IDEX MUTUAL FUNDS
IDEX JENNISON EQUITY OPPORTUNITY
IDEX GREAT COMPANIES -- AMERICA(SM)
IDEX GOLDMAN SACHS GROWTH
IDEX JCC GROWTH
IDEX NWQ VALUE EQUITY
IDEX SALOMON ALL CAP
IDEX TRANSAMERICA EQUITY
IDEX ALGER AGGRESSIVE GROWTH
IDEX GREAT COMPANIES -- TECHNOLOGY(SM)
IDEX JCC CAPITAL APPRECIATION
IDEX MUNDER NET50
IDEX PILGRIM BAXTER MID CAP GROWTH
IDEX PILGRIM BAXTER TECHNOLOGY
IDEX TRANSAMERICA SMALL COMPANY
IDEX T. ROWE PRICE SMALL CAP
IDEX GABELLI GLOBAL GROWTH
IDEX GE INTERNATIONAL EQUITY
IDEX GREAT COMPANIES -- GLOBAL(2)
IDEX JCC GLOBAL (closed to new investors)
IDEX GE U.S. EQUITY
IDEX JCC GROWTH & INCOME
IDEX T. ROWE PRICE DIVIDEND GROWTH
IDEX DEAN ASSET ALLOCATION
IDEX JCC BALANCED
IDEX LKCM STRATEGIC TOTAL RETURN
IDEX AEGON INCOME PLUS
IDEX FEDERATED TAX EXEMPT
IDEX JCC FLEXIBLE INCOME
STATEMENT OF ADDITIONAL INFORMATION
December 1, 2000
IDEX MUTUAL FUNDS
570 Carillon Parkway
St. Petersburg, Florida 33716
Customer Service (888) 233-4339 (toll free)
The funds listed above are series of IDEX Mutual Funds (the "Fund"), an
open-end management investment company that offers a selection of investment
funds. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). All funds, other than the IDEX JCC Capital
Appreciation, IDEX Pilgrim Baxter Technology, IDEX Salomon All Cap, IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM), are
diversified.
This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the Fund's prospectus dated December 1, 2000 which may
be obtained free of charge by writing or calling the Fund at the above address
or telephone number. This Statement of Additional Information ("SAI") contains
additional and more detailed information about the Fund's operations and
activities than that set forth in the prospectus. The Fund's annual report and
semi-annual report to shareholders are incorporated by reference into this SAI.
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TABLE OF CONTENTS
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INVESTMENT OBJECTIVES ............................................................. 1
Investment Restrictions, Policies and Practices ................................... 1
Investment Restrictions of IDEX Jennison Equity Opportunity ...................... 1
Investment Restrictions of IDEX Great Companies -- America(SM) and IDEX Great
Companies -- Technology(SM) .................................................... 2
Investment Restrictions of IDEX Goldman Sachs Growth ............................. 3
Investment Restrictions of IDEX JCC Growth and IDEX JCC Flexible Income .......... 4
Investment Restrictions of IDEX NWQ Value Equity ................................. 5
Investment Restrictions of IDEX Salomon All Cap .................................. 6
Investment Restrictions of IDEX Transamerica Small Company and IDEX
Transamerica Equity ............................................................ 7
Investment Restrictions of IDEX Alger Aggressive Growth .......................... 9
Investment Restrictions of IDEX JCC Capital Appreciation and IDEX JCC Balanced ... 10
Investment Restrictions of IDEX Munder Net50 ..................................... 11
Investment Restrictions of IDEX Pilgrim Baxter Mid Cap Growth .................... 12
Investment Restrictions of IDEX Pilgrim Baxter Technology ........................ 13
Investment Restrictions of IDEX Transamerica Small Company and IDEX
Transamerica Equity ............................................................ 13
Investment Restrictions of IDEX T. Rowe Price Small Cap and IDEX T. Rowe Price
Dividend Growth ................................................................ 15
Investment Restrictions of IDEX Gabelli Global Growth ............................ 16
Investment Restrictions of IDEX GE International Equity .......................... 17
Investment Restrictions of IDEX Great Companies -- Global(2) ..................... 18
Investment Restrictions of IDEX JCC Global (Closed to new Investors) ............. 20
Investment Restrictions of IDEX GE U.S. Equity ................................... 21
Investment Restrictions of IDEX JCC Growth & Income .............................. 23
Investment Restrictions of IDEX Dean Asset Allocation ............................ 23
Investment Restrictions of IDEX LKCM Strategic Total Return ...................... 25
Investment Restrictions of IDEX AEGON Income Plus ................................ 26
Investment Restrictions of IDEX Federated Tax Exempt ............................. 27
OTHER POLICIES AND PRACTICES OF THE FUND .......................................... 29
Futures, Options and Other Derivative Instruments ................................ 29
Futures Contracts ............................................................... 29
Options on Futures Contracts .................................................... 31
Options on Securities ........................................................... 32
Options on Foreign Currencies ................................................... 35
Forward Contracts ............................................................... 35
Swaps and Swap-Related Products ................................................. 37
Index Options ................................................................... 38
WEBS and Other Index-Related Securities ......................................... 38
Euro Instruments ................................................................ 39
Special Investment Considerations and Risks ..................................... 39
Additional Risks of Options on Foreign Currencies,
Forward Contracts and Foreign Instruments ..................................... 39
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Sovereign Debt Securities (IDEX Gabelli Global Growth) ........................ 40
Other Investment Companies .................................................... 40
GEI Short-term Investment Fund ................................................ 40
When-Issued, Delayed Settlement and Forward Delivery Securities ............... 41
Zero Coupon, Pay-In-Kind and Step Coupon Securities .......................... 41
Income Producing Securities .................................................. 42
Lending of Fund Securities ................................................... 43
Joint Trading Accounts ....................................................... 43
Illiquid Securities .......................................................... 43
Securities Subject to Reorganization (WRL Gabelli Global Growth) ............. 43
Repurchase and Reverse Repurchase Agreements ................................. 44
Pass-Through Securities ...................................................... 44
High-Yield/High-Risk Bonds ................................................... 45
Warrants and Rights .......................................................... 46
U.S. Government Securities ................................................... 46
Temporary Defensive Position ................................................. 46
Money Market Reserves (IDEX T. Rowe Price Small Cap and IDEX T. Rowe Price
Dividend Growth) ........................................................... 46
Turnover Rate ................................................................ 47
INVESTMENT ADVISORY AND OTHER SERVICES ........................................ 48
DISTRIBUTOR ................................................................... 54
ADMINISTRATIVE SERVICES ....................................................... 55
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES ................................ 56
FUND TRANSACTIONS AND BROKERAGE ............................................... 56
TRUSTEES AND OFFICERS ......................................................... 59
PURCHASE OF SHARES ............................................................ 64
DEALER REALLOWANCES ........................................................... 64
DISTRIBUTION PLANS ............................................................ 65
DISTRIBUTION FEES ............................................................. 67
NET ASSET VALUE DETERMINATION ................................................. 69
DIVIDENDS AND OTHER DISTRIBUTIONS ............................................. 71
SHAREHOLDER ACCOUNTS .......................................................... 71
RETIREMENT PLANS .............................................................. 71
REDEMPTION OF SHARES .......................................................... 72
TAXES ......................................................................... 73
PRINCIPAL SHAREHOLDERS ........................................................ 74
MISCELLANEOUS ................................................................. 78
Organization ................................................................. 78
Shares of Beneficial Interest ................................................ 78
Legal Counsel and Independent Certified Public Accountants ................... 79
Registration Statement ....................................................... 79
PERFORMANCE INFORMATION ....................................................... 79
FINANCIAL STATEMENTS .......................................................... 84
APPENDIX A-CERTAIN SECURITIES IN WHICH THE FUNDS MAY INVEST ................... A-1
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INVESTMENT OBJECTIVES
The prospectus discusses the investment objective of each fund of the IDEX
Mutual Funds, the principal types of securities in which each fund will invest,
and the policies and practices of each fund. The following discussion of
Investment Restrictions, Policies and Practices supplements that set forth in
the prospectus.
There can be no assurance that a fund will, in fact, achieve its objective. A
fund's investment objective may be changed by the Board of Trustees without
shareholder approval. A change in the investment objective of a fund may result
in the fund having an investment objective different from that which the
shareholder deemed appropriate at the time of investment.
INVESTMENT RESTRICTIONS, POLICIES
AND PRACTICES
As indicated in the prospectus, each fund is subject to certain fundamental
policies and restrictions which as such may not be changed without shareholder
approval. Shareholder approval would be the approval by the lesser of (i) more
than 50% of the outstanding voting securities of a fund, or (ii) 67% or more of
the voting securities present at a meeting if the holders of more than 50% of
the outstanding voting securities of a fund are present or represented by
proxy.
INVESTMENT RESTRICTIONS OF
IDEX JENNISON EQUITY OPPORTUNITY
(formerly IDEX C.A.S.E. Growth)
IDEX Jennison Equity Opportunity may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than cash items and "government securities"
as defined in the 1940 Act) if immediately after and as a result of such
purchase (a) the value of the holdings of the fund in the securities of such
issuer exceeds 5% of the value of the fund's total assets, or (b) the fund owns
more than 10% of the outstanding voting securities of any one class of
securities of such issuer;
2. Invest 25% or more of the value of the fund'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 fund from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as 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 fund;
6. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements or deposits of
assets to provide margin or guarantee positions in connection with transactions
in options, futures contracts, swaps, forward contracts, or other derivative
instruments or the segregation of assets in connection with such transactions;
and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions, which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not, 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
Trading Commission regulations if the aggregate initial margin deposits and
premiums required to establish positions in futures contracts and related
options that do not fall within the definition of bona fide hedging
transactions would exceed 5% of the fair market value of the fund's net assets,
after taking into account unrealized profits and losses on such contracts it
has entered into and (ii) enter into any futures
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contracts or options on futures contracts if the aggregate amount of the fund's
commitments under outstanding futures contracts positions and options on
futures contracts would exceed the market value of its total assets;
(B) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions;
(C) The fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts and other derivative instruments are not deemed to constitute
selling securities short;
(D) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits 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 fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or other securities for which the Board of Trustees has made a
determination of liquidity, as permitted under the 1940 Act;
(F) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies.
Limitations (i) and (ii) do not apply to money market funds or to securities
received as dividends, through offers of exchange, or as a result of
consolidation, merger or other reorganization;
(G) The fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(H) The fund may not invest more than 25% of its net assets at the time
of purchase in the securities of foreign issuers and obligors; and
(I) The fund may not invest in companies for the purpose of exercising
control or management.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX GREAT COMPANIES -- AMERICA(SM) AND
IDEX GREAT COMPANIES -- TECHNOLOGY(SM)
Each fund may not, as a matter of fundamental policy:
1. Act as underwriter of securities issued by other persons, except to
the extent that, in connection with the disposition of fund securities, it may
technically be deemed to be an underwriter under certain securities laws;
2. Invest 25% or more of the fund'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. Buy or sell physical commodities (but this shall not prevent the fund
from entering into futures contracts and options thereon);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own debt or equity
securities issued by companies engaged in those businesses;
5. Borrow money or pledge, mortgage or hypothecate any of its assets
except that the fund may borrow on a secured or unsecured basis as a temporary
measure for extraordinary or emergency purposes. Such temporary borrowing may
not exceed 5% of the value of the fund's total assets when the borrowing is
made;
6. Issue any senior security 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;
7. Lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent
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to other parties (but this limitation does not apply to purchases of commercial
paper, debt securities or to repurchase agreements);
Furthermore, each fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees of the Fund without
shareholder or policyowner approval:
(A) Each fund may not make short sales of securities or maintain a short
position. This restriction shall not apply to transactions involving selling
securities "short against the box;"
(B) Each fund may not participate on a "joint" or "joint and several"
basis in any trading account in securities; and
(C) Each fund 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.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
IDEX RESTRICTIONS OF
IDEX GOLDMAN SACHS GROWTH
IDEX Goldman Sachs Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
2. Borrow money except (a) the fund may borrow from banks (as defined in
the 1940 Act) or through reverse repurchase agreements in amounts up to 33 1/3
of its total assets (including the amount borrowed), (b) the fund may, to the
extent permitted by applicable law, borrow up to an additional 5% of its total
assets for temporary purposes, (c) the fund may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of fund securities,
(d) the fund may purchase securities on margin to the extent permitted by
applicable law and (e) the fund may engage in mortgage dollar rolls which are
accounted for as financings;
3. Purchase or sell physical commodities (but this shall not prevent the
fund from investing in currency and financial instruments and contracts that
are commodities or commodity contracts);
4. Invest more than 25% of the fund'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,
provided that 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;
5. Make loans, except through (a) the purchase of debt obligations in
accordance with the fund's investment objective and policies, (b) repurchase
agreements with banks, brokers, dealers and other financial institutions, and
(c) loans of securities as permitted by applicable law;
6. Purchase or sell real estate (but this shall not prevent the fund 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);
7. Issue senior securities, except as permitted by the 1940 Act; and
8. Underwrite securities issued by other persons, except to the extent
that the fund may be deemed to
be an underwriter within the meaning of the 1933 Act
in connection with the purchase and sale of its fund securities in the ordinary
course of pursuing its investment objective.
Furthermore, the fund has adopted the following non-fundamental restrictions
which may be changed by the Board of Trustees without shareholder approval:
(A) The fund may not invest in companies for the purpose of exercising
control or management;
(B) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act or any other securities as to which a
determination as to liquidity has been made pursuant to
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guidelines adopted by the Board of Trustees, as permitted under the 1940 Act;
(C) The fund may not purchase additional securities when money borrowed
exceeds 5% of its total assets. This restriction shall not apply to temporary
borrowings until the fund's assets exceed $40,000,000; and
(D) The fund may not make short sales of securities, except short sales
"against the box."
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX JCC GROWTH AND
IDEX JCC FLEXIBLE INCOME
IDEX JCC Growth and IDEX JCC Flexible Income each may not, as a matter of
fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than cash items and "government securities"
as defined under the 1940 Act), if immediately after and as a result of such
purchase (a) the value of the holdings of the fund in the securities of such
issuer exceeds 5% of the value of the fund's total assets, or (b) the fund owns
more than 10% of the outstanding voting securities of such issuer;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the fund from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of portfolio securities of the fund;
6. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements or deposits of
assets to provide margin or guarantee positions in connection with transactions
in options, futures contracts, swaps, forward contracts, and other derivative
instruments or the segregation of assets in connection with such transactions;
and
8. Issue senior securities, except as permitted by the 1940 Act.
As a fundamental policy governing concentration, the fund will not invest 25%
or more of its total assets in any one particular industry, other than U.S.
government securities.
Furthermore, each fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) A fund may not: (i) enter into any futures contracts or options on
futures contracts for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the fund's net assets, after taking into account unrealized profits and losses
on such contracts it has entered into; and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the fund's
commitments under outstanding futures contracts positions and options on
futures contracts would exceed the market value of its total assets;
(B) A fund may not mortgage or pledge any securities owned or held by the
fund in amounts that exceed, in the aggregate, 15% of the fund's net assets,
provided that this limitation does not apply to reverse repurchase agreements
or in the case of assets deposited to provide
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margin or guarantee positions in options, futures contracts, swaps, forward
contracts or other derivative instruments or the segregation of assets in
connection with such transactions;
(C) A fund may not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts, and other derivative instruments are not deemed to
constitute selling securities short;
(D) A fund may not purchase securities on margin, except that each fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits made in
connection with transactions in options, futures contracts, swaps, forward
contracts, and other derivative instruments shall not be deemed to constitute
purchasing securities on margin;
(E) A fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 (the "1933 Act"), or any successor
to such Rule, Section 4(2) commercial paper or any securities which the Board
of Trustees or the investment sub-adviser, as appropriate, has made a
determination of liquidity, as permitted under the 1940 Act;
(F) A fund may not invest in companies for the purpose of exercising
control or management;
(G) A fund may not (i) purchase securities of other investment companies,
except in the open market where no commission except the ordinary broker's
commission is paid, or (ii) purchase or retain securities issued by other
open-end investment companies. Limitations (i) and (ii) do not apply to money
market funds or to securities received as dividends, through offers of
exchange, or as a result of consolidation, merger or other reorganization; and
(H) A fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the funds may own debt
or equity securities of companies engaged in those businesses. In making all
investments for IDEX JCC Flexible Income, the sub-adviser will emphasize
economic or financial factors or circumstances of the issuer, rather than
opportunities for short-term arbitrage.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
INVESTMENT RESTRICTIONS OF
IDEX NWQ VALUE EQUITY
IDEX NWQ Value Equity may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase
(a) the value of the holdings of the fund in the securities of such issuer
exceeds 5% of the value of the fund's total assets, or (b) the fund owns more
than 10% of the outstanding voting securities of any one class of securities of
such issuer;
2. Invest 25% or more of the value of the fund's total assets in any
particular industry (other than U.S. government securities);
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the fund from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own debt or equity
securities issued by companies engaged in those businesses;
5. Act as 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 fund;
6. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
7. The fund may borrow money only for temporary or emergency purposes (not
for leveraging or investment) in an amount not exceeding 10% of the value of the
fund's total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed 10% of the value of the fund's total
assets by
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reason of a decline in net assets will be reduced within three business days to
the extent necessary to comply with the 10% limitation. The fund may not
purchase additional securities when borrowings exceed 5% of total assets. 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;
and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not, 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
Trading Commission regulations if the aggregate initial margin deposits and
premiums required to establish positions in futures contracts and related
options that do not fall within the definition of bona fide hedging
transactions would exceed 5% of the fair market value of the fund's net assets,
after taking into account unrealized profits and losses on such contracts it
has entered into and (ii) enter into any futures contracts or options on
futures contracts if the aggregate amount of the fund's commitments under
outstanding futures contracts positions and options on futures contracts would
exceed the market value of its total assets;
(B) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions;
(C) The fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts and other derivative instruments are not deemed to constitute
selling securities short;
(D) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits 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 fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or other securities for which the Board of Trustees has made a
determination of liquidity, as permitted under the 1940 Act;
(F) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of consolidation, merger or other reorganization;
(G) The fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(H) The fund may not invest more than 25% of its net assets at the time
of purchase in the securities of foreign issuers and obligors; and
(I) The fund may not invest in companies for the purpose of exercising
control or management.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX SALOMON ALL CAP
IDEX Salomon All Cap may not, as a matter of fundamental policy:
1. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts; however, the fund may: (a) purchase interests in real
estate investment trusts or companies which invest in or own
6
<PAGE>
real estate if the securities of such trusts or companies are registered under
the 1933 Act and are readily marketable or holding or selling real estate
received in connection with securities it holds; and (b) may enter into futures
contracts, including futures contracts on interest rates, stock indices and
currencies, and options thereon, and may engage in forward currency contracts
and buy, sell and write options on currencies. This policy shall not prohibit
reverse repurchase agreements or deposits of assets to margin or guarantee
positions in futures, options, swaps or forward contracts, or the segregation
of assets in connection with such contracts;
2. Invest more than 25% of the fund'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. Borrow money, except that the fund may borrow from banks for
investment purposes up to an aggregate of 15% of the value of its total assets
taken at the time of borrowing. The fund may borrow for temporary or emergency
purposes an aggregate amount not to exceed 5% of the value of its total assets
at the time of borrowing;
4. Issue senior securities, except as permitted by the 1940 Act;
5. Underwrite securities issued by other persons, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the 1933
Act in connection with the purchase and sale of its fund securities in the
ordinary course of pursuing its investment objective; and
6. Make loans, except that the fund may purchase debt obligations in
which the fund may invest consistent with its investment objectives and
policies or enter into, and make loans of, its portfolio securities, as
permitted under the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental restrictions
that may be changed by the Board of Trustees without shareholder approval:
(A) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act or any other securities as to which a
determination as to liquidity has been made pursuant to guidelines adopted by
the Board of Trustees, as permitted under the 1940 Act;
(B) The fund may not invest in companies for the purpose of exercising
control or management; and
(C) The fund may not sell securities short except short sales "against
the box."
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX TRANSAMERICA SMALL COMPANY
AND IDEX TRANSAMERICA EQUITY
Each fund may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than Government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceed 5% of
the fund's total assets, or (b) the fund owns more than 10% of the outstanding
voting securities of any one class of securities of such issuer. All securities
of a foreign government and its agencies will be treated as a single issuer for
purposes of this restriction;
2. Borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments of
dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33.33% of the value of
the fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever outstanding borrowings, not including reverse repurchase
agreements, represent 5% or more of the fund's total assets, the fund will not
make any additional investments;
3. Lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending securities in an amount not to exceed
33.33% of the fund's assets taken at market value, (c) entering into repurchase
agreements (d) trading in financial futures contracts, index futures contracts,
securities indexes and options on financial futures contracts, options on index
7
<PAGE>
futures contracts, options on securities and options on securities indexes and
(e) entering into variable rate demand notes;
4. Purchase securities (other than U.S. government securities) of any
issuer if, as a result of the purchase, more than 5% of the fund's total assets
would be invested in the securities of the issuer, except that up to 25% of the
value of the total assets of the fund may be invested without regard to this
limitation. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction;
5. Purchase more than 10% of the voting securities of any one issuer, or
more than 10% of the oustanding securities of any class of issuer, except that
(a) this limitation is not applicable to the fund's investments in government
securities and (b) up to 25% of the value of the assets of the fund may be
invested without regard to these 10% limitations. All securities of a foreign
government and its agencies will be treated as a single issuer for purposes of
this restriction. These limitations are subject to any further limitations
under the 1940 Act;
6. Invest more than 25% of the value of its total assets in securities
issued by companies engaged in any one industry, including non-domestic banks
or any foreign government. This limitation does not apply to securities issued
or guaranteed by the United States government, its agencies or
instrumentalities;
7. Underwrite any issue of securities, except to the extent that the sale
of securities in accordance with the fund's investment objective, policies and
limitations may be deemed to be an underwriting, and except that the fund may
acquire securities under circumstances in which, if the securities were sold,
the fund might be deemed to be an underwriter for purposes of the 1933 Act;
8. Purchase or sell real estate or real estate limited partnership
interests, or invest in oil, gas or mineral leases, or mineral exploration or
development programs, except that the fund may (a) invest in securities secured
by real estate, mortgages or interests in real estate or mortgages, (b)
purchase securities issued by companies that invest or deal in real estate,
mortgages or interests in real estate or mortgages, (c) engage in the purchase
and sale of real estate as necessary to provide it with an office for the
transaction of business or (d) acquire real estate or interests in real estate
securing an issuer's obligations, in the event of a default by that issuer;
9. Make short sales of securities or maintain a short position unless, at
all times when a short position is open, the fund owns an equal amount of the
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short;
10. Purchase securities on margin, except that the fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts, financial futures
contracts or related options, and options on securities, and options on
securities indexes will not be deemed to be a purchase of securities on margin
by the fund;
11. Invest in commodities, except that the fund may invest in futures
contracts (including financial futures contracts or securities index futures
contracts) and related options and other similar contracts as described in this
Statement of Additional Information and in the prospectus;
12. 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.
Furthermore, the funds have adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not purchase securities of other investment companies,
other than a security acquired in connection with a merger, consolidation,
acquisition, reorganization or offer of exchange and except as permitted under
the 1940 Act, if as a result of the purchase: (a) more than 10% of the value of
the fund's total assets would be invested in the securities of investment
companies; (b) more than 5% of the value of the fund's total assets would be
invested in the securities of any one investment company; or (c) the fund would
own more than 3% of the total outstanding voting securities of any investment
company.
(B) The fund may not invest in companies for the purposes of exercising
control or management.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
8
<PAGE>
INVESTMENT RESTRICTIONS OF
IDEX ALGER AGGRESSIVE GROWTH
IDEX Alger Aggressive Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act), if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
2. Purchase any securities that would cause more than 25% of the value of
the fund's total assets to be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that there
shall be no limit on the purchase of U.S. government securities;
3. Purchase or sell real estate or real estate limited partnerships,
except that the fund may purchase and sell securities secured by real estate,
mortgages or interests therein and securities that are issued by companies that
invest or deal in real estate;
4. Invest in commodities, except that the fund may purchase or sell stock
index futures contracts and related options thereon if thereafter no more than
5% of its total assets are invested in aggregate initial margin and premiums;
5. Make loans to others, except through purchasing qualified debt
obligations, lending fund securities or entering into repurchase agreements;
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its fund securities;
7. Borrow money, except that the fund may borrow from banks for
investment purposes as set forth in the prospectus and may also engage in
reverse repurchase agreements. Immediately after any borrowing, including
reverse repurchase agreements, the fund will maintain asset coverage of not
less than 300% with respect to all borrowings; and
8. Issue senior securities, except that the fund may borrow from banks
for investment purposes so long as the fund maintains the required coverage.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees of the funds without
shareholder approval:
(A) The fund may not sell securities short or purchase securities on
margin, except that the fund may obtain any short-term credit necessary for the
clearance of purchases and sales of securities. These restrictions shall not
apply to transactions involving selling securities "short against the box;"
(B) The fund may not pledge, hypothecate, mortgage or otherwise encumber
more than 15% of the value of the fund's total assets except in connection with
borrowings described in number 7 above. These restrictions shall not apply to
transactions involving reverse repurchase agreements or the purchase of
securities subject to firm commitment agreements or on a when-issued basis;
(C) The fund may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of consolidation, merger or other reorganization;
(E) The fund may not invest in companies for the purpose of exercising
control or management; and
(F) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees has
made a determination as to liquidity, as permitted under the 1940 Act.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
9
<PAGE>
INVESTMENT RESTRICTIONS OF
IDEX JCC CAPITAL APPRECIATION
AND IDEX JCC BALANCED
IDEX JCC Capital Appreciation and IDEX JCC Balanced each may not, as a matter
of fundamental policy:
1. With respect to 75% of its total assets in the case of IDEX JCC
Balanced, and 50% of its total assets in the case of IDEX JCC Capital
Appreciation, purchase the securities of any one issuer (except cash items and
"government securities" as defined under the 1940 Act), if immediately after
and as a result of such purchase (a) the value of the holdings of the fund in
the securities of such issuer exceeds 5% of the value of such fund's total
assets, or (b) the fund owns more than 10% of the outstanding voting securities
of such issuer. With respect to the remaining 50% of the value of its total
assets, IDEX JCC Capital Appreciation may invest in the securities of as few as
two issuers;
2. Invest more than 25% of the value of its assets in any particular
industry (other than U.S. government securities);
3. Invest directly in real estate or interests in real estate; however, a
fund may own debt or equity securities issued by companies engaged in those
businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent a fund from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed
by physical commodities);
5. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or repurchase
agreements);
6. Act as underwriter of securities issued by others, except to the
extent that a fund may be deemed an underwriter in connection with the
disposition of portfolio securities of that fund;
7. The fund may borrow money for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 25% of the value of the
fund's total assets (including the amount borrowed) less liabilities (other
than borrowings). Borrowings that exceed 25% of the value of the fund's total
assets by reason of a decline in net assets will reduce within three business
days to the extent necessary to comply with the 25% limitation. This policy
shall not prohibit reverse repurchase agreements, or deposits of assets to
margin or guarantee positions in futures, options, swaps or forward contracts,
and the segregation of assets in connection with such contracts; and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the funds have adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) A fund may not: (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission regulations if the aggregate
initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of a fund's
net assets, after taking into account unrealized profits and unrealized losses
on any such contracts it has entered into; and (ii) enter into any futures
contracts if the aggregate amount of such fund's commitments under outstanding
futures contracts positions of that fund's would exceed the market value of its
total assets;
(B) A fund may not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold short
without the payment of any additional consideration therefore, and provided
that transactions in futures, options, swaps and forward contracts are not
deemed to constitute selling securities short;
(C) A fund may not purchase securities on margin, except that a fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in futures, options, contracts, swaps, and forward
contracts, shall not be deemed to constitute purchasing securities on margin;
(D) A fund may not (i) purchase securities of other investment companies,
except in the open market where no commission except the ordinary broker's
commission is paid, or (ii) purchase or retain securities issued by other
open-end investment companies. Limitations
(i) and (ii) do not apply to money market funds or to securities received as
dividends, through offers of exchange, or as a result of consolidation, merger
or other reorganization;
(E) A fund may not mortgage or pledge any securities owned or held by a
fund in amounts that exceed, in
10
<PAGE>
the aggregate, 15% of that fund's net asset value, provided that this
limitation does not apply to reverse repurchase agreements, deposits of assets
to margin, guarantee positions in futures, options, swaps or forward contracts
or segregation of assets in connection with such contracts;
(F) A fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(G) A fund may not purchase any security or enter into a repurchase
agreement, if as a result, more than 15% of its net assets would be invested in
repurchase agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market. The Trustees, or the fund's investment adviser or sub-adviser
acting pursuant to authority delegated by the Trustees, may determine that a
readily available market exists for securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper and municipal lease obligations. Accordingly, such securities
may not be subject to the foregoing limitation;
(H) A fund may not invest in companies for the purpose of exercising
control or management; and
(I) With respect to IDEX JCC Balanced only, at least 25% of the total
assets of that fund will normally be invested in fixed-income senior
securities, which include corporate debt securities and preferred stock.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
INVESTMENT RESTRICTIONS OF
IDEX MUNDER Net50
IDEX Munder Net50 may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act), if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer. All securities of a foreign government and its agencies will be treated
as a single issuer for purposes of this restriction;
2. Invest directly in real estate or interests in real estate; however,
the fund may own debt or equity securities issued by companies engaged in those
businesses;
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the fund from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities);
4. Lend any security or make any other loan if, as a result, more than
25% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt securities or
repurchase agreements);
5. Underwrite securities issued by other persons, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of the fund's
portfolio securities;
6. Borrow money but the fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of its respective total assets (including the amount borrowed) less
liabilities (other than borrowings). If the borrowings exceed 25% of the value
of the fund's total assets by reason of a decline in net assets, the fund 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, deposits of assets to margin or guarantee positions in
futures, options, swaps or forward contracts, or the segregation of assets in
connection with such contracts.
