, 1992, June 29, 1987, April 1, 1985 and June 14, 1985,
respectively. Commencement of operations for the Class C shares of
Growth, Global, Flexible Income, Tax-Exempt and Income Plus was October
1, 1993. Commencement of operations for Class A and Class C shares of
Balanced, Capital Appreciation, Aggressive Growth and Equity-Income was
December 2, 1994. Commencement of operations for Class B shares of each
of the Portfolios was October 1, 1995. Commencement of operations for
Class A, Class B and Class C shares of the Tactical Asset Allocation
Portfolio was October 1, 1995. Commencement of operations for Class A,
Class B and Class C shares of the C.A.S.E. Portfolio is February 1, 1996.
(See Notes (4), (5) and (6) to Financial Highlights.)
(2) As of October 1, 1992, Growth Class A and Flexible Income Class A
discontinued the practice of equalization accounting.
(3) Prior to May 1, 1991, no 12b-1 fees were incurred by Growth Class A
shares. Effective May 1, 1991, Growth Portfolio Class A shares incurred
12b-1 fees at the rate of 0.25% in accordance with the Plan of
Distribution under Rule 12b-1 of the Investment Company Act of 1940
applicable to those shares. Effective October 1, 1993 Growth Class A
shares' 12b-1 fee rate changed from 0.25% to 0.35%. Prior to October 1,
1993, no 12b-1 fees were incurred by Flexible Income Class A shares.
Effective October 1, 1993, Flexible Income Portfolio Class A shares
incurred 12b-1 fees at the rate of 0.35% in accordance with the Plan of
Distribution under Rule 12b-1 of the Investment Company Act of 1940
applicable to those shares.
(4) On October 1, 1993, IDEX Total Income Trust ("IDEX Total") was
reorganized into IDEX II Flexible Income Portfolio, which had no prior
operating history as of that date. Pursuant to the Agreement and Plan of
Reorganization and Liquidation, Flexible Income acquired all of the
assets and assumed all of the liabilities of IDEX Total in exchange for
Class A shares of Flexible Income. All historical financial information
relates to IDEX Total prior to the date it was reorganized into Flexible
Income.
(5) On August 5, 1992, shareholders of AEGON USA High Yield Portfolio ("AEGON
High Yield") approved an Agreement and Plan of Reorganization and
Liquidation ("Reorganization Agreement") whereby, on August 7, 1992,
AEGON High Yield was reorganized into IDEX II Income Plus (formerly known
as IDEX II High Yield Portfolio), which had no prior operating history as
of that date. Pursuant to the Reorganization Agreement, Income Plus
acquired all of the assets and assumed all the liabilities of AEGON High
Yield in exchange for shares of Income Plus. All historical financial
information prior to August 7, 1992 relates to AEGON High Yield.
(6) On August 5, 1992, shareholders of AEGON USA Tax-Exempt Portfolio ("AEGON
Tax-Exempt") approved an Agreement and Plan of Reorganization and
Liquidation ("Reorganization Agreement") whereby, on August 7, 1992,
AEGON Tax-Exempt was reorganized into IDEX II Tax-Exempt Portfolio, which
had no prior operating history as of that date. Pursuant to the
Reorganization Agreement, Tax-Exempt acquired all of the assets and
assumed all of the liabilities of AEGON Tax-Exempt in exchange for shares
of Tax-Exempt. All historical financial information prior to August 7,
1992 relates to AEGON Tax-Exempt.
(7) Total return has been calculated without deduction of a sales load, if
any, on an initial purchase and assumes all dividends and distributions
are paid in additional shares. Short periods (where applicable) are not
annualized.
(8) For the period ended September 30, 1995, the annualized expense ratios
for Tax-Exempt Class A and Class C, Flexible Income Class A and Class C,
Balanced Class A and Class C, Equity-Income Class A and Class C, Capital
Appreciation Class A and Class C and Aggressive Growth Class A and Class
C would have been 1.35% and 1.60%, 1.94% and 2.49%, 4.48% and 5.03%,
4.57% and 5.12%, 4.17% and 4.72%, 3.35% and 3.91%, respectively, without
expense reimbursement by the investment adviser. The following summarizes
the expense ratios without expense reimbursement by the investment
adviser for those Portfolios whose ratios are net of expense
reimbursement for prior periods. Short periods (where applicable) are
annualized.
<TABLE>
<CAPTION>
GROWTH GLOBAL FLEXIBLE INCOME TAX-EXEMPT INCOME PLUS
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 -- -- -- -- 2.13% 8.59% 1.30% 20.88% -- --
1993 -- -- 3.65% -- 1.56% -- 1.43% -- -- --
1992 -- -- -- -- 1.66% -- 1.20% -- -- --
1991 -- -- -- -- 1.75% -- 1.24% -- 1.21% --
1990 -- -- -- -- 1.60% -- 0.92% -- 1.44% --
1989 -- -- -- -- 1.56% -- 1.11% -- 1.09% --
1988 -- -- -- -- 1.96% -- 1.13% -- 1.11% --
1987 1.39% -- -- -- -- -- 1.37% -- 1.20% --
1986 2.21% -- -- -- -- -- 2.92% -- 2.25% --
1985 -- -- -- -- -- -- 5.62% -- 3.96% --
</TABLE>
Transfer agent fees and expenses of Global and Capital Appreciation
Portfolios had reductions of $323 and $8, respectively, for commission
credits received through affiliated brokers during the period ended
September 30, 1995. Custody fees of Capital Appreciation, Global, Growth,
Equity-Income, Balanced, Flexible Income, Income Plus and Tax-Exempt
Portfolios had custody earnings credit reductions of $2,040, $110,004,
$121,069, $4,176, $2,317, $3,308, $14,555 and $6,647, respectively. The
following summarizes the annualized expense ratios reduced by both
affiliated brokerage and custody earnings credits for the period ended
September 30, 1995. The Aggressive Growth Portfolio had no affiliated
brokerage or custody earnings credits for the period ended
September 30, 1995.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION GLOBAL GROWTH EQUITY-INCOME BALANCED FLEXIBLE INCOME INCOME PLUS
- -------------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.85% 3.40% 1.97% 2.52% 1.84% 2.38% 2.85% 3.40% 2.85% 3.40% 1.85% 2.40% 1.26% 1.81%
<CAPTION>
TAX-EXEMPT
- ----------------
CLASS A CLASS C
- ------- -------
<S> <C>
1.00% 1.25%
</TABLE>
(9) This rate is calculated by dividing the average value of the Portfolio's
long-term investments during the period into the lesser of its respective
long-term purchases or sales during the period. Short periods (where
applicable) are annualized.
7
<PAGE>
PERFORMANCE/TOTAL RETURN
Mutual fund performance is most often stated as "total return." Total return,
expressed as a percentage, shows the change in value of fund shares, plus its
income and capital gain distributions, net of expenses or sales charges, from
the beginning of a period to the end of a period. Total return may be annual --
the return achieved in a year -- or cumulative, over a period of several years.
Each IDEX II Portfolio's performance is calculated separately for Class A,
Class B and Class C shares.
You may also see a Portfolio's performance described in terms of "average
annual total return." This rate shows the hypothetical annual compounded
return that would have produced the same cumulative return if performance had
been constant over the entire period. Because average annual returns for more
than one year tend to smooth out variations in performance, such figures are
not the same as actual year-by-year results.
The SAI contains a more detailed description of the method used to calculate
average annual total return for each Portfolio.
YIELD
The current 30-day yield for a class of shares of the Flexible Income
Portfolio, the Tax-Exempt Portfolio or the Income Plus Portfolio is based on
the investment income earned during a particular 30-day period (including
dividends, if any, and interest), less expenses (excluding reductions for
affiliated brokerage and custody earnings credits) accrued during that
period, divided by average shares outstanding during the period, and divided
by the maximum offering price per share on the last day of the period. The
resulting figure is multiplied by 12 for an annual yield.
PERFORMANCE SHOWN IN ADVERTISING
The Portfolios may advertise their returns in non-standard ways, or for
periods in addition to those the NASD and SEC require to be shown. The
Portfolios may also advertise returns without deducting sales charges; such
returns would appear higher than actual returns which reflect sales charges.
Each class of shares of the Tax-Exempt Portfolio may advertise its "taxable
equivalent yield." This figure shows the percentage yield an investor in a
given tax bracket -- typically the highest -- would have to earn on a taxable
investment in order to equal the tax-exempt income of the Portfolio.
COMMERCIAL PERFORMANCE RANKINGS AND COMPARISONS TO STANDARD INVESTING INDEXES
The Portfolios may sometimes advertise their "Lipper Rankings" or
"Morningstar Ratings," or other ratings or rankings published by business
magazines or newspapers such as FORBES, MONEY, THE WALL STREET JOURNAL,
BUSINESS WEEK, BARRON'S, CHANGING TIMES, FORTUNE or INSTITUTIONAL INVESTOR.
These rankings or ratings may include criteria relating to Portfolio
characteristics, as well as to performance.
When the Portfolios advertise such rankings or ratings relating to the
Portfolio performance, information will be included about the ranking
category, 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.
A Portfolio may also compare its performance to other selected funds or to
recognized market indexes, such as the Standard & Poor's 500 Stock Index (the
"S&P 500"), the Dow Jones Industrial Average, the Standard & Poor's Midcap
Index, the Russell 2000, the NASDAQ Composite, the Lehman Brothers
Intermediate Government Corporate Bond Index, the Lehman Brothers Long
Government Corporate Bond Index, the Merrill Lynch High Yield Master Index,
the Lehman Brothers Long Municipal Bond Index or the Morgan Stanley Capital
International World Index.
The Global Portfolio's performance may be compared to the record of global
market indicators such as the Morgan Stanley Capital International Europe,
Australia, Far East Index ("EAFE Index"). The EAFE Index is an unmanaged
index of foreign common stock prices translated into U.S. dollars.
In addition, a Portfolio may make appropriate comparisons of its performance
to the performance of other types of investments, including certificates of
deposit, savings accounts and U.S. Treasury securities, or of certain
interest rate and inflation indexes, such as the Consumer Price Index.
All performance figures are based on historical results and are not intended
to predict future performance. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost.
8
<PAGE>
THE PORTFOLIOS: A SUMMARY OF THEIR OBJECTIVES,
INVESTMENT PRACTICES AND RISKS
/bullet/ THIS SECTION PROVIDES A DESCRIPTION OF THE IDEX II PORTFOLIOS. THE
PORTFOLIOS ARE GENERALLY LISTED IN ORDER FROM THOSE WITH HIGHER TO
LOWER RISK/REWARD CHARACTERISTICS. PORTFOLIOS WITH HIGHER RISK/REWARD
CHARACTERISTICS MAY EXPERIENCE GREATER VOLATILITY IN NET ASSET VALUE
CHANGES AND TOTAL RETURN. THIS SUMMARY SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS CALLED: SECURITIES IN WHICH THE PORTFOLIOS INVEST;
HOW THE PORTFOLIOS INVEST; AND ADDITIONAL RISK FACTORS, WHICH PROVIDE
MORE INFORMATION ABOUT THE PORTFOLIOS' INVESTMENTS, PRACTICES AND
RISKS.
INTRODUCTION TO
THE PORTFOLIOS
Each Portfolio is a series of IDEX II Series Fund, an open-end management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"). All Portfolios other than the Capital Appreciation Portfolio are
diversified. The Capital Appreciation Portfolio is nondiversified. See How
the Portfolios Invest - Diversification.
Each Portfolio has its own investment objective and policies. These are
described, Portfolio by Portfolio, below.
Each Portfolio may change its investment objective without shareholder
approval. You will be notified 30 days before any such change. Unless
otherwise noted, a Portfolio may also change its investment policies without
shareholder approval.
If a Portfolio changes its investment objective, its new objective may not
suit your needs. You will be allowed 30 days after notice of an investment
objective change to sell or exchange your Portfolio shares without paying a
sales or exchange fee. If you sell or exchange your shares, you may, however,
realize a taxable gain or loss.
There can be no assurance that a Portfolio will achieve its investment
objective.
AGGRESSIVE GROWTH PORTFOLIO
OBJECTIVE: Long-term capital appreciation.
INVESTMENT FOCUS: The Aggressive Growth Portfolio is a diversified, actively
managed portfolio primarily composed of equity securities traded on domestic
stock exchanges or in the over-the-counter market. These securities include
common or preferred stocks, or securities convertible into or exchangeable
for equity securities, including warrants and rights.
INVESTOR PROFILE: For the investor who aggressively seeks capital growth, and
who can tolerate volatility in the value of an investment.
PRIMARY INVESTMENT PRACTICES: The Portfolio may engage in leveraging and
options and futures transactions, which are considered speculative and which
may cause the Portfolio's net asset value to be more volatile than the net
asset value of a fund which does not engage in these activities.
Except during temporary defensive periods, the Portfolio invests at least 85%
of its assets in equity securities. The sub-adviser may pick stocks of
developing companies; older companies that appear to be entering a new stage
of growth due to management changes or development of new technologies,
products or markets; or companies providing products or services with a high
unit volume growth rate.
In order to afford the Aggressive Growth Portfolio the flexibility to take
advantage of new opportunities for investments in accordance with its
investment objective, the Aggressive Growth Portfolio may hold up to 15% of
its net assets in money market instruments and repurchase agreements and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods. This amount may be higher than that maintained by other funds with
similar investment objectives. Under those circumstances, investment income
may constitute a proportionately larger amount of the return realized by the
Portfolio.
CAPITAL APPRECIATION PORTFOLIO
OBJECTIVE: Long-term growth of capital in a manner consistent with the
preservation of capital.
INVESTMENT FOCUS: The Capital Appreciation Portfolio is a nondiversified
Portfolio that pursues its objective by normally investing at least 50% of
its equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall within the
range of companies in the MidCap Index. Companies whose capitalization falls
outside this range after the Portfolio's initial purchase continue to be
considered medium-sized companies for purposes of this policy. As of
September 29, 1995, the MidCap Index included companies with capitalizations
between approximately $120 million and $7.4 billion. The range of the MidCap
Index is expected to change on a regular basis. Subject to the above policy,
the Portfolio may also invest in smaller or larger issuers.
INVESTOR PROFILE: For the investor who wants capital growth, but who also
wants an investment which is intended to sustain its principal value over
time.
PRIMARY INVESTMENT PRACTICES: The Portfolio invests in industries and stocks
of companies the sub-adviser believes are experiencing favorable demand for
their products and services, and which operate in a favorable competitive
environment and regulatory climate. The sub-adviser searches especially for
stocks with earnings growth potential that may not be recognized by the
market. Some fund holdings may create incidental income.
Medium-sized companies may suffer more significant losses as well as realize
more substantial growth than larger issuers. Investments in such companies
tend to be more volatile than investments in larger companies, and are
somewhat speculative.
GLOBAL PORTFOLIO
OBJECTIVE: Long-term growth of capital in a manner consistent with
preservation of capital primarily through investing in common stocks of
foreign and domestic issuers.
INVESTMENT FOCUS: The Global Portfolio invests primarily in common stocks of
foreign and domestic issuers. It also invests in securities issued by foreign
or domestic governments, government agencies, and other government entities.
INVESTOR PROFILE: For the investor who wants capital growth without being
limited to investments in U.S. securities. The investor should also be able
to tolerate the significant risk factors associated with foreign investing.
PRIMARY INVESTMENT PRACTICES: The Global Portfolio's assets are normally
invested in securities of issuers from at least five different countries,
including the United States. Under unusual marketing circumstances, the
Portfolio may, however,
9
<PAGE>
invest its assets in as few as three countries, or for temporary emergency
defensive purposes, in a single country.
The Portfolio seeks to invest substantially all of its assets in common stocks
of companies that the sub-adviser believes are experiencing favorable demand for
their products and services, and which operate in a favorable competitive
environment and regulatory climate. These stocks are selected solely for their
capital growth potential; investment income is not a consideration.
In evaluating foreign investments, the manager looks for: prospects for
relative economic growth among countries, regions or geographic areas;
expected levels of inflation; government policies influencing business
conditions; and the outlook for currency relationships.
GROWTH PORTFOLIO
OBJECTIVE: Growth of capital.
INVESTMENT FOCUS: The Growth Portfolio invests primarily in common stocks
listed on a national securities exchange or on NASDAQ, which the Portfolio's
sub-adviser believes have a good potential for capital growth. Investment
analysis focuses on stocks with earnings growth potential that may not be
recognized by the market. These securities are selected solely for their
growth potential; investment income is not a consideration.
INVESTOR PROFILE: For the investor who wants capital growth in a broadly
diversified stock portfolio, and who can tolerate significant fluctuations in
value.
PRIMARY INVESTMENT PRACTICES: The Growth Portfolio seeks to invest
substantially all of its assets in common stocks when its sub-adviser
believes that the relevant market environment favors such investing. 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.
C.A.S.E. PORTFOLIO
OBJECTIVE: Annual growth of capital through investment in companies whose
management, financial resources and fundamentals appear attractive on a scale
measured against each company's present value.
INVESTMENT FOCUS: The C.A.S.E. Portfolio's assets are normally invested in
companies whose securities are traded on a national exchange or in the
domestic over-the-counter markets. Companies are selected based on their
perceived qualitative and quantitative fundamental strengths, on a market
relative basis against other companies in the same industry, sector and
against the broad market.
INVESTOR PROFILE: For investors who seek growth in excess of the S&P 500 on a
quarterly basis, in good markets as well as bad markets, but want a
diversified portfolio that seeks to have investments in companies that have
below market risk characteristics. The investor should be comfortable with
the price fluctuations of a stock portfolio.
PRIMARY INVESTMENT PRACTICES: Employing the sub-adviser's proprietary forms
of market comparative and stock specific research, companies are selected
after evaluating the present nature of the economic cycle and after the
sub-adviser identifies what it believes to be attractive sectors, industries
and company specific circumstances. The C.A.S.E. Portfolio normally invests
in common, preferred and convertible stocks of firms that the sub-adviser
believes exhibit below market risk characteristics supported by below market
multiples on a leading, lagging and ten-year basis, and are perceived to
have above average fundamentals including return on equity, price to earnings
ratio and other balance sheet components to obtain long-term capital growth.
The sub-adviser applies its proprietary forms of research to such companies
which it believes exhibit superior products, above average growth rates along
with sound management and financials. Each company selected in the Portfolio
is monitored against more than two dozen disciplines, on a market and
comparative basis, including insider's activity, market style leadership,
earnings surprise, analyst's change in earnings projection, return on equity,
five-year earnings per share growth, price earnings ratio, price-to-book,
price to cash flow, institutional activity and holdings, stock price changes,
price to 200 day moving average, price to historical rising inflation, price
to declining U.S. dollar and earnings projected change. The sub-adviser
believes that above average performance is as much a condition of eliminating
bad situations as it is discovering good ones. Securities are sold when
companies appear overvalued or lose the fundamentals necessary for future
confidence as determined by the sub-adviser of the Portfolio. Under certain
circumstances, the Portfolio may elect to invest 20% or more of its
investable assets in money market instruments, repurchase agreements and cash
equivalents.
EQUITY-INCOME PORTFOLIO
OBJECTIVE: Current income, long-term growth of income and capital appreciation.
INVESTMENT FOCUS: The Equity-Income Portfolio seeks to invest primarily in
income-producing common or preferred stock when the portfolio manager
believes that the market favors profitable investing in those securities. The
Portfolio's remaining assets will ordinarily be invested in debt obligations,
many of which will be convertible into common stock, and other fixed-income
securities.
INVESTOR PROFILE: For the investor who wants current income with the prospect
of income growth, plus the prospect of capital growth. The investor should be
comfortable with the price fluctuations of a stock portfolio.
PRIMARY INVESTMENT PRACTICES: The Equity-Income Portfolio does not, at
present, intend to invest more than 20% of its assets in equities which do
not pay a dividend. The sub-adviser typically selects equities and securities
convertible into equities issued by companies which display strong
fundamental characteristics, including balance sheet quality, cash flow
generation, earnings and dividend growth record and outlook, and
profitability levels. The sub-adviser may also select securities based on
other factors. For example, some securities may be purchased at an apparent
discount to their appropriate value, anticipating that they will increase to
that value over time. The Portfolio seeks to achieve an income yield in
excess of the average dividend income yield of the stocks in the S&P 500.
The sub-adviser expects that the majority of the Portfolio's equity
securities will be listed on a national securities exchange or traded on
NASDAQ or in the U.S. over-the-counter market.
TACTICAL ASSET ALLOCATION PORTFOLIO
OBJECTIVE: Preservation of capital and competitive investment returns.
INVESTMENT FOCUS: The Tactical Asset Allocation Portfolio invests primarily
in stocks, U.S. Treasury bonds, notes and bills and money market funds.
Models are used in determining when the Portfolio's assets are "tactically"
allocated among these groups of investments.
10
<PAGE>
INVESTOR PROFILE: For the investor who wants a combination of capital growth
and income, and who is comfortable with the risks associated with an actively
traded portfolio which shifts assets between equity and debt.
PRIMARY INVESTMENT PRACTICES: The Tactical Asset Allocation Portfolio does not,
at present, intend to invest more than 20% of its assets in equities which do
not pay a dividend. The Portfolio focuses on high quality, liquid, large
capitalization stocks. These stocks are selected via a "bottom-up" screening
method (i.e., company by company, not industry by industry, or by any other
large category) which seeks to identify undervalued companies. The screening
method compares financial characteristics such as the price-to-cash flow ratio,
price-to-sales ratio, price-to-earnings ratio (P/E ratio), dividend yield, and
return on equity to a stock's historical norms. The Portfolio seeks to achieve
an income yield in excess of the dividend income yield of the S&P 500.
Undervalued companies -- those which are selling at less than true value -- are
by definition out of favor with most investors. However, the portfolio manager
believes that investors' expectations and the company's operating performance
ultimately determine which statistically "undervalued" stocks make good
investments. In order to preserve a margin of safety for the Portfolio's
investors, the sub-adviser thoroughly reviews the risks surrounding stocks under
consideration for investment. The goal is to choose stocks whose price has been
driven down due to an "overreaction" by the market to their perceived risks.
Stocks are given a careful fundamental and technical evaluation to determine
their likely prospects for positive investment performance.
"Asset allocation" is an investment technique which shifts assets from one
class of investment to another in anticipation of changes in market
direction. The Tactical Asset Allocation Portfolio seeks to enhance its
returns in positive markets by increasing its equity exposure, then to
protect itself in negative markets by shifting assets into fixed income
investments and reducing equity exposure.
The portfolio manager utilizes a series of linear statistical models that
attempt to forecast total stock market returns for both short (12 to 18
months) and long (36 to 60 months) time periods. These time series models,
developed by the sub-adviser, help compare anticipated risks and rewards of
holding stocks versus holding treasury notes and money market funds. The
models therefore determine when the sub-adviser "tactically" adjusts asset
allocation through a gradual shifting of assets among stocks, U.S. Treasury
bonds and notes and money market funds. A combination of fundamental,
technical, sentiment and monetary variables is used in the forecasting
models.
The Portfolio seeks to invest its assets primarily in income producing common
or preferred stock when the sub-adviser believes that the market environment
favors profitable investing in such securities. The remainder of the
Portfolio will ordinarily be invested in debt obligations of U.S. issuers,
some of which will typically be convertible into common stock.
If the forecasting models predict a decline in the stock market, the
Portfolio may invest as much as 10% of its total assets in money market
funds, within limits imposed by the 1940 Act, which restricts the Portfolio's
investments in investment companies. The Portfolio will indirectly bear its
proportionate share of any investment advisory fees and expenses paid by the
funds in which it invests, in addition to the investment advisory fee and
expenses paid by the Portfolio.
BALANCED PORTFOLIO
OBJECTIVE: Long-term capital growth, consistent with preservation of capital
and balanced by current income.
INVESTMENT FOCUS: The Balanced Portfolio normally invests 40-60% of its
assets in equity securities selected primarily for growth potential and
40-60% of its assets in fixed income securities. At least 25% of its assets
normally will be invested in fixed income senior securities, which include
corporate debt and preferred stocks.
INVESTOR PROFILE: For the investor who wants capital growth and income from
the same investment, but who also wants an investment which has the prospect
of sustaining its interim principal value through maintaining a balance
between equity and debt. The Portfolio is not designed for investors who
desire a consistent level of income.
PRIMARY INVESTMENT PRACTICES: The growth component of the Portfolio is
expected to consist primarily of common stocks, selected in industries and
companies that the sub-adviser believes are experiencing favorable demand for
their products and services, and which operate in a favorable competitive
environment and regulatory climate. The sub-adviser's analysis of these
stocks aims to find companies with earnings growth potential that may not be
recognized by the market.
The income component of the Balanced Portfolio may consist of all types of
income-producing securities, including common stocks selected primarily for
their dividend payments, preferred stocks, convertible securities and debt
securities of corporate and government issuers.
The Portfolio may select equity securities for the income component on the
basis of growth potential, dividend paying properties, or some combination of
both.
The Balanced Portfolio may shift assets between the growth and income
portions of its portfolio based on its manager's analysis of the relevant
market, financial and economic conditions. If the sub-adviser believes that
growth securities will provide better returns than the yields available or
expected on income-producing securities, then the Portfolio will place a
greater emphasis on growth securities.
FLEXIBLE INCOME PORTFOLIO
OBJECTIVE: Maximum total return for shareholders, consistent with preservation
of capital, by actively managing a portfolio of income-producing securities.
INVESTMENT FOCUS: As a fundamental policy, the Flexible Income Portfolio will
normally invest at least 80% of its assets in income-producing securities. It
may invest in all types of income-producing securities, including domestic or
foreign securities issued by companies or by governments or governmental
agencies and lower rated securities.
INVESTOR PROFILE: For the investor who wants current income enhanced by possible
capital growth, and is willing to tolerate the fluctuation in principal value
associated with changes in the interest rate environment and the risks
associated with substantial holdings of high-yield/ high-risk bonds.
PRIMARY INVESTMENT PRACTICES: The Portfolio emphasizes total return, primarily
through investing in corporate debt securities which offer higher yield but more
risk than higher grade securities. It may purchase debt securities of any
maturity. The average maturity of the Portfolio may vary substantially,
depending on the sub-adviser's analysis of market, economic and financial
conditions.
The Portfolio has no pre-established quality standards and may invest in debt
securities of any quality, including lower rated
11
<PAGE>
bonds that may offer higher yields because of the greater risks involved in such
investments. The Portfolio may also invest in unrated debt securities of foreign
and domestic issuers.
The Flexible Income Portfolio may, at times, have substantial holdings of
high-yield/high-risk bonds or unrated bonds of foreign and domestic issuers.
The Flexible Income Portfolio may also purchase mortgage-and other asset-
backed securities, preferred stocks, income producing common stocks or
securities convertible into common stocks if such securities appear to offer
the best opportunity for maximum total return.
If rated securities held by the Portfolio are downgraded by a ratings agency,
the sub-adviser will consider the advisability of keeping these securities.
The sub-adviser uses, but does not place sole reliance on, credit ratings in
evaluating bonds and determining credit quality of the issuer.
INCOME PLUS PORTFOLIO
OBJECTIVE: As high a level of current income as is consistent with the avoidance
of excessive risk.
INVESTMENT FOCUS: The Income Plus Portfolio invests in a diversified portfolio
of fixed-income and convertible debt securities and dividend-paying common,
preferred and convertible preferred stocks. Although yields on convertible
securities are often lower than yields on nonconvertible bonds and preferred
stocks of comparable investment quality, the Portfolio may invest in convertible
securities if the total return is expected to provide higher current income than
nonconvertible securities. The Portfolio may also hold or invest in common
stocks which are acquired in conversion or exchange of, or in a unit offering
with, fixed-income securities.
INVESTOR PROFILE: For the investor who wants high current income and is
willing to tolerate the fluctuation in principal value associated with
changes in the interest rate environment.
PRIMARY INVESTMENT PRACTICES: The Portfolio seeks yields as high as possible
while managing risk through certain investment policies described below.
The Portfolio will not invest in rated securities that, at the time of
investment, are rated below B by Moody's or B by S&P ("b," in the case of
Moody's preferred stock ratings). It may invest in unrated securities which,
in the manager's judgment, are of equivalent quality. The Portfolio may not
invest in rated corporate securities if, after such investment, more than 50%
of its total holdings of securities (other than commercial paper) would then
be rated below B by Moody's or B by S&P.
The Portfolio may not invest in commercial paper of corporate issuers which
is rated below Prime-2 by Moody's or A-2 by S&P. It may invest in unrated
commercial paper of comparable quality, as determined by the sub-adviser.
Under certain conditions, the Income Plus Portfolio may temporarily invest
some or all of its assets in short-term obligations such as (a) commercial
paper and bankers' acceptances of U.S. banks; (b) U.S. dollar-denominated
obligations of U.S. bank branches located outside the United States and of
U.S. branches of foreign banks; (c) U.S. dollar-denominated time deposits
(subject to certain restrictions described in the SAI); and (d) obligations
of the U.S. government, its agencies or instrumentalities. Before investing
in any foreign short-term bank obligations, the sub-adviser will consider
factors including the political and economic condition in a country, the
prospect for changes in the value of its currency, the possibility of
expropriation or nationalization, and interest payment limitations, based on
existing or prior actions of the foreign government. Such risks cannot be
entirely eliminated from foreign investing.
If rated securities held by the Portfolio are downgraded by a ratings agency,
the sub-adviser will consider the advisability of keeping these securities.
At all times, however, the sub-adviser will ensure that no more than 50% of
the Portfolio's total holdings (other than commercial paper) would be rated
below B by Moody's or B by S&P.
The sub-adviser uses, but does not place sole reliance on, credit ratings in
evaluating bonds and determining credit quality of the issuer.
TAX-EXEMPT PORTFOLIO
OBJECTIVE: Maximum current interest income exempt from federal income tax,
consistent with preservation of capital.
INVESTMENT FOCUS: Ordinarily, at least 80% of the Tax-Exempt Portfolio's net
assets will be invested in municipal obligations. These are obligations
issued by states, territories or possessions of the United States, the
District of Columbia and their political subdivisions, agencies,
instrumentalities and authorities if the interest on such securities is, in
the opinion of bond counsel, exempt from federal income tax. Income from
municipal obligations may be subject to state and local tax and may
constitute an item of preference for determining the federal alternative
minimum tax. The weighted average maturity of securities in the Tax-Exempt
Portfolio is generally expected to be between 20 and 35 years.
INVESTOR PROFILE: For the investor who wants high current federal tax-free
income, and is willing to tolerate the fluctuation in principal value
associated with changes in the interest rate environment. Yields on municipal
obligations are typically lower that on similar taxable securities. The
Tax-Exempt Portfolio is not well suited as an investment vehicle for tax-
exempt retirement programs which receive no benefit from the tax-exempt
nature of the majority of the Portfolio's income. Also, the benefits of
tax-exempt income are greater for persons with higher taxable incomes.
PRIMARY INVESTMENT PRACTICES: The Portfolio seeks yields as high as possible
while managing risk through certain investment policies described below.
The Portfolio normally invests at least 75% of its net assets in (a)
municipal obligations which are rated at the time of purchase within the four
highest ratings of Moody's or S&P; (b) municipal commercial paper rated at
the time of purchase within the highest grade assigned by Moody's or S&P; and
(c) unrated municipal notes (with maturities between 6 months and 3 years) of
issuers which, at the time of purchase, have outstanding at least one issue
of municipal bonds rated in the four highest ratings of Moody's or S&P. In
addition, the Portfolio may invest in unrated municipal obligations which the
portfolio manager considers equal in quality to the four highest ratings of
Moody's or S&P. Unrated municipal securities may be less liquid than rated
securities. Therefore, their purchase by the Portfolio may entail somewhat
greater risk than that involved in rated municipal obligations.
Bonds rated in the fourth category by Moody's or S&P have some speculative
characteristics. The Portfolio's operating policies place no specific limit
on the proportion of the Portfolio which may be made up of bonds in these
categories, so
12
<PAGE>
long as the sub-adviser believes that the Portfolio's objective of preserving
capital is being met.
If rated securities held by the Portfolio are downgraded by a ratings agency,
the sub-adviser will consider the advisability of keeping these securities.
The Portfolio may also invest in floating and variable rate municipal
obligations or participation interests in such obligations. The interest on
these obligations or participations must be free from federal income tax, and
the credit quality must be equal to long-term bonds rated in the four highest
Moody's or S&P categories, or to short-term bonds rated in the two highest
Moody's or S&P categories.
Under certain conditions, the Portfolio may invest as much as 20% of its assets
in taxable securities. For example, the Portfolio may make such investments due
to market conditions, while temporarily holding funds in readiness for
tax-exempt investments, or to provide highly liquid securities to meet
anticipated share sales. Such investments may also be made when the sub-adviser
determines that a defensive position is required in anticipation of a decline in
the market value of portfolio securities. These temporary investments may
consist of the following fixed-income, short-term securities: (a) U.S.
government securities; (b) certificates of deposit issued by domestic banks with
assets of at least $1 billion and having deposits insured by the Federal Deposit
Insurance Corporation; (c) repurchase agreements with respect to government
securities; and (d) commercial paper rated P-1 by Moody's or A-1 by S&P.
A period of rising commercial interest rates may adversely affect the value
of the Portfolio and its net asset value per share. This may require rapid
portfolio turnover, with temporary investments in lower-yielding and taxable
instruments, to adjust the Portfolio to higher prevailing rates. Conversely,
portfolio values will tend to increase in periods of falling commercial
rates.
Congress has periodically considered proposals to restrict or eliminate the
federal income tax exemption for interest on certain types of, or on all,
municipal obligations. Such legislation would affect the availability of
municipal obligations for investment and the value of the Portfolio's assets.
The Portfolio's income which is exempt from federal taxes is not generally
exempt from state and local income taxes.
SECURITIES IN WHICH THE
PORTFOLIOS INVEST
A Portfolio's potential risks and rewards are achieved fundamentally from the
investments it makes. This section discusses those securities with special
risk/reward considerations. This section should be read together with the
section called Additional Risk Factors.
FOREIGN SECURITIES
Subject to the following limitations, nine of the eleven Portfolios may
invest directly in foreign securities denominated in a foreign currency and
not publicly traded in the United States.
/bullet/ The Growth, Balanced, Capital Appreciation, Aggressive Growth, Tactical
Asset Allocation and C.A.S.E. Portfolios may invest up to 25% of their
individual assets, directly or indirectly, in foreign securities.
/bullet/ The Global Portfolio may invest without limit in foreign securities.
/bullet/ The Equity-Income Portfolio may invest up to 25% of its assets directly
or indirectly in foreign securities, provided that no more than 10% of
its assets may be invested directly in such securities denominated in
foreign currency and not publicly traded in the United States.
/bullet/ The Flexible Income Portfolio may invest up to 50% of its assets,
directly or indirectly, in foreign securities, provided that no more
than 25% of its assets may be invested in the securities of the
government or private issuers of any one foreign country.
In addition to direct foreign investment, these Portfolios may also invest in
foreign securities through American Depositary Receipts ("ADRs") or American
Depositary Shares ("ADSs"), which are dollar-denominated receipts issued by
domestic banks or securities firms. ADRs and ADSs are publicly traded on U.S.
exchanges, and may not involve the same risks as securities denominated in
foreign currency.
Each of these Portfolios may also indirectly invest in foreign securities
through European Depositary Receipts ("EDRs"), which are typically issued by
European banks; in Global Depositary Receipts ("GDRs"), which may be issued
by domestic or foreign banks; and in other types of receipts evidencing
ownership of foreign securities.
Investments in foreign securities involve different risks from investing in
domestic securities. See Additional Risk Factors.
FUTURES, OPTIONS AND OTHER
DERIVATIVE INSTRUMENTS
The Growth, Global, Flexible Income, Balanced, Capital Appreciation,
Aggressive Growth, Equity-Income, Tactical Asset Allocation and C.A.S.E
Portfolios 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. These instruments are commonly called
derivatives, because their price is derived from an underlying index,
security or other measure of value.
These Portfolios use derivatives primarily as a hedge -- that is, to protect
portfolio positions against market or currency swings.
Futures contracts and related options may be used to attempt to enhance
profit, but each Portfolio limits non-hedging use of such instruments by
requiring that the aggregate initial margin and premiums required to
establish non-hedging positions will not exceed 5% of the fair market value
of such Portfolio's net assets.
The Equity-Income and Tactical Asset Allocation Portfolios do not currently
intend to purchase or sell any derivatives. However, they may do so in the
future.
The Flexible Income Portfolio may also write and purchase options on
securities to attempt to enhance income. Call options, which give the buyer
the right to "call away" a portfolio security at a designated price until a
certain date, must be "covered" -- that is, the Portfolio must own the
securities required to fulfill the contract.
The Income Plus Portfolio may purchase and sell contracts for the future
delivery of fixed-income securities at an established price, commonly called
"interest rate futures contracts." It does so only for the purpose of hedging
against anticipated interest rate changes that would adversely affect the
value of Portfolio securities. The Portfolio will maintain cash or cash
equivalents equal in value to the market value of futures contracts purchased
(less related margin deposits) to assure that its position is fully
collateralized and that its use of such contracts is minimally leveraged.
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The Aggressive Growth Portfolio intends to use derivatives for hedging as
well as to enhance income, subject to these limitations:
/bullet/ The Portfolio may write covered call options on common stocks that it
owns or has an immediate right to acquire through conversion or
exchange of other securities in an amount not to exceed 25% of total
assets.
/bullet/ The Portfolio does not intend to write any put options.
/bullet/ The Portfolio may buy only those options listed on a national
securities exchange.
/bullet/ The Portfolio will not purchase options if, as a result, the aggregate
cost of all outstanding options exceeds 10% of the Portfolio's total
assets.
/bullet/ No more than 5% of the Portfolio's total assets will be committed to
non-hedging transactions.
/bullet/ The Portfolio will buy and sell stock index futures contracts and
options on stock index futures only for hedging or other permissible
risk-management purposes, not for speculation. Aggregate initial
margins and premiums on such investments may not be more than 5% of the
Portfolio's assets.
The Portfolios' futures contracts activities are limited in such a manner as
to qualify for certain exemptions from registration with the Commodity
Futures Trading Commission.
There can be no assurance that the use of derivatives will help a Portfolio
achieve its investment objective. Derivatives involve special risks. See
Additional Risk Factors.
For more information about derivatives and their risks, see the SAI.
MORTGAGE AND OTHER
ASSET-BACKED SECURITIES
Each Portfolio may invest up to 25% of its net assets in mortgage- and other
asset-backed securities. These are subject to prepayment risk -- the
possibility that early payoffs of underlying mortgages or other loans will
cause the principal and interest on the security to be paid before its stated
maturity. These early payments are more likely during periods when long-term
interest rates decline. In the event of such a prepayment during an interest
rate decline, a Portfolio may be required to invest the unanticipated
proceeds at a lower interest rate. Prepayments during such periods will also
limit a Portfolio's ability to participate in the kind of market gains
possible with comparable government securities not subject to prepayment.
CONVERTIBLE SECURITIES
The Portfolios may invest in varying degrees in convertible securities, which
may include corporate notes or preferred stock, but ordinarily are long-term
debt obligations which are convertible at a stated rate and time into common
stock of the issuer.
As with all debt securities, the market value of convertibles tends to
decline as interest rates rise and to increase as interest rates fall.
Convertible securities generally offer lower interest rates or dividend
yields than non-convertible securities of similar quality. However, when the
market price of the common stock underlying a convertible exceeds the
conversion price, the price of the convertible tends to rise like the common
stock price. When the price of the underlying stock declines, the convertible
tends to trade increasingly on a yield basis; therefore, its price may not
fall as much as the price of the common stock.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure. That means convertible obligations are supposed to be paid
off before common stock obligations. Consequently, most convertibles are of
higher quality and entail less risk of decline in market value than the
issuer's common stock. However, the extent to which such risk is reduced
depends largely on the market value of the convertible as a debt security --
i.e., if compared to other debt securities, the convertible pays a
competitive rate and is in demand, its price will hold up.
Each Portfolio will evaluate convertibles for potential investment using the
same ratings criteria as such Portfolio would use for investments in non-
convertible debt securities. See Securities in Which the Portfolios Invest-
Debt Securities.
WHEN-ISSUED, DELAYED DELIVERY
AND FORWARD TRANSACTIONS
Each Portfolio, other than the Tax-Exempt and Tactical Asset Allocation
Portfolios, may buy securities on a when-issued or delayed delivery basis.
They may also enter into contracts to buy securities for a fixed price at a
future date beyond normal settlement time ("forward commitments").
The Tax-Exempt Portfolio may purchase municipal bonds on a when-issued or
delayed delivery basis.
The Portfolios bear the risk that the value of such securities may change
before delivery and the risk that the seller may not complete the
transaction.
ILLIQUID SECURITIES
The Growth, Global, Flexible Income, Balanced, Capital Appreciation,
Aggressive Growth, Equity-Income, Tactical Asset Allocation and C.A.S.E.
Portfolios may invest as much as 15% of their net assets in securities that
are considered illiquid. The Tax-Exempt and Income Plus Portfolios may invest
as much as 10% of net assets in such securities.
Securities are considered illiquid if there is no readily available market
for them, or because they carry legal or contractual restrictions on resale.
It often takes more time to sell illiquid securities, and costs more in
brokerage or dealer discounts or other expenses than does the sale of
exchange-listed securities or securities traded over-the-counter. As a
result, a Portfolio may not be able to sell such securities readily when the
sub-adviser thinks it proper to do so. The sub-adviser may have to sell an
alternative security in order to meet short-term needs for cash such as
shareholder redemption requests at a time that may not be advantageous.
Certain securities, called Rule 144A securities, are not registered for sale
to the public, but may be sold to certain institutional investors. Rule 144A
securities may be considered liquid if a dealer or an institutional market
exists for them. Procedures have been established by the Portfolios'
sub-advisers and Board of Trustees to determine if certain Rule 144A
securities and other securities, including commercial paper, are liquid.
Under similar procedures for the Flexible Income and Tax-Exempt Portfolios,
the sub-adviser and Board of Trustees may determine that certain municipal
leases are liquid. Securities purchased under these rules may later become
illiquid. The Portfolios' investments in such securities could have the
effect of increasing the level of Portfolio illiquidity to the extent that a
dealer or institutional trading market declines.
The Tactical Asset Allocation Portfolio does not currently intend to invest
in illiquid securities.
ZERO COUPON BONDS AND
OTHER SECURITIES
Each of the Portfolios other than the Aggressive Growth Portfolio may invest as
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much as 10% of their assets in zero coupon bonds, step coupon bonds,
pay-in-kind securities or strips.
/bullet/ Zero coupon bonds do not make regular interest payments. They are sold
at a discount from face value. Principal and accreted discount
(representing interest accrued but not paid) are paid at maturity.
/bullet/ Step coupon bonds sell at a discount and pay a low coupon rate for an
initial period, then pay a higher coupon rate thereafter.
/bullet/ Pay-in-kind securities may pay interest in cash or in the form of a
similar bond or other asset.
/bullet/ Strips are debt securities that are stripped of their interest after
the securities are issued, but are comparable to zero coupon bonds.
The market value of these four kinds of securities generally fluctuates more in
response to interest rate changes than does the market value of interest-paying
securities of comparable quality and term. The Portfolios may realize greater
gains or losses as a result of such fluctuations.
To pay cash distributions from income earned on these kinds of securities,
the Portfolios may sell certain securities and may incur a capital gain or
loss on the sale.
REPURCHASE AND REVERSE
REPURCHASE AGREEMENTS
Each of the Portfolios may invest in repurchase and reverse repurchase
agreements. In a repurchase agreement, the Portfolio buys a security and
simultaneously agrees to resell it to the seller, generally a bank or
broker-dealer who agrees to repurchase the security, at a specified price and
date or on demand. This technique is a method of earning income on idle cash.
The repurchase agreement is effectively secured by the value of the
underlying security.
If a seller fails to repurchase the security as agreed, the Portfolio may
suffer a loss if the security's value declines before it can be sold on the
open market. If the seller goes bankrupt, a Portfolio may encounter delays
and increased costs in selling the underlying security.
Repurchase agreements maturing in more than seven days are subject to the
limits described above on illiquid securities.
In a reverse repurchase agreement, a Portfolio sells a security to another
party such as a bank or broker-dealer in return for cash and the Portfolio
agrees to buy the security back at a future date and price. These agreements
may provide cash to satisfy unusually heavy redemption requests or for other
temporary or emergency purposes without actually selling portfolio
securities. They also may help earn additional income on securities like
treasury bills and notes.
U.S. GOVERNMENT SECURITIES
Each of the Portfolios may invest in U.S. government securities, which are
debt securities backed either by the credit of the U.S. government as a whole
or only by the credit of the issuing agency or instrumentality. Securities
issued by the Federal Home Loan Banks and the Federal National Mortgage
Association (FNMA) are supported by the agency's right to borrow money from
the U.S. Treasury under certain circumstances. U.S. Treasury bonds, notes and
bills, and some agency securities, such as those issued by the Government
National Mortgage Association (GNMA), are backed by the full faith and credit
of the U.S. government as to payment of principal and interest and are the
highest quality U.S. government securities.
The Portfolios themselves, and their share prices and yields, are not
guaranteed by the U.S. government.
DEBT SECURITIES
None of the Portfolios, other than the Flexible Income and Income Plus
Portfolios, may invest more than 5% of its net assets in junk bonds. The
Flexible Income Portfolio may invest without limit, and the Income Plus
Portfolio may invest up to 50% of its assets, in junk bonds. Bonds rated
below investment grade are commonly known as "junk bonds" and normally
involve greater risk than investment grade securities. (See Additional Risk
Factors.)
The Aggressive Growth and C.A.S.E. Portfolios may invest in debt securities
rated only in the three highest categories by Moody's (Aaa, Aa or A) or S&P
(AAA, AA or A).
The Equity-Income and Tactical Asset Allocation Portfolios will limit
investments in commercial paper to obligations rated Prime-1 by Moody's or
A-1 by S&P.
The Portfolios may also buy unrated securities that, in the sub-adviser's
opinion, are equal in quality to the Portfolio's rated debt securities.
Unrated debt securities are not necessarily of lower grade than rated
securities, but they may not be as attractive to some buyers. The Portfolios
rely on the credit analysis of their sub-advisers when investing in unrated
debt securities.
See the IDEX II Tax-Exempt Portfolio - Primary Investment Practices for a
discussion of the Portfolio's investments in debt securities.
HOW THE
PORTFOLIOS INVEST
A Portfolio's potential risks and rewards are affected by the investment
techniques practiced by the Portfolio. This section discusses investing
techniques with special risk/reward considerations.
DIVERSIFICATION
Diversification is the practice of spreading a portfolio's assets over a
number of investments, investment types, industries or countries to reduce
risk. A non-diversified portfolio has the ability to take larger positions in
fewer issuers. Because the appreciation or depreciation of a single security
may have a greater impact on the net asset value of a non-diversified
portfolio, its share price can be expected to fluctuate more than a
comparable diversified portfolio.
Each of the Portfolios other than the Capital Appreciation Portfolio is
diversified as a matter of fundamental policy, and is defined as a
diversified investment company under the 1940 Act. A diversified company must
have at least 75% of the value of its total assets in cash and cash items
(including receivables), government securities, securities of other
investment companies and other securities. For purposes of this calculation,
the company may not count securities of a single issuer that account for more
than 5% of the company's assets or that constitute more than 10% of the
issuer's voting securities. The Capital Appreciation Portfolio is a
nondiversified investment company.
As a fundamental policy governing concentration, each of the Portfolios will
not invest more than 25% of assets in any one particular industry, other than
U.S. government securities.
The Capital Appreciation Portfolio reserves the right to become a diversified
investment company (as defined by the 1940 Act). Currently, however, its
policies are as follows:
With respect to 50% of its assets, the Capital Appreciation Portfolio will
not buy
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the securities of any one issuer (other than cash items and U.S.
government securities) if, as a result, the Portfolio
/bullet/ owns more than 10% of the outstanding voting securities of that issuer;
or
/bullet/ the value of the Portfolio's holdings of that issuer exceeds 5% of the
value of the Portfolio's total assets.
The Capital Appreciation Portfolio may invest as much as 50% of its assets in
the securities of as few as two issuers. However, it does not expect to do so
unless its sub-adviser sees the potential for substantial capital
appreciation in such an investment. The Portfolio does intend to take
advantage of the flexibility of its nondiversification policy by investing
more than 5% of total assets in the securities of one issuer.
To the extent that the Portfolio makes such single large investments, it
increases its exposure to credit and/or market risks, and to the profit
potential, associated with a single issuer. Both profit potential and risk
are greater in a nondiversified portfolio than in a diversified portfolio.
See The Portfolios: A Summary of Their Objectives, Investment Practices and
Risks for discussion of the individual Portfolios' diversification styles.
PORTFOLIO TURNOVER
Although it is the policy of the Growth, Global, Flexible Income, Balanced,
Capital Appreciation, Aggressive Growth, Equity-Income, Tactical Asset
Allocation and C.A.S.E. Portfolios to buy and hold securities for their
stated investment objectives, changes in these holdings will be made whenever
the respective portfolio managers believe they are advisable. Such changes
may result from:
/bullet/ liquidity needs;
/bullet/ securities having reached a price or yield objective;
/bullet/ anticipated changes in interest rates or the credit standing of an
issuer; or
/bullet/ developments not foreseen at the time of the investment decision.
To a limited extent, these Portfolios may engage in a significant number of
short-term transactions if such investing serves their objectives. The rate
of portfolio turnover will not be a limiting factor when such short-term
investing is considered appropriate.
The estimated annual portfolio turnover rate of the Tactical Asset Allocation
is expected to be under 100%. The estimated portfolio turnover rate of the
C.A.S.E. Portfolio is expected to exceed 100%, but to be under 200% annually.
The investment policies of the Tax-Exempt and Income Plus Portfolios may
lead to frequent changes in investments, particularly when interest rates
fluctuate rapidly. Securities may be sold in anticipation of a decline in
portfolio value (a rise in interest rates) or bought in anticipation of an
increase in portfolio value (a fall in interest rates).
In addition, a security may be sold and another bought at approximately the
same time to take advantage of a temporary disparity, in the manager's
judgment, in the normal yield relationship between the two securities. These
yield disparities may occur for reasons not directly related to the
investment quality of particular issues or to the general movement of
interest rates; instead, this disparity may come about because of changes in
the overall demand for or supply of various types of securities or because of
changes in the objectives of investors in such securities.
Turnover rate will not limit a manager's ability to buy or sell securities
for either of these Portfolios. Certain tax rules may restrict a Portfolio's
ability to sell securities when the security has been held for less than
three months.
Increased turnover results in higher brokerage costs or mark-up charges for a
Portfolio; these charges are ultimately borne by the shareholders. Short-term
trading may also result in short-term capital gains, which are taxed as
ordinary income to the Portfolio's shareholders.
For historical Portfolio turnover rates, see Financial Highlights. For more
discussion of portfolio turnover, see the SAI.
CASH POSITIONS AND DEBT INVESTING
BY STOCK PORTFOLIOS
The portfolio managers of the Aggressive Growth, Capital Appreciation,
Growth, Global, Equity-Income, Tactical Asset Allocation and C.A.S.E.
Portfolios may at times choose to hold some portion of net assets in cash, or
to invest that cash in a variety of debt securities. This may be done as a
defensive measure at times when desirable risk/reward characteristics are not
available in stocks or to earn income from otherwise uninvested cash. When a
Portfolio increases its cash or debt investment position, its income may
increase while its ability decreases to participate in stock market declines
or advances.