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 this
SAI.
Furthermore, the fund has adopted the following non-fundamental restrictions
which may be changed by the Board of Trustees of the fund without shareholder
approval:
(A) The fund may not sell securities short, except short sales "against
the box;"
11
<PAGE>
(B) The fund may not participate on a "joint" or "joint and several"
basis in any trading account in securities;
(C) The fund may not purchase securities of open-end or closed-end
investment companies except in compliance with the Investment Company Act of
1940, and the rules and regulations thereunder and with the next paragraph.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX PILGRIM BAXTER MID CAP GROWTH
IDEX Pilgrim Baxter Mid Cap Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
2. Borrow money except for temporary or emergency purposes (not for
leveraging or investment) in an amount exceeding 10% of the value of the fund's
total assets. This borrowing provision is included solely to facilitate the
orderly sale of fund securities to accommodate substantial redemption requests
if they should occur and is not for investment purposes. All borrowings in
excess of 5% of the fund's total assets will be repaid before making
investments;
3. Make loans, except that the fund, in accordance with its investment
objectives and policies, may purchase or hold debt securities, and enter into
repurchase agreements as described in the fund's prospectus and this SAI;
4. Purchase or sell real estate, real estate limited partnership
interests, futures contracts, commodities or commodity contracts, except that
this shall not prevent the fund from (i) investing in readily marketable
securities of issuers which can invest in real estate or commodities,
institutions that issue mortgages, or real estate investment trusts which deal
in real estate or interests therein, pursuant to the fund's investment
objective and policies, and (ii) entering into futures contracts and options
thereon that are listed on a national securities or commodities exchange where,
as a result thereof, no more than 5% of the fund's total assets (taken at
market value at the time of entering into the futures contracts) would be
committed to margin deposits on such futures contracts and premiums paid for
unexpired options on such futures contracts; provided that, in the case of an
option that is "in-the-money" at the time of purchase, the "in-the-money"
amount, as defined under the Commodities Futures Trading Commission
regulations, may be excluded in computing the 5% limit. The fund (as a matter
of operating policy) will utilize only listed futures contracts and options
thereon;
5. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a fund security;
6. Issue senior securities, except as permitted by the 1940 Act; and
7. Invest more than 25% of the fund'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.
Furthermore, the fund has adopted the following non-fundamental restrictions,
which may be changed by the Board of Trustees without shareholder approval:
(A) The fund may not invest in companies for the purpose of exercising
control;
(B) The fund may not pledge, mortgage or hypothecate assets, except (i)
to secure temporary borrowings as permitted by the fund's limitation on
permitted borrowings, or (ii) in connection with permitted transactions
regarding options and futures contracts;
(C) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees has
made a determination as to liquidity, as permitted under the 1940 Act; and
(D) The fund may not purchase securities of other investment companies
except as permitted by the 1940 Act and the rules and regulations thereunder.
With respect to restriction 7 above, the fund may use (with the consent of the
Investment Adviser) industry classifications reflected by Bloomberg Sub-Groups
for the communications equipment, electronic components and accessories, and
the computer and other data processing service sectors, if applicable at the
time of determination.
12
<PAGE>
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX PILGRIM BAXTER TECHNOLOGY
The fund may not, as a matter of fundamental policy:
1. Make loans, except that each fund, in accordance with its investment
objectives and policies, may (i) purchase debt instruments, and (ii) enter into
repurchase agreements;
2. Act as an underwriter of securities of other issuers, except as it may
be deemed an underwriter under the 1933 Act in connection with the purchase and
sale of portfolio securities;
3. Purchase or sell commodities or commodity contracts, except that, in
accordance with its investment objective and policies may: (i) invest in
readily marketable securities of issuers which invest or engage in such
activities; and (ii) enter into forward contracts, futures contracts and
options thereon;
4. Purchase or sell real estate, or real estate partnership interests,
except that this limitation shall not prevent the fund from investing directly
or indirectly in readily marketable securities of issuers which can invest in
real estate, institutions that issue mortgages, or real estate investment
trusts which deal with real estate or interests therein;
5. Issue senior securities, except as permitted by the 1940 Act;
6. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding 10% of the value of the fund's total assets. This
borrowing provision is intended to facilitate the orderly sale of fund
securities to accomodate substantial redemption requests if they should occur,
and is not for investment purposes. All borrowings in excess of 5% of the
fund's total assets will be repaid before making investments;
7. Invest in companies for the purpose of exercising control;
8. Pledge, mortgage or hypothecate assets, except (i) to secure temporary
borrowings permitted by the fund's limitation on permitted borrowings, or (ii)
in connection with permitted transactions regarding options and futures
contracts;
9. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the fund may (i) obtain short-term credits as
necessary for the clearance of security transactions and (ii) establish margin
accounts as may be necessary in connection with the fund's use of options and
futures contracts;
10. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder;
11. Invest in interests in oil, gas or other mineral exploration or
development programs.
The foregoing percentages will apply at the time of the purchase of a security.
Furthermore, the fund has adopted the following non-fundamental restrictions,
which may be changed by the Board of Trustees without a vote of shareholders:
The fund may not:
1. Invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of its net assets. This limitation does not include any Rule
144A restricted security that has been determined by, or pursuant to procedures
established by, the Board, based on trading markets for such security, to be
liquid;
2. Purchase or sell puts, calls, straddles, spreads, and any combination
thereof, if by reason thereof, the value of its aggregate investment in such
classes of securities will exceed 5% of its total assets.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX TRANSAMERICA SMALL COMPANY
AND IDEX TRANSAMERICA EQUITY
Each fund may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than Government securities as defined in
the 1940 Act) if
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<PAGE>
immediately after and as a result of such purchase (a) the value of the
holdings of the fund in the securities of such issuer exceed 5% of the fund's
total assets, or (b) the fund owns more than 10% of the outstanding voting
securities of any one class of securities of such issuer. All securities of a
foreign government and its agencies will be treated as a single issuer for
purposes of this restriction;
2. Borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments of
dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33.33% of the value of
the fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever outstanding borrowings, not including reverse repurchase
agreements, represent 5% or more of the fund's total assets, the fund will not
make any additional investments;
3. Lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending securities in an amount not to exceed
33.33% of the fund's assets taken at market value, (c) entering into repurchase
agreements (d) trading in financial futures contracts, index futures contracts,
securities indexes and options on financial futures contracts, options on index
futures contracts, options on securities and options on securities indexes and
(e) entering into variable rate demand notes;
4. Purchase securities (other than U.S. government securities) of any
issuer if, as a result of the purchase, more than 5% of the fund's total assets
would be invested in the securities of the issuer, except that up to 25% of the
value of the total assets of the fund may be invested without regard to this
limitation. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction;
5. Purchase more than 10% of the voting securities of any one issuer, or
more than 10% of the oustanding securities of any class of issuer, except that
(a) this limitation is not applicable to the fund's investments in government
securities and (b) up to 25% of the value of the assets of the fund may be
invested without regard to these 10% limitations. All securities of a foreign
government and its agencies will be treated as a single issuer for purposes of
this restriction. These limitations are subject to any further limitations
under the 1940 Act;
6. Invest more than 25% of the value of its total assets in securities
issued by companies engaged in any one industry, including non-domestic banks
or any foreign government. This limitation does not apply to securities issued
or guaranteed by the United States government, its agencies or
instrumentalities;
7. Underwrite any issue of securities, except to the extent that the sale
of securities in accordance with the fund's investment objective, policies and
limitations may be deemed to be an underwriting, and except that the fund may
acquire securities under circumstances in which, if the securities were sold,
the fund might be deemed to be an underwriter for purposes of the 1933 Act;
8. Purchase or sell real estate or real estate limited partnership
interests, or invest in oil, gas or mineral leases, or mineral exploration or
development programs, except that the fund may (a) invest in securities secured
by real estate, mortgages or interests in real estate or mortgages, (b)
purchase securities issued by companies that invest or deal in real estate,
mortgages or interests in real estate or mortgages, (c) engage in the purchase
and sale of real estate as necessary to provide it with an office for the
transaction of business or (d) acquire real estate or interests in real estate
securing an issuer's obligations, in the event of a default by that issuer;
9. Make short sales of securities or maintain a short position unless, at
all times when a short position is open, the fund owns an equal amount of the
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short;
10. Purchase securities on margin, except that the fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts, financial futures
contracts or related options, and options on securities, and options on
securities indexes will not be deemed to be a purchase of securities on margin
by the fund;
11. Invest in commodities, except that the fund may invest in futures
contracts (including financial futures contracts or securities index futures
contracts) and related options and other similar contracts as described in this
Statement of Additional Information and in the prospectus;
12. 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.
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<PAGE>
Furthermore, the funds have adopted the following non-fundamental investment
restrictions, which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not purchase securities of other investment companies,
other than a security acquired in connection with a merger, consolidation,
acquisition, reorganization or offer of exchange and except as permitted under
the 1940 Act, if as a result of the purchase: (a) more than 10% of the value of
the fund's total assets would be invested in the securities of investment
companies; (b) more than 5% of the value of the fund's total assets would be
invested in the securities of any one investment company; or (c) the fund would
own more than 3% of the total outstanding voting securities of any investment
company;
(B) The fund may not invest in companies for the purposes of exercising
control or management.
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and
limitations as such fund (which might result in duplication of certain fees and
expenses).
INVESTMENT RESTRICTIONS OF
IDEX T. ROWE PRICE SMALL CAP AND
IDEX T. ROWE PRICE DIVIDEND GROWTH
IDEX T. Rowe Price Small Cap and IDEX T. Rowe Price Dividend Growth each may
not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
2. Borrow money except for temporary or emergency purposes (not for
leveraging or investment) in an amount exceeding 33 1/3 of the value of the
fund's total assets (including amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed 33 1/3 of the value of the fund's total
assets by reason of a decline in net assets will be reduced within three
business days to the extent necessary to comply with the 33 1/3 limitation. This
policy shall not prohibit reverse repurchase agreements or deposits of assets to
margin or guarantee positions in futures, options, swaps or forward contracts,
or the segregation of assets in connection with such contracts;
3. Purchase or sell physical commodities (but this shall not prevent the
fund from entering into future contracts and options thereon);
4. Invest more than 25% of the fund's total 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, provided that 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;
5. Make loans, although the funds may lend fund securities provided that
the aggregate of such loans do not exceed 33 1/3 of the value of the fund's
total assets. The fund may purchase money market securities, enter into
repurchase agreements and acquire publicly distributed or privately placed debt
securities, and purchase debt;
6. Purchase or sell real estate (but this shall not prevent the fund 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);
7. Issue senior securities, except as permitted by the 1940 Act; and
8. Underwrite securities issued by other persons, except to the extent
that the fund may be deemed to
be an underwriter within the meaning of the 1933 Act
in connection with the purchase and sale of its fund securities in the ordinary
course of pursuing its investment objective.
Furthermore, the funds have adopted the following non-fundamental
restrictions which may be changed by the Board of Trustees of the funds without
shareholder approval:
(A) A fund may not purchase additional securities when money borrowed
exceeds 5% of its total assets. This restriction shall not apply to temporary
borrowings until the fund's net assets exceed $40,000,000;
(B) A fund may not purchase a futures contract or an option thereon, if,
with respect to positions in futures
15
<PAGE>
or options on futures which do not represent bona fide hedging, the aggregate
initial margin and premiums on such options would exceed 5% of the fund's net
asset value;
(C) A fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act or any other securities as to which a
determination as to liquidity has been made pursuant to guidelines adopted by
the Board of Trustees, as permitted under the 1940 Act;
(D) A fund may not invest in companies for the purpose of exercising
control or management;
(E) A fund may not purchase securities of open-end or closed-end
investment companies except (i) in compliance with the 1940 Act; or (ii)
securities of the T. Rowe Price Reserve Investment or Government Reserve
Investment Funds;
(F) A fund may not purchase securities on margin, except (i) for use of
short-term credit necessary for clearance of purchases of fund securities; and
(ii) it may make margin deposits in connection with futures contracts or other
permissible investments;
(G) A fund may not mortgage, pledge, hypothecate or, in any manner,
transfer any security owned by the fund as security for indebtedness except as
may be necessary in connection with permissible borrowings or investments and
then such mortgaging, pledging or hypothecating may not exceed 33 1/3 of the
fund's total assets at the time of borrowing or investment; and
(H) A fund may not sell securities short, except short sales "against the
box".
In addition to the above, as a fundamental policy, a fund may, notwithstanding
any other investment policy or limitation (whether or not fundamental), invest
all of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as such fund (which might result in duplication of certain fees
and expenses).
INVESTMENT RESTRICTIONS OF
IDEX GABELLI GLOBAL GROWTH
IDEX Gabelli Global Growth may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than cash items and "Government Securities"
as defined in the 1940 Act) if immediately after and as a result of such
purchase (a) the value of the holdings of the fund in the securities of such
issuer exceeds 5% of the value of the fund's total assets, or (b), the fund
owns more than 10% of the outstanding voting securities of any one class of
securities of such issuer;
2. 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;
3. Borrow money except (a) the portfolio may borrow from banks (as
defined in the 1940 Act) or through reverse repurchase agreements, (b) the
portfolio may, to the extent permitted by applicable law, borrow up to an
additional 5% of its total assets for temporary purposes (not for leveraging or
borrowing), (c) or pledge its assets other than to secure such issuances or in
connection with hedging transactions, short-sales, when-issued and forward
commitment transactions and similar investment strategies;
4. Make loans except (i) by purchasing fixed-income securities and or by
entering into repurchase agreements or (ii) by lending the portfolio securities
to banks, brokers, dealers and other financial institutions so long as such
loans are not inconsistent with the 1940 Act or the rules and regulations or
interpretations of the SEC thereunder;
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 its portfolio securities;
6. Invest in companies for the purpose of exercising control or
management;
7. 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;
8. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
9. Invest 25% or more of the fund'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,
provided that there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government or
16
<PAGE>
its agencies or instrumentalities, or of certificates of deposit and bankers'
acceptances.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions, which may be changed by the Board of Trustees of the Fund without
shareholder or policyowner approval:
(A) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 or any other securities as to which a determination as
to liquidity has been made pursuant to guidelines adopted by the Board of
Trustees as permitted under the 1940 Act;
(B) The fund may not mortgage, pledge or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection with
permissible activities;
(C) The fund may not purchase securities on margin, provided that the
fund may obtain short-term credits necessary for the clearance of purchases and
sales of securities, and further provided that the fund may make margin
deposits in connection with its use of financial futures, forward contracts, or
derivative instruments.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX GE INTERNATIONAL EQUITY
(formerly IDEX GE/Scottish Equitable
International Equity)
IDEX GE International Equity may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase
(a) the value of the holdings of the fund in the securities of such issuer
exceeds 5% of the value of the fund's total assets, or (b) the fund owns more
than 10% of the outstanding voting securities of any one class of securities of
such issuer. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction;
2. Invest 25% or more of the value of the fund's total assets in any
particular industry (other than U.S. government securities). For purposes of
this restriction, the term industry shall include (a) the government of any one
country other than the U.S., but not the U.S. government and (b) all
supranational organizations;
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the fund from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities);
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the fund may own securities or other
instruments backed by real estate, including mortgage-backed securities, or
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 fund;
6. Lend any security or make any other loan if, as a result, more than
30% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 33 1/3 of the
value of the fund's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed 33 1/3 of the
value of the fund's total assets by reason of a decline in net assets will be
reduced within three business days to the extent necessary to comply with the
33 1/3 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; and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
17
<PAGE>
(A) The fund 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
Trading Commission regulations if the aggregate initial margin deposits and
premiums required to establish positions in futures contracts and related
options that do not fall within the definition of bona fide hedging
transactions would exceed 5% of the fair market value of the fund's net assets,
after taking into account unrealized profits and losses on such contracts it
has entered into and (ii) enter into any futures contracts or options on
futures contracts if the aggregate amount of the fund's commitments under
outstanding futures contracts positions and options on futures contracts would
exceed the market value of its total assets;
(B) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions;
(C) The fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts and other derivative instruments are not deemed to constitute
selling securities short;
(D) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits 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 fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or other securities for which the Board of Trustees has made a
determination of liquidity, as permitted under the 1940 Act;
(F) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of consolidation, merger or other reorganization. The
fund may also invest in the GEI Short-Term Investment Fund, an investment fund
advised by GE Asset Management Incorporated ("GEAM"), created specifically to
serve as a vehicle for the collective investment of cash balances of the fund
and other accounts advised by GEAM or General Electric Investment Corporation.
Investments in GEI Short-Term Investment Fund are not considered investments in
another investment company for the purposes of this restriction;
(G) The fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses; and
(H) The fund may not invest in companies for the purpose of exercising
control or management.
With respect to investment restriction No. 2 above, the fund may use the
industry classifications reflected by the S&P 500 Composite Stock Index, if
applicable at the time of determination. For all other fund holdings the fund
may use the Directory of Companies Required to File Annual Reports with the SEC
and Bloomberg, Inc. In addition, the fund may select its own industry
classifications, provided such classifications are reasonable.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX GREAT COMPANIES -- GLOBAL(2)
IDEX Great Companies - Global(2) may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act), if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets. Or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer;
18
<PAGE>
2. Invest 25% or more of the fund'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,
provided that 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 other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the fund from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities);
4. Invest directly in real estate or interests in real estate; however,
the fund may own debt or equity securities issued by companies engaged in those
businesses;
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);
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its fund securities;
7. Borrow money, except for temporary or emergency purposes (not for
leveraging or investment) in an amount exceeding 25% of the value of the fund's
total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed 25% of the value of the fund's total
assets by reason of a decline in net assets will be reduced within three
business days to the extent necessary to comply with the 25% limitation. This
policy shall not prohibit reverse repurchase agreements or deposits of assets
to margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such contracts;
8. 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.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions, which may be changed by the Board of Trustees of the Fund without
shareholder or policyowner approval:
(A) The fund may not (i) enter into any futures contracts or options on
futures contracts for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the fund's net assets, after taking into account unrealized profits and losses
on such contracts it has entered into and (ii) enter into any futures contracts
or options on futures contracts if the aggregate amount of the fund's
commitments under outstanding futures contracts positions and options on
futures contracts would exceed the market value of its total assets;
(B) The fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short and provided that transactions in options, swaps and forward futures
contracts are not deemed to constitute selling securities short;
(C) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, provided that margin payments and other deposits in connection
with transactions in options, futures, swaps and forward contracts shall not be
deemed to constitute purchasing securities on margin;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies.
Limitations (i) and (ii) do no apply to money market funds or to securities
received as dividends, through offers of exchange, or as a result of a
consolidation, merger or other reorganization;
(E) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to margin or guarantee positions
in futures, options, swaps or forward contracts or the segregation of assets in
connection with such contracts;
(F) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include
19
<PAGE>
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933 or any other securities as to which the Board of Directors has made a
determination as to liquidity, as permitted under the 1940 Act;
(G) The fund may not invest in companies for the purpose of exercising
control or management. In addition to the above, as a fundamental policy, the
fund may, notwithstanding any other investment policy or limitation (whether or
not fundamental), invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectves, policies and limitations as such fund (which might result
in duplication of certain fees and expenses).
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX JCC GLOBAL
(This fund is closed to new investors effective September 1, 2000.)
IDEX JCC Global may not, as a matter of fundamental policy:
1. Own more than 10% of the outstanding voting securities of any one
issuer and, as to seventy-five percent (75%) of the value of its total assets,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the 1940 Act), if immediately after and as a
result of such purchase, (a) the value of the holdings of the fund in the
securities of such issuer exceeds 5% of the value of the fund's total assets;
2. Invest more than 25% of the value of its assets in any particular
industry (other than government securities);
3. Invest directly in real estate or interests in real estate; however,
the fund may own debt or equity securities issued by companies engaged in those
businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the fund from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities);
5. Lend any security or make any other loan if, as a result, more than
25% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements);
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities;
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements or deposits of
assets to margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such contracts; and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not (i) enter into any futures contracts or options on
futures contracts for purposes other than bona fide hedging transactions within
the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the fund's net assets, after taking into account unrealized profits and losses
on such contracts it has entered into; and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the fund's
commitments under outstanding futures contracts positions and options on
futures contracts would exceed the market value of its total assets;
(B) The fund may not sell securities short, unless it owns or has the
right, without the payment of any additional compensation, to obtain securities
equivalent in kind and amount to the securities sold short, and provided that
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short;
(C) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in options,
20
<PAGE>
futures, swaps and forward contracts shall not be deemed to constitute
purchasing securities on margin;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(E) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions;
(F) The fund may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(G) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees have
made a determination as to liquidity, as permitted under the 1940 Act; and
(H) The fund may not invest in companies for the purpose of exercising
control or management.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX GE U.S. EQUITY
IDEX GE U.S. Equity may not, as a matter of fundamental policy:
1. Borrow money, except that a fund may enter into reverse repurchase
agreements and may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33 1/3% of the
value of the fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings, including reverse repurchase
agreements, of 5% or more of a fund's total assets are outstanding, the fund
will not make any additional investments;
2. Lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending portfolio securities in an amount not
to exceed 30% of the fund's total assets taken at market value, (c) entering
into repurchase agreements, (d) trading in financial futures contracts, index
futures contracts, securities indexes and options on financial futures
contracts, options on index futures contracts, options on securities and
options on securities indexes and (e) entering into variable rate demand notes;
3. Purchase securities (other than Government Securities) of any issuer
if, as a result of the purchase, more than 5% of the fund's total assets would
be invested in the securities of the issuer, except that up to 25% of the value
of the total assets of the fund may be invested without regard to this
limitation. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction;
4. Purchase more than 10% of the voting securities of any one issuer, or
more than 10% of the outstanding securities of any class of issuer, except that
(a) this limitation is not applicable to a fund's investments in Government
Securities and (b) up to 25% of the value of the assets of the fund may be
invested without regard to these 10% limitations. All securities of a foreign
government and its agencies will be treated as a single issuer for purposes of
this restriction;
5. Invest more than 25% of the value of its total assets in securities of
issuers in any one industry. For purposes of this restriction, the term
industry will be deemed to include (a) the government of any one country other
than the United States, but not the U.S. Government and (b) all supra-national
organizations;
6. Underwrite any issue of securities, except to the extent that the sale
of portfolio securities in accordance with the fund's investment objective,
policies and limitations may be deemed to be an underwriting, and except that
the fund may acquire securities under circumstances in which, if the securities
were sold, the fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933, as amended;
21
<PAGE>
7. Purchase or sell real estate or real estate limited partnership
interests, or invest in oil, gas or mineral leases, or mineral exploration or
development programs, except that a fund may (a) invest in securities secured
by real estate, mortgages or interests in real estate or mortgages, (b)
purchase securities issued by companies that invest or deal in real estate,
mortgages or interests in real estate or mortgages, (c) engage in the purchase
and sale of real estate as necessary to provide it with an office for the
transaction of business or (d) acquire real estate or interests in real estate
securing an issuer's obligations in the event of a default by that issuer;
8. Make short sales of securities or maintain a short position, unless at
all times when a short position is open, the fund owns an equal amount of the
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short;
9. Purchase securities on margin, except that a fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts, financial futures
contracts or related options, and options on securities, options on securities
indexes and options on currencies will not be deemed to be a purchase of
securities on margin by a fund;
10. Invest in commodities, except that each non-money market fund may
invest in futures contracts (including financial futures contracts, index
futures contracts or securities index futures contracts) and related options
and other similar contracts (including foreign currency forward, futures and
options contracts) as described in this Statement of Additional Information and
in the Prospectus;
11. Invest in companies for the purpose of exercising control or
management;
12. Issue senior securities except as otherwise permitted by the 1940 Act
and as otherwise permitted herein.
Furthermore, the fund 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 fund may not purchase illiquid securities if more than 15% of the
net assets of the fund would be invested in illiquid securities. For purposes
of this restriction, illiquid securities are securities that cannot be disposed
of by a fund within seven days in the ordinary course of business at
approximately the amount at which the fund has valued the securities;
(B) The fund may not purchase restricted securities if more than 10% of
the total assets of the fund would be invested in restricted securities.
Restricted securities are securities that are subject to contractual or legal
restrictions on transfer, excluding for purposes of this restriction,
restricted securities that are eligible for resale pursuant to Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A Securities"), that have been
determined to be liquid by the Trust's Board of Trustees based upon the trading
markets for the securities;
(C) The fund may not purchase securities of other investment companies,
other than a security acquired in connection with a merger, consolidation,
acquisition, reorganization or offer of exchange except as otherwise permitted
under the 1940 Act. Investments by the fund in GEI Short-Term Investment Fund,
a private investment fund advised by GE Asset Management Incorporated ("GEAM"),
created specifically to serve as a vehicle for the collective investment of
cash balances of the fund and other accounts advised by GEAM or General
Electric Investment Corporation ("GEIC"), are not subject to this restriction,
pursuant to and in accordance with necessary regulatory approvals.
The percentage limitations in the restrictions listed above apply at the time
of purchases of securities. For purposes of investment restriction number 5,
the fund may use the industry classifications reflected by the S&P 500
Composite Stock Index, if applicable at the time of determination. For all
other portfolio holdings, the fund may use the Directory of Companies Required
to File Annual Reports with the SEC and Bloomberg Inc. In addition, the fund
may select its own industry classifications, provided such classifications are
reasonable.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX JCC GROWTH & INCOME
IDEX JCC Growth & Income may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than
22
<PAGE>
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 fund in the securities of such issuer exceeds 5% of the value
of the fund's total assets, or (b) the fund owns more than 10% of the
outstanding voting securities of any one class of securities of such issuer.
All securities of a foreign government and its agencies will be treated as a
single issuer for purposes of this restriction;
2. Invest 25% or more of the value of its total assets in any particular
industry (other than U.S. government securities). For purposes of this
limitation only, industrial development bonds issued by nongovernmental users
shall not be deemed to be municipal obligations. Industrial development bonds
shall be classified according to the industry of the entity that has the
ultimate responsibility for the payment of principal and interest on the
obligation;
3. Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies engaged in those
businesses;
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the fund from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities);
5. Lend any security or make any other loan if, as a result, more than
25% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt securities or
repurchase agreements);
6. Underwrite securities issued by other persons, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of the fund's
portfolio securities;
7. Borrow money but the fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 25% of
the value of its respective total assets (including the amount borrowed) less
liabilities (other than borrowings). If the borrowings exceed 25% of the value
of the fund's total assets by reason of a decline in net assets, the fund 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, deposits of assets to margin or guarantee positions in
futures, options, swaps or forward contracts, or the segregation of assets in
connection with such contracts.
Furthermore, the fund has adopted the following non-fundamental restrictions,
which may be changed by the Board of Trustees of the fund without shareholder
approval:
(A) The fund may not sell securities short, unless they own or have the
right to obtain securities equivalent in kind and amount to the securities sold
short without the payment of any additional consideration therefor, and
provided that transactions in futures, options, swaps and forward contracts are
not deemed to constitute selling securities short.
In addition to the above, the fund may, notwithstanding any other investment
policy or limitation (whether or not fundamental), invest all of its assets in
the securities of a single open-end management company with substantially the
same fundamental investment objectives, policies and limitations as such fund
(which might result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX DEAN ASSET ALLOCATION
IDEX Dean Asset Allocation may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of such issuer;
2. Invest more than 25% of the fund'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 fund from investing in securities or other instruments backed by
physical commodities);
4. Purchase or sell real estate (but this shall not prevent the fund from
investing in securities or other
23
<PAGE>
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);
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities;
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation;
and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not 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;
(B) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in options, futures, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin;
(C) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(D) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options, swaps or forward contracts or segregation of assets in connection with
such contracts;
(E) The fund may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(F) The fund may not invest in companies for the purpose of exercising
control or management; and
(G) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees has
made a determination as to liquidity, as permitted under the 1940 Act.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX LKCM STRATEGIC TOTAL RETURN
IDEX LKCM Strategic Total Return may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of such issuer;
2. Invest more than 25% of the fund'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
24
<PAGE>
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 real estate (but this shall not prevent the fund 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);
4. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
fund 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 or debt securities);
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities;
7. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
fund's total assets by reason of a decline in net assets will be reduced within
three business days to the extent necessary to comply with the 25% limitation;
and
8. Issue senior securities, except as permitted by the 1940 Act.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) The fund may not mortgage or pledge any securities owned or held by
the fund in amounts that exceed, in the aggregate, 15% of the fund's net
assets, provided that this limitation does not apply 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;
(B) The fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that margin payments and other deposits in connection with
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short;
(C) The fund may not purchase securities on margin, except that the fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits in
connection with transactions in options, futures, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin;
(D) The fund may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization;
(E) The fund may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the fund may own debt
or equity securities of companies engaged in those businesses;
(F) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act, or any successor to such Rule, Section 4(2)
commercial paper or any other securities as to which the Board of Trustees has
made a determination as to liquidity, as permitted under the 1940 Act;
(G) The fund may not invest in companies for the purpose of exercising
control or management; and
(H) The fund 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 fund's total assets would be invested in
such securities.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
25
<PAGE>
INVESTMENT RESTRICTIONS OF
IDEX AEGON INCOME PLUS
IDEX AEGON Income Plus 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 one-third of the
current value of the fund'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 fund'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 fund 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 fund may pledge not more than one-third
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 fund's performance under
such contracts, shall not be deemed a pledging of fund 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 fund under certain state
laws, the fund 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 fund's public
utilities portfolio concentration, except that the fund 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 fund's total assets would be
invested in the securities of such issuer, provided that up to 25% of the
fund's total net assets may be invested without regard to this 5% limitation
and in the case of certificates of deposit, time deposits and bankers'
acceptances, up to 25% of total fund 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 fund'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 fund may
be deemed to be an underwriter in connection with the sale of its portfolio
securities, although the fund may purchase securities directly from the issuers
thereof for investment in accordance with the fund's investment objective and
policies;
9. Purchase or sell commodities or commodity contracts, except that the
fund 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 fund 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 fund'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 control;
15. Invest in oil, gas or other mineral exploration or development
programs;
16. Purchase or hold any real estate or mortgage loans thereon, except
that the fund 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
26
<PAGE>
17. Purchase the securities (other than government securities) of any
issuer if, as a result, the fund 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.
Furthermore, the fund has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Trustees without shareholder
approval:
(A) Write or purchase put, call, straddle or spread options, or
combinations thereof;
(B) Invest more than 10% of its net assets in illiquid securities;
(C) Invest in real estate limited partnerships;
(D) Invest more than 25% of its net assets at the time of purchase in the
securities of foreign issuers and obligors; and
(E) Purchase or sell interest rate futures contracts (a) involving
aggregate delivery or purchase obligations in excess of 30% of the fund's net
assets, or aggregate margin deposits made by the fund in excess of 5% of the
fund'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 Commodity Futures Trading
Commission ("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 fund's
shares have been qualified for public offering.
In addition to the above, as a fundamental policy, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
INVESTMENT RESTRICTIONS OF
IDEX FEDERATED TAX EXEMPT
(formerly IDEX AEGON
Tax Exempt)
IDEX Federated Tax Exempt may not, as a matter of fundamental policy:
1. With respect to 75% of the fund's total assets, purchase the
securities of any one issuer (other than government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the fund in the securities of such issuer exceeds 5%
of the value of the fund's total assets, or (b) the fund owns more than 10% of
the outstanding voting securities of any one class of securities of such
issuer. All securities of a foreign government and its agencies will be treated
as a single issuer for purposes of this restriction;
2. Underwrite any issue of securities, except to the extent the fund may
be deemed to be an underwriter in connection with the sale of its portfolio
securities, although the fund may purchase Municipal Obligations directly from
the issuers thereof for investment in accordance with the fund's investment
objective and policies;
3. Make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same
industry, provided that the fund may invest more than 25% of the value of its
assets in industrial development bonds. Government securities, municipal
securities and bank instruments will not be deemed to constitute an industry.
As to industrial development bonds, the fund may purchase securities of an
issuer resulting in the ownership of more than 25% of the fund's assets in one
industry, and the fund reserves the right to invest more than 25% of its assets
in industrial development bonds in the same state;
4. Purchase securities on margin or sell "short," but the fund 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 fund 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. Invest in securities of other investment companies, except in the
event of merger or reorganization with another investment company;
7. 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;
8. Invest in companies for the purpose of exercising management or
control;
9. The fund may not purchase or sell physical commodities, provided that
the fund may purchase securities of companies that deal in commodities. For
purposes of this restriction, investments in transactions involving futures
contracts and options, forward currency contracts, swap transactions and other
financial contracts
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that settle by payment of cash are not deemed to be investments in commodities;
and
10. The fund may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding one-third of the
current value of the fund'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 repurchase agreements would not
constitute borrowings.
Furthermore, the fund has adopted the following non-fundamental restrictions
which may be changed by the Board of Trustees without shareholder approval:
(A) The fund may not invest more than 15% of its net assets in illiquid
securities. This does not include securities elegible for resale
pursuant to Rule 144A under the 1933 or any other securities as
to which a determination as to liquidity has been made pursuant
to quidelines adopted by the Board of Trustees as permitted under
the 1940 Act;
(B) The fund may not mortgage, pledge or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities
in connection with any permissible borrowing or to collateral
arrangements in connection with permissible activities;
(C) The fund may not purchase securities on margin, provided that the
fund may obtain short-term credits necessary for the clearance of
purchases and sales of securities, and further provided that the
fund may make margin deposits in connection with its use of
financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or
derivative instruments.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the fund
will not exclude foreign bank instruments from industry concentration tests as
long as the policy of the SEC remains in effect.
As a matter of fundamental policy, the fund will invest 80% of its assets in
tax exempt securities that are not subject to alternate minimum tax. 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
funds 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, the fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and limitations as such fund (which might
result in duplication of certain fees and expenses).
OTHER POLICIES AND PRACTICES OF THE FUNDS
FUTURES, OPTIONS AND OTHER
DERIVATIVE INSTRUMENTS
The following investments are subject to limitations as set forth in each
fund's investment restrictions and policies.
Futures Contracts. A fund may enter into futures contracts. Futures contracts
are for the purchase or sale, for future delivery, of equity or fixed-income
securities, foreign currencies or contracts based on financial indices,
including indices of U.S. government securities, foreign government securities
and equity or fixed-income securities. The IDEX AEGON Income Plus may enter
into interest rate futures contracts. These contracts are for the purchase or
sale of fixed-income securities. U.S. futures contracts are traded on exchanges
which have been designated "contract markets" by the Commodity Futures Trading
Commission ("CFTC") and must be executed through a Futures Trading Commission
merchant ("FTCM"), or brokerage firm, which is a member of the relevant
contract market. Through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
When a fund buys or sells a futures contract, it must receive or deliver the
underlying instrument (or a cash payment based on the difference between the
underlying instrument's closing price and the price at which the contract was
entered into) at a specified price on a specified date. Transactions in futures
contracts may be made to attempt to hedge against potential changes in interest
or currency exchange rates, or the price of a security or a securities index
which might correlate with, or otherwise adversely affect, either the value of
the fund's securities or the prices of securities which the fund is considering
buying at a later date.
The buyer or seller of a futures contract is not required to deliver or pay for
the underlying instrument unless the contract is held until the delivery date.
However, both the buyer and seller are required to deposit "initial margin" for
the benefit of the FTCM when the contract is entered
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into. Initial margin deposits are equal to a percentage of the contract's
value, as set by the exchange on which the contract is traded, and may be
maintained in cash or liquid assets by the fund's custodian for the benefit of
the FTCM. Initial margin payments are similar to good faith deposits or
performance bonds.
Unlike margin extended by a securities broker, initial margin payments do not
constitute purchasing securities on margin for purposes of a fund's investment
limitations. If the value of either party's position declines, that party will
be required to make additional "variation margin" payments with the FTCM to
settle the change in value on a daily basis. The party that has a gain may be
entitled to receive all or a portion of this amount. In the event of the
bankruptcy of the FTCM that holds margin on behalf of a fund, that fund may be
entitled to return of the margin owed to such fund only in proportion to the
amount received by the FTCM's other customers. The fund's sub-adviser will
attempt to minimize the risk by careful monitoring of the creditworthiness of
the FTCMs with which a fund does business and by segregating margin payments
with the custodian.
Although a fund would segregate with the custodian cash and liquid assets in an
amount sufficient to cover its open futures obligations, the segregated assets
would be available to that fund immediately upon closing out the futures
position, while settlement of securities transactions could take several days.
However, because a fund's cash that may otherwise be invested would be held
uninvested or invested in liquid assets so long as the futures position remains
open, such fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.
The acquisition or sale of a futures contract may occur, for example, when a
fund holds or is considering purchasing equity or debt securities and seeks to
protect itself from fluctuations in prices or interest rates without buying or
selling those securities. For example, if stock or debt prices were expected to
decrease, a fund might sell equity index futures contracts, thereby hoping to
offset a potential decline in the value of equity securities in the fund by a
corresponding increase in the value of the futures contract position held by
that fund and thereby preventing the fund's net asset value from declining as
much as it otherwise would have.
Similarly, if interest rates were expected to rise, a fund might sell bond
index futures contracts, thereby hoping to offset a potential decline in the
value of debt securities in the fund by a corresponding increase in the value
of the futures contract position held by the fund. A fund also could seek to
protect against potential price declines by selling fund securities and
investing in money market instruments. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an investment
technique allows a fund to maintain a defensive position without having to sell
fund securities.
Likewise, when prices of equity securities are expected to increase, or
interest rates are expected to fall, futures contracts may be bought to attempt
to hedge against the possibility of having to buy equity securities at higher
prices. This technique is sometimes known as an anticipatory hedge. Since the
fluctuations in the value of futures contracts should be similar to those of
equity securities, a fund could take advantage of the potential rise in the
value of equity or debt securities without buying them until the market has
stabilized. At that time, the futures contracts could be liquidated and such
fund could buy equity or debt securities on the cash market. To the extent a
fund enters into futures contracts for this purpose, the segregated assets
maintained to cover such fund's obligations (with respect to futures contracts)
will consist of liquid assets from its portfolio in an amount equal to the
difference between the contract price and the aggregate value of the initial
and variation margin payments made by that fund.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets.
Second, the liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced and prices in the futures market distorted.
Third, from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions.
Due to the possibility of the foregoing distortions, a correct forecast of
general price trends by the fund manager still may not result in a successful
use of futures contracts.
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Futures contracts entail risks. Although each of the funds that invests in such
contracts believes that their use will benefit the fund, if the fund
sub-adviser's investment judgment proves incorrect, the fund's overall
performance could be worse than if the fund had not entered into futures
contracts.
For example, if a fund has hedged against the effects of a possible decrease in
prices of securities held in its fund and prices increase instead, that fund
may lose part or all of the benefit of the increased value of the securities
because of offsetting losses in the fund's futures positions. In addition, if a
fund has insufficient cash, it may have to sell securities from its fund to
meet daily variation margin requirements. Those sales may, but will not
necessarily, be at increased prices which reflect the rising market and may
occur at a time when the sales are disadvantageous to the fund.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
a fund will not exactly match that fund's current or potential investments. A
fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests.
For example, by hedging investments in fund securities with a futures contract
based on a broad index of securities may involve a risk that the futures
position will not correlate precisely with such performance of the fund's
investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments correlate with a fund's
investments. Futures prices are affected by factors such as: current and
anticipated short-term interest rates; changes in volatility of the underlying
instruments; and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices.
Imperfect correlations between a fund's investments and its futures positions
may also result from: differing levels of demand in the futures markets and the
securities markets; from structural differences in how futures and securities
are traded; and from imposition of daily price fluctuation limits for futures
contracts.
A fund may buy or sell futures contracts with a greater or lesser value than
the securities it wishes to hedge or is considering purchasing in order to
attempt to compensate for differences in historical volatility between the
futures contract and the securities. This may not be successful in all cases.
If price changes in a fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
may result in losses that are not offset by the gains in that fund's other
investments.
Because futures contracts are generally settled within a day from the date they
are closed out, compared with a settlement period of seven days for some types
of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time.
In addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, such fund's access to other assets held to cover its futures positions
also could be impaired.
Although futures contracts by their terms call for the delivery or acquisition
of the underlying commodities, or a cash payment based on the value of the
underlying commodities, in most cases the contractual obligation is offset
before the delivery date of the contract. This is accomplished by buying, in
the case of a contractual obligation to sell, or selling, in the case of a
contractual obligation to buy, an identical futures contract on a commodities
exchange. Such a transaction cancels the obligation to make or take delivery of
the commodities.
If applicable, each fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the
futures markets. The funds will use futures contracts and related options
primarily for bona fide hedging purposes within the meaning of CFTC
regulations. In addition, the funds may hold positions in futures contracts and
related options that do not fall within the definition of bona fide hedging
transactions, provided that the aggregate initial margin and premiums required
to establish such positions will not exceed 5% of the fair market value of a
fund's net assets, after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into.
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IDEX Alger Aggressive Growth may not enter into a futures contract or related
option (except for closing transactions) if, immediately thereafter, the sum of
the amount of its initial margin and premiums on open futures contracts and
options thereon would exceed 5% of IDEX Alger Aggressive Growth's total assets
(taken at current value); however, in the case of an option that is
"in-the-money" at the time of the purchase, the "in-the-money" amount may be
excluded in calculating the 5% limitation. An "in-the-money" call option is any
whose strike price is lower than the current price of the underlying stock.
(The strike price per share for which the underlying stock may be purchased (in
the case of a call) by the option buyer upon exercise of the option contract.)
Options on Futures Contracts. A fund may buy and write put and call options on
futures contracts. An option on a futures contract gives a fund the right (but
not the obligation) to buy or sell the contract at a specified price on or
before a specified date. Transactions in options on futures contracts may be
made to attempt to hedge against potential changes in interest rates or
currency exchange rates, or the price of a security or a securities index which
might correlate with, or otherwise adversely affect, either the value of the
fund's securities or the prices of securities which the fund is considering
buying at a later date. Transactions in options on future contracts will not be
made for speculation.
The purchase of a call option on a futures contract is similar in some respects
to the purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership of the
option may or may not be less risky than ownership of the futures contract or
the underlying instrument. As with the purchase of futures contracts, when a
fund is not fully invested it may buy a call option on a futures contract to
hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in such fund's holdings.
The writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at expiration of the option is higher than the exercise price, a
fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which that fund is
considering buying.
If a call or put option a fund has written is exercised, such fund will incur a
loss which will be reduced by the amount of the premium it received. Depending
on the degree of correlation between the change in the value of its fund
securities and changes in the value of the futures positions, that fund's
losses from existing options on futures may to some extent be reduced or
increased by changes in the value of fund securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on fund securities. For example, a
fund may buy a put option on a futures contract to hedge its fund securities
against the risk of falling prices or rising interest rates.
The amount of risk a fund assumes when it buys an option on a futures contract
is the premium paid for the option plus related transaction costs. In addition
to the correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the options bought.
Options on Securities. In an effort to increase current income and to reduce
fluctuations in net asset value, each of the funds, other than IDEX Federated
Tax Exempt and IDEX AEGON Income Plus, may write covered put and call options
and buy put and call options on securities that are traded on United States and
foreign securities exchanges, and over-the-counter. A fund also may write call
options that are not covered for cross-hedging purposes. A fund may write and
buy options on the same types of securities that the fund may purchase
directly. There are no specific limitations on a fund's writing and buying of
options on securities.
A put option gives the holder the right, upon payment of a premium, to deliver
a specified amount of a security to the writer of the option on or before a
fixed date at a predetermined price. A call option gives the holder the right,
upon payment of a premium, to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined price.
A put option written by a fund is "covered" if the fund: (i) segregates cash
not available for investment or other liquid assets with a value equal to the
exercise price with
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its custodian; or (ii) continues to own an equivalent number of puts of the
same "series" (that is, puts on the same underlying securities having the same
exercise prices and expiration dates as those written by the fund), or an
equivalent number of puts of the same "class" (that is, puts on the same
underlying securities) with exercise prices greater than those it has written
(or if the exercise prices of the puts it holds are less than the exercise
prices of those it has written, the difference is segregated with the
custodian).
The premium paid by the buyer of an option will reflect, among other things,
the relationship of the exercise price to the market price and the volatility
of the underlying security, the remaining term of the option, supply and demand
and interest rates.
A call option written by a fund is "covered" if the fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or has segregated
additional cash with its custodian) upon conversion or exchange of other
securities held in its fund. A call option written by a fund is also deemed to
be covered: (i) if that fund holds a call at the same exercise price for the
same exercise period and on the same securities as the call written; (ii) in
the case of a call on a stock index, if the fund owns a fund of securities
substantially replicating the movement of the index underlying the call option;
or (iii) if at the time the call is written an amount of cash, U.S. government
securities or other liquid assets equal to the fluctuating market value of the
optioned securities is segregated with the custodian.
A fund may also write call options that are not covered for cross-hedging
purposes. A fund collateralizes its obligation under a written call option for
cross-hedging purposes by segregating cash or other liquid assets in an amount
not less than the market value of the underlying security, marked-to-market
daily. A fund would write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received from the
cross-hedge transaction would exceed that which would be received from writing
a covered call option and the fund manager believes that writing the option
would achieve the desired hedge.
If a put or call option written by a fund were exercised, the fund would be
obligated to buy or sell the underlying security at the exercise price. Writing
a put option involves the risk of a decrease in the market value of the
underlying security, in which case the option could be exercised and the
underlying security would then be sold by the option holder to the fund at a
higher price than its current market value. Writing a call option involves the
risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the fund to the option holder at a lower price than its current market
value. Those risks could be reduced by entering into an offsetting transaction.
A fund retains the premium received from writing a put or call option whether
or not the option is exercised.
The writer of an option may have no control when the underlying security must
be sold, in the case of a call option, or bought, in the case of a put option,
since with regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation. Whether or not
an option expires unexercised, the writer retains the amount of the premium.
This amount, of course, may, in the case of a covered call option, be offset by
a decline in the market value of the underlying security during the option
period. If a call option is exercised, the writer experiences a profit or loss
from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will
permit a fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit the fund to write another put
option to the extent that the exercise price thereof is secured by other
deposited liquid assets. Effecting a closing transaction also will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other fund investments. If a fund desires to sell a
particular security on
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which the fund has written a call option, such fund will effect a closing
transaction prior to or concurrent with the sale of the security.
A fund will realize a profit from a closing transaction if the price of a
purchase transaction is less than the premium received from writing the option
or the price received from a sale transaction is more than the premium paid to
buy the option. The fund will realize a loss from a closing transaction if the
price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the fund.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, a fund
may not be able to effect closing transactions in particular options and that
fund would have to exercise the options in order to realize any profit. If a
fund is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market may include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by a national securities exchange on which the option is traded
("Exchange") on opening or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; (v)
the facilities of an Exchange or the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume; or (vi) one or
more Exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class
or series of options). In that case, the secondary market on that Exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
A fund may, subject to its investment restrictions, write options in connection
with buy-and-write transactions. In other words, the fund may buy a security
and then write a call option against that security. The exercise price of such
call will depend upon the expected price movement of the underlying security.
The exercise price of a call option may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current value of the
underlying security at the time the option is written.
Buy-and-write transactions using "in-the-money" call options may be used when
it is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
"at-the-money" call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately during the
option period. Buy-and-write transactions using "out-of-the-money" call options
may be used when it is expected that the premiums received from writing the
call option plus the appreciation in the market price of the underlying
security up to the exercise price will be greater than the appreciation in the
price of the underlying security alone.
If the call options are exercised in such transactions, the fund's maximum gain
will be the premium received by it for writing the option, adjusted upwards or
downwards by the difference between that fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset by the
amount of premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and a fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, a fund may elect to close the position or take
delivery of the security at the exercise price and that fund's return will be
the premium received from the put options minus the amount by which the market
price of the security is below the exercise price.
A fund may buy put options to hedge against a decline in the value of its fund.
By using put options in this way, a fund will reduce any profit it might
otherwise have realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.
A fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any
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transaction costs will reduce the benefit, if any, realized by such fund upon
exercise of the option, and, unless the price of the underlying security rises
sufficiently, the option may expire worthless to that fund.
In purchasing an option, a fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid. The fund would realize a loss if the price of the
underlying security did not increase (in the case of a call) or decrease (in
the case of a put) during the period by more than the amount of the premium. If
a put or call option purchased by a fund were permitted to expire without being
sold or exercised, the fund would lose the amount of the premium.
Although they entitle the holder to buy equity securities, warrants on and
options to purchase equity securities do not entitle the holder to dividends or
voting rights with respect to the underlying securities, nor do they represent
any rights in the assets of the issuer of those securities.
In addition to options on securities, a fund may also purchase and sell call
and put options on securities indexes. A stock index reflects in a single
number the market value of many different stocks. Relative values are assigned
to the stocks included in an index and the index fluctuates with changes in the
market values of the stocks. The options give the holder the right to receive a
cash settlement during the term of the option based on the difference between
the exercise price and the value of the index. By writing a put or call option
on a securities index, a fund is obligated, in return for the premium received,
to make delivery of this amount. A fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. A fund will not purchase these options unless a fund's
sub-adviser is satisfied with the development, depth and liquidity of the
market and believes the options can be closed out.
Price movements in a fund's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
indexes cannot serve as a complete hedge and will depend, in part, on the
ability of its sub-adviser to predict correctly movements in the direction of
the stock market generally or of a particular industry. Because options on
securities indexes require settlement in cash, a fund's sub-adviser may be
forced to liquidate fund securities to meet settlement obligations.
The amount of risk a fund assumes when it buys an option on a futures contract
is the premium paid for the option plus related transaction costs. In addition
to the correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the options bought.
Options on Foreign Currencies. Subject to any investment restrictions, a fund
may buy and write options on foreign currencies in a manner similar to that in
which futures contracts or forward contracts on foreign currencies will be
utilized. For example, a decline in the U.S. dollar value of a foreign currency
in which fund securities are denominated will reduce the U.S. dollar value of
such securities, even if their value in the foreign currency remains constant.
In order to protect against such diminutions in the value of fund securities, a
fund may buy put options on the foreign currency. If the value of the currency
declines, such fund will have the right to sell such currency for a fixed
amount in U.S. dollars and will offset, in whole or in part, the adverse effect
on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a fund may buy call options thereon. The purchase of
such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to a fund from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs. In
addition, if currency exchange rates do not move in the direction or to the
extent desired, a fund could sustain losses on transactions in foreign currency
options that would require such fund to forego a portion or all of the benefits
of advantageous changes in those rates. In addition, in the case of other types
of options, the benefit to the fund from purchases of foreign currency options
will be reduced by the amount of the premium and related transaction costs.
A fund may also write options on foreign currencies. For example, in attempting
to hedge against a potential decline in the U.S. dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates,
a fund could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
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not be exercised and the diminution in value of fund securities will be offset
by the amount of the premium received.
Similarly, instead of purchasing a call option to attempt to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired, a fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow that fund to hedge the
increased cost up to the amount of premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium. If exchange rates do not move
in the expected direction, the option may be exercised and a fund would be
required to buy or sell the underlying currency at a loss which may not be
offset by the amount of the premium. Through the writing of options on foreign
currencies, a fund also may lose all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.
A fund may write covered call options on foreign currencies. A call option
written on a foreign currency by a fund is "covered" if that fund owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration that is segregated by its
custodian) upon conversion or exchange of other foreign currency held in its
fund. A call option is also covered if: (i) the fund holds a call at the same
exercise price for the same exercise period and on the same currency as the
call written; or (ii) at the time the call is written, an amount of cash, U.S.
government securities or other liquid assets equal to the fluctuating market
value of the optioned currency is segregated with the custodian.
A fund may write call options on foreign currencies for cross-hedging purposes
that would not be deemed to be covered. A call option on a foreign currency is
for cross-hedging purposes if it is not covered but is designed to provide a
hedge against a decline due to an adverse change in the exchange rate in the
U.S. dollar value of a security which the fund owns or has the right to acquire
and which is denominated in the currency underlying the option. In such
circumstances, a fund collateralizes the option by segregating cash or other
liquid assets in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
Forward Contracts. A forward contract is an agreement between two parties in
which one party is obligated to deliver a stated amount of a stated asset at a
specified time in the future, and the other party is obligated to pay a
specified invoice amount for the assets at the time of delivery. A fund may
enter into forward contracts to purchase and sell government securities,
foreign currencies or other financial instruments. Forward contracts generally
are traded in an interbank market conducted directly between traders (usually
large commercial banks) and their customers. Unlike futures contracts, which
are standardized contracts, forward contracts can be specifically drawn to meet
the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.
The following discussion summarizes a fund's principal uses of forward foreign
currency exchange contracts ("forward currency contracts").
A fund may enter into forward currency contracts with stated contract values of
up to the value of that fund's assets. A forward currency contract is an
obligation to buy or sell an amount of a specified currency for an agreed upon
price (which may be in U.S. dollars or another currency). A fund will exchange
foreign currencies for U.S. dollars and for other foreign currencies in the
normal course of business.
They may buy and sell currencies through forward currency contracts in order to
fix a price for securities it has agreed to buy or sell ("transaction hedge").
A fund also may hedge some or all of its investments denominated in foreign
currency, or exposed to foreign currency fluctuations against a decline in the
value of that currency relative to the U.S. dollar. This is accomplished by
entering into forward currency contracts to sell an amount of that currency (or
a proxy currency whose performance is expected to replicate or exceed the
performance of that currency relative to the U.S. dollar) approximating the
value of some or all of its fund securities denominated in that currency
("position hedge"), or by participating in options or futures contracts with
respect to the currency.