SHORT SALES
Each of the Portfolios may sell securities "short against the box." A short
sale is a sale of a security that the Portfolio does not own. A short sale is
"against the box" if, at all times when the short sale is open, the Portfolio
owns an equal amount of the securities sold short or convertible into those
same securities, or exchangeable without further consideration for,
securities of the same issue as the securities sold short.
BORROWING AND LENDING
Each Portfolio may borrow money from banks for temporary or emergency
purposes. The amount borrowed shall not exceed 25% of total assets for the
Growth, Global, Flexible Income, Balanced, Capital Appreciation,
Equity-Income, Tactical Asset Allocation and C.A.S.E. Portfolios, and 33 1/3%
of total assets for the Tax-Exempt and Income Plus Portfolios.
To secure borrowings, a Portfolio may not mortgage or pledge its securities
in amounts that exceed 15% of its net assets for the Growth, Global, Flexible
Income, Balanced, Capital Appreciation, Equity-Income, Tactical Asset
Allocation and C.A.S.E. Portfolios, and 10% of net assets for the Tax-Exempt
and Income Plus Portfolios.
The Tactical Asset Allocation Portfolio does not currently intend to borrow.
The Growth, Global, Flexible Income, Balanced and Capital Appreciation
Portfolios may borrow money from or lend money to other funds that permit
such transactions and that are advised or sub-advised by Janus Capital
Corporation ("Janus Capital"). The Portfolios must seek and obtain permission
to do so from the SEC. There is no assurance that such permission will be
granted.
The Aggressive Growth Portfolio may borrow for investment purposes -- this is
called "leveraging." The Portfolio may borrow only from banks, not from other
investment companies.
The 1940 Act requires that a Portfolio maintain continuous asset coverage of
300% of the amount borrowed -- that is, total assets including borrowings,
less liabilities exclusive of borrowings, must be three times the amount
borrowed. There are risks associated with leveraging:
/bullet/ If the Portfolio's asset coverage drops below 300% of borrowings, the
Portfolio may be required to sell securities within three days to
reduce its debt
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and restore the 300% coverage, even though it may be disadvantageous
to do so.
/bullet/ Leveraging may exaggerate the effect on net asset value of any increase
or decrease in the market value of the Portfolio's securities.
/bullet/ Money borrowed for leveraging will be subject to interest costs. In
certain cases, interest costs may exceed the return received on the
securities purchased.
/bullet/ The Portfolio may be required to maintain minimum average balances in
connection with borrowing or to pay a commitment or other fee to
maintain a line of credit. Either of these requirements would increase
the cost of borrowing over the stated interest rate.
State law and regulations may impose additional limits on the Portfolio's
borrowing.
For more information about borrowing and lending, see the SAI.
LENDING PORTFOLIOS SECURITIES
Each of the Portfolios other than the Tax-Exempt and Income Plus Portfolios may
lend securities to broker-dealers and financial institutions to realize
additional income. As a fundamental policy, these Portfolios (except for the
Aggressive Growth Portfolio) will not lend securities or other assets if, as a
result, more than 25% of total assets would be lent to other parties. In
practice, at this time, none of these Portfolios intend to lend securities or
make any other loans valued at more than 5% of total assets.
As a fundamental policy, the Aggressive Growth Portfolio may not make loans
to others, except through buying qualified debt obligations, lending
portfolio securities or entering into repurchase agreements. The Aggressive
Growth Portfolio will not lend securities or other assets if, as a result,
more than 20% of its total assets would be lent to other parties.
If the borrower of a security defaults, the Portfolio may be delayed or
prevented from recovering collateral, or may be otherwise required to cover a
transaction in the security loaned.
If portfolio securities are loaned, collateral values must be continuously
maintained at no less than 100% by pricing both the securities loaned and the
collateral daily.
If a material event is to be voted upon affecting a Portfolio's investment in
securities which are on loan, the Portfolio will take such actions as may be
appropriate in order to vote its shares.
For more information about lending securities, see the SAI.
MASTER FUND/FEEDER FUND OPTION
The Fund may in the future seek to achieve the investment objective of the
Growth, Global, Flexible Income, Balanced, Capital Appreciation, Aggressive
Growth, Equity-Income, Tactical Asset Allocation or C.A.S.E. Portfolios by
investing all of a Portfolio's assets in another investment company having
the same objective and substantially the same investment policies and
restrictions.
Such an investment would be made only if the Board of Trustees of the Fund
determines it would be in the best interests of the Portfolio and its
shareholders. In making this determination, the Board will consider benefits
to shareholders and the opportunities to reduce costs and increase
efficiency, among other things. Should such a determination be made,
shareholders will be given at least 30 days notice.
CHANGES IN INVESTMENT
POLICIES AND RULES
Each Portfolio is subject to investment restrictions, certain of which are
fundamental policies of that Portfolio. As such, they may not be changed
without shareholder approval. Non-fundamental investment restrictions and
operating policies may be changed by the Board of Trustees without
shareholder approval.
The investment restrictions of each Portfolio are described in the SAI.
NEW INVESTMENT INSTRUMENTS
The sub-advisers reserve the right to evaluate new financial instruments as
they are developed and become actively traded. Subject to any applicable
investment restriction, a Portfolio may invest in any such investment
products that its manager believes will further the Portfolio's investment
objective.
ADDITIONAL RISK FACTORS
All investments involve risks. Some securities and some investment practices
involve taking special or additional risks. This section describes a number
of those risk factors.
FOREIGN SECURITIES
Investments in foreign securities involve risks that are different in some
respects from investments in securities of U.S. issuers. These risks include:
CURRENCY VALUE. Changes in currency exchange rates may affect the value of
foreign securities and the value of their dividend or interest payments and,
therefore, a Portfolio's share price and returns. Currency exchange rates are
affected by numerous factors, including relative interest rates, balances of
trade, levels of foreign investment and manipulation by central banks. The
foreign currency market is essentially unregulated and can be subject to
speculative trading. From time to time, many countries impose exchange
controls which limit or prohibit trading in certain currencies.
CURRENCY TRADING COSTS. ADRs do not involve the same direct currency and
liquidity risks as securities denominated in foreign currencies. However, the
value of the currency in which the foreign security represented by the ADR is
denominated may affect the value of the ADR.
To the extent that a Portfolio invests in foreign securities denominated in
foreign currencies, its share price reflects the price movements both of its
securities and of the currencies in which they are denominated. The share
price of a Portfolio that invests in both U.S. and foreign securities may
have a low correlation with movements in the U.S. markets. If most of the
securities in a Portfolio are denominated in foreign currencies or depend on
the value of foreign currencies, the relative strength of the U.S. dollar
against those foreign currencies may be an important factor in that
Portfolio's performance. A Portfolio incurs costs in converting foreign
currencies into U.S. dollars, and vice versa.
DIFFERENT ACCOUNTING AND REPORTING PRACTICES. Foreign companies are generally
subject to tax laws and to accounting, auditing and financial reporting
standards, practices and requirements different from those that apply in the
U.S.
LESS INFORMATION AVAILABLE. There is generally less public information
available about foreign companies.
LESS REGULATION. Many foreign countries have less stringent securities
regulations than the U.S.
MORE DIFFICULT BUSINESS NEGOTIATIONS. A Portfolio may find it difficult to
enforce obligations in foreign countries or to negotiate favorable brokerage
commission rates.
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REDUCED LIQUIDITY/INCREASED VOLATILITY. Some foreign securities are less
liquid, and their prices more volatile, than securities of comparable U.S.
companies.
SETTLEMENT DELAYS. Settling foreign securities transactions may take longer
than settlements in the U.S.
HIGHER CUSTODY CHARGES. Custodianship of shares may cost more for foreign
securities than it does for U.S. securities.
ASSET VULNERABILITY. In some foreign countries, there is a risk of direct
seizure or appropriation through taxation of assets of a Portfolio. Certain
countries may also impose limits on the removal of securities or other assets
of a Portfolio. Interest, dividends and capital gains on foreign securities
held by a Portfolio may be subject to foreign withholding taxes.
POLITICAL INSTABILITY. In some countries, political instability, war or
diplomatic developments could affect investments.
These risks may be greater in developing countries or in 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 only a small number of
securities. As a result, securities of issuers located in developing
countries may have limited marketability and may be subject to abrupt or
erratic price fluctuations.
At times, the Portfolios' foreign securities may be listed on exchanges or
traded in markets which are open on days (such as Saturday) when the Portfolios
do not compute a price or accept orders for purchase, sale or exchange of
shares. As a result, the net asset value of the Portfolios may be significantly
affected by trading on days when shareholders cannot make transactions.
HEDGING FOREIGN CURRENCY TRANSACTIONS. A Portfolio may hedge some or all of
its investments denominated in a foreign currency against a decline in the
value of that currency. For example, a Portfolio may buy or sell securities
while using forward currency contracts to fix a price in U.S. dollars for
securities it has agreed to buy or sell ("transaction hedge"). A Portfolio
may enter into contracts to sell a foreign currency for U.S. dollars (not
exceeding the value of a given Portfolio's assets denominated in that
currency) or by participation in options or futures contracts with respect to
a currency ("position hedge").
A Portfolio could hedge a 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"). Or it may 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 a given
currency, if the portfolio manager believes there is a reasonable degree of
correlation between movements in the two currencies ("cross-hedge").
As an operating policy, a Portfolio 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 a Portfolio anticipates buying securities
denominated in a particular currency, it may enter into a forward contract to
purchase such currency in exchange for the U.S. 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 affect a Portfolio's performance if the manager's
projection of future exchange rates is wrong.
FUTURES, OPTIONS AND OTHER
DERIVATIVE INSTRUMENTS
Generally, options, futures contracts, forward contracts and swap-related
products ("derivative instruments") involve additional investment risks and
transaction costs, and draw upon skills and experience which are different
from those needed to pick the other securities or instruments in which a
Portfolio invests. Special risks of derivatives' use include:
INACCURATE MARKET PREDICTIONS. If interest rates, securities prices or
currency markets do not move in the directions expected by a portfolio
manager who uses derivatives based on those measures, these instruments may
fail in their intended purpose and result in losses to the Portfolio.
IMPERFECT CORRELATION. Derivatives' prices may be imperfectly correlated with
the prices of the securities, interest rates or currencies being hedged. When
this happens, the expected benefits may be diminished.
ILLIQUIDITY. A liquid secondary market may not be available for a particular
instrument at a particular time. A Portfolio may therefore be unable to
control losses by closing out a derivative position.
TAX CONSIDERATIONS. A Portfolio may have to delay closing out certain
derivative positions to avoid adverse tax consequences.
The risk of loss from investing in derivative instruments is potentially
unlimited. See the SAI for more information about derivatives.
FIXED INCOME INVESTING
Risk in the fixed income component of any Portfolio depends on (1) the term
of the securities; (2) the quality of the securities; and (3) changes in
interest rates.
When prevailing interest rates trend downward, the price of existing debt
securities tends to go up, because the coupon payments (or yield) of those
securities becomes more valuable in comparison to prevailing rates. When
interest rates trend upward, the price of existing securities tends to go
down.
This effect usually becomes more pronounced with longer-term issues than with
shorter-term issues.
The effect of these fluctuations, in turn, on a Portfolio's share price and
yield depends on the extent to which a Portfolio is invested in debt
securities.
HIGH-YIELD/HIGH-RISK BONDS
High-yield/high risk debt securities are also known as "junk bonds." These
bonds involve significant quality and liquidity concerns. Their yields
fluctuate. They are not suitable for short-term investing.
Higher yields are ordinarily available on fixed-income securities which are
unrated or are rated in the lower categories by services such as S&P or
Moody's. Unrated securities are not necessarily of lower quality than rated
securities, but the markets for lower rated and unrated securities are less
liquid than higher rated securities.
Lower rated debt securities (including convertibles) carry significant
default risk -- the risk that the issuer will not make interest or principal
payments when due. Because the coupon rates on these securities are high, the
issuers might experience great financial stress in an economic downturn or
during periods of rising interest rates. This stress might adversely affect
their ability to make interest or principal
payments or to obtain additional credit. A bond default within the Portfolio
would cause losses to the Portfolio.
18
<PAGE>
The performance of high-yield debt securities in an economic downturn cannot
be precisely predicted.
Appendix A of this Prospectus contains a description of bond rating
categories and includes a weighted average debt rating table for the Flexible
Income and Income Plus Portfolios.
SPECIAL SITUATIONS
Each Portfolio may invest in "special situations" from time to time. Special
situations arise when, in the opinion of a portfolio manager, a company's
securities may be recognized, then increase considerably in price, due to:
/bullet/ a new product or process;
/bullet/ a management change;
/bullet/ a technological breakthrough;
/bullet/ an extraordinary corporate event; or
/bullet/ a temporary imbalance in the supply of, and demand for, the securities
of an issuer.
Investing in a special situation carries an additional risk of loss if the
expected development does not happen or does not attract the expected
attention. The impact of special situation investing to a Portfolio will
depend on the size of the Portfolio's investment in a situation.
INVESTMENT ADVISORY
AND OTHER SERVICES
The Fund is run by a Board of Trustees. Subject to the supervision of the
Board of Trustees, the assets of each Portfolio are managed by investment
advisers and sub-advisers, and by portfolio managers. This section describes
IDEX II Series Fund's ownership, organization and management.
TRUSTEES
The Board of Trustees is responsible for managing the business and affairs of
IDEX II Series Fund. It oversees the operation of the Fund by its officers. It
also reviews the management of the Portfolios' assets by the investment advisers
and sub-advisers. Information about the Trustees and officers of the Fund is
contained in the SAI.
GROWTH, GLOBAL, FLEXIBLE
INCOME, BALANCED AND CAPITAL
APPRECIATION PORTFOLIOS
INVESTMENT ADVISER
These Portfolios have each 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 IDEX Fund, IDEX
II Series Fund Growth, Global, Flexible Income (and its predecessor, IDEX
Total Income Trust), Balanced and Capital Appreciation Portfolios and IDEX
Fund 3 since the inception of each Fund or Portfolio.
ADVISORY FEES PAID
BY THESE PORTFOLIOS
IMI is responsible for furnishing or causing to be furnished to each of these
Portfolios investment advice and recommendations, and for supervising the
purchase and sale of securities as directed by appropriate Fund officers. In
addition, IMI is responsible for the administration of each of these
Portfolios.
The Portfolios pay IMI an annual fee, computed daily and paid monthly, based
on each Portfolio's average daily net assets, as shown in the Advisory Fee
Schedule.
The investment advisory fees paid by these Portfolios are higher than those
paid by most other funds.
ADVISORY FEE REIMBURSEMENT
IMI will reimburse a Portfolio or waive fees, or both, to the extent that the
Portfolio's normal net operating expenses, including advisory fees but
excluding interest, taxes, brokerage commissions and 12b-1 fees, exceed on an
annual basis the lesser of the most restrictive expense limitation imposed by
any state in which its shares are offered, or, with respect to the Growth,
Flexible Income, Balanced and Capital Appreciation Portfolios, 1.50% of that
Portfolio's average daily net assets.
TAX-EXEMPT, INCOME PLUS,
AGGRESSIVE GROWTH, EQUITY-
INCOME, TACTICAL ASSET ALLOCATION
AND C.A.S.E. PORTFOLIOS
INVESTMENT ADVISER
These Portfolios have each entered into an Advisory Agreement with
InterSecurities, Inc. ("ISI"), whose address is 201 Highland Avenue, Largo,
Florida 34640, to act as its investment adviser. ISI has served as investment
adviser to the Tax-Exempt and Income Plus Portfolios since 1992, the
Aggressive Growth and Equity-Income Portfolios since their inception in
December of 1994, the Tactical Asset Allocation Portfolio since its inception
in October, 1995 and the C.A.S.E. Portfolio since its inception in February,
1996. ISI is an affiliate of IMI.
ADVISORY FEES PAID BY
THESE PORTFOLIOS
ISI is responsible for furnishing or causing to be furnished to each of these
Portfolios investment advice and recommendations, and for supervising the
purchase and sale of securities as directed by appropriate Fund officers. In
addition, ISI is responsible for the administration of each of these
Portfolios.
The Portfolios pay ISI an annual fee, computed daily and paid monthly, based
on each Portfolio's net assets, as shown in the Advisory Fee Schedule.
The investment advisory fees paid by these Portfolios are higher than those
paid by most other funds.
No investment advisory fees were paid for the fiscal year ended September 30,
1995 by the Tactical Asset Allocation and C.A.S.E. Portfolios since those
Portfolios had not begun operations as of that date.
ADVISORY FEE REIMBURSEMENT
Pursuant to an expense limitation voluntarily adopted by ISI, ISI will
reimburse a Portfolio or waive fees, or both, to the extent that the
Portfolio's normal net operating expenses, including advisory fees but
excluding interest, taxes, brokerage commissions and 12b-1 fees, exceed on an
annual basis the lesser of the most restrictive expense limitation imposed by
any state in which its shares are offered, or the following percentages of
each Portfolio's average daily net assets: Tax-Exempt Portfolio, .65%; Income
Plus Portfolio, 1.25%; Aggressive Growth and Equity-Income Portfolios, 1.50%;
and Tactical Asset Allocation and C.A.S.E. Portfolios, 2.50% for the first
full fiscal year of the Portfolio, and 1.50% thereafter.
No expenses were paid for the fiscal year ended September 30, 1995 by the
Tactical Asset Allocation and C.A.S.E. Portfolios, since those Portfolios had
not begun operations as of that date.
19
<PAGE>
ACTUAL ADVISORY FEE RATIOS FOR
THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995
------------------------------
PERCENTAGE OF
AVERAGE DAILY
NET ASSETS
----------
Growth 1.00%
Global 1.00%
Flexible Income 0.82%
Balanced 0.00%
Capital Appreciation 0.00%
* Net of fees waived by IMI.
TOTAL ACTUAL EXPENSE RATIOS FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1995,
INCLUDING THE INVESTMENT ADVISORY FEE.
--------------------------------------
PERCENTAGE OF AVERAGE DAILY NET ASSETS
--------------------------------------
CLASS A CLASS C
------- -------
Growth 1.86% 2.41%
Global 2.10% 2.65%
Flexible Income 1.87% 2.42%
Balanced 2.92% 3.47%
Capital Appreciation 2.90% 3.45%
* Net of fees waived by IMI.
(No expenses are shown for Class B shares since that class of shares was not
offered until October 1, 1995.)
ADVISORY FEE SCHEDULE
---------------------
CAPITAL FLEXIBLE
AVERAGE DAILY NET ASSETS GROWTH GLOBAL BALANCED APPRECIATION INCOME
------------------------ ------ ------ -------- ------------ ------
First $750 million 1.00% 1.00% 1.00% 1.00%
the next $250 million 0.90% 0.90% 0.90% 0.90%
over $1 billion 0.85% 0.85% 0.85% 0.85%
First $100 million 0.90%
the next $150 million 0.80%
over $250 million 0.70%
ACTUAL ADVISORY FEE RATIOS FOR
THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995
------------------
PERCENTAGE OF
AVERAGE DAILY
NET ASSETS
----------
Tax-Exempt 0.28%
Income Plus 0.60%
Aggressive Growth 0.41%
Equity-Income 0.00%
* Net of fees waived by ISI.
TOTAL ACTUAL EXPENSE RATIOS FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1995,
INCLUDING THE INVESTMENT ADVISORY FEE:
--------------------------------------
PERCENTAGE OF AVERAGE DAILY NET ASSETS
--------------------------------------
CLASS A CLASS C
------- -------
Tax-Exempt 1.02% 1.27%
Income Plus 1.29% 1.84%
Aggressive Growth 2.85% 3.40%
Equity-Income 2.99% 3.54%
* Net of fees waived by ISI.
(No expenses are shown for Class B shares since that class of shares was not
offered until October 1, 1995.)
ADVISORY FEE SCHEDULE
---------------------
TACTICAL
TAX- INCOME AGGRESSIVE EQUITY- ASSET
AVERAGE DAILY NET ASSETS EXEMPT PLUS GROWTH INCOME ALLOCATION C.A.S.E.
- ------------------------ ------ ---- ------ ------ ---------- --------
First $750 million 0.60% 0.60% 1.00% 1.00% 1.00% 1.00%
the next $250 million 0.60% 0.60% 0.90% 0.90% 0.90% 0.90%
over $1 billion 0.60% 0.60% 0.85% 0.85% 0.85% 0.85%
20
<PAGE>
BUSINESS EXPENSES BORNE
BY THE PORTFOLIOS
In addition to the investment advisory fee, under their Advisory Agreements,
the Portfolios pay most of their 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
Portfolios also pay all brokerage commissions in connection with portfolio
transactions.
OWNERSHIP OF IDEX MANAGEMENT,
INC. AND INTERSECURITIES, INC.
Fifty percent (50%) of the outstanding stock of IMI and 100% of the
outstanding stock of ISI, 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, the sub-adviser of the Growth, Global,
Flexible Income, Balanced and Capital Appreciation Portfolios, owns the
remaining 50% of the 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.
SUB-ADVISERS
Janus Capital, AEGON USA Investment Management, Inc. ("AEGON Management"),
Fred Alger Management, Inc. ("Alger Management"), Luther King Capital
Management Corporation ("Luther King"), Dean Investment Associates ("Dean
Investment") and C.A.S.E. Management, Inc. ("C.A.S.E."), whose functions in
managing the Portfolios are described below, are described in this Prospectus
collectively as the "sub-advisers" and individually as a "sub-adviser."
GROWTH, GLOBAL, FLEXIBLE
INCOME, BALANCED, AND CAPITAL
APPRECIATION PORTFOLIOS
IMI has entered into an Investment Counsel Agreement for each of these
Portfolios with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206.
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 is also sub-adviser to IDEX Fund and IDEX Fund 3 and
to certain Portfolios of the WRL Series Fund, Inc.
Janus Capital provides IMI with investment advice and recommendations for
each Portfolio consistent with that Portfolio's investment objective,
policies and restrictions, and supervises all security purchases and sales on
behalf of the Portfolio, 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 NASD.
While Janus Capital provides portfolio management services, IMI retains
responsibility for the performance of such functions. For its services, Janus
Capital receives 50% of the fees received by IMI under each of the Growth,
Global, Flexible Income, Balanced and Capital Appreciation Portfolios'
respective Advisory Agreements, less 50% of any amount reimbursed to the
Portfolio or waived by IMI pursuant to that Portfolio'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 SAI.
PORTFOLIO MANAGERS:
Scott W. Schoelzel has served as portfolio manager of the Growth Portfolio
since January, 1996. He previously served as co-portfolio manager of the
Growth Portfolio from 1995 until becoming portfolio manager. Mr. Schoelzel
also serves as portfolio manager of other mutual funds in the IDEX group:
IDEX Fund and IDEX Fund 3. 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.
Helen Y. Hayes has served as portfolio manager of the Global Portfolio since
its inception. Ms. Hayes is also an Executive Vice President of Janus
Investment Fund and Janus Aspen Series. Ms. Hayes has been employed by Janus
Capital since 1987.
Ronald V. Speaker has served as portfolio manager of the Flexible Income
Portfolio since October, 1993, and served as portfolio manager of the
Flexible Income Portfolio's predecessor, IDEX Total Income Trust, since
February, 1992. Mr. Speaker is also an Executive Vice President of Janus
Investment Fund and Janus Aspen Series; he joined Janus Capital as a
securities analyst and research associate in 1986.
Blaine P. Rollins has assisted in the management of the Balanced Portfolio
since its inception, and will assume full time responsibility as portfolio
manager on February 1, 1996. Mr. Rollins joined Janus Capital in 1990 and has
gained experience as a trader and research analyst prior to assuming
management responsibility for the Balanced Portfolio. He holds a Bachelor of
Science in Finance from the University of Colorado and is a Chartered
Financial Analyst. He has also managed the Janus Balanced Fund since January
1996.
James P. Goff has served as portfolio manager of the Capital Appreciation
Portfolio since its inception. Mr. Goff joined Janus Capital in 1988 and has
managed Janus Enterprise Fund since its inception in September, 1992. He has
co-managed Janus Venture Fund since December, 1993.
TAX-EXEMPT AND
INCOME PLUS PORTFOLIOS
AEGON Management, 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499, serves
as the investment sub-adviser to each of these Portfolios pursuant to an
Investment Counsel Agreement relating to each Portfolio. Each Investment
Counsel Agreement was entered into between ISI and AEGON USA Securities, Inc.
("AEGON Securities"), formerly known as MidAmerica Management Corporation,
which assigned each Agreement to AEGON Management on September 30, 1992.
AEGON Securities previously served as the investment adviser to each series
of AEGON USA Managed Portfolios, Inc. AEGON Management also serves as
sub-adviser to certain portfolios of the WRL Series Fund, Inc. AEGON
Management is a wholly owned indirect subsidiary of AEGON USA and thus is an
affiliate of ISI and IMI.
AEGON Management provides ISI with investment advice and recommendations for
each Portfolio consistent with that Portfolio's investment objective,
policies and restrictions, and supervises all security
21
<PAGE>
purchases and sales on behalf of the Portfolio, including the negotiation of
commissions and the allocation of principal business and portfolio brokerage.
In allocating such portfolio transactions, AEGON Management may consider
research and other services furnished to it and may place portfolio
transactions with broker-dealers that are affiliated with ISI or AEGON
Management. In placing portfolio business with all dealers, AEGON Management
seeks the best execution of each transaction, and all brokerage placement
must be consistent with the Rules of Fair Practice of the NASD.
While AEGON Management provides portfolio management services, ISI retains
responsibility for the performance of such functions. For its services, AEGON
Management receives 50% of the fees received by ISI under the Tax-Exempt and
Income Plus Portfolios' Advisory Agreements, less 50% of any amount
reimbursed to that Portfolio or waived by ISI pursuant to that Portfolio's
expense limitation.
PORTFOLIO MANAGERS:
Rachel A. Dennis has served as portfolio manager of the Tax-Exempt Portfolio
since its inception. Ms. Dennis is a Vice President of AEGON Management. Ms.
Dennis has been employed by AEGON Management and its affiliates in various
positions since 1977.
David R. Halfpap has served as portfolio manager of the Income Plus Portfolio
since its inception. Mr. Halfpap is also a Senior Vice President of AEGON
Management and has been employed by AEGON Management and its affiliates in
various positions since 1975.
AGGRESSIVE GROWTH PORTFOLIO
Alger Management, 75 Maiden Lane, New York, New York 10038, serves as the
investment sub-adviser to the Aggressive Growth Portfolio pursuant to an
Investment Counsel Agreement relating to the Portfolio. Alger Management, a
registered investment adviser, is a wholly owned subsidiary of Fred Alger &
Company, Incorporated ("Alger, Inc."), which in turn is a wholly-owned
subsidiary of Alger Associates, Inc., a financial services holding company
controlled by Fred M. Alger and David D. Alger. As of September 30, 1995,
Alger Management had approximately $4.8 billion in assets under management
for investment companies and private accounts. Alger Management has served as
the investment sub-adviser to the WRL Series Fund, Inc. Aggressive Growth
Portfolio since its inception in February, 1994.
Alger Management provides ISI with investment advice and recommendations for
the Aggressive Growth Portfolio consistent with that Portfolio's investment
objective, policies and restrictions, and supervises all security purchases
and sales on behalf of the Portfolio, including the negotiation of
commissions and the allocation of principal business and portfolio brokerage.
In allocating such portfolio transactions, Alger Management may consider
research and other services furnished to it. It is anticipated that Alger,
Inc., an affiliate of Alger Management, will serve as the Aggressive Growth
Portfolio's broker in effecting substantially all of the Portfolio's
transactions on securities exchanges and will retain commissions in
accordance with certain regulations of the SEC. In placing portfolio business
with all dealers, Alger Management seeks the best execution of each
transaction, and all brokerage placement must be consistent with the Rules of
Fair Practice of the NASD.
While Alger Management provides portfolio management services, ISI retains
responsibility for the performance of such functions. For its services, Alger
Management receives 40% of the fees received by ISI under the Aggressive
Growth Portfolio's Advisory Agreement, less 40% of any amount reimbursed to
that Portfolio or waived by ISI pursuant to that Portfolio's expense
limitation.
PORTFOLIO MANAGER:
David Alger has served as portfolio manager of the Aggressive Growth
Portfolio since its inception in December, 1994. Mr. Alger has served as an
Executive Vice President and Director of Research of Alger Management since
1971, and as President since 1995. He serves as portfolio manager for other
mutual funds and investment accounts managed by Alger Management. Mr. Alger
has also served as the portfolio manager of the WRL Series Fund, Inc.
Aggressive Growth Portfolio since its inception in February, 1994.
EQUITY-INCOME PORTFOLIO
Luther King, 301 Commerce Street, Suite 1600, Fort Worth, Texas 76102, serves
as the investment sub-adviser to the Equity-Income Portfolio pursuant to an
Investment Counsel Agreement relating to the Portfolio. Ultimate control of
the sub-adviser is exercised by J. Luther King, Jr. Luther King is a
registered investment adviser and provides investment management services to
accounts of individual and other institutional investors. Luther King has
served as the investment sub-adviser to the WRL Series Fund, Inc.
Equity-Income Portfolio since its inception in February, 1993.
Luther King provides ISI with investment advice and recommendations for the
Equity-Income Portfolio consistent with that Portfolio's investment
objective, policies and restrictions, and supervises all security purchases
and sales transactions on behalf of the Portfolio, including the negotiation
of commissions and the allocation of principal business and portfolio
brokerage. In allocating such portfolio transactions, Luther King may
consider research and other services furnished to it and may place portfolio
transactions with broker-dealers that are affiliated with ISI or Luther
King. In placing portfolio business with all dealers, Luther King seeks the
best execution of each transaction, and all brokerage placement must be
consistent with the Rules of Fair Practice of the NASD.
While Luther King provides portfolio management services, ISI retains
responsibility for the performance of such functions. For its services,
Luther King receives 40% of the fees received by ISI under the Equity-Income
Portfolio's Advisory Agreement, less 40% of any amount reimbursed to that
Portfolio or waived by ISI pursuant to that Portfolio's expense limitation.
PORTFOLIO MANAGERS:
Luther King, Jr., Scot C. Hollmann and John Patrick Clegg have served as
portfolio managers of the Equity-Income Portfolio since its inception. Mr.
King has been President of Luther King since 1979. Mr. Hollmann has served as
Vice President of Luther King since 1983, and Mr. Clegg has served as Vice
President of Luther King since 1991.
TACTICAL ASSET
ALLOCATION PORTFOLIO
ISI has entered into an Investment Counsel Agreement for the Tactical Asset
Allocation Portfolio with Dean Investment, a division of C.H. Dean and
Associates, Inc., 2480 Kettering Tower, Dayton, Ohio 45423-2480. Founded in
1972, Dean Investment manages portfolios for individuals and institutional
clients world-wide and provides a full range of investment advisory services,
with more than $3.8 billion in assets under management as of September 30,
1995. Dean Investment has served as the investment sub-adviser to the WRL
Series Fund, Inc. Tactical Asset Allocation Portfolio since its inception in
January, 1995.
Dean Investment provides ISI with investment advice and recommendations
22
<PAGE>
for the Tactical Asset Allocation Portfolio consistent with that Portfolio's
investment objective, policies and restrictions, and supervises all security
purchases and sales on behalf of the Portfolio, including the negotiation of
commissions and the allocation of principal business and portfolio brokerage.
In allocating such portfolio transactions, Dean Investment may consider
research and other services furnished to it and may place portfolio
transactions with broker-dealers that are affiliated with ISI or Dean
Investment. In placing portfolio business with all dealers, Dean Investment
seeks the best execution of each transaction, and all brokerage placement
must be consistent with the Rules of Fair Practice of the NASD.
While Dean Investment provides portfolio management services, ISI retains
responsibility for the performance of such functions. For its services, Dean
Investment receives 40% of the fees received by ISI under the Tactical Asset
Allocation Portfolio's Advisory Agreement, less 40% of any amount reimbursed
to that Portfolio or waived by ISI pursuant to that Portfolio's expense
limitation.
PORTFOLIO MANAGERS:
John C. Riazzi, CFA, is the Senior Portfolio Manager of the Tactical Asset
Allocation Portfolio. Mr. Riazzi joined Dean Investment in March of 1989.
Before being promoted to Vice President and Director of Consulting Services,
Mr. Riazzi was responsible for client servicing, portfolio execution and
trading operations. Mr. Riazzi has been a member of the Central Investment
Committee of Dean Investment and a Senior Institutional Portfolio Manager for
the past four years.
Arvind Sachdeva, CFA, is the Senior Equity Strategist of the Tactical Asset
Allocation Portfolio. Mr. Sachdeva joined Dean Investment in 1993. Before
that, he had been the Senior Security Analyst and Equity Portfolio Manager
for Carillon Advisers, Inc. from 1985 to 1993. Carillon Advisers, Inc. is an
investment subsidiary of the Union Central Life Insurance Company.
C.A.S.E. PORTFOLIO
C.A.S.E., located at 2255 Glades Road, Suite 221-A, Boca Raton, FL 33431,
serves as the investment sub-adviser to the C.A.S.E. Portfolio pursuant to an
Investment Counsel Agreement relating to the Portfolio. C.A.S.E. is a
registered investment advisory firm and a wholly-owned subsidiary of
C.A.S.E., Inc. C.A.S.E., Inc. is indirectly controlled by William Edward
Lange, President and Chief Executive Officer of the sub-adviser. C.A.S.E.
provides investment management services to financial institutions, high net
worth individuals and other professional money managers. C.A.S.E. has served
as the investment sub-adviser to the WRL Series Fund, Inc. C.A.S.E. Quality
Growth, C.A.S.E. Growth & Income and C.A.S.E. Growth Portfolios since their
inception in 1995.
C.A.S.E. provides ISI with investment advice and recommendations for the
C.A.S.E. Portfolio consistent with that Portfolio's investment objective,
policies and restrictions, and supervises all security purchases and sales
transactions on behalf of the Portfolio, including the negotiation of
commissions and the allocation of principal business and portfolio brokerage.
In allocating such portfolio transactions, C.A.S.E. may consider research and
other services furnished to it and may place portfolio transactions with
broker-dealers that are affiliated with ISI or C.A.S.E. In placing portfolio
business with all dealers, C.A.S.E. seeks the best execution of each
transaction, and all brokerage placement must be consistent with the Rules of
Fair Practice of the NASD.
While C.A.S.E. provides portfolio management services, ISI retains
responsibility for the performance of such functions. For its services,
C.A.S.E. receives 40% of the fees received by ISI under the C.A.S.E.
Portfolio's Advisory Agreement, less 40% of any amount reimbursed to the
Portfolio or waived by ISI pursuant to that Portfolio's expense limitation.
PORTFOLIO MANAGERS:
The C.A.S.E. Portfolio is managed by a team of investors called the Portfolio
Management Committee. William Edward Lange serves as the head portfolio
manager to the Portfolio Management Committee. Mr. Lange has been President
of C.A.S.E. since 1984.
ADMINISTRATOR
IMI has entered into separate Administrative Services Agreements
("Administrative Agreements") pursuant to which ISI serves as administrator
to the Growth, Global, Flexible Income, Balanced and Capital Appreciation
Portfolios.
Under these Administrative Agreements, ISI provides all services required to
carry on the general administrative and corporate affairs of these
Portfolios. 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 record keeping.
For its services under an Administrative Agreement, ISI receives 50% of the
fees received by IMI under the corresponding Advisory Agreement. Under
certain circumstances, the amounts payable to ISI under an Administrative
Agreement will be reduced by any additional compensation payable by IMI to
Janus Capital, as described in the SAI.
DISTRIBUTOR AND
DISTRIBUTION AND
SERVICE PLANS
UNDERWRITING AGREEMENTS
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 Fund 3.
ISI is compensated by each Portfolio for services as distributor and
principal underwriter for Class A, Class B and Class C shares of each
Portfolio.
DISTRIBUTION PLANS
ISI may use the fees payable under these plans as it deems appropriate to pay
for activities or expenses primarily intended to result in the sale of the
respective share classes or in personal service to and/or maintenance of
shareholder accounts of the respective share classes. Expense categories may
include, but are not limited to: compensation to employees of ISI;
compensation to and expenses of ISI, dealers or other financial institutions
who sell shares or service shareholder accounts; the costs of printing and
distributing prospectuses, statements of additional information and reports
for other than existing shareholders; and the costs of preparing, printing
and distributing sales literature and advertising materials. Payments made
under the plans may exceed distribution expenses actually incurred.
Of the distribution and service fees received by ISI for Class A and Class B
shares, ISI currently reallows an annual amount of 0.25% of the average daily
net assets of that Portfolio's Class A or Class B shares to brokers or
dealers that have sold such shares. Of the distribution and service fees
received by ISI for Class C shares, ISI currently reallows the total fees to
brokers or dealers that have sold such Class C shares.
23
<PAGE>
CLASS A SHARE
DISTRIBUTION PLAN
As compensation for the expenses borne by ISI and the distribution services
provided, ISI receives the sales charges imposed on Class A shares and
reallows a portion of such charges to brokers or dealers that have sold Class
A shares.
ISI may also receive annual service and distribution fees in accordance with
the Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act, adopted
with respect to each class of shares of a Portfolio. Under its Plan of
Distribution for Class A shares, ("Class A Plan"), a Portfolio may pay ISI an
annual distribution fee of up to 0.35%, and an annual service fee of up to
0.25%, of the average daily net assets of that Portfolio's Class A shares.
However, to the extent that a Portfolio pays service fees, the amount the
Portfolio may pay as a distribution fee is reduced accordingly, so that the
total fees payable under the Class A Plan may not exceed 0.35%, on an
annualized basis, of the average daily net assets of that Portfolio's Class A
shares.
CLASS B SHARE
DISTRIBUTION PLAN
Under its Plan of Distribution for Class B shares ("Class B Plan"), a
Portfolio may pay ISI an annual distribution fee of up to 0.75%, and an
annual service fee of up to 0.25%, of the average daily net assets of that
Portfolio's Class B shares.
CLASS C SHARE
DISTRIBUTION PLAN
Under its Plan of Distribution for Class C shares ("Class C Plan"), a
Portfolio may pay ISI an annual distribution fee of up to 0.75%, and an
annual service fee of up to 0.25%, of the average daily net assets of that
Portfolio's Class C shares. However, the total fee payable pursuant to a
Class C Plan may not, on an annualized basis, exceed 0.90% of the average
daily net assets of each Portfolio, and the Tax-Exempt Portfolio currently
intends to limit the total fees payable pursuant to its Class C Plan to 0.60%
of the average daily net assets of that Portfolio's Class C shares.
MISCELLANEOUS INFORMATION
ORGANIZATION OF THE PORTFOLIOS
Each Portfolio is a series of IDEX II Series Fund ("the Fund"), a
Massachusetts business trust that was formed by a Declaration of Trust dated
January 7, 1986 and whose operations are governed by a Restatement of
Declaration of Trust dated as of August 30, 1991 ("Declaration of Trust"). A
copy of the Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. Before its organization as a series company,
the Fund was called IDEX II.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the Fund. The 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 IDEX believes is remote.
CLASS A, CLASS B AND
CLASS C SHARES
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. The shares of
beneficial interest of each Portfolio are currently divided into three
classes in reliance on Rule 18f-3 under the 1940 Act: Class A, Class B, and
Class C shares. Each class represents interests in the same assets of the
Portfolio. The classes differ as follows:
/bullet/ Each class of shares has exclusive voting rights on matters pertaining
to its plan of distribution or any other matters appropriately limited
to that class.
/bullet/ Class A shares are subject to an initial sales charge, or front-end
load. Class A shares which are not subject to an initial sales charge
because of the size of the purchase are subject to a deferred sales
charge if redeemed during the first year.
/bullet/ Class B shares are subject to a contingent deferred sales charge, or
back-end load, at a declining rate.
/bullet/ Class C shares are subject to higher ongoing distribution and service
fees than Class A shares, and lower ongoing distribution and service
fees than Class B shares.
Each class may bear differing amounts of certain class-specific expenses.
Each class has a separate exchange privilege. Each share of a series is
entitled to equal voting, dividend, liquidation, and redemption rights,
except that due to the differing expenses borne by the three classes,
dividends and liquidation proceeds of Class B and Class C shares are expected
to be lower than for Class A shares of the same Portfolio.
Class B shares convert automatically into Class A shares of the same
Portfolio eight years after the end of the calendar month in which the
shareholder's order to purchase the share was accepted. The conversion is
based on net asset value, without any sales charge, fee or other charge. The
purpose of this conversion is to relieve the holders of the Class B shares
from the higher service and distribution fees imposed on those shares, after
ISI has been substantially compensated for distribution expenses by those
fees.
The Fund does not expect that there will be any conflicts between the
interests of holders of the different classes of shares of the same Portfolio
because of the class structure. The Board of Trustees will consider, if
necessary, whether any such conflict exists; if it does, the Board will take
appropriate action to resolve it.
24
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION SCHEDULE
PORTFOLIO INCOME CAPITAL GAIN
DISTRIBUTIONS DISTRIBUTIONS*
<S> <C> <C>
Aggressive Growth Semi-annually Annually
Capital Appreciation Semi-annually Annually
Global Semi-annually Annually
Growth Semi-annually Annually
C.A.S.E. Semi-annually Annually
Equity-Income Quarterly Annually
Tactical Asset Allocation Quarterly Annually
Balanced Quarterly Annually
Flexible Income Monthly Annually
Income Plus Monthly Annually
Tax-Exempt Monthly Annually
<FN>
* Capital gain distributions realized during each fiscal year, ending September 30, normally will be declared
and paid in the following fiscal year. To avoid a 4% excise tax on undistributed amounts of ordinary income
and capital gains, as described in the SAI, a Portfolio may, to the extent permitted by the SEC, pay addi-
tional distributions of capital gain in any year and make additional dividend distributions.
</FN>
</TABLE>
PERSONAL SECURITIES TRADING
The Fund permits "Access Persons" as defined by Rule 17j-1 under the 1940 Act
to engage in personal securities transactions, subject to the terms of the
Code of Ethics and Insider Trading Policy ("the Policy") that has been
adopted by the Board of Trustees of the Fund. Access Persons must use the
guidelines established by this Policy for all personal securities
transactions and are subject to certain prohibitions on personal trading. The
Fund's sub-advisers, pursuant to Rule 17j-1 and other applicable laws, and
pursuant to the terms of the Policy, must adopt and enforce their own Code of
Ethics and Insider Trading Policies appropriate to their particular business
needs. Each sub-adviser must report to the Board of Trustees on a quarterly
basis with respect to the administration and enforcement of such Policy,
including any violations thereof which may potentially affect the Fund.
SHAREHOLDER MEETINGS
The Fund does not intend to hold annual meetings of shareholders, unless
required to do so by the 1940 Act or by the Declaration of Trust. A meeting
will be called for the election of trustees upon the written request of
holders of 10% of the outstanding shares of the Fund. Shareholders have
neither preemptive nor cumulative voting rights.
THE 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.
THE CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, is custodian of the Fund's assets and serves as custodian for
qualified retirement plans and individual retirement plan accounts investing
in the Fund. However, all correspondence about a shareholder's account should
be sent to IDEX.
SHAREHOLDER INQUIRIES
Inquiries by shareholders about a Portfolio or the Fund or requests for forms
for opening or changing accounts or plans should be made by writing IDEX at
P.O. Box 9015, Clearwater, Florida 34618-9015 or calling IDEX Customer
Service at (800) 851-9777.
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, the Fund will send only one copy of certain mailings to a
shareholder who has more than one account (each with the same taxpayer ID
number). Further, two or more shareholders may elect to receive a
consolidated statement and only one copy of certain mailings for their
accounts so long as they share the same surname and address. Select this
option on the New Account Application or by written request to IDEX.
Additional copies of shareholder reports and prospectuses may be obtained by
calling IDEX Customer Service.
DISTRIBUTIONS AND TAXES
This section discusses how and when the portfolios make distributions to you
from their net earnings and profits, and some of your tax responsibilities
related to such distributions.
INCOME AND
CAPITAL GAINS DISTRIBUTIONS
The portfolios pay two kinds of distributions. Ordinary income distributions
are made from fund earnings from interest paid on taxable bonds, dividends
paid on stocks, and other kinds of securities income. Capital gains
distributions are made from gains realized when securities owned by a
Portfolio for more than one year are sold at an amount greater than their
cost. Short-term capital gain distributions (related to securities sold which
have been owned one year or less) are ordinary income, not capital gain, to
shareholders.
NOTE: A Portfolio may also realize capital losses.
Income distributions are made at intervals throughout the year, depending on
which Portfolio you own (see the chart above). Capital gains distributions
are generally made once a year.
Dividends and other distributions paid by a Portfolio with respect to its
Class A, Class B, and Class C shares are calculated in the same manner and
declared and paid at the same time. For a complete discussion of Class A,
Class B and Class C share values and expenses, see Shareholder Information
and Instructions.
If you buy shares in a non-retirement account on or shortly before the record
date for a dividend or other taxable distribution, you will pay full price
for the shares,
25
<PAGE>
then receive some portion of what you paid as a taxable distribution.
HOW YOU RECEIVE
YOUR DISTRIBUTIONS
The Portfolios will automatically reinvest your dividend and capital gain
distributions in additional portfolio shares of the same class you already
own, unless you specify another payment method. See Shareholder Information
and Instructions for complete information about how to receive your
distributions.
Requested cash distributions will be paid by direct deposit (via Automated
Clearing House electronic funds transfer ("ACH")), or by check, whichever you
choose on your New Account Application. Dividend checks are usually mailed,
along with a confirmation, on the payable date. The dividend checks will be
made out to the shareholder of record and sent to the address of record. You
may request a different payee or address on the New Account Application. To
do so on an existing account, send a signature guarantee request to IDEX.
Any checks which cannot be delivered and are returned to IDEX will be
reinvested in full or fractional shares in your account at the net asset
value next computed after the check has been received by IDEX. To reduce
costs to a Portfolio, 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 IDEX. Cash distributions that total less than $5.00 will be
reinvested into the account.
The Flexible Income, Tax-Exempt and Income Plus Portfolios pay income
distributions monthly. If you own shares of one or more of these portfolios,
and you choose to have your dividends reinvested, this reinvestment will take
place every month. However, you will receive statements of these transactions
each quarter.
Shareholders may obtain further information or change their dividend or
distribution options any time before the record date of any dividend or
distribution by calling IDEX Customer Service at (800) 851-9777 or writing to
IDEX, P.O. Box 9015, Clearwater, FL 34618-9015.
TAX INFORMATION
Each Portfolio is treated as a separate entity for federal tax purposes. Each
Portfolio is a regulated investment company, as defined by Subchapter M of
the Internal Revenue Code of 1986 (the "Code"), as amended.
For each fiscal period, if a Portfolio meets certain requirements of the
Code, the Portfolio does not pay taxes on net income realized from investment
operations to the extent earnings and profits are distributed to
shareholders. Shareholders are responsible for any taxes related to
distributions. (See The Tax-Exempt Portfolio -- Special Considerations,
below, for discussion of tax-exempt distributions; see the SAI for a complete
discussion of a mutual fund as a regulated investment company.)
If a Portfolio 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 Portfolio 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 the first year, and the
Portfolio will be treated as having paid the distribution on that date.
"TAXABLE EVENTS" -- WHEN AND
HOW YOU OWE TAX RELATED TO
YOUR PORTFOLIO INVESTMENT
SELLING OR EXCHANGING SHARES. When you sell shares, whether you take cash or
exchange the shares for shares in another Portfolio or Fund, it is a "taxable
event." For non-retirement plan accounts, you will owe tax if you realize a
taxable gain on the sale or exchange. On the other hand, if you realize a
loss based on your tax basis in the shares, you may be able to offset that
capital loss against capital gain income you have. If there were any capital
gains distributions on the shares, the loss that is allowed will be treated
as a long-term capital loss, to the extent of the capital gains
distributions.
For tax purposes, the cost of a Class A share is generally the per-share
price you paid for your shares (which may include sales charges); the cost of
a Class B or Class C share is the per-share NAV. As a general rule, your gain
or loss on a sale or exchange 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. Under current tax law, individuals are
subject to a maximum federal tax rate of 28% on net capital gain.
For most accounts (other than retirement plan accounts which will receive
Form 1099-R), IDEX will provide you with your "cost basis" when you sell
shares. This cost basis figure is important. It is figured on the single
category average cost method, and will allow you to determine whether you
have gained or lost on your sale.
You are not required to use this method; in fact, if you have previously sold
shares in a Portfolio and did not use this method to report gain or loss, it
is not available to you for sales of shares in that Portfolio. To determine
which method is most suitable for you, please consult your tax adviser.
NOTE: Please keep all regular account statements to use in conjunction with
average cost information (if received) in order to determine tax gain or loss
on the sale of Portfolio shares.
INCOME TAX OWED ON INCOME DISTRIBUTIONS. Ordinary income distributions from
all Portfolios, whether received in cash or reinvested, are subject to
ordinary income tax rates. See the Tax-Exempt Portfolio - Special
Considerations, below.
INCOME TAX OWED ON CAPITAL GAIN DISTRIBUTIONS. As explained above, the
Portfolios generally distribute net realized capital gains, to the extent
available, to shareholders once a year. These capital gains distributions,
whether paid in cash or reinvested, are subject to the maximum capital gains
tax rate of 28% -- the same tax rate as if you sell shares and realize a
gain. If you sell shares in a Portfolio, then buy shares again under the
reinvestment privilege described in Shareholder Information and Instructions,
the cost of shares sold may need to be reduced related to any front-end sales
charges you may have initially paid. See the SAI and consult your tax adviser
about these rules, as well as wash sale provisions of the Internal Revenue
Code.
THE TAX-EXEMPT PORTFOLIO --
SPECIAL CONSIDERATIONS
The Tax-Exempt Portfolio intends to continue to qualify to pay
"exempt-interest" dividends. These are distributions from the Portfolio's
investment income attributable to interest on municipal obligations.
Exempt-interest dividends are generally excluded from the calculation of the
gross income of recipients for federal income tax purposes.
The Tax-Exempt Portfolio's principal business is tax-exempt investing.
However, some of its investments or activities may result in taxable income
to its shareholders, or other tax consequences. Possible tax effects include:
ALTERNATIVE MINIMUM TAX. Some securities held by the Tax-Exempt Portfolio may
pay interest which is a tax preference item for purposes of computing the
federal
26
<PAGE>
alternative minimum tax for both individuals and corporations. For a complete
discussion of the alternative minimum tax, see the SAI.
TAXABLE INCOME DIVIDENDS. Some securities held by the Tax-Exempt Portfolio
may pay interest that is taxable as ordinary income.
CAPITAL GAINS. Any capital gains distributions from the Tax-Exempt Portfolio
are taxable as capital gains.
SOCIAL SECURITY AND RAILROAD RETIREMENT BENEFITS. Exempt-interest dividends
from the Tax-Exempt Portfolio are included in the calculation of total income
for recipients of Social Security or railroad retirement benefits. As a
result, although the exempt-interest dividends from the Portfolio are still
tax-exempt, they may be figured into the calculation of how much of a
recipient's Social Security or railroad retirement income is taxed.
CAPITAL LOSS ALLOWANCE. If shares of a Portfolio that earned exempt-interest
dividends are redeemed at a loss after being held for six months or less,
part of the loss will be disallowed for income tax purposes, to the extent of
exempt-interest dividends that were earned on the shares. It is anticipated
that this situation could only occur for shareholders in the Tax-Exempt
Portfolio.