A fund also may enter into a forward currency contract with respect to a
currency where such fund is considering the purchase or sale of investments
denominated in that currency but has not yet selected the specific investments
("anticipatory hedge"). In any of these circumstances a fund may,
alternatively, enter into a forward currency contract to purchase or sell one
foreign currency for a second currency that is expected to perform more
favorably relative to the U.S. dollar if the fund's sub-adviser believes there
is a reasonable degree of correlation between movements in the two currencies
("cross-hedge").
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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 fund's
foreign currency denominated fund securities.
The matching of the increase in value of a forward currency contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. Shifting
a fund's currency exposure from one foreign currency to another removes that
fund's opportunity to profit from increases in the value of the original
currency and involves a risk of increased losses to such fund if the fund's
sub-adviser's position projection of future exchange rates is inaccurate. Proxy
hedges and cross-hedges may result in losses if the currency used to hedge does
not perform similarly to the currency in which hedged securities are
denominated. Unforeseen changes in currency prices may result in poorer overall
performance for a fund than if it had not entered into such contracts.
A fund will cover outstanding forward currency contracts by maintaining liquid
fund securities denominated in the currency underlying the forward contract or
the currency being hedged. To the extent that a fund is not able to cover its
forward currency positions with underlying fund securities, its custodian will
segregate cash or other liquid assets having a value equal to the aggregate
amount of such fund's commitments under forward contracts entered into with
respect to position hedges, cross-hedges and anticipatory hedges. If the value
of the securities used to cover a position or the value of segregated assets
declines, the fund will find alternative cover or segregate additional cash or
other liquid assets on a daily basis so that the value of the covered and
segregated assets will be equal to the amount of a fund's commitments with
respect to such contracts.
As an alternative to segregating assets, a fund may buy call options permitting
the fund to buy the amount of foreign currency being hedged by a forward sale
contract, or a fund may buy put options permitting it to sell the amount of
foreign currency subject to a forward buy contract.
While forward currency contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward currency contracts.
In such event, a fund's ability to utilize forward currency contracts may be
restricted. In addition, a fund may not always be able to enter into forward
currency contracts at attractive prices and may be limited in its ability to
use these contracts to hedge its assets.
Swaps and Swap-Related Products. In order to attempt to protect the value of
its investments from interest rate or currency exchange rate fluctuations, a
fund may, subject to its investment restrictions, enter into interest rate and
currency exchange rate swaps, and may buy or sell interest rate and currency
exchange rate caps and floors. A fund's sub-adviser may enter into these
transactions primarily to attempt to preserve a return or spread on a
particular investment or portion of its portfolio. A fund also may enter into
these transactions to attempt to protect against any increase in the price of
securities the fund may consider buying at a later date.
The funds do not intend to use these transactions as a speculative investment.
Interest rate swaps involve the exchange by a fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different currencies.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually based
principal amount from the party selling the interest rate floor.
A fund, subject to its investment restrictions, enters into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with a fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of a fund's obligations over its entitlements with respect to each interest
rate swap, will be calculated on a daily basis. An amount of cash or other
liquid assets having an aggregate net asset at least equal to the accrued
excess will be segregated by its custodian.
If a fund enters into an interest rate swap on other than a net basis, it will
maintain a segregated account in the full amount accrued on a daily basis of
its obligations with respect to the swap. A fund will not enter into any
interest rate swap, cap or floor transaction unless the unsecured senior debt
or the claims-paying ability of the other party thereto is rated in one of the
three highest rating categories of at least one nationally recognized
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statistical rating organization at the time of entering into such transaction.
A fund's sub-adviser will monitor the creditworthiness of all counterparties on
an ongoing basis. If there is a default by the other party to such a
transaction, the fund will have contractual remedies pursuant to the agreements
related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. The sub-advisers have determined
that, as a result, the swap market has become relatively liquid. Caps and
floors are more recent innovations for which standardized documentation has not
yet been developed and, accordingly, they are less liquid than swaps. To the
extent a fund sells (i.e., writes) caps and floors, it will segregate cash or
other liquid assets having an aggregate net asset value at least equal to the
full amount, accrued on a daily basis, of its obligations with respect to any
caps or floors.
There is no limit on the amount of interest rate swap transactions that may be
entered into by a fund, unless so stated in its investment objectives, although
none of the funds presently intends to engage in such transactions in excess of
5% of its total assets. These transactions may in some instances involve the
delivery of securities or other underlying assets by a fund or its counterparty
to collateralize obligations under the swap.
Under the documentation currently used in those markets, the risk of loss with
respect to interest rate swaps is limited to the net amount of the interest
payments that a fund is contractually obligated to make. If the other party to
an interest rate swap that is not collateralized defaults, a fund would risk
the loss of the net amount of the payments that it contractually is entitled to
receive. A fund may buy and sell (i.e., write) caps and floors without
limitation, subject to the segregation requirement described above.
In addition to the instruments, strategies and risks described in this SAI and
in the prospectus, there may be additional opportunities in connection with
options, futures contracts, forward currency contracts and other hedging
techniques that become available as a fund's sub-adviser develops new
techniques, as regulatory authorities broaden the range of permitted
transactions, and as new instruments are developed. The funds' sub-advisers may
use these opportunities to the extent they are consistent with each fund's
investment objective and as are permitted by a fund's investment limitations
and applicable regulatory requirements.
Index Options. In seeking to hedge all or a portion of its investments, a fund
may purchase and write put and call options on securities indices listed on
U.S. or foreign securities exchanges or traded in the over-the-counter market,
which indices include securities held in the funds. The funds with such option
writing authority may write only covered options. A fund may also use
securities index options as a means of participating in a securities market
without making direct purchases of securities.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Options on
securities indices are generally similar to options on specific securities.
Unlike options on securities, however, options on securities indices do not
involve the delivery on an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date. A fund
may purchase and write put and call options on securities indices or securities
index futures contracts that are traded on a U.S. exchange or board of trade or
a foreign exchange, to the extent permitted under rules and interpretations of
the CFTC, as a hedge against changes in market conditions and interest rates,
and for duration management, and may enter into closing transactions with
respect to those options to terminate existing positions. A securities index
fluctuates with changes in the market values of the securities included in the
index. Securities index options may be based on a broad or narrow market index
or on an industry or market segment.
The delivery requirements of options on securities indices differ from options
on securities. Unlike a securities option, which contemplates the right to take
or make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (i) the amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in the case of a call)
the closing value of the underlying index on the date of exercise, multiplied
by (ii) a fixed "index multiplier." Receipt of this cash amount will depend
upon the closing level of the securities index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option. The amount of cash received will be equal to
the difference between the closing price of the index and the exercise price of
the option
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expressed in dollars times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
The writer may offset its position in securities index options prior to
expiration by entering into a closing transaction on an exchange or it may
allow the option to expire unexercised.
The effectiveness of purchasing or writing securities index options as a
hedging technique will depend upon the extent to which price movements in the
portion of a securities portfolio being hedged correlate with price movements
of the securities index selected. Because the value of an index option depends
upon movements in the level of the index rather than the price of a particular
security, whether a fund realizes a gain or loss from the purchase of writing
of options on an index depends upon movements in the level of prices in the
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular security. As a
result, successful use by a fund of options on securities indices is subject to
the sub-adviser's ability to predict correctly movements in the direction of
the market generally or of a particular industry. This ability contemplates
different skills and techniques from those used in predicting changes in the
price of individual securities.
Securities index options are subject to position and exercise limits and other
regulations imposed by the exchange on which they are traded. The ability of a
fund to engage in closing purchase transactions with respect to securities
index options depends on the existence of a liquid secondary market. Although a
fund will generally purchase or write securities index options only if a liquid
secondary market for the options purchased or sold appears to exist, no such
secondary market may exist, or the market may cease to exist at some future
date, for some options. No assurance can be given that a closing purchase
transaction can be effected when the sub-adviser desires that a fund engage in
such a transaction.
WEBS and Other Index-Related Securities. Subject to limitations under the 1940
Act, a fund may invest in shares of an investment company whose shares are
known as "World Equity Benchmark Shares" or "WEBS." WEBS have been listed for
trading on the American Stock Exchange, Inc. The funds also may invest in the
CountryBaskets Index Fund, Inc., or another fund the shares of which are the
substantial equivalent of WEBS. A fund may invest in S&P Depositary Receipts,
or "SPDRs." SPDRs are securities that represent ownership in a long-term unit
investment trust that holds a portfolio of common stocks designed to track the
performance of the S&P 500 Index. A fund investing in a SPDR would be entitled
to the dividends that accrue to the S&P 500 stocks in the underlying portfolio,
less trust expenses. Investing in these securities may result in duplication of
certain fees and expenses paid by these securities in addition to the advisory
fees and expenses paid by the fund.
Euro Instruments. The funds may each make investments in Euro instruments. Euro
instruments are U.S. dollar-denominated futures contracts, or options thereon,
which are linked to the London Interbank Offered Rate (the "LIBOR"), although
foreign currency-denominated instruments are available from time to time. Euro
futures contracts enable purchasers to obtain a fixed rate for the lending of
funds, and sellers to obtain a fixed rate for borrowings. A fund might use Euro
futures contracts and options thereon to hedge against changes in LIBOR, which
may be linked to many interest rate swaps and fixed income instruments.
Special Investment Considerations and Risks. The successful use of the
investment practices described above with respect to futures contracts, options
on futures contracts, forward contracts, options on securities, options on
foreign currencies and swaps and swap-related products draws upon skills and
experience which are different from those needed to select the other
instruments in which a fund may invest. Should interest or exchange rates, or
the prices of securities or financial indices move in an unexpected manner, a
fund may not achieve the desired benefits of the foregoing instruments or may
realize losses and thus be in a worse position than if such strategies had not
been used. Unlike many exchange-traded futures contracts and options on futures
contracts, there are no daily price fluctuation limits with respect to options
on currencies, forward contracts and other negotiated or over-the-counter
instruments, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the price of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses.
A fund's ability to dispose of its positions in the foregoing instruments will
depend on the availability of liquid markets in the instruments. Markets in a
number of the instruments are relatively new and still developing, and it is
impossible to predict the amount of trading interest that may exist in those
instruments in the future.
Particular risks exist with respect to the use of each of the foregoing
instruments and could result in such
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adverse consequences to a fund as: the possible loss of the entire premium paid
for an option bought by a fund; the inability of the fund, as the writer of a
covered call option, to benefit from the appreciation of the underlying
securities above the exercise price of the option; and the possible need to
defer closing out positions in certain instruments to avoid adverse tax
consequences. As a result, no assurance can be given that a fund will be able
to use those instruments effectively for their intended purposes.
In connection with certain of its hedging transactions, a fund must segregate
assets with the fund's custodian bank to ensure that such fund will be able to
meet its obligations pursuant to these instruments. Segregated assets generally
may not be disposed of for so long as a fund maintains the positions giving
rise to the segregation requirement. Segregation of a large percentage of a
fund's assets could impede implementation of that fund's investment policies or
its ability to meet redemption requests or other current obligations.
Additional Risks of Options on Foreign Currencies, Forward Contracts and
Foreign Instruments. Unlike transactions entered into by a fund in futures
contracts, options on foreign currencies and forward contracts are not traded
on contract markets regulated by the CFTC or (with the exception of certain
foreign currency options) by the SEC. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation.
Options on currencies may be traded over-the-counter. In an over-the-counter
trading environment, many of the protections afforded to exchange participants
will not be available. For example, there are no daily price fluctuation
limits, and adverse market movements could therefore continue to an unlimited
extent over a period of time. Although the buyer of an option cannot lose more
than the amount of the premium plus related transaction costs, this entire
amount could be lost. Moreover, an option writer and a buyer or seller of
futures or forward contracts could lose amounts substantially in excess of any
premium received or initial margin or collateral posted due to the potential
additional margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby reducing the
risk of counterparty default. Further, a liquid secondary market in options
traded on a national securities exchange may be more readily available than in
the over-the-counter market, potentially permitting a fund to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses in
the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events.
In addition, exchange-traded options on foreign currencies involve certain
risks not presented by the over-the-counter market. For example, exercise and
settlement of such options must be made exclusively through the OCC, which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign government
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures on exercise and settlement. These include
such things as technical changes in the mechanics of delivery of currency, the
fixing of dollar settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts, options
on futures contracts, forward contracts and options on foreign currencies may
be traded on foreign exchanges and over-the-counter in foreign countries. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) less availability than that available in
the United States of data on which to make trading decisions; (iii) delays in a
fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in
the United States; and (v) low trading volume.
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SOVEREIGN DEBT SECURITIES
(IDEX GABELLI GLOBAL GROWTH)
The IDEX Gabelli Global Growth portfolio may invest in securities issued or
guaranteed by any country and denominated in any currency. The fund expects
that it generally will invest in developed countries including Australia,
Canada, Finland, France, Germany, the Netherlands, Japan, Italy, New Zealand,
Norway, Spain, Sweden, the United Kingdom and the United States. The
obligations of governmental entities have various kinds of government support
and include obligations issued or guaranteed by governmental entities with
taxing power. These obligations may or may not be supported by the full faith
and credit of a government. Debt securities issued or guaranteed by foreign
governmental entities have credit characteristics similar to those of domestic
debt securities but include additional risks. These additional risks include
those resulting from devaluation of currencies, future adverse political and
economic developments and other foreign governmental laws.
The fund may also purchase securities issued by semi-governmental or
supranational agencies such as the Asian Developmental Bank, the International
Bank for Reconstruction and Development, the Export-Import Bank and the
European Investment Bank. The governmental members, or "stockholders," usually
make initial capital contributions to the supranational entity and in many
cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings. The fund will not
invest more than 25% of its assets in the securities of supranational
entities.
OTHER INVESTMENT COMPANIES
Subject to its investment restrictions, a fund may invest in securities issued
by other investment companies as permitted. A fund may indirectly bear a
portion of any investment advisory fees and expenses paid by funds in which it
invests, in addition to the advisory fees and expenses paid by the fund.
GEI Short-Term Investment Fund
The IDEX GE International Equity fund and IDEX GE U.S. Equity fund may invest
in the GEI Short-Term Investment Fund (the "Investment Fund"), an investment
fund created specifically to serve as a vehicle for the collective investment
of cash balances of accounts advised by GEAM or its affiliate, GEIC. The
Investment Fund invests exclusively in certain money market instruments. More
particularly, the Investment Fund may invest in: (i) securities issued or
guaranteed by the U.S. government or one of its agencies or instrumentalities,
(ii) debt obligations of banks, savings and loan institutions, insurance
companies and mortgage bankers, (iii) commercial paper and notes, including
those with variable and floating rates of interest, (iv) debt obligations of
foreign branches of foreign banks, (v) debt obligations issued or guaranteed by
one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities, including obligations of supranational entities,
(vi) debt securities issued by foreign issuers and (vii) repurchase agreements.
The Investment Fund is advised by GEAM. No advisory fee is charged by GEAM to
the Investment Fund, nor will the IDEX GE International Equity fund and IDEX GE
U.S. Equity fund incur any sales charge, redemption fee, distribution fee or
service fee in connection with its investments in the Investment Fund. There
may be a duplication of certain other fees and expenses.
WHEN-ISSUED, DELAYED SETTLEMENT AND
FORWARD DELIVERY SECURITIES
Securities may be purchased and sold on a "when-issued," "delayed settlement,"
or "forward (delayed) delivery" basis.
"When-issued" or "forward delivery" refers to securities whose terms are
available, and for which a market exists, but which are not available for
immediate delivery. When-issued or forward delivery transactions may be
expected to occur a month or more before delivery is due.
A fund may engage in when-issued transactions to obtain what is considered to
be an advantageous price and yield at the time of the transaction. When a fund
engages in when-issued or forward delivery transactions, it will do so for the
purpose of acquiring securities consistent with its investment objective and
policies and not for the purpose of investment leverage.
"Delayed settlement" is a term used to describe settlement of a securities
transaction in the secondary market which will occur sometime in the future. No
payment or delivery is made by a fund until it receives payment or delivery
from the other party for any of the above transactions.
The fund will segregate with its custodian cash, U.S. government securities or
other liquid assets at least equal to the value or purchase commitments until
payment is made. The segregated securities will either mature or, if necessary,
be sold on or before the settlement date. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery of
the securities is made, although a fund may
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earn income on securites it has segregated to collateralize its delayed
delivery purchases.
New issues of stocks and bonds, private placements and U.S. government
securities may be sold in this manner.
RISK FACTORS
At the time of settlement, the market value of the security may be more or less
than the purchase price. A fund bears the risk of such market value
fluctuations. These transactions also involve the risk that the other party to
the transaction may default on its obligation to make payment or delivery. As a
result, the fund may be delayed or prevented from completing the transaction
and may incur additional costs as a consequence of the delay.
ZERO COUPON, PAY-IN-KIND AND
STEP COUPON SECURITIES
Subject to its investment restrictions, a fund may invest in zero coupon,
pay-in-kind and step-coupon securities. Zero-coupon bonds are issued and traded
at a discount from their face value. They do not entitle the holder to any
periodic payment of interest prior to maturity. Step coupon bonds trade at a
discount from their face value and pay coupon interest. The coupon rate is low
for an initial period and then increases to a higher coupon rate thereafter.
The discount from the face amount or par value depends on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the security
and the perceived credit quality of the issuer. Pay-in-kind bonds give the
issuer an option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal to the
amount of the coupon payment that would have been made. The IDEX JCC Flexible
Income 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 fund must distribute its investment company taxable income,
including the original issue discount accrued on zero-coupon or step-coupon
bonds. Because it will not receive cash payments on a current basis in respect
of accrued original-issue discount on zero-coupon bonds or step-coupon bonds
during the period before interest payments begin, in some years a fund may have
to distribute cash obtained from other sources in order to satisfy the
distribution requirements under the Code. A fund might obtain such cash from
selling other portfolio holdings. These actions may reduce the assets to which
fund expenses could be allocated and may reduce the rate of return for such
fund. In some circumstances, such sales might be necessary in order to satisfy
cash distribution requirements even though investment considerations might
otherwise make it undesirable for a fund to sell the securities at the time.
Generally, the market prices of zero-coupon bonds and strip securities are more
volatile than the prices of securities that pay interest periodically in cash
and they are likely to respond to changes in interest rates to a greater degree
than other types of debt securities having similar maturities and credit
quality.
INCOME PRODUCING SECURITIES
IDEX JCC Flexible Income focuses its investments in income-producing
securities.
IDEX JCC Flexible Income will purchase defaulted securities only when the
sub-adviser believes, based upon 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 sub-adviser'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:
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 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.
Disposition of Fund Securities. IDEX JCC Flexible Income generally
intends to purchase securities for which its sub-adviser expects an
active market to be maintained, defaulted securities may be less
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actively traded than other securities making it more difficult to dispose
of substantial holdings of such securities at prevailing market prices.
IDEX JCC Flexible Income will limit its holdings of any such securities
to amounts that the sub-adviser believes could be readily sold, and its
holdings of such securities would, in any event, be limited so as not to
limit IDEX JCC Flexible Income's ability to readily dispose of its
securities to meet redemptions.
Other. Defaulted securities require active monitoring and may, at times,
require participation in bankruptcy or receivership proceedings on behalf
of the IDEX JCC Flexible Income.
Other types of income producing securities that the funds may purchase include,
but are not limited to, the following:
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
a fund the option to obligate a broker, dealer or bank to repurchase a
security held by a fund 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
funds will not invest more than 5% of their respective assets in inverse
floaters.
The funds will purchase instruments with demand features, standby commitments
and tender option bonds primarily for the purpose of increasing the liquidity
of their portfolios.
o Risk Factors
These investments are subject to credit risk and market risk. Credit risk
relates to the party's ability to make payment upon demand; market risk relates
to the fact that the value of the security will be impacted by the rise and
fall of interest rates.
LENDING OF FUND SECURITIES
Subject to any applicable investment restriction relating to lending, a fund
may lend securities from its portfolio. Under applicable regulatory
requirements (which are subject to change), the following conditions apply to
securities loans: a) the loan must be continuously secured by liquid assets
maintained on a current basis in an amount at least equal to the market value
of the securities loaned; b) a fund must receive any dividends or interest paid
by the issuer on such securities; c) a fund must have the right to call the
loan and obtain the securities loaned at any time upon notice of not more than
five business days, including the right to call the loan to permit voting of
the securities; and d) a fund must receive either interest from the investment
of collateral or a fixed fee from the borrower. Securities loaned by a fund
remain subject to fluctuations in market value. A fund may pay reasonable
finders, custodian and administrative fees in connection with a loan.
Securities lending, as with other extensions of credit, involves the risk that
the borrower may default. Although securities loans will be fully
collateralized at all times, a fund may experience delays in, or be prevented
from, recovering the collateral. During a period that a fund seeks to enforce
its rights against the borrower, the collateral and the securities loaned
remain subject to fluctuations in market value. A fund may also incur expenses
in enforcing its rights. If a fund has sold the loaned security, it may not be
able to settle the sale of the security and may incur potential liability to
the buyer of the security on loan for its costs to cover the purchase. A fund
will not lend securities to any adviser or sub-adviser to the funds or their
affiliates. By lending its securities, a fund can increase its income by
continuing to receive interest or dividends on the loaned securities as well as
by either investing the cash collateral in short-term securities or by earning
income in the form of interest paid by the borrower when U.S. government
securities are used as collateral.
JOINT TRADING ACCOUNTS
IDEX JCC Growth, IDEX JCC Global, IDEX JCC Flexible Income and IDEX JCC Growth
& Income, IDEX JCC Balanced, IDEX JCC Capital Appreciation, and other clients
of Janus and its affiliates, may place assets in joint trading accounts for the
purpose of making short-term investments in money market instruments. The Board
of Trustees must approve the participation of each of these funds in these
joint trading accounts and procedures pursuant to which the joint accounts will
operate. The joint trading accounts are to be operated pursuant to an exemptive
order issued to Janus and certain of its affiliates by the SEC. All joint
account participants, including these funds, will bear the expenses of the
joint trading accounts in proportion to their investments. Financial
difficulties of other participants in the joint accounts could
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cause delays or other difficulties for the funds in withdrawing their assets
from joint trading accounts.
ILLIQUID SECURITIES
Subject to its investment restrictions, a fund may invest its assets in
illiquid securities (i.e., securities that are not readily marketable). The
Board of Trustees has authorized the sub-advisers to make liquidity
determinations with respect to its securities, including Rule 144A securities,
commercial paper and municipal lease obligations in accordance with the
guidelines established by the Board of Trustees. Under the guidelines, the sub-
adviser will consider the following factors in determining whether a Rule 144A
security or a municipal lease obligation is liquid: 1) the frequency of trades
and quoted prices for the security; 2) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; 3)
the willingness of dealers to undertake to make a market in the security; and
4) the nature of the marketplace trades, including the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer. With respect to municipal lease obligations, the sub-adviser of IDEX
Federated Tax Exempt and IDEX JCC Flexible Income will also consider factors
unique to municipal lease obligations including the general creditworthiness of
the municipality, the importance of the property covered by the lease
obligation and the likelihood that the marketability of the obligation will be
maintained throughout the time the obligation is held by the fund. The sale of
illiquid securities often requires more time and results in higher brokerage
charges or dealer discounts and other selling expenses than does the sale of
securities eligible for trading on national securities exchanges or in the
over-the-counter markets. A fund may be restricted in its ability to sell such
securities at a time when the sub-adviser deems it advisable to do so. In
addition, in order to meet redemption requests, a fund may have to sell other
assets, rather than such illiquid securities, at a time which is not
advantageous.
SECURITIES SUBJECT TO REORGANIZATION
(IDEX GABELLI GLOBAL GROWTH)
The IDEX Gabelli Global Growth fund may invest in securities for which a tender
or exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of Gabelli, there is a reasonable prospect of
high total return significantly greater than the brokerage and other
transaction expenses involved.
In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the sub-adviser which must appraise not only the value of the issuer
and its component businesses as well as the assets or securities to be received
as a result of the contemplated transaction but also the financial resources
and business motivation of the offer and the dynamics and business climate when
the offer of the proposal is in process. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the
portfolio thereby increasing its brokerage and other transaction expenses.
Gabelli intends to select investments of the type described which, in its view,
have a reasonable prospect of capital appreciation which is significant in
relation to both risk involved and the potential of available alternate
investments.
REPURCHASE AND REVERSE REPURCHASE
AGREEMENTS
Subject to its investment restrictions, a fund may enter into repurchase and
reverse repurchase agreements. Reverse repurchase agreements are also subject
to the applicable restrictions regarding senior securities. In a repurchase
agreement, a fund purchases a security and simultaneously commits to resell
that security to the seller at an agreed upon price on an agreed upon date
within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value (at least equal to the amount of the agreed upon resale price and
marked-to-market daily) of the underlying security or collateral. A fund may
engage in a repurchase agreement with respect to any security in which it is
authorized to invest. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays
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and costs to a fund in connection with bankruptcy proceedings), it is the
policy of each fund to limit repurchase agreements to those parties whose
creditworthiness has been reviewed and found satisfactory by the sub-adviser
for that fund and approved by the Board of Trustees. In addition, the funds
currently intend to invest primarily in repurchase agreements collateralized by
cash, U.S. government securities, or money market instruments whose value
equals at least 100% of the repurchase price, marked-to-market daily.
In a reverse repurchase agreement, a fund sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees
to repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, a fund will segregate with its custodian
cash and appropriate liquid assets with the funds' custodian to cover its
obligation under the agreement. The funds will enter into reverse repurchase
agreements only with parties the investment sub-adviser for each fund deems
creditworthy and that have been reviewed by the Board of Trustees.
The IDEX Goldman Sachs Growth may, together with other registered investment
companies managed by GSAM or its affiliates, transfer uninvested cash balances
into a single joint account, the daily aggregate balance of which will be
invested in one or more repurchase agreements.
Repurchase agreements involve the risk that the seller will fail to repurchase
the security, as agreed. In that case, a fund will bear the risk of market
value fluctuations until the security can be sold and may encounter delays and
incur costs in liquidating the security. In the event of bankruptcy or
insolvency of the seller, delays and costs are incurred.
Reverse repurchase agreements may expose a fund to greater fluctuations in the
value of its assets.
PASS-THROUGH SECURITIES
Each of the funds may, in varying degrees, invest in various types of
pass-through securities, such as mortgage-backed securities, asset-backed
securities and participation interests. A pass-through security is a share or
certificate of interest in a pool of debt obligations that has been repackaged
by an intermediary, such as a bank or broker-dealer. The purchaser receives an
undivided interest in the underlying pool of securities. The issuers of the
underlying securities make interest and principal payments to the intermediary
which are passed through to purchasers, such as the funds.
The most common type of pass-through securities are mortgage-backed securities.
Government National Mortgage Association ("GNMA") Certificates are mortgage-
backed securities that evidence an undivided interest in a pool of mortgage
loans. GNMA Certificates differ from traditional bonds in that principal is
paid back monthly by the borrowers over the term of the loan rather than
returned in a lump sum at maturity. A fund will generally purchase "modified
pass-through" GNMA Certificates, which entitle the holder to receive a share of
all interest and principal payments paid and owned on the mortgage pool, net of
fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment. GNMA Certificates are backed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates
in that each PC represents a pro rata share of all interest and principal
payments made and owned on the underlying pool. FHLMC guarantees timely
payments of interest on PCs and the full return of principal. GMCs also
represent a pro rata interest in a pool of mortgages. However, these
instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. This type of security is guaranteed by FHLMC as to
timely payment of principal and interest, but is not backed by the full faith
and credit of the U.S. government.