SOME STATE TAX EXEMPTIONS
In some states, shareholders are not subject to state taxation on
distributions made by a registered investment company that were derived from
interest on or portions of their account value attributed to direct or
indirect obligations of the U.S. government. This exemption generally does
not apply to dividends derived from interest on obligations issued by
agencies or instrumentalities of the U.S. government, or interest earned on
repurchase obligations secured by such obligations or direct obligations of
the U.S. government. See Securities in Which the Portfolios Invest for an
explanation of these securities and transactions.
Since state and local tax rules vary, please consult your tax adviser.
TAX STATEMENTS
Tax forms related to dividends and other distributions paid by a Portfolio
are mailed annually. For most types of accounts, IDEX will report the
proceeds of redemptions to shareholders and the Internal Revenue Service
("IRS") annually. Average cost basis information on non-retirement plan
account redemptions is not currently reported to the IRS.
TAX WITHHOLDING
Each Portfolio, except the Tax-Exempt Portfolio, is required to withhold 31%
of all dividends, and each Portfolio, including the Tax-Exempt Portfolio, is
required to withhold 31% of capital gains distributions and redemption
proceeds, paid on behalf of any individuals and certain other noncorporate
shareholders who do not furnish the Portfolio with a correct taxpayer
identification number. Withholding from income distributions and capital gain
distributions also is required for shareholders who otherwise are subject to
backup withholding according to the IRS.
NOTE: The foregoing is only a general summary of some of the important
federal tax considerations under current law generally affecting each
Portfolio and its shareholders; see the SAI 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.
SHAREHOLDER INFORMATION
AND INSTRUCTIONS
This section discusses buying, selling, and exchanging shares of a Portfolio;
sales charges and possible waivers and discounts; and general shareholder
account information.
If you need help or additional forms, call IDEX Customer Service at (800)
851-9777 M-F, 8 a.m-7 p.m. ET, or contact your representative.
HOW TO BUY SHARES
1. OPEN AN ACCOUNT
Fill out the New Account Application form included with this prospectus
and send it to IDEX. IRAs and other retirement accounts require a
different application. To open an IRA, call or write your registered
representative or IDEX for an IRA application. If you already have an
account in an IDEX Fund or Portfolio, you may open an account in another
IDEX Fund or Portfolio with the same account features by calling or
writing to IDEX.
NOTE: You must include your Social Security or other Taxpayer
Identification Number with your application, or your account may be
subject to backup withholding or to involuntary termination.
The Fund reserves the right to reject any purchase.
2. CHOOSE A, B, OR C SHARES
For a complete discussion of A, B, and C shares, and help in understanding
which choice may be best for you, see Which Class of Shares Should You
Buy? below. Be sure to specify which Class of shares you want to buy.
3. PAY FOR YOUR SHARES
You may buy shares in the following ways:
/bullet/ By check, by mail
Make your check payable to IDEX Mutual Funds and send it to
IDEX INVESTOR SERVICES, INC.
P.O. BOX 9015
CLEARWATER, FL 34618-9015 or
201 HIGHLAND AVENUE
LARGO, FL 34640.
/bullet/ By automatic investment plan
With an automatic investment plan, you choose to invest a regular
dollar amount, and have that amount deducted from a bank account on
any day between the 3rd and 28th day of each month. Your moneys will
be transferred via ACH. To set up, change or discontinue an automatic
investment plan, call or write IDEX Customer Service.
/bullet/ By telephone
Telephone purchases may be set up by calling or writing IDEX Customer
Service, or you may select telephone purchases on your New Account
Application. Funds to pay for telephone orders will be transferred
electronically from your bank account via ACH. See also Other
Information, Telephone Transactions.
/bullet/ Through authorized dealers
Orders of at least $1,000 ("confirmed purchases") may be issued
through authorized dealers. If you open a new account through a
dealer, the dealer is responsible for opening your account and
providing your taxpayer ID number. If you already have an IDEX
account, no additional documentation is needed. Dealers may pay for
share orders with Federal funds bank wires by instructing their banks
to wire Federal funds as follows:
NATIONSBANK OF FLORIDA, N.A.
TAMPA, FLORIDA
ABA #063100277
DDA #3601194554
ATTN: IDEX INVESTOR SERVICES, INC.
CONFIRMED PURCHASE ORDER NUMBER(S)
SHAREHOLDER'S ACCOUNT NAME(S)
27
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARE QUANTITY DISCOUNTS
AGGRESSIVE GROWTH PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
GLOBAL PORTFOLIO
GROWTH PORTFOLIO
C.A.S.E. PORTFOLIO
EQUITY-INCOME PORTFOLIO
TACTICAL ASSET ALLOCATION PORTFOLIO
BALANCED PORTFOLIO
SALES CHARGE REALLOWANCE SALES CHARGE
AS % OF TO DEALERS AS A % AS % OF
AMOUNT OF PURCHASE OFFERING PRICE OF OFFERING PRICE AMOUNT INVESTED
<S> <C> <C> <C>
Less than $50,000 5.50% 4.75% 5.82%
$50,000 but less than $100,000 4.75% 4.00% 4.99%
$100,000 but less than $250,000 3.50% 2.75% 3.63%
$250,000 but less than $500,000 2.75% 2.25% 2.83%
$500,000 but less than $1,000,000 2.00% 1.75% 2.04%
$1,000,000 or more 0.00% 1.00%* 0.00%
<FN>
* This amount is not a charge incurred by shareholders. ISI, at its own expense, may make the following
payments in accordance with its procedures as may be in effect from time to time: 1.00% of the net asset
value of shares sold in amounts of $1,000,000 but less than $2,500,000; .75% of the net asset value of
shares sold in amounts of $2,500,000 but less than $4,000,000; .50% of the net asset value of shares sold in
amounts of $4,000,000 but less than $5,000,000; and .25% of the net asset value of shares sold in amounts of
$5,000,000 or more. The privilege of purchasing Class A shares at net asset value in amounts of $1,000,000
or more is not available if another net asset value purchase privilege is also applicable.
NOTE: If you redeem Class A shares on which no up-front sales charge was imposed because you invested $1
million or more during the first 12 months after buying them, you will pay a deferred sales charge equal to
1%. You do not pay any deferred sales charge when you redeem any Class A shares if you paid an up-front
sales charge on those shares, regardless of how long you have owned them.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARE QUANTITY DISCOUNTS
FLEXIBLE INCOME PORTFOLIO
INCOME PLUS PORTFOLIO
TAX-EXEMPT PORTFOLIO
SALES CHARGE REALLOWANCE SALES CHARGE
AS % OF TO DEALERS AS A % AS % OF
AMOUNT OF PURCHASE OFFERING PRICE OF OFFERING PRICE AMOUNT INVESTED
<S> <C> <C> <C>
Less than $50,000 4.75% 4.00% 4.99%
$50,000 but less than $100,000 4.00% 3.25% 4.17%
$100,000 but less than $250,000 3.50% 2.75% 3.63%
$250,000 but less than $500,000 2.25% 1.75% 2.30%
$500,000 but less than $1,000,000 1.25% 1.00% 1.27%
$1,000,000 or more 0.00% 0.50%* 0.00%
<FN>
* This amount is not a charge incurred by shareholders. ISI, at its own expense, may make the following pay-
ments in accordance with its procedures as may be in effect from time to time: .50% of the net asset value
of shares sold in amounts of $1,000,000 but less than $2,500,000; .35% of the net asset value of shares sold
in amounts of $2,500,000 but less than $4,000,000; .20% of the net asset value of shares sold in amounts of
$4,000,000 but less than $5,000,000; and .15% of the net asset value of shares sold in amounts of $5,000,000
or more. The privilege of purchasing Class A shares at net asset value in amounts of $1,000,000 or more is
not available if another net asset value purchase privilege is also applicable.
NOTE: If you redeem Class A shares on which no up-front sales charge was imposed because you invested $1
million or more during the first 12 months after buying them, you will pay a deferred sales charge equal to
1%. You do not pay any deferred sales charge when you redeem any Class A shares if you paid an up-front
sales charge on those shares, regardless of how long you have owned them.
</FN>
</TABLE>
28
<PAGE>
The dealer's bank may charge for a wire transfer. IDEX currently does not
charge for this service.
The Fund generally will not accept initial purchases for less than $500 worth
of shares (including the sales charge in the case of Class A shares).
Purchases through certain plans for regular investment, like the automatic
investment plan described above, do not require a minimum initial investment.
If you already own Portfolio shares and are buying more, the minimum purchase
amount is usually $50.
Purchases of shares generally must be "settled" (payment received by the Fund
and shares credited to your account) within three business days from when the
Fund gets your purchase order. Therefore, the Fund must receive your payment
within that time.
PER-SHARE PUBLIC OFFERING
PRICE AND NET ASSET VALUE
Public offering price and net asset value ("NAV") per share usually refer to
the purchase price and value of one share of a class of a Portfolio, Class A,
Class B, or Class C, respectively. The public offering price of a Class A
share of a Portfolio is its per share NAV plus the sales charge. With Class B
or Class C shares, there are no up-front sales charges, so the public
offering price is simply the NAV.
Net assets of an entire Portfolio are determined by adding the value of all
securities, receivables and other assets of the Portfolio, and subtracting
liabilities. However, for purposes of shareholder communication, public
offering price and NAV per share usually refer to the purchase price and
value of one share of one class of a Portfolio, respectively.
The number of shares that you buy is determined by the next NAV per share
calculated after IDEX receives and accepts your order to purchase shares. NAV
is determined separately for each class of shares of a Portfolio. Example: If
you buy $1,000 worth of Class B shares of a Portfolio, and the Portfolio's
Class B per-share NAV is $10, you will receive 100 Class B shares of that
Portfolio.
The NAV per share of each Class of a Portfolio is determined by the Fund's
custodian on each day that the New York Stock Exchange (the "Exchange") is
open, as of the close of the regular session of business on the Exchange. The
Exchange currently closes at 4:00 p.m. Eastern time each day it is open.
Per share NAV for each share class is determined by dividing the net assets
allocable to that share class by the total number of shares outstanding of
that class.
In determining total net assets and thus, NAV per share, 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-advisers under the supervision of the Board of
Trustees. The different expenses borne by each class of shares will result in
different NAVs and dividends for each Class. The NAV of Class B and Class C
shares will generally be lower than the Class A share NAV of a given
Portfolio because Class B and Class C shares carry higher expenses.
CLASS A SHARES: SALES
CHARGES, AVAILABLE DISCOUNTS
AND DEALER REALLOWANCES
When you buy Class A shares, you generally pay an up-front sales charge. When
you buy Class A shares you also pay service and distribution fees up to 0.35%
per year throughout your investment. You can reduce the up-front sales charge
percentage in four ways:
/bullet/ By investing larger amounts;
By investing under a "right of accumulation," which credits your
account for shares you already own in various IDEX portfolios and
helps you earn discounts on new investments;
/bullet/ By filing a "letter of intention" to buy enough shares within a 13
month period to qualify for a reduced sales charge; or
/bullet/ By investing as part of a qualified group.
You generally pay no sales charge upon redemption of Class A shares. However,
if you pay no up-front sales charge because you are purchasing $1 million or
more of Class A shares, you will pay a deferred sales charge of 1% if you
redeem any of those shares within the first 12 months after buying them. The
charge is assessed on an amount equal to the lesser of the then current
market value or the original cost of the shares being redeemed. No sales
charge is imposed on increases in net asset value above the initial purchase
price.
WHAT IS A "DEALER REALLOWANCE"?
IDEX sells its funds both directly and through authorized dealers in the
United States and its territories. Your Portfolio receives the entire NAV of
shares sold. ISI retains the sales charge, then reallows uniform discounts
from the applicable public offering price to all of its dealers -- this is
how dealers are compensated.
From time to time, ISI will create special promotions with dealers, in which
dealers earn larger reallowances in return for selling significant amounts of
shares or in return for certain training services. Sometimes, these dealers
may earn virtually the entire sales charge; at those times, they may be
deemed underwriters as described in the Securities Act of 1933.
Promotions may also involve non-cash incentives such as prizes or
merchandise. Non-cash compensation may also be in the form of attendance at
seminars conducted by ISI, including lodging and travel expenses.
Reallowances may also be given to banks or other financial institutions to
compensate them for their services in connection with Class A share sales and
servicing of shareholder accounts.
ISI may also pay dealers, banks or other institutions from its own funds for
administrative services in connection with larger accounts. Discounts Through
a Right of Accumulation.
DISCOUNTS THROUGH A
RIGHT OF ACCUMULATION
If you already own Class A shares of certain IDEX Portfolios, you may be able
to get a sales charge discount when you buy new shares of Portfolios
described in this Prospectus. The value of the shares you already own may be
"accumulated" -- i.e., counted together with the value of the new shares you
plan to buy -- to achieve quantities eligible for discount. Ask your sales
representative for information, or call IDEX Customer Service.
DISCOUNTS THROUGH A
LETTER OF INTENTION
You may also earn a sales charge discount on Class A shares by making a
written commitment to invest, within a 13-month period, an amount which
qualifies for discount. This written commitment, called a Letter of Intention
("LOI"), is not a binding legal obligation.
Shares purchased under the terms of an LOI will be sold at the public
offering price -- NAV plus discounted sales charge -- which applies to the
total value of the shares you commit to buy during the period of the LOI.
During this period, your share purchases are subject to the following rules:
/bullet/ The first 5% of the amount that you agree to invest will be placed in
escrow until the LOI is fulfilled or 13 months has expired.
29
<PAGE>
/bullet/ Future changes in quantity discounts (breakpoints) will apply to
purchases under the LOI.
/bullet/ Sales charge adjustments will be made if you actually buy more or less
than you commit to buy during the period of your LOI.
/bullet/ Shares bought up to 90 days before an LOI may be included in your LOI.
The LOI, however, will start on the day of the first purchase that is
included under the LOI.
/bullet/ Right of accumulation can apply to an LOI. That is, the current value
of all previous purchases into Class A shares that paid a sales charge
can be counted towards fulfillment of the LOI, but the sales charges
on these previous purchases will not be adjusted.
/bullet/ Each LOI investment must be at least 5% of the total commitment.
/bullet/ Dividends and capital gains must be reinvested in additional shares.
No cash distributions are allowed under an LOI.
You may elect to invest under an LOI on your New Account Application. For
more information about an LOI, consult your registered representative or call
IDEX Customer Service at (800) 851-9777.
DISCOUNTS AS A QUALIFIED GROUP
Members of a qualified group may purchase Class A shares at a reduced sales
charge applicable to the group within a specified period. IDEX takes into
account the anticipated aggregate amount of purchases by the group of Class A
shares and shares of other IDEX funds with a front-end sales charge. 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 Portfolio or
similar investments and (iii) satisfies uniform criteria that allows IDEX and
other dealers offering Portfolio shares to realize economies of scale.
Pension or other employee benefit plan participants may qualify for group
purchases. The Fund reserves the right to modify or terminate this privilege
at any time. For information about qualifying groups, call IDEX Customer
Service.
WAIVER OF CLASS A SHARE
SALES CHARGES FOR
CERTAIN INDIVIDUALS
Class A shares of a Portfolio may be sold without sales charges to:
/bullet/ Current or former trustees, trustees emeriti, directors, officers,
full-time employees or sales representatives of the Fund, IMI, Janus
Capital, ISI, AEGON Management, Alger Management, Luther King, Dean
Investment, C.A.S.E., or any of their affiliates;
/bullet/ Directors, officers, full-time employees and sales representatives of
any dealer having a sales agreement with ISI;
/bullet/ Any trust, pension, profit-sharing or other benefit plan for any of
the foregoing persons;
/bullet/ Any members of the family of any of the foregoing persons; or
/bullet/ "Wrap" accounts for the benefit of clients of certain broker-dealers,
financial institutions or financial planners, who have entered into
arrangements with the Fund or ISI.
Persons eligible to buy Class A shares at NAV may not impose a sales charge
when they re-sell those shares.
CLASS B SHARES: SALES
CHARGES, DEALER REALLOWANCES
AND POSSIBLE WAIVERS
When you buy Class B shares, you pay no up-front sales charge. You pay
service and distribution fees up to 1.00% per year throughout your
investment. When you redeem your shares, you may incur a sales charge. This
charge decreases year by year.
The amount subject to sales charge is determined as follows:
/bullet/ Distributions (both dividends and capital gains) are not subject to
the sales charge;
/bullet/ No sales charge is imposed on any increase in value of your shares;
/bullet/ Shares acquired by reinvesting distributions are not subject to the
sales charge;
/bullet/ If your shares are worth less than when you bought them, the charge
will be assessed on their current (or lower) value;
/bullet/ When you issue a redemption order for Class B shares, IDEX always
sells the longest-held shares first, then the next-longest held, and
so forth, until your redemption request is fulfilled.
For the purpose of calculating the contingent deferred sales charge, your
holding period for Class B shares always begins on the first day of the first
month after you pay for them.
Class B shares may not be purchased in individual amounts of more than
$500,000. In addition to the reallowances at the time of sale, dealers begin
to earn an annual service fee of up to 0.25% of average daily net assets on B
shares in the thirteenth month after their sale.
SALES CHARGE WAIVERS
ON CLASS B SHARES
The sales charge on Class B shares may be waived in certain circumstances:
/bullet/ Following the death of the shareholder;
/bullet/ Following the total disability of the shareholder, as determined by
the Social Security Administration. The waiver applies only to shares
held at the time of the determination of the disability;
/bullet/ On redemptions made under provisions of the Fund's systematic
withdrawal plan, but limited to 12% annually of the value of the
account on the date the systematic withdrawal plan is established; or
/bullet/ After selling Class B shares of one portfolio, if you decide to
reinvest those proceeds within 90 days in Class B shares of another
portfolio, the sales charge on your initial redemption will be waived.
See the SAI for complete information about Class B share sales charge
waivers.
CLASS C SHARES: SALES CHARGES
AND DEALER REALLOWANCES
When you buy Class C shares, you pay no up-front sales charge. Throughout
your investment, you will be charged service and distribution fees of up to
0.90% per year.
The Tax-Exempt Portfolio intends to limit these fees to no more than 0.60% of
average daily net assets of its Class C shares.
ISI currently pays dealers for sales of Class C shares a distribution fee not
to exceed 0.90% per year of average daily net assets of Class C shares sold
by that dealer.
NOTE: The purpose and function of the contingent deferred sales charge on
Class B shares, and of the annual service and distribution fees on Class B
and Class C shares, are the same as the purpose and function of the up-front
commission and annual service and distribution fees on Class A shares.
WHICH CLASS OF SHARES
SHOULD YOU BUY?
Class A, Class B, and Class C share commissions, dealer reallowances,
discounts, and possible waivers have been explained in the sections above.
Please consult with your registered representative to decide which class of
shares is
30
<PAGE>
appropriate for you. Which class makes the most sense for you will depend
upon your particular circumstances and investment goals. The Fund provides
three classes of shares with differing charges so that you can choose what
makes sense in your situation. Some things you should think about:
/bullet/ How much you intend to invest. For example, Class A shares have an
initial shares charge, but if you invest more you may get a lower
percentage sales charge or no sales charge at all on Class A shares.
/bullet/ How long you intend to keep shares. Class B shares charge a sales load
upon redemption during the first six years, but the amount declines
each year and goes to zero if you keep your shares more than six
years. However, Class A shares on which you pay an up-front sales
charge and Class C shares (that do not have any up-front sales
charges) are not subject to any sales charges when you redeem.
/bullet/ Whether you think you will keep your shares long enough that the
higher annual distribution and services fees paid by Class B or Class
C shares will add up to more than the up-front sales charge on Class A
shares, based on the amount you are investing. Remember that if you
hold Class B shares for eight years they automatically become Class A
shares (which have a lower annual distribution and service fee than
any other class of the Fund's shares), even though you do not pay any
up-front sales charge. Class C shares have lower service and
distribution charges than Class B shares, but Class C shares do not
convert to Class A shares free of the sales charge.
NOTE: For a hypothetical comparison of the expenses which you might incur
with a $1,000 investment in Class A, Class B, and Class C shares, see Examples
of Expenses under Summary of Expenses.
Class A, Class B, and Class C shares of a Portfolio represent interests in
the same portfolio of investments. They generally have the same rights.
However, each class of shares bears separate expenses for service and
distribution and other expenses pertaining to that class. Each class of
shares has separate voting rights on its distribution plan, or on any other
matters involving only that class.
Dividends and other distributions are calculated in a similar fashion and
paid at the same time for each class of shares. The per share dividends from
net investment income on Class B and Class C shares are expected to be lower
than those from Class A shares because of Class B and Class C shares' higher
expenses.
<TABLE>
<CAPTION>
CLASS B SHARES
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE*
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth and sixth 1%
Seventh and later 0%
<FN>
* The charge is assessed on an amount equal to the lesser of the then current market value or the original
cost of the shares being redeemed. No sales charge is imposed on increases in net asset value above the ini-
tial purchase price.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES DEALER REALLOWANCES
GROWTH PORTFOLIO, GLOBAL PORTFOLIO, BALANCED PORTFOLIO, CAPITAL APPRECIATION PORTFOLIO, AGGRESSIVE GROWTH
PORTFOLIO, EQUITY-INCOME PORTFOLIO, TACTICAL ASSET ALLOCATION PORTFOLIO, C.A.S.E. PORTFOLIO
AMOUNT OF CLASS B SHARES PURCHASED DEALER REALLOWANCE %
<S> <C>
Up to $250,000 4.00%
$250,000 to $500,000 2.50%
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE INCOME PORTFOLIO, TAX-EXEMPT PORTFOLIO, INCOME PLUS PORTFOLIO
AMOUNT OF CLASS B SHARES PURCHASED DEALER REALLOWANCE %
<S> <C>
Up to $250,000 3.00%
$250,000 to $500,000 2.00%
<FN>
NOTE: Class B shares are not sold in amounts over $500,000.
</FN>
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Up-front sales charge Yes No No
Higher ongoing service and distribution
fees No Yes Yes
Sales charge on redemption No Yes* No
Quantity sales charge discounts available Yes No No
<FN>
* The redemption charge on Class B shares declines year by year and reaches 0% after seven years. After eight
years, Class B shares convert to A shares, which are subject to lower ongoing fees.
</FN>
</TABLE>
HOW TO REDEEM (SELL) SHARES
GENERAL INFORMATION. You may redeem (sell) your shares at any time at the
next determined NAV after IDEX receives your redemption request. For
information about how NAV is determined, see Per-Share Public Offering Price
and Net Asset Value under How to Buy Shares.
IDEX will normally pay you for your shares within three days of receiving a
valid redemption request. However, if you have purchased the shares by check
or ACH, IDEX must first be sure your payment has cleared. It will, therefore,
not pay for redemptions of this kind until such purchase(s) has cleared the
bank, which may take up to 15 days.
Your check will be sent by first-class mail. You can pay $20 (by check or
deduction from your account) for overnight delivery, if you wish, and if the
service is available to your account address.
Redemption and repurchase of shares may be suspended or payment postponed
during any period when the Exchange is closed (other then on weekends or
customary holidays) or trading on the Exchanges is restricted, or during a
period of an emergency or other periods during which the SEC permits such
suspension.
This section describes selling shares for cash. For other circumstances, see
Redemption of Shares in the SAI.
As described under How to Buy Shares, Class B and certain Class A share sales
will be charged the appropriate contingent deferred sales charge applicable
to certain redemptions.
TO REDEEM SHARES BY MAIL. Send your redemption request to:
IDEX INVESTOR SERVICES, INC.
ATTENTION: REDEMPTIONS
P.O. BOX 9015
CLEARWATER, FL 34618-9015.
Your redemption request must be signed by the owner(s) of the account, or by
a person authorized to act for the owner(s).
/bullet/ Include the name of the Portfolio, the class of shares, the number of
shares or dollar amount of shares to be sold, the account number, and
the name(s) on the account.
/bullet/ If you have previously requested share certificates, they must be
returned if you wish to redeem these shares.
/bullet/ Your signature may have to be guaranteed. See Signature Guarantees
below.
Evidence of the authority of the person seeking a redemption is required for
all redemptions of shares held in the name of a corporation, a partnership,
trust or fiduciary.
SIGNATURE GUARANTEES. For your protection, a signature guarantee will be
required for the following transactions:
/bullet/ redemption requests larger than $100,000 by check;
/bullet/ redemption requests of any size made in an account where the
registration and/or address has been changed in the last 10 days;
/bullet/ redemptions by check made payable to someone other than the name on
the account, and/or sent to an address other than the address of
record;
/bullet/ redemptions by Federal funds bank wire to a bank that is not
pre-designated on your account;
/bullet/ certain requests to change the registered owners of an account; or
/bullet/ to change certain arrangements in your existing systematic withdrawal
plan or cash dividend payment details.
This guarantee must be made by a national or state bank, a member firm of a
national stock exchange, or any other eligible guarantor as defined by the
SEC. Notarization is not an acceptable substitute. IDEX may require signature
guarantees for certain other circumstances from time to time.
TO REDEEM SHARES BY TELEPHONE AND RECEIVE YOUR MONEY BY CHECK. You may redeem
shares in amounts up to $50,000 by phone per day and receive your money by
check unless you have declined this privilege on the New Account Application.
Call (800) 851-9777 to order a phone redemption.
Telephone redemption with payment by check is not allowed:
/bullet/ For shares purchased by check or ACH within the past 15 days;
/bullet/ For retirement accounts (except IRAs, which will be subject to 10%
withholding);
/bullet/ For shares represented by certificates;
/bullet/ In amounts of $50,000 and over; or
/bullet/ In accounts where the registration and/or address has been changed
within the past 10 days.
If the account is held in more than one name, IDEX may accept the telephone
sale order of any one account holder. Your registered representative may
redeem shares on your behalf by telephone unless you have declined this
privilege on your New Account Application.
The Fund reserves the right to alter or modify the telephone redemption
privilege. See Other Information -- Telephone Transactions for further
information.
TO REDEEM SHARES BY TELEPHONE AND RECEIVE YOUR MONEY ELECTRONICALLY BY ACH OR
BANK WIRE. You may sell up to $50,000 worth of shares by phone and receive
your money by ACH or Federal funds bank wire to a pre-authorized bank
account. To receive this privilege, complete the appropriate section of the
New Account Application. If you already have an account, and wish to add the
electronic payment privilege, mail a signature guaranteed letter and bank
information (usually a voided check) to IDEX. ACH transfers usually take
three banking days. No fee is currently charged for this service.
Funds sent via Federal funds bank wire usually arrive on the next banking
day. Each time you have money wired to your bank account via a Federal funds
wire, a $20 fee will be charged. This amount will be deducted from your
account by the sale of shares. The receiving bank may also charge you a fee.
Federal funds wire transfers require a minimum redemption of $1,000.
32
<PAGE>
If you do not have the wire transfer privilege, and do not want to establish
it as a standing privilege on your account, you may still redeem shares and
receive funds at a U.S. bank via Federal funds wire by writing a letter of
instruction to IDEX. A Federal funds wire redemption generally requires a
signature guarantee.
TO REDEEM SHARES THROUGH A REGISTERED DEALER. You may also place confirmed
redemption requests through registered securities dealers. Some of these
dealers use the National Securities Clearing Corporation ("NSCC") electronic
order system. It is the responsibility of such dealers to transmit your sell
orders promptly. Payment for these redemption requests will be made to the
dealer within three days after IDEX receives your order, properly signed,
including share certificates and appropriate signature guarantees where
necessary. IDEX reviews all such orders.
TO REDEEM SHARES AUTOMATICALLY, AT REGULAR INTERVALS. You may establish a
systematic withdrawal plan ("SWP") on your New Account Application or by
calling Customer Service and obtaining the forms to do so. To set up an SWP,
you must:
/bullet/ Have an account worth at least $10,000;
/bullet/ Withdraw only up to 12% annually of the value of your account, if you
own B shares;
/bullet/ Withdraw at least $50 with each redemption.
You may receive your money via ACH to your bank account or by check to your
address of record.
Withdrawals paid by check are normally made seven to 10 days before the first
of the month, although the Fund cannot guarantee that you will receive your
money exactly by the date you select. You may make withdrawals monthly,
quarterly, or annually.
Special considerations in using an SWP:
/bullet/ If an SWP is established on a new account, the initial disbursement
will not be made within 15 days of the date of your initial purchase.
/bullet/ Dividends and capital gains distributions on accounts with an active
SWP are usually paid in additional shares of the Portfolio.
/bullet/ If the requested payments under an SWP require sale of more shares
than have been credited through the payment of dividends and capital
gains distributions in additional shares, your original investment may
depleted and ultimately exhausted.
/bullet/ Payments under an SWP probably will include some amount of your
original investment and are taxable events.
/bullet/ An SWP may not be advantageous to maintain while you simultaneously
buy shares in the same portfolio; you'll pay more in sales charges
than you have to.
/bullet/ You can change or cancel an SWP at any time by writing or calling
IDEX. An SWP will be terminated when all shares in an account have
been redeemed, or when IDEX receives notice of the account holder's
death.
REINVESTMENT PRIVILEGE
If you sell Class A or Class B shares, you may repurchase Class A or Class B
shares in any Portfolio of the same class or the IDEX Fund, in an amount not
more than the amount you sold without incurring a new sales charge. To do this,
you must send a written request to IDEX within 90 days after you sell your
shares. IDEX reserves the right to modify or eliminate this reinvestment
privilege at any time. Exchanging shares is allowed any time, generally
without new sales charges. See How to Exchange Shares, below.
When you exercise this reinvestment privilege:
/bullet/ You may reinvest the proceeds of a Class A share sale in Class A
shares without paying the up-front commission;
/bullet/ You may reinvest the proceeds of a Class B share sale in Class B
shares, and your new shares will be considered the same age as your
old shares -- i.e., if you sell three-year-old shares and buy new
shares, the new shares will be, effectively, three years old, and
therefore subject to a smaller contingent deferred sales charge;
/bullet/ The contingent deferred sales charge you paid when you sold your Class
B shares will also be reinvested in new Class B shares;
/bullet/ Alternatively, you may reinvest the proceeds of a Class B share sale
(less the contingent deferred sales charge paid) in Class A shares
without paying the up-front sales charge on these Class A shares.
NOTE: Certain distributions from qualified plans are not eligible for this
privilege.
HOW TO EXCHANGE SHARES
GENERAL INFORMATION. You may exchange shares of one Fund or Portfolio for
shares in the same class of another Portfolio. No sales charges are imposed
at the time of an exchange; exchanges must be made in amounts of $500 or
more. You may exchange Class A shares for Class A shares, Class B shares for
Class B shares, and Class C shares for Class C shares, among any of the
Portfolios in this Fund. Class A shares may be exchanged for shares in any
Funds or Portfolios of the IDEX group.
In the case of Class B share exchanges, the contingent deferred sales charge
will be calculated from the date you bought your original shares -- i.e.,
your new shares will be the same age as your old shares, so your sales charge
will not increase.
In addition, you may exchange Class A or Class C shares for any of the three
portfolios of the Cash Equivalent Fund or the California Tax-Exempt Money
Market Fund. Class B shares may be exchanged only for the Cash Equivalent
Money Market Portfolio. See Money Market Fund Exchange Privilege, below.
You automatically have the telephone exchange privilege unless you decline it
on your New Account Application.
Exchanges may be made by mail or by phone. Write or call IDEX Customer
Service.
You may exchange all the shares in one account for shares in another account.
All special account features present in the old account, such as Automatic
Investment Plan, Letter of Intention, or Systematic Withdrawal/Exchange Plan,
will be transferred to the new account, unless IDEX is otherwise instructed.
You may exchange part of the shares in one account and open a new account for
new shares in another fund or portfolio. In partial exchanges, all special
account features except Automatic Investment Plan and Systematic
Withdrawal/Exchange Plan will be transferred to the new account, unless IDEX
is otherwise instructed.
Before making an exchange into a Fund or Portfolio which is new to you, read
the Prospectus carefully. Obtain Prospectuses by calling or writing IDEX
Customer Service.
The Fund reserves the right to limit exchanges or modify or terminate the
exchange privilege at any time.
33
<PAGE>
TELEPHONE EXCHANGES. Call IDEX Customer Service at (800) 851-9777 to make a
telephone exchange. New shares acquired by phone exchange must be registered
in exactly the same name as the shares sold by phone exchange. No share
certificates are available for shares acquired through a phone exchange. See
Other Information -- Telephone Transactions for more information.
SYSTEMATIC EXCHANGES. You may choose, either on your New Account
Application, or by writing IDEX, to exchange shares of the same class
automatically at regular intervals from one Portfolio to another. All
conditions described above under General Information also apply to systematic
exchanges.
New shares acquired by systematic exchange must be registered in exactly the
same name as the shares sold in a systematic exchange. No share certificates
are available for shares acquired through a systematic exchange.
MONEY MARKET FUND EXCHANGE PRIVILEGE. You may make sales charge-free
exchanges of at least $500 at NAV from Class A or Class C shares to any of
the three portfolios of the Cash Equivalent Fund or the California Tax-Exempt
Money Market Fund. Class B shares may be exchanged without sales charge,
minimum $500 at NAV, only into the Cash Equivalent Money Market Portfolio.
You may also sell your shares of any of the Money Market Funds in minimum
amounts of $500 and invest the proceeds in the same class of shares of any of
the other Portfolios.
Sales charges will be made on exchanges from Money Market Funds when you have
originally invested in these Money Market Funds, then decided to exchange for
shares of a Portfolio in the Fund.
Systematic exchanges may also be made between the Money Market Funds and the
Portfolios of the Fund. See Systematic Exchanges, above, for conditions.
These Funds (the "Money Market Funds"), which are separately managed by
Zurich Kemper Investments, Inc., are open-end, diversified money market
mutual funds.
Sales of shares in connection with Money Market Fund exchanges will be
effected as of the end of the day when your exchange request is received, if
it is 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 a Money Market Fund
exchange, you should consider the investment objective of the Money Market
Fund and read its current Prospectus.
You may request a Money Market Fund exchange by writing or calling IDEX
Customer Service.
CLASS B SHARES -- SALES CHARGE DETERMINATION IN MONEY MARKET FUND EXCHANGES.
When you exchange Class B shares of a Portfolio for Class B shares of the
Cash Equivalent Money Market Portfolio, you will not be charged a contingent
deferred sales charge. You will be charged the sales charge if you
subsequently sell the Class B shares of the Cash Equivalent Money Market
Portfolio, but the time you held the shares of the Cash Equivalent Money
Market Portfolio will not count toward figuring the sales charge.
Similarly, if you exchange Class B shares of the Cash Equivalent Money Market
Portfolio back for Class B shares of a Portfolio of the Fund, no sales charge
will be made. However, when you eventually sell the Class B shares of your
Portfolio, you will pay the deferred sales charge, which is determined only
for the time you hold Class B shares in the Fund. The time you held Class B
shares of the Cash Equivalent Money Market Portfolio does not count toward
figuring your ultimate sales charge.
OTHER INFORMATION
MINIMUM ACCOUNT BALANCE. The Fund may redeem any account in which the
balance has fallen below $500 due to redemptions and there are no share
purchases within the past 60 days, unless the account is less than 24 months
old. If the account holds Class B shares, a sales charge will be deducted
from this sale.
The Fund will notify the holder of such an account 60 days before closing it.
After being notified, the account holder may make share purchases to bring
the account above the $500 minimum.
REPURCHASE ARRANGEMENTS. For the convenience of its shareholders, the Fund
has authorized ISI to act as its agent in the repurchase of Fund shares. This
procedure may be terminated at any time. If you sell your shares to ISI
through a dealer, your dealer may charge you an additional fee.
RETIREMENT PLANS. Class A, Class B, and Class C shares may be purchased in
qualified retirement plans, including individual retirement accounts (IRAs),
401(k)s, Simplified Employee Pension Plans (SEP-IRAs), corporate and self-
employed pension and profit sharing plans (Keoghs) and 403(b)(7) programs.
Do not try to open a retirement plan with the application in this Prospectus.
These plans require a different application. Call or write IDEX Customer
Service to obtain the application.
Retirement plan accounts are ordinarily charged a $12 per year maintenance
fee, with a maximum of $24 a year per taxpayer ID number. However, if your
retirement plan is under custody of Investors Fiduciary Trust Company and
your combined retirement account balances per taxpayer ID number are more
than $50,000, there is generally no fee.
The SAI contains more information about retirement plans. Investors should
consult with their tax advisers about tax-deferral issues in such plans.
TELEPHONE TRANSACTIONS. The Fund, ISI and IDEX will not be liable for
complying with telephone instructions, and investors will bear the risk of
loss. The Fund, ISI and/or IDEX will employ reasonable procedures to make
sure telephone instructions are genuine. These procedures may include, among
others, requiring forms of personal identification, providing written
confirmation of telephone transactions and/or tape recording telephone
orders. If the Fund, ISI and/or IDEX do not employ such reasonable
procedures, they may be held liable for loss due to fraudulent or
unauthorized telephone instructions.
HOW TRANSACTIONS ARE CONFIRMED. After most every account transaction, except
when shares are bought with reinvested dividends and capital gains
distributions and except for automatic redemptions or purchases via ACH, you
will receive a statement. This statement will show the details of the
transaction, the number of shares held in your account and the transactions
since the beginning of the year. You will receive a quarterly statement which
details your dividend and capital gain distribution reinvestments as well as
your ACH transactions.
HISTORICAL STATEMENTS. You may order a historical statement covering years
before the current year.
SHARE CERTIFICATES. Account holders ordinarily do not want share
certificates. Shares are normally recorded on the Fund's books and no
certificates are issued. You may, however, obtain certificates for your
shares, with these limitations:
34
<PAGE>
/bullet/ No certificates will be issued for fractional shares;
/bullet/ No certificates will be issued for accounts holding less than 30
shares, except in connection with sales or transfers of shares from
other funds when you already hold certificates;
/bullet/ Certificates are issued only in the same name as your account;
/bullet/ Certificates are not issued for retirements plan accounts with IFTC as
custodian.
If you want certificates representing your shares, you may write or call IDEX
to request them. You may return share certificates to IDEX at any time. There
may be a charge for cancelling and replacing lost or stolen share
certificates. Notify IDEX immediately if your certificates are lost or
stolen. Remember that if you ask for a certificate for your shares, you will
not be able to redeem or exchange your shares by telephone. Also, you will
have to send your share certificate to us when you want to redeem or exchange
those shares.
35
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
BRIEF EXPLANATION OF RATING CATEGORIES
BOND RATING EXPLANATION
- ------------------------------------ ---------------- ---------------------------------------------------------------------------
<S> <C> <C>
STANDARD & POOR'S CORPORATION AAA Highest rating; extremely strong capacity to pay principal and interest.
AA High quality; very strong capacity to pay principal and interest.
A Strong capacity to pay principal and interest; somewhat more susceptible to
the adverse effects of changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest; normally exhibit adequate
protection parameters, but adverse economic conditions or changing
circumstances more likely to lead to a weakened capacity to pay principal
and interest than for higher rated bonds.
BB, B, Predominantly speculative with respect to the issuer's capacity to meet
CCC, CC, C required interest and principal payments. BB - lowest degree of
speculation; C - the highest degree of speculation. Quality and protective
characteristics outweighed by large uncertainties or major risk exposure to
adverse conditions.
D In default.
- ------------------------------------ ---------------- ---------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC. Aaa Highest quality, smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the high-grade bond
group.
A Upper-medium grade obligations; many favorable investment attributes.
Baa Medium-grade obligations; neither highly protected nor poorly secured.
Interest and principal appear adequate for the present but certain
protective elements may be lacking
or may be unreliable over any great length of time.
Ba More uncertain, with speculative elements. Protection of interest and
principal payments not well safeguarded during good and bad times.
B Lack characteristics of desirable investment; potentially low assurance
of timely interest and principal payments or maintenance of other contract
terms over time.
Caa Poor standing, may be in default; elements of danger with respect to
principal or interest payments.
Ca Speculative in a high degree; could be in default or have other marked
shortcomings.
C Lowest-rated; extremely poor prospects of ever attaining investment
standing.
</TABLE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended September 30, 1995, the percentage of
securities holdings by rating category based upon a weighted average was:
<TABLE>
<CAPTION>
BONDS- S&P RATING FLEXIBLE INCOME PORTFOLIO INCOME PLUS PORTFOLIO
<S> <C> <C>
AAA 12.6% -%
AA 3.7% 2.8%
A 11.4% 1.7%
BBB 27.1% 44.2%
BB 13.1% 14.6%
B 28.0% 18.7%
CCC -% -%
CC -% -%
C -% -%
Preferred Stock -% 0.5%
Cash, Equivalents and Assets Less Liabilities 4.1% 17.5%
------------------------------------------------- ------------------------------ --------------------------
TOTAL 100% 100%
------------------------------------------------- ------------------------------ --------------------------
</TABLE>
No other Fund held 5% or more of its assets in bonds rated below investment
grade, including unrated bonds deemed to be the equivalent of noninvestment
grade securities, for the fiscal period ended September 30, 1995. Unrated
securities and securities that have received different ratings from more than
one agency will be treated as noninvestment grade securities unless the
portfolio manager determines that such securities are the equivalent of
investment grade securities.
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<PAGE>
APPENDIX B
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of the types of securities
in which the Portfolios may invest. The Portfolios may invest in these
securities to the extent permitted by their investment objectives and
policies. The Portfolios are not limited by this discussion and may invest in
ANY type of security unless precluded by the policies discussed elsewhere in
this Prospectus or in the SAI.
I. EQUITY AND DEBT SECURITIES
BONDS ARE DEBT SECURITIES issued by a company, municipality or government
agency. The issuer of a bond is required to pay the holder the amount of the
loan (or par value) at a specified maturity and to make scheduled interest
payments.
CERTIFICATES OF PARTICIPATION ("COPS") are certificates representing an
interest in a pool of securities. Holders are entitled to a proportionate
interest in the underlying securities. Municipal lease obligations are often
sold in the form of COPs. See "Municipal lease obligations" below.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from
1 to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The Portfolios may purchase commercial paper
issued under Section 4(2) of the Securities Act of 1933. The Portfolios may
determine that such securities are liquid under guidelines established by the
Trustees.
COMMON STOCK represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on
common stock are not fixed but are declared at the discretion of the issuer's
board of directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed
dividend or interest payment and are convertible into common stock at a
specified price or conversion ratio.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation
that entitle the holder to dividends and capital gains on the underlying
security. Receipts include those issued by domestic banks (American
Depositary Receipts), foreign banks (Global or European Depositary Receipts)
and broker-dealers (depositary shares).
FIXED-INCOME SECURITIES are securities that pay a fixed rate of return. The
term generally includes short- and long-term government, corporate and
municipal obligations that pay a fixed rate of interest or coupons for a
specified period of time and preferred stock, which pays fixed dividends.
Coupon and dividend rates may be fixed for the life of the issue or, in the
case of adjustable and floating rate securities, for a shorter period.
HIGH-YIELD/HIGH-RISK BONDS are securities that are rated below investment
grade by the primary rating agencies (BB or lower by Standard & Poor's and Ba
or lower by Moody's). Other terms commonly used to describe such securities
include "lower rated bonds," "non-investment grade bonds" and "junk bonds."
INDUSTRIAL DEVELOPMENT BONDS are revenue bonds that are issued by a public
authority but which may be backed only by the credit and security of a
private issuer and may involve greater credit risk. See "Municipal
securities" below.
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in an organized pool of
mortgages or other debt. These securities are generally pass-through
securities, which means that principal and interest payments on the
underlying securities (less servicing fees) are passed through to
shareholders on a pro rata basis. These securities involve prepayment risk,
which is the risk that the underlying mortgages or other debt may be
refinanced or paid off prior to their maturities during periods of declining
interest rates. In that case, a portfolio manager may have to reinvest the
proceeds from the securities at a lower rate. Potential market gains on a
security subject to prepayment risk may be more limited than potential market
gains on a comparable security that is not subject to prepayment risk.
MUNICIPAL LEASE OBLIGATIONS are revenue bonds backed by leases or installment
purchase contracts for property or equipment. Lease obligations may not be
backed by the issuing municipality's credit and may involve risks not
normally associated with general obligation bonds and other revenue bonds.
For example, their interest may become taxable if the lease is assigned and
the holders may incur losses if the issuer does not appropriate funds for the
lease payments on an annual basis, which may result in termination of the
lease and possible default.
MUNICIPAL SECURITIES are bonds or notes issued by a U.S. state or political
subdivision. A municipal security may be a general obligation backed by the
full faith and credit (i.e., the borrowing and taxing power) of a municipality
or a revenue obligation paid out of the revenues of a designated project,
facility or revenue source.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are foreign investment funds or
trusts. In addition to bearing their proportionate share of a Portfolio's
expenses, shareholders may indirectly bear similar expenses of PFICs and
similar trusts.
PREFERRED STOCK is a class of stock that generally pays dividends at a
specified rate and has preference over common stock in the payment of
dividends and liquidation. Preferred stock generally does not carry voting
rights.
REPURCHASE AGREEMENTS involve the purchase of a security by a Portfolio and a
simultaneous agreement by a bank or dealer to repurchase the security from
the Portfolio at a specified date or upon demand. This technique offers a
method of earning income on idle cash. These securities involve the risk that
the seller will fail to repurchase the security, as agreed. In that case, a
Portfolio will bear the risk of market value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security.
REVERSE REPURCHASE agreements involve the sale of a security by a Portfolio
to another party (generally a bank or dealer) in return for cash and an
agreement by the Portfolio to buy the security back at a specified price and
time. This technique may be used to provide cash to satisfy unusually high
redemption requests or for other temporary or emergency purposes.
STANDBY COMMITMENTS are obligations purchased by a Portfolio from a dealer
that give the Portfolio the option to sell a security to the dealer at a
specified price.
TENDER OPTION BONDS are generally long-term securities that have been coupled
with an option to tender the securities to a bank, broker-dealer or other
financial institution at periodic intervals and receive the face value of the
bond. This type of security is commonly used as a means of enhancing the
liquidity of municipal securities.
37
<PAGE>
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of
one to ten years and Treasury bonds may be issued with any maturity but
generally have maturities of at least ten years. U.S. government securities
also include indirect obligations of the U.S. government that are issued by
federal agencies and government sponsored entities. Unlike Treasury
securities, agency securities generally are not backed by the full faith and
credit of the U.S. government. Some agency securities are supported by the
right of the issuer to borrow from the Treasury, others are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations and others are supported only by the credit of the sponsoring
agency.
WARRANTS are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at
the time of issuance of the warrant. The right may last for a period of years
or indefinitely.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD TRANSACTIONS generally involve the
purchase of a security with payment and delivery due at some time in the
future (i.e., beyond normal settlement). The Portfolios do not earn interest
on such securities until settlement and bear the risk of market value
fluctuations in between the purchase and settlement dates. New issues of
stocks and bonds, private placements and U.S. government securities may be
sold in this manner.
ZERO COUPON BONDS are debt securities that do not pay regular interest at
regular intervals, but are issued at a significant discount from face value.
The discount approximates the total amount of interest the security will
accrue from the date of issuance to maturity. Strips are debt securities that
are stripped of their interest (usually by a financial intermediary) after
the securities are issued. The market value of these securities generally
fluctuates more in response to changes in interest rates than interest-paying
securities of comparable maturity.
II. FUTURES, OPTIONS AND
OTHER DERIVATIVES
FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Portfolios may buy and sell futures contracts on foreign
currencies, securities and financial indices including interest rates or an
index of U.S. government, foreign government, equity or fixed-income
securities. An option on a futures contract gives the buyer the right, but
not the obligation, to buy or sell a futures contract at a specified price on
or before a specified date. Futures contracts and options on futures are
standardized and traded on designated exchanges.
INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices or other financial indicators.
Such securities may be positively or negatively indexed (i.e. their value may
increase or decrease if the reference index or instrument appreciates).
Indexed/structured securities may have return characteristics similar to
direct investments in the underlying instruments and may be more volatile
than the underlying instruments. A Portfolio bears the market risk of an
investment in the underlying instruments, as well as the credit risk of the
issuer.
INVERSE FLOATERS are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument.
OPTIONS are the right, but not the obligation, to buy or sell a specified
amount of securities or other assets on or before a fixed date at a
predetermined price. The Portfolios may purchase and write put and call
options on securities, securities indices and foreign currencies. A put
option gives the holder the right, upon payment of a premium, to deliver a
specified amount of a security to the writer of the option on or before a
fixed date at a predetermined price. A call option gives the holder the
right, upon payment of a premium, to call upon the writer to deliver a
specified amount of a security on or before a fixed date at a predetermined
price.
FORWARD CONTRACTS are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are
not currently exchange traded and are typically negotiated on an individual
basis. The Portfolios may enter into forward currency contracts to hedge
against declines in the value of non-dollar denominated securities or to
reduce the impact of currency appreciation on purchases of nondollar
denominated securities. They may also enter into forward contracts to
purchase or sell securities or other financial indices.
INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
38
<PAGE>
IDEX II AGGRESSIVE GROWTH PORTFOLIO
IDEX II CAPITAL APPRECIATION PORTFOLIO
IDEX II GLOBAL PORTFOLIO
IDEX II GROWTH PORTFOLIO
IDEX II C.A.S.E. PORTFOLIO
IDEX II EQUITY-INCOME PORTFOLIO
IDEX II TACTICAL ASSET ALLOCATION PORTFOLIO
IDEX II BALANCED PORTFOLIO
IDEX II FLEXIBLE INCOME PORTFOLIO
IDEX II INCOME PLUS PORTFOLIO
IDEX II TAX-EXEMPT PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
IDEX II SERIES FUND
201 Highland Avenue
Largo, Florida 34640
Shareholder Services (800) 851-9777
IDEX II Aggressive Growth Portfolio, IDEX II Capital Appreciation
Portfolio, IDEX II Global Portfolio, IDEX II Growth Portfolio, IDEX II
C.A.S.E. Portfolio, IDEX II Equity-Income Portfolio, IDEX II Tactical Asset
Allocation Portfolio, IDEX II Balanced Portfolio, IDEX II Flexible Income
Portfolio, IDEX II Income Plus Portfolio (formerly known as IDEX II High
Yield Portfolio) and IDEX II Tax-Exempt Portfolio (each a "Portfolio" and
collectively, the "Portfolios") are series of IDEX II Series Fund (the
"Fund"), an open-end management investment company that offers a selection of
investment portfolios. All Portfolios other than the Capital Appreciation
Portfolio are diversified, while the Capital Appreciation Portfolio is
nondiversified. IDEX II Aggressive Growth Portfolio seeks long-term capital
appreciation. IDEX II C.A.S.E. Portfolio seeks annual growth of capital
through investments in companies whose management, financial resources and
fundamentals appear attractive on a scale measured against each company's
present value. IDEX II Capital Appreciation Portfolio seeks long-term growth
of capital in a manner consistent with the preservation of capital by
emphasizing investments in common stocks of companies by normally investing
at least 50% of its equity assets in securities issued by medium-sized
companies as described in the Prospectus. IDEX II Global Portfolio seeks
long-term growth of capital in a manner consistent with preservation of
capital, primarily through investments in common stocks of foreign and
domestic issuers. IDEX II Growth Portfolio seeks only growth of capital. IDEX
II Equity-Income Portfolio seeks to provide current income, long-term growth
of income and capital appreciation. IDEX II Tactical Asset Allocation
Portfolio seeks preservation of capital and competitive investment returns.
IDEX II Balanced Portfolio seeks long-term capital growth, consistent with
preservation of capital and balanced by current income. IDEX II Flexible
Income Portfolio seeks to obtain maximum total return for its shareholders,
consistent with preservation of capital, by actively managing a portfolio of
income-producing securities. IDEX II Income Plus Portfolio seeks to provide
as high a level of current income as is consistent with the avoidance of
excessive risk. IDEX II Tax-Exempt Portfolio seeks to provide maximum current
interest income exempt from federal income tax in a manner consistent with
preservation of capital.