The Federal National Mortgage Association ("FNMA") issues guaranteed mortgage
pass-through certificates ("FNMA Certificates"). FNMA Certificates resemble
GNMA Certificates in that each FNMA Certificate represents a pro rata share of
all interest and principal payments made and owned on the underlying pool. This
type of security is guaranteed by FNMA as to timely payment of principal and
interest, but it is not backed by the full faith and credit of the U.S.
government.
Each of the mortgage-backed securities described above is characterized by
monthly payments to the holder, reflecting the monthly payments made by the
borrowers who received the underlying mortgage loans. The payments to the
security holders (such as a fund), like the payments on the underlying loans,
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 20 or 30 years, the borrowers can,
and typically do, pay them off sooner. Thus, the security holders frequently
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receive prepayments of principal in addition to the principal that is part of
the regular monthly payments. A borrower is more likely to prepay a mortgage
that bears a relatively high rate of interest. This means that in times of
declining interest rates, some of a fund's higher yielding mortgage-backed
securities may be converted to cash. That fund will then be forced to accept
lower interest rates when that cash is used to purchase additional securities
in the mortgage-backed securities sector or in other investment sectors.
Mortgage and asset-backed securities may have periodic income payments or may
pay interest at maturity (as is the case with Treasury bills or zero-coupon
bonds).
Asset-backed securities represent interests in pools of consumer loans and are
backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and
interest and principal payments ultimately depend upon payment of the
underlying loans by individuals. Tax-exempt asset-backed securities include
units of beneficial interests in pools of purchase contracts, financing leases,
and sales agreements that may be created when a municipality enters into an
installment purchase contract or lease with a vendor. Such securities may be
secured by the assets purchased or leased by the municipality; however, if the
municipality stops making payments, there generally will be no recourse against
the vendor. The market for tax-exempt asset-backed securities is still
relatively new. These obligations are likely to involve unscheduled prepayments
of principal.
HIGH YIELD/HIGH-RISK BONDS
High-yield/high-risk bonds, below investment grade securities (commonly known
as "junk bonds") involve significant credit and liquidity concerns and
fluctuating yields, and are not suitable for short-term investing. Higher
yields are ordinarily available on fixed-income securities which are unrated or
are rated in the lower rating categories of recognized rating services such as
Moody's and Standard & Poor's.
Valuation risks. Lower rated bonds also involve the risk that the issuer will
not make interest or principal payments when due. In the event of an
unanticipated default, a fund owning such bonds would experience a reduction in
its income, and could expect a decline in the market value of the securities so
affected. Such funds, furthermore, may incur additional costs in seeking the
recovery of the defaulted securities. More careful analysis of the financial
condition of each issuer of lower rated securities is therefore necessary.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service their principal and interest payments
obligations, to meet projected business goals and to obtain additional
financing.
The market prices of lower grade securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or individual developments specific to
the issuer. Periods of economic or political uncertainty and change can be
expected to result in volatility of prices of these securities. Past experience
with high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods.
Liquidity risks. Lower rated securities also may have less liquid markets than
higher rated securities, and their liquidity as well as their value may be more
severely affected by adverse economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a greater
negative impact on the market for lower rated bonds.
Unrated securities are not necessarily of lower quality than rated securities,
but the markets for lower rated and nonrated securities are more limited than
those in which higher rated securities are traded. In addition, an economic
downturn or increase in interest rates is likely to have a greater negative
effect on: (i) the market for lower rated and nonrated securities; (ii) the
value of high yield debt securities held by a fund; (iii) the new asset value
of a fund holding such securities; and (iv) the ability of the bonds' issuers
to repay principal and interest, meet projected business goals and obtain
additional financing than on higher rated securities.
WARRANTS AND RIGHTS
Subject to its investment restrictions, a fund may invest in warrants and
rights. A warrant is a type of security that entitles the holder to buy a
proportionate amount of common stock at a specified price, usually higher than
the market price at the time of issuance, for a period of years or to
perpetuity. In contrast, rights, which also represent the right to buy common
shares, normally have a subscription price lower than the current market value
of the common stock and a life of two to four weeks.
U.S. GOVERNMENT SECURITIES
Examples of the types of U.S. government securities that a fund may hold
include, in addition to those described in the prospectus and direct
obligations of the U.S. Treasury, the obligations of the Federal Housing
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Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Bank, Federal Intermediate Credit Banks,
Federal Land Banks and Maritime Administration. U.S. government securities may
be supported by the full faith and credit of the U.S. government (such as
securities of the Small Business Administration); by the right of the issuer to
borrow from the Treasury (such as securities of the Federal Home Loan Bank); by
the discretionary authority of the U.S. government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association);
or only by the credit of the issuing agency.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, a portfolio may, at times, choose to hold
some portion of its net assets in cash, or to invest that cash in a variety of
debt securities. This may be done as a defensive measure at times when
desirable risk/reward characteristics are not available in stocks or to earn
income from otherwise uninvested cash. When a fund increases its cash or debt
investment position, its income may increase while its ability to participate
in stock market advances or declines decrease. Furthermore, when a fund assumes
a temporary defensive position it may not be able to achieve its investment
objective.
MONEY MARKET RESERVES
(IDEX T. Rowe Price Small Cap and
IDEX T. Rowe Price Dividend Growth)
It is expected that these funds will invest their cash reserves primarily in a
money market fund established for the exclusive use of the T. Rowe Price family
of mutual funds and other clients of T. Rowe Price and Price-Fleming. The
Reserve Investment Fund ("RIF") and Government Reserve Investment Fund ("GRIF")
are series of Reserve Investment Funds, Inc. Additional series may be created
in the future. These funds were created and operate pursuant to an Exemptive
Order issued by the SEC (Investment Company Act Release No. IC-22770, July 29,
1997).
The funds must comply with the requirements of Rule 2a-7 under the 1940 Act
governing money market funds. To that end, the RIF invests at least 95% of its
total assets in prime money market instruments receiving the highest credit
rating from at least one Nationally Recognized Statistical Rating Organization.
The GRIF invests primarily in a portfolio of U.S. Government-backed securities,
primarily U.S. Treasuries, and repurchase agreements thereon.
The RIF and GRIF provide very efficient means of managing the cash reserves of
the funds. While the RIF does not pay an advisory fee to the investment
manager, they will incur other expenses. However, the RIF and GRIF are expected
by T. Rowe Price to operate at very low expense ratios. The funds will only
invest in the RIF or GRIF to the extent it is consistent with their objectives
and programs and the terms of the Exemptive Order issued by the SEC.
The RIF and GRIF are not insured or guaranteed by the U.S. government, and
there is no assurance they will maintain a stable net asset value of $1.00 per
share. Investing in these securities may result in duplication of certain fees
and expenses.
TURNOVER RATE
<TABLE>
<CAPTION>
Fund* October 31, 1999 October 31, 1998
------------------------------------- ------------------ -----------------
<S> <C> <C>
IDEX Alger Aggressive Growth 96.25% 142.08%
IDEX GE International Equity** 71.70% 50.01%
IDEX JCC Capital Appreciation 93.54% 136.59%
IDEX JCC Global 145.40% 87.68%
IDEX JCC Growth 70.97% 27.19%
IDEX Jennison Equity Opportunity*** 125.60% 147.01%
IDEX NWQ Value Equity 26.29% 30.43%
IDEX LKCM Strategic Total Return 60.18% 32.12%
IDEX Dean Asset Allocation 82.20% 55.45%
IDEX JCC Balanced 59.57% 61.50%
IDEX JCC Flexible Income 100.22% 90.63%
IDEX AEGON Income Plus 26.95% 53.09%
IDEX Federated Tax Exempt**** 35.97% 42.42%
IDEX Goldman Sachs Growth 21.91% N/A
IDEX T. Rowe Price Dividend Growth 20.48% N/A
IDEX T. Rowe Price Small Cap 42.52% N/A
IDEX Salomon All Cap 82.70% N/A
IDEX Pilgrim Baxter Mid Cap Growth 150.78% N/A
</TABLE>
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------------------------------
* Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE
U.S. Equity, IDEX Transamerica Small Company and IDEX Transamerica Equity
funds as these funds commenced operations on March 1, 2000, for IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM) as they
commenced operations on July 14, 2000; for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000; and for IDEX JCC Growth & Income and IDEX Munder Net50,
as they commenced operations on December 1, 2000.
** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
*** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund and the fund was named IDEX C.A.S.E. Growth.
**** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
As stated in the prospectus, each of the funds generally intends to purchase
and sell securities as deemed appropriate by the fund's sub-adviser to further
a fund's stated investment objective, and the rate of fund turnover is not
expected to be a limiting factor when changes are deemed to be appropriate.
Fund transactions for IDEX Federated Tax Exempt and IDEX AEGON Income Plus are
ordinarily undertaken to achieve each fund's investment objective in light of
anticipated movements in the level of interest rates. The investment policies
of IDEX Federated Tax Exempt and IDEX AEGON Income Plus may lead to frequent
changes in investments, particularly in periods of rapidly fluctuating interest
rates.
These percentages are calculated by dividing the lesser of purchases or sales
of fund securities during the fiscal year by the monthly average of the value
of such securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less). For
example, a fund turnover rate of 100% would mean that all of a fund's
securities (except those excluded from the calculation) were replaced once in a
period of one year. A high rate of fund turnover generally involves
correspondingly greater brokerage commission expenses.
Turnover rates may vary greatly from year to year, as well as within a
particular year, and may also be affected by cash requirements for redemptions
of a fund's shares and by requirements, the satisfaction of which enable the
fund to receive favorable tax treatment. Because the rate of fund turnover is
not a limiting factor, particular holdings may be sold at any time if
investment judgment or fund operations make a sale advisable. As a result, the
annual fund turnover rate in future years may exceed the percentage shown
above.
INVESTMENT ADVISORY AND OTHER SERVICES
IDEX Mutual Funds has entered into a Management and Investment Advisory
Agreement ("Advisory Agreement") on behalf of each fund with Idex Management,
Inc. ("IMI"), located at 570 Carillon Parkway, St. Petersburg, Florida 33716.
IMI supervises each respective fund's investments and conducts its investment
program.
The Advisory Agreement provides that IMI will perform the following services or
cause them to be performed by others: (i) furnish to the fund investment advice
and recommendations; (ii) supervise the purchase and sale of securities as
directed by appropriate fund officers, and (iii) be responsible for the
administration of each fund. For services to IDEX JCC Capital Appreciation,
IDEX JCC Global, IDEX JCC Growth and IDEX JCC Balanced, IMI receives an annual
fee, computed daily and paid monthly, equal to 1.00% of the first $750 million
of each fund's average daily net assets, 0.90% of the next $250 million of each
fund's average daily net assets, and 0.85% of the average daily net assets of
that fund in excess of $1 billion. For services to IDEX JCC Growth & Income,
IMI receives an annual fee, computed daily and paid monthly, equal to 1.00% of
the first $400 million of the fund's average daily net assets; 0.95% of the
next $400 million; and 0.85% of assets in excess of $500 million. For services
to IDEX JCC Flexible Income, IMI receives 0.90% of the first $100 million,
0.80% of the next $150 million and 0.70% of the fund's average daily net assets
over $250 million; for IDEX AEGON Income Plus and IDEX Federated Tax Exempt,
IMI receives 0.60% of each fund's average daily net assets; and for IDEX Alger
Aggressive Growth, IDEX GE International Equity, IDEX Jennison Equity
Opportunity, IDEX NWQ Value Equity, IDEX LKCM Strategic Total Return, IDEX Dean
Asset Allocation, IDEX Goldman Sachs Growth, IDEX T. Rowe Price Dividend
Growth, IDEX Salomon All Cap, IDEX Pilgrim Baxter Mid Cap Growth, IDEX T. Rowe
Price Small Cap, IDEX Pilgrim Baxter Technology, IDEX GE U.S. Equity, IDEX
Transamerica Small Company, IDEX Transamerica Equity, IDEX Great Companies --
America(SM), IDEX Great Companies -- Technology(SM) and IDEX Great Companies --
Global(2), IMI receives 0.80% of the first $500 million of each fund's average
daily net assets and 0.70% of each fund's average daily net assets over $500
million; and for IDEX Gabelli Global Growth, IMI receives 1.00% of the first
$500 million of the funds average daily net assets, 0.90% of assets from $500
million to $1 billion and 0.80% of assets over $1 billion; and for IDEX Munder
Net50, IMI receives 1.00% of the first $1 billion of the fund's average daily
net assets and 0.95% of assets in excess of $1 billion.
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The duties and responsibilities of the investment adviser are specified in the
Advisory Agreement. The Advisory Agreement was approved by the Board of
Trustees (including a majority of trustees who are not parties to the Advisory
Agreement or interested persons, as defined by the 1940 Act, of any such
party). The Advisory Agreement is not assignable and may be terminated without
penalty upon 60 days' written notice at the option of either the Fund, IMI or
by a vote of shareholders of each fund. The Advisory Agreement provides that it
can be continued from year to year so long as such continuance is specifically
approved annually (a) by the Board of Trustees or by a majority of the
outstanding shares of each fund and (b) by a majority vote of the Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party cast in person at a special meeting called for such purposes.
The Advisory Agreement also provides that IMI shall not be liable to the funds
or to any shareholder for any error of judgment or mistake of law or for any
loss suffered by a fund or by any shareholder in connection with matters to
which the Advisory Agreement relates, except for a breach of fiduciary duty or
a loss resulting from willful misfeasance, bad faith, gross negligence, or
reckless disregard on the part of IMI in the performance of its duties
thereunder.
The Advisory Agreement became effective as follows: IDEX Federated Tax Exempt -
June 15, 2000; IDEX AEGON Income Plus - April 22, 1992; IDEX Alger Aggressive
Growth and IDEX LKCM Strategic Total Return - September 30, 1994; IDEX Dean
Asset Allocation - June 1, 1995; IDEX Jennison Equity Opportunity - December 1,
2000; IDEX NWQ Value Equity - October 30, 1996; IDEX GE International Equity -
February 1, 1997; IDEX JCC Capital Appreciation, IDEX JCC Global, IDEX JCC
Growth, IDEX JCC Balanced and IDEX JCC Flexible Income - June 25, 1998; IDEX
Pilgrim Baxter Mid Cap Growth, IDEX T. Rowe Price Small Cap, IDEX Goldman Sachs
Growth, IDEX T. Rowe Price Dividend Growth, IDEX Salomon All Cap. - March 1,
1999; IDEX Pilgrim Baxter Technology, IDEX GE U.S. Equity, IDEX Transamerica
Small Company and IDEX Transamerica Equity - March 1, 2000; IDEX Great
Companies -- Global(2) and IDEX Gabelli Global Growth - September 1, 2000; and
IDEX JCC Growth & Income and IDEX Munder Net50 -- December 1, 2000
Each fund pays its allocable share of the fees and expenses of a fund's
non-interested trustees, custodian and transfer agent fees, brokerage
commissions and all other expenses in connection with the execution of its
portfolio transactions, administrative, clerical, recordkeeping, bookkeeping,
legal, auditing and accounting expenses, interest and taxes, expenses of
preparing tax returns, expenses of shareholders' meetings and preparing,
printing and mailing proxy statements (unless otherwise agreed to by the funds
or IMI, expenses of preparing and typesetting periodic reports to shareholders
(except for those reports the funds permit to be used as sales literature), and
the costs, including filing fees, of renewing or maintaining registration of
fund shares under federal and state law. The investment adviser will reimburse
a fund, or waive fees, or both, whenever, in any fiscal year, the total cost to
a fund of normal operating expenses chargeable to its income account, including
the investment advisory fee but excluding brokerage commissions, interest,
taxes and 12b-1 fees, exceeds, in the case of the IDEX JCC Capital
Appreciation, IDEX JCC Growth, IDEX JCC Balanced and IDEX JCC Flexible Income,
1.50% of each fund's average daily net assets; 1.40% for IDEX Pilgrim Baxter
Technology, IDEX Gabelli Global Growth, IDEX JCC Growth & Income and IDEX
Munder Net50; in the case of IDEX AEGON Income Plus, 1.25% of average daily net
assets; in the case of the IDEX Federated Tax Exempt, 1.00% of average daily
net assets; and 1.20% of a fund's average daily net assets for all other funds.
The IDEX JCC Global does not have an expense limitation.
48
<PAGE>
<TABLE>
<CAPTION>
Advisory Fee After Reimbursement
--------------------------------------------------------
October 31
--------------------------------------------------------
Fund* Adviser 1999 1998 1997
------------------------------------- --------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
IDEX Alger Aggressive Growth IMI $ 617,922 $ 344,018 $ 130,896
IDEX GE International Equity** IMI $ (53,604) $ (64,180) $ (110,543)
IDEX JCC Capital Appreciation IMI $ 466,930 $ 167,150 $ 45,071
IDEX JCC Global IMI $ 6,949,268 $3,907,062 $ 2,224,062
IDEX JCC Growth IMI $21,381,062 $1,352,188 $11,676,637
IDEX Jennison Equity Opportunity*** IMI $ (31,048) $ 36,124 $ (96,157)
IDEX NWQ Value Equity IMI $ 35,123 $ 46,140 $ (63,589)
IDEX LKCM Strategic Total Return IMI $ 393,829 $ 380,273 $ 127,630
IDEX Dean Asset Allocation IMI $ 237,931 $ 325,285 $ 120,873
IDEX JCC Balanced IMI $ 1,086,804 $ 206,736 $ (4,940)
IDEX JCC Flexible Income IMI $ 184,981 $ 151,489 $ 60,744
IDEX AEGON Income Plus IMI $ 484,795 $ 441,912 $ 416,928
IDEX Federated Tax Exempt**** IMI $ 122,580 $ 136,481 $ (7,330)
IDEX Goldman Sachs Growth IMI $ (76,699) N/A N/A
IDEX T. Rowe Price Dividend Growth IMI $ (76,054) N/A N/A
IDEX Salomon All Cap IMI $ (70,744) N/A N/A
IDEX Pilgrim Baxter Mid Cap Growth IMI $ (67,394) N/A N/A
IDEX T. Rowe Price Small Cap IMI $ (70,793) N/A N/A
<CAPTION>
Advisory Fee Reimbursements
---------------------------------------------
October 31
---------------------------------------------
Fund* 1999 1998 1997
------------------------------------- ----------- ------------------ --------------
<S> <C> <C> <C>
IDEX Alger Aggressive Growth $318,097 $173,443 $192,695
IDEX GE International Equity** $114,536 $117,653 $128,291
IDEX JCC Capital Appreciation $ 94,449 $107,861 $193,491
IDEX JCC Global $ 0 0 0
IDEX JCC Growth $713,062 0 0
IDEX Jennison Equity Opportunity*** $103,977 $ 51,462 $150,161
IDEX NWQ Value Equity $105,260 $ 93,563 $104,638
IDEX LKCM Strategic Total Return $ 85,282 $ 30,860 $ 96,214
IDEX Dean Asset Allocation $ 68,735 $ 8,119 $ 99,277
IDEX JCC Balanced $ 6,324 $ 50,820 $139,247
IDEX JCC Flexible Income $ 36,126 $ 186 $ 95,242
IDEX AEGON Income Plus $ 0 0 0
IDEX Federated Tax Exempt**** $ 28,238 $ 10,071 $155,172
IDEX Goldman Sachs Growth $ 88,276 N/A N/A
IDEX T. Rowe Price Dividend Growth $ 87,719 N/A N/A
IDEX Salomon All Cap $ 79,464 N/A N/A
IDEX Pilgrim Baxter Mid Cap Growth $ 79,128 N/A N/A
IDEX T. Rowe Price Small Cap $ 80,896 N/A N/A
</TABLE>
------------------------------
* Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE
U.S. Equity, IDEX Transamerica Small Company, and IDEX Transamerica Equity
as they did not commence operations until March 1, 2000; for IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM) as they
commenced operations on July 14, 2000; for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000; for IDEX JCC Growth & Income and IDEX Munder Net50 as
they commenced operations on December 1, 2000.
** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
*** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as subadviser
to this fund and the fund was named IDEX C.A.S.E. Growth.
**** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
Janus Capital Corporation ("JCC"), 100 Fillmore Street, Denver, CO 80206,
serves as sub-adviser to IDEX JCC Capital Appreciation, IDEX JCC Global, IDEX
JCC Growth, IDEX JCC Balanced and IDEX JCC Flexible Income pursuant to an
Investment Counsel Agreement dated June 25, 1998 with IMI, and serves as
sub-adviser to IDEX JCC Growth & Income pursuant to an Investment Counsel
Agreement dated December 1, 2000 with IMI.
Fred Alger Management, Inc. ("Alger"), 1 World Trade Center, Suite 9333, New
York, NY 10048, serves as sub-adviser to IDEX Alger Aggressive Growth pursuant
to an Investment Counsel Agreement dated September 30, 1994 with IMI.
Luther King Capital Management Corporation ("LKCM"), 301 Commerce Street, Suite
1600, Fort Worth, TX 76102, serves as sub-adviser to IDEX LKCM Strategic Total
Return pursuant to an Investment Counsel Agreement dated as of September 30,
1994.
Dean Investment Associates ("Dean"), a Division of C.H. Dean and Associates,
Inc., 2480 Kettering Tower, Dayton, Ohio 45423-2480 serves as sub-adviser to
IDEX Dean Asset Allocation pursuant to an Investment Counsel Agreement dated as
of June 30, 1995.
Jennison Associates, LLC ("Jennison"), 466 Lexington Avenue, New York, NY
10017, serves as sub-adviser to IDEX Jennison equity Opportunity pursuant to an
Investment Counsel Agreement dated December 1, 2000.
NWQ Investment Management Company, Inc. ("NWQ"), 2049 Century Park East, 4th
Floor, Los Angeles, CA 90067, serves as sub-adviser to IDEX NWQ Value Equity
pursuant to an Investment Counsel Agreement dated October 30, 1996.
GE Asset Management Incorporated ("GEAM"), 3003 Summer Street, Stamford, CT
06905, serves as sub-adviser to IDEX GE International Equity and IDEX GE U.S.
Equity pursuant to Sub-Advisory Agreements dated March 1, 2000.
T. Rowe Price Associates, Inc. ("T. Rowe Price"), 100 E. Pratt Street,
Baltimore, MD 21202 serves as sub-adviser to IDEX T. Rowe Price Dividend Growth
and IDEX T. Rowe Price Small Cap pursuant to an Investment Counsel Agreement
dated March 1, 1999.
Salomon Brothers Asset Management Inc ("SBAM"), 7 World Trade Center, New York,
NY 10048 serves as sub-adviser to IDEX Salomon All Cap pursuant to an
Investment Counsel Agreement dated March 1, 1999.
49
<PAGE>
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") 825 Dupportrail, Wayne, PA
19087 serves as sub-adviser to IDEX Pilgrim Baxter Mid Cap Growth pursuant to
an Investment Counsel Agreement dated March 1, 1999 and as sub-advisor to IDEX
Pilgrim Baxter Technology pursuant to a Sub-Advisory Agreement dated March 1,
2000.
Goldman Sachs Asset Management ("GSAM") One New York Plaza, New York, NY 10004
serves as sub-adviser to IDEX Goldman Sachs Growth pursuant to an Investment
Counsel Agreement dated March 1, 1999.
AEGON USA Investment Management, Inc. ("AIMI"), 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499, serves as sub-adviser to IDEX AEGON Income Plus pursuant to
an Investment Counsel Agreement dated April 22, 1992.
Transamerica Investment Management, LLC, 1150 South Olive Street, Suite 2700,
Los Angeles, CA 90015, serves as sub-adviser to IDEX Transamerica Small Company
and IDEX Transamerica Equity pursuant to a Sub-Advisory Agreement dated March
1, 2000.
Great Companies, L.L.C., 8550 Ulmerton Road, Largo, FL 33771, serves as
sub-adviser to IDEX Great Companies -- America(SM) and IDEX Great Companies --
Technology(SM) pursuant to a sub-advisory agreement dated June 15, 2000 and to
IDEX Great Companies -- Global(2) pursuant to a sub-advisory agreement dated
September 1, 2000.
Federated Investment Management Company, Federated Investors Tower, Pittsburgh,
PA 15222-3779, serves as sub-adviser to IDEX Federated Tax Exempt pursuant to a
Sub-Advisory Agreement dated June 15, 2000.
Gabelli Asset Management Company, One Corporate Center, Rye, New York serves as
sub-adviser to IDEX Gabelli Global Growth pursuant to a Sub-Advisory Agreement
dated September 1, 2000.
Munder Capital Management, 480 Pierce Stree, Birmingham, MI 48009, serves as
sub-adviser to IDEX Munder Net50.
The sub-advisers also serve as sub-advisers to certain portfolios of the WRL
Series Fund, Inc., a registered investment company. They may be referred to
herein collectively as the "sub-advisers" and individually as a "sub-adviser."
<TABLE>
<CAPTION>
Fund Sub-Adviser Sub-Advisory Fee
--------------------------- --------------------------- -----------------------------------------------------
<S> <C> <C>
IDEX Jennison Equity Jennison Associates, LLC 50% of the fees received by IMI under the Advisory
Opportunity Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX Great Companies -- Great Companies, L.L.C. 50% of the advisory fees received by IMI, less
America(SM) 50% of any amount reimbursed pursuant to its
expense limitation
IDEX Goldman Sachs Growth Goldman Sachs Asset 0.50% of the first $50 million of average daily net
Management assets; 0.45% of the next $50-$100 million in
assets; and 0.40% of assets in excess of $100
million
IDEX JCC Growth Janus Capital Corporation 0.50% of the first $750 million of average daily net
assets; 0.45% of the next $250 million; and
0.4250% of assets in excess of $1 billion, less
50% of any amount reimbursed pursuant to the
fund's expense limitation
IDEX NWQ Value Equity NWQ Investment Manage- 50% of the fees received by IMI under the Advisory
ment Company, Inc. Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX Salomon All Cap Salomon Brothers Asset 0.30% of the first $20 million of average daily net
Management, Inc. assets; 0.50% of the next $20-$100 million of
average daily net assets; and 0.40% of average
daily net assets over $100 million
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Fund Sub-Adviser Sub-Advisory Fee
-------------------------------- --------------------------- ------------------------------------------------------
<S> <C> <C>
IDEX Transamerica Equity Transamerica Investment 50% of the fees received by IMI under the Advisory
Management LLC Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX Alger Aggressive Growth Fred Alger Management, 50% of the fees received by IMI under the Advisory
Inc. Agreement, less 40% of any amount reimbursed
pursuant to its expense limitation
IDEX Great Companies -- Great Companies, L.L.C. 50% of the advisory fees received by IMI, less
Technology(SM) 50% of any amount reimbursed pursuant to its
expense limitation
IDEX JCC Capital Appreciation Janus Capital Corporation 0.50% of the first $750 million of average daily net
assets; 0.45% of the next $250 million assets; and
0.4250% of assets in excess of $1 billion, less
50% of any amount reimbursed pursuant to the
fund's expense limitation
IDEX Munder Net50 Munder Capital Manage- 0.65% of the first $1 billion of average daily net
ment assets; and 0.60% of assets in excess of $1 billion.
IDEX Pilgrim Baxter Mid Cap Pilgrim Baxter & Associ- 0.50% of the first $100 million of average daily net
Growth ates, Ltd. assets; 0.40% of assets in excess of $100 million
(from first dollar)
IDEX Pilgrim Baxter Technology Pilgrim Baxter & Associ- 0.55% of the first $500 million of average daily net
ates, Ltd. assets; 0.50% of assets in excess of $500 million
IDEX Transamerica Small Transamerica Investment 50% of the fees received by IMI under the Advisory
Company Management, LLC Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation.
IDEX T. Rowe Price Small Cap T. Rowe Price Associates, 0.35% of average daily net assets
Inc.