This Statement of Additional Information is not a Prospectus, and should
be read in conjunction with the Prospectus dated February 1, 1996 which may
be obtained free of charge by writing or calling the Fund at the above
address or telephone number. This Statement of Additional Information
contains additional and more detailed information about each Portfolio's
operations and activities than that set forth in the Prospectus.
ISF00065-2/96
<PAGE>
IDEX II SERIES FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVES .................................................................... 1
INVESTMENT RESTRICTIONS, POLICIES AND PRACTICES .......................................... 1
Investment Restrictions of IDEX II Aggressive Growth Portfolio ......................... 1
Investment Restrictions of IDEX II Capital Appreciation Portfolio and
IDEX II Balanced Portfolio ............................................................ 3
Investment Restrictions of IDEX II Global Portfolio .................................... 5
Investment Restrictions of IDEX II Growth Portfolio and
IDEX II Flexible Income Portfolio ..................................................... 7
Investment Restrictions of IDEX II C.A.S.E. Portfolio .................................. 9
Investment Restrictions of IDEX II Equity-Income Portfolio ............................. 11
Investment Restrictions of IDEX II Tactical Asset Allocation Portfolio ................ 12
Investment Restrictions of IDEX II Income Plus Portfolio ............................... 14
Investment Restrictions of IDEX II Tax-Exempt Portfolio ................................ 16
OTHER POLICIES AND PRACTICES OF THE PORTFOLIOS ........................................... 18
Futures, Options and Other Derivative Instruments ...................................... 18
Futures Contracts .................................................................... 18
Options on Futures Contracts ......................................................... 21
Options on Securities ................................................................ 22
Options on Foreign Currencies ........................................................ 26
Forward Contracts .................................................................... 27
Swaps and Swap-Related Products ...................................................... 28
Eurodollar Instruments ............................................................... 29
Special Investment Considerations and Risks .......................................... 30
Additional Risks of Options on Foreign Currencies, Forward Contracts and
Foreign Instruments ................................................................. 30
Other Investment Companies ............................................................. 31
Zero Coupon, Pay-In-Kind and Step Coupon Securities .................................... 31
Income-Producing Securities ............................................................ 32
Lending of Portfolio Securities ........................................................ 33
Joint Accounts ......................................................................... 34
Illiquid Securities .................................................................... 34
Repurchase and Reverse Repurchase Agreements ........................................... 34
Pass-through Securities ................................................................ 35
High-Yield/High-Risk Bonds ............................................................. 36
Warrants and Rights .................................................................... 37
U.S. Government Securities ............................................................. 37
Portfolio Turnover ..................................................................... 37
INVESTMENT ADVISORY AND OTHER SERVICES ................................................... 38
Growth, Global, Flexible Income, Balanced and Capital Appreciation Portfolios ......... 38
Tax-Exempt, Income Plus, Aggressive Growth, Equity-Income, Tactical Asset Allocation
and C.A.S.E. Portfolios ............................................................... 41
Additional Investment Advisory or Sub-Advisory Services Provided by the Sub-Advisers .. 43
i
<PAGE>
DISTRIBUTOR .............................................................................. 44
ADMINISTRATIVE SERVICES .................................................................. 44
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES ........................................... 45
PORTFOLIO TRANSACTIONS AND BROKERAGE ..................................................... 46
TRUSTEES AND OFFICERS .................................................................... 49
PURCHASE OF SHARES ....................................................................... 53
DISTRIBUTION PLANS ....................................................................... 54
NET ASSET VALUE DETERMINATION ............................................................ 57
DIVIDENDS AND OTHER DISTRIBUTIONS ........................................................ 59
SHAREHOLDER ACCOUNTS ..................................................................... 59
RETIREMENT PLANS ......................................................................... 59
REDEMPTION OF SHARES ..................................................................... 60
TAXES .................................................................................... 61
PRINCIPAL SHAREHOLDERS ................................................................... 63
MISCELLANEOUS ............................................................................ 63
Organization ........................................................................... 63
Shares of Beneficial Interest .......................................................... 64
Legal Counsel and Auditors ............................................................. 64
Registration Statement ................................................................. 65
PERFORMANCE INFORMATION .................................................................. 65
FINANCIAL STATEMENTS ..................................................................... 69
APPENDIX A--CERTAIN SECURITIES IN WHICH THE PORTFOLIOS MAY INVEST ........................ 70
</TABLE>
ii
<PAGE>
INVESTMENT OBJECTIVES
The Prospectus discusses the investment objective of each Portfolio, the
types of securities in which each Portfolio will invest and the policies and
practices of each Portfolio. The following discussion of Investment
Restrictions, Policies and Practices supplements that set forth in the
Prospectus.
There can be no assurance that a Portfolio will, in fact, achieve its
objective. A Portfolio's investment objective may be changed by the Board of
Trustees without shareholder approval. A change in the investment objective
of a Portfolio may result in the Portfolio having an investment objective
different from that which the shareholder deemed appropriate at the time of
investment. A Portfolio will not change its objective without 30 days prior
notice to its shareholders nor will it charge shareholders an exchange fee or
redemption fee after such notice and prior to the expiration of such 30 day
notice period. However, should a shareholder decide to redeem Portfolio
shares because of a change in the objective, the shareholder may realize a
taxable gain or loss.
INVESTMENT RESTRICTIONS, POLICIES AND PRACTICES
As indicated in the Prospectus, each Portfolio is subject to certain
fundamental policies and restrictions which as such may not be changed
without shareholder approval. Shareholder approval would be the approval by
the lesser of (i) more than 50% of the outstanding voting securities of a
Portfolio, or (ii) 67% or more of the voting securities present at a meeting
if the holders of more than 50% of the outstanding voting securities of a
Portfolio are present or represented by proxy.
As of February 1, 1996, the non-fundamental investment restrictions for
each Portfolio relating to borrowing and/or senior securities will be applied
as fundamental restrictions. It is anticipated that the Board of Trustees of
the Fund will approve this change at the regular quarterly meeting which will
be held on March 18, 1996.
INVESTMENT RESTRICTIONS OF IDEX II AGGRESSIVE GROWTH PORTFOLIO
IDEX II Aggressive Growth Portfolio may not, as a matter of fundamental
policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the Portfolio in the securities of such issuer
exceeds 5% of the value of the Portfolio's total assets, or (b) the Portfolio
owns more than 10% of the outstanding voting securities of any one class of
securities of such issuer;
2. Purchase any securities that would cause more than 25% of the value of
the Portfolio's total assets to be invested in the securities of issuers
conducting their principal business activities in the same industry; provided
that there shall be no limit on the purchase of U.S. government securities;
3. Purchase or sell real estate or real estate limited partnerships,
except that the Portfolio may purchase and sell securities secured by real
estate, mortgages or interests therein and securities that are issued by
companies that invest or deal in real estate;
4. Invest in commodities, except that the Portfolio may purchase or sell
stock index futures contracts and related options thereon if thereafter no
more than 5% of its total assets are invested in aggregate initial margin and
premiums;
5. Make loans to others, except through purchasing qualified debt
obligations, lending portfolio securities or entering into repurchase
agreements; and
1
<PAGE>
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental
investment restrictions which may be changed by the Board of Trustees of the
Fund without shareholder approval:
(A) The Portfolio may not invest in warrants, except that the Portfolio
may invest in warrants if, as a result, the investments (valued at the lower
of cost or market) would not exceed 5% of the value of the Portfolio's net
assets, of which not more than 2% of the Portfolio's net assets may be
invested in warrants not listed on a recognized domestic stock exchange.
Warrants acquired by the Portfolio as part of a unit or attached to
securities at the time of acquisition are not subject to this limitation;
(B) The Portfolio may not sell securities short or purchase securities on
margin, except that the Portfolio may obtain any short-term credit necessary
for the clearance of purchases and sales of securities. These restrictions
shall not apply to transactions involving selling securities "short against
the box";
(C) The Portfolio may not pledge, hypothecate, mortgage or otherwise
encumber more than 15% of the value of the Portfolio's total assets except in
connection with borrowings described in H below. These restrictions shall not
apply to transactions involving reverse repurchase agreements or the purchase
of securities subject to firm commitment agreements or on a when-issued
basis;
(D) The Portfolio may not purchase securities, including securities of
issuers which are not readily marketable, of any issuer (other than U.S.
government agencies and instrumentalities or instruments guaranteed by an
entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase;
(E) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(F) The Portfolio may not invest in securities of other investment
companies, except as it may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets or offer of exchange;
(G) The Portfolio may not purchase or retain the securities of any issuer
if any of the officers or directors of the Portfolio or investment adviser
individually owns more than 0.5% of the outstanding securities of the issuer
and together they own beneficially more than 5% of the securities;
(H) The Portfolio may not borrow money, except that the Portfolio may
borrow from banks for investment purposes as set forth in the Prospectus and
may also engage in reverse repurchase agreements. Immediately after any
borrowing, including reverse repurchase agreements, the Portfolio will
maintain asset coverage of not less than 300% with respect to all borrowings;
(I) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(J) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, or any successor to
such Rule, Section 4(2) commercial paper or any other securities as to which
the Board of Trustees has made a determination as to liquidity, as permitted
under the 1940 Act; and
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(K) The Portfolio may not issue senior securities, except that the
Portfolio may borrow from banks for investment purposes so long as the
Portfolio maintains the required coverage.
INVESTMENT RESTRICTIONS OF IDEX II CAPITAL APPRECIATION PORTFOLIO AND IDEX II
BALANCED PORTFOLIO
IDEX II Capital Appreciation Portfolio and IDEX II Balanced Portfolio may
not, as a matter of fundamental policy:
1. With respect to 75% of its total assets in the case of the Balanced
Portfolio and 50% of its total assets in the case of the Capital Appreciation
Portfolio, purchase the securities of any one issuer (except cash items and
"government securities" as defined under the Investment Company Act of 1940,
as amended (the "1940 Act") ), if immediately after and as a result of such
purchase the value of the holdings of the Portfolio in the securities of such
issuer exceeds 5% of the value of such Portfolio's total assets or the
Portfolio owns more than 10% of the outstanding voting securities of such
issuer. With respect to the remaining 50% of the value of its total assets,
IDEX II Capital Appreciation Portfolio may invest in the securities of as few
as two issuers;
2. Invest more than 25% of the value of its assets in any particular
industry (other than U.S. government securities);
3. Invest directly in real estate or interests in real estate; however, a
Portfolio may own debt or equity securities issued by companies engaged in
those businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent a Portfolio from purchasing or selling options, futures,
swaps and forward contracts or from investing in securities or other
instruments backed by physical commodities);
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper, debt securities or repurchase
agreements); and
6. Act as underwriter of securities issued by others, except to the extent
that a Portfolio may be deemed an underwriter in connection with the
disposition of portfolio securities of that Portfolio.
Furthermore, the Capital Appreciation Portfolio and the Balanced Portfolio
have adopted the following non-fundamental investment restrictions which may
be changed by the Board of Trustees without shareholder approval:
(A) The Portfolio's investment in warrants, valued at the lower of cost or
market value may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of its net assets, may
be warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall
be deemed to be without value for the purpose of monitoring this policy;
(B) The Portfolio may not: (i) enter into any futures contracts and
related options for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission ("CFTC") regulations if
the aggregate initial margin and premiums required to establish positions in
futures contracts and related options that do not fall within the definition
of bona fide hedging transactions will exceed 5% of the fair market value of
a Portfolio's net assets, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; and (ii) enter
into any futures contracts if the aggregate amount of such Portfolio's
commitments under outstanding futures contracts positions of that Portfolio
would exceed the market value of its total assets;
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<PAGE>
(C) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short without the payment of any additional consideration therefore, and
provided that transactions in futures, options, swaps and forward contracts
are not deemed to constitute selling securities short;
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in futures, options, contracts,
swaps, and forward contracts, shall not be deemed to constitute purchasing
securities on margin;
(E) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger. If
the Portfolio invests in a money market fund, the investment adviser will
reduce its advisory fees by the amount of any investment advisory and
administrative services fees paid to the investment manager of the money
market fund;
(F) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of that
Portfolio's net asset value, provided that this limitation does not apply to
reverse repurchase agreements, deposits of assets to margin, guarantee
positions in futures, options, swaps or forward contracts or segregation of
assets in connection with such contracts;
(G) The Portfolio may not purchase securities, including securities of
issuers which are not readily marketable, of any issuer (other than U.S.
government agencies and instrumentalities or instruments guaranteed by an
entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase;
(H) The Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(I) The Portfolio may borrow money for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the
value of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). If borrowings exceed 25% of the value of
the Portfolio's total assets by reason of a decline in net assets, the
Portfolio will reduce its borrowings within three business days to the extent
necessary to comply with the 25% limitation. This policy shall not prohibit
reverse repurchase agreements, or deposits of assets to margin or guarantee
positions in futures, options, swaps or forward contracts, and the
segregation of assets in connection with such contracts;
(J) The Portfolio may not purchase any security or enter into a repurchase
agreement, if as a result, more than 15% of its net assets would be invested
in repurchase agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market. The Trustees, or the Portfolio's investment adviser or
sub-adviser acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, or any
successor to such Rule, Section 4(2) commercial paper and municipal lease
obligations. Accordingly, such securities may not be subject to the foregoing
limitation;
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<PAGE>
(K) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(L) With respect to the Balanced Portfolio only, at least 25% of the
assets of that Portfolio will normally be invested in fixed-income senior
securities, which include corporate debt securities and preferred stock; and
(M) The Portfolio may not purchase or retain the securities of any issuer
if any of the officers or directors of the Portfolio or investment adviser
individually owns more than 0.5% of the outstanding securities of the issuer
and together they own beneficially more than 5% of the securities.
INVESTMENT RESTRICTIONS OF IDEX II GLOBAL PORTFOLIO
IDEX II Global Portfolio may not, as a matter of fundamental policy:
1. Own more than 10% of the outstanding voting securities of any one
issuer and, as to seventy-five percent (75%) of the value of its total
assets, purchase the securities of any one issuer (except cash items and
"government securities" as defined under the Investment Company Act of 1940,
as amended (the "1940 Act") ), if immediately after and as a result of such
purchase, the value of the holdings of the Portfolio in the securities of
such issuer exceeds 5% of the value of the Portfolio's total assets;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Invest directly in real estate or interests in real estate; however,
the Portfolio may own debt or equity securities issued by companies engaged
in those businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the Portfolio from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed
by physical commodities);
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper, debt securities or to repurchase
agreements); and
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of its portfolio securities.
Furthermore, the Global Portfolio has adopted the following
non-fundamental investment restrictions which may be changed by the Board of
Trustees without shareholder approval:
(A) The Portfolio's investments in warrants, valued at the lower of cost
or market, may not exceed 5% of the value of its net assets. Included within
that amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities shall be deemed to be without value;
(B) The Portfolio may not: (i) enter into any futures contracts or options
on futures contracts for purposes other than bona fide hedging transactions
within the meaning of Commodity Futures Commission regulations if the
aggregate initial margin deposits and premiums required to establish
positions in futures contracts and related options that do not fall within
the definition of bona fide
5
<PAGE>
hedging transactions would exceed 5% of the fair market value of the
Portfolio's net assets, after taking into account unrealized profits and
losses on such contracts it has entered into; and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the
Portfolio's commitments under outstanding futures contracts positions and
options on futures contracts would exceed the market value of its total
assets;
(C) The Portfolio may not sell securities short, unless it owns or has the
right, without the payment of any additional compensation, to obtain
securities equivalent in kind and amount to the securities sold short, and
provided that transactions in options, swaps and forward futures contracts
are not deemed to constitute selling securities short;
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in options, futures, swaps and
forward contracts shall not be deemed to constitute purchasing securities on
margin;
(E) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(F) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to provide
margin or guarantee positions in options, futures contracts, swaps, forward
contracts or other derivative instruments or the segregation of assets in
connection with such transactions;
(G) The Portfolio may not purchase securities of any issuer (other than
U.S. government agencies and instrumentalities or instruments guaranteed by
an entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase;
(H) The Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(I) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that exceed 25% of
the value of the Portfolio's total assets by reason of a decline in net
assets will be reduced within three business days to the extent necessary to
comply with the 25% limitation. This policy shall not prohibit reverse
repurchase agreements or deposits of assets to margin or guarantee positions
in futures, options, swaps or forward contracts, or the segregation of assets
in connection with such contacts;
(J) The Portfolio may not invest more than 15% of its assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such Rule,
Section 4(2) commercial paper or any other securities as to which the Board
of Trustees have made a determination as to liquidity, as permitted under the
1940 Act; and
(K) The Portfolio may not invest in companies for the purpose of
exercising control or management.
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<PAGE>
INVESTMENT RESTRICTIONS OF IDEX II GROWTH PORTFOLIO AND IDEX II FLEXIBLE
INCOME PORTFOLIO
IDEX II Growth Portfolio and IDEX II Flexible Income Portfolio may not, as a
matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than cash items and "government
securities" as defined under the Investment Company Act of 1940, as amended
(the "1940 Act")), if immediately after and as a result of such purchase (a)
the value of the holdings of the Portfolio in the securities of such issuer
exceeds 5% of the value of the Portfolio's total assets, or (b) the Portfolio
owns more than 10% of the outstanding voting securities of such issuer;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the Portfolio from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by
physical commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the Portfolio may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as underwriter of securities issued by others, except to the extent
that it may be deemed an underwriter in connection with the disposition of
portfolio securities of the Portfolio; and
6. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper, debt securities or to repurchase
agreements).
Furthermore, the Growth Portfolio and the Flexible Income Portfolio have
adopted the following non-fundamental investment restrictions which may be
changed by the Board of Trustees without shareholder approval:
(A) The Portfolio may not: (i) enter into any futures contracts or options
on futures contracts for purposes other than bona fide hedging transactions
within the meaning of Commodity Futures Commission regulations if the
aggregate initial margin deposits and premiums required to establish
positions in futures contracts and related options that do not fall within
the definition of bona fide hedging transactions would exceed 5% of the fair
market value of the Portfolio's net assets, after taking into account
unrealized profits and losses on such contracts it has entered into; and (ii)
enter into any futures contracts or options on futures contracts if the
aggregate amount of the Portfolio's commitments under outstanding futures
contracts positions and options on futures contracts would exceed the market
value of its total assets;
(B) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to provide
margin or guarantee positions in options, futures contracts, swaps, forward
contracts or other derivative instruments or the segregation of assets in
connection with such transactions;
(C) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in options, futures contracts,
swaps, forward contracts, and other derivative instruments are not deemed to
constitute selling securities short;
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<PAGE>
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits made in connection with transactions in options, futures contracts,
swaps, forward contracts, and other derivative instruments shall not be
deemed to constitute purchasing securities on margin;
(E) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that exceed 25% of
the value of the Portfolio's total assets by reason of a decline in net
assets will be reduced within three business days to the extent necessary to
comply with the 25% limitation. This policy shall not prohibit reverse
repurchase agreements or deposits of assets to provide margin or guarantee
positions in connection with transactions in options, futures contracts,
swaps, forward contracts, and other derivative instruments or the segregation
of assets in connection with such transactions;
(F) The Portfolio may not invest more than 15% of its assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such Rule,
Section 4(2) commercial paper or any securities which the Board of Trustees
or the investment sub-adviser, as appropriate, has made a determination of
liquidity, as permitted under the 1940 Act;
(G) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(H) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Restrictions (i) and (ii) do not apply
to money market funds or to securities received as dividends, through offers
to exchange, or as a result of reorganization, consolidation, or merger. If
the Portfolio invests in a money market fund, the investment advisers will
reduce their advisory fees by the amount of any investment advisory or
administrative service fees paid to the investment manager of the money
market fund;
(I) The Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(J) The Portfolio may not purchase the securities of any issuer (other
than U.S. government agencies and instrumentalities or instruments guaranteed
by an entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the value of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase; and
(K) The Portfolio may not invest in warrants valued at the lower of cost
or market value, if such value exceeds 5% of the Portfolio's net assets,
provided that no more than 2% of the Portfolio's net assets may be invested
in warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities may be
deemed to be without value.
In making all investments for the IDEX II Flexible Income Portfolio, the
sub-adviser will emphasize economic or financial factors or circumstances of
the issuer, rather than opportunities for short-term arbitrage.
8
<PAGE>
INVESTMENT RESTRICTIONS OF IDEX II C.A.S.E. PORTFOLIO
IDEX II C.A.S.E Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than cash items and "government
securities" as defined in the 1940 Act) if immediately after and as a result
of such purchase (a) the value of the holdings of the Portfolio in the
securities of such issuer exceeds 5% of the value of the Portfolio's total
assets, or (b) the Portfolio owns more than 10% of the outstanding voting
securities of any one class of securities of such issuer;
2. Invest 25% or more of the value of the Portfolio's assets in any
particular industry (other than government securities);
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the Portfolio from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by
physical commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the Portfolio may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Portfolio; and
6. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper, debt securities or to repurchase
agreements).
7. The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the
value of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed 25% of the
value of the Portfolio's total assets by reason of a decline in net assets
will be reduced within three business days to the extent necessary to comply
with the 25% limitation. This policy shall not prohibit reverse repurchase
agreements or deposits of assets to provide margin or guarantee positions in
connection with transactions in options, futures contracts, swaps, forward
contracts, or other derivative instruments or the segregation of assets in
connection with such transactions.
8. The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
Furthermore, the Portfolio has adopted the following non-fundamental
investment restrictions which may be changed by the Board of Trustees of the
Fund without shareholder approval:
(A) The Portfolio may not, as a matter of non-fundamental policy (i) enter
into any futures contracts or options on futures contracts for purposes other
than bona fide hedging transactions within the meaning of Commodity Futures
Commission regulations if the aggregate initial margin deposits and premiums
required to establish positions in futures contracts and related options that
do not fall within the definition of bona fide hedging transactions would
exceed 5% of the fair market value of the Portfolio's net assets, after
taking into account unrealized profits and losses on such contracts it has
entered into and (ii) enter into any futures contracts or options on futures
contracts if the aggregate amount of the Portfolio's commitments under
outstanding futures contracts positions and options on futures contracts
would exceed the market value of its total assets;
9
<PAGE>
(B) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to provide
margin or guarantee positions in options, futures contracts, swaps, forward
contracts or other derivative instruments or the segregation of assets in
connection with such transactions;
(C) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in options, futures contracts,
swaps, forward contracts and other derivative instruments are not deemed to
constitute selling securities short;
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits made in connection with transactions in options, futures contracts,
swaps, forward contracts, and other derivative instruments shall not be
deemed to constitute purchasing securities on margin;
(E) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, or any successor to
such Rule, Section 4(2) commercial paper or other securities for which the
Board of Trustees has made a determination of liquidity, as permitted under
the 1940 Act;
(F) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Restrictions (i) and (ii) do not apply
to money market funds or to securities received as dividends, through offers
to exchange, or as a result of reorganization, consolidation, or merger. If
the Portfolio invests in a money market fund, the investment adviser will
reduce its advisory fee by the amount of any investment advisory or
administrative service fees paid to the investment manager of the money
market fund;
(G) The Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(H) The Portfolio may not invest more than 25% of its net assets at the
time of purchase in the securities of foreign issuers and obligors;
(I) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(J) The Portfolio's investment in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within
that amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities shall be deemed to be without value;
(K) The Portfolio may not purchase securities, including securities of
issuers which are not readily marketable, of any issuer (other than U.S.
government agencies and instrumentalities or instruments guaranteed by an
entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase; and (M)
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<PAGE>
(L) The Portfolio may not purchase or retain the securities of any issuer
if any of the officers or directors of the Portfolio or investment adviser
individually owns more than 0.5% of the outstanding securities of the issuer
and together they own beneficially more than 5% of the securities.
INVESTMENT RESTRICTIONS OF IDEX II EQUITY-INCOME PORTFOLIO
IDEX II Equity-Income Portfolio may not, as a matter of fundamental policy:
With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the Portfolio in the securities of such issuer
exceeds 5% of the value of the Portfolio's total assets, or (b) the Portfolio
owns more than 10% of the outstanding voting securities of such issuer;
Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of
this restriction. In addition, there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances;
Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in
the real estate business);
Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by
physical commodities);
Lend any security or make any other loan if, as a result, more than 25% of
its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper or debt securities); and
Act as an underwriter of securities issued by others, except to the extent
that it may be deemed an underwriter in connection with the disposition of
its portfolio securities.
Furthermore, the Equity-Income Portfolio has adopted the following
non-fundamental investment restrictions which may be changed by the Board of
Trustees of the Fund without shareholder approval:
(A) The Portfolio's investments in warrants, valued at the lower of cost
or market, may not exceed 5% of the value of its net assets. Included within
that amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities shall be deemed to be without value;
(B) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply in the
case of assets deposited to margin or guarantee positions in options, futures
contracts and options on futures contracts or placed in a segregated account
in connection with such contracts;
(C) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that margin payments and
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<PAGE>
other deposits in connection with transactions in options, swaps and forward
futures contracts are not deemed to constitute selling securities short;
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in options, futures, swaps and
forward contracts shall not be deemed to constitute purchasing securities on
margin;
(E) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(F) The Portfolio may not purchase securities, including securities of
issuers which are not readily marketable, of any issuer (other than U.S.
government agencies and instrumentalities or instruments guaranteed by an
entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase;
(G) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(H) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that exceed 25% of
the value of the Portfolio's total assets by reason of a decline in net
assets will be reduced within three business days to the extent necessary to
comply with the 25% limitation;
(I) The Portfolio may not invest more than 15% of its assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such Rule,
Section 4(2) commercial paper or any other securities as to which the Board
of Trustees has made a determination as to liquidity, as permitted under the
1940 Act;
(J) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(K) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act;
(L) The Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States
if at the time of acquisition more than 10% of the Portfolio's total assets
would be invested in such securities; and
(M) The Portfolio may not purchase or retain the securities of any issuer
if any of the officers or directors of the Portfolio or investment adviser
individually owns more than 0.5% of the outstanding securities of the issuer
and together they own beneficially more than 5% of the securities.
INVESTMENT RESTRICTIONS OF IDEX II TACTICAL ASSET ALLOCATION PORTFOLIO
IDEX II Tactical Asset Allocation Portfolio may not, as a matter of
fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of
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such purchase (a) the value of the holdings of the Portfolio in the
securities of such issuer exceeds 5% of the value of the Portfolio's total
assets, or (b) the Portfolio owns more than 10% of the outstanding voting
securities of such issuer;
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of
this restriction. In addition, there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or of certificates of deposit and bankers acceptances;
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this limitation shall not
prevent the Portfolio from investing in securities or other instruments
backed by physical commodities);
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in
the real estate business);
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper or debt securities); and
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of its portfolio securities.
Furthermore, the Tactical Asset Allocation Portfolio has adopted the
following non-fundamental investment restrictions which may be changed by the
Board of Trustees of the Fund without shareholder approval:
(A) The Portfolio's investment in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within
that amount, but not to exceed 2% of the value of the Portfolio's net assets,
may be warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to
securities shall be deemed to be without value;
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that margin payments and other deposits in
connection with transactions in options, swaps and forward and futures
contracts are not deemed to constitute selling securities short;
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in options, futures, swaps and
forward contracts shall not be deemed to constitute purchasing securities on
margin;
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation
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<PAGE>
does not apply to reverse repurchase agreements, deposits of assets to
margin, guarantee positions in futures, options, swaps or forward contracts
or segregation of assets in connection with such contracts;
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses;
(G) The Portfolio may not invest in companies for the purpose of
exercising control or management;
(H) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act;
(I) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that exceed 25% of
the value of the Portfolio's total assets by reason of a decline in net
assets will be reduced within three business days to the extent necessary to
comply with the 25% limitation;
(J) The Portfolio may not purchase securities, including securities of
issuers which are not readily marketable, of any issuer (other than U.S.
government agencies and instrumentalities or instruments guaranteed by an
entity with a record of more than three years' continuous operation,
including that of predecessors) with a record of less than three years'
continuous operation (including that of predecessors) if such purchase would
cause the cost of the Portfolio's investments in all such issuers to exceed
5% of the Portfolio's total assets taken at market value at the time of such
purchase;
(K) The Portfolio may not purchase or retain the securities of any issuer
if any of the officers or directors of the Portfolio or investment adviser
individually owns more than 0.5% of the outstanding securities of the issuer
and together they own beneficially more than 5% of the securities; and
(L) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, or any successor to
such Rule, Section 4(2) commercial paper or any other securities as to which
the Board of Trustees has made a determination as to liquidity, as permitted
under the 1940 Act.
INVESTMENT RESTRICTIONS OF IDEX II INCOME PLUS PORTFOLIO
IDEX II Income Plus Portfolio may not, as a matter of fundamental policy:
1. Borrow money, except from a bank for temporary or emergency purposes
(not for leveraging or investment) in an amount not to exceed 1/3 of the
current value of the Portfolio's total assets (including the amount borrowed)
less liabilities (not including the amount borrowed) at the time the
borrowing is made. If at any time the Portfolio's borrowings exceed this
limitation due to a decline in net assets, such borrowings will be reduced
within 3 business days to the extent necessary to comply with the limitation.
The Portfolio will borrow only to facilitate redemptions requested by
shareholders which might otherwise require untimely disposition of portfolio
securities and will not purchase securities while borrowings are outstanding;
2. Pledge assets, except that the Portfolio may pledge not more than 1/3
of its total assets (taken at current value) to secure borrowings made in
accordance with paragraph 1 above. Initial margin deposits under interest
rate futures contracts, which are made to guarantee the Portfolio's
performance under such contracts, shall not be deemed a pledging of Portfolio
assets for the purpose of this investment restriction. As a matter of
non-fundamental operating policy, in order to permit the sale of shares of
the
14
<PAGE>
Portfolio under certain state laws, the Portfolio will not pledge its assets
in excess of an amount equal to 10% of its net assets unless such state
restrictions are changed;
3. Invest more than 25% of its assets, measured at the time of investment,
in a single industry (which term shall not include governments or their
political subdivisions), outside the industries of the Portfolio's public
utilities Portfolio concentration, except that the Portfolio may, for
temporary defensive purposes, invest more than 25% of its total assets in the
obligations of banks;
4. Purchase the securities (other than government securities) of any
issuer if, as a result, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, provided that up to 25% of the
Portfolio's total net assets may be invested without regard to this 5%
limitation and in the case of certificates of deposit, time deposits and
banker's acceptances, up to 25% of total Portfolio assets may be invested
without regard to such 5% limitation, but shall instead be subject to a 10%
limitation;
5. Invest in mineral leases;
6. Invest in bank time deposits with maturities of over 7 calendar days,
or invest more than 10% of the Portfolio's total assets in bank time deposits
with maturities of from 2 business days through 7 calendar days;
7. Issue senior securities, except to the extent that senior securities
may be deemed to arise from bank borrowings and purchases of government
securities on a "when-issued" or "delayed delivery" basis, as described in
the Prospectus;
8. Underwrite any issue of securities, except to the extent the Portfolio
may be deemed to be an underwriter in connection with the sale of its
portfolio securities, although the Portfolio may purchase securities directly
from the issuers thereof for investment in accordance with the Portfolio's
investment objective and policies;
9. Purchase or sell commodities or commodity contracts, except that the
Portfolio may purchase and sell interest rate futures contracts for hedging
purposes as set forth in the Prospectus;
10. Purchase securities on margin or sell "short", but the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities. (Initial and maintenance margin deposits
and payment with respect to interest rate futures contracts are not
considered the purchase of securities on margin);
11. Purchase or retain the securities of any issuer, if, to the
Portfolio's knowledge, those officers and directors of the manager and
sub-adviser who individually own beneficially more than 0.5% of the
outstanding securities of such issuer together own beneficially more than 5%
of such outstanding securities;
12. Invest in securities of other investment companies, except in the
event of merger or reorganization with another investment company;
13. Make loans, except to the extent the purchase of notes, bonds,
bankers' acceptances or other evidence of indebtedness or the entry into
repurchase agreements or deposits (including time deposits and certificates
of deposit) with banks may be considered loans;
14. Invest in companies for the purpose of exercising management or
control;
15. Invest in oil, gas or other mineral exploration or development
programs;
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<PAGE>
16. Purchase or hold any real estate or mortgage loans thereon, except
that the Portfolio may invest in securities secured by real estate or
interests therein or issued by persons (such as real estate investment
trusts) which deal in real estate or interests therein; and
17. Purchase the securities (other than government securities) of any
issuer if, as a result, the Portfolio would hold more than 10% of any class
of securities (including any class of voting securities) of such issuer; for
this purpose, all debt obligations of an issuer, and all shares of stock of
an issuer other than common stock, are treated as a single class of
securities.
The Income Plus Portfolio has also adopted certain non-fundamental
investment restrictions which may be changed by the Board of Trustees without
shareholder approval. The Income Plus Portfolio may not:
(A) Write or purchase put, call, straddle or spread options, or
combinations thereof;
(B) Invest more than 10% of its assets in illiquid securities;
(C) Invest more than 5% of its net assets in securities (other than
government securities) of issuers which, together with their predecessors,
have been in business for less than 3 years;
(D) Invest in real estate limited partnerships;
(E) Purchase or sell interest rate futures contracts (a) involving
aggregate delivery or purchase obligations in excess of 30% of the
Portfolio's net assets, or aggregate margin deposits made by the Portfolio in
excess of 5% of the Portfolio's net assets, (b) which are not for hedging
purposes only, or (c) which are executed under custodial, reserve and other
arrangements inconsistent with regulations and policies adopted or positions
taken (i) by the Securities and Exchange Commission for exemption from
enforcement proceedings under Section 17(f) or 18(f) of the 1940 Act, (ii) by
the CFTC for exemption of investment companies registered under the 1940 Act
from registration as "commodity pool operators" and from certain provisions
of Subpart B of Part 4 of the CFTC's regulations, or (iii) by state
securities commissioners or administrators in the states in which the
Portfolio's shares have been qualified for public offering; and
(F) The Fund may not invest in warrants, valued at the lower of cost or
market value, if such value exceeds 5% of the Fund's net assets, provided
that no more than 2% of the Fund's net assets may be invested in warrants
which are not listed on the New York or American Stock Exchange. Warrants
acquired by the Fund in units or attached to securities may be deemed to be
without value.
INVESTMENT RESTRICTIONS OF IDEX II TAX-EXEMPT PORTFOLIO
IDEX II Tax-Exempt Portfolio may not, as a matter of fundamental policy:
1. Underwrite any issue of securities, except to the extent the Portfolio
may be deemed to be an underwriter in connection with the sale of its
portfolio securities, although the Portfolio may purchase Municipal
Obligations directly from the issuers thereof for investment in accordance
with the Portfolio's investment objective and policies;
2. Purchase the securities (other than government securities) of any
issuer if, as a result, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, provided that up to 25% of the
Portfolio's total net assets may be invested without regard to this 5%
limitation;
3. Invest in any direct interest in an oil, gas or other mineral
exploration or development program;
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<PAGE>
4. Purchase securities on margin or sell "short", but the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
5. Purchase or hold any real estate or mortgage loans thereon, except that
the Portfolio may invest in securities secured by real estate or interests
therein or issued by persons (such as real estate investment trusts) which
deal in real estate or interests therein;
6. Purchase or retain the securities of any issuer, if, to the Portfolio's
knowledge, those officers and directors of the manager or sub-adviser who
individually own beneficially more than 0.5% of the outstanding securities of
such issuer together own beneficially more than 5% of such outstanding
securities;
7. Invest in securities of other investment companies, except in the event
of merger or reorganization with another investment company;
8. Make loans, except to the extent the purchase of notes, bonds, or other
evidences of indebtedness or the entry into repurchase agreements or deposits
with banks may be considered loans;
9. Invest in companies for the purpose of exercising management or
control;
10. Write, purchase or sell put, call, straddle or spread options, except
for hedging purposes only, in accordance with such non-fundamental policies
that the Board may from time to time adopt; and
11. Purchase or sell commodities or commodity contracts.
The Tax-Exempt Portfolio has adopted the following non-fundamental
restrictions which may be changed by the Board of Trustees without
shareholder approval:
(A) The Portfolio may not invest more than 10% of its assets in illiquid
securities;
(B) The Portfolio may not invest in oil, gas or mineral leases;
(C) The Portfolio may not invest in real estate limited partnerships;
(D) The Portfolio may not invest more than 5% of its net assets in
securities of issuers which, together with their predecessors, have been in
business for less than 3 years;
(E) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 1/3 of
the current value of the Portfolio's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed at the time the
borrowing is made). For purposes of this limitation, reverse repurchases
would not constitute borrowings; and
(F) For hedging purposes only, the Tax-Exempt Portfolio may adopt policies
permitting:
(1) the purchase and sale of interest rate futures contracts, the
purchase of put and call options thereon, and the writing of covered
call or secured put options thereon, not involving delivery or
purchase obligations in excess of 30% of the Portfolio's net assets,
and
(2) the purchase of put and call options related to portfolio securities
and securities to be purchased for the Tax-Exempt Portfolio, the
writing of secured put and covered call options,
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<PAGE>
and the entering into of closing purchase transactions with respect
to such options, where such transactions will not involve futures
contract margin deposits and premiums on option purchases which, in
the aggregate, exceed 5% of the Portfolio's net assets, in the
judgment of the sub-adviser are economically appropriate to the
reduction of risks inherent in the ongoing management of the
Portfolio, and are executed under custodial, reserve and other
arrangements consistent with regulations and policies adopted or
positions taken (i) by the Securities and Exchange Commission for
exemption from enforcement proceedings under Section 17(f) or 18(f)
of the Investment Company Act of 1940, as amended (the "1940 Act"),
(ii) by the Commodity Futures Trading Commission (the "CFTC") for
exemption of investment companies registered under the 1940 Act from
registration as "commodity pool operators" and from certain
provisions of Subpart B of Part 4 of the CFTC's regulations, and
(iii) by state securities commissioners or administrators in the
states in which the Portfolio's shares have been qualified for
public offering.
The Tax-Exempt Portfolio does not intend in the foreseeable future to
adopt the foregoing investment policies to permit trading in interest rate
futures contracts, options thereon, and options on portfolio securities.
Except with respect to borrowing money, if a percentage limitation set
forth above is complied with at the time of the investment, a subsequent
change in the percentage resulting from any change in value of the net assets
of any of the Portfolios will not result in a violation of such restriction.
Additional limitations on borrowing that are imposed by state law and
regulations may apply.
In addition to the above, as a fundamental policy, each of the Portfolios
other than the Tax-Exempt Portfolio and the Income Plus Portfolio, may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such Portfolio.
OTHER POLICIES AND PRACTICES OF THE PORTFOLIOS
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS.
A. FUTURES CONTRACTS. Each of the Portfolios other than the Tax-Exempt
Portfolio and the Income Plus Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign
currencies or contracts based on financial indices including indices of
U.S. government securities, foreign government securities, equity or
fixed-income securities ("futures contracts"). The Income Plus Portfolio
may enter into contracts for the purchase or sale of fixed-income
securities ("interest rate futures contracts") as described in the
Prospectus. U.S. futures contracts are traded on exchanges which have been
designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant
("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the
exchange.
When a Portfolio buys or sells a futures contract it incurs a contractual
obligation to receive or deliver the underlying instrument (or a cash
payment based on the difference between the underlying instrument's
closing price and the price at which the contract was entered into) at a
specified price on a specified date. Transactions in futures contracts may
be made to attempt to hedge against potential changes in interest or
currency exchange rates or the price of a security or a securities index
which might correlate with or otherwise adversely affect either the value
of the Portfolio's securities or the prices of securities which the
Portfolio is considering buying at a later date.
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<PAGE>
The buyer or seller of a futures contract is not required to deliver or
pay for the underlying instrument unless the contract is held until the
delivery date. However, both the buyer and seller are required to deposit
"initial margin" for the benefit of the FCM when the contract is entered
into. Initial margin deposits are equal to a percentage of the contract's
value, as set by the exchange on which the contract is traded, and may be
maintained in cash or certain high-grade liquid assets by the Portfolio's
custodian for the benefit of the FCM. Initial margin payments are similar
to good faith deposits or performance bonds. Unlike margin extended by a
securities broker, initial margin payments do not constitute purchasing
securities on margin for purposes of a Portfolio's investment limitations.
If the value of either party's position declines, that party will be
required to make additional "variation margin" payments with the FCM to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. In the event of
the bankruptcy of the FCM that holds margin on behalf of a Portfolio, that
Portfolio may be entitled to return of the margin owed to such Portfolio
only in proportion to the amount received by the FCM's other customers.
The portfolio manager will attempt to minimize the risk by careful
monitoring of the creditworthiness of the FCMs with which a Portfolio does
business and by segregating margin payments with the custodian.
Although a Portfolio would segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets
would be available to that Portfolio immediately upon closing out the
futures position, while settlement of securities transactions could take
several days. However, because a Portfolio's cash that may otherwise be
invested would be held uninvested or invested in high-grade liquid assets
so long as the futures position remains open, such Portfolio's return
could be diminished due to the opportunity losses of foregoing other
potential investments.
The acquisition or sale of a futures contract may occur, for example, when
a Portfolio holds or is considering purchasing equity or debt securities
and seeks to protect itself from fluctuations in prices or interest rates
without buying or selling those securities. For example, if stock or debt
prices were expected to decrease, a Portfolio might sell equity index
futures contracts, thereby hoping to offset a potential decline in the
value of equity securities in the Portfolio by a corresponding increase in
the value of the futures contract position held by that Portfolio and
thereby preventing the Portfolio's net asset value from declining as much
as it otherwise would have. Similarly, if interest rates were expected to
rise, a Portfolio might sell bond index futures contracts, thereby hoping
to offset a potential decline in the value of debt securities in the
portfolio by a corresponding increase in the value of the futures contract
position held by the Portfolio. A Portfolio also could seek to protect
against potential price declines by selling portfolio securities and
investing in money market instruments. However, since the futures market
is more liquid than the cash market, the use of futures contracts as an
investment technique allows a Portfolio to maintain a defensive position
without having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase, or
interest rates are expected to fall, futures contracts may be bought to
attempt to hedge against the possibility of having to buy equity
securities at higher prices. This technique is sometimes known as an
anticipatory hedge. Since the fluctuations in the value of futures
contracts should be similar to those of equity securities, a Portfolio
could take advantage of the potential rise in the value of equity or debt
securities without buying them until the market has stabilized. At that
time, the futures contracts could be liquidated and such Portfolio could
buy equity or debt securities on the cash market. To the extent a
Portfolio enters into futures contracts for this purpose, the segregated
assets maintained to cover such Portfolio's obligations with respect to
futures contracts will consist of high-grade liquid assets from its
portfolio in an amount equal to the
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<PAGE>
difference between the contract price and the aggregate value of the
initial and variation margin payments made by that Portfolio with respect
to the futures contracts.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial
margin and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close out futures contracts
through offsetting transactions which could distort the normal price
relationship between the cash and futures markets. Second, the liquidity
of the futures market depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
market could be reduced and prices in the futures market distorted. Third,
from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in
the futures market may cause temporary price distortions. Due to the
possibility of the foregoing distortions, a correct forecast of general
price trends by the portfolio manager still may not result in a successful
use of futures contracts.
Futures contracts entail risks. Although each of the Portfolios that
invests in such contracts believes that their use will benefit the
Portfolio, if the portfolio manager's investment judgment proves
incorrect, the Portfolio's overall performance could be worse than if the
Portfolio had not entered into futures contracts. For example, if a
Portfolio has hedged against the effects of a possible decrease in prices
of securities held in its portfolio and prices increase instead, that
Portfolio may lose part or all of the benefit of the increased value of
the securities because of offsetting losses in the Portfolio's futures
positions. In addition, if a Portfolio has insufficient cash, it may have
to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may, but will not necessarily, be at increased
prices which reflect the rising market and may occur at a time when the
sales are disadvantageous to the Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures contracts
available to a Portfolio will not match exactly such Portfolio's current
or potential investments. A Portfolio may buy and sell futures contracts
based on underlying instruments with different characteristics from the
securities in which it typically invests--for example, by hedging
investments in portfolio securities with a futures contract based on a
broad index of securities--which involves a risk that the futures position
will not correlate precisely with such performance of the Portfolio's
investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments correlate with a
Portfolio's investments. Futures prices are affected by factors such as
current and anticipated short-term interest rates, changes in volatility
of the underlying instruments, and the time remaining until expiration of
the contract. Those factors may affect securities prices differently from
futures prices. Imperfect correlations between a Portfolio's investments
and its futures positions may also result from differing levels of demand
in the futures markets and the securities markets, from structural
differences in how futures and securities are traded, and from imposition
of daily price fluctuation limits for futures contracts. A Portfolio may
buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to
attempt to compensate for differences in historical volatility between the
futures contract and the securities, although this may not be successful
in all cases. If price changes in a Portfolio's futures positions are
poorly correlated with its other investments, its futures positions may
fail to produce desired gains or may result in losses that are not offset
by the gains in that Portfolio's other investments.
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<PAGE>
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of seven days for
some types of securities, the futures markets can provide superior
liquidity to the securities markets. Nevertheless, there is no assurance a
liquid secondary market will exist for any particular futures contract at
any particular time. In addition, futures exchanges may establish daily
price fluctuation limits for futures contracts and may halt trading if a
contract's price moves upward or downward more than the limit in a given
day. On volatile trading days when the price fluctuation limit is reached,
it may be impossible for a Portfolio to enter into new positions or close
out existing positions. If the secondary market for a futures contract is
not liquid because of price fluctuation limits or otherwise, the Portfolio
may not be able to promptly liquidate unfavorable futures positions and
potentially could be required to continue to hold a futures position until
the delivery date, regardless of changes in its value. As a result, such
Portfolio's access to other assets held to cover its futures positions
also could be impaired.
Although futures contracts by their terms call for the delivery or
acquisition of the underlying commodities or a cash payment based on the
value of the underlying commodities, in most cases the contractual
obligation is offset before the delivery date of the contract by buying,
in the case of a contractual obligation to sell, or selling, in the case
of a contractual obligation to buy, an identical futures contract on a
commodities exchange. Such a transaction cancels the obligation to make or
take delivery of the commodities.
The Aggressive Growth, Capital Appreciation, Global, Growth, C.A.S.E.,
Equity-Income, Tactical Asset Allocation, Balanced and Flexible Income
Portfolios each intend to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with
the CFTC and the National Futures Association, which regulate trading in
the futures markets. The Portfolios will use futures contracts and related
options primarily for bona fide hedging purposes within the meaning of
CFTC regulations; except that, in addition, the Portfolios may hold
positions in futures contracts and related options that do not fall within
the definition of bona fide hedging transactions, provided that the
aggregate initial margin and premiums required to establish such positions
will not exceed 5% of the fair market value of a Portfolio's net assets,
after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into.
The Aggressive Growth Portfolio may not enter into a futures contract or
related option (except for closing transactions) if, immediately
thereafter, the sum of the amount of its initial margin and premiums on
open futures contracts and options thereon would exceed 5% of the
Aggressive Growth Portfolio's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
B. OPTIONS ON FUTURES CONTRACTS. Each of the Portfolios other than the
Tax-Exempt and Income Plus Portfolios may buy and write put and call
options on futures contracts. An option on a future gives a Portfolio the
right (but not the obligation) to buy or sell a futures contract at a
specified price on or before a specified date. Transactions in options on
futures contracts may be made to attempt to hedge against potential
changes in interest rates or currency exchange rates or the price of a
security or a securities index which might correlate with or otherwise
adversely affect either the value of the Portfolio's securities or the
prices of securities which the Portfolio is considering buying at a later
date. Transactions in options on future contracts will not be made for
speculation.
The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to
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either the price of the futures contract upon which it is based or the
price of the underlying instrument, ownership of the option may or may not
be less risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, when a Portfolio is
not fully invested it may buy a call option on a futures contract to hedge
against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which
is deliverable under, or of the index comprising, the futures contract. If
the futures price at the expiration of the option is below the exercise
price, a Portfolio will retain the full amount of the option premium which
provides a partial hedge against any decline that may have occurred in
such Portfolio's holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of the
security or foreign currency which is deliverable under, or of the index
comprising, the futures contract. If the futures price at expiration of
the option is higher than the exercise price, a Portfolio will retain the
full amount of the option premium which provides a partial hedge against
any increase in the price of securities which that Portfolio is
considering buying. If a call or put option a Portfolio has written is
exercised, such Portfolio will incur a loss which will be reduced by the
amount of the premium it received. Depending on the degree of correlation
between the change in the value of its portfolio securities and changes in
the value of the futures positions, that Portfolio's losses from existing
options on futures may to some extent be reduced or increased by changes
in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio
securities. For example, a Portfolio may buy a put option on a futures
contract to hedge its portfolio securities against the risk of falling
prices or rising interest rates.
The amount of risk a Portfolio assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase
of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of
the options bought.
C. OPTIONS ON SECURITIES. In an effort to increase current income and to
reduce fluctuations in net asset value, each of the Portfolios other than
the Tax-Exempt Portfolio and the Income Plus Portfolio may write covered
put and call options and buy put and call options on securities that are
traded on United States and foreign securities exchanges and
over-the-counter. A Portfolio also may write call options that are not
covered for cross-hedging purposes. A Portfolio may write and buy options
on the same types of securities that the Portfolio may purchase directly.
There are no specific limitations on the Portfolios' writing and buying of
options on securities.
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security to the writer of the option on or
before a fixed date at a predetermined price. A call option gives the
holder the right, upon payment of a premium, to call upon the writer to
deliver a specified amount of a security on or before a fixed date at a
predetermined price.
A put option written by a Portfolio is "covered" if the Portfolio (i)
segregates cash not available for investment or high-grade liquid assets
with a value equal to the exercise price with its custodian or (ii) holds
a put on the same security and in the same principal amount as the put
written and the exercise price of the put held is equal to or greater than
the exercise price of the put written. The premium paid by the buyer of an
option will reflect, among other things, the relationship of the exercise
price to the market price and the volatility of the underlying security,
the remaining term of the option, supply and demand and interest rates.
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A call option written by a Portfolio is "covered" if the Portfolio owns
the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash
consideration (or has segregated additional cash with its custodian) upon
conversion or exchange of other securities held in its portfolio. A call
option written by a Portfolio is also deemed to be covered if that
Portfolio holds a call on the same security and in the same principal
amount as the call written and the exercise price of the call held (i) is
equal to or less than the exercise price of the call written or (ii) is
greater than the exercise price of the call written if the difference is
segregated with its custodian.
A Portfolio may also write call options that are not covered for cross
hedging purposes. A Portfolio collateralizes its obligation under a
written call option for cross-hedging purposes by segregating cash or
high-grade liquid assets in an amount not less than the market value of
the underlying security, marked-to-market daily. A Portfolio would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction
would exceed that which would be received from writing a covered call
option and the portfolio manager believes that writing the option would
achieve the desired hedge.
If a put or call option written by a Portfolio were exercised, the
Portfolio would be obligated to buy or sell the underlying security at the
exercise price. Writing a put option involves the risk of a decrease in
the market value of the underlying security, in which case the option
could be exercised and the underlying security would then be sold by the
option holder to the Portfolio at a higher price than its current market
value. Writing a call option involves the risk of an increase in the
market value of the underlying security, in which case the option could be
exercised and the underlying security would then be sold by the Portfolio
to the option holder at a lower price than its current market value. Those
risks could be reduced by entering into an offsetting transaction. A
Portfolio retains the premium received from writing a put or call option
whether or not the option is exercised.