IDEX Gabelli Global Growth Gabelli Asset Management 0.50% of the first $500 million of the fund's
Company average daily net assets; 0.40% of assets over
$500 million up to $1 billion; and 0.30% of assets
in excess of $1 billion
IDEX GE International Equity GE Asset Management, 50% of the fees received by IMI under the Advisory
Inc. Agreement
IDEX Great Companies -- Great Companies, L.L.C. 50% of the advisory fees received by IMI, less
Global(2) 50% of any amount reimbursed pursuant to its
expense limitation
IDEX JCC Global Janus Capital Corporation 0.50% of the first $750 million of average daily net
assets; 0.45% of the next $250 million in assets;
and 0.4250% of assets in excess of $1 billion
IDEX GE U.S. Equity GE Asset Management, 50% of the fees received by IMI under the Advisory
Inc. Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX JCC Growth & Income Janus Capital Corporation 0.55% of the first $100 million of the fund's
average daily net assets; 0.50% of the next $400
million of the fund's average daily net assets; and
0.45% of assets over $500 million
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Fund Sub-Adviser Sub-Advisory Fee
----------------------------- --------------------------- -----------------------------------------------------
<S> <C> <C>
IDEX T. Rowe Price Dividend T. Rowe Price Associates, 0.50% of the first $100 million of average daily net
Growth Inc. assets and 0.40% of assets over $100 million
(from first dollar)
IDEX Dean Asset Allocation Dean Investment Associ- 50% of the fees received by IMI under the Advisory
ates Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX JCC Balanced Janus Capital Corporation 0.50% of the first $750 million of average daily net
assets; 0.45% of next $250 million in assets; and
0.4250% of assets in excess of $1 billion, less
50% of any amount reimbursed pursuant to the
fund's expense limitation
IDEX LKCM Strategic Total Luther King Capital 50% of the fees received by IMI under the Advisory
Return Management Corporation Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX AEGON Income Plus AEGON USA Investment 50% of the fees received by IMI under the Advisory
Management, Inc. Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX Federated Tax Exempt Federated Investment 50% of the fees received by IMI under the Advisory
Management Company Agreement, less 50% of any amount reimbursed
pursuant to its expense limitation
IDEX JCC Flexible Income Janus Capital Corporation 0.45% of the first $100 million of average daily net
assets; 0.40% of the next $150 million in assets;
and 0.35% of assets in excess of $250 million, less
50% of any amount reimbursed pursuant to the
fund's expense limitation
</TABLE>
52
<PAGE>
SUB-ADVISORY FEES PAID*
(Net of Fees Reimbursed)
<TABLE>
<CAPTION>
October 31
----------------------------------------------
Fund 1999 1998 1997
-------------------------------------- ----------- ---------- ----------
<S> <C> <C> <C>
IDEX Alger Aggressive Growth $ 342,362 $ 137,607 $ 52,325
IDEX GE International Equity** $ 0 $ 0 0
IDEX JCC Capital Appreciation $ 233,465 $ 83,575 $ 22,536
IDEX JCC Global $ 3,480,875 $1,953,531 $1,112,031
IDEX JCC Growth $11,063,717 $6,769,684 $5,838,319
IDEX Jennison Equity Opportunity*** $ 0 $ 14,450 0
IDEX NWQ Value Equity $ 16,106 $ 18,456 0
IDEX LKCM Strategic Total Return $ 197,195 $ 152,109 $ 50,944
IDEX Dean Asset Allocation $ 119,012 $ 130,114 $ 48,349
IDEX JCC Balanced $ 545,519 $ 103,368 0
IDEX JCC Flexible Income $ 95,664 $ 75,745 $ 30,372
IDEX AEGON Income Plus $ 242,397 $ 220,956 $ 208,464
IDEX Federated Tax Exempt**** $ 61,347 $ 68,241 0
IDEX Goldman Sachs Growth $ 10,780 N/A N/A
IDEX T. Rowe Price Dividend Growth $ 10,862 N/A N/A
IDEX Salomon All Cap $ 4,872 N/A N/A
IDEX Pilgrim Baxter Mid Cap Growth $ 10,925 N/A N/A
IDEX T. Rowe Price Small Cap $ 6,615 N/A N/A
</TABLE>
------------------------------
* Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE
U.S. Equity, IDEX Transamerica Small Company, and IDEX Transamerica Equity
as they did not commence operations until March 1, 2000 and for IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM) as they
commenced operations on July 14, 2000; for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000 and for IDEX JCC Growth & Income and IDEX Munder Net50 as
they commenced operations on December 1, 2000.
** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
*** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund and this fund was named IDEX C.A.S.E. Growth.
**** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
AUSA Holding Company ("AUSA") owns 100% of the outstanding stock of IMI. AUSA
also owns 100% of the outstanding shares of the Fund's distributor and transfer
agent. AUSA is wholly-owned by AEGON USA, Inc., a financial services holding
company located at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. AEGON
USA, Inc. is a wholly-owned indirect subsidiary of AEGON N.V., a Netherlands
corporation and publicly traded international insurance group.
Janus Capital has agreed that it will, until June 25, 2000, provided that it
continues to serve as sub-adviser to the funds it currently sub-advises and
compensate ISI for its services in connection with promotion, marketing, and
distribution in an amount equal to 0.0375% of the average daily net assets of
each of IDEX JCC Capital Appreciation, IDEX JCC Growth, IDEX JCC Balanced and
IDEX JCC Flexible Income at certain levels. This agreement will terminate on
that date.
Each of the sub-advisers also serves as investment adviser or sub-adviser to
other funds and/or private accounts which may have investment objectives
identical or similar to that of the funds. Securities frequently meet the
investment objectives of one or all of these funds, the other funds and the
private accounts. In such cases, a sub-adviser's decision to recommend a
purchase to one fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amounts available for
investment by each fund or account, the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Another
factor considered in the investment recommendations is other investments which
each fund or account presently has in a particular industry.
It is possible that at times identical securities will be held by more than one
fund or account. However, positions in the same issue may vary and the length
of time that any fund or account may choose to hold its investment in the same
issue may likewise vary. To the extent that more than one of the funds or
private accounts served by a sub-adviser seeks to acquire or sell the same
security at about the same time, either the price obtained by the funds or the
amount of securities that may be purchased or sold by a fund at one time may be
adversely affected. On the other hand, if the same securities are bought or
sold at the same time by more than one fund or account, the resulting
participation in volume transactions could produce better executions for the
funds. In the event more than one fund or account purchases or sells the same
security on a given date, the purchase and sale transactions are allocated
among the fund(s), the other funds and the private accounts in a manner
believed by the sub-advisers to be equitable to each.
53
<PAGE>
DISTRIBUTOR
IDEX Mutual Funds has entered into an Underwriting Agreement with
InterSecurities, Inc. ("ISI"), located at 570 Carillon Parkway, St. Petersburg,
Florida 33716 to act as the principal underwriter of the shares of the funds.
The Underwriting Agreement will continue from year to
year so long as its continuance is approved at least annually in the same
manner as the Investment Advisory Agreements discussed above. A discussion of
ISI's responsibilities and charges as principal underwriter of fund shares is
set forth in the prospectus.
UNDERWRITING COMMISSIONS*
<TABLE>
<CAPTION>
Commissions Received Commissions Retained
For the Period Ended For the Period Ended
----------------------------------------- -----------------------------------------
October 31 October 31
----------------------------------------- -----------------------------------------
Fund 1999 1998 1997 1999 1998 1997
------------------------------------- ------------ ---------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IDEX Alger Aggressive Growth $ 1,519,511 $ 449,078 $ 330,689 $1,321,658 $ 64,099 $ 47,828
IDEX GE International Equity** $ 21,901 $ 64,324 $ 48,603 $ 19,102 $ 9,250 $ 7,335
IDEX JCC Capital Appreciation $ 882,472 $ 164,358 $ 271,016 $ 772,645 $ 26,358 $ 42,668
IDEX JCC Global $ 4,132,880 $2,784,651 $2,336,372 $3,671,479 $401,257 $353,015
IDEX JCC Growth $11,290,051 $2,848,238 $2,541,907 $9,851,566 $424,803 $396,160
IDEX Jennison Equity Opportunity*** $ 65,496 $ 70,063 $ 69,637 $ 57,639 $ 9,325 $ 10,625
IDEX NWQ Value Equity $ 117,549 $ 172,567 $ 105,441 $ 102,842 $ 25,433 $ 15,512
IDEX LKCM Strategic Total Return $ 416,127 $ 419,778 $ 260,944 $ 356,357 $ 67,470 $ 41,330
IDEX Dean Asset Allocation $ 111,737 $ 186,182 $ 208,715 $ 97,158 $ 28,499 $ 34,415
IDEX JCC Balanced $ 1,767,590 $ 344,872 $ 174,256 $1,566,316 $ 34,919 $ 27,931
IDEX JCC Flexible Income $ 131,918 $ 40,463 $ 28,133 $ 115,018 $ 1,530 $ 4,862
IDEX AEGON Income Plus $ 348,609 $ 165,033 $ 99,411 $ 296,635 $ 21,369 $ 17,322
IDEX Federated Tax Exempt**** $ 78,111 $ 30,201 $ 25,760 $ 66,807 $ 5,356 $ 4,591
IDEX Goldman Sachs Growth $ 57,489 N/A N/A $ 50,035 N/A N/A
IDEX T. Rowe Price Dividend Growth $ 65,630 N/A N/A $ 57,802 N/A N/A
IDEX Salomon All Cap $ 56,382 N/A N/A $ 48,803 N/A N/A
IDEX Pilgrim Baxter Mid Cap Growth $ 66,207 N/A N/A $ 57,809 N/A N/A
IDEX T. Rowe Price Small Cap $ 33,728 N/A N/A $ 29,698 N/A N/A
</TABLE>
For the Period Ended October 31, 1999:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemptions and Brokerage Other
Fund Commissions Repurchases Commissions Compensation
------------------------------------- ------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
IDEX Alger Aggressive Growth $1,321,658 $ 16,561 0 $ 265,092
IDEX GE International Equity** $ 19,102 $ 4,889 0 $ 13,086
IDEX JCC Capital Appreciation $ 772,645 $ 36,013 0 $ 121,878
IDEX JCC Global $3,671,479 $ 56,276 0 $1,836,360
IDEX JCC Growth $9,851,566 $199,755 0 $2,358,409
IDEX Jennison Equity Opportunity*** $ 57,639 $ 3,796 0 $ 24,631
IDEX NWQ Value Equity $ 102,842 $ 8,142 0 $ 49,144
IDEX LKCM Strategic Total Return $ 356,357 $ 12,682 0 $ 121,320
IDEX Dean Asset Allocation $ 97,158 $ 3,660 0 $ 103,690
IDEX JCC Balanced $1,566,316 $ 35,435 0 $ 456,321
IDEX JCC Flexible Income $ 115,018 $ 20,562 0 $ 66,778
IDEX AEGON Income Plus $ 296,635 $ 18,391 0 $ 130,361
IDEX Federated Tax Exempt**** $ 66,807 $ 2,663 0 $ 26,703
IDEX Goldman Sachs Growth $ 50,035 $ 247 0 $ 2,428
IDEX T. Rowe Price Dividend Growth $ 57,802 $ 1,040 0 $ 3,204
IDEX Salomon All Cap $ 48,803 $ 2 0 $ 1,765
IDEX Pilgrim Baxter Mid Cap Growth $ 57,809 $ 1,022 0 $ 2,280
IDEX T. Rowe Price Small Cap $ 29,698 $ 206 0 $ 2,557
</TABLE>
--------------
* Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE
U.S. Equity, IDEX Transamerica Small Company, and IDEX Transamerica Equity
as they did not commence operations until March 1, 2000; for IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM) as they
commenced operations on July 14, 2000; for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000; or for IDEX JCC Growth & Income and IDEX Munder Net50 as
they commenced operations on December 1, 2000.
** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
*** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund and this fund was named IDEX C.A.S.E. Growth.
**** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
54
<PAGE>
ADMINISTRATIVE SERVICES
IMI is responsible for the supervision all of the administrative functions,
providing office space, and paying its allocable portion of the salaries, fees
and expenses of all Fund officers and of those trustees who are affiliated with
IMI. The costs and expenses, including legal and accounting fees, filing fees
and printing costs in connection with the formation of a fund and the
preparation and filing of a fund's initial registration statements under the
1933 Act and 1940 Act are also paid by the adviser. IMI has entered into
Administrative Services Agreements ("Administrative Agreement") with ISI
applicable to each fund. Under each Administrative Agreement, ISI carries out
and supervises all of the administrative functions of the funds and incurs
IMI's expenses related to such functions.
The administrative duties of ISI with respect to each fund include: providing
the fund with office space, telephones, office equipment and supplies; paying
the compensation of the Fund's officers for services rendered as such;
supervising and assisting in preparation of annual and semi-annual reports to
shareholders, notices of dividends, capital gain distributions and tax
information; supervising compliance by the Fund with the recordkeeping
requirements under the 1940 Act and regulations thereunder and with the state
regulatory requirements; maintaining books and records of the Fund (other than
those maintained by the Fund's custodian and transfer agent); preparing and
filing tax returns and reports; monitoring and supervising relationships with
the Fund's custodian and transfer agent; monitoring the qualifications of tax
deferred retirement plans providing for investment in shares of each fund;
authorizing expenditures and approving bills for payment on behalf of each
fund; and providing executive, clerical and secretarial help needed to carry
out its duties.
ADMINISTRATIVE FEES**
<TABLE>
<CAPTION>
Fund
---- 1998 1999
<S> <C> <C>
IDEX JCC Capital Appreciation $ 137,506 $ 227,137
IDEX JCC Global $1,953,531 $ 3,468,393
IDEX JCC Growth $6,812,504 $10,317,345
IDEX JCC Balanced $ 128,778 $ 541,285
IDEX Alger Aggressive Growth* $ 310,477 $ 275,560
IDEX GE International Equity*(1) -0- -0-
IDEX Jennison Equity Opportunity*(2) $ 52,552 -0-
IDEX NWQ Value Equity* $ 83,822 $ 19,017
IDEX LKCM Strategic Total Return* $ 246,680 $ 196,382
IDEX Dean Asset Allocation* $ 200,042 $ 119,083
IDEX AEGON Income Plus*(3) $ 220,956 $ 242,398
IDEX Federated Tax Exempt*(2) $ 73,276 $ 61,347
IDEX Goldman Sachs Growth N/A -0-
IDEX T. Rowe Price Dividend Growth N/A -0-
IDEX Salomon All Cap N/A -0-
IDEX Pilgrim Baxter Mid Cap Growth N/A -0-
IDEX T. Rowe Price Small Cap N/A -0-
IDEX JCC Flexible Income* $ 75,838 $ 89,131
</TABLE>
--------------
* Effective March 1, 1999, Idex Management, Inc. replaced ISI as investment
adviser to these funds.
** No information is included for IDEX Transamerica Small Company, IDEX
Transamerica Equity and IDEX GE U.S. Equity as they commenced operations on
March 1, 2000; for IDEX Great Companies -- America(SM) and IDEX Great
Companies -- Technology(SM) as they l commenced operations on July 14, 2000;
for IDEX Great Companies -- Global(2) and IDEX Gabelli Global Growth as they
commenced operations on September 1, 2000; or for IDEX JCC Growth & Income
and IDEX Munder Net50 as they commenced operations on December 1, 2000.
(1) Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
(2) Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund, and this fund was named IDEX C.A.S.E. Growth.
(3) Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
55
<PAGE>
CUSTODIAN, TRANSFER AGENT AND OTHER AFFILIATES
State Street Bank & Trust, 801 Pennsylvania, Kansas City, Missouri 64105-1307,
is custodian for the fund. The custodian is not responsible for any of the
investment policies or decisions of a fund, but holds its assets in
safekeeping, and collects and remits the income thereon subject to the
instructions of the funds.
Idex Investor Services, Inc. ("IIS"), P. O. Box 9015, Clearwater, Florida
33758-9015, is the transfer agent for each fund, withholding agent and dividend
disbursing agent. IIS is a wholly-owned subsidiary of AUSA Holding Company and
thus is an affiliate of IMI and AIMI. Each fund pays the transfer agent an
annual per-account charge of $15.70 for each of its shareholder accounts in
existence, $2.79 for each new account opened and $1.67 for each closed account.
State Street Bank & Trust ("State Street") is a provider of data processing and
recordkeeping services for the Fund's transfer agent. Each fund may use another
affiliate of State Street as introducing broker for certain portfolio
transactions as a means to reduce expenses through a credit against transfer
agency fees with regard to commissions earned by such affiliate. (See "Fund
Transactions and Brokerage.") There were no brokerage credits received for the
periods ended October 31, 1999, 1998 and 1997.
TRANSFER AGENCY FEES*
<TABLE>
<CAPTION>
Fees and Expenses Net of Brokerage
Credits For the Period Ended
------------------------------------------
October 31
Fund 1999 1998 1997
---- ---------- ---------- ----------
<S> <C> <C> <C>
IDEX Alger Aggressive Growth $ 592,015 $ 311,310 $ 217,941
IDEX GE International Equity** $ 29,790 $ 25,385 $ 11,583
IDEX JCC Capital Appreciation $ 209,550 $ 128,201 $ 133,515
IDEX JCC Global $1,662,198 $1,032,225 $ 628,833
IDEX JCC Growth $3,525,633 $2,628,305 $2,811,027
IDEX Jennison Equity Opportunity*** $ 54,690 $ 46,730 $ 32,500
IDEX NWQ Value Equity $ 87,425 $ 71,985 $ 20,957
IDEX LKCM Strategic Total Return $ 199,815 $ 145,685 $ 89,918
IDEX Dean Asset Allocation $ 117,310 $ 107,100 $ 71,335
IDEX JCC Balanced $ 304,645 $ 81,805 $ 48,876
IDEX JCC Flexible Income $ 60,510 $ 32,859 $ 48,615
IDEX AEGON Income Plus $ 141,930 $ 119,036 $ 86,126
IDEX Federated Tax Exempt**** $ 31,360 $ 21,690 $ 34,786
IDEX Goldman Sachs Growth $ 12,130 NA NA
IDEX T. Rowe Price Dividend Growth $ 12,370 NA NA
IDEX Salomon All Cap $ 12,370 NA NA
IDEX Pilgrim Baxter Mid Cap Growth $ 12,370 NA NA
IDEX T. Rowe Price Small Cap $ 12,370 NA NA
</TABLE>
------------------------------
* Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE
U.S. Equity, IDEX Transamerica Small Company, and IDEX Transamerica Equity
as they did not commence operations until March 1, 2000; for IDEX Great
Companies -- America(SM) and IDEX Great Companies -- Technology(SM) as they
commenced operations on July 14, 2000; for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000; or for IDEX JCC Growth & Income and IDEX Munder Net50 as
they commenced operations on December 1, 2000. .
** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
*** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund, and this fund was named IDEX C.A.S.E. Growth.
**** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
FUND TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of fund business for each of the funds and
negotiation of commission rates are made by a fund's sub-adviser, whose policy
is to obtain the "best execution" (prompt and reliable execution at the most
favorable security price) of all fund transactions. The Advisory Agreement and
Investment Counsel Agreement for each fund specifically provide that in placing
portfolio transactions for a fund, the fund's
56
<PAGE>
sub-adviser may agree to pay brokerage commissions for effecting a securities
transaction in an amount higher than another broker or dealer would have
charged for effecting that transaction as authorized, under certain
circumstances, by the Securities Exchange Act of 1934.
In selecting brokers and dealers and in negotiating commissions, a fund's
sub-adviser considers a number of factors, including but not limited to:
The sub-adviser's knowledge of currently available negotiated commission
rates or prices of securities and other current transaction costs;
The nature of the security being traded;
The size and type of the transaction;
The nature and character of the markets for the security to be purchased
or sold;
The desired timing of the trade;
The activity existing and expected in the market for the particular
security;
The quality of the execution, clearance and settlement services;
Financial stability;
The existence of actual or apparent operational problems of any broker or
dealer; and
Research products and services provided.
In recognition of the value of the foregoing factors, the sub-adviser may place
portfolio transactions with a broker with whom it has negotiated a commission
that is in excess of the commission another broker would have charged for
effecting that transaction. This is done if the sub-adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research provided by such broker viewed in terms of either
that particular transaction or of the overall responsibilities of the
sub-adviser. Research provided may include:
Furnishing advice, either directly or through publications or writings,
as to the value of securities, the advisability of purchasing or selling
specific securities and the availability of securities or purchasers or
sellers of securities;
Furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and
trends and portfolio strategy;
Access to research analysts, corporate management personnel, industry
experts, economists and government officials; and
Comparative performance evaluation and technical measurement services and
quotation services, and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment,
software, information and accessories that deliver process or otherwise
utilize information, including the research described above) that assist
the sub-adviser in carrying out its responsibilities.
Most of the brokers and dealers used by the funds' sub-advisers provide
research and other services described above.
A sub-adviser may use research products and services in servicing other
accounts in addition to the funds. If a sub-adviser determines that any
research product or service has a mixed use, such that it also serves functions
that do not assist in the investment decision-making process, a sub-adviser may
allocate the costs of such service or product accordingly. The portion of the
product or service that a sub-adviser determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may be a conflict of interest for a sub-adviser.
When a fund purchases or sells a security in the over-the-counter market, the
transaction takes place directly with a principal market-maker without the use
of a broker, except in those circumstances where better prices and executions
will be achieved through the use of a broker.
A sub-adviser may also consider the sale or recommendation of a fund's shares
by a broker or dealer to its customers as a factor in the selection of brokers
or dealers to execute portfolio transactions. In placing portfolio business
with brokers or dealers, a sub-adviser will seek the best execution of each
transaction, and all such brokerage placement must be consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
A sub-adviser may place transactions for the purchase or sale of portfolio
securities with affiliates of IMI, ISI or the sub-adviser, including DST
Securities, Inc., or Fred Alger & Company, Incorporated. It is anticipated that
Fred Alger & Company, Incorporated, an affiliate of Alger, will serve as IDEX
Alger Aggressive Growth's broker in effecting substantially all of IDEX Alger
Aggressive Growth's transactions on securities exchanges and
57
<PAGE>
will retain commissions in accordance with certain regulations of the SEC. A
sub-adviser may place transactions if it reasonably believes that the quality
of the transaction and the associated commission are fair and reasonable, and
if overall the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Other Affiliates," are lower than those
that would otherwise be incurred. Under rules adopted by the SEC, the Fund's
Board of Trustees will conduct periodic compliance reviews of such brokerage
allocations and review certain procedures adopted by the Board of Trustees to
ensure compliance with these rules and to determine their continued
appropriateness.
For the fiscal year ended October 31, 1999, IDEX Alger Aggressive Growth paid
the following commissions to Fred Alger & Company, Incorporated:
<TABLE>
<CAPTION>
Commissions Paid:
-----------------
<S> <C>
Fiscal 1999 $ 136,631
Fiscal 1999 Percentages:
Commissions with affiliates to
total commissions 99%
Value of brokerage transactions
with affiliates to value of total
brokerage transactions 99%
</TABLE>
As of October 31, 1999, IDEX JCC Balanced owned $2,440,447 and IDEX JCC Capital
Appreciation owned $1,263,133 of the common stock of Charles Schwab Corp.
Charles Schwab Corp. is one of the ten brokers or dealers that received the
greatest dollar amount of brokerage commissions from IDEX JCC Balanced and IDEX
JCC Capital Appreciation during the fiscal year ended October 31, 1999.
As of October 31, 1999, IDEX Alger Aggressive Growth owned $1,831,188 and IDEX
Dean Asset Allocation owned $951,250 of the common stock of Morgan Stanley,
Dean Witter, Discover and Company. Morgan Stanley, Dean Witter, Discover and
Company is one of the ten brokers or dealers that received the greatest dollar
amount of brokerage commissions from IDEX Alger Aggressive Growth and IDEX Dean
Asset Allocation during the fiscal year ended October 31, 1999.
As of October 31, 1999, IDEX LKCM Strategic Total Return owned $204,000 of the
common stock of J.P. Morgan & Company, Inc. J.P. Morgan & Company, Inc. is one
of the ten brokers or dealers that received the greatest dollar amount of
brokerage commissions from IDEX LKCM Strategic Total Return during the fiscal
year ended October 31, 1999.
As of October 31, 1999, IDEX T. Rowe Price Small Cap owned $1,413 of the common
stock of Donaldson, Lufkin & Jenrette, Inc. Donaldson, Lufkin & Jenrette, Inc.
is one of the ten brokers or dealers that received the greatest dollar amount
of brokerage commissions from IDEX T. Rowe Price Small Cap during the fiscal
year ended October 31, 1999.
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
IDEX Alger IDEX GE IDEX JCC
Brokerage Commissions Paid Aggressive International Capital
(including Affiliated Brokerage) Growth Equity* Appreciation
---------------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
October 31, 1999 $136,673 $20,219 $179,054
October 31, 1998 $155,668 $17,998 $ 89,687
October 31, 1997 $ 79,346 $ 6,337 $108,748
Affiliated Brokerage Paid
-------------------------
October 31, 1999 $136,631 $ 0 $ 0
October 31, 1998 $154,866 $ 0 $ 0
October 31, 1997 $ 78,761 $ 0 $ 0
<CAPTION>
IDEX Jennison IDEX NWQ
Brokerage Commissions Paid IDEX JCC IDEX JCC Equity Value
(including Affiliated Brokerage) Global Growth Opportunity** Equity
---------------------------------- ------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
October 31, 1999 $2,189,777 $2,668,652 $29,437 $13,580
October 31, 1998 $ 954,707 $ 843,937 $38,910 $15,539
October 31, 1997 $ 119,665 $1,301,654 $34,840 $10,553
Affiliated Brokerage Paid
----------------------------------
October 31, 1999 $ 0 $ 0 $ 0 $ 0
October 31, 1998 $ 0 $ 0 $ 0 $ 0
October 31, 1997 $ 0 $ 0 $ 0 $ 0
</TABLE>
<TABLE>
<CAPTION>
IDEX LKCM IDEX Dean IDEX JCC IDEX AEGON
Brokerage Commissions Paid Strategic Asset IDEX JCC Flexible Income IDEX Federated***
(including Affiliated Brokerage) Total Return Allocation Balanced Income Plus Tax Exempt
---------------------------------- -------------- ------------ ---------- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1999 $62,337 $55,676 $376,364 $165,196 $0 $0
October 31, 1998 $39,334 $43,487 $ 46,796 $ 23,653 $0 $0
October 31, 1997 $26,187 $48,786 $ 42,482 $101,213 $0 $0
Affiliated Brokerage Paid
----------------------------------
October 31, 1999 $ 0 $ 0 $ 0 $ 0 $0 $0
October 31, 1998 $ 0 $ 0 $ 0 $ 0 $0 $0
October 31, 1997 $ 0 $ 0 $ 0 $ 0 $0 $0
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
IDEX Pilgrim
Brokerage Commissions Paid IDEX Goldman IDEX T. Rowe Price IDEX Salomon Baxter IDEX T. Rowe Price
(including Affiliated Brokerage) Sachs Growth Dividend Growth All Cap Mid Cap Growth Small Cap
---------------------------------- -------------- -------------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
October 31, 1999 $5,614 $2,883 $11,258 $6,289 $2,752
October 31, 1998 NA NA NA NA NA
October 31, 1997 NA NA NA NA NA
Affiliated Brokerage Paid
-------------------------
October 31, 1999 $ 538 $ 0 $ 68 $ 0 $ 0
October 31, 1998 NA NA NA NA NA
October 31, 1997 NA NA NA NA NA
</TABLE>
--------------
* Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund, and the fund was named IDEX C.A.S.E. Growth.
*** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
IDEX JCC Global, IDEX JCC Growth, IDEX LKCM Strategic Total Return, IDEX JCC
Balanced, IDEX JCC Flexible Income and IDEX JCC Capital Appreciation all
experienced a significant increase in brokerage commissions paid as a result of
the increased volume of sales of the respective funds for fiscal year ended
10/31/99.
During the fiscal year ended October 31, 1999, IDEX Jennison Equity
Opportunity, IDEX Dean Asset Allocation, IDEX NWQ Value Equity, IDEX LKCM
Strategic Total Return, IDEX Goldman Sachs Growth and IDEX Pilgrim Baxter Mid
Cap Growth had transactions in the amounts of $16,075,765, $16,075,691,
$3,390,556,000, $6,549,213, $58,608, and $1,489,815, respectively, which
resulted in brokerage commissions of $14,260, $29,352, $5,270, $1,047, $2,993
and $7,647, respectively, that were directed to brokers for brokerage and
research services provided. IDEX GE International Equity, IDEX JCC Growth, IDEX
JCC Global, IDEX JCC Balanced and IDEX JCC Capital Appreciation had brokerage
commissions in the amounts of $305, $53,372, $7,609, $2,442 and $882,
respectively, that were directed to brokers for brokerage and research services
provided.
TRUSTEES AND OFFICERS
DIRECTORS AND OFFICERS
The fund is governed by a Board of Trustees. Subject to the supervision of the
Board of Trustees, the assets of each fund are managed by an investment adviser
and sub-advisers, and by fund managers. The Board of Trustees is responsible
for managing the business and affairs of the Fund. It oversees the operation of
the Fund by its officers. It also reviews the management of the funds' assets
by the investment adviser and sub-advisers. Information about the Directors and
officers of the Fund is as follows:
<TABLE>
<CAPTION>
Position(s)
Name, Address and Age held with the Fund Principal Occupation(s) During the past 5 years
-------------------------------- -------------------- -----------------------------------------------------------
<S> <C> <C>
Peter R. Brown Trustee Currently retired (January, 2000 - present); Director, WRL
(DOB 05/10/28) Series Fund, Inc. (investment company); Chairman of the
11180 6th Street East Board, Peter Brown Construction Company, Largo, Florida
Treasure Island, Florida 33706 (1963 - 2000); Rear Admiral (Ret.) U.S. Navy Reserve,
Civil Engineer Corps.
Daniel Calabria Trustee Currently retired; Trustee (1993 - present) and President
(DOB 03/05/36) (1963 - 1995) of the Florida Tax Free Funds (mutual
7068 S. Shore Drive S., South funds); President and Director (1995) of Sun Chiropractic
Pasadena, Florida 33707-4605 Clinics, Inc.; Executive Vice President (1993 - 1995) of
William R. Hough & Co. (investment adviser, municipal
bond and underwriting firm).
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name, Address and Age held with the Fund Principal Occupation(s) During the past 5 years
---------------------------- ----------------------- -------------------------------------------------------------
<S> <C> <C>
Trustee Currently retired (1990 - present).
James L. Churchill
(DOB 05/07/30)
15 Hawthorne Road
Bluffington, South Carolina
29910-4901
Charles C. Harris Trustee Currently retired (1988 - present); Director, WRL Series
(DOB 07/15/30) Fund, Inc. (investment company) (March, 1994 - present).
35 Winston Drive
Clearwater, Florida 33756
William W. Short, Jr. Trustee Director (September, 2000 - present), WRL Series Fund,
(DOB 02/25/36) Inc. (investment company); President and sole shareholder
12420 73rd Court of Shorts, Inc. (men's retail apparel); Chairman of Southern
Largo, Florida 33773 Apparel Corporation, S.A.C. Apparel Corporation and
S.A.C. Distributors (nationwide wholesale apparel distribu-
tors), Largo, Florida.
Jack E. Zimmerman Trustee Currently retired; Director (December, 1987 - present)
(DOB 02/03/28) Western Reserve Life Assurance Co. of Ohio.
507 Saint Michael Circle Mr. Zimmerman is also the brother-in-law of John Kenney,
Kettering, Ohio 45429 Chairman and CEO of the Fund.
Patrick S. Baird President and Trustee President (June, 2000 - present) and Director (December,
(DOB 01/19/54) 1999 - present), WRL Series Fund, Inc. (investment
4333 Edgewood Road, NE company); Director (March, 1991 - December, 1999),
Cedar Rapids, Iowa 52499 Western Reserve Life Assurance Co. of Ohio; Executive
Vice President (February, 1995 - present) and Chief
Operating Officer (February, 1996 - present), AEGON USA,
Inc. (financial services holding company, Cedar Rapids,
Iowa); Director (December, 1991 - present), Chief Operat-
ing Officer (April, 1996 - present), and Senior Vice
President (April, 1995 - present), PFL Life Insurance Co.;
President (July, 1996 - present), and CFO (May, 1992 -
present), AUSA Holding Co.
John R. Kenney(1,2) Chairman, Trustee Chairman of the Board (1986 - present) and President
(DOB 02/8/38) and Chief Executive (March, 1993 - June, 2000), WRL Series Fund, Inc.
Officer (investment company); Chairman of the Board, Director
and Co-CEO, (March, 2000 - present), Great Companies,
L.L.C. (investment adviser); Chairman of the Board
(August, 1987 - present), CEO (April, 1982 - present),
President (December, 1992 - December, 1999) and
Director (July, 1973 - present), Western Reserve Life
Assurance Co. of Ohio; Chairman of the Board (May,
1988 - present), Idex Investor Services, Inc. (transfer
agent); Director (December, 1990 - present), Idex Manage-
ment, Inc. (investment adviser); Director (January, 1987 -
April, 1999) and Chairman of the Board (May, 1988 - April,
1999), InterSecurities, Inc. (broker-dealer/underwriter);
Chairman of the Board (September, 1996 - present) and President
(September, 1997 - present), WRL Investment Management, Inc.
(investment adviser); Chairman of the Board and Director
(September, 1996 - present), President (September, 1997 - present),
WRL Investment Services, Inc. (transfer agent).
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name, Address and Age held with the Fund Principal Occupation(s) During the past 5 years
------------------------- ---------------------- ------------------------------------------------------------
<S> <C> <C>
Jerome C. Vahl(1,2) Executive Vice Executive Vice President (September, 2000 - present),
(DOB 04/24/56) President WRL Series Fund, Inc. (investment company); President
and Director (December, 1999 - present), Executive Vice
President (June, 1998 - December, 1999) and Vice
President (December, 1995 - June, 1998), Western
Reserve Life Assurance Co. of Ohio; Director (March,
2000 - present), Great Companies L.L.C. (investment
adviser); Vice President (1986 - present), AEGON USA,
Inc. (financial services holding company, Cedar Rapids,
Iowa); Director (November, 1999 - present), Idex Investor
Services, Inc. (transfer agent), WRL Investment Services,
Inc. (transfer agent), and WRL Investment Management,
Inc. (investment adviser); Director (June, 1998 - present),
Idex Management, Inc. (investment adviser); Vice
President (February, 2000 - present), AUSA Holding Co.
Thomas R. Moriarty(1,2) Executive Vice Senior Vice President (March, 1995 - September, 2000),
(DOB 05/03/51) President, Treasurer IDEX Mutual Funds (investment company); Chairman
and Principal (November, 1999 - present), President and CEO (April,
Financial Officer 1999 - present) and Senior Vice President (June, 1991 -
April, 1999), InterSecurities (broker-dealer/underwriter);
Senior Vice President (September, 2000 - present) and Vice
President (April, 1993 - September, 2000), Western Reserve Life
Assurance Co. of Ohio; Director (April, 1994 - present),
President and CEO (November, 1999 - present) and Senior
Vice President (June, 1991 - November, 1999), Idex
Investor Services, Inc. (transfer agent); Director (June,
1998 - present), President and CEO (November, 1999 -
present) and Vice President (November, 1990 - November,
1999), Idex Management, Inc. (investment adviser); Vice
President (December, 1999 - present), AFSG Securities
Corp. (underwriter).
David Bullock(1,2) Executive Vice President (March, 1999 - April, 2000), AEGON Distributors;
(DOB 04/25/56) President AEGON Equity Group; Executive Vice President
(September, 1998 - September, 2000), Western Reserve
Life Assurance Co. of Ohio; Director (August, 1999 -
present), Chairman (December, 1999 - present), President
and CEO (October, 1999 - present), Transamerica Capital,
Inc. (broker-dealer, formerly Endeavor Group); Director
(August, 1999 - present), Endeavor Management Co.;
prior to 1998, Senior Vice President, National Sales
Manager and Division Vice President of GE Financial
Assurance.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name, Address and Age held with the Fund Principal Occupation(s) During the past 5 years
----------------------------- --------------------- -------------------------------------------------------------
<S> <C> <C>
John K. Carter(1,2) Vice President, Assistant Vice President, Assistant Secretary and Counsel
(DOB 04/24/61) Secretary and (June, 1999 - December, 1999), IDEX Mutual Funds
Counsel (investment company); Vice President, Secretary and
Counsel (December, 1999 - present) and Assistant Vice
President, Assistant Secretary and Counsel (June, 1999 -
December, 1999), WRL Series Fund, Inc. (investment
company); Vice President and Counsel (June, 2000 -
present) and Assistant Vice President and Counsel
(September, 1999 - June, 2000), Western Reserve Life
Assurance Co. of Ohio; Vice President, Counsel and
Assistant Secretary (April, 2000 - present), AEGON Asset
Management Services, Inc.; Vice President, Counsel and
Assistant Secretary (April, 2000 - present), Idex Investor
Services, Inc. (transfer agent) and WRL Investment
Services, Inc. (transfer agent); Vice President, Counsel,
Compliance Officer and Assistant Secretary (April, 2000 -
present), Idex Management, Inc. (investment adviser) and
WRL Investment Management, Inc. (investment adviser);
Assistant Secretary (April, 1999 - present); Vice President
and Counsel (March, 1997 - May, 1999), Salomon Smith
Barney; Assistant Vice President, Associate Corporate
Counsel and Trust Officer (September, 1993 - March,
1997), Franklin Templeton Mutual Funds.
Thomas E. Pierpan (1,2) Vice President and Associate General Counsel and Secretary (December,
(DOB 10/18/43) Assistant Secretary 1997 - December, 1999), IDEX Mutual Funds (investment
company); Vice President (March, 1995 - present),
Assistant Secretary (March, 1995 - December, 1997 and
December, 1999 - present) and Associate General Counsel
and Secretary (December, 1997 - December, 1999), WRL
Series Fund (investment company); Senior Vice President
and General Counsel (December, 1999 - present), As-
sistant Secretary (March, 1996 - present), Associate
General Counsel (January, 1997- December, 1999), Vice
President (December, 1993 - December, 1999) and
Counsel (April, 1995 - January, 1997), Western Reserve
Life Assurance Co. of Ohio; Assistant Vice President and
Assistant Secretary (December, 1998 - present), AFSG
Securities Corp. (underwriter).
Christopher G. Roetzer(1,2) Vice President, Assistant Vice President (November, 1990 - March, 1997),
(DOB 01/11/63) Assistant Treasurer IDEX Mutual Funds (investment company); Vice President,
and Principal Ac- Fund Financial Reporting and Control (October, 1996 -
counting Officer present) and Assistant Vice President (May, 1988 -
October, 1996), Idex Investor Services, Inc. (transfer
agent); Vice President (April, 2000 - present) and Assistant
Vice President (November, 1990 - April, 2000), Idex
Management, Inc. (investment adviser); Assistant Vice
President (May, 1988 - present), InterSecurities, Inc.
(broker-dealer/underwriter).
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Position(s)
Name, Address and Age held with the Fund Principal Occupation(s) During the past 5 years
----------------------------- --------------------- -------------------------------------------------------------
<S> <C> <C>
Julian Lerner Trustee Emeritus Currently retired; Trustee of American Skandia Trust;
(DOB 11/12/24) (effective January 1, Director of American Skandia Advisory Funds; Trustee of
One Spurling Plaza 2000) American Skandia Master Trust; Investment Consultant
Suite 208 (1995 - 1996) and Senior Vice President (1987 - 1995),
12850 Spurling Road Aim Capital Management (investment adviser).
Dallas, Texas 75230
(1) The principal business address is P.O. Box 9015 , Clearwater, Florida 33758-9015.
(2) Interested Person, as defined in the 1940 Act, and affiliated person of Investment Adviser.
</TABLE>
The Fund pays no salaries or compensation to any of its officers, all of whom
are officers or employees of either ISI, IMI or their affiliates. Disinterested
Trustees (i.e., Trustees who are not affiliated with ISI, IMI or any of the
sub-advisers) receive for each regular Board meeting: (a) a total annual
retainer fee of $20,000 from the funds, of which the funds pay a pro rata share
allocable to each fund based on the relative assets of the fund; plus (b)
$4,000 and incidental expenses per meeting attended. Three of the Disinterested
Trustees have been elected to serve on the Fund's Audit Committee, which meets
twice annually. Each Audit Committee member receives a total of $2,500 per
Audit Committee meeting attended in addition to the regular meetings attended.
In the case of a Special Board Meeting, each of the Disinterested Trustees
receives a fee of $2,500 plus incidental expenses per special meeting attended,
in addition to the regular meetings attended. Any fees and expenses
paid to Trustees who are affiliates of IMI or ISI are paid by IMI and/or ISI
and not by the funds.
Commencing on January 1, 1996, a non-qualified deferred compensation plan (the
"Plan") became available to Trustees who are not interested persons of the
Fund. Under the Plan, compensation may be deferred that would otherwise be
payable by the Fund and/or WRL Series Fund, Inc., to a Disinterested Trustee or
Director on a current basis for services rendered as Trustee or Director.
Deferred compensation amounts will accumulate based on the value of Class A
shares of a fund (without imposition of sales charge), as elected by the
Trustee. It is not anticipated that the Plan will have any impact on the funds.
The following table provides compensation amounts paid to Disinterested
Trustees of the Fund for the fiscalyear ended October 31, 1999.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension Or Retirement Total Compensation Paid to
Compensation From Benefits Accrued As Part of Trustees from Fund
Name of Person, Position IDEX Mutual Funds * Fund Expenses Complex**
-------------------------------- ------------------------- ----------------------------- ---------------------------
For Year Ended 10/31/99 As of 10/31/99 10/31/99
<S> <C> <C> <C>
Peter R. Brown, Trustee $ 28,250 $28,750 $ 41,000
Daniel Calabria, Trustee $ 25,500 $ 6,375 $ 25,500
James L. Churchill, Trustee $ 25,500 $16,400 $ 25,500
Charles C. Harris, Trustee $ 28,250 $ 0 $ 41,000
Julian A. Lerner, Trustee*** $ 25,500 $ 0 $ 25,500
William W. Short, Jr., Trustee $ 28,250 $22,750 $ 28,250
Jack E. Zimmerman, Trustee $ 25,500 $ 5,500 $ 25,500
-------- ------- --------
Total $186,750 $79,775 $212,250
</TABLE>
------------------------------
* Of this aggregate compensation, the total amounts deferred (including
earnings) and accrued for the benefit of the participating Trustees for the
year ended October 31, 1999 were as follows: Peter R. Brown, $30,961; Daniel
Calabria, $7,542; James L. Churchill, $19,425; William W. Short, Jr.,
$22,750; and Jack E. Zimmerman, $5,500.
** The Fund Complex consists of IDEX Mutual Funds and WRL Series Fund, Inc.
*** Effective January 1, 2000, Mr. Lerner became a Trustee Emeritus.
The Board of Trustees has adopted a policy whereby any Disinterested Trustee of
the Fund in office on September 1, 1990 who has served at least three years as
a trustee may, subject to certain limitations, elect upon his resignation to
serve as a trustee emeritus for a period of two years. A trustee emeritus has
no authority, power or responsibility with respect to any matter of the Fund.
While serving as such, a trustee emeritus is entitled to
63
<PAGE>
receive from the Fund an annual fee equal to one-half the fee then payable per
annum to Disinterested Trustees of the Fund, plus reimbursement of expenses
incurred for attendance at Board meetings.
The Fund has an Executive Committee whose members currently are John R. Kenney,
Pat Baird and Peter R. Brown. The Executive Committee may perform all of the
functions which may be performed by the Board of Trustees, except as set forth
in the Declaration of Trust and By-Laws of the Fund or as prohibited by
applicable law.
During the fiscal year ended October 31, 1999, the Fund paid $266,525 in
trustees fees and expenses, and no trustee emeritus fees or expenses. As of
January 30, 2000, the trustees and officers held in the aggregate less than 1%
of the outstanding shares of each of the funds.
PURCHASE OF SHARES
As stated in the prospectus, each fund offers investors a choice of four
classes of shares. (IDEX JCC Growth also includes a fifth class, Class T
shares, which are not available for new investors.) Class A, Class B, Class C
or Class M shares of a fund can be purchased through ISI or through
broker-dealers or other financial institutions that have sales agreements with
ISI. Shares of each fund are sold at the net asset value per share as
determined at the close of the regular session of business on the New York
Stock Exchange next occurring after a purchase order is received and accepted
by the fund. (The applicable sales charge is added in the case of Class A,
Class M and Class T shares.) The prospectus contains detailed information about
the purchase of fund shares.
DEALER REALLOWANCES
IDEX sells shares of its funds both directly and through authorized dealers.
When you buy shares, your fund receives the entire NAV of the shares you
purchase. ISI keeps the sales charge, then "reallows" a portion to the dealers
through which shares were purchased. This is how dealers are compensated.
From time to time, ISI will create special promotions in which dealers earn
larger reallowances in return for selling significant amounts of shares or for
certain training services. Sometimes, these dealers may earn virtually the
entire sales charge; at those times, they may be deemed underwriters as
described in the 1933 Act.
Promotions may also involve non-cash incentives such as prizes or merchandise.
Non-cash compensation may also be in the form of attendance at seminars
conducted by ISI, including lodging and travel expenses, in accordance with the
rules of the NASD.
Reallowances may also be given to financial institutions to compensate them for
their services in connection with Class A share sales and servicing of
shareholder accounts.
ISI may also pay dealers or financial institutions from its own funds or
administrative services for larger accounts.
Class A Share Dealer Reallowances
(all funds except IDEX JCC Flexible Income, IDEX AEGON Income Plus
and IDEX Federated Tax Exempt)
<TABLE>
<CAPTION>
Reallowance to Dealers as a %
Amount of Purchase of Offering Price
---------------------------------------- ------------------------------
<S> <C>
Under $50 Thousand 4.75%
$50 Thousand to under $100 Thousand 4.00%
$100 Thousand to under $250 Thousand 2.75%
$250 Thousand to under $500 Thousand 2.25%
$500 Thousand to under $1 Million 1.75%
For purchases of $1 Million and above:
$1 Million to under $5 Million 1.00%
$5 Million to under $50 Million Plus 0.50%
$50 Million and above Plus 0.25%
</TABLE>
64
<PAGE>
Class A Share Dealer Reallowances
(IDEX JCC Flexible Income, IDEX AEGON Income Plus
and IDEX Federated Tax Exempt)
<TABLE>
<CAPTION>
Reallowance to Dealers as a %
Amount of Purchase of Offering Price
---------------------------------------- ------------------------------
<S> <C>
Under $50 Thousand 4.00%
$50 Thousand to under $100 Thousand 3.25%
$100 Thousand to under $250 Thousand 2.75%
$250 Thousand to under $500 Thousand 1.75%
$500 Thousand to under $1 Million 1.00%
For purchases of $1 Million and above:
$1 Million to under $5 Million 0.50%
$5 Million and above Plus 0.25%
</TABLE>
Class B Share Dealer Reallowances
<TABLE>
<CAPTION>
Reallowance to Dealers as a %
of Offering Price
----------------------------------
<S> <C>
All purchases 5.00%*
* From time to time, ISI may
reallow to a dealer an amount
less than 5% on sales of Class B
shares. In such circumstances,
ISI will benefit directly to the
extent the reallowance percentage
is reduced below 5% on any
purchase of Class B shares.
</TABLE>
Class M Share Dealer Reallowances
<TABLE>
<CAPTION>
Reallowance to Dealers as a %
Amount of Purchase of Offering Price
-------------------- ------------------------------
<S> <C>
ll purchases 2.00%
</TABLE>
Class T Share Dealer Reallowances
(IDEX JCC Growth)
<TABLE>
<CAPTION>
Reallowance to Dealers as a %
Amount of Purchase of Offering Price
--------------------- ------------------------------
<S> <C>
$1,000,000 and over 1.00%
</TABLE>
DISTRIBUTION PLANS
As stated in the prospectus under "Investment Advisory and Other Services,"
each fund has adopted a separate Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (individually, a "Plan" and collectively, the "Plans"), applicable
to Class A, Class B, Class C and Class M shares of the fund. This Plan is
structured as a Compensation Plan. Class T shares of IDEX JCC Growth are not
subject to annual distribution and service fees.
In determining whether to approve the Distribution Plan and the Distribution
Agreements, the Trustees considered the possible advantages afforded
shareholders from adopting the Distribution Plans and Distribution Agreements.
The Trustees were informed by representatives of ISI that reimbursements of
distribution-related expenses by the Fund under the Distribution Plans would
provide incentives to ISI to establish and maintain an enhanced distribution
system whereby new investors will be attracted to the funds. The Trustees
believe that improvements in distribution services should result in increased
sales of shares in the funds. In turn, increased sales are expected to lead to
an increase in a fund's net asset levels, which would enable the funds to
achieve economies of scale and lower their per-share operating expenses. In
addition, higher net asset levels could enhance the investment management of
the funds, for net inflows of cash from new sales may enable a fund's
investment adviser and sub-adviser to take advantage of attractive investment
opportunities. Finally, reduced
65
<PAGE>
redemptions could eliminate the potential need to liquidate attractive
securities positions in order to raise the capital necessary to meet redemption
requests.
Under the Plans for Class A shares (the "Class A Plans"), a fund may pay ISI an
annual distribution fee of up to 0.35% and an annual service fee of up to 0.25%
of the average daily net assets of a fund's Class A shares; however, to the
extent that a fund pays service fees, the amount which a fund may pay as a
distribution fee is reduced accordingly so that the total fees payable under
the Class A Plan may not exceed on an annualized basis 0.35% of the average
daily net assets of a fund's Class A shares.
Under the Plans for Class B shares (the "Class B Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class B shares.
Under the Plans for Class C shares (the "Class C Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class C shares.
Under the Plans for Class M shares (the "Class M Plans"), a fund may pay ISI an
annual distribution fee of up to 0.75% and an annual service fee of up to 0.25%
of the average daily net assets of the fund's Class M shares; however, the
total fee payable pursuant to the Class M Plan may not, on an annualized basis,
exceed 0.90% of the average daily net assets of the fund's Class M shares.
ISI may use the fees payable under the Class A, Class B, Class C and Class M
Plans as it deems appropriate to pay for activities or expenses primarily
intended to result in the sale of the Class A, Class B, Class C or Class M
shares, respectively, or in personal service to and/or maintenance of these
shareholder accounts. For each class, these activities and expenses may
include, but are not limited to:
Compensation to employees of ISI;
Compensation to and expenses of ISI and other selected dealers who engage
in or otherwise support the distribution of shares or who service
shareholder accounts;
The costs of printing and distributing prospectuses, statements of
additional information and reports for other than existing shareholders;
and
The cost of preparing, printing and distributing sales literature and
advertising materials.
Under the Plans, as required by Rule 12b-1, the Board of Trustees will review,
at least quarterly, a written report provided by ISI of the amounts expended by
ISI in distributing and servicing Class A, Class B, Class C or Class M shares
of the funds and the purpose for which such expenditures were made. For so long
as the Plans are in effect, selection and nomination of the Trustees who are
not interested persons of the Fund shall be committed to the discretion of the
Trustees who are not interested persons of the Fund.
A Plan may be terminated as to a class of shares of a fund at any time by vote
of a majority of the Disinterested Trustees, or by vote of a majority of the
outstanding voting securities of the applicable class. A Plan may be amended by
vote of the Trustees, including a majority of the Disinterested Trustees of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or any agreement relating thereto, cast in person at a meeting called for
that purpose. Any amendment of a Plan that would materially increase the costs
to a particular class of shares of a fund requires approval by the shareholders
of that class. A Plan will remain in effect for successive one year periods, so
long as such continuance is approved annually by vote of the Fund's Trustees,
including a majority of the Disinterested Trustees, cast in person at a meeting
called for the purpose of voting on such continuance.
66
<PAGE>
DISTRIBUTION FEES
Distribution related expenses incurred by ISI for the fiscal year ended October
31, 1999 are listed in the table below. These expenses have been partially
reimbursed to ISI by a 12b-1 arrangement with the funds.