The writer of an option may have no control when the underlying security
must be sold, in the case of a call option, or bought, in the case of a
put option, since with regard to certain options, the writer may be
assigned an exercise notice at any time prior to the termination of the
obligation. Whether or not an option expires unexercised, the writer
retains the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the market value
of the underlying security during the option period. If a call option is
exercised, the writer experiences a profit or loss from the sale of the
underlying security. If a put option is exercised, the writer must fulfill
the obligation to buy the underlying security at the exercise price, which
will usually exceed the then market value of the underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option
of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option. Likewise,
an investor who is the holder of an option may liquidate its position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously bought. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected.
In the case of a written call option, effecting a closing transaction will
permit a Portfolio to write another call option on the underlying security
with either a different exercise price or expiration date or both. In the
case of a written put option, such transaction will permit the Portfolio
to write another put option to the extent that the exercise price thereof
is secured by
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deposited high-grade liquid assets. Effecting a closing transaction also
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Portfolio
investments. If a Portfolio desires to sell a particular security on which
the Portfolio has written a call option, such Portfolio will effect a
closing transaction prior to or concurrent with the sale of the security.
A Portfolio will realize a profit from a closing transaction if the price
of a purchase transaction is less than the premium received from writing
the option or the price received from a sale transaction is more than the
premium paid to buy the option. The Portfolio will realize a loss from a
closing transaction if the price of the purchase transaction is more than
the premium received from writing the option or the price received from a
sale transaction is less than the premium paid to buy the option. Because
increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the
Portfolio.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, a
Portfolio may not be able to effect closing transactions in particular
options and that Portfolio would have to exercise the options in order to
realize any profit. If a Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise. Reasons for the absence of a liquid secondary
market may include the following: (i) there may be insufficient trading
interest in certain options, (ii) restrictions may be imposed by a
national securities exchange on which the option is traded ("Exchange") on
opening or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities, (iv) unusual or unforeseen
circumstances may interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume, or (vi) one
or more Exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that Exchange that had
been issued by the OCC as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Each of the Portfolios other than the Tax-Exempt Portfolio and the Income
Plus Portfolio may write options in connection with buy-and-write
transactions. In other words, the Portfolio may buy a security and then
write a call option against that security. The exercise price of such call
will depend upon the expected price movement of the underlying security.
The exercise price of a call option may be below ("in-the-money"), equal
to ("at-the-money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. Buy-and-write
transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the
premiums received from writing the call option plus the appreciation in
the market price of the underlying security up to the exercise price will
be greater than the appreciation in the price of the underlying security
alone. If the call options are exercised in such transactions, the
Portfolio's maximum gain will be the premium received by it for writing
the option, adjusted upwards or downwards by the difference between that
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Portfolio's purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying security
declines, the amount of such decline will be offset by the amount of
premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the
put option will expire worthless and a Portfolio's gain will be limited to
the premium received. If the market price of the underlying security
declines or otherwise is below the exercise price, a Portfolio may elect
to close the position or take delivery of the security at the exercise
price and that Portfolio's return will be the premium received from the
put options minus the amount by which the market price of the security is
below the exercise price.
A Portfolio may buy put options to hedge against a decline in the value of
its Portfolio. By using put options in this way, a Portfolio will reduce
any profit it might otherwise have realized in the underlying security by
the amount of the premium paid for the put option and by transaction
costs.
A Portfolio may buy call options to hedge against an increase in the price
of securities that it may buy in the future. The premium paid for the call
option plus any transaction costs will reduce the benefit, if any,
realized by such Portfolio upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option may expire
worthless to that Portfolio.
In purchasing an option, a Portfolio would be in a position to realize a
gain if, during the option period, the price of the underlying security
increased (in the case of a call) or decreased (in the case of a put) by
an amount in excess of the premium paid and would realize a loss if the
price of the underlying security did not increase (in the case of a call)
or decrease (in the case of a put) during the period by more than the
amount of the premium. If a put or call option purchased by a Portfolio
were permitted to expire without being sold or exercised, the Portfolio
would lose the amount of the premium.
Although they entitle the holder to buy equity securities, warrants on and
options to purchase equity securities do not entitle the holder to
dividends or voting rights with respect to the underlying securities, nor
do they represent any rights in the assets of the issuer of those
securities.
In addition to options on securities, a Portfolio may also purchase and
sell call and put options on securities indexes. A stock index reflects in
a single number the market value of many different stocks. Relative values
are assigned to the stocks included in an index and the index fluctuates
with changes in the market values of the stocks. The options give the
holder the right to receive a cash settlement during the term of the
option based on the difference between the exercise price and the value of
the index. By writing a put or call option on a securities index, the
Portfolio is obligated, in return for the premium received, to make
delivery of this amount. The Portfolio may offset its position in stock
index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase these options
unless the sub-adviser is satisfied with the development, depth and
liquidity of the market and believes the options can be closed out.
Price movements in the Portfolio's securities may not correlate precisely
with movements in the level of an index and, therefore, the use of options
on indexes cannot serve as a complete hedge
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and will depend, in part, on the ability of its portfolio manager to
predict correctly movements in the direction of the stock market generally
or of a particular industry. Because options on securities indexes require
settlement in cash, the portfolio manager may be forced to liquidate
portfolio securities to meet settlement obligations.
The amount of risk a Portfolio assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase
of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of
the options bought.
D. OPTIONS ON FOREIGN CURRENCIES. Each of the Portfolios other than the
Tax-Exempt Portfolio and the Income Plus Portfolio may buy and write
options on foreign currencies in a manner similar to that in which futures
contracts or forward contracts on foreign currencies will be utilized. For
example, a decline in the U.S. dollar value of a foreign currency in which
portfolio securities are denominated will reduce the U.S. dollar value of
such securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the value of
portfolio securities, a Portfolio may buy put options on the foreign
currency. If the value of the currency declines, such Portfolio will have
the right to sell such currency for a fixed amount in U.S. dollars and
will offset, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing
the cost of such securities, a Portfolio may buy call options thereon. The
purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to a Portfolio from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in
the direction or to the extent desired, a Portfolio could sustain losses
on transactions in foreign currency options that would require such
Portfolio to forego a portion or all of the benefits of advantageous
changes in those rates. In addition, in the case of other types of
options, the benefit to the Portfolio from purchases of foreign currency
options will be reduced by the amount of the premium and related
transaction costs.
A Portfolio may also write options on foreign currencies. For example, in
attempting to hedge against a potential decline in the U.S. dollar value
of foreign currency denominated securities due to adverse fluctuations in
exchange rates, a Portfolio could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to attempt to hedge against
a potential increase in the U.S. dollar cost of securities to be acquired,
a Portfolio could write a put option on the relevant currency which, if
rates move in the manner projected, will expire unexercised and allow that
Portfolio to hedge the increased cost up to the amount of premium. As in
the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of
the premium. If exchange rates do not move in the expected direction, the
option may be exercised and a Portfolio would be required to buy or sell
the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, a
Portfolio also may lose all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.
A Portfolio may write covered call options on foreign currencies. A call
option written on a foreign currency by a Portfolio is "covered" if that
Portfolio owns the underlying foreign
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currency covered by the call or has an absolute and immediate right to
acquire that foreign currency without additional cash consideration (or
for additional cash consideration that is segregated by its custodian)
upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if a Portfolio has a call on the
same foreign currency and in the same principal amount as the call written
if the exercise price of the call held (i) is equal to or less than the
exercise price of the call written or (ii) is greater than the exercise
price of the call written, if the difference is maintained by such
Portfolio in cash or high-grade liquid assets that are segregated with the
Fund's custodian.
Each of the Portfolios other than the Tax-Exempt Portfolio and the Income
Plus Portfolio may write call options on foreign currencies for
cross-hedging purposes that would not be deemed to be covered. A call
option on a foreign currency is for cross-hedging purposes if it is not
covered but is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security
which the Portfolio owns or has the right to acquire and which is
denominated in the currency underlying the option. In such circumstances,
a Portfolio collateralizes the option by segregating cash or high-grade
liquid assets in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
E. FORWARD CONTRACTS. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated
asset at a specified time in the future and the other party is obligated
to pay a specified invoice amount for the assets at the time of delivery.
Each of the Portfolios other than the Tax-Exempt Portfolio and Income Plus
Portfolio may enter into forward contracts to purchase and sell government
securities, foreign currencies or other financial instruments. Forward
contracts generally are traded in an interbank market conducted directly
between traders (usually large commercial banks) and their customers.
Unlike futures contracts, which are standardized contracts, forward
contracts can be specifically drawn to meet the needs of the parties that
enter into them. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated exchange.
The following discussion summarizes the Aggressive Growth, C.A.S.E.,
Capital Appreciation, Global, Growth, Equity-Income, Tactical Asset
Allocation, Balanced and Flexible Income Portfolios' principal uses of
forward foreign currency exchange contracts ("forward currency
contracts"). A Portfolio may enter into forward currency contracts with
stated contract values of up to the value of that Portfolio's assets. A
forward currency contract is an obligation to buy or sell an amount of a
specified currency for an agreed price (which may be in U.S. dollars or
another foreign currency). A Portfolio will exchange foreign currencies
for U.S. dollars and for other foreign currencies in the normal course of
business and may buy and sell currencies through forward currency
contracts in order to fix a price for securities it has agreed to buy or
sell ("transaction hedge"). A Portfolio also may hedge some or all of its
investments denominated in foreign currency against a decline in the value
of that currency relative to the U.S. dollar by entering into forward
currency contracts to sell an amount of that currency (or a proxy currency
whose performance is expected to replicate or exceed the performance of
that currency relative to the U.S. dollar) approximating the value of some
or all of its portfolio securities denominated in that currency ("position
hedge") or by participating in options or futures contracts with respect
to the currency. A Portfolio also may enter into a forward currency
contract with respect to a currency where such Portfolio is considering
the purchase or sale of investments denominated in that currency but has
not yet selected the specific investments ("anticipatory hedge"). In any
of these circumstances a Portfolio may, alternatively, enter into a
forward currency contract to purchase or sell one foreign currency for a
second currency that is expected to perform more favorably relative to the
U.S. dollar if the portfolio manager believes there is a reasonable degree
of correlation between movements in the two currencies ("cross-hedge").
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These types of hedging seek to minimize the effect of currency
appreciation as well as depreciation, but do not eliminate fluctuations in
the underlying U.S. dollar equivalent value of the proceeds of or rates of
return on a Portfolio's foreign currency denominated portfolio securities.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. Shifting a Portfolio's currency exposure from one foreign
currency to another removes that Portfolio's opportunity to profit from
increases in the value of the original currency and involves a risk of
increased losses to such Portfolio if its portfolio manager's position
projection of future exchange rates is inaccurate. Proxy hedges and
cross-hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which hedged securities are
denominated. Unforeseen changes in currency prices may result in poorer
overall performance for a Portfolio than if it had not entered into such
contracts.
A Portfolio will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency
underlying the forward contract or the currency being hedged. To the
extent that a Portfolio is not able to cover its forward currency
positions with underlying portfolio securities, its custodian will
segregate cash or high-grade liquid assets having a value equal to the
aggregate amount of such Portfolio's commitments under forward contracts
entered into with respect to position hedges, cross-hedges and
anticipatory hedges. If the value of the securities used to cover a
position or the value of segregated assets declines, the Portfolio will
find alternative cover or segregate additional cash or high-grade liquid
assets on a daily basis so that the value of the covered and segregated
assets will be equal to the amount of a Portfolio's commitments with
respect to such contracts. As an alternative to segregating assets, a
Portfolio may buy call options permitting such Portfolio to buy the amount
of foreign currency being hedged by a forward sale contract or a Portfolio
may buy put options permitting it to sell the amount of foreign currency
subject to a forward buy contract.
While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such
event, a Portfolio's ability to utilize forward contracts may be
restricted. In addition, a Portfolio may not always be able to enter into
forward contracts at attractive prices and may be limited in its ability
to use these contracts to hedge its assets.
F. SWAPS AND SWAP-RELATED PRODUCTS. In order to attempt to protect the value
of its investments from interest rate or currency exchange rate
fluctuations, each of the Portfolios other than the Tax-Exempt Portfolio
and the Income Plus Portfolio may enter into interest rate and currency
exchange rate swaps, and may buy or sell interest rate and currency
exchange rate caps and floors. The portfolio manager expects to enter into
these transactions primarily to attempt to preserve a return or spread on
a particular investment or portion of its portfolio. A Portfolio also may
enter into these transactions to attempt to protect against any increase
in the price of securities the Portfolio may consider buying at a later
date.
Each Portfolio does not intend to use these transactions as a speculative
investment. Interest rate swaps involve the exchange by a Portfolio with
another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments. The
exchange commitments can involve payments to be made in the same currency
or in different currencies. The purchase of an interest rate cap entitles
the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually based principal amount from the party selling the interest
rate cap. The purchase of an interest rate floor entitles the purchaser,
to the extent that a specified index falls below a predetermined interest
rate, to receive payments of interest on a contractually based principal
amount from the party selling the interest rate floor.
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Each of the Portfolios other than the Tax-Exempt and Income Plus
Portfolios may enter into interest rate swaps, caps and floors on either
an asset-based or liability-based basis, depending upon whether it is
hedging its assets or its liabilities, and will usually enter into
interest rate swaps on a net basis (i.e., the two payment streams are
netted out, with a Portfolio receiving or paying, as the case may be, only
the net amount of the two payments). The net amount of the excess, if any,
of a Portfolio's obligations over its entitlements with respect to each
interest rate swap will be calculated on a daily basis and an amount of
cash or high-grade liquid assets having an aggregate net asset at least
equal to the accrued excess will be segregated by its custodian. If a
Portfolio enters into an interest rate swap on other than a net basis, it
will maintain a segregated account in the full amount accrued on a daily
basis of its obligations with respect to the swap. A Portfolio will not
enter into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other party
thereto is rated in one of the three highest rating categories of at least
one nationally recognized statistical rating organization at the time of
entering into such transaction. The portfolio manager will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Portfolio will have
contractual remedies pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. The sub-advisers have
determined that, as a result, the swap market has become relatively
liquid. Caps and floors are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are less
liquid than swaps. To the extent a Portfolio sells (i.e., writes) caps and
floors, it will segregate cash or high-grade liquid assets having an
aggregate net asset value at least equal to the full amount, accrued on a
daily basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by the Aggressive Growth, Capital Appreciation,
Global, Growth, C.A.S.E., Equity-Income, Tactical Asset Allocation,
Balanced and Flexible Income Portfolios, although none of the Portfolios
presently intends to engage in such transactions in excess of 5% of its
total assets. These transactions may in some instances involve the
delivery of securities or other underlying assets by a Portfolio or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with
respect to interest rate swaps is limited to the net amount of the
interest payments that a Portfolio is contractually obligated to make. If
the other party to an interest rate swap that is not collateralized
defaults, a Portfolio would risk the loss of the net amount of the
payments that it contractually is entitled to receive. A Portfolio may buy
and sell (i.e., write) caps and floors without limitation, subject to the
segregation requirement described above.
In addition to the instruments, strategies and risks described in this
Statement of Additional Information and in the Prospectus, there may be
additional opportunities in connection with options, futures contracts,
forward currency contracts and other hedging techniques, that become
available as the portfolio managers develop new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
instruments are developed. The portfolio managers may use these
opportunities to the extent they are consistent with the Portfolio's
investment objective and are permitted by the Portfolio's investment
limitations and applicable regulatory requirements.
G. EURODOLLAR INSTRUMENTS. The Portfolios may each make investments in
Eurodollar instruments. Eurodollar instruments are U.S. dollar-denominated
futures contracts or options thereon which are linked to the London
Interbank Offered Rate (the "LIBOR"), although
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foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. A
Portfolio might use Eurodollar futures contracts and options thereon to
hedge against changes in LIBOR, to which many interest rate swaps and
fixed income instruments are linked.
H. SPECIAL INVESTMENT CONSIDERATIONS AND RISKS. The successful use of the
investment practices described above with respect to futures contracts,
options on futures contracts, forward contracts, options on securities and
on foreign currencies, and swaps and swap-related products draws upon
skills and experience which are different from those needed to select the
other instruments in which a Portfolio invests. Should interest or
exchange rates or the prices of securities or financial indices move in an
unexpected manner, a Portfolio may not achieve the desired benefits of the
foregoing instruments or may realize losses and thus be in a worse
position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits with respect to options on
currencies, forward contracts and other negotiated or over-the-counter
instruments, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation
between movements in the price of the securities and currencies hedged or
used for cover will not be perfect and could produce unanticipated losses.
A Portfolio's ability to dispose of its positions in the foregoing
instruments will depend on the availability of liquid markets in the
instruments. Markets in a number of the instruments are relatively new and
still developing, and it is impossible to predict the amount of trading
interest that may exist in those instruments in the future. Particular
risks exist with respect to the use of each of the foregoing instruments
and could result in such adverse consequences to a Portfolio as the
possible loss of the entire premium paid for an option bought by a
Portfolio, the inability of the Portfolio, as the writer of a covered call
option, to benefit from the appreciation of the underlying securities
above the exercise price of the option and the possible need to defer
closing out positions in certain instruments to avoid adverse tax
consequences. As a result, no assurance can be given that a Portfolio will
be able to use those instruments effectively for their intended purposes.
In connection with certain of its hedging transactions, a Portfolio must
segregate assets with the Fund's custodian bank to ensure that such
Portfolio will be able to meet its obligations pursuant to these
instruments. Segregated assets generally may be not be disposed of for so
long as a Portfolio maintains the positions giving rise to the segregation
requirement. Segregation of a large percentage of a Portfolio's assets
could impede implementation of that Portfolio's investment policies or its
ability to meet redemption requests or other current obligations.
I. ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND
FOREIGN INSTRUMENTS. Unlike transactions entered into by a Portfolio in
futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the
exception of certain foreign currency options) by the SEC. To the
contrary, such instruments are traded through financial institutions
acting as market-makers, although foreign currency options are also traded
on certain national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Options on currencies may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no
daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although
the buyer of an option cannot lose more than the amount of the premium
plus related transaction
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costs, this entire amount could be lost. Moreover, an option writer and a
buyer or seller of futures or forward contracts could lose amounts
substantially in excess of any premium received or initial margin or
collateral posted due to the potential additional margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions.
In particular, all foreign currency option positions entered into on a
national securities exchange are cleared and guaranteed by the OCC,
thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities exchange may
be more readily available than in the over-the-counter market, potentially
permitting a Portfolio to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign
currency market, possible intervention by governmental authorities and the
effects of other political and economic events. In addition,
exchange-traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise and
settlement of such options must be made exclusively through the OCC, which
has established banking relationships in applicable foreign countries for
this purpose. As a result, the OCC may, if it determines that foreign
government restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the
OCC or its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on
exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in
foreign countries. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic
factors, (ii) lesser availability than in the United States of data on
which to make trading decisions, (iii) delays in a Portfolio's ability to
act upon economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the United
States, and (v) low trading volume.
OTHER INVESTMENT COMPANIES.
The Tactical Asset Allocation Portfolio may invest up to 10% of its total
assets, calculated at the time of purchase, in the securities of money market
funds, which are investment companies. The Portfolio may not invest (i) more
than 5% of its total assets in the securities of any one investment company
or (ii) in more than 3% of the total outstanding voting securities of any
other investment company. The Portfolio will indirectly bear its
proportionate share of any investment advisory fees and expenses paid by the
funds in which it invests, in addition to the investment advisory fee and
expenses paid by the Portfolio.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES.
Although it is the policy of the Flexible Income, Income Plus and Tactical
Asset Allocation Portfolios to invest primarily in income-producing
securities, each of the Portfolios other than the
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Aggressive Growth Portfolio may invest up to 10% of their assets in zero
coupon, pay-in-kind and step-coupon securities. Zero-coupon bonds are issued
and traded at a discount from their face value. They do not entitle the
holder to any periodic payment of interest prior to maturity. Step coupon
bonds trade at a discount from their face value and pay coupon interest. The
coupon rate is low for an initial period and then increases to a higher
coupon rate thereafter. The discount from the face amount or par value
depends on the time remaining until cash payments begin, prevailing interest
rates, liquidity of the security and the perceived credit quality of the
issuer. Pay-in-kind bonds give the issuer an option to pay cash at a coupon
payment date or give the holder of the security a similar bond with the same
coupon rate and a face value equal to the amount of the coupon payment that
would have been made. The Flexible Income Portfolio may also invest in
"strips", which are debt securities that are stripped of their interest after
the securities are issued, but otherwise are comparable to zero coupon bonds.
Current federal income tax law requires holders of zero-coupon securities
and step-coupon securities to report the portion of the original issue
discount on such securities that accrues that year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986 ("Code"), a Portfolio must distribute its investment
company taxable income, including the original issue discount accrued on
zero-coupon or step-coupon bonds. Because it will not receive cash payments
on a current basis in respect of accrued original-issue discount on
zero-coupon bonds or step-coupon bonds during the period before interest
payments begin, in some years a Portfolio may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. A Portfolio might obtain such cash from selling other
portfolio holdings. These actions may reduce the assets to which Portfolio
expenses could be allocated and may reduce the rate of return for such
Portfolio. In some circumstances, such sales might be necessary in order to
satisfy cash distribution requirements even though investment considerations
might otherwise make it undesirable for a Portfolio to sell the securities at
the time.
Generally, the market prices of zero-coupon bonds and strip securities are
more volatile than the prices of securities that pay interest periodically
and in cash and are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having similar maturities
and credit quality.
INCOME-PRODUCING SECURITIES.
As a fundamental policy, the Flexible Income Portfolio may not purchase a
non-income-producing security if, after such purchase, less than 80% of the
Flexible Income Portfolio's total assets would be invested in
income-producing securities. Income-producing securities include securities
that make periodic income payments, as well as those that make interest
payments on a deferred basis, or pay interest at maturity (as in the case
with treasury bills or zero-coupon bonds).
The Flexible Income Portfolio will purchase defaulted securities only when
its portfolio manager believes, based upon his analysis of the financial
condition, results of operations and economic outlook of an issuer, that
there is potential for resumption of income payments and that the securities
offer an unusual opportunity for capital appreciation. Notwithstanding the
portfolio manager's belief as to the resumption of income payments, however,
the purchase of any security on which payment of interest or dividends is
suspended involves a high degree of risk. Such risk includes, among other
things, the following:
A. FINANCIAL AND MARKET RISKS. Investments in securities that are in default
involve a high degree of financial and market risks that can result in
substantial or at times even total losses. Issuers of defaulted securities
may have substantial capital needs and may become involved in bankruptcy
or reorganization proceedings. Among the problems involved in investments
in
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such issuers is the fact that it may be difficult to obtain information
about the condition of such issuers. The market prices of such securities
also are subject to abrupt and erratic movements and above average price
volatility, and the spread between the bid and asked prices of such
securities may be greater than normally expected.
B. DISPOSITION OF PORTFOLIO SECURITIES. Although the Flexible Income
Portfolio generally intends to purchase securities for which its portfolio
manager expects an active market to be maintained, defaulted securities
may be less actively traded than other securities and it may be difficult
to dispose of substantial holdings of such securities at prevailing market
prices. The Flexible Income Portfolio will limit its holdings of any such
securities to amounts that its portfolio manager believes could be readily
sold, and its holdings of such securities would, in any event, be limited
so as not to limit the Flexible Income Portfolio's ability to readily
dispose of its securities to meet redemptions.
C. OTHER. Defaulted securities require active monitoring and may, at times,
require participation in bankruptcy or receivership proceedings on behalf
of the Flexible Income Portfolio.
Other types of income producing securities that the Portfolios may
purchase include, but are not limited to, the following types of securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities are
relatively long-term instruments that often carry demand features
permitting the holder to demand payment of principal at any time or at
specified intervals prior to maturity.
STANDBY COMMITMENTS. These instruments, which are similar to a put, give
the Portfolios the option to obligate a broker, dealer or bank to
repurchase a security held by the Portfolios at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker,
dealer or bank) to grant the holders of such securities the option to
tender the securities to the institution at periodic intervals.
INVERSE FLOATERS. Inverse floaters are instruments whose interest bears an
inverse relationship to the interest rate on another security. The
Portfolios will not invest more than 5% of their respective assets in
inverse floaters.
The Portfolios will purchase instruments with demand features, standby
commitments and tender option bonds primarily for the purpose of increasing
the liquidity of their portfolios.
LENDING OF PORTFOLIO SECURITIES.
Subject to any applicable investment restriction relating to lending, each
of the Portfolios other than the Tax-Exempt Portfolio and the Income Plus
Portfolio may lend securities from its portfolio. Under applicable regulatory
requirements (which are subject to change), the following conditions apply to
securities loans: a) the loan must be continuously secured by liquid assets
maintained on a current basis in an amount at least equal to the market value
of the securities loaned; b) a Portfolio must receive any dividends or
interest paid by the issuer on such securities; c) a Portfolio must have the
right to call the loan and obtain the securities loaned at any time upon
notice of not more than five business days, including the right to call the
loan to permit voting of the securities; and d) a Portfolio must receive
either interest from the investment of collateral or a fixed fee from the
borrower. Securities loaned by a Portfolio remain subject to fluctuations in
market value. A Portfolio may pay reasonable finders, custodian and
administrative fees in connection with a loan. Securities lending, as with
other
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extensions of credit, involves the risk that the borrower may default.
Although securities loans will be fully collateralized at all times, a
Portfolio may experience delays in, or be prevented from, recovering the
collateral. During a period that a Portfolio seeks to enforce its rights
against the borrower, the collateral and the securities loaned remain subject
to fluctuations in market value. A Portfolio may also incur expenses in
enforcing its rights. If a Portfolio has sold the loaned security, it may not
be able to settle the sale of the security and may incur potential liability
to the buyer of the security on loan for its costs to cover the purchase. The
Portfolios will not lend securities to any advisers or sub-advisers to the
Fund or their affiliates. By lending its securities, a Portfolio can increase
its income by continuing to receive interest or dividends on the loaned
securities as well as by either investing the cash collateral in short-term
securities or by earning income in the form of interest paid by the borrower
when U.S. government securities are used as collateral.
JOINT ACCOUNTS.
Janus Capital, the sub-adviser to the Growth, Global, Flexible Income,
Balanced and Capital Appreciation Portfolios, has received exemptive relief
from the SEC to permit any funds advised or sub-advised by Janus Capital to
invest in certain money market instruments through a joint account.
Accordingly, these Portfolios may purchase such instruments through a joint
account.
ILLIQUID SECURITIES.
Each of the Aggressive Growth, C.A.S.E., Capital Appreciation, Global,
Growth, Equity-Income, Tactical Asset Allocation, Balanced and Flexible
Income Portfolios may invest up to 15%, and each of the Tax-Exempt and Income
Plus Portfolios may invest up to 10%, of its net assets in illiquid
securities (i.e., securities that are not readily marketable). The Board of
Trustees has authorized the sub-advisers to make liquidity determinations
with respect to its securities, including Rule 144A securities, commercial
paper and municipal lease obligations in accordance with the guidelines
established by the Board of Trustees. Under the guidelines, the portfolio
manager will consider the following factors in determining whether a Rule
144A security or a municipal lease obligation is liquid: 1) the frequency of
trades and quoted prices for the security; 2) the number of dealers willing
to purchase or sell the security and the number of other potential
purchasers; 3) the willingness of dealers to undertake to make a market in
the security; and 4) the nature of the marketplace trades, including the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer. With respect to municipal lease obligations, the
portfolio managers of the Tax-Exempt and Flexible Income Portfolios will also
consider factors unique to municipal lease obligations including the general
creditworthiness of the municipality, the importance of the property covered
by the lease obligation and the likelihood that the marketability of the
obligation will be maintained throughout the time the obligation is held by
the Portfolio. The sale of illiquid securities often requires more time and
results in higher brokerage charges or dealer discounts and other selling
expenses than does the sale of securities eligible for trading on national
securities exchanges or in the over-the-counter markets. A Portfolio may be
restricted in its ability to sell such securities at a time when the
sub-advisor deems it advisable to do so. In addition, in order to meet
redemption requests, a Portfolio may have to sell other assets, rather than
such illiquid securities, at a time which is not advantageous.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS.
Although each of the Portfolios may enter into repurchase and reverse
repurchase agreements, the Growth, C.A.S.E., Global, Flexible Income,
Tax-Exempt, Equity-Income and Income Plus Portfolios do not intend to invest
more than 5% of their assets, and the Balanced, Capital Appreciation,
Aggressive Growth and Tactical Asset Allocation Portfolios do not intend to
invest more than 15% of their assets, in either repurchase or reverse
repurchase agreements. In a repurchase agreement, a Portfolio purchases a
security and simultaneously commits to resell that security to the seller at
an agreed upon
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price on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon incremental amount which is unrelated to the coupon
rate or maturity of the purchased security. A repurchase agreement involves
the obligation of the seller to pay the agreed upon price, which obligation
is in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked-to-market daily) of the underlying security or
"collateral". A Portfolio may engage in a repurchase agreement with respect
to any security in which it is authorized to invest. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to a Portfolio in
connection with bankruptcy proceedings), it is the policy of each Portfolio
to limit repurchase agreements to those parties whose creditworthiness has
been reviewed and found satisfactory by the investment sub-adviser for that
Portfolio and approved by the Board of Trustees of the Fund. In addition, the
Portfolios currently intend to invest primarily in repurchase agreements
collateralized by U.S. government securities whose value equals at least 100%
of the repurchase price, marked-to-market daily.
In a reverse repurchase agreement, a Portfolio sells a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash and agrees to repurchase the instrument at a particular price and time.
While a reverse repurchase agreement is outstanding, a Portfolio will
segregate cash and appropriate liquid assets with the Fund's custodian to
cover its obligation under the agreement. The Portfolios will enter into
reverse repurchase agreements only with parties the investment sub-adviser
for each Portfolio deems creditworthy and that have been reviewed by the
Board of Trustees of the Fund.
PASS-THROUGH SECURITIES.
Each of the Portfolios may, in varying degrees, invest in various types of
pass-through securities, such as mortgage-backed securities, asset-backed
securities and participation interests. A pass-through security is a share or
certificate of interest in a pool of debt obligations that have been
repackaged by an intermediary, such as a bank or broker-dealer. The purchaser
receives an undivided interest in the underlying pool of securities. The
issuers of the underlying securities make interest and principal payments to
the intermediary which are passed through to purchasers, such as the
Portfolios. The most common type of pass-through securities are
mortgage-backed securities. Government National Mortgage Association ("GNMA")
Certificates are mortgage-backed securities that evidence an undivided
interest in a pool of mortgage loans. GNMA Certificates differ from
traditional bonds in that principal is paid back monthly by the borrowers
over the term of the loan rather than returned in a lump sum at maturity. A
Portfolio will generally purchase "modified pass-through" GNMA Certificates,
which entitle the holder to receive a share of all interest and principal
payments paid and owned on the mortgage pool, net of fees paid to the
"issuer" and GNMA, regardless of whether or not the mortgagor actually makes
the payment. GNMA Certificates are backed as to the timely payment of
principal and interest by the full faith and credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates
("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all interest and
principal payments made and owned on the underlying pool. FHLMC guarantees
timely payments of interest on PCs and the full return of principal. GMCs
also represent a pro rata interest in a pool of mortgages. However, these
instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. This type of security is guaranteed by FHLMC as
to timely payment of principal and interest, but is not backed by the full
faith and credit of the U.S. government.
The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro
rata share of all interest and principal payments made and owned
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on the underlying pool. This type of security is guaranteed by FNMA as to
timely payment of principal and interest, but it is not backed by the full
faith and credit of the U.S. government.
Each of the mortgage-backed securities described above is characterized by
monthly payments to the holder, reflecting the monthly payments made by the
borrowers who received the underlying mortgage loans. The payments to the
security holders (such as a Portfolio), like the payments on the underlying
loans, represent both principal and interest. Although the underlying
mortgage loans are for specified periods of time, such as 20 or 30 years, the
borrowers can, and typically do, pay them off sooner. Thus, the security
holders frequently receive prepayments of principal in addition to the
principal that is part of the regular monthly payments. A borrower is more
likely to prepay a mortgage that bears a relatively high rate of interest.
This means that in times of declining interest rates, some of a Portfolio's
higher yielding mortgage-backed securities might be converted to cash and
that Portfolio will be forced to accept lower interest rates when that cash
is used to purchase additional securities in the mortgage-backed securities
sector or in other investment sectors. Mortgage and asset-backed securities
may have periodic income payments or may pay interest at maturity (as is the
case with Treasury bills or zero-coupon bonds).
Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obliger or guarantor of the security and
interest and principal payments ultimately depend upon payment of the
underlying loans by individuals. Tax-exempt asset-backed securities include
units of beneficial interests in pools of purchase contracts, financing
leases, and sales agreements that may be created when a municipality enters
into an installment purchase contract or lease with a vendor. Such securities
may be secured by the assets purchased or leased by the municipality;
however, if the municipality stops making payments, there generally will be
no recourse against the vendor. The market for tax-exempt asset-backed
securities is still relatively new. These obligations are likely to involve
unscheduled prepayments of principal.
HIGH-YIELD/HIGH-RISK BONDS.
High-yield/high-risk, below investment grade securities (commonly known as
"junk bonds") involve significant credit and liquidity concerns and
fluctuating yields and are not suitable for short-term investing. Higher
yields are ordinarily available on fixed-income securities which are unrated
or are rated in the lower rating categories of recognized rating services
such as Moody's and Standard & Poor's. None of the Portfolios other than the
Flexible Income Portfolio and the Income Plus Portfolio may invest more than
5% of its net assets in junk bonds. Lower rated bonds also involve the risk
that the issuer will not make interest or principal payments when due. In the
event of an unanticipated default, a Portfolio owning such bonds would
experience a reduction in its income, and could expect a decline in the
market value of the securities so affected. More careful analysis of the
financial condition of each issuer of lower rated securities is therefore
necessary. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payments obligations, to meet projected business goals and to obtain
additional financing.
The market prices of lower grade securities are generally less sensitive
to interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or individual developments specific to
the issuer. Periods of economic or political uncertainty and change can be
expected to result in volatility of prices of these securities. Since the
last major economic recession, there has been a substantial increase in the
use of high-yield debt securities to fund highly leveraged corporate
acquisitions and restructurings, so past experience with high-yield
securities in a prolonged economic downturn may not provide an accurate
indication of future performance during such periods. Lower rated securities
also may have less liquid markets than higher rated securities, and their
liquidity
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as well as their value may be more severely affected by adverse economic
conditions. Adverse publicity and investor perceptions as well as new or
proposed laws may also have a greater negative impact on the market for lower
rated bonds.
Unrated securities are not necessarily of lower quality than rated
securities, but the markets for lower rated and nonrated securities are more
limited than those in which higher rated securities are traded. In addition,
an economic downturn or increase in interest rates is likely to have a
greater negative effect on the market for lower rated and nonrated
securities, the value of high yield debt securities held by a Portfolio, the
new asset value of a Portfolio holding such securities and the ability of the
bonds' issuers to repay principal and interest, meet projected business goals
and obtain additional financing than on higher rated securities.
WARRANTS AND RIGHTS.
Each of the Portfolios other than the Tax-Exempt Portfolio may invest in
warrants and rights. A warrant is a type of security that entitles the holder
to buy a proportionate amount of common stock at a specified price, usually
higher than the market price at the time of issuance, for a period of years
or to perpetuity. In contrast, rights, which also represent the right to buy
common shares, normally have a subscription price lower than the current
market value of the common stock and a life of two to four weeks. The
Portfolios intend to invest in warrants valued at the lower of cost or market
value not exceeding 5% of the value of their net assets, and that are freely
transferrable and traded on the major securities exchanges.
U.S. GOVERNMENT SECURITIES.
Examples of the types of U.S. government securities that the Portfolios
may hold include, in addition to those described in the Prospectus and direct
obligations of the U.S. Treasury, the obligations of the Federal Housing
Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Bank, Federal Intermediate Credit Banks,
Federal Land Banks and Maritime Administration. U.S. government securities
may be supported by the full faith and credit of the U.S. government (such as
securities of the Small Business Administration); by the right of the issuer
to borrow from the Treasury (such as securities of the Federal Home Loan
Bank); by the discretionary authority of the U.S. government to purchase the
agency's obligations (such as securities of the Federal National Mortgage
Association); or only by the credit of the issuing agency.
PORTFOLIO TURNOVER.
As stated in the Prospectus, each of the Growth, C.A.S.E., Global,
Flexible Income, Balanced, Capital Appreciation, Aggressive Growth,
Equity-Income and Tactical Asset Allocation Portfolios generally intend to
purchase and sell securities as deemed appropriate by its portfolio manager
to further the Portfolio's stated investment objective, and the rate of
portfolio turnover is not expected to be a limiting factor when changes are
deemed to be appropriate. The Growth Portfolio's portfolio turnover rate for
the fiscal years ended September 30, 1995, 1994 and 1993 were 123.26%,
63.73%, and 97.40%, respectively. The Global Portfolio's portfolio turnover
rate for the fiscal years ended September 30, 1995, 1994 and 1993 were
161.48%, 148.01% and 116.98%, respectively. The Flexible Income Portfolio's
portfolio turnover rate for the fiscal year ended September 30, 1995 and 1994
was 149.58% and 105.40%, respectively. For the eleven month period ended
September 30, 1993, the portfolio turnover rate of IDEX Total Income Trust,
predecessor to the Flexible Income Portfolio, was 138.86%. For the fiscal
year ended September 30, 1995, the portfolio turnover rates for each of the
Balanced, Aggressive Growth, Equity-Income and Capital Appreciation
Portfolios were 100.35%, 107.41%, 42.18% and 319.95%, respectively. The
estimated annual turnover rate for the Tactical Asset Allocation
37
<PAGE>
Portfolio for the fiscal year ended September 30, 1996 is expected to be less
than 100%. The estimated annual turnover rate for the C.A.S.E. Portfolio for
the fiscal year ended September 30, 1996 is expected to be between 100% and
200%.
These percentages are calculated by dividing the lesser of purchases or
sales of portfolio securities during the fiscal year by the monthly average
of the value of such securities (excluding from the computation all
securities, including options, with maturities at the time of acquisition of
one year or less). For example, a portfolio turnover rate of 100% would mean
that all of the Portfolio's securities (except those excluded from the
calculation) were replaced once in a period of one year. A high rate of
portfolio turnover generally involves correspondingly greater brokerage
commission expenses. Turnover rates may vary greatly from year to year as
well as within a particular year and may also be affected by cash
requirements for redemptions of the Portfolio's shares and by requirements,
the satisfaction of which enable the Portfolio to receive favorable tax
treatment. Because the rate of portfolio turnover is not a limiting factor,
particular holdings may be sold at any time, if investment judgement or
portfolio operations make a sale advisable. As a result, the annual portfolio
turnover rate in future years may exceed the percentage shown above.
Portfolio transactions for the Tax-Exempt Portfolio and the Income Plus
Portfolio are ordinarily undertaken to achieve each Portfolio's investment
objective in light of anticipated movements in the level of interest rates.
The investment policies of the Tax-Exempt Portfolio and the Income Plus
Portfolio may lead to frequent changes in investments, particularly in
periods of rapidly fluctuating interest rates. The portfolio turnover rate of
each Portfolio normally is anticipated to be less than 100%, although this
rate will not be a limiting factor when either Portfolio deems it desirable
to sell or purchase securities. For the fiscal years ended September 30,
1995, 1994 and 1993, the portfolio turnover rates of the Tax-Exempt Portfolio
were 126.48%, 59.84% and 91.03%, respectively. For the fiscal years ended
September 30, 1995, 1994 and 1993, the portfolio turnover rates of the Income
Plus Portfolio were 25.07%, 48.12% and 54.51%, respectively.
INVESTMENT ADVISORY AND OTHER SERVICES
GROWTH, GLOBAL, FLEXIBLE INCOME, BALANCED AND CAPITAL APPRECIATION PORTFOLIOS
The Fund has entered into a Management and Investment Advisory Agreement
(collectively, the "Advisory Agreements") applicable to the Growth, Global,
Flexible Income, Balanced and Capital Appreciation Portfolios with Idex
Management, Inc. ("IMI"), 201 Highland Avenue, Largo, Florida 34640. IMI
supervises each Portfolio's investments and conducts its investment program.
Each Advisory Agreement provides that IMI will perform the following services
or cause them to be performed by others: (i) furnish to the Portfolio
investment advice and recommendations, (ii) supervise the purchase and sale
of securities as directed by appropriate Fund officers, and (iii) be
responsible for the administration of the Portfolio. For its services to each
of those Portfolios, IMI receives an annual fee, computed daily and paid
monthly, equal to 1.00% of the first $750 million of that Portfolio's average
daily net assets, 0.9% of the next $250 million of that Portfolio's average
daily net assets, and 0.8% of the average daily net assets of that Portfolio
in excess of $1 billion. The Growth Portfolio incurred investment advisory
fees of $4,292,430, $4,949,754 and $4,960,323 for the fiscal years ended
September 30, 1995, 1994 and 1993, respectively. For the fiscal year ended
September 30, 1995, 1994 and 1993, the Global Portfolio incurred investment
advisory fees of $873,921, $558,189 and $64,951 (net of fees waived by IMI of
$52,462 pursuant to the Global Portfolio's expense limitation of 2.5% for
1993). For the fiscal year ended September 30, 1995 and 1994, the Flexible
Income Portfolio incurred investment advisory fees of $185,824 and $136,806
(net of fee waivers by IMI of $16,128 and $98,496 pursuant to the Flexible
Income Portfolio's expense limitation of 1.5%). For the eleven month period
ended September 30, 1993, IDEX Total Income Trust, predecessor to the
Flexible Income Portfolios, incurred
38
<PAGE>
investment advisory fees of $186,653 (net of fees waived by IMI of $53,337
pursuant to IDEX Total Income Trust's voluntary expense limitation of 1.5%).
For the fiscal year ended September 30, 1995, the Balanced and Capital
Appreciation Portfolios incurred investment advisory fees of $31,512 and
$43,610, respectively (net of fees waived by IMI of $49,201 and $55,475,
respectively, pursuant to each Portfolio's expense limitation of 2.5%.)
The duties and responsibilities of the investment adviser are specified in
the Advisory Agreements. The Agreements were approved by the Board of
Trustees of the Fund (including a majority of trustees who are not parties to
the Agreement or interested persons, as defined by the 1940 Act, of any such
party.) The Agreements are not assignable and may be terminated without
penalty upon 60 days written notice at the option of either the Fund or IMI
or by a vote of shareholders of each Portfolio. Each provides that it can be
continued from year to year so long as such continuance is specifically
approved annually (a) by the Board of Trustees of the Fund or by a majority
of the outstanding shares of the Portfolio and (b) by a majority vote of the
Trustees who are not parties to the Agreement or interested persons of any
such party cast in person at a meeting.
The Agreements also provide that IMI shall not be liable to the Fund or to
any shareholder for any error of judgment or mistake of law or for any loss
suffered by the Fund or by any shareholder in connection with matters to
which the Agreements relate, except for a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard on the part of IMI in the performance of its duties thereunder.
The Growth Portfolio's Advisory Agreement became effective April 22, 1991.
The Global Portfolio's Advisory Agreement became effective April 22, 1992.
The Flexible Income Portfolio's Advisory Agreement was entered into as of
August 5, 1993. The Balanced and Capital Appreciation Portfolio's Advisory
Agreements were entered into as of September 30, 1994.
IMI supervises all of the administrative functions of these Portfolios,
provides office space, and pays its allocable portion of the salaries, fees
and expenses of all Fund officers and of those trustees who are affiliated
with IMI. The costs and expenses, including legal and accounting fees, filing
fees and printing costs in connection with the formation of the Fund and the
preparation and filing of the Fund's initial registration statements under
the Securities Act of 1933 and 1940 Act are paid by IMI.
The Growth, Global, Flexible Income, Balanced and Capital Appreciation
Portfolios each pay its allocable share of the fees and expenses of the
Fund's non-interested trustees, custodian and transfer agent fees, brokerage
commissions and all other expenses in connection with the execution of its
portfolio transactions, administrative, clerical, recordkeeping, bookkeeping,
legal, auditing and accounting expenses, interest and taxes, expenses of
preparing tax returns, expenses of shareholders' meetings and preparing,
printing and mailing proxy statements (unless otherwise agreed to by the Fund
and IMI), expenses of preparing and typesetting periodic reports to
shareholders (except for those reports the Portfolio permits to be used as
sales literature), and the costs, including filing fees, of renewing or
maintaining registration of Portfolio shares under federal and state law.
Whenever, in any fiscal year, the total cost to a Portfolio of normal
operating expenses chargeable to its income account, including the investment
advisory fee but excluding brokerage commissions, interest, taxes and 12b-1
fees, exceeds on an annual basis the lesser of the most restrictive expense
limitation imposed by any state in which its shares are offered or, with
respect to the Growth, Global and Flexible Income Portfolios, 1.5% of each
Portfolio's average daily net assets, and with respect to the Balanced and
Capital Appreciation Portfolios, 2.5% of each Portfolio's daily net assets
for the first fiscal year, and 1.5% thereafter, IMI will reimburse that
Portfolio, or waive fees in an amount equal to that excess.
IMI has entered into an Investment Counsel Agreement applicable to each of
the Growth, Global, Flexible Income, Balanced and Capital Appreciation
Portfolios, respectively, with Janus Capital
39
<PAGE>
Corporation ("Janus Capital"). These Agreements are referred to collectively
as the Investment Counsel Agreements. The Investment Counsel Agreement for
the Growth Portfolio became effective April 22, 1991, the Global Portfolio's
Investment Counsel Agreement became effective April 22, 1992, the Flexible
Income Portfolio's Investment Counsel Agreement became effective August 5,
1993, and the Balanced and Capital Appreciation Portfolios' respective
Investment Counsel Agreements were entered into as of September 30, 1994.
Further discussions of the basic fee arrangements and allocation of
responsibilities are set forth in the Prospectus. The Growth Portfolio
incurred investment sub-advisory fees of $2,146,215, $2,474,877 and
$2,480,162 for the fiscal years ended September 30, 1995, 1994 and 1993,
respectively. For the fiscal years ended September 30, 1995, 1994 and 1993,
the Global Portfolio incurred investment sub-advisory fees of $436,960,
$279,095 and $32,476, respectively. For the fiscal year ended September 30,
1995 and 1994, the Flexible Income Portfolio incurred investment sub-advisory
fees of $92,912 and $68,403, respectively. For the eleven month period ended
September 30, 1993, IDEX Total Income Trust, predecessor to the Flexible
Income Portfolio, incurred investment sub-advisory fees of $93,327. For the
fiscal year ended September 30, 1995, the Balanced and Capital Appreciation
Portfolios incurred investment sub-advisory fees of $15,756 and $21,805,
respectively.
The Investment Counsel Agreements provide for additional compensation to
be paid by IMI to Janus Capital as follows: If on December 31 of 1995, and
December 31 of each year thereafter ("Target Date") the aggregate actual net
assets on that date of the Fund and any other registered investment company
sponsored by IMI, containing the name IDEX or with respect to which IMI acts
as investment adviser or administrator, and to which Janus Capital provides
investment advice (the "Advised Funds") are less than the applicable Target
Net Assets specified in Table 1 below, then IMI shall pay to Janus Capital a
percentage, as specified in Table 2 below, of the Net Fee otherwise payable
to InterSecurities, Inc., or any other affiliate of IMI serving as
administrator to the Fund for the calendar year following such date (the
"Administrator").
<TABLE>
<CAPTION>
TABLE 1
TARGET DATE ADVISED FUNDS TARGET NET ASSETS
- ----------------------------- ------------------------------------
<S> <C>
December 31, 1995 ........... $950 million
(and December 31 of each
year thereafter)
</TABLE>
The Net Fee of the Administrator shall be the fee received by the
Administrator from IMI less any reimbursement from the Administrator in
connection with any applicable expense limitation. The percentage of the Net
Fee so payable to Janus Capital shall be determined by the percentage that on
the applicable Target Date the aggregate actual net assets of the Advised
Funds are less than the applicable Target Net Assets of the Advised Funds
("Shortfall of Target") in accordance with Table 2 below:
<TABLE>
<CAPTION>
TABLE 2
SHORTFALL OF TARGET PERCENTAGE OF NET FEE
- ------------------------ --------------------------
<S> <C>
5% - 10% ............... 10%
Over 10% - 20% ......... 20%
Over 20% - 30% ......... 30%
Over 30% ............... 40%
</TABLE>
No additional fees shall be payable to Janus Capital for any year if, for
the five-year period ending December 31 of the preceding year, the respective
total returns of a majority of the Advised Funds that have the objective of
investing primarily in equity securities with such a five-year record (and
with respect to which Janus Capital shall have provided investment advice for
all of such five years and for
40
<PAGE>
the then current year), which in 1995 were IDEX Fund, IDEX II Growth, Global,
Flexible Income, Balanced and Capital Appreciation Portfolios and IDEX Fund
3, are not in the top one-third of their respective fund categories as
determined by Lipper Analytical Services, Inc. or its successor (or if no
successor exists, by a mutually agreed upon statistical service). No
additional fees were payable by IMI to Janus Capital for 1995 because Advised
Funds Target Net Assets exceeded $950 million on December 31, 1994.
IMI and Janus Capital also serve as investment adviser and sub-adviser,
respectively, to certain other funds in the IDEX Group, IDEX Fund and IDEX
Fund 3. Janus Capital also serves as sub-adviser to certain portfolios of
WRL Series Fund, Inc., a registered investment company. Janus Capital has
served as investment adviser to Janus Fund since 1970 and currently serves as
investment adviser to each portfolio of the Janus Investment Fund and Janus
Aspen Series as well as sub-adviser to other mutual funds. Janus Capital also
serves as investment adviser to individual, corporate, charitable and
retirement accounts. Janus Capital managed over $29 billion in assets as of
September 30, 1995.
Janus Capital and AUSA Holding Company ("AUSA") each own 50% of the
outstanding stock of IMI. AUSA also owns 100% of the outstanding shares of
the Fund's distributor and transfer agent. AUSA is wholly-owned by AEGON USA,
Inc., a financial services holding company located at 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499. AEGON USA, Inc. is a wholly-owned indirect
subsidiary of AEGON nv, a Netherlands corporation and publicly traded
international insurance group. Kansas City Southern Industries, Inc. ("KCSI")
owns approximately 83% of Janus Capital, most of which it acquired in 1984.
Thomas H. Bailey, President and Chairman of the Boards of Janus Capital and
IMI, owns approximately 12% of Janus Capital's voting stock and, by agreement
with KCSI, selects a majority of Janus Capital's Board. KCSI, whose address
is 114 West 11th Street, Kansas City, Missouri 64105-1804, is a publicly
traded holding company whose primary subsidiaries are engaged in
transportation and financial services.
TAX-EXEMPT, INCOME PLUS, AGGRESSIVE GROWTH, EQUITY-INCOME, TACTICAL ASSET
ALLOCATION AND C.A.S.E. PORTFOLIOS
The Fund has entered into a Management and Investment Advisory Agreement
(collectively, the "Advisory Agreements") applicable to each of the
Tax-Exempt, Income Plus, Aggressive Growth, Equity-Income, Tactical Asset
Allocation and C.A.S.E. Portfolios with InterSecurities, Inc. ("ISI"), whose
address is 201 Highland Avenue, Largo, Florida 34640. ISI supervises each of
these Portfolios' investments and conducts its investment program. Each of
these Portfolios' Advisory Agreement provides that ISI will perform the
following services or cause them to be performed by others: (i) furnish to
the Portfolio investment advice and recommendations, (ii) supervise the
purchase and sale of securities as directed by appropriate Fund officers, and
(iii) be responsible for the administration of the Portfolio. ISI carries out
and supervises all of the administrative functions of the Portfolios,
provides office space and pays its allocable portion of the salaries, fees
and expenses of all Fund officers and of those trustees who are affiliated
with ISI. For its services to the Tax-Exempt and Income Plus Portfolios, ISI
receives an annual fee of .60% of that Portfolio's average daily net assets
computed and paid on a monthly basis. For its services to the Aggressive
Growth, Equity-Income, Tactical Asset Allocation and C.A.S.E. Portfolios, ISI
receives an annual fee, computed daily and paid monthly, equal to 1.00% of
the first $750 million of that Portfolio's average daily net assets, 0.9% of
the next $250 million of that Portfolio's average daily net assets, and 0.8%
of the average daily net assets of the Portfolio in excess of $1 billion. For
the fiscal years ended September 30, 1995, 1994 and 1993, the Tax-Exempt
Portfolio incurred investment advisory fees of $169,325, $65,782 and $48,680,
respectively (net of fee waivers by ISI of $91,270 for the year ended 1995,
$115,553 for the year ended 1994 and $125,292 for the year ended 1993
pursuant to the Tax-Exempt Portfolio's expense limitation). The Income Plus
Portfolio incurred investment advisory fees of $402,031, $421,791 and
$378,875 for the fiscal years ended September 30, 1995, 1994 and 1993,
respectively. The Aggressive Growth and Equity-Income Portfolios incurred
investment advisory fees of $62,031 and $25,137, respectively for the fiscal
41
<PAGE>
year ended September 30, 1995 (net of fees waived by ISI of $31,402 and
$39,831, respectively, pursuant to each Portfolio's expense limitation of
2.5%).
No investment advisory fees were paid by the IDEX II Tactical Asset
Allocation and C.A.S.E. Portfolios for the fiscal year ended September 30,
1995, as those Portfolios had not commenced operations as of that date.
The duties and responsibilities of the investment adviser are specified in
the Advisory Agreements. The Agreements were approved by the Board of
Trustees of the Fund (including a majority of trustees who are not parties to
the Agreement or interested persons, as defined by the 1940 Act, of any such
party). The Agreements are not assignable and may be terminated without
penalty upon 60 days written notice at the option of either the Fund or ISI
or by a vote of shareholders of each Portfolio. Each provides that it can be
continued from year to year so long as such continuance is specifically
approved annually (a) by the Board of Trustees of the Fund or by a majority
of the outstanding shares of the Portfolio and (b) by a majority vote of the
Trustees who are not parties to the Agreement or interested persons of any
such party cast in person at a meeting.
The Agreements also provide that ISI shall not be liable to the Fund or to
any shareholder for any error of judgment or mistake of law or for any loss
suffered by the Fund or by any shareholder in connection with matters to
which the Agreements relate, except for a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard on the part of ISI in the performance of its duties thereunder.
The Advisory Agreement for each of the Tax-Exempt and Income Plus
Portfolios became effective April 22, 1992. The Advisory Agreement for each
of the Aggressive Growth and Equity Income Portfolios was entered into as of
September 30, 1994. The Advisory Agreement for the Tactical Asset Allocation
Portfolio was entered into as of June 1, 1995. The Advisory Agreement for the
C.A.S.E. Portfolio was entered into as of November 15, 1995.
Each of the Tax-Exempt, Income Plus, Aggressive Growth, Equity-Income,
Tactical Asset Allocation and C.A.S.E. Portfolios pays custodian and transfer
agent fees, brokerage commissions and all other expenses in connection with
the execution of portfolio transactions, administrative, clerical,
recordkeeping, bookkeeping, legal, auditing and accounting expenses, interest
and taxes, expenses of preparing tax returns, expenses of shareholders'
meetings and preparing, printing and mailing proxy statements (unless
otherwise agreed to by the Fund and ISI), expenses of preparing and
typesetting periodic reports to its shareholders (except for those reports
the Fund permits to be used as sales literature), its allocable share of the
fees and expenses of the Fund's non-interested Trustees, and the costs,
including filing fees, of registering and renewing or maintaining
registration of its shares under federal and state law. ISI will reimburse a
Portfolio, or waive fees, or both, whenever, in any fiscal year, the total
cost to a Portfolio of normal operating expenses chargeable to its income
account, including the investment advisory fee but excluding brokerage
commissions, interest, taxes and 12b-1 fees, exceeds the strictest applicable
expense limitation imposed by state law. Further, pursuant to an expense
limitation voluntarily adopted by ISI, ISI plans to reimburse a Portfolio, or
waive fees, or both, whenever, in any fiscal year, in the case of the
Tax-Exempt and Income Plus Portfolios, the total costs to a Portfolio of such
normal operating expenses exceeds 0.65% and 1.25% of the average daily net
assets of the Tax-Exempt Portfolio and Income Plus Portfolio, respectively,
and in the case of the Aggressive Growth, Equity Income, Tactical Asset
Allocation and C.A.S.E. Portfolios, the total cost to a Portfolio of such
normal operating expenses exceeds 2.5% of the average daily net assets for
the first fiscal year, and 1.5% thereafter, if such limitations are less than
the strictest applicable expense limitation imposed by state law.
AEGON USA Investment Management, Inc. ("AEGON Management"), 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499, serves as the investment sub-adviser to
the Tax-Exempt Portfolio and
42
<PAGE>
the Income Plus Portfolio pursuant to an Investment Counsel Agreement
relating to each Portfolio. Each Investment Counsel Agreement was entered
into between ISI and AEGON Securities which assigned each Agreement to AEGON
Management, the parent of AEGON Securities, on September 30, 1992. AEGON
Management is a wholly-owned indirect subsidiary of AEGON USA and thus is an
affiliate of ISI and IMI.
The Tax-Exempt Portfolio incurred investment sub-advisory fees of $84,662,
$32,891 and $24,340 for the fiscal years ended September 30, 1995, 1994 and
1993, respectively. For the fiscal years ended September 30, 1995, 1994 and
1993, the Income Plus Portfolio incurred investment sub-advisory fees of
$201,015, $210,896 and $189,438, respectively.
Fred Alger Management, Inc. ("Alger Management"), 75 Maiden Lane, New
York, NY 10038, serves as the investment sub-adviser to the Aggressive Growth
Portfolio pursuant to an Investment Counsel Agreement dated as of September
30, 1994 relating to that Portfolio. Luther King Capital Management
Corporation ("Luther King"), 301 Commerce Street, Suite 1600, Fort Worth, TX
76102, serves as the investment sub-adviser to the Equity-Income Portfolio
pursuant to an Investment Counsel Agreement dated as of September 30, 1994
relating to that Portfolio. Dean Investment Associates ("Dean Investment"), a
Division of C.H. Dean and Associates, Inc., 2480 Kettering Tower, Dayton,
Ohio 45423-2480 serves as the investment sub-adviser to the Tactical Asset
Allocation Portfolio pursuant to an Investment Counsel Agreement dated as of
June 30, 1995 relating to that Portfolio. C.A.S.E. Management, Inc.
("C.A.S.E."), 2255 Glades Road, Suite 221-A, Boca Raton, FL 33431, serves as
the investment sub-adviser to the C.A.S.E. Portfolio pursuant to an
Investment Counsel Agreement dated November 15, 1995 relating to that
Portfolio. Discussions of the fee arrangements and allocation of
responsibilities are set forth in the Prospectus.
The Aggressive Growth and Equity-Income Portfolios incurred investment
sub-advisory fees of $31,015 and $12,568, respectively, for the fiscal year
ended September 30, 1995.
No investment sub-advisory fees were assessed for the IDEX II Tactical
Asset Allocation and C.A.S.E. Portfolios for the fiscal year ended September
30, 1995, as those Portfolios had not commenced operations at that time.
Janus Capital, AEGON Management, Alger Management, Luther King, Dean
Investment and C.A.S.E. also serve as sub-advisers to certain portfolios of
WRL Series Fund, Inc., a registered investment company. Janus Capital, AEGON
Management, Alger Management, Luther King, Dean Investment and C.A.S.E. may
be referred to herein collectively as the "sub-advisers" and individually as
a "sub-adviser."
ADDITIONAL INVESTMENT ADVISORY OR SUB-ADVISORY SERVICES PROVIDED BY THE
SUB-ADVISERS
Janus Capital provides investment advisory services to IMI for the Growth,
Global, Flexible Income, Balanced and Capital Appreciation Portfolios. AEGON
Management provides investment advisory services to ISI for the Tax-Exempt
and Income Plus Portfolios. Alger Management provides investment advisory
services to ISI for the Aggressive Growth Portfolio. Luther King provides
investment advisory services to ISI for the Equity-Income Portfolio. Dean
Investment provides investment advisory services to ISI for the Tactical
Asset Allocation Portfolio. C.A.S.E. provides investment advisory services to
ISI for the C.A.S.E. Portfolio. Each of the sub-advisers also serves as
investment adviser or sub-adviser to other funds and/or private accounts
which may have investment objectives identical or similar to that of the
Portfolios. Securities frequently meet the investment objectives of one or
all of these Portfolios, the other funds and the private accounts. In such
cases, a sub-adviser's decision to recommend a purchase to one fund or
account rather than another is based on a number of factors. The determining
factors in most cases are the amounts available for investment by
43
<PAGE>
each fund or account, the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Another
factor considered in the investment recommendations is other investments
which each fund or account presently has in a particular industry.
It is possible that at times identical securities will be held by more
than one fund or account. However, positions in the same issue may vary and
the length of time that any fund or account may choose to hold its investment
in the same issue may likewise vary. To the extent that more than one of the
funds or private accounts served by a sub-adviser seeks to acquire or sell
the same security at about the same time, either the price obtained by the
Portfolios or the amount of securities that may be purchased or sold by a
Portfolio at one time may be adversely affected. On the other hand, if the
same securities are bought or sold at the same time by more than one fund or
account, the resulting participation in volume transactions could produce
better executions for the Portfolios. In the event more than one fund or
account purchases or sells the same security on a given date, the purchase
and sale transactions are allocated among the Portfolio(s), the other funds
and the private accounts in a manner believed by the sub-advisers to be
equitable to each.
DISTRIBUTOR
The Fund has entered into an Underwriting Agreement with ISI to act as the
principal underwriter of Fund shares. The Underwriting Agreement will
continue from year to year so long as its continuance is approved at least
annually in the same manner as the Investment Advisory Agreements discussed
above. A discussion of ISI's responsibilities and charges as principal
underwriter of Fund shares is set forth in the Prospectus.
For the fiscal years ended September 30, 1995, 1994 and 1993, ISI received
$1,155,639, $2,389,332 and $4,372,620, respectively, and retained $167,446,
$346,753 and $602,394, respectively, in underwriting commissions on the sale
of Growth Portfolio shares. For the fiscal years ended September 30, 1995,
1994 and 1993, ISI received $491,761, $1,202,555 and $131,986, respectively,
and retained $73,278, $102,320 and $13,201, respectively, in underwriting
commissions on the sale of Global Portfolio shares. For the fiscal year ended
September 30, 1995 and 1994, ISI received $28,794 and $66,672, respectively,
and retained $5,736 and $12,453, respectively, in underwriting commissions on
the sale of Flexible Income Portfolio shares. On the sale of shares of IDEX
Total Income Trust, predecessor to the Flexible Income Portfolio, ISI
received $213,601 and retained $28,977 in underwriting commissions for the
eleven month period ended September 30, 1993.
For the fiscal years ended September 30, 1995, 1994 and 1993, ISI received
$22,502, $73,000 and $80,394, respectively, and retained $4,491, $14,193 and
$6,931, respectively, in underwriting commissions on the sale of Tax-Exempt
Portfolio shares. For the fiscal years ended September 30, 1995, 1994 and
1993, ISI received $142,265, $285,345 and $376,367, respectively, and
retained $26,821, $52,998 and $32,200, respectively, in underwriting
commissions on the sale of Income Plus Portfolio shares. For the fiscal year
ended September 30, 1995, ISI received $61,824, $73,332, $228,229 and
$90,604, respectively, and retained $10,074, $10,921, $33,478 and $14,667,
respectively, in underwriting commissions on the sale of Balanced, Capital
Appreciation, Aggressive Growth and Equity-Income Portfolios.
No underwriting commissions were received or retained on the sale of
Tactical Asset Allocation or C.A.S.E. Portfolio shares for the fiscal year
ended September 30, 1995, as those Portfolios had not commenced operations at
that time.
ADMINISTRATIVE SERVICES
ISI also serves as administrator to each Portfolio. This is in addition to
ISI's responsibilities as principal underwriter and distributor of Portfolio
shares. IMI has entered into an Administrative
44
<PAGE>
Services Agreement ("Administrative Agreement") with ISI applicable to each
of the Growth, Global, Flexible Income, Balanced and Capital Appreciation
Portfolios. Under each Administrative Agreement, ISI carries out and
supervises all of the administrative functions of the Portfolio and incurs
IMI's expenses related to such functions. The basic fee arrangement and
allocation of responsibilities is set forth in the Prospectus. The amount
payable to ISI under the Administrative Agreement will be reduced to the
extent that additional compensation is paid by IMI to Janus Capital, as
described above under "Investment Advisory and Other Services--Growth,
Global, Flexible Income, Balanced and Capital Appreciation Portfolios".
The administrative duties of ISI with respect to each Portfolio include:
providing the Portfolio with office space, telephones, office equipment and
supplies; paying the compensation of the Fund's officers for services
rendered as such; supervising and assisting in preparation of annual and
semi-annual reports to shareholders, notices of dividends, capital gain
distributions and tax information; supervising compliance by the Fund with
the recordkeeping requirements under the 1940 Act and regulations thereunder
and with the state regulatory requirements; maintaining books and records of
the Portfolio (other than those maintained by the Fund's custodian and
transfer agent); preparing and filing tax returns and reports; monitoring and
supervising relationships with the Fund's custodian and transfer agent;
monitoring the qualifications of tax deferred retirement plans providing for
investment in shares of the Portfolio; authorizing expenditures and approving
bills for payment on behalf of the Portfolio; and providing executive,
clerical and secretarial help needed to carry out its duties.
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas
City, Missouri 64105, is Custodian for the Fund. The Custodian is in no way
responsible for any of the investment policies or decisions of a Portfolio,
but holds its assets in safekeeping and collects and remits the income
thereon subject to the instructions of the Fund. For the fiscal years ended
September 30, 1995, 1994 and 1993, the Growth Portfolio incurred custodian
fees and expenses of $35,050, $69,012 and $76,802, respectively, net of
earnings credits of $121,069, $78,696 and $36,334, respectively. For the
fiscal years ended September 30, 1995, 1994 and 1993, the Global Portfolio
incurred custodian fees and expenses of $92,608, $254,474 and $27,632,
respectively, net of earnings credits of $110,004, $42,370 and $5,809,
respectively. For the fiscal year ended September 30, 1995 and 1994, the
Flexible Income Portfolio incurred custodian fees and expenses of $18,545 and
$17,912, respectively, net of earnings credits of $3,308 and $10,676,
respectively. For the eleven month period ended September 30, 1993, IDEX
Total Income Trust, predecessor to the Flexible Income Portfolio, incurred
custodian fees and expenses of $28,632, net of earnings credits of $5,171.
For the fiscal years ended September 30, 1995, 1994 and 1993, the Tax-Exempt
Portfolio incurred custodian fees and expenses of $6,484, $6,192 and $7,822,
respectively, net of earnings of $6,647, $11,082 and $9,263. For the fiscal
years ended September 30, 1995, 1994 and 1993, the Income Plus Portfolio
incurred custodian fees and expenses of $11,389, $17,039 and $12,391,
respectively, net of earnings credits of $14,555, $8,914 and $7,005. For the
fiscal year ended September 30, 1995, the Aggressive Growth, Capital
Appreciation, Balanced and Equity-Income Portfolios incurred custodian fees
and expenses of $27,772, $32,264, $21,302 and $3,886, respectively, net of
earnings of $0, $2,040, $2,317 and $4,176.
Idex Investor Services, Inc., P. O. Box 9015, Clearwater, Florida
34618-9015, is the Fund's transfer agent, withholding agent and dividend
disbursing agent. Idex Investor Services, Inc. is a wholly-owned subsidiary
of AUSA Holding Company and thus is an affiliate of IMI, ISI and AEGON
Management. Each Portfolio pays the transfer agent a monthly per-account
charge of $1.185 for each of its shareholder accounts in existence during the
prior month, plus $2.48 for each new account opened in the prior month. For
the fiscal years ended September 30, 1995, 1994 and 1993, the Growth
Portfolio incurred transfer agency fees and expenses of $1,741,068,
$1,523,083 and $1,160,335, respectively, net of
45
<PAGE>
brokerage credits of $0, $12,039 and $26,696. For the fiscal years ended
September 30, 1995, 1994 and 1993, the Global Portfolio incurred transfer
agency fees and expenses of $341,591, $34,294 and $27,632, respectively, net
of brokerage credits of $323, $222 and $1,319, respectively. For the fiscal
year ended September 30, 1995 and 1994, the Flexible Income Portfolio
incurred transfer agency fees and expenses of $53,822 and $60,995,
respectively. For the eleven month period ended September 30, 1993, IDEX
Total Income Trust, predecessor to the Flexible Income Portfolio, incurred
transfer agency fees and expenses of $57,258. For the fiscal years ended
September 30, 1995, 1994 and 1993, the Tax-Exempt Portfolio incurred transfer
agency fees and expenses of $35,084, $40,702 and $31,420, respectively. For
the fiscal years ended September 30, 1995, 1994 and 1993, the Income Plus
Portfolio incurred transfer agency fees and expenses of $118,821, $152,834
and $93,313, respectively. For the fiscal year ended September 30, 1995, the
Balanced, Capital Appreciation, Aggressive Growth and Equity-Income
Portfolios incurred transfer agency fees and expenses of $9,905, $22,570,
$27,772 and $10,668, respectively, net of brokerage credits of $0, $8 and $0,
respectively.
No custodian or transfer agency fees and expenses were incurred by the
IDEX II Tactical Asset Allocation and C.A.S.E. Portfolios for the fiscal year
ended September 30, 1995, as those Portfolios had not commenced operations as
of that date.
DST, provider of data processing and recordkeeping services for the Fund's
transfer agent, is a wholly-owned subsidiary of KCSI and, thus, is an
affiliate of IMI and Janus Capital. Each Portfolio may use another affiliate
of DST as introducing broker for certain portfolio transactions as a means to
reduce expenses through a credit against transfer agency fees with regard to
commissions earned by such affiliate. (See "Portfolio Transactions and
Brokerage.")
PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of portfolio business for each of the
Portfolios and negotiation of its commission rates are made by its
sub-adviser, whose policy is to obtain the "best execution" (prompt and
reliable execution at the most favorable security price) of all portfolio
transactions. The Advisory Agreement and Investment Counsel Agreement of each
Portfolio specifically provide that in placing portfolio transactions for
each of the Portfolios, the sub-adviser may agree to pay brokerage
commissions for effecting a securities transaction in an amount higher than
another broker or dealer would have charged for effecting that transaction as
authorized, under certain circumstances, by the Securities Exchange Act of
1934.
In selecting brokers and dealers and in negotiating commissions, a
sub-adviser considers a number of factors, including but not limited to: the
sub-adviser's knowledge of currently available negotiated commission rates or
prices of securities and other current transaction costs; the nature of the
security being traded; the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
desired timing of the trade; the activity existing and expected in the market
for the particular security; the quality of the execution, clearance and
settlement services; financial stability; the existence of actual or apparent
operational problems of any broker or dealer; and research products and
services provided. In recognition of the value of the foregoing factors, the
sub-adviser may place portfolio transactions with a broker with whom it has
negotiated a commission that is in excess of the commission another broker
would have charged for effecting that transaction if the sub-adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research provided by such broker
viewed in terms of either that particular transaction or of the overall
responsibilities of the sub-adviser. Research provided may include:
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers,
46
<PAGE>
industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends
and portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services, and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment,
software, information and accessories that deliver, process or otherwise
utilize information, including the research described above) that assist the
sub-adviser in carrying out its responsibilities. Most brokers and dealers
used by the sub-advisers provide research and other services described above.
The sub-adviser may use research products and services in servicing other
accounts in addition to the Portfolio. If the sub-adviser determines that any
research product or service has a mixed use, such that it also serves
functions that do not assist in the investment decision-making process, the
sub-adviser may allocate the costs of such service or product accordingly.
The portion of the product or service that the sub-adviser determines will
assist it in the investment decision-making process may be paid for in
brokerage commission dollars. Such allocation may be a conflict of interest
for the sub-adviser.
When a Portfolio purchases or sells a security in the over-the-counter
market, the transaction takes place directly with a principal market-maker,
without the use of a broker, except in those circumstances where better
prices and executions will be achieved through the use of a broker.
The sub-adviser may also consider the sale or recommendation of a
Portfolio's shares by a broker or dealer to its customers as a factor in the
selection of brokers or dealers to execute portfolio transactions. In placing
portfolio business with broker or dealers, the sub-adviser will seek the best
execution of each transaction and all such brokerage placement must be
consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
The sub-adviser may place transactions for the purchase or sale of
portfolio securities with affiliates of IMI, ISI or the sub-adviser,
including DST Securities, Inc., ISI or Fred Alger & Company, Incorporated. It
is anticipated that Fred Alger & Company, Incorporated, an affiliate of Alger
Management, will serve as the Aggressive Growth Portfolio's broker in
effecting substantially all of the Aggressive Growth Portfolio's transactions
on securities exchanges and will retain commissions in accordance with
certain regulations of the Securities and Exchange Commission. The
sub-adviser may place transactions if it reasonably believes that the quality
of the transaction and the associated commission are fair and reasonable and
if, overall, the associated transaction costs, net of any credits described
above under "Custodian, Transfer Agent and Other Affiliates," are lower than
those that would otherwise be incurred. Under rules adopted by the Securities
and Exchange Commission, the Fund's Board of Trustees will conduct periodic
compliance reviews of such brokerage allocations and review certain
procedures adopted by the Board of Trustees to ensure compliance with these
rules as often as necessary to determine their continued appropriateness. For
the fiscal year ended September 30, 1995 the Global and Capital Appreciation
Portfolios paid the following commissions to DST Securities, Inc. and the
Aggressive Growth Portfolio paid the following commissions to Fred Alger &
Company, Incorporated:
<TABLE>
<CAPTION>
DST SECURITIES, FRED ALGER
COMMISSIONS PAID: INC. & COMPANY, INCORPORATED
-------------------- ------------------------
<S> <C> <C>
Fiscal 1995 ....................................... $4.42 $18,944
Fiscal 1995 Percentages:
Commissions with affiliates to total commissions 0.3% 96.8%
Value of brokerage transactions with affiliates
to total brokerage transactions .................. 0.2% 38.5%
</TABLE>
As of September 30, 1995, the Growth Portfolio owned $17,428,125 of the
common stock of Merrill Lynch and Company, Inc. ("Merrill Lynch"). Merrill
Lynch is one of the ten brokers or dealers that
47
<PAGE>
received the greatest dollar amount of brokerage commissions from the Growth
Portfolio during the fiscal year ended September 30, 1995.
As of September 30, 1995, the Aggressive Growth Portfolio owned a total of
$62,938 of the common stocks of Merrill Lynch and Lehman Brothers Holdings,
Inc., which are two of the ten brokers or dealers that received the greatest
dollar amount of brokerage commissions from the Aggressive Growth Portfolio
during the fiscal year ended September 30, 1995.
During the fiscal years ended September 30, 1995, 1994 and 1993, brokerage
commissions in the amount of $0, $16,052 and $35,594, respectively, were paid
to affiliated brokers by the Growth Portfolio. The Growth Portfolio received
transfer agency fee credits of $0, $12,309 and $26,696 for the fiscal years
ended September 30, 1995, 1994 and 1993, respectively, as a result of such
affiliated brokerage. For the fiscal years ended September 30, 1995, 1994 and
1993, brokerage commissions in the amount of $431, $296 and $1,758,
respectively, were paid to affiliated brokers by the Global Portfolio. As a
result of such affiliated brokerage, the Global Portfolio received transfer
agency fee credits of $323, $222 and $1,319 for the fiscal years ended
September 30, 1995, 1994 and 1993, respectively. No brokerage commissions
were paid by the Flexible Income Portfolio to broker-dealers affiliated with
IMI or Janus Capital during the fiscal year ended September 30, 1995 or 1994
or to IDEX Total Income Trust, predecessor to the Flexible Income Portfolio,
during the eleven month period ended September 30, 1993. For the fiscal year
ended September 30, 1995, brokerage commissions in the amount of $0, $11,
$18,944 and $0, respectively, were paid to affiliated brokers by the
Balanced, Capital Appreciation, Aggressive Growth and Equity-Income
Portfolios, respectively. As a result of such affiliated brokerage, the
Balanced, Capital Appreciation, Aggressive Growth and Equity-Income
Portfolios received transfer agency fee credits of $0, $8, $0 and $0,
respectively for the fiscal year ended September 30, 1995.
For the fiscal years ended September 30, 1995, 1994 and 1993, the total
amount of brokerage commissions including affiliated brokerage commissions
paid by the Growth Portfolio were $930,417, $607,482 and $676,415,
respectively. For the fiscal years ended September 30, 1995, 1994 and 1993,
the total amount of brokerage commissions including affiliated brokerage
commissions paid by the Global Portfolio were $124,068, $61,311 and $23,248,
respectively. The total amount of brokerage commissions including affiliated
brokerage commissions paid by the Flexible Income Portfolio for the fiscal
year ended September 30, 1995 and 1994 were $1,853 and $2,936. The total
amount of brokerage commissions paid by IDEX Total Income Trust, predecessor
to the Flexible Income Portfolio, for the eleven month period ended September
30, 1993 was $5,018. During the fiscal years ended September 30, 1995, 1994
and 1993, the Tax-Exempt and Income Plus Portfolios paid no brokerage
commissions on the purchase or sale of portfolio securities. For the fiscal
year ended September 30, 1995, the total amount of brokerage commissions
including affiliated brokerage commissions paid by the Balanced, Capital
Appreciation, Aggressive Growth and Equity-Income Portfolios were $9,193,
$41,182, $19,568 and $9,661.
No brokerage commissions were paid on the purchase or sale of Tactical
Asset Allocation or C.A.S.E. Portfolio shares for the fiscal year ended
September 30, 1995, as those Portfolios had not commenced operations at that
time.
During the fiscal year ended September 30, 1995, Growth, Global, Flexible
Income, Balanced, Capital Appreciation and Equity-Income Portfolio
transactions in the amounts of $22,679,117, $2,936,843, $0, $263,886,
$202,956 and $2,406,385, respectively, resulting in brokerage commissions of
$48,522, $9,690, $0, $705, $963 and $4,904, respectively, were directed to
brokers for brokerage and research services provided.
48
<PAGE>
TRUSTEES AND OFFICERS
The following information includes the name, address(1), date of birth,
relationship with the Fund and principal occupations of the trustees and
officers of the Fund during at least the last five years:
Peter R. Brown Trustee of IDEX II Series Fund, IDEX Fund and IDEX
1475 Belcher Road South Fund 3; Director of WRL Series Fund, Inc. (investment
Largo, FL 34640 company); Chairman of the Board of Peter Brown
05/10/28 Construction Co., Largo, Florida (construction,
contractors and engineers); Rear Admiral (Retired),
U.S. Navy Reserve, Civil Engineer Corps.
James L. Churchill Trustee of IDEX II Series Fund, IDEX Fund and IDEX
12 Lavington Road Fund 3; currently retired; formerly, President (1981-
Long Cove 1990) and Executive Vice President (1979-1981) of the
Hilton Head, SC 29928 Avionics Group of Rockwell International Corporation,
05/07/30 Cedar Rapids, Iowa (supplier of aviation
electronics).
Becky A. Ferrell(2) Vice President (September, 1995 - present), Assistant
12/10/60 Vice President (March, 1994 - September, 1995),
Counsel and Secretary (March, 1994 - present) of IDEX
II Series Fund, IDEX Fund and IDEX Fund 3; Vice
President (September, 1995 - present), Assistant
Vice President (March, 1994 - September, 1995), and
Secretary (March, 1994 - present) WRL Series Fund,
Inc. (investment company); Assistant Vice
President, Counsel and Assistant Secretary of
InterSecurities, Inc. (March, 1994 - present)
(broker-dealer); Attorney (August, 1993 - present),
Western Reserve Life Assurance Co. of Ohio (life
insurance); Attorney, Hearne, Graziano, Nader &
Buhr, P.A. (September, 1992 - August, 1993) (law
firm); Legal Writing Instructor, Florida State
University College of Law (August, 1991 - June, 1992)
(law school); Teaching Assistant, English,
University of South Florida (August, 1990 - July,
1991) (university); Associate Attorney, Johnson,
Blakely, Pope, Bokor, Ruppel & Burns, P.A. (August,
1989 - July, 1990) (law firm); Attorney, Schifino,
Fleischer & Neal, P.A. (August, 1986 - August, 1989)
(law firm); Attorney, Trenam, Simmons, Kemker,
Scharf, Barkin, Frye & O'Neill, P.A. (August, 1984 -
August, 1986) (law firm).
Richard B. Franz, II(2) Treasurer of IDEX II Series Fund, IDEX Fund and IDEX
07/12/50 Fund 3 (May, 1988 to present); Treasurer of WRL
Series Fund, Inc. (May 1988 to present) (investment
company); Treasurer of InterSecurities, Inc. (May
1988 to present); Treasurer of ISI Insurance Agency,
Inc. (September 1992 to present); Treasurer of Idex
Management, Inc. (May 1988 to present); Treasurer of
Idex Investor Services, Inc. (May 1988 to present);
Senior Vice President and Treasurer of Pioneer
Western Corporation and Treasurer of its subsidiaries
(May 1988 to February 1991); Senior Vice President,
Treasurer and Chief Financial Officer of Western
Reserve Life Assurance Co. of Ohio (November 1987 to
present).
49
<PAGE>
William H. Geiger(2) Vice President (November 1990 to present), Secretary
06/01/47 (June 1990 to March 1994) and Assistant Secretary
(March 1994 to present) of IDEX II Series Fund, IDEX
Fund and IDEX Fund 3; Secretary (June 1990 to March
1994) and Assistant Secretary (March 1994 to
present) of WRL Series Fund, Inc. (investment
company); Senior Vice President, Secretary and
General Counsel (July 1990 to present) of Western
Reserve Life Assurance Co. of Ohio (life insurance);
Secretary of Idex Management, Inc. (November 1990 to
present); Secretary (May 1990 to present) and
Director (April 1991 to present) of InterSecurities,
Inc.; Secretary of ISI Insurance Agency, Inc.
(September 1992 to present); Secretary of Idex
Investor Services, Inc. (May 1990 to present); Vice
President, Secretary and General Counsel of Pioneer
Western Corporation and Secretary of its subsidiaries
(May 1990 to February 1991) (financial services);
Secretary and General Counsel of Orange State Life
and Health Insurance Company and its affiliates
(March 1980 to April 1990) (life and health
insurance).
Charles C. Harris Trustee of IDEX II Series Fund, IDEX Fund and IDEX
35 Winston Drive Fund 3; Director of WRL Series Fund, Inc. (investment
Clearwater, FL 34616 company); currently retired (1988 - present); Senior
07/15/30 Vice President, Treasurer (1966 - 1988), Western
Reserve Life Assurance Co. of Ohio (life insurance);
Vice President, Treasurer (1968 - 1988), Director
(1968 - 1987), Pioneer Western Corporation (financial
services); Vice President of WRL Series Fund, Inc.
(1986 - December, 1990) (investment company).
G. John Hurley(2) President and Chief Executive Officer (September 1990
09/12/48 to present), Trustee (June 1990 to present) and
Executive Vice President (June 1988 to September
1990) of IDEX II Series Fund, IDEX Fund and IDEX Fund
3; Executive Vice President (June 1993 to present)
and Director (March, 1994 to present) of WRL Series
Fund, Inc. (investment company); President, Chief
Executive Officer and Director of InterSecurities,
Inc. (May 1988 to present) (broker-dealer);
President of ISI Insurance Agency, Inc. (September
1992 to present); Executive Vice President of Western
Reserve Life Assurance Co. of Ohio (April 1993 to
present) (life insurance); President, Chief Executive
Officer and Director of PW Securities, Inc. (1983
to November 1990) (broker-dealer); President, Chief
Executive Officer and Director (September 1990 to
present) and Executive Vice President and Director
(May 1988 to September 1990) of Idex Management,
Inc.; President and Director of Idex Investor
Services, Inc. (May 1988 to present); Assistant
Vice President of AEGON USA Managed Portfolios, Inc.
(September 1991 to September 1992) (financial
services); Vice President of Pioneer Western
Corporation (May 1988 to February 1991) (financial
services). Mr. Hurley was employed by Pioneer Western
Corporation in various executive positions from 1972
until February, 1991.
50
<PAGE>
John R. Kenney(2) Trustee (1987 to present), Chairman (December 1989 to
02/08/38 present) and President and Chief Executive Officer
(1987 to September 1990) of IDEX II Series Fund, IDEX
Fund and IDEX Fund 3; Chairman of the Board of WRL
Series Fund, Inc. (1986 to present) (investment
company); President and Director (1985 to September
1990) and Director (December 1990 to present) of
Idex Management, Inc.; Chairman (1988 to present)
and Director (1985 to present) of InterSecurities,
Inc. (broker-dealer); Director of ISI Insurance
Agency, Inc. (October 1992 to present); President
and Chief Executive Officer, (1978 to 1987),
Chairman and Chief Executive Officer (1987 to 1992)
and Chairman, President and Chief Executive Officer
(1992 to present) of Western Reserve Life Assurance
Co. of Ohio (life insurance); Senior Vice President
of AEGON USA, Inc. (May 1992 to present) (financial
services holding company); Chairman and Chief
Executive Officer (1988 to February 1991), President
and Chief Executive Officer (1988 to 1989), Executive
Vice President (1972 to 1988) and Director (1976 to
February 1991) of Pioneer Western Corporation
(financial services). Mr. Kenney is also the
brother-in-law of Jack Zimmerman, a Trustee of the
Fund.
Leslie E. Martin(2) Vice President and National Marketing Manager
09/19/55 (January 1993 to present) of IDEX II Series Fund,
IDEX Fund and IDEX Fund 3; Vice President of
Marketing (January 1993 to present) of
InterSecurities, Inc. (broker-dealer); and Vice
President of Marketing of Social Responsibility
Investment Group (April 1991 to January 1992)
(investment company); and Vice President of Regional
Marketing of Calvert Group (June 1988 to January
1991) (investment company).
Thomas R. Moriarty(2) Senior Vice President (March 1995 to present), Vice
05/03/51 President and Principal Accounting Officer (November
1990 to March 1995) and Principal Accounting Officer
(1988 to September 1990) of IDEX II Series Fund, IDEX
Fund and IDEX Fund 3; Senior Vice President (June
1991 to present) and Vice President (1988 to June
1991) of InterSecurities, Inc. (broker-dealer);
Senior Vice President of ISI Insurance Agency, Inc.
(September 1992 to present); President (November 1990
to present) and Vice President (1988 to November
1990) of PW Securities, Inc. (broker-dealer); Senior
Vice President (June 1991 to present) and Vice
President (1988 to June 1991) of Idex Investor
Services, Inc.; Vice President (November 1990 to
present); Assistant Vice President (1988 to September
1990) of Idex Management, Inc., Vice President of
Western Reserve Life Assurance Co. of Ohio (June 1993
to present) (life insurance); Assistant Vice
President of AEGON USA Managed Portfolios, Inc.
(September 1991 to September 1992) (financial
services); President (November 1990 to December 1992)
and Vice President (1988 to November 1990) of PW
Securities, Inc. (broker-dealer). Mr. Moriarty was
employed by Pioneer Western Corporation in various
executive positions from 1984 to February, 1991.
51
<PAGE>
Christopher G. Roetzer(2) Principal Accounting Officer (March 1995 to present),
01/11/63 Assistant Vice President (November 1990 to present)
of IDEX II Series Fund, IDEX Fund and IDEX Fund 3;
Assistant Vice President and Controller (May 1988 to
present) of InterSecurities, Inc. (broker-dealer);
Assistant Vice President of ISI Insurance Agency,
Inc. (September 1992 to present); Assistant Vice
President and Controller of Idex Investor Services,
Inc. (May 1988 to present); Assistant Vice President
of Idex Management, Inc. (November 1990 to present);
Assistant Vice President and Assistant Controller
(April 1988 to May 1988) and Accounting Manager (June
1986 to April 1988) of Western Reserve Life Assurance
Co. of Ohio (life insurance); and Auditor (September
1984 to June 1986) of Peat, Marwick, Mitchell & Co.
(CPA firm).
William W. Short, Jr. Trustee of IDEX II Series Fund, IDEX Fund and IDEX
12420 73rd Court North Fund 3; President and sole shareholder of Shorts,
Largo, FL 34623 Inc. (men's retail apparel); Chairman of Southern
02/25/36 Apparel Corporation and S.A.C. Distributors
(nationwide wholesale apparel distributors), Largo,
Florida; Director of Barnett Banks of Pinellas
County; Trustee of Morton Plant Hospital Foundation;
former Chairman of Advisory Board of First Florida
Bank, Pinellas County, Florida.
Jack E. Zimmerman Trustee of IDEX II Series Fund, IDEX Fund and IDEX
507 Saint Michel Circle Fund 3; Director (1987 to present), Western Reserve
Kettering, OH 45429-1972 Life Assurance Co. of Ohio (life insurance);
02/03/28 currently retired; formerly, Director, Regional
Marketing, Martin Marietta Corporation, Dayton, Ohio
(September 1986 to January 1993) (aerospace
industry); Director of Strategic Planning of Martin
Marietta Baltimore Aerospace (January 1986 to
September 1986). Mr. Zimmerman is also the
brother-in-law of John Kenney, Trustee and Chairman
of the Fund.
- --------------------
(1) The principal business address of each person listed, unless otherwise
indicated, is P.O. Box 9015, Clearwater, FL 34618-5068.
(2) Interested Person (as defined in the Investment Company Act of 1940) of the
Fund.
The Fund pays no salaries or compensation to any of its officers, all of
whom are officers or employees of either ISI or its affiliates. Disinterested
Trustees (i.e., Trustees who are not affiliated with IMI, Janus Capital, ISI,
AEGON Management, Alger Management or Luther King) receive: (a) a total
annual retainer fee of $13,000 from IDEX II Series Fund, IDEX Fund and IDEX
Fund 3; of which the Fund pays a pro rata share allocable to each Portfolio
based on the relative assets of the Portfolio; plus (b) $1,250 and incidental
expenses per meeting attended. Any fees and expenses paid to Trustees who are
affiliates of IMI or ISI (Messrs. Kenney and Hurley named in chart below) are
paid by IMI and/or ISI and not by the Fund or the Fund Complex. The Fund did
not offer its Trustees or officers any pension or retirement benefits during
or prior to the fiscal year ended September 30, 1995. The following table
provides compensation amounts paid to Disinterested Trustees of the Fund for
the fiscal year ended September 30, 1995.
52
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION PAID
COMPENSATION FROM TO TRUSTEES FROM FUND
NAME OF PERSON, POSITION IDEX II SERIES FUND COMPLEX*
-------------------------------- -------------------- ------------------------------
<S> <C> <C>
Peter R. Brown, Trustee ........ $15,016 $22,250
James L. Churchill, Trustee ... $14,652 $21,750
Charles C. Harris, Trustee .... $14,652 $21,750
G. John Hurley, Trustee ........ $-0- $-0-
John R. Kenney, Trustee ........ $-0- $-0-
William W. Short, Jr., Trustee $15,016 $22,250
Jack E. Zimmerman, Trustee .... $14,652 $21,750
<FN>
- -----------------------------------------------------------------------------
* The Fund Complex includes the Fund, Idex Fund, Idex Fund 3 and WRL Series
Fund, Inc.
</FN>
</TABLE>
The Board of Trustees has adopted a policy whereby any Disinterested
Trustee of the Fund in office on September 1, 1990 who has served at least
three years as a trustee may, subject to certain limitations, elect upon his
resignation to serve as a trustee emeritus for a period of two years. A
trustee emeritus has no authority, power or responsibility with respect to
any Fund matter. While serving as such, a trustee emeritus is entitled to
receive from the Fund an annual fee equal to one-half the fee then payable
per annum to Disinterested Trustees of the Fund, plus reimbursement of
expenses incurred for attendance at Board meetings.
The Fund has an executive committee whose members currently are John R.
Kenney, G. John Hurley and Peter R. Brown. The executive committee may
perform all of the functions which may be performed by the Board of Trustees,
except as set forth in the Declaration of Trust and By-Laws of the Fund or as
prohibited by applicable law.
Commencing on January 1, 1996, a non-qualified deferred compensation plan
(the "Plan") became available to Trustees who are not interested persons of
the Fund. Under the Plan, compensation may be deferred that would otherwise
be payable by the Fund, IDEX Fund, IDEX Fund 3 and/or WRL Series Fund, Inc.,
to a Disinterested Trustee or Director on a current basis for services
rendered as Trustee. Once any necessary regulatory approvals are obtained,
deferred compensation amounts will accumulate based on the value of Class A
shares of a Portfolio of the Fund (without imposition of sales charge), as
elected by the Trustee. It is not anticipated that the Plan will have any
impact on the Portfolios of the Fund.
During the fiscal year ended September 30, 1995, the Fund paid $78,244 in
trustees fees and expenses and no trustee emeritus fees or expenses. As of
November 1, 1995, the trustees and officers held in the aggregate less than
1% of the outstanding shares of each of the Aggressive Growth, Capital
Appreciation, Global, Growth, C.A.S.E., Equity-Income, Tactical Asset
Allocation, Balanced, Flexible Income, Income Plus and Tax-Exempt Portfolios.
PURCHASE OF SHARES
As stated in the Prospectus, each Portfolio offers investors a choice of
three classes of shares. Class A, Class B or Class C shares of a Portfolio
can be purchased through ISI or through broker-dealers or other financial
institutions that have sales agreements with ISI. Shares of each Portfolio
are sold at the net asset value per share as determined at the close of the
regular session of business on the
53
<PAGE>
New York Stock Exchange next occurring after a purchase order is received and
accepted by the Fund plus the applicable sales charge in the case of Class A
shares. The Prospectus contains detailed information about the purchase of
Portfolio shares.
DISTRIBUTION PLANS
As stated in the Prospectus under "Investment Advisory and Other
Services", each Portfolio has adopted a separate Distribution Plan pursuant
to Rule 12b-1 under the 1940 Act (individually, a "Plan" and collectively,
the "Plans"), applicable to Class A, Class B and Class C shares of the
Portfolio.
Under the Plans for Class A shares (the "Class A Plans"), a Portfolio may
pay ISI an annual distribution fee of up to 0.35%, and an annual service fee
of up to 0.25%, of the average daily net assets of the Portfolio's Class A
shares; however, to the extent that the Portfolio pays service fees, the
amount which the Portfolio may pay as a distribution fee is reduced
accordingly so that the total fees payable under the Class A Plan may not
exceed on an annualized basis 0.35% of the average daily net assets of the
Portfolio's Class A shares.
Under the Plans for Class B shares (the "Class B Plans"), a Portfolio may
pay ISI an annual distribution fee of up to 0.75% and an annual service fee
of up to 0.25%, of the average daily net assets of the Portfolio's Class B
shares.
Under the Plans for Class C shares (the "Class C Plans"), a Portfolio may
pay ISI an annual distribution fee of up to 0.75% and an annual service fee
of up to 0.25% of the average daily net assets of the Portfolio's Class C
shares; however, the total fee payable pursuant to the Class C Plan may not
on an annualized basis exceed 0.90% of the average daily net assets of the
Portfolio's Class C shares.
ISI may use the fees payable under the Class A, Class B and Class C Plans
as it deems appropriate to pay for activities or expenses primarily intended
to result in the sale of the Class A, Class B or Class C shares,
respectively, or in personal service to and/or maintenance of Class A, Class
B or Class C shareholder accounts, respectively. For each class, these
activities and expenses may include, but are not limited to compensation to
employees of ISI; compensation to and expenses of ISI and other selected
dealers who engage in or otherwise support the distribution of shares or who
service shareholder accounts; the costs of printing and distributing
prospectuses, statements of additional information and reports for other than
existing shareholders; and the cost of preparing, printing and distributing
sales literature and advertising materials.
Under the Plans, as required by Rule 12b-1, the Board of Trustees will
review at least quarterly a written report provided by ISI of the amounts
expended by ISI in distributing and servicing Class A, Class B or Class C
shares of the Portfolio and the purpose for which such expenditures were
made. For so long as the Plans are in effect, selection and nomination of the
Trustees who are not interested persons of the Fund shall be committed to the
discretion of the Trustees who are not interested persons of the Fund.
A Plan may be terminated as to a class of shares of a Portfolio at any
time by vote of a majority of the non-interested Trustees or by vote of a
majority of the outstanding voting securities of the applicable class. A Plan
may be amended by vote of the Trustees, including a majority of the non-
interested Trustees who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Plan or any
agreement relating thereto ("non-interested Trustees"), cast in person at a
meeting called for that purpose. Any amendment of a Plan that would
materially increase the costs to a particular class of shares of a Portfolio
requires approval by the shareholders of that class. A Plan will remain in
effect for successive one year periods, so long as such continuance is
approved
54
<PAGE>
annually by vote of the Fund's Trustees, including a majority of the
non-interested Trustees, cast in person at a meeting called for the purpose
of voting on such continuance.
During the fiscal year ended September 30, 1995, the Fund incurred fees
under the Plan applicable to the Class A shares of the Growth, Global,
Flexible Income, Tax-Exempt, Income Plus, Balanced, Aggressive Growth,
Equity-Income and Capital Appreciation Portfolios in the amounts of
$1,496,132, $293,288, $70,009, $97,746, $227,812, $5,983, $20,522, $8,379 and
$11,713, respectively, of which $837,834, $164,241, $39,205, $54,738,
$127,575, $3,350, $11,492, $4,692 and $6,559, respectively, was paid to non-
affiliated broker/dealers.
During the fiscal year ended September 30, 1995, the Fund incurred fees
under the Plan applicable to the Class C shares of the Growth, Global,
Flexible Income, Tax-Exempt, Income Plus, Balanced, Aggressive Growth,
Equity-Income and Capital Appreciation Portfolios in the amounts of $37,551,
$32,348, $5,801, $1,760, $17,237, $12,977, $3,058, $1,076 and $9,131,
respectively, of which $21,029, $18,115, $3,249, $986, $9,653, $7,267,
$1,712, $603 and $5,113, respectively, was paid to non-affiliated
broker/dealers.
55
<PAGE>
Distribution fees for the fiscal year ended September 30, 1995, were used
by the Distributor as follows:
<TABLE>
<CAPTION>
AGGRESSIVE CAPITAL
GROWTH APPRECIATION GLOBAL GROWTH EQUITY-INCOME
--------------- --------------- --------------- --------------- ---------------
A C A C A C A C A C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising ........... 3,657 912 1,766 1,288 14,259 1,111 38,999 1,495 1,748 143
Printing/mailing
Prospectuses to
other than current
shareholders ........ 20,411 6,242 7,816 6,462 60,427 4,624 170,641 7,127 8,656 708
Compensation
to underwriters ..... 5,817 1,249 3,329 925 83,796 10,297 425,069 9,569 2,380 598
Compensation
to dealers .......... 14,544 1,768 8,324 8,151 209,491 22,067 1,062,673 27,980 5,950 474
Compensation
to sales personnel .. 25,349 6,485 11,602 9,985 86,696 6,507 242,467 9,231 12,576 1,025
Interest or other
finance charges .....
Travel ................ 5,255 1,394 2,283 1,938 16,808 1,263 47,538 1,842 2,506 204
Office Expenses ....... 2,453 652 1,096 1,022 8,003 597 22,668 869 1,232 100
Administrative
Processing Costs .... 1,182 664 926 645 7,706 1,343 39,700 1,430 753 625
------ ------ ------ ------ ------- ------ --------- ------ ------ -----
Total ................. 78,668 19,366 37,142 30,416 487,186 47,809 2,049,755 59,543 35,801 3,877
====== ====== ====== ====== ======= ====== ========= ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE
BALANCED INCOME PLUS TAX-EXEMPT
--------------- --------------- --------------- ---------------
A C A C A C A C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising ........... 1,499 1,936 1,852 198 6,111 555 1,917 259
Printing/mailing
Prospectuses to
other than current
shareholders ........ 7,209 8,954 8,795 848 27,724 2,356 8,377 1,191
Compensation
to underwriters ..... 1,699 321 20,003 1,744 65,089 1,088 27,927 216
Compensation
to dealers .......... 4,248 12,574 50,006 4,060 162,723 16,138 69,819 1,538
Compensation
to sales personnel .. 9,967 15,275 11,662 1,241 38,450 3,483 11,615 1,761
Interest or other
finance charges .....
Travel ................ 1,985 2,903 2,319 244 7,630 685 2,277 343
Office Expenses ....... 956 1,570 1,106 115 3,594 322 1,079 172
Administrative
Processing Costs .... 694 638 1,588 673 7,986 752 1,381 653
------ ------ ------ ------ ------- ------ --------- ------
Total ................. 25,257 44,171 92,331 9,123 314,307 25,379 124,392 6,133
====== ====== ====== ====== ======= ====== ========= ======
<FN>
- ------------------
On October 1, 1995, the Fund began offering Class B Shares of each IDEX II
Portfolio. Accordingly, no distribution fees were applicable to Class B
shares for the period ended September 30, 1995. No distribution fees were
applicable to Class A or Class C shares of the Tactical Asset Allocation or
C.A.S.E. Portfolios for the fiscal year ended September 30, 1995, as those
Portfolios had not commenced operations at that time.
</FN>
</TABLE>
56
<PAGE>
NET ASSET VALUE DETERMINATION
As stated in the Prospectus, net asset value is determined separately for
each class of shares of a Portfolio on each day as of the close of the
regular session of business on the New York Stock Exchange (the "Exchange"),
currently 4:00 p.m. Eastern Time, Monday through Friday, except on (i) days
on which changes in the value of portfolio securities will not materially
affect the net asset value of a particular class of shares of the Portfolio;
(ii) days during which no shares of the Portfolio are tendered for redemption
and no orders to purchase shares of that Portfolio are received; or (iii)
customary national holidays on which the Exchange is closed. The per share
net asset value of each class of shares of a Portfolio is determined by
dividing the total value of the Portfolio's securities, receivables and other
assets allocable to that class by the total number of shares outstanding of
that class. The public offering price of a Class A, Class B or Class C share
of a Portfolio is the net asset value per share plus, in the case of Class A
shares, the applicable sales charge. Investment securities are valued at the
closing price for securities traded on a principal securities exchange (U.S.
or foreign) or on the NASDAQ National Market. Investment securities traded on
the over-the-counter market and listed securities for which no sales are
reported for the trading period immediately preceding the time of
determination are valued at the last bid price. Foreign currency denominated
assets and liabilities are converted into U.S. dollars at the closing
exchange rate each day. Other securities for which quotations are not readily
available are valued at fair values determined in such manner as the
Portfolio's sub-adviser, under the supervision of the Board of Trustees,
decide in good faith.
The offering price per share of the Growth Portfolio as of September 30,
1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ........... $22.84 $22.64
Add maximum selling commission
(5.50% of offering price for Class A
shares) ................................... 1.33 0
---------- ----------
Offering price per share .................... $24.17 $22.64
========== ==========
The offering price per share of the Global Portfolio as of September 30,
1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $17.73 $17.46
Add maximum selling commission
(5.50% of offering price for Class A shares) 1.03 0
---------- ----------
Offering price per share ..................... $18.76 $17.46
========== ==========
The offering price per share of the Flexible Income Portfolio as of
September 30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $ 9.17 $9.17
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.46 0
---------- ----------
Offering price per share ..................... $ 9.63 $9.17
========== ==========
57
<PAGE>
The offering price per share of the Tax-Exempt Portfolio as of September
30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $11.34 $11.34
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.57 0
---------- ----------
Offering price per share ..................... $11.91 $11.34
========== ==========
The offering price per share of the Income Plus Portfolio as of September
30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $10.36 $10.35
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.52 0
---------- ----------
Offering price per share ..................... $10.88 $10.35
========== ==========
The offering price per share of the Balanced Portfolio as of September 30,
1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $11.47 $11.47
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.67 0
---------- ----------
Offering price per share ..................... $12.14 $11.47
========== ==========
The offering price per share of the Capital Appreciation Portfolio as of
September 30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $13.54 $13.49
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.79 0
---------- ----------
Offering price per share ..................... $14.33 $13.49
========== ==========
The offering price per share of the Aggressive Growth Portfolio as of
September 30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $17.68 $17.64
Add maximum selling commission
(5.50% of offering price for Class A shares) 1.03 0
---------- ----------
Offering price per share ..................... $18.71 $17.64
========== ==========
58
<PAGE>
The offering price per share of the Equity-Income Portfolio as of
September 30, 1995 was calculated as follows:
CLASS A CLASS C
---------- ----------
Net asset value per share
(net assets shares outstanding) ............ $11.74 $11.73
Add maximum selling commission
(5.50% of offering price for Class A shares) 0.68 0
---------- ----------
Offering price per share ..................... $12.42 $11.73
========== ==========
No such calculations are presented for Class B shares of the Portfolios,
as Class B shares were not offered by any Portfolio until October 1, 1995.
No such calculations are presented for Class A, Class B or Class C shares
of IDEX II Tactical Asset Allocation or C.A.S.E. Portfolios because no shares
of those Portfolios were outstanding as of September 30, 1995.
DIVIDENDS AND OTHER DISTRIBUTIONS
As indicated in the Prospectus, an investor may choose among several
options with respect to dividends and capital gain distributions payable to
the investor. Dividends or other distributions will be paid in full and
fractional shares at the net asset value determined as of the ex-dividend
date, unless the shareholder has elected another distribution option as
described in the Prospectus. Transaction confirmations and checks for
payments designated to be made in cash generally will be mailed on the
payable date. The per share income dividends on Class B and Class C shares of
a Portfolio are anticipated to be lower than the per share income dividends
on Class A shares of that Portfolio as a result of higher service and
distribution fees applicable to the Class B and Class C shares.
SHAREHOLDER ACCOUNTS
Detailed information about general procedures for Shareholder Accounts and
specific types of accounts is set forth in the Prospectus.
RETIREMENT PLANS
As stated in the Prospectus, the Fund offers several types of retirement
plans that an investor may establish to invest in shares of a Portfolio with
tax deductible dollars. Prototype retirement plans for both corporations and
self-employed individuals and for Individual Retirement Accounts, Code
Section 401(k) Plans and Simplified Employee Pension Plans are available by
calling or writing ISI. These plans require the completion of separate
applications which are also available from ISI. Investors Fiduciary Trust
Company, Kansas City, Missouri, acts as the custodian or trustee under these
plans for which it charges an annual fee of up to $12.00 on each such account
with a maximum of $24 per tax identification number. Shares of a Portfolio
are also available for investment by Code Section 403(b)(7) retirement plans
for employees of charities, schools, and other qualifying employers. The Tax
Exempt Portfolio is not well-suited as an investment vehicle for tax-deferred
retirement plans which cannot benefit from tax-exempt income and whose
distributed earnings are taxable to individual recipients as ordinary income.
59
<PAGE>
To receive additional information or forms on these plans, please call
Customer Service at (800) 851-9777 or write the Transfer Agent at P. O. Box
9015, Clearwater, Florida 34618-9015. No contribution to a retirement plan
can be made until the appropriate forms to establish the plan have been
completed. It is advisable for an investor considering the funding of any
retirement plan to consult with an attorney, retirement plan consultant or
financial or tax advisor with respect to the requirements of such plans and
the tax aspects thereof.
REDEMPTION OF SHARES
Shareholders may redeem their shares at any time at a price equal to the
net asset value per share next determined following receipt of a valid
redemption order by the transfer agent, in proper form as prescribed in the
Prospectus. Payment will ordinarily be made within three days of the receipt
of a valid redemption order. The value of shares on redemption may be more or
less than the shareholder's cost, depending upon the market value of the
Portfolio's net assets at the time of redemption. CLASS B SHARES ARE ALSO
SUBJECT TO A DECLINING CONTINGENT DEFERRED SALES CHARGE UPON CERTAIN
REDEMPTIONS. THE PROSPECTUS DESCRIBES THE REQUIREMENTS AND PROCEDURES FOR THE
REDEMPTION OF SHARES.
Shares will normally be redeemed for cash, although each Portfolio retains
the right to redeem its shares in kind under unusual circumstances, in order
to protect the interests of the remaining shareholders, by the delivery of
securities selected from its assets at its discretion. The Fund has, however,
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of a Portfolio during any 90-day period
for any one shareholder. Should redemptions by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess in cash or
in kind. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage costs in converting the assets to cash. The method of valuing
securities used to make redemptions in kind will be the same as the method of
valuing portfolio securities described under "Net Asset Value Determination",
and such valuation will be made as of the same time the redemption price is
determined. Upon any distributions in-kind, shareholders may appeal the
valuation of such securities by writing to the Fund.
Redemption of shares may be suspended, or the date of payment may be
postponed, whenever (1) trading on the Exchange is restricted, as determined
by the Securities and Exchange Commission, or the Exchange is closed except
for holidays and weekends, (2) the Securities and Exchange Commission permits
such suspension and so orders, or (3) an emergency exists as determined by
the Securities and Exchange Commission so that disposal of securities and
determination of net asset value is not reasonably practicable.
The Contingent Deferred Sales Charge ("CDSC") is waived on redemptions of
Class B shares in the circumstances described below:
(a) REDEMPTION UPON TOTAL DISABILITY OR DEATH
The Fund will waive the CDSC on redemptions following the death or total
disability (as evidenced by a determination of the federal Social Security
Administration) of a Class B shareholder, but in the case of total disability
only as to shares owned at the time of the initial determination of
disability. The Transfer Agent or Distributor will require satisfactory proof
of death or disability before it determines to waive the CDSC.
(b) REDEMPTION PURSUANT TO A FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's
60
<PAGE>
investment in the Fund will be redeemed systematically by the Fund on a
periodic basis, and the proceeds paid in accordance with the shareholder's
instructions. The amount to be redeemed and frequency of the systematic
withdrawals will be specified by the shareholder upon his or her election to
participate in the Plan. The CDSC will be waived on redemptions made under
the Plan subject to the limitations described below.
The amount of the shareholder's investment in a Fund at the time election
to participate in the Plan is made with respect to the Fund is hereinafter
referred to as the "Initial Account Balance." The amount to be systematically
redeemed from the Fund without the imposition of a CDSC may not exceed a
maximum of 12% annually of the shareholder's Initial Account Balance. The
Fund reserves the right to change the terms and conditions of the Plan and
the ability to offer the Plan.
The CDSC is also waived on redemption of Class B shares as it relates to
the reinvestment of redemption proceeds in Class B shares of another IDEX
Portfolio within 90 days after redemption.
TAXES
Each Portfolio has qualified, and intends to continue to qualify, for
treatment as a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code"). In order to qualify for that
treatment, each Portfolio must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and must meet several additional requirements. With respect to
each Portfolio, these requirements include the following: (1) the Portfolio
must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities, or other income (including gains
from futures contracts) derived with respect to its business of investing in
securities; (2) the Portfolio must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities or futures
contracts that were held for less than three months ("Short-Short
Limitation"); (3) at the close of each quarter of the Portfolio's taxable
year, at least 50% of the value of its total assets must be represented by
cash and cash items, U.S. government securities, securities of other RICs and
other securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Portfolio's
total assets and that does not represent more than 10% of the outstanding
voting securities of the issuer; and (4) at the close of each quarter of the
Portfolio's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.
A Portfolio will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of
its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other
amounts. Each Portfolio intends to distribute annually a sufficient amount of
any taxable income and capital gains so as to avoid liability for this excise
tax.
If the Tax-Exempt Portfolio invests in any instruments that generate
taxable income, under the circumstances described in the Prospectus,
distributions of the interest earned thereon will be taxable to that
Portfolio's shareholders as ordinary income to the extent of its earnings and
profits. Moreover, if that Portfolio realizes capital gains as a result of
market transactions, any distributions of that gain also will be taxable to
its shareholders.
Proposals may be introduced before Congress for the purpose of restricting
or eliminating the federal income tax exemption for interest on municipal
securities. If such a proposal were enacted, the
61
<PAGE>
availability of municipal securities for investment by the Tax-Exempt
Portfolio and the value of its portfolio securities would be affected. In
that event, the Tax-Exempt Portfolio will re-evaluate its investment
objective and policies.
Dividends and interest received by a Portfolio may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and foreign countries generally do not impose taxes on
capital gains in respect of investments by foreign investors. If more than
50% of the value of the Global Portfolio's total assets at the close of its
taxable year consists of securities of foreign corporations, it will be
eligible to, and may, file an election with the Internal Revenue Service that
will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign and U.S. possessions income
taxes paid by it. Pursuant to the election, a Portfolio will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Portfolio that represents income from foreign or
U.S. possessions sources as his own income from those sources, and (3) either
deduct the taxes deemed paid by him in computing his taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. The Global Portfolio will report to
its shareholders shortly after each taxable year their respective shares of
the income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Each Portfolio except the Tax-Exempt Portfolio may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at
least 75% of its gross income is passive or (2) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, a Portfolio will be subject to federal income tax on a
portion of any "excess distribution" received on the stock of a PFIC or of
any gain on disposition of that stock (collectively "PFIC income"), plus
interest thereon, even if the Portfolio distributes the PFIC income as a
taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Portfolio's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders. If a Portfolio invests in a PFIC and elects
to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Portfolio will be required to
include in income each year its pro rata share of the qualified electing
fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss), even if they are
not distributed to the Portfolio; those amounts would be subject to the
distribution requirements described above. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the income received in connection therewith by a
Portfolio. Income from foreign currencies (except certain gains therefrom
that may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by a Portfolio with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from the
disposition of foreign currencies that are not directly related to the
Portfolio's principal business of investing in securities (or options and
futures with respect thereto) also will be subject to the Short-Short
Limitation if the securities are held for less than three months.
If a Portfolio satisfies certain requirements, any increase in value on a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting
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<PAGE>
hedging position during the period of the hedge for purposes of determining
whether the Portfolio satisfies the Short-Short Limitation. Thus, only the
net gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each Portfolio intends that, when it engages
in hedging transactions, they will qualify for this treatment, but at the
present time it is not clear whether this treatment will be available for all
of the Portfolio's hedging transactions. To the extent this treatment is not
available, a Portfolio may be forced to defer the closing out of certain
options and futures contracts beyond the time when it otherwise would be
advantageous to do so, in order for the Portfolio to continue to qualify as a
RIC.
The treatment of income dividends and capital gain distributions by a
Portfolio to shareholders under the various state income tax laws may not
parallel that under the federal law. Qualification as a regulated investment
company does not involve supervision of a Portfolio's management or of its
investment policies and practices by any governmental authority.
Shareholders are urged to consult their own tax advisors with specific
reference to their own tax situations, including their state and local tax
liabilities.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Fund, as of November 1, 1995, no shareholder owned
beneficially or of record 5% or more of the outstanding shares of beneficial
interest of each of the Growth, Global, Flexible Income, Tax-Exempt,
Balanced, Capital Appreciation, Aggressive Growth, Equity-Income, Tactical
Asset Allocation or C.A.S.E. Portfolios, with the following exceptions:
Robert E. and Pauline F. Dutcher were record owners of approximately 5% of
the Tactical Asset Allocation Portfolio; Katherine P. and David E. Thorn were
record owners of approximately 6.2% of the Tactical Asset Allocation
Portfolio; H.O. Wilber was record owner of approximately 6.7% of the Tactical
Asset Allocation Portfolio; Iris Bauermerster was record owner of
approximately 11.6% of the Tactical Asset Allocation Portfolio. As of
November 1, 1995, ISI owned beneficially or of record approximately 8% and
45% of the Equity-Income Portfolio and the Tactical Asset Allocation
Portfolio, respectively. As of November 1, 1995, certain affiliates of ISI
and AEGON Management were the record owners of shares of beneficial interest
of the Income Plus Portfolio, as follows: AUSA Life Insurance Company owned
approximately 6.9%, and Bankers United Life Assurance Company owned
approximately 2%.
MISCELLANEOUS
ORGANIZATION
The Portfolios are series of IDEX II Series Fund, a Massachusetts business
trust that was formed by a Declaration of Trust dated January 7, 1986. The
Trust currently is governed by a Restatement of Declaration of Trust
("Declaration of Trust") dated as of August 30, 1991.
On August 7, 1992, in a tax-free reorganization, the IDEX II Tax-Exempt
Portfolio acquired all of the assets and assumed all of the liabilities of
the AEGON USA Tax-Exempt Portfolio in exchange for shares of the IDEX II
Tax-Exempt Portfolio which were then distributed to the AEGON USA Tax-Exempt
Portfolio shareholders, and the IDEX II Income Plus Portfolio (then known as
IDEX II High Yield Portfolio) acquired all of the assets and assumed all of
the liabilities of the AEGON USA High Yield Portfolio in exchange for shares
of the IDEX II Income Plus Portfolio which were then distributed to the AEGON
USA High Yield Portfolio shareholders. All historical financial and
performance information set forth in the Statement of Additional Information
relates to the AEGON
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USA Tax-Exempt Portfolio and the AEGON USA High Yield Portfolio prior to the
date they were reorganized into the IDEX II Tax-Exempt Portfolio and the IDEX
II Income Plus Portfolio, respectively. On August 21, 1992, in a tax-free
reorganization, IDEX II Growth Portfolio acquired all of the assets and
assumed all of the liabilities of AEGON USA Growth Portfolio and AEGON USA
Capital Appreciation Portfolio in exchange for shares of IDEX II Growth
Portfolio which were then distributed on a pro rata basis to the respective
AEGON USA Growth Portfolio and AEGON USA Capital Appreciation Portfolio
shareholders.
On October 1, 1993, in a tax-free reorganization, the Flexible Income
Portfolio acquired all of the assets and assumed all of the liabilities of
IDEX Total Income Trust ("IDEX Total") in exchange for shares of the Flexible
Income Portfolio which were then distributed to IDEX Total shareholders. All
historical financial and performance information set forth in the Statement
of Additional Information relates to IDEX Total prior to the date it was
reorganized into the Flexible Income Portfolio.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Fund to issue an unlimited number of
shares of beneficial interest. Shares of the Fund are fully paid and
nonassessable when issued. Shares of the Fund have no preemptive, cumulative
voting, conversion or subscription rights. Shares of the Fund are fully
transferable but the Fund is not bound to recognize any transfer until it is
recorded on its books.
The shares of beneficial interest of each Portfolio are divided into three
classes, Class A, Class B and Class C. Each class represents interests in the
same assets of the Portfolio and differ as follows: each class of shares has
exclusive voting rights on matters pertaining to its plan of distribution or
any other matter appropriately limited to that class; Class A shares are
subject to an initial sales charge; Class B shares are subject to a
contingent deferred sales charge, or back-end load, at a declining rate;
Class B and Class C shares are subject to higher ongoing distribution and
service fees; each class may bear differing amounts of certain class-specific
expenses; and each class has a separate exchange privilege. The Fund does not
anticipate that there will be any conflicts between the interests of holders
of the different classes of shares of the same Portfolio by virtue of these
classes. On an ongoing basis, the Board of Trustees will consider whether any
such conflict exists and, if so, take appropriate action. On any matter
submitted to a vote of shareholders of a series or class, each full issued
and outstanding share of that series or class has one vote.
The Declaration of Trust provides that each of the trustees will continue
in office until the termination of the Trust or his earlier death,
resignation, bankruptcy or removal. A meeting will be called for the election
of trustees upon the written request of holders of 10% or more of the
outstanding shares of the Trust. Vacancies may be filled by majority of the
remaining trustees, subject to certain limitations imposed by the 1940 Act.
Therefore, it is not anticipated that annual or regular meetings of
shareholders normally will be held, unless otherwise required by the
Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders
have the power to vote for the election and removal of trustees, to terminate
or reorganize the Fund, to amend the Declaration of Trust, on whether to
bring certain derivative actions and on any other matters on which a
shareholder vote is required by the 1940 Act, the Declaration of Trust, the
Fund's bylaws or the trustees.
LEGAL COUNSEL AND AUDITORS
Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as counsel to the Fund and certain of its affiliates.
Price Waterhouse, LLP, 1055 Broadway, Kansas City, Missouri 64105, serves as
independent accountants for the Fund.
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REGISTRATION STATEMENT
This Statement of Additional Information and the prospectus for the
Portfolios do not contain all the information set forth in the registration
statement and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities Act
of 1933 and the 1940 Act, to which reference is hereby made.
PERFORMANCE INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for a particular class of shares
of a Portfolio will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in the Portfolio over periods of
1, 5, and 10 years. These are the average annual compounded rates of return
that would equate the initial amount invested to the ending redeemable value.
These rates of return are calculated pursuant to the following formula:
1
-
T ( (ERV /divided by/ P) /minus/ N)1
(where P = a hypothetical initial investment of $1,000; T = the average
annual total return; N = the number of years; and ERV = the ending redeemable
value of a hypothetical $1,000 investment made at the beginning of the
period). All average annual total return figures reflect the deduction of a
proportionate share of each Portfolio's expenses on an annual basis, and
assume that the maximum sales load (Class A shares only) is deducted from the
initial $1,000 investment and all dividends and distributions are paid in
additional shares.
For the one-year period ended September 30, 1995, the five-year period
ended September 30, 1995 and the period from inception (May 8, 1986) through
September 30, 1995, the average annual total return for the Growth
Portfolio's Class A shares was 29.15%, 16.84% and 15.44%, respectively,
assuming deduction of the maximum sales charge of 5.5% and taking into
account 12b-1 fees at the maximum level of 0.35%. Assuming no deduction of
the maximum sales charge of 5.5%, the average annual total returns for the
Growth Portfolio's Class A shares were 36.70%, 18.17% and 16.17%,
respectively, for those same periods. The cumulative total returns for the
Class A shares of the Growth Portfolio for the one-year period ended
September 30, 1995, the five-year period ended September 30, 1995 and the
period from inception (May 8, 1986) through September 30, 1995 were 36.70%,
130.43% and 309.24%, respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995, the average annual
total return for the Growth Portfolio's Class C shares was 36.32% and 12.16%,
respectively, which takes into account 12b-1 fees at the maximum level of
0.90%. The cumulative total return for the Class C shares of the Growth
Portfolio for the one-year period ended September 30, 1995 and the period
from inception (October 1, 1993) through September 30, 1995 was 36.32% and
25.80%, respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1992) through September 30, 1995, the average annual
total return for the Global Portfolio's Class A shares was 9.10% and 20.24%,
respectively, assuming deduction of the maximum sales charge of 5.5% and
taking into account 12b-1 fees at the maximum level of 0.35%. Assuming no
deduction of the maximum sales charge of 5.5%, the average annual total
return for the Global Portfolio's Class A shares was_15.47% and 22.53%,
respectively, for those periods. The cumulative total return for the Class A
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shares of the Global Portfolio for the one-year period ended September 30,
1995 and for the period from inception (October 1, 1992) through September
30, 1995 was 15.47% and 83.94%, respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995, the average annual
total return for the Global Portfolio's Class C shares was 15.14% and 16.25%,
respectively, which takes into account 12b-1 fees at the maximum level of
0.90%. The cumulative total return for the Class C shares of the Global
Portfolio for the one-year period ended September 30, 1995 and the period
from inception (October 1, 1993) through September 30, 1995 was 15.14% and
35.15%, respectively.
For the one-year period ended September 30, 1995, the five-year period
ended September 30, 1995 and the period from inception (June 29, 1987)
through September 30, 1995, the average annual total return for the Flexible
Income Portfolio's Class A shares was 6.27%, 11.38% and 7.48%, respectively,
assuming deduction of the applicable maximum sales charge of 4.75% and taking
into account 12b-1 fees at the maximum level of 0.35% through the period
ended September 30, 1995. Assuming no deduction of the maximum sales charge
of 4.75%, the average annual total return for the Flexible Income Portfolio's
Class A shares was 11.57%, 12.48% and 8.19%, respectively, for those periods.
For the one-year period ended September 30, 1995, the five-year period ended
September 30, 1995 and the period from inception (June 29, 1987) through
September 30, 1995, the cumulative total return for the Flexible Income
Portfolio's Class A shares, was 11.31%, 80.05% and 91.58%, respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995, the average annual
total return for the Flexible Income Portfolio's Class C shares was 10.95%
and 4.07%, respectively, which takes into account 12b-1 fees at the maximum
level of 0.90%. The cumulative total return for the Class C shares of the
Flexible Income Portfolio for the one-year period ended September 30, 1995
and the period from inception (October 1, 1993) through September 30, 1995
was 10.95% and 8.32%.
For the one-year period ended September 30, 1995, the five-year period
ended September 30, 1995, the ten-year period ended September 30, 1995 and
the period from inception (April 1, 1985) through September 30, 1995, the
average annual total return for the Tax-Exempt Portfolio's Class A shares was
2.66%, 6.18%, 7.70% and 7.63%, respectively, assuming deduction of the
maximum sales charge of 4.75% and taking into account 12b-1 fees at the
maximum level of 0.35% through the period ended September 30, 1995. Assuming
no deduction of the maximum sales charge of 4.75%, the average annual total
return for the Tax-Exempt Portfolio's Class A shares was 7.75%, 7.22%, 8.23%
and 8.12%, respectively, for those periods. The cumulative total return for
the Class A shares of the Tax-Exempt Portfolio for the one-year period ended
September 30, 1995, the five-year period ended September 30, 1995, the
ten-year period ended September 30, 1995 and the period from inception (April
1, 1985) through September 30, 1995 was 7.75%, 41.70%, 120.63% and 127.07%,
respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995, the average annual
total return for the Tax-Exempt Portfolio's Class C shares was 7.48% and
3.29%, respectively, which takes into account 12b-1 fees at the maximum level
of 0.60%. The cumulative total return for the Class C shares of the
Tax-Exempt Portfolio for the one-year period ended September 30, 1995 and the
period from inception (October 1, 1993) through September 30, 1995 was 7.48%
and 6.70%.
For the one-year period ended September 30, 1995, the five-year period
ended September 30, 1995, the ten-year period ended September 30, 1995 and
the period from inception (June 14, 1985) through September 30, 1995, the
average annual total return for the Income Plus Portfolio's Class A shares
was 10.31%, 10.78%, 10.20% and 10.37%, respectively, assuming deduction of
the maximum sales charge of 4.75% and taking into account 12b-1 fees at the
maximum level of 0.35% through the period ended
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September 30, 1995. Assuming no deduction of the maximum sales charge of
4.75%, the average annual total return for the Income Plus Portfolio's Class
A shares was 15.85%, 11.87%, 10.74% and 10.89%, respectively, for those
periods. The cumulative total return for the Class A shares of the Income
Plus Portfolio for the one-year period ended September 30, 1995, the
five-year period ended September 30, 1995, the ten-year period ended
September 30, 1995 and the period from inception (June 14, 1985) through
September 30, 1995 was 15.85%, 75.22%, 177.47% and 189.82%, respectively.
For the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995, the average annual
total return for the Income Plus Portfolio's Class C shares was 15.08% and
4.80%, which takes into account 12b-1 fees at the maximum level of 0.90%. The
cumulative total return for the Class C shares of the Income Plus Portfolio
for the one-year period ended September 30, 1995 and the period from
inception (October 1, 1993) through September 30, 1995 was 15.08% and 9.85%.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Balanced Portfolio's Class A shares was
8.93%, assuming deduction of the maximum sales charge of 5.5% and taking into
account 12b-1 fees at the maximum level of 0.35%. Assuming no deduction of
the maximum sales charge of 5.5%, the cumulative total return for the
Balanced Portfolio's Class A shares was 15.27% for that period.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Balanced Portfolio's Class C shares was
14.77%, which takes into account 12b-1 fees at the maximum level of 0.90%.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Capital Appreciation Portfolio's Class A
shares was 27.98%, assuming deduction of the maximum sales charge of 5.5% and
taking into account 12b-1 fees at the maximum level of 0.35%. Assuming no
deduction of the maximum sales charge of 5.5%, the cumulative total return
for the Capital Appreciation Portfolio's Class A shares was 35.40% for that
period.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Capital Appreciation Portfolio's Class C
shares was 34.90%, which takes into account 12b-1 fees at the maximum level
of 0.90%.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Aggressive Growth Portfolio's Class A
shares was 67.20%, assuming deduction of the maximum sales charge of 5.5% and
taking into account 12b-1 fees at the maximum level of 0.35%. Assuming no
deduction of the maximum sales charge of 5.5%, the cumulative total return
for the Aggressive Growth Portfolio's Class A shares was 76.80% for that
period.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Aggressive Growth Portfolio's Class C
shares was 76.40%, which takes into account 12b-1 fees at the maximum level
of 0.90%.
For the period from December 2, 1994 (inception) to March 31, 1995, the
cumulative total return for the Equity-Income Portfolio's Class A shares was
11.93%, assuming deduction of the maximum sales charge of 5.5% and taking
into account 12b-1 fees at the maximum level of 0.35%. Assuming no deduction
of the maximum sales charge of 5.5%, the cumulative total return for the
Equity-Income Portfolio's Class A shares was 18.43% for that period.
For the period from December 2, 1994 (inception) to September 30, 1995,
the cumulative total return for the Equity-Income Portfolio's Class C shares
was 17.95%, which takes into account 12b-1 fees at the maximum level of
0.90%.
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The current yield for a particular class of shares of the Flexible Income
Portfolio, the Tax-Exempt Portfolio, the Income Plus Portfolio, Balanced
Portfolio or the Equity-Income Portfolio is computed in accordance with a
standardized method prescribed by rules of the Securities and Exchange
Commission. The yield is computed by dividing the Portfolio's investment
income per share earned during a particular 30-day base period (including
dividends, if any and interest earned, minus expenses (excluding reductions
for affiliated brokerage and custody earnings credits) accrued during the
period) by the maximum offering price per share on the last day of the base
period and then annualizing the result. The current yield for the Class A and
Class C shares of the Flexible Income Portfolio for the 30-day period ended
September 30, 1995 was 6.27% and 6.16%, respectively. The current yield for
the Class A and Class C shares of the Tax-Exempt Portfolio for the 30-day
period ended September 30, 1995 was 4.49% and 4.48%, respectively. The
current yield for the Class A and Class C shares of the Income Plus Portfolio
for the 30-day period ended September 30, 1995 was 6.43% and 6.28%,
respectively. The current yield for the Class A and Class C shares of the
Balanced Portfolio for the 30-day period ended September 30, 1995 was 0.64%
and 0.23%, respectively. The current yield for the Class A and Class C shares
of the Equity-Income Portfolio for the 30-day period ended September 30, 1995
was 0.04% and 0.00%, respectively.
The tax equivalent yield of the Tax-Exempt Portfolio is computed by
dividing that portion of the yield (as computed above) which is tax-exempt by
one minus an assumed tax rate of 28% and adding the product to that portion,
if any, of the Portfolio's yield that is not tax-exempt. The tax equivalent
yield of the Tax-Exempt Portfolio's Class A and Class C shares based on a
30-day period ended September 30, 1995 was 6.24% and 6.22%, respectively.
As stated in the Prospectus, from time to time in advertisements or sales
material, a Portfolio may present and discuss its performance rankings and/or
ratings or other information as published by recognized mutual fund
statistical services or by publications of general interest such as THE WALL
STREET JOURNAL, THE BOSTON GLOBE, THE NEW YORK TIMES, THE LOS ANGELES TIMES,
CHRISTIAN SCIENCE MONITOR, USA TODAY, THE TAMPA TRIBUNE, THE ST. PETERSBURG
TIMES, FINANCIAL TIMES, THE HARTFORD CURRENT, INTERNATIONAL HERALD TRIBUNE,
INVESTOR'S BUSINESS DAILY, THE BOSTON HERALD, THE WASHINGTON POST,
KIPLINGER'S WASHINGTON LETTER, KIPLINGER'S TAX REPORT, KIPLINGER'S PERSONAL
FINANCE MAGAZINE, BARRON'S, BUSINESS WEEK, FINANCIAL SERVICES WEEK, NATIONAL
UNDERWRITER, TIME, NEWSWEEK, PENSIONS & INVESTMENTS, U.S. NEWS AND WORLD
REPORT, MORNINGSTAR MUTUAL FUND VALUES, THE ECONOMIST, BANK LETTER, BOSTON
BUSINESS JOURNAL, RESEARCH RECOMMENDATIONS, FACS OF THE WEEK, MONEY, MODERN
MATURITY, FORBES, FORTUNE, FINANCIAL PLANNER, AMERICAN BANKER, U.S. BANKER,
ABA BANKING JOURNAL, INSTITUTIONAL INVESTOR (U.S./EUROPE), REGISTERED
REPRESENTATIVE, INDEPENDENT AGENT, AMERICAN DEMOGRAPHICS, TRUSTS & ESTATES,
CREDIT UNION MANAGEMENT, PERSONAL INVESTOR, NEW ENGLAND BUSINESS, BUSINESS
MONTH, GENTLEMEN'S QUARTERLY, EMPLOYEE RESEARCH REPORT, EMPLOYEE BENEFIT PLAN
REVIEW, ICI MUTUAL FUND NEWS, SUCCEED, JOHNSON CHARTS, WEISENBERGER
INVESTMENT COMPANIES SERVICE and MUTUAL FUND QUARTERLY. A Portfolio may also
advertise non-standardized performance information which is for periods in
addition to those required to be presented, or which provides actual
year-by-year return, or any combination thereof, or both. For Class A and
Class B shares, non-standardized performance may also be that which does not
reflect deduction of the maximum sales charge applicable to Class A shares or
the contingent deferred sales charge applicable to Class B shares. In
addition, a Portfolio may, as appropriate, compare its performance to that of
other types of investments such as certificates of deposit, savings accounts
and U.S. Treasuries, or to certain interest rate and inflation indices, such
as the Consumer Price Index. A Portfolio may also advertise various methods
of investing including, among others, dollar cost averaging, and may use
compounding illustrations to show the results of such investment methods. The
Fund or the Distributor may also from time to time in advertisements or sales
material present tables or other information comparing tax-exempt yields to
the equivalent taxable yields, whether with specific reference to the
Tax-Exempt Portfolio or otherwise.
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FINANCIAL STATEMENTS
Audited Financial Statements for IDEX II Growth Portfolio, IDEX II Global
Portfolio, IDEX II Flexible Income Portfolio (successor of IDEX Total Income
Trust), IDEX II Tax-Exempt Portfolio, IDEX II Income Plus Portfolio (formerly
known as IDEX II High Yield Portfolio), IDEX II Balanced Portfolio, IDEX II
Capital Appreciation Portfolio, IDEX II Aggressive Growth Portfolio and IDEX
II Equity-Income Portfolio for the fiscal year ended September 30, 1995 are
incorporated by reference from the Fund's Annual Report dated September 30,
1995. No financial information exists for IDEX II Tactical Asset Allocation
Portfolio or IDEX II C.A.S.E. Portfolio for the fiscal year ended September
30, 1995, as those Portfolios had not commenced operations as of that date.
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APPENDIX A
CERTAIN SECURITIES IN WHICH THE PORTFOLIOS MAY INVEST
I. MUNICIPAL OBLIGATIONS IN WHICH THE TAX-EXEMPT PORTFOLIO MAY INVEST
A. MUNICIPAL BONDS
GENERAL INFORMATION. Municipal Bonds are debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range
of public facilities such as airports, highways, bridges, schools, hospitals,
housing, mass transportation, streets and water and sewer works, and that pay
interest that is exempt from federal income tax in the opinion of issuer's
counsel. Other public purposes for which Municipal Bonds may be issued
include the refunding of outstanding obligations, obtaining funds for general
expenses and obtaining funds to lend to other public institutions and
facilities.
The two principal classifications of Municipal Bonds are "general
obligation" bonds and "revenue" or "special tax" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue or special tax bonds
are payable only from the revenues derived from a particular facility or
class of facilities or project or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but are not supported by
the issuer's power to levy general taxes. Most industrial development bonds
are in this category.
There are, of course, variations in the security of Municipal bonds, both
within a particular classification and between classifications, depending on
numerous factors. The yields of Municipal Bonds depend, among other things,
upon general money market conditions, general conditions of the Municipal
Bond market, size of a particular offering, the maturity of the obligations
and rating of the issue.
INDUSTRIAL DEVELOPMENT BONDS AND PRIVATE ACTIVITY BONDS. Industrial
development bonds ("IDBs") and private activity bonds ("PABs") are issued by
or on behalf of public authorities to finance various privately operated
facilities, such as airports or pollution control facilities. PABs generally
are such bonds issued after August 15, 1986. These obligations are included
within the term "municipal bonds" if the interest paid thereon is exempt from
federal income tax in the opinion of the bond counsel. IDBs and PABs are in
most cases revenue bonds and thus are not payable from the unrestricted
revenues of the issuer. The credit quality of IDBs and PABs is usually
directly related to the credit standing of the user of the facilities being
financed.
PURCHASES ON "WHEN-ISSUED" OR "DELAYED DELIVERY" BASIS. Sometimes the
Tax-Exempt Portfolio may buy Municipal Bonds on a "when-issued" or "delayed
delivery" basis. This means that when it agrees to buy, the terms of the
Bonds and the price it will pay are fixed, but it does not purchase and take
delivery of the Bonds until a later date (the "settlement date"), which is
usually within one month. The Tax-Exempt Portfolio pays no money and receives
no interest before the settlement date. The commitment to purchase securities
on a when-issued or delayed delivery basis involves the risk that the market
value of such securities may fall below cost prior to the settlement date.
While the Tax-Exempt Portfolio may sell the Municipal Bonds before the
settlement date, it will ordinarily do so only for investment management
reasons. Ordinarily, the Tax-Exempt Portfolio purchases Municipal Bonds that
it has agreed to buy on a when-issued or delayed delivery basis. Gains or
losses on sales prior to the settlement date are not tax-exempt.
A Municipal Bond purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date. The Tax-Exempt Portfolio will
direct the Fund's custodian to segregate cash, U.S.
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Government securities or other appropriate high-grade debt obligations owned
by the Portfolio that are at least equal in value to the amount the
Tax-Exempt Portfolio will have to pay on the settlement date. If necessary,
additional assets will be placed in the account daily so that the value of
the account will at least equal the Portfolio's purchase commitment.
B. MUNICIPAL NOTES
The Tax-Exempt Portfolio may invest in the following types of Municipal
Notes, subject to the quality requirements described in the Prospectus:
PROJECT NOTES. Project notes ("PNs") are issued on behalf of local
authorities at auctions conducted by the United States Department of Housing
and Urban Development to raise funds for federally sponsored urban renewal,
neighborhood development and housing programs. PNs are backed by the full
faith and credit of the Federal government through agreements with the local
authority which provide that, if required, the Federal government will lend
the issuer an amount equal to the principal of and interest on the PNs.
Ordinarily, PNs are repaid by rolling over the notes or from the proceeds of
new bonds or other securities which are issued to provide permanent
financing.
BOND ANTICIPATION NOTES. Bond anticipation notes ("BANs") are usually
general obligations of state and local governmental issuers which are sold to
obtain interim financing for projects that will eventually be funded through
the sale of long-term debt obligations or bonds. The ability of an issuer to
meet its obligations on its BANs is primarily dependent on the issuer's
access to the long-term municipal bond market and the likelihood that the
proceeds of such bond sales will be used to pay the principal and interest on
the BANs.
TAX ANTICIPATION NOTES. Tax anticipation notes ("TANs") are issued by
state and local governments to finance their current operations. Repayment is
generally to be derived from specific future tax revenues. TANs are usually
general obligations of the issuer. A weakness in an issuer's capacity to
raise taxes due to, among other things, a decline in its tax base or a rise
in delinquencies, could adversely affect the issuer's ability to meet its
obligations on outstanding TANs.
REVENUE ANTICIPATION NOTES. Revenue anticipation notes ("RANs") are issued
by governments or governmental bodies with the expectation that future
revenues from a designated source will be used to repay the notes. In
general, they also constitute general obligations of the issuer. A decline in
the receipt of projected revenues, such as anticipated revenues from another
level of government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could affect
the ability of the issuer to pay the principal and interest on RANs.
CONSTRUCTION LOAN NOTES. Construction loan notes are issued to provide
construction financing for specific projects. Frequently, these notes are
redeemed with funds obtained from the Federal Housing Administration.
BANK NOTES. Bank notes are notes issued by local governmental bodies and
agencies as those described above to commercial banks as evidence of
borrowings. Banks on occasion sell such notes to purchasers such as the
Tax-Exempt Portfolio. The purposes for which the notes are issued vary, but
bank notes are frequently issued to meet short-term working-capital or
capital-project needs. These notes typically are redeemed with revenue from
taxes or from long-term financing proceeds, and may have risks similar to the
risks associated with TANs and RANs.
C. MUNICIPAL COMMERCIAL PAPER
Municipal Commercial Paper (also called "short-term discount notes")
represents short-term obligations of state and local governments and their
agencies issued typically to meet seasonal working
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capital or interim construction financing requirements. Municipal Commercial
Paper is often issued at a discount, with shorter maturities than Municipal
Notes. Such obligations are repayable from general revenues of the issuer or
refinanced with long-term debt. In most cases, Municipal Commercial Paper is
backed by letters of credit, lending or note repurchase agreements, or other
credit facility agreements offered by banks or other institutions.
While the various types of Municipal Notes and Municipal Commercial Paper
described above as a group represent the major portion of the tax-exempt note
market, other types of notes are occasionally available in the marketplace
and the Tax-Exempt Portfolio may invest in such other types of notes to the
extent permitted under its investment objective and policies. Such short-term
obligations may be issued for different purposes and with different security
than those mentioned above.
D. FLOATING RATE AND VARIABLE RATE OBLIGATIONS
The Tax-Exempt Portfolio may purchase floating rate and variable rate
obligations, including participation interests therein (see section E below).
Investments in floating or variable rate securities normally will include
IDBs which provide that the rate of interest is set as a specific percentage
of a designated base rate, such as the rate on Treasury Bonds or Bills or the
prime rate at a major commercial bank, and that the Portfolio can demand
payment of the obligation on short notice at par value plus accrued interest.
Variable rate securities provide for a specified periodic adjustment in the
interest rate, while floating rate securities have flexible rates that change
whenever there is a change in the designated base interest rate. Frequently,
such securities are secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying creditor (i.e.,
the corporation utilizing the IDBs financing) or the bank, as the case may
be, must be equivalent to the Municipal Obligation ratings required for
purchases for the Tax-Exempt Portfolio.
E. PARTICIPATION INTERESTS
The Tax-Exempt Portfolio may invest in participation interests purchased
from banks in variable rate tax-exempt securities (such as IDBs) owned by the
banks. A participation interest gives the purchaser an undivided interest in
the tax-exempt security in the proportion that the Portfolio's participation
interest bears to the total principal amount of the tax-exempt security, and
permits demand repurchase as described in section D above. Participations are
frequently backed by an irrevocable letter of credit or guarantee of the bank
offering the participation which the sub-adviser, under the supervision of
the Board of Trustees, has determined meets the prescribed quality standards
for the Tax-Exempt Portfolio. The Portfolio has the right to sell the
instrument back to the bank and draw on the letter of credit on 7 days'
notice for all or any part of the Portfolio's participation interest in the
tax-exempt security, plus accrued interest. The Portfolio intends to exercise
its demand rights under the letter of credit only (1) upon a default under
the terms of the tax-exempt security, (2) as needed to provide liquidity in
order to meet redemptions, or (3) upon a drop in the rating or the
sub-adviser's evaluation of the underlying security. Banks charge a service
and letter of credit fee and a fee for issuing repurchase commitments in an
amount equal to the excess of the interest paid on the tax-exempt securities
over the yield negotiated between the Portfolio and the bank at which the
instruments were purchased by the Tax-Exempt Portfolio. The sub-adviser will
monitor the pricing, quality and liquidity of the variable rate demand
instruments held by the Tax-Exempt Portfolio, including the IDBs supported by
bank letters of credit or guarantee, on the basis of published financial
information, reports or rating agencies and other bank analytical services.
Participation interests will be purchased only if, in the opinion of counsel,
interest income on such interest will be tax-exempt when distributed as
dividends to shareholders.
Obligations of issuers of Municipal Bonds, Municipal Notes and Municipal
Commercial Paper are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of
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creditors, such as the Federal Bankruptcy Act, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities' power to levy taxes. There is also the
possibility that litigation or other conditions may materially affect the
power or ability of an issuer to pay, when due, the principal of and interest
on its Municipal Obligations.
II. OBLIGATIONS IN WHICH EACH PORTFOLIO MAY INVEST
(UNLESS OTHERWISE NOTED)
A. U.S. GOVERNMENT OBLIGATIONS
As described in the Prospectus, the Portfolios may invest in some or all
of the following types of direct obligations of the Federal Government,
issued by the Department of the Treasury, and backed by the full faith and
credit of the Federal Government.
TREASURY BILLS. Treasury bills are issued with maturities of up to one
year. They are issued in bearer form, are sold on a discount basis and are
payable at par value at maturity.
TREASURY NOTES. Treasury Notes are longer-term interest bearing
obligations with original maturities of one to seven years.
TREASURY BONDS. Treasury bonds are longer-term interest bearing
obligations with original maturities from 5 to 30 years.
B. OBLIGATIONS OF FEDERAL AGENCIES, INSTRUMENTALITIES AND AUTHORITIES
Certain federal agencies have been established as instrumentalities of the
United States Government to supervise and finance certain types of
activities. These agencies include, but are not limited to, the Banks for
Cooperatives, Federal Land Banks, Federal Intermediate Credit Banks, Federal
Home Loan Banks ("FHLB"), Federal National Mortgage Association ("FNMA"),
Government National Mortgage Association ("GNMA"), Export-Import Bank of the
United States, and Tennessee Valley Authority ("TVA"). Issues of these
agencies, while not direct obligations of the United States Government, are
either backed by the full faith and credit of the United States (e.g., GNMA
Certificates or certain TVA Bonds) or are guaranteed by the Treasury (e.g.,
certain other TVA Bonds) or supported by the issuing agencies' right to
borrow from the Treasury (e.g., FHLB and FNMA Bonds). There can be no
assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally obligated to do so.
C. CERTIFICATES OF DEPOSIT (ALL PORTFOLIOS) AND TIME DEPOSITS (INCOME PLUS
PORTFOLIO ONLY)
A time deposit is a non-negotiable interest-bearing deposit with a bank
which generally cannot be withdrawn prior to a specified maturity date
without substantial interest penalties. A certificate of deposit ("CD") is a
negotiable instrument issued by a bank against a time deposit. CDs normally
can be traded in the secondary market prior to maturity, and are thus more
liquid than other forms of time deposits. The Portfolios will only invest in
U.S. dollar denominated time deposits and CDs representing deposits in U.S.
Banks with assets of $1 billion or more, whose deposits are insured by the
Federal Deposit Insurance Corporation.
D. COMMERCIAL PAPER
Commercial paper refers to short-term unsecured promissory notes issued by
commercial and industrial corporations to finance their current operations.
Commercial paper may be issued at a
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discount and redeemed at par, or issued at par with interest added at
maturity. The interest or discount rate depends on general interest rates,
the credit standing of the issuer, and the maturity of the note, and
generally moves in tandem with rates on large CDs and Treasury bills. An
established secondary market exists for commercial paper, particularly that
of stronger issuers which are rated by Moody's Investors Service, Inc. and
Standard and Poor's Ratings Group. Investments in commercial paper are
subject to the risks that general interest rates will rise, that the credit
standing and outside rating of the issuer will fall, or that the secondary
market in the issuer's notes will become too limited to permit their
liquidation at a reasonable price.
E. BANKER'S ACCEPTANCE
A banker's acceptance is a negotiable short-term draft, generally arising
from a bank customer's commercial transaction with another party, with
payment due for the transaction on the maturity date of the customer's draft.
The draft becomes a banker's acceptance when the bank, upon fulfillment of
the obligations of the third party, accepts the draft for later payment at
maturity, thus adding the bank's guarantee of payment to its customer's own
obligation. In effect, a banker's acceptance is a post-dated certified check
payable to its bearer at maturity. Such acceptances are highly liquid, but
are subject to the risk that both the customer and the accepting bank will be
unable to pay at maturity. The Portfolios may invest in U.S. dollar
denominated banker's acceptances issued by U.S. banks, their foreign
branches, and by U.S. branches of foreign banks.
F. REPURCHASE AGREEMENTS FOR U.S. GOVERNMENT SECURITIES (EXCEPT
EQUITY-INCOME PORTFOLIO)
The Portfolios may enter into repurchase agreements with banks and dealers
for securities of or guaranteed by the U.S. Government, under which the
Portfolio purchases securities and agrees to resell the securities at an
agreed upon time and at an agreed upon price. The difference between the
amount the Portfolio pays for the securities and the amount it receives upon
resale is accrued as interest and reflected in the Portfolio's net investment
income. When the Portfolio enters into repurchase agreements, it relies on
the seller to repurchase the securities. Failure to do so may result in a
loss for the Portfolio if the market value of the securities is less than the
repurchase price. Under the Investment Company Act of 1940, repurchase
agreements may be considered collateralized loans by the Portfolio.
At the time a Portfolio enters into a repurchase agreement, the value of
the underlying security including accrued interest will be equal to or exceed
the value of the repurchase agreement and, for repurchase agreements that
mature in more than one day, the seller will agree that the value of the
underlying security including accrued interest will continue to be at least
equal to the value of the repurchase agreement.
Although repurchase agreements carry certain risks not associated with
direct investment in securities, the Portfolios intend to enter into
repurchase agreements only with banks and dealers in transactions which the
sub-adviser believes present minimal credit risks in accordance with
guidelines adopted by the Trustees. To the extent that proceeds from any
sales of collateral upon a default in the counterparty's obligation to
repurchase were less than the repurchase price, the Portfolio would suffer a
loss. If the counterpart's petitions for bankruptcy or otherwise becomes
subject to bankruptcy or liquidation proceedings, there might be restrictions
on the Portfolio's ability to sell the collateral and the Portfolio could
suffer a loss.
III. OTHER SECURITIES IN WHICH THE PORTFOLIOS MAY INVEST
A. CORPORATE DEBT SECURITIES
The Portfolio may invest in corporate bonds, notes and debentures of long
and short maturities and of various grades, including unrated securities.
Corporate debt securities exist in great variety, differing
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from one another in quality, maturity, and call or other provisions. Lower
grade bonds, whether rated or unrated, usually offer higher interest income,
but also carry increased risk of default. Corporate bonds may be secured or
unsecured, senior to or subordinated to other debt of the issuer, and,
occasionally, may be guaranteed by another entity. In addition, they may
carry other features, such as those described under "Convertible Securities"
and "Variable or Floating Rate Securities", or have special features such as
the right of the holder to shorten or lengthen the maturity of a given debt
instrument, rights to purchase additional securities, rights to elect from
among two or more currencies in which to receive interest or principal
payments, or provisions permitting the holder to participate in earnings of
the issuer or to participate in the value of some specified commodity,
financial index, or other measure of value.
B. INTERNATIONAL AGENCY OBLIGATIONS
The Portfolio may invest in bonds, notes or Eurobonds of international
agencies. Examples are securities issued by the Asian Development Bank, the
European Economic Community, and the European Investment Bank. The Portfolio
may also purchase obligations of the International Bank for Reconstruction
and Development which, while technically not a U.S. Government agency or
instrumentality, has the right to borrow from the participating countries,
including the United States.
C. BANK OBLIGATIONS OR SAVINGS AND LOAN OBLIGATIONS
The Portfolios may purchase certificates of deposit, bankers' acceptances
and other debt obligations of commercial banks and certificates of deposit
and other debt obligations of savings and loan associations ("S&L's").
Certificates of deposit are receipts from a bank or an S&L for funds
deposited for a specified period of time at a specified rate of return.
Bankers' acceptance are time drafts drawn on commercial banks by borrowers,
usually in connection with international commercial transactions. These
instruments may be issued by institutions of any size, may be of any
maturity, and may be insured or uninsured. The quality of bank or savings and
loan obligations may be affected by such factors as (a) location - the
strength of the local economy will often affect financial institutions in the
region, (b) asset mix -institutions with substantial loans in a troubled
industry may be weakened by those loans, and (c) amount of equity capital
- -under-capitalized financial institutions are more vulnerable when loan
losses are suffered. The portfolio manager will evaluate these and other
factors affecting the quality of bank and savings and loan obligations
purchased by the Portfolio, but the Portfolio is not restricted to
obligations or institutions which satisfy specified quality criteria.
D. VARIABLE OR FLOATING RATE SECURITIES
The Portfolio may purchase variable rate securities that provide for
automatic establishment of a new interest rate at fixed intervals (e.g.,
daily, monthly, semi-annually, etc.). Floating rate securities provide for
automatic adjustment of the interest rate whenever some specified interest
rate index changes. The interest rate on variable and floating rate
securities is ordinarily determined by reference to, or is a percentage of, a
bank's prime rate, the 90-day U.S. Treasury bill rate, the rate of return on
commercial paper or bank certificates of deposit, an index of short-term
interest rates, or some other objective measure.
E. PREFERRED STOCKS (ALL PORTFOLIOS EXCEPT THE TAX-EXEMPT PORTFOLIO)
Preferred stocks are securities which represent an ownership interest in a
corporation and which give the owner a prior claim over common stock on the
corporation's earnings and assets. Preferred stock generally pays quarterly
dividends. Preferred stocks may differ in many of their provisions. Among the
features that differentiate preferred stocks from one another are the
dividend rights, which may be cumulative or non-cumulative and participating
or non-participating, redemption provisions,
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and voting rights. Such features will establish the income return and may
affect the prospects for capital appreciation or risks of capital loss.
F. CONVERTIBLE SECURITIES
The Portfolios may invest in debt securities convertible into or
exchangeable for equity securities, or debt securities that carry with them
the right to acquire equity securities, as evidenced by warrants attached to
such securities or acquired as part of units of the securities. Such
securities normally pay less current income than securities without
conversion features, but add the potential opportunity for appreciation from
enhanced value for the equity securities into which they are convertible, and
the concomitant risk of loss from declines in those values.
G. COMMON STOCKS
Each Portfolio (other than the Tax-Exempt Portfolio) invests in common
stocks. The Flexible Income Portfolio will consider investment in
income-producing common stocks if the yields of common stocks generally
become competitive with the yields of other income securities. Common stocks
are junior to the debt obligations and preferred stocks of an issuer. Hence,
dividend payments on common stocks should be regarded as less secure than
income payments on corporate debt securities.
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IDEX II SERIES FUND
OTHER INFORMATION
PART C
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
List all financial statements and exhibits filed as part of the
Registration Statement.
(a) Financial Statements:
(1) Audited financial statements of IDEX II Growth, Global,
Flexible Income, Tax-Exempt Income Plus, Balanced, Capital
Appreciation, Aggressive Growth and Equity-Income Portfolios
for the fiscal year ended September 30, 1995 included in the
IDEX II Series Fund's 1995 Annual Report to Shareholders are
incorporated by reference into the Statement of Additional
Information. No financial information exists for the IDEX II
Tactical Asset Allocation and C.A.S.E. Portfolios for the
fiscal year ended September 30, 1995, as those Portfolios had
not commenced operations at that time.
(2) Financial Highlights of IDEX II Aggressive Growth Portfolio,
IDEX II Capital Appreciation Portfolio, IDEX II Global
Portfolio, IDEX II Growth Portfolio, IDEX II Equity-Income
Portfolio, IDEX II Balanced Portfolio, IDEX II Flexible Income
Portfolio, IDEX II Income Plus Portfolio and IDEX II
Tax-Exempt Portfolio are included on pages 4-7 of the
Prospectus.
(b) Exhibits:
Exhibit 1 Restatement of Declaration of Trust 1
Exhibit 2 Bylaws, as amended 2
Exhibit 3 Not Applicable
Exhibit 4 Specimen Share Certificate:
(a) Class A Shares
(1) IDEX II Aggressive Growth Portfolio 3
(2) IDEX II Capital Appreciation Portfolio 3
(3) IDEX II Global Portfolio 2
(4) IDEX II Growth Portfolio 2
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 3
- --------
1 Filed previously with Post-Effective Amendment No. 17 to Registration
Statement filed on January 1, 1995.
2 Filed previously with Post-Effective Amendment No. 15 to Registration
Statement filed on December 3, 1993.
3 Filed previously with Post-Effective Amendment No. 16 to Registration
Statement filed on October 3, 1994.
4 Filed previously with Post-Effective Amendment No. 20 to Registration
Statement filed on November 17, 1995.
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(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 3
(9) IDEX II Flexible Income Portfolio 6
(10) IDEX II Income Plus Portfolio 2
(11) IDEX II Tax Exempt Portfolio 2
(b) Class B Shares
(1) IDEX II Aggressive Growth Portfolio 5
(2) IDEX II Capital Appreciation Portfolio 5
(3) IDEX II Global Portfolio 5
(4) IDEX II Growth Portfolio 5
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 5
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 5
(9) IDEX II Flexible Income Portfolio 5
(10) IDEX II Income Plus Portfolio 5
(11) IDEX II Tax Exempt Portfolio 5
(c) Class C Shares
(1) IDEX II Aggressive Growth Portfolio 3
(2) IDEX II Capital Appreciation Portfolio 3
(3) IDEX II Global Portfolio 2
(4) IDEX II Growth Portfolio 2
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 3
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 3
(9) IDEX II Flexible Income Portfolio 5
(10) IDEX II Income Plus Portfolio 2
(11) IDEX II Tax Exempt Portfolio 2
Exhibit 5 (a) Management and Investment Advisory Agreement
(1) IDEX II Aggressive Growth Portfolio 1
(2) IDEX II Capital Appreciation Portfolio 1
(3) IDEX II Global Portfolio 7
(4) IDEX II Growth Portfolio 8
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 1
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 1
(9) IDEX II Flexible Income Portfolio 6
(10) IDEX II Income Plus Portfolio 9
- --------
5 Filed previously with Post-Effective Amendment No. 18 to Registration
Statement filed on June 30, 1995.
6 Filed previously with Post-Effective Amendment No. 13 to Registration
Statement filed on July 26, 1993.
7 Filed previously with Post-Effective Amendment No. 9 to Registration
Statement filed on July 29, 1992.
8 Filed previously with Post-Effective Amendment No. 6 to Registration
Statement filed on November 18, 1991.
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(11) IDEX II Tax-Exempt Portfolio 9
(b) Investment Counsel Agreement
(1) IDEX II Aggressive Growth Portfolio 1
(2) IDEX II Capital Appreciation Portfolio 1
(3) IDEX II Global Portfolio 7
(4) IDEX II Growth Portfolio 8
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 1
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 1
(9) IDEX II Flexible Income Portfolio 6
(10) IDEX II Income Plus Portfolio 9
(11) IDEX II Tax-Exempt Portfolio 9
(c) Administrative Services Agreement
(1) IDEX II Capital Appreciation Portfolio 1
(2) IDEX II Global Portfolio 7
(3) IDEX II Growth Portfolio 8
(4) IDEX II Balanced Portfolio 1
(5) IDEX II Flexible Income Portfolio 6
Exhibit 6 (a) Underwriting Agreement 4
(b) Dealer's Sales Agreement 4
(c) Service Agreement 4
(d) Wholesaler's Agreement 4
Exhibit 7 Trustees/Directors Deferred Compensation Plan 4
Exhibit 8 Custody Agreement 10
Exhibit 9 Transfer Agency Agreement with Idex Investor Services, Inc. 4
Exhibit 10 Opinion of Counsel
Exhibit 11 (a) Consent of Price Waterhouse LLP
(b) Consent of Sutherland Asbill & Brennan
Exhibit 12 Not Applicable
Exhibit 13 Investment Letter from Sole Shareholder 10
Exhibit 14 (a) Model Individual Retirement Plan 1
(b) Prototype Money Purchase Pension and Profit Sharing
Plan 11
(c) Model Section 403(b)(7) Plan 1
(d) Model 401(k) Plan 7
- --------
9 Filed previously with Registration Statement filed on Form N-14 filed
on April 20, 1992.
10 Filed previously with Pre-Effective Amendment No. 1 to Registration
Statement filed on March 7, 1986.
11 Filed previously with Post-Effective Amendment No. 5 to Registration
Statement filed on February 1, 1991.
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Exhibit 15 (a) Plan of Distribution under Rule 12b-1 - Class A Shares
(1) IDEX II Aggressive Growth Portfolio 1
(2) IDEX II Capital Appreciation Portfolio 1
(3) IDEX II Global Portfolio 12
(4) IDEX II Growth Portfolio 12
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 1
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 1
(9) IDEX II Flexible Income Portfolio 5
(10) IDEX II Income Plus Portfolio 13
(11) IDEX II Tax-Exempt Portfolio 13
(b) Plan of Distribution under Rule 12b-1 - Class B Shares
(1) IDEX II Aggressive Growth Portfolio 5
(2) IDEX II Capital Appreciation Portfolio 5
(3) IDEX II Global Portfolio 5
(4) IDEX II Growth Portfolio 5
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 5
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 5
(9) IDEX II Flexible Income Portfolio 5
(10) IDEX II Income Plus Portfolio 5
(11) IDEX II Tax Exempt Portfolio 5
(c) Plan of Distribution under Rule 12b-1 - Class C Shares
(1) IDEX II Aggressive Growth Portfolio 1
(2) IDEX II Capital Appreciation Portfolio 1
(3) IDEX II Global Portfolio 13
(4) IDEX II Growth Portfolio 13
(5) IDEX II C.A.S.E. Portfolio 4
(6) IDEX II Equity-Income Portfolio 1
(7) IDEX II Tactical Asset Allocation Portfolio 5
(8) IDEX II Balanced Portfolio 1
(9) IDEX II Flexible Income Portfolio 5
(10) IDEX II Income Plus Portfolio 13
(11) IDEX II Tax-Exempt Portfolio 13
Exhibit 16 (a) Computation of Performance
Class A Shares
(1) IDEX II Aggressive Growth Portfolio 5
(2) IDEX II Capital Appreciation Portfolio 5
(3) IDEX II Global Portfolio 2
(4) IDEX II Growth Portfolio 12
(5) IDEX II Equity-Income Portfolio 5
(6) IDEX II Balanced Portfolio 5
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12 Filed previously with Post-Effective Amendment No. 14 to Registration
Statement filed on August 2, 1993.
13 Filed previously with Post-Effective Amendment No. 7 to Registration
Statement filed on January 17, 1992.
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(7) IDEX II Flexible Income Portfolio 3
(8) IDEX II Income Plus Portfolio 8
(9) IDEX II Tax-Exempt Portfolio 8
(b) Computation of Performance Quotation
Class C Shares
(1) IDEX II Aggressive Growth Portfolio 5
(2) IDEX II Capital Appreciation Portfolio 5
(3) IDEX II Global Portfolio 1
(4) IDEX II Growth Portfolio 1
(5) IDEX II Equity-Income Portfolio 5
(6) IDEX II Balanced Portfolio 5
(7) IDEX II Flexible Income Portfolio 1
(8) IDEX II Income Plus Portfolio 1
(9) IDEX II Tax-Exempt Portfolio 1
Exhibit 18 Multiple Class Plan 5
Exhibit 19 Powers of Attorney 5
Exhibit 27 Financial Data Schedule
Item 25 Persons Controlled by or under Common Control with Registrant
To the knowledge of the Registrant, IDEX II Aggressive Growth, Capital
Appreciation, Global, Growth, C.A.S.E., Equity-Income, Tactical Asset
Allocation, Balanced, Flexible Income, Income Plus and Tax-Exempt Portfolios are
not controlled by or under common control with any other person. The Registrant
has no subsidiaries.
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
The number of record holders of shares of beneficial interest of the
Registrant as of January 10, 1996, was as follows:
TITLE OF CLASS A SHARES NUMBER OF RECORD HOLDERS
----------------------- ------------------------
Shares of Beneficial Interest
IDEX II Aggressive Growth Portfolio 3,286
IDEX II Capital Appreciation Portfolio 1,057
IDEX II Global Portfolio 11,600
IDEX II Growth Portfolio 60,760
IDEX II C.A.S.E. Portfolio 0
IDEX II Equity-Income Portfolio 707
IDEX II Tactical Asset Allocation Portfolio 139
IDEX II Balanced Portfolio 388
IDEX II Flexible Income Portfolio 1,500
IDEX II Income Plus Portfolio 3,804
IDEX II Tax-Exempt Portfolio 1,094
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TITLE OF CLASS A SHARES NUMBER OF RECORD HOLDERS
----------------------- ------------------------
Shares of Beneficial Interest
IDEX II Aggressive Growth Portfolio 97
IDEX II Capital Appreciation Portfolio 37
IDEX II Global Portfolio 63
IDEX II Growth Portfolio 153
IDEX II C.A.S.E. Portfolio 0
IDEX II Equity-Income Portfolio 32
IDEX II Tactical Asset Allocation Portfolio 50
IDEX II Balanced Portfolio 16
IDEX II Flexible Income Portfolio 5
IDEX II Income Plus Portfolio 19
IDEX II Tax-Exempt Portfolio 3
TITLE OF CLASS C SHARES NUMBER OF RECORD HOLDERS
----------------------- ------------------------
Shares of Beneficial Interest
IDEX II Aggressive Growth Portfolio 437
IDEX II Capital Appreciation Portfolio 170
IDEX II Global Portfolio 1,283
IDEX II Growth Portfolio 1,708
IDEX II C.A.S.E. Portfolio 0
IDEX II Equity-Income Portfolio 117
IDEX II Tactical Asset Allocation Portfolio 42
IDEX II Balanced Portfolio 138
IDEX II Flexible Income Portfolio 140
IDEX II Income Plus Portfolio 293
IDEX II Tax-Exempt Portfolio 92
ITEM 27 INDEMNIFICATION
Provisions relating to indemnification of the Registrant's Trustees and
employees are included in Registrant's Restatement of Declaration of Trust and
Bylaws which are incorporated herein by reference.
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
(a). IDEX II Growth Portfolio, IDEX II Global Portfolio, IDEX II
Flexible Income Portfolio, IDEX II Balanced Portfolio and IDEX
II Capital Appreciation Portfolio
The only business of Idex Management, Inc. is to serve as the
investment adviser of IDEX Fund; IDEX II Growth Portfolio, IDEX II Global
Portfolio, IDEX II Flexible Income Portfolio, IDEX II Balanced Portfolio and
IDEX II Capital Appreciation Portfolio of IDEX II Series Fund; and IDEX Fund 3.
Janus Capital Corporation ("Janus Capital") serves as sub-adviser to
certain portfolios and mutual funds in the IDEX Group of Funds and as investment
adviser to each portfolio of Janus Investment Fund and Janus Aspen Series and as
adviser or sub-adviser to several other mutual funds and private and retirement
accounts. Janus Capital also serves as sub-adviser to certain portfolios of the
WRL Series Fund, Inc. Thomas H. Bailey, Chairman and President of Janus Capital
and Chairman of the Board of Directors of Idex Management, Inc., has no
business, profession, vocation or employment of a substantial nature other than
his positions with Idex Management, Inc., Janus Investment Fund, Janus Aspen
Series and Janus Capital. Steven R. Goodbarn, Vice President of Finance,
Treasurer and Chief Financial Officer of Janus Capital, Treasurer and Chief
Financial Officer of Janus Investment Fund and Janus Aspen Series and Director
of Idex Management, Inc., has no substantial business, profession, vocation or
employment other than his positions with Janus Capital, Janus Investment Fund,
Janus Aspen Series and Idex Management, Inc. James P. Craig, James P. Goff,
Scott W. Schoelzel, Ronald
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V. Speaker and Helen Y. Hayes are Vice Presidents of Janus Capital, and have no
substantial business, profession, vocation or employment other than their
positions with Janus Capital, Janus Investment Fund and Janus Aspen Series.
David C. Tucker is Vice President, Secretary and General Counsel of Janus
Capital, and Vice President and General Counsel of Janus Investment Fund and
Janus Aspen Series; he has no substantial business, profession, vocation or
employment other than his positions with Janus Capital, Janus Investment Fund
and Janus Aspen Series. Michael N. Stolper, a director of Janus Capital, is
President of Stolper & Company, Inc., 525 "B" Street, Suite 1080, San Diego, CA
92101, an investment performance consultant. Michael E. Herman, a director of
Janus Capital, is Chairman of the Finance Committee of Ewing Marion Kauffman
Foundation, 4900 Oak, Kansas City, MO 64112. Thomas A. McDonnell, a director of
Janus Capital, is President, Chief Executive Officer and a director of DST
Systems, Inc., 1004 Baltimore Avenue, Kansas City, MO 64105, a provider of data
processing and recordkeeping services for various mutual funds (including the
IDEX Funds), and Executive Vice President and a director of Kansas City Southern
Industries, Inc., 114 W. 11th Street, Kansas City, MO, 64105, a publicly traded
holding company whose primary subsidiaries are engaged in transportation,
information processing and financial services. The only business, professions,
vocations or employments of a substantial nature of Messrs. Kenney, Hurley,
Moriarty, Geiger, Franz and Ms. Ferrell, the remaining officers and directors of
Idex Management, Inc., are described under "Trustees and Officers" in the
Statement of Additional Information included in this Registration Statement.
(b). IDEX II Tax-Exempt Portfolio, IDEX II Income Plus Portfolio,
IDEX II Aggressive Growth Portfolio, IDEX II Equity-Income
Portfolio, IDEX II Tactical Asset Allocation Portfolio and
IDEX II C.A.S.E. Portfolio.
InterSecurities, Inc. ("ISI") serves as investment adviser to IDEX II
Tax-Exempt Portfolio, IDEX II Income Plus Portfolio, IDEX II Aggressive Growth
Portfolio, IDEX II Equity-Income Portfolio, IDEX II Tactical Asset Allocation
Portfolio and IDEX II C.A.S.E. Portfolio, and serves as principal underwriter to
the Fund, IDEX Fund and IDEX Fund 3. ISI is also a registered broker-dealer
engaged in the retail brokerage of securities. The only business, professions,
vocations or employments of a substantial nature of Messrs. Kenney, Hurley,
Moriarty, Geiger and Franz, officers and directors of ISI, are described under
"Trustees and Officers" in the Statement of Additional Information included in
this Registration Statement. In addition, the following describes the principal
occupations of other officers and directors of ISI: J. Will Paull, a Director of
ISI, is Chairman, President and Chief Executive Officer of Associated Mariner
Financial Group, 17199 N. Laurel Park Drive, Ste. 100, Livonia, MI 48152-3908, a
Financial Holding Company whose primary subsidiaries are engaged in insurance
and financial services; Donald L. Cudney is a Senior Vice President of ISI;
William G. Cummings, Vice President of ISI, is also Vice President of Associated
Mariner Financial Group; Gerald P. Kirk is a Vice President of ISI; Gordon E.
Hippner is a Vice President of ISI; Cynthia L. Remley, Vice President and
Assistant Secretary of ISI, is also Vice President of Western Reserve Life and
Assistant Secretary of Idex Investor Services, Inc.; Leslie E. Martin, a Vice
President of ISI, is also Vice President of the Fund, IDEX Fund and IDEX Fund 3;
Stanley R. Orr, Vice President of ISI, is also Vice President of Western Reserve
Life; Terry L. Garvin, Vice President of ISI, is also a Vice President of
Western Reserve Life.
AEGON USA Investment Management, Inc. ("AEGON Management"), is an Iowa
Corporation which was incorporated on April 12, 1989. AEGON Management became a
registered investment adviser on March 16, 1992 and has assumed all of the
investment advisory functions of AEGON USA Securities, Inc. ("AEGON
Securities"). AEGON Management and AEGON Securities are wholly-owned
subsidiaries of AUSA Holding Company, which is a wholly-owned subsidiary of
AEGON USA, Inc.
AEGON Management serves as sub-adviser to IDEX II Tax-Exempt Portfolio
and IDEX II Income Plus Portfolio. Patrick E. Falconio, President, Director and
Chairman of the Board of AEGON Management, is also Executive Vice President and
Chief Investment Officer of AEGON USA, Inc.; Senior Vice President and Director
of AUSA Holding Company and Senior Vice President and Chief Investment Officer
of AUSA Life Insurance Company, Inc. Mr. Falconio is also currently an officer
and/or a director of other AEGON affiliates. Brenda K. Clancy, Director of AEGON
Management, is also Vice President and Controller of AEGON USA, Inc. Ms. Clancy
is also currently an officer and/or director of other AEGON affiliates. Craig D.
Vermie, Director of AEGON Management, is also Secretary of AUSA Life Insurance
Company, Inc. and Vice President and Corporate Counsel of AEGON USA, Inc. Mr.
Vermie is also currently an officer and/or a director of other AEGON affiliates.
Donald E. Flynn, Executive Vice President of AEGON Management is also a Vice
President of AUSA Life Insurance Company, Inc. Mr. Flynn is also currently an
officer and/or director of other
7
<PAGE>
AEGON affiliates. Donald W. Chamberlain, is an Executive Vice President of AEGON
Management; James D. Ross is an Executive Vice President of AEGON Management;
Clifford A. Sheets is an Executive Vice President of AEGON Management; Ralph M.
O'Brien, a Senior Vice President of AEGON Management, is also a Vice President
of AUSA Life Insurance Company, Inc. Mr. O'Brien is also currently an officer
and/or a director of other AEGON affiliates. Michael Van Meter is a Senior Vice
Presidents of AEGON Management; David R. Halfpap is a Senior Vice President of
AEGON Management and a Vice President of AUSA Life Insurance Company, Inc. Mr.
Halfpap is also currently an officer and/or a director of other AEGON
affiliates. Robert L. Hansen is Vice President of AEGON Management and Vice
President of AUSA Life Insurance Company, Inc.; Jon D. Kettering is Vice
President and Treasurer of AEGON Management and Vice President of AUSA Life
Insurance Company, Inc.; Gregory W. Theobald, Vice President and Secretary of
AEGON Management, is also Vice President and Asst. Secretary of AUSA Life
Insurance Company, Inc. Mr. Theobald is also currently an officer and/or a
director of other AEGON affiliates. Drew E. Washburn, Kenneth M. Certain, Rachel
A. Dennis, Michael N. Meese, Frederick A. Sabetta, Steven P. Opp and Lewis O.
Funkhouser are Vice Presidents of AEGON Management. James E. Fine, Brad J.
Beman, Thomas E. Myers and Mary T. Pech are Assistant Vice Presidents of AEGON
Management.
Fred Alger Management, Inc. ("Alger Management"), sub-adviser to the
Aggressive Growth Portfolio, is a wholly owned subsidiary of Fred Alger &
Company, Incorporated ("Alger, Inc.") which in turn is a wholly-owned subsidiary
of Alger Associates, Inc., a financial services holding company. Alger
Management is generally engaged in rendering investment advisory services to
mutual funds, institutions and, to a lesser extent, individuals.
Fred M. Alger III serves as Chairman of the Board of Alger Associates,
Inc. ("Associates"), Alger Management, Alger, Inc., Alger Properties, Inc.
("Properties"), Alger Shareholder Services, Inc. ("Services"), Alger Life
Insurance Agency, Inc. ("Agency") and Analysts Resources, Inc. David D. Alger
serves as President and Director of Associates, Alger Management, Alger Inc.,
Properties, Services and Agency; and Executive Vice President and Director of
Analysts Resources, Inc. Gregory S. Duch serves as Executive Vice President,
Treasurer and Director of Alger Management and Properties; and Executive Vice
President and Treasurer of Associates, Alger Inc., Analysts Resources, Inc.,
Services and Agency. Nanci K. Staple serves as Secretary of Associates, Alger
Management, Alger Inc., Properties, Analysts Resources, Inc., Services and
Agency. The principal business address of each of the companies listed above,
other than Alger, Inc., is 75 Maiden Lane, New York, NY 10038. The principal
business address of Alger, Inc. is 30 Montgomery Street, Jersey City, NJ 07302.
Luther King Capital Management Corporation ("Luther King"), sub-adviser
to the Equity-Income Portfolio, is a registered investment adviser providing
investment management services. Luther King also provides investment management
services to individual and institutional investors on a private basis. J. Luther
King, Jr., President of Luther King, Emmett M. Murphy, Paul W. Greenwell, Robert
M. Holt, Jr., Scot C. Hollmann, David L. Dowler, David D. May, J. Patrick Clegg,
Donald R. Andrews, Joan M. Maynard, Robert B. Crates, Scott M. Kleberg and
Barbara S. Garcia, officers of Luther King, have no substantial business,
profession, vocation or employment other than their positions with Luther King.
Dean Investment Associates ("Dean Investment"), a division of C.H. Dean
and Associates, Inc., sub-adviser to the Tactical Asset Allocation Portfolio, is
a registered investment adviser providing investment management services. Dean
Investment became a registered investment adviser on March 11, 1974. C.H. Dean
and Associates, Inc. was incorporated as an Ohio corporation on March 28, 1975.
Chauncey H. Dean is the Chairman and Chief Executive Officer; Dennis D.
Dean is President; Frank H. Scott is Senior Vice President; John C. Riazzi is
Vice President and Director of Consulting Services; Robert D. Dean is Vice
President and Director of Research; Richard M. Luthman is Senior Vice President;
Darrell N. Fulton is Vice President of Information Systems. The business address
of each of the officers of Dean Investment is 2480 Kettering Tower, Dayton, OH
45423-2480.
8
<PAGE>
C.A.S.E. Management, Inc. ("C.A.S.E".), sub-adviser to the C.A.S.E.
Portfolio, is a registered investment advisory firm and a wholly-owned
subsidiary of C.A.S.E., Inc. C.A.S.E., Inc. is indirectly controlled by William
Edward Lange, President and Chief Executive Officer of C.A.S.E. C.A.S.E.
provides investment management services to financial institutions, high net
worth individuals, and other professional money managers.
William E. Lange is the President, Chief Executive Officer and Founder;
John E.D. de la V. Browne, Senior Vice President; Robert G. Errigo, Executive
Vice President; John Gordon, Senior Vice President; Bruce H. Jordan, Senior Vice
President; and James M. LaBonte, Chief Operating Officer. Officers of C.A.S.E.
have no other business, professions, vocations or employments of a substantial
nature. The business address of each of the officers is 2255 Glades Road, Suite
221-A, Boca Raton, FL 33431.
ITEM 29 PRINCIPAL UNDERWRITER
InterSecurities, Inc.
(a) The Registrant has entered into an Underwriting Agreement with
InterSecurities, Inc. ("ISI"), whose address is P.O. Box 9053,
Clearwater, FL 34618-9053, to act as the principal underwriter
of Fund shares. ISI also serves as the principal underwriter
to IDEX Fund and IDEX Fund 3, each a registered investment
company within the Fund complex.
(b) Directors and Officers of Principal Underwriter
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
- ---- -------------------------------------- -------------------------------------
<S> <C> <C>
John R. Kenney Chairman and Director Chairman and Trustee
G. John Hurley President, Chief Executive Officer President, Chief Executive
and Director Officer and Trustee
J. Will Paull Director N/A
William H. Geiger Director and Secretary Vice President and Assistant
Secretary
Thomas R. Moriarty Senior Vice President Senior Vice President
Donald L. Cudney Senior Vice President N/A
Becky A. Ferrell Assistant Vice President, Counsel Vice President, Counsel
and Assistant Secretary and Secretary
Richard B. Franz II Treasurer Treasurer
Christopher G. Roetzer Assistant Vice President Assistant Vice President and
Principal Accounting Officer
Cynthia L. Remley Vice President, Counsel and N/A
Assistant Secretary
Terry L. Garvin Vice President N/A
Gordon E. Hippner Vice President N/A
9
<PAGE>
Gerard P. Kirk Vice President N/A
Leslie E. Martin, III Vice President Vice President
Stanley R. Orr Vice President N/A
William G. Cummings Vice President N/A
Pamela C. Dils Assistant Vice President and N/A
Assistant Secretary
Kristy L. Dowd Assistant Vice President N/A
Diane Rogers Assistant Vice President N/A
Sammie Jo McClintick Assistant Vice President N/A
Ronald J. Klimas Assistant Vice President N/A
Russell W. Crooks Assistant Vice President N/A
Greg Limardi Assistant Vice President N/A
Laura Schneider Assistant Secretary N/A
Stuart Walsky Assistant Vice President N/A
</TABLE>
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained as follows:
(a) Shareholder records are maintained by the Registrant's
transfer agent, Idex Investor Services, Inc., P. O. Box 9015,
Clearwater, FL 34618-9015.
(b) All other accounting records of the Registrant are maintained
at the offices of the Registrant at 201 Highland Avenue,
Largo, FL, 34640 or 33 N. Garden Avenue, Suites 1000 & 1100,
Clearwater, FL 34615, and are in the physical possession of
the officers of the Fund, or at the offices of the Custodian,
Investors Fiduciary Trust Company, 127 West 10th Street,
Kansas City, MO 64105.
ITEM 31 MANAGEMENT SERVICES
The Registrant has no management-related service contract which is not
discussed in Part I of this form. See the section of the Prospectus entitled
"Investment Advisory and Other Services" for a discussion of the management and
advisory services furnished by Idex Management, Inc., Janus Capital Corporation,
InterSecurities, Inc., AEGON USA Management, Inc., Fred Alger Management, Inc.,
Luther King Capital Management Corporation, Dean Investment Associates and
C.A.S.E. Management, Inc. pursuant to the Management and Investment Advisory
Agreements, the Investment Counsel Agreements, the Administrative Services
Agreements and the Underwriting Agreement.
10
<PAGE>
ITEM 32 UNDERTAKINGS
(a) Not applicable
(b) Registrant hereby undertakes to file a Post-Effective
Amendment including the financial statements of IDEX II
C.A.S.E. Portfolio, which need not be certified, within four
to six months after the effective date of this Post-Effective
Amendment to the Registration Statement.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual
report to shareholders, upon request and without charge.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Largo and
State of Florida, on the 30th day of January, 1996.
IDEX II Series Fund
By: /s/ G. JOHN HURLEY
-----------------------------------------
G. John Hurley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933 and
Investment Company Act of 1940, this Post-Effective Amendment to its
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/ JOHN R. KENNEY Chairman and Trustee January 30, 1996
- ----------------------------
John R. Kenney
/s/ G. JOHN HURLEY President and Trustee January 30, 1996
- ---------------------------- (Principal Executive Officer)
G. John Hurley
/s/ RICHARD B. FRANZ II Treasurer January 30, 1996
- ----------------------------
Richard B. Franz II
/s/ CHRISTOPHER G. ROETZER Assistant Vice President and January 30, 1996
- ---------------------------- Principal Accounting Officer
Christopher G. Roetzer
/s/ PETER R. BROWN * Trustee January 30, 1996
- ----------------------------
Peter R. Brown *
/s/ JAMES L. CHURCHILL * Trustee January 30, 1996
- ----------------------------
James L. Churchill *
/s/ CHARLES C. HARRIS * Trustee January 30, 1996
- ----------------------------
Charles C. Harris
<PAGE>
/s/ WILLIAM W. SHORT, JR. * Trustee January 30, 1996
- ----------------------------
William W. Short, Jr. *
/s/ JACK E. ZIMMERMAN * Trustee January 30, 1996
- ----------------------------
Jack E. Zimmerman *
/s/ G. JOHN HURLEY
- ----------------------------
*Signed by G. John Hurley
Attorney in Fact
December 26, 1995
IDEX II Series Fund
201 Highland Avenue
Largo, FL 34640
RE: IDEX II Series Fund
Offering of Shares of Beneficial Interest
Gentlemen:
In my capacity as Vice President, Secretary and Counsel, I have acted
as counsel for IDEX II Series Fund (the "Fund") and have reviewed the
Registration Statement under the Securities Act of 1933 on Form N-1A, and
amendments thereto, with respect to the offer and sale of shares of beneficial
interest, no par value, of the above-referenced Fund, including the "Rule 24f-2
Notice" for the fiscal year ended September 30, 1995, registering such shares
pursuant to such Registration Statement, as amended, in accordance with Rule
24f-2 under the Investment Company Act of 1940.
I have examined the Fund's Declaration of Trust and Bylaws, as amended;
the proceedings of its Board of Trustees relating to the authorization,
issuance, and proposed sales of the shares; and such other records and documents
as I deemed relevant. Based upon such examination, it is my opinion that upon
the issuance and sale of the shares of beneficial interest of the Fund in the
manner contemplated by the aforesaid Registration Statement, as amended, such
shares were validly issued, fully paid and nonassessable outstanding shares of
beneficial interest of the Fund.
Very truly yours,
/s/
Becky A. Ferrell
Vice President, Secretary and Counsel
BAF/ldd
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
IDEX II Series Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the portfolios constituting
IDEX II Series Fund (hereafter referred to as the "Fund") at September 30, 1995,
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the period indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above. The financial highlights of
the Tax-Exempt Portfolio and the Income Plus Portfolio for the year ended
November 30, 1991 were audited by other independent accountants whose report
dated December 20, 1991 expressed an unqualified opinion thereon.
/s/
PRICE WATERHOUSE LLP
Kansas City, Missouri
November 17, 1995
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 21 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated November 17, 1995, relating to the financial
statements and financial highlights appearing in the September 30, 1995 Annual
Report to Shareholders of the IDEX II Series Fund which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Legal Counsel and Auditors" in the Statement of Additional Information.
/s/
PRICE WATERHOUSE LLP
Kansas City, Missouri
January 30, 1996
EXHIBIT 11(B)
CONSENT OF SUTHERLAND, ASBILL & BRENNAN
We consent to the reference to our firm under the heading "Legal Counsel
and Auditors" in the statement of additional information included in
Post-Effective Amendment No. 21 to the Registration Statement on Form N-1A for
IDEX II Series Fund (File No. 33-2659). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.
/s/ Sutherland, Asbill & Brennan
----------------------------
SUTHERLAND, ASBILL & BRENNAN
Washington, D.C.
January 26, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II GLOBAL FOR THE PERIOD ENDED SEPTEMBER 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 041
<NAME> IDEX II GLOBAL/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 75,549
<INVESTMENTS-AT-VALUE> 89,519
<RECEIVABLES> 835
<ASSETS-OTHER> 3,816
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,170
<PAYABLE-FOR-SECURITIES> 401
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 805
<TOTAL-LIABILITIES> 1,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,165
<SHARES-COMMON-STOCK> 5,042
<SHARES-COMMON-PRIOR> 5,102
<ACCUMULATED-NII-CURRENT> (14)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 899
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,914
<NET-ASSETS> 92,964
<DIVIDEND-INCOME> 1,090
<INTEREST-INCOME> 371
<OTHER-INCOME> 0
<EXPENSES-NET> 1,745
<NET-INVESTMENT-INCOME> (284)
<REALIZED-GAINS-CURRENT> 1,394
<APPREC-INCREASE-CURRENT> 11,284
<NET-CHANGE-FROM-OPS> 12,394
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,199
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,267
<NUMBER-OF-SHARES-REDEEMED> 1,525
<SHARES-REINVESTED> 198
<NET-CHANGE-IN-ASSETS> 8,152
<ACCUMULATED-NII-PRIOR> (21)
<ACCUMULATED-GAINS-PRIOR> 2,704
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 874
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,855
<AVERAGE-NET-ASSETS> 83,820
<PER-SHARE-NAV-BEGIN> 15.93
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.56
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.73
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II GLOBAL FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> IDEX II GLOBAL/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 75,549
<INVESTMENTS-AT-VALUE> 89,519
<RECEIVABLES> 835
<ASSETS-OTHER> 3,816
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,170
<PAYABLE-FOR-SECURITIES> 401
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 805
<TOTAL-LIABILITIES> 1,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,165
<SHARES-COMMON-STOCK> 204
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (14)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 899
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,914
<NET-ASSETS> 92,964
<DIVIDEND-INCOME> 1,090
<INTEREST-INCOME> 371
<OTHER-INCOME> 0
<EXPENSES-NET> 1,745
<NET-INVESTMENT-INCOME> (284)
<REALIZED-GAINS-CURRENT> 1,394
<APPREC-INCREASE-CURRENT> 11,284
<NET-CHANGE-FROM-OPS> 12,394
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,199
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 78
<NUMBER-OF-SHARES-REDEEMED> 110
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> 8,152
<ACCUMULATED-NII-PRIOR> (21)
<ACCUMULATED-GAINS-PRIOR> 2,704
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 874
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,855
<AVERAGE-NET-ASSETS> 3,594
<PER-SHARE-NAV-BEGIN> 15.74
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.56
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.46
<EXPENSE-RATIO> 2.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II TAX EXEMPT FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> IDEX II TAX EXEMPT/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 27,570
<INVESTMENTS-AT-VALUE> 27,786
<RECEIVABLES> 7,204
<ASSETS-OTHER> 176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,166
<PAYABLE-FOR-SECURITIES> 7,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 7,311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,533
<SHARES-COMMON-STOCK> 2,416
<SHARES-COMMON-PRIOR> 2,621
<ACCUMULATED-NII-CURRENT> 68
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 217
<NET-ASSETS> 27,855
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,651
<OTHER-INCOME> 0
<EXPENSES-NET> 283
<NET-INVESTMENT-INCOME> 1,368
<REALIZED-GAINS-CURRENT> 120
<APPREC-INCREASE-CURRENT> 602
<NET-CHANGE-FROM-OPS> 2,090
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,397
<DISTRIBUTIONS-OF-GAINS> 91
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143
<NUMBER-OF-SHARES-REDEEMED> 438
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> (1,518)
<ACCUMULATED-NII-PRIOR> 111
<ACCUMULATED-GAINS-PRIOR> 8
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 290
<AVERAGE-NET-ASSETS> 27,923
<PER-SHARE-NAV-BEGIN> 11.10
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.34
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II TAX EXEMPT FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> IDEX II TAX EXEMPT/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 27,570
<INVESTMENTS-AT-VALUE> 27,786
<RECEIVABLES> 7,204
<ASSETS-OTHER> 176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,166
<PAYABLE-FOR-SECURITIES> 7,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 7,311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,533
<SHARES-COMMON-STOCK> 40
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 68
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 217
<NET-ASSETS> 27,855
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,651
<OTHER-INCOME> 0
<EXPENSES-NET> 283
<NET-INVESTMENT-INCOME> 1,368
<REALIZED-GAINS-CURRENT> 120
<APPREC-INCREASE-CURRENT> 602
<NET-CHANGE-FROM-OPS> 2,090
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14
<DISTRIBUTIONS-OF-GAINS> 91
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5
<NUMBER-OF-SHARES-REDEEMED> 21
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (1,518)
<ACCUMULATED-NII-PRIOR> 111
<ACCUMULATED-GAINS-PRIOR> 8
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 290
<AVERAGE-NET-ASSETS> 294
<PER-SHARE-NAV-BEGIN> 11.10
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.34
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II INCOME PLUS FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> IDEX II INCOME PLUS/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 66,945
<INVESTMENTS-AT-VALUE> 68,406
<RECEIVABLES> 1,984
<ASSETS-OTHER> 476
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,866
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105
<TOTAL-LIABILITIES> 140
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,488
<SHARES-COMMON-STOCK> 6,638
<SHARES-COMMON-PRIOR> 6,560
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (381)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,461
<NET-ASSETS> 70,726
<DIVIDEND-INCOME> 38
<INTEREST-INCOME> 5,870
<OTHER-INCOME> 0
<EXPENSES-NET> 858
<NET-INVESTMENT-INCOME> 5,050
<REALIZED-GAINS-CURRENT> (534)
<APPREC-INCREASE-CURRENT> 5,224
<NET-CHANGE-FROM-OPS> 9,740
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,919
<DISTRIBUTIONS-OF-GAINS> 676
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 629
<NUMBER-OF-SHARES-REDEEMED> 952
<SHARES-REINVESTED> 401
<NET-CHANGE-IN-ASSETS> 4,619
<ACCUMULATED-NII-PRIOR> 158
<ACCUMULATED-GAINS-PRIOR> 829
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 402
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 872
<AVERAGE-NET-ASSETS> 65,103
<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> 0.75
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> 0.75
<PER-SHARE-DISTRIBUTIONS> 0.10
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II INCOME PLUS FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> IDEX II INCOME PLUS/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 66,945
<INVESTMENTS-AT-VALUE> 68,406
<RECEIVABLES> 1,984
<ASSETS-OTHER> 476
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,866
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105
<TOTAL-LIABILITIES> 140
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,488
<SHARES-COMMON-STOCK> 191
<SHARES-COMMON-PRIOR> 217
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (381)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,461
<NET-ASSETS> 70,726
<DIVIDEND-INCOME> 38
<INTEREST-INCOME> 5,870
<OTHER-INCOME> 0
<EXPENSES-NET> 858
<NET-INVESTMENT-INCOME> 5,050
<REALIZED-GAINS-CURRENT> (534)
<APPREC-INCREASE-CURRENT> 5,224
<NET-CHANGE-FROM-OPS> 9,740
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 131
<DISTRIBUTIONS-OF-GAINS> 676
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66
<NUMBER-OF-SHARES-REDEEMED> 104
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 4,619
<ACCUMULATED-NII-PRIOR> 158
<ACCUMULATED-GAINS-PRIOR> 829
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 402
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 872
<AVERAGE-NET-ASSETS> 1,915
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> 0.69
<PER-SHARE-DISTRIBUTIONS> 0.10
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II EQUITY-INCOME FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 081
<NAME> IDEX II EQUITY-INCOME/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 4,539
<INVESTMENTS-AT-VALUE> 4,926
<RECEIVABLES> 94
<ASSETS-OTHER> 5,407
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,986
<SHARES-COMMON-STOCK> 440
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 78
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 388
<NET-ASSETS> 5,448
<DIVIDEND-INCOME> 46
<INTEREST-INCOME> 50
<OTHER-INCOME> 0
<EXPENSES-NET> 72
<NET-INVESTMENT-INCOME> 24
<REALIZED-GAINS-CURRENT> 78
<APPREC-INCREASE-CURRENT> 388
<NET-CHANGE-FROM-OPS> 490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 27
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 483
<NUMBER-OF-SHARES-REDEEMED> 45
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 5,448
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76
<AVERAGE-NET-ASSETS> 2,913
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 1.75
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.74
<EXPENSE-RATIO> 2.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II EQUITY-INCOME FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 083
<NAME> IDEX II EQUITY-INCOME/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 4,539
<INVESTMENTS-AT-VALUE> 4,926
<RECEIVABLES> 94
<ASSETS-OTHER> 5,407
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,986
<SHARES-COMMON-STOCK> 24
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 78
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 388
<NET-ASSETS> 5,448
<DIVIDEND-INCOME> 46
<INTEREST-INCOME> 50
<OTHER-INCOME> 0
<EXPENSES-NET> 72
<NET-INVESTMENT-INCOME> 24
<REALIZED-GAINS-CURRENT> 78
<APPREC-INCREASE-CURRENT> 388
<NET-CHANGE-FROM-OPS> 490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30
<NUMBER-OF-SHARES-REDEEMED> 6
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,448
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76
<AVERAGE-NET-ASSETS> 146
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.75
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.73
<EXPENSE-RATIO> 3.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II FLEXIBLE INCOME FOR THE PERIOD ENDED SEPTEMBER 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> IDEX II FLEXIBLE INCOME/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 18,682
<INVESTMENTS-AT-VALUE> 19,517
<RECEIVABLES> 1,677
<ASSETS-OTHER> 76
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,270
<PAYABLE-FOR-SECURITIES> 878
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,998
<SHARES-COMMON-STOCK> 2,158
<SHARES-COMMON-PRIOR> 2,438
<ACCUMULATED-NII-CURRENT> 22
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,512)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 836
<NET-ASSETS> 20,344
<DIVIDEND-INCOME> 72
<INTEREST-INCOME> 1,765
<OTHER-INCOME> 0
<EXPENSES-NET> 386
<NET-INVESTMENT-INCOME> 1,451
<REALIZED-GAINS-CURRENT> (803)
<APPREC-INCREASE-CURRENT> 1,574
<NET-CHANGE-FROM-OPS> 2,222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,435
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 196
<NUMBER-OF-SHARES-REDEEMED> 599
<SHARES-REINVESTED> 123
<NET-CHANGE-IN-ASSETS> (1,874)
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> (2,709)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 389
<AVERAGE-NET-ASSETS> 19,998
<PER-SHARE-NAV-BEGIN> 8.83
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.37
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.17
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II FLEXIBLE INCOME FOR THE PERIOD ENDED SEPTEMBER 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> IDEX II FLEXIBLE INCOME/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 18,682
<INVESTMENTS-AT-VALUE> 19,517
<RECEIVABLES> 1,677
<ASSETS-OTHER> 76
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,270
<PAYABLE-FOR-SECURITIES> 878
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,998
<SHARES-COMMON-STOCK> 61
<SHARES-COMMON-PRIOR> 78
<ACCUMULATED-NII-CURRENT> 22
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,512)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 836
<NET-ASSETS> 20,344
<DIVIDEND-INCOME> 72
<INTEREST-INCOME> 1,765
<OTHER-INCOME> 0
<EXPENSES-NET> 386
<NET-INVESTMENT-INCOME> 1,451
<REALIZED-GAINS-CURRENT> (803)
<APPREC-INCREASE-CURRENT> 1,574
<NET-CHANGE-FROM-OPS> 2,222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 43
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28
<NUMBER-OF-SHARES-REDEEMED> 49
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (1,874)
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> (2,709)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 389
<AVERAGE-NET-ASSETS> 644
<PER-SHARE-NAV-BEGIN> 8.83
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.37
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.17
<EXPENSE-RATIO> 2.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II AGGRESSIVE GROWTH FOR THE PERIOD ENDED SEPTEMBER 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 061
<NAME> IDEX II AGGRESSIVE GROWTH/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 17,544
<INVESTMENTS-AT-VALUE> 20,601
<RECEIVABLES> 513
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,114
<PAYABLE-FOR-SECURITIES> 2,548
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 2,631
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,217
<SHARES-COMMON-STOCK> 947
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,208
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,058
<NET-ASSETS> 18,483
<DIVIDEND-INCOME> 17
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> 179
<NET-INVESTMENT-INCOME> (150)
<REALIZED-GAINS-CURRENT> 1,358
<APPREC-INCREASE-CURRENT> 3,058
<NET-CHANGE-FROM-OPS> 4,266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,055
<NUMBER-OF-SHARES-REDEEMED> 108
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,483
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179
<AVERAGE-NET-ASSETS> 7,134
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 7.82
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.68
<EXPENSE-RATIO> 2.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II AGGRESSIVE GROWTH FOR THE PERIOD ENDED SEPTEMBER 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 063
<NAME> IDEX II AGGRESSIVE GROWTH/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 17,544
<INVESTMENTS-AT-VALUE> 20,601
<RECEIVABLES> 513
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,114
<PAYABLE-FOR-SECURITIES> 2,548
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 2,631
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,217
<SHARES-COMMON-STOCK> 98
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,208
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,058
<NET-ASSETS> 18,483
<DIVIDEND-INCOME> 17
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> 179
<NET-INVESTMENT-INCOME> (150)
<REALIZED-GAINS-CURRENT> 1,358
<APPREC-INCREASE-CURRENT> 3,058
<NET-CHANGE-FROM-OPS> 4,266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 137
<NUMBER-OF-SHARES-REDEEMED> (39)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,483
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179
<AVERAGE-NET-ASSETS> 413
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.18)
<PER-SHARE-GAIN-APPREC> 7.82
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.64
<EXPENSE-RATIO> 3.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II BALANCED FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 091
<NAME> IDEX II BALANCED/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 6,773
<INVESTMENTS-AT-VALUE> 7,207
<RECEIVABLES> 192
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,401
<PAYABLE-FOR-SECURITIES> 293
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73
<TOTAL-LIABILITIES> 366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,458
<SHARES-COMMON-STOCK> 320
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 428
<NET-ASSETS> 7,035
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 91
<OTHER-INCOME> 0
<EXPENSES-NET> 98
<NET-INVESTMENT-INCOME> 12
<REALIZED-GAINS-CURRENT> 150
<APPREC-INCREASE-CURRENT> 428
<NET-CHANGE-FROM-OPS> 590
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 348
<NUMBER-OF-SHARES-REDEEMED> 29
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 7,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 100
<AVERAGE-NET-ASSETS> 2,079
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.47
<EXPENSE-RATIO> 2.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II BALANCED FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 093
<NAME> IDEX II BALANCED/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 6,773
<INVESTMENTS-AT-VALUE> 7,207
<RECEIVABLES> 192
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,401
<PAYABLE-FOR-SECURITIES> 293
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73
<TOTAL-LIABILITIES> 366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,458
<SHARES-COMMON-STOCK> 293
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 428
<NET-ASSETS> 7,035
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 91
<OTHER-INCOME> 0
<EXPENSES-NET> 98
<NET-INVESTMENT-INCOME> 12
<REALIZED-GAINS-CURRENT> 150
<APPREC-INCREASE-CURRENT> 428
<NET-CHANGE-FROM-OPS> 590
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 297
<NUMBER-OF-SHARES-REDEEMED> 4
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 100
<AVERAGE-NET-ASSETS> 1,754
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.47
<EXPENSE-RATIO> 3.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II GROWTH FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> IDEX II GROWTH/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 360,655
<INVESTMENTS-AT-VALUE> 493,775
<RECEIVABLES> 7,537
<ASSETS-OTHER> 3,380
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 504,692
<PAYABLE-FOR-SECURITIES> 12,574
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 590
<TOTAL-LIABILITIES> 13,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307,416
<SHARES-COMMON-STOCK> 21,273
<SHARES-COMMON-PRIOR> 25,691
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50,839
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 133,273
<NET-ASSETS> 491,528
<DIVIDEND-INCOME> 3,435
<INTEREST-INCOME> 3,432
<OTHER-INCOME> 0
<EXPENSES-NET> 7,910
<NET-INVESTMENT-INCOME> (1,043)
<REALIZED-GAINS-CURRENT> 55,933
<APPREC-INCREASE-CURRENT> 81,841
<NET-CHANGE-FROM-OPS> 136,731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,732
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,662
<NUMBER-OF-SHARES-REDEEMED> 6,181
<SHARES-REINVESTED> 101
<NET-CHANGE-IN-ASSETS> 56,898
<ACCUMULATED-NII-PRIOR> 165
<ACCUMULATED-GAINS-PRIOR> (3,693)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,292
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,031
<AVERAGE-NET-ASSETS> 425,222
<PER-SHARE-NAV-BEGIN> 16.78
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 6.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.84
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II GROWTH FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> IDEX II GROWTH/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 360,655
<INVESTMENTS-AT-VALUE> 493,775
<RECEIVABLES> 7,537
<ASSETS-OTHER> 3,380
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 504,692
<PAYABLE-FOR-SECURITIES> 12,574
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 590
<TOTAL-LIABILITIES> 13,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307,416
<SHARES-COMMON-STOCK> 247
<SHARES-COMMON-PRIOR> 205
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50,839
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 133,273
<NET-ASSETS> 491,528
<DIVIDEND-INCOME> 3,435
<INTEREST-INCOME> 3,432
<OTHER-INCOME> 0
<EXPENSES-NET> 7,910
<NET-INVESTMENT-INCOME> (1,043)
<REALIZED-GAINS-CURRENT> 55,933
<APPREC-INCREASE-CURRENT> 81,841
<NET-CHANGE-FROM-OPS> 136,731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,732
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 59
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 56,898
<ACCUMULATED-NII-PRIOR> 165
<ACCUMULATED-GAINS-PRIOR> (3,693)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,292
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,031
<AVERAGE-NET-ASSETS> 4,178
<PER-SHARE-NAV-BEGIN> 16.68
<PER-SHARE-NII> (0.15)
<PER-SHARE-GAIN-APPREC> 6.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.64
<EXPENSE-RATIO> 2.41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II CAPITAL APPRECIATION FOR THE PERIOD ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 071
<NAME> IDEX II CAPITAL APPRECIATION/CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 7,532
<INVESTMENTS-AT-VALUE> 8,648
<RECEIVABLES> 565
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,242
<PAYABLE-FOR-SECURITIES> 323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 113
<TOTAL-LIABILITIES> 436
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,198
<SHARES-COMMON-STOCK> 461
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 476
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,103
<NET-ASSETS> 8,806
<DIVIDEND-INCOME> 130
<INTEREST-INCOME> 29
<OTHER-INCOME> 0
<EXPENSES-NET> 130
<NET-INVESTMENT-INCOME> 29
<REALIZED-GAINS-CURRENT> 476
<APPREC-INCREASE-CURRENT> 1,103
<NET-CHANGE-FROM-OPS> 1,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 589
<NUMBER-OF-SHARES-REDEEMED> 128
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,806
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 44
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132
<AVERAGE-NET-ASSETS> 4,072
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 3.57
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.54
<EXPENSE-RATIO> 2.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF IDEX II CAPITAL APPRECIATION FOR THE PERIOD ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> IDEX II CAPITAL APPRECIATION/CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-02-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 7,532
<INVESTMENTS-AT-VALUE> 8,648
<RECEIVABLES> 565
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,242
<PAYABLE-FOR-SECURITIES> 323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 113
<TOTAL-LIABILITIES> 436
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,198
<SHARES-COMMON-STOCK> 190
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 476
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,103
<NET-ASSETS> 8,806
<DIVIDEND-INCOME> 130
<INTEREST-INCOME> 29
<OTHER-INCOME> 0
<EXPENSES-NET> 130
<NET-INVESTMENT-INCOME> 29
<REALIZED-GAINS-CURRENT> 476
<APPREC-INCREASE-CURRENT> 1,103
<NET-CHANGE-FROM-OPS> 1,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 210
<NUMBER-OF-SHARES-REDEEMED> 20
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,806
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 44
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132
<AVERAGE-NET-ASSETS> 1,234
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 3.49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.49
<EXPENSE-RATIO> 3.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