<TABLE>
<CAPTION>
IDEX Alger IDEX GE
Aggressive Growth International Equity(a)
------------------------------------------ --------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
-------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 9,595.00 $ 3,772.00 $ 1,921.00 $ 1,413.00 $ 243.00 $ 61.00
Printing/mailing
prospectuses to
other than current
shareholders $ 61,356.00 $ 35,263.00 $14,239.00 $ 3,966.00 $1,096.00 $ 296.00
Compensation to
underwriters $ 82,159.00 $ 10,650.00 $ 9,908.00 $ 9,009.00 $ 911.00 $ 700.00
Compensation to
dealers $ 90,221.00 $ 10,388.00 $10,669.00 $ 4,101.00 $ 730.00 $ 225.00
Compensation to
sales personnel $ 96,459.00 $ 60,562.00 $23,724.00 $ 5,726.00 $1,625.00 $ 407.00
Interest or other
finance charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 16,087.00 $ 9,885.00 $ 3,905.00 $ 988.00 $ 277.00 $ 70.00
Office expenses $ 38,951.00 $ 21,915.00 $ 9,011.00 $ 2,981.00 $ 728.00 $ 189.00
Administrative
processing costs $ 7,707.00 $ 3,345.00 $ 1,432.00 $ 718.00 $ 545.00 $ 434.00
TOTAL $402,535.00 $155,780.00 $74,809.00 $28,902.00 $6,155.00 $2,382.00
<CAPTION>
IDEX JCC
Capital Appreciation IDEX JCC Global
----------------------------------------- --------------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
-------------- ------------- ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 2,890.00 $ 398.00 $ 202.00 $ 60,768.00 $ 40,576.00 $ 19,900.00
Printing/mailing
prospectuses to
other than current
shareholders $ 35,743.00 $21,964.00 $ 6,143.00 $ 206,007.00 $174,040.00 $ 96,475.00
Compensation to
underwriters $ 57,551.00 $ 4,255.00 $ 2,636.00 $ 372,477.00 $ 33,054.00 $ 37,174.00
Compensation to
dealers $ 34,182.00 $ 4,710.00 $ 2,142.00 $ 571,972.00 $125,943.00 $173,332.00
Compensation to
sales personnel $ 66,949.00 $44,328.00 $11,597.00 $ 306,976.00 $267,195.00 $146,338.00
Interest or other
finance charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 10,767.00 $ 7,017.00 $ 1,860.00 $ 52,291.00 $ 45,010.00 $ 24,637.00
Office expenses $ 22,185.00 $13,106.00 $ 3,612.00 $ 147,920.00 $118,752.00 $ 63,977.00
Administrative
processing costs $ 2,922.00 $ 1,461.00 $ 716.00 $ 18,930.00 $ 10,701.00 $ 5,475.00
TOTAL $233,189.00 $97,239.00 $28,908.00 $1,737,341.00 $815,271.00 $567,308.00
</TABLE>
<TABLE>
<CAPTION>
IDEX Jennison Equity
IDEX JCC Growth* Opportunity(b)
----------------------------------------------- --------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
---------------- ---------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 120,362.00 $ 38,742.00 $ 35,590.00 $ 1,230.00 $ 414.00 $ 89.00
Printing/mailing
prospectuses to other
than current shareholders $ 709,903.00 $ 321,350.00 $160,177.00 $ 4,125.00 $ 2,554.00 $ 952.00
Compensation to
underwriters $1,226,914.00 $ 36,618.00 $ 56,341.00 $ 5,522.00 $ 1,347.00 $ 828.00
Compensation to dealers $1,594,500.00 $ 33,541.00 $ 85,572.00 $ 5,118.00 $ 3,182.00 $1,320.00
Compensation to sales
personnel $1,099,234.00 $ 532,917.00 $247,632.00 $ 6,270.00 $ 4,247.00 $1,701.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 183,902.00 $ 87,694.00 $ 41,623.00 $ 1,065.00 $ 701.00 $ 276.00
Office expenses $ 455,525.00 $ 199,947.00 $106,804.00 $ 2,983.00 $ 1,660.00 $ 588.00
Administrative processing
costs $ 42,263.00 $ 10,518.00 $ 4,740.00 $ 958.00 $ 718.00 $ 513.00
TOTAL $5,432,603.00 $1,261,327.00 $736,479.00 $27,271.00 $14,823.00 $6,267.00
<CAPTION>
IDEX NWQ Value Equity
--------------------------------------
A B M**
Shares Shares Shares
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $ 1,420.00 $ 1,043.00 $ 336.00
Printing/mailing
prospectuses to other
than current shareholders $ 6,262.00 $ 7,745.00 $ 2,386.00
Compensation to
underwriters $13,681.00 $ 3,940.00 $ 2,371.00
Compensation to dealers $ 7,189.00 $ 2,955.00 $ 1,751.00
Compensation to sales
personnel $ 9,647.00 $11,800.00 $ 4,031.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00
Travel $ 1,626.00 $ 1,991.00 $ 664.00
Office expenses $ 4,238.00 $ 4,693.00 $ 1,517.00
Administrative processing
costs $ 1,272.00 $ 1,004.00 $ 622.00
TOTAL $45,335.00 $35,171.00 $13,678.00
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
IDEX LKCM Strategic Total Return IDEX Dean Asset Allocation
---------------------------------------- --------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
-------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 5,607.00 $ 2,534.00 $ 1,658.00 $ 2,245.00 $ 2,530.00 $ 1,502.00
Printing/mailing prospectuses
to other than
current shareholders $ 35,549.00 $16,235.00 $ 8,564.00 $ 9,472.00 $ 9,110.00 $ 4,801.00
Compensation to
underwriters $ 61,529.00 $ 9,946.00 $11,628.00 $25,307.00 $12,506.00 $11,988.00
Compensation to dealers $ 25,366.00 $ 4,768.00 $ 5,883.00 $11,318.00 $ 9,605.00 $ 4,123.00
Compensation to sales
personnel $ 57,388.00 $26,654.00 $13,365.00 $14,485.00 $13,099.00 $ 6,864.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 9,509.00 $ 4,413.00 $ 2,239.00 $ 2,434.00 $ 2,242.00 $ 1,180.00
Office expenses $ 22,846.00 $10,423.00 $ 5,636.00 $ 6,516.00 $ 6,393.00 $ 3,474.00
Administrative processing
costs $ 2,843.00 $ 1,465.00 $ 941.00 $ 1,502.00 $ 1,277.00 $ 847.00
TOTAL $220,637.00 $76,438.00 $49,914.00 $73,279.00 $56,762.00 $34,779.00
<CAPTION>
IDEX JCC Balanced
-------------------------------------------
A B M**
Shares Shares Shares
-------------- ------------- --------------
<S> <C> <C> <C>
Advertising $ 9,144.00 $ 15,076.00 $ 5,529.00
Printing/mailing prospectuses
to other than
current shareholders $139,822.00 $142,813.00 $ 61,446.00
Compensation to
underwriters $ 59,763.00 $ 7,922.00 $ 5,529.00
Compensation to dealers $ 41,737.00 $ 6,619.00 $ 17,262.00
Compensation to sales
personnel $230,602.00 $238,851.00 $101,218.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00
Travel $ 37,769.00 $ 39,217.00 $ 16,637.00
Office expenses $ 81,951.00 $ 87,601.00 $ 36,895.00
Administrative processing
costs $ 2,653.00 $ 2,524.00 $ 1,127.00
TOTAL $603,441.00 $540,623.00 $245,643.00
</TABLE>
<TABLE>
<CAPTION>
IDEX JCC Flexible Income IDEX AEGON Income Plus
-------------------------------------- ----------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
------------ ------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 2,868.00 $ 3,747.00 $ 1,285.00 $ 9,469.00 $ 4,363.00 $ 3,253.00
Printing/mailing prospectuses
to other than current
shareholders $11,523.00 $15,528.00 $ 5,540.00 $ 41,806.00 $18,607.00 $10,176.00
Compensation to
underwriters $22,938.00 $ 1,052.00 $ 2,057.00 $123,779.00 $ 2,942.00 $ 5,430.00
Compensation to dealers $14,607.00 $ 1,120.00 $ 3,928.00 $ 37,940.00 $ 1,767.00 $ 9,235.00
Compensation to sales
personnel $17,700.00 $23,413.00 $ 8,388.00 $ 61,234.00 $29,237.00 $15,662.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 2,989.00 $ 3,973.00 $ 1,414.00 $ 10,382.00 $ 4,901.00 $ 2,642.00
Office expenses $ 7,969.00 $10,573.00 $ 3,774.00 $ 28,643.00 $12,806.00 $ 7,598.00
Administrative processing
costs $ 1,084.00 $ 634.00 $ 516.00 $ 2,574.00 $ 822.00 $ 651.00
TOTAL $81,678.00 $60,040.00 $26,902.00 $315,827.00 $75,445.00 $54,647.00
<CAPTION>
IDEX Federated Tax Exempt(c)
-----------------------------------------
A B M**
Shares Shares Shares
-------------- ------------- ------------
<S> <C> <C> <C>
Advertising $ 2,583.00 $ 945.00 $ 1,003.00
Printing/mailing prospectuses
to other than current
shareholders $ 20,983.00 $13,898.00 $ 7,195.00
Compensation to
underwriters $ 32,574.00 $ 463.00 $ 1,618.00
Compensation to dealers $ 22,579.00 $ 330.00 $ 2,845.00
Compensation to sales
personnel $ 32,605.00 $24,429.00 $11,453.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00
Travel $ 5,441.00 $ 3,965.00 $ 1,906.00
Office expenses $ 12,784.00 $ 8,323.00 $ 4,492.00
Administrative processing
costs $ 891.00 $ 412.00 $ 449.00
TOTAL $130,440.00 $52,765.00 $30,961.00
</TABLE>
<TABLE>
<CAPTION>
IDEX T. Rowe Price
IDEX Goldman Sachs Growth Dividend Growth
-------------------------------------- --------------------------------------
A B M** A B M**
Shares Shares Shares Shares Shares Shares
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 0.00 $ 0.00 $ 7.00 $ 0.00 $ 0.00 $ 0.00
Printing/mailing prospectuses
to other than current
shareholders $1,520.00 $2,323.00 $ 693.00 $1,611.00 $2,192.00 $1,255.00
Compensation to underwriters $ 659.00 $ 0.00 $ 0.00 $ 610.00 $ 0.00 $ 0.00
Compensation to dealers $ 302.00 $ 0.00 $ 0.00 $ 226.00 $ 0.00 $ 0.00
Compensation to sales
personnel $3,136.00 $4,480.00 $1,363.00 $3,501.00 $4,622.00 $2,252.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Travel $ 493.00 $ 714.00 $ 214.00 $ 545.00 $ 724.00 $ 402.00
Office expenses $ 891.00 $1,324.00 $ 414.00 $ 959.00 $1,285.00 $ 739.00
Administrative processing
costs $ 46.00 $ 47.00 $ 14.00 $ 37.00 $ 52.00 $ 15.00
TOTAL $7,047.00 $8,888.00 $2,705.00 $7,489.00 $8,875.00 $4,663.00
<CAPTION>
IDEX Salomon All Cap
--------------------------------------
A B M**
Shares Shares Shares
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $ 0.00 $ 0.00 $ 3.00
Printing/mailing prospectuses
to other than current
shareholders $1,218.00 $1,314.00 $ 466.00
Compensation to underwriters $ 595.00 $ 0.00 $ 0.00
Compensation to dealers $ 173.00 $ 0.00 $ 0.00
Compensation to sales
personnel $2,728.00 $2,987.00 $ 966.00
Interest or other finance
charges $ 0.00 $ 0.00 $ 0.00
Travel $ 422.00 $ 461.00 $ 150.00
Office expenses $ 737.00 $ 797.00 $ 287.00
Administrative processing
costs $ 29.00 $ 30.00 $ 10.00
TOTAL $5,902.00 $5,589.00 $1,882.00
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
IDEX Pilgrim Baxter Mid Cap Growth
--------------------------------------
A B M**
Shares Shares Shares
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $ 119.00 $ 0.00 $ 0.00
Printing/mailing prospectuses to other than current shareholders $1,474.00 $1,607.00 $ 737.00
Compensation to underwriters $ 829.00 $ 0.00 $ 0.00
Compensation to dealers $ 240.00 $ 0.00 $ 0.00
Compensation to sales personnel $3,124.00 $3,493.00 $1,564.00
Interest or other finance charges $ 0.00 $ 0.00 $ 0.00
Travel $1,474.00 $1,607.00 $ 737.00
Office expenses $ 940.00 $ 957.00 $ 446.00
Administrative processing costs $ 53.00 $ 109.00 $ 15.00
TOTAL $8,253.00 $7,773.00 $3,499.00
<CAPTION>
IDEX T. Rowe Price Small Cap
--------------------------------------
A B M**
Shares Shares Shares
------------ ------------ ------------
<S> <C> <C> <C>
Advertising $ 24.00 $ 24.00 $ 27.00
Printing/mailing prospectuses to other than current shareholders $1,217.00 $1,072.00 $ 694.00
Compensation to underwriters $ 778.00 $ 0.00 $ 0.00
Compensation to dealers $ 261.00 $ 0.00 $ 0.00
Compensation to sales personnel $2,252.00 $1,987.00 $1,263.00
Interest or other finance charges $ 0.00 $ 0.00 $ 0.00
Travel $ 359.00 $ 316.00 $ 200.00
Office expenses $ 714.00 $ 634.00 $ 422.00
Administrative processing costs $ 50.00 $ 42.00 $ 10.00
TOTAL $5,655.00 $4,075.00 $2,616.00
</TABLE>
------------------------------
* Class T shares of IDEX JCC Growth are not subject to annual distribution and
service fees.
** All shares designated as Class C shares prior to March 1, 1999 were renamed
as Class M shares on that date. Effective November 1, 1999, each fund began
offering a new Class C share that has different fees and expenses than the
previous Class C share. Information is not included for the new Class C
share because the Fund began offering those shares on November 1, 1999.
(a) Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
(b) Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this and this fund was named IDEX C.A.S.E. Growth.
(c) Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
Expenses are not listed for IDEX Pilgrim Baxter Technology, IDEX GE U.S. Equity,
IDEX Transamerica Small Company, and IDEX Transamerica Equity as these funds
commenced operations March 1, 2000; for IDEX Great Companies -- America(SM) and
IDEX Great Companies -- Technology(SM) as they commenced operations on July 14,
2000; for IDEX Great Companies -- Global(2) and IDEX Gabelli Global Growth as
they commenced operations on September 1, 2000; and for IDEX JCC Growth & Income
and IDEX Munder Net50 as they commenced operations on December 1, 2000.
NET ASSET VALUE DETERMINATION
Net asset value is determined separately for each class of shares of a fund on
each day as of the close of the regular session of business on the New York
Stock Exchange (the "Exchange"), currently 4:00 p.m. Eastern Time, Monday
through Friday, except on: (i) days on which changes in the value of portfolio
securities will not materially affect the net asset value of a particular class
of shares of the funds; (ii) days during which no shares of a fund are tendered
for redemption and no orders to purchase shares of that fund are received; or
(iii) customary national holidays on which the Exchange is closed. The per share
net asset value of each class of shares of a fund is determined by adding the
fund's total assets, subtracting liabilities and dividing by the number of
shares outstanding. The public offering price of a Class A, Class B, Class C,
Class M or Class T share of a fund is the net asset value per share plus, the
applicable sales charge in the case of Class A, Class M or Class T shares.
Investment securities are valued at the closing price for securities traded on a
principal securities exchange (U.S. or foreign), or on the NASDAQ National
Market. Investment securities traded on the over-the-counter market and listed
securities for which no sales are reported for the trading period immediately
preceding the time of determination are valued at the last bid price. Foreign
currency denominated assets and liabilities are converted into U.S. dollars at
the closing exchange rate each day. Other securities for which quotations are
not readily available are valued at fair values determined in such manner as a
fund's sub-adviser, under the supervision of the Board of Trustees, decides in
good faith. (Information is not included in the chart below for IDEX Pilgrim
Baxter Technology, IDEX GE U.S. Equity, IDEX Transamerica Small Company, and
IDEX Transamerica Equity as these funds commenced operations March 1, 2000; for
IDEX Great Companies -- America(SM) and IDEX Great Companies -- Technology(SM)
as they will commence operations July 14, 2000; and for IDEX Great Companies --
Global(2) and IDEX Gabelli Global Growth as they commenced operations on
September 1, 2000; and for IDEX JCC Growth & Income and IDEX Munder Net50 as
they commenced operations on December 1, 2000.
69
<PAGE>
OFFERING PRICE PER SHARE CALCULATED AS FOLLOWS:
<TABLE>
<CAPTION>
Net Asset Value Per Share Add Maximum Amount of Sales Offering Price
As of October 31, 1999 (net assets/shares outstanding) Selling Commission Charge Per Share
------------------------------------ --------------------------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
IDEX Alger Aggressive Growth
Class A $33.05 5.50% $1.92 $34.97
Class B $32.44 0.00% $ -- $32.44
Class M* $32.53 1.00% $0.33 $32.86
IDEX GE International Equity(a)
Class A $12.85 5.50% $0.75 $13.60
Class B $12.70 0.00% $ -- $12.70
Class M* $12.73 1.00% $0.13 $12.86
IDEX JCC Capital Appreciation
Class A $31.09 5.50% $1.81 $32.90
Class B $30.51 0.00% $ -- $30.51
Class M* $30.60 1.00% $0.31 $30.91
IDEX JCC Global
Class A $33.80 5.50% $1.97 $35.77
Class B $32.98 0.00% $ -- $32.98
Class M* $32.91 1.00% $0.33 $33.24
IDEX JCC Growth
Class A $46.72 5.50% $2.72 $49.44
Class B $45.38 0.00% $ -- $45.38
Class M* $45.58 1.00% $0.46 $46.04
Class T $47.45 8.50% $4.41 $51.86
IDEX Jennison Equity Opportunity(b)
Class A $12.14 5.50% $0.71 $12.85
Class B $11.93 0.00% $ -- $11.93
Class M* $11.96 1.00% $0.12 $12.08
IDEX NWQ Value Equity
Class A $11.28 5.50% $0.66 $11.94
Class B $11.09 0.00% $ -- $11.09
Class M* $11.12 1.00% $0.11 $11.23
IDEX LKCM Strategic Total Return
Class A $17.62 5.50% $1.03 $18.65
Class B $17.60 0.00% $ -- $17.60
Class M* $17.61 1.00% $0.18 $17.79
IDEX Dean Asset Allocation
Class A $11.79 5.50% $0.69 $12.48
Class B $11.78 0.00% $ -- $11.78
Class M* $11.78 1.00% $0.12 $11.90
IDEX JCC Balanced
Class A $18.96 5.50% $1.10 $20.06
Class B $18.95 0.00% $ -- $18.95
Class M* $18.95 1.00% $0.19 $19.14
IDEX JCC Flexible Income
Class A $ 9.46 4.75% $0.47 $ 9.93
Class B $ 9.46 0.00% $ -- $ 9.46
Class M* $ 9.46 1.00% $0.10 $ 9.56
IDEX AEGON Income Plus
Class A $ 9.67 4.75% $0.48 $10.15
Class B $ 9.67 0.00% $ -- $ 9.67
Class M* $ 9.67 1.00% $0.10 $ 9.77
IDEX Federated Tax Exempt(c)
Class A $10.60 4.75% $0.53 $11.13
Class B $10.59 0.00% $ -- $10.59
Class M* $10.59 1.00% $0.11 $10.70
IDEX Goldman Sachs Growth
Class A $11.40 5.50% $0.66 $12.06
Class B $11.35 0.00% $ -- $11.35
Class M* $11.36 1.00% $0.11 $11.47
IDEX T. Rowe Price Dividend Growth
Class A $10.20 5.50% $0.59 $10.79
Class B $10.19 0.00% $ -- $10.19
Class M* $10.19 1.00% $0.10 $10.29
IDEX Salomon All Cap
Class A $11.70 5.50% $0.68 $12.38
Class B $11.66 0.00% $ -- $11.66
Class M* $11.67 1.00% $0.12 $11.79
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Net Asset Value Per Share Add Maximum Amount of Sales Offering Price
As of October 31, 1999 (net assets/shares outstanding) Selling Commission Charge Per Share
----------------------------------- --------------------------------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
IDEX Pilgrim Baxter Mid Cap Growth
Class A $14.80 5.50% $0.86 $15.66
Class B $14.76 0.00% $ -- $14.76
Class M* $14.77 1.00% $0.15 $14.92
IDEX T. Rowe Price Small Cap
Class A $11.01 5.50% $0.64 $11.65
Class B $10.97 0.00% $ -- $10.97
Class M* $10.98 1.00% $0.11 $11.09
</TABLE>
------------------------------
* All shares designated as Class C shares prior to March 1, 1999 were renamed
as Class M shares on that date. Effective November 1, 1999, each fund began
offering a new Class C share that has different fees and expenses than the
previous Class C share. Information is not included for the new Class C
share because the Fund began offering those shares on November 1, 1999.
(a) Prior to March 1, 2000, Scottish Equitable Investment Management Limited
served as co-manager of this fund.
(b) Prior to December 1, 2000, C.A.S.E. Management, Inc. served as sub-adviser
to this fund and this was was named IDEX C.A.S.E. Growth.
(c) Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
An investor may choose among several options with respect to dividends and
capital gains distributions payable to the investor. Dividends or other
distributions will be paid in full and fractional shares at the net asset value
determined as of the ex-dividend date unless the shareholder has elected
another distribution option as described in the prospectus. Transaction
confirmations and checks for payments designated to be made in cash generally
will be mailed on the payable date. The per share income dividends on Class B,
Class C and Class M shares of a fund are anticipated to be lower than the per
share income dividends on Class A shares of that fund (and Class T shares of
IDEX JCC Growth), as a result of higher distribution and service fees
applicable to the Class B, Class C and Class M shares.
SHAREHOLDER ACCOUNTS
Detailed information about general procedures for Shareholder Accounts and
specific types of accounts isset forth in the prospectus.
RETIREMENT PLANS
The Fund offers several types of retirement plans that an investor may
establish to invest in shares of a fund with tax deductible dollars. Prototype
retirement plans for both corporations and self-employed individuals, and for
Individual Retirement Accounts, Code Section 401(k) Plans and Simplified
Employee Pension Plans are available by calling or writing IDEX Customer
Service. These plans require the completion of separate applications which are
also available from IDEX Customer Service. State Street Bank & Trust, Kansas
City, Missouri, acts as the custodian or trustee under these plans for which it
charges an annual fee of up to $15.00 on each such account with a maximum of
$30.00 per tax identification number. However, if your retirement plan is under
custody of State Street and your combined retirement account balances per
taxpayer identification number are more than $50,000, there is generally no
fee. Shares of a fund are also available for investment by Code Section
403(b)(7) retirement plans for employees of charities, schools, and other
qualifying employers. IDEX Federated Tax Exempt 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. To receive additional information or forms on
these plans, please call IDEX Customer Service at 1-888-233-4339 (toll free) or
write to Idex Investor Services, Inc. at P.O. Box 9015, Clearwater, Florida
33758-9015. No contribution to a retirement plan can be made until the
appropriate forms to establish the plan have been completed. It is advisable
for an investor considering the funding of any retirement plan to consult with
an attorney, retirement plan consultant or financial or tax advisor with
respect to the requirements of such plans and the tax aspects thereof.
71
<PAGE>
REDEMPTION OF SHARES
Shareholders may redeem their shares at any time at any price equal to the net
asset value per share next determined following receipt of a valid redemption
order by the transfer agent, in proper form. Payment will ordinarily be made
within three days of the receipt of a valid redemption order. The value of
shares on redemption may be more or less than the shareholder's cost, depending
upon the market value of the fund's net assets at the time of redemption. Class
B share and Class M share and certain Class A and Class T share purchases are
also subject to a contingent deferred sales charge upon certain redemptions.
The prospectus describes the requirements and procedures for the redemption of
shares.
Shares will normally be redeemed for cash, although each fund retains the right
to redeem its shares in kind under unusual circumstances in order to protect
the interests of the remaining shareholders by the delivery of securities
selected from its assets at its discretion. The Fund has, however, elected to
be governed by Rule 18f-1 under the 1940 Act pursuant to which a fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of a fund during any 90-day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, the fund will
have the option of redeeming the excess in cash or in kind. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage costs in
converting the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "Net Asset Value Determination," and such valuation
will be made as of the same time the redemption price is determined. Upon any
distributions in kind, shareholders may appeal the valuation of such securities
by writing to the Fund.
Redemption of shares may be suspended, or the date of payment may be postponed,
whenever: (1) trading on the Exchange is restricted, as determined by the SEC,
or the Exchange is closed except for holidays and weekends; (2) the SEC permits
such suspension and so orders; or (3) an emergency exists as determined by the
SEC so that disposal of securities and determination of net asset value is not
reasonably practicable.
The CDSC is waived on redemptions of Class B and Class M shares (and Class A, C
and T, when applicable) in the circumstances described below:
(a) Redemption upon Total Disability or Death
A fund will waive the CDSC on redemptions following the death or total
disability (as evidenced by a determination of the Federal Social Security
Administration) of a shareholder, but in the case of total disability only as
to shares owned at the time of the initial determination of disability. The
transfer agent or distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC.
(b) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
A shareholder may elect to participate in a systematic withdrawal plan ("SWP")
with respect to the shareholder's investment in a fund. Under the SWP, a dollar
amount of a participating shareholder's investment in the fund will be redeemed
systematically by the fund on a periodic basis, and the proceeds paid in
accordance with the shareholder's instructions. The amount to be redeemed and
frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the SWP. The CDSC will be waived on
redemptions made under the SWP subject to the limitations described below.
The amount of a shareholder's investment in a fund at the time election to
participate in the SWP is made with respect to the fund is hereinafter referred
to as the "Initial Account Balance." The amount to be systematically withdrawn
from a fund without the imposition of a CDSC may not exceed a maximum of 12%
annually of the shareholder's Initial Account Balance. The funds reserves the
right to change the terms and conditions of the SWP and the ability to offer
the SWP.
Please Note: The amount redeemed under this waiver does not need to be under a
systematic withdrawal plan. If it is not under a systematic withdrawal plan, it
is limited to one redemption per calendar year up to 12% of your account
balance at the time of redemption.
(c) Reinvestment Privilege
The CDSC is also waived on redemption of shares as it relates to the
reinvestment of redemption proceeds in the same class of shares of another fund
within 90 days after redemption.
(d) Certain Retirement Plan Withdrawals
For accounts opened prior to April 1, 2000, on withdrawals from IRS qualified
and nonqualified retirement plans, individual retirement accounts,
tax-sheltered accounts, and deferred compensation plans, where such withdrawals
are permitted under the terms of the plan or account. (This waiver does not
include transfer of asset redemptions, broker directed accounts or omnibus
accounts.)
72
<PAGE>
TAXES
Each fund has qualified (except IDEX Munder Net50 and IDEX JCC Growth & Income,
which intend to qualify), and expects to continue to qualify, for treatment as
a regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended (the "Code"). In order to qualify for that treatment, a fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income ("Distribution Requirement") and must meet
several additional requirements. With respect to each fund, these requirements
include the following: (1) the fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
foreign currencies, or other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) at the close of each
quarter of a fund's taxable year, at least 50% of the value of its total assets
must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities that, with respect to any one
issuer, do not exceed 5% of the value of the fund's total assets and that do
not represent more than 10% of the outstanding voting securities of the issuer;
and (3) at the close of each quarter of a fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other than
U.S. government securities or the securities of other RICs) of any one issuer.
If each fund qualifies as a regulated investment company and distributes to its
shareholders substantially all of its net income and net capital gains, then
each fund should have little or no income taxable to it under the Code. If a
fund fails to qualify as a regulated investment company, the fund will be
subject to federal, and possibly state, corporate taxes on its taxable income
and gains, and distributions to its shareholders will constitute ordinary
dividend income to the extent of the fund's available earnings and profits.
A fund will be subject to a nondeductible 4% excise tax to the extent it fails
to distribute by the end of any calendar year substantially all of its ordinary
income for that year and capital gains net income for the one-year period
ending on October 31 of that year, plus certain other amounts. Each fund
intends to distribute annually a sufficient amount of any taxable income and
capital gains so as to avoid liability for this excise tax.
In order for IDEX Federated Tax Exempt to pay exempt-interest dividends for any
taxable year, at the close of each taxable quarter, at least 50% of the
aggregate value of the fund's portfolio must consist of exempt-interest
obligations. If IDEX Federated Tax Exempt invests in any instruments that
generate taxable income, distributions of the interest earned thereon will be
taxable to that fund's shareholders as ordinary income to the extent of its
earnings and profits. Moreover, if that fund 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 availability of municipal
securities for investment by IDEX Federated Tax Exempt and the value of its
portfolio securities would be affected. In that event, IDEX Federated Tax
Exempt will re-evaluate its investment objective and policies.
Dividends and interest received by a fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. However, tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes. In
addition, most foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors and most U.S. Tax conventions
preclude the imposition of such taxes.
If more than 50% of the value of IDEX JCC Global's total assets at the close of
its taxable year consists of securities of foreign corporations, it will be
eligible to, and may, file an election with the IRS that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign and U.S. possessions income taxes paid by it. Pursuant
to the election, a fund will treat those taxes as dividends paid to its
shareholders and each shareholder will be required to: (1) include in gross
income, and treat as paid by him, his proportionate share of those taxes; (2)
treat his share of those taxes and of any dividend paid by the fund that
represents income from foreign or U.S. possessions sources as his own income
from those sources; and (3) either deduct the taxes deemed paid by him in
computing his taxable income or, alternatively, use the foregoing information
in calculating the limitation applicable to the foreign tax credit against his
federal income tax. IDEX JCC Global will report to its shareholders shortly
after each taxable year their respective shares of the income from sources
within, and taxes paid to, foreign countries and U.S. possessions if it makes
this election.
73
<PAGE>
Each fund, except IDEX Federated Tax Exempt, may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive; or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under
certain circumstances, a fund will be subject to federal income tax on a
portion of any "excess distribution" received on the stock of a PFIC or of any
gain on disposition of that stock (collectively, "PFIC income"), plus interest
thereon, even if the fund distributes the PFIC income as a taxable dividend to
its shareholders. The balance of the PFIC income will be included in the fund's
investment company taxable income and, accordingly, will not be taxable to it
to the extent that income is distributed to its shareholders. If a fund invests
in a PFIC and elects to treat the PFIC as a "qualified electing fund," then in
lieu of the foregoing tax and interest obligation, the fund will be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss). This will occur even if such
income and gains are not distributed to the fund and those amounts would be
subject to the Distribution Requirement described above. In most instances it
will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
In addition, another election may be available that would involve marking to
market a fund's PFIC stock at the end of each taxable year (and on certain
other dates prescribed in the Code), with the result that unrealized gains are
treated as though they were realized although any such gains recognized will be
ordinary income rather than capital gain. If this election were made, tax at
the fund level under the excess distribution rules would be eliminated, but a
fund could, in limited circumstances, incur nondeductible interest charges. A
fund's intention to qualify annually as a regulated investment company may
limit a fund's election with respect to PFIC stock.
The use of hedging strategies, such as writing (selling) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the character and timing of
recognition of the income received in connection therewith by a fund. In order
to comply with the diversification and other requirements applicable to RICs, a
fund may not be able to buy or sell certain securities at certain times, so the
investments utilized (and the time at which such investments are purchased and
sold) may be different from what the fund might otherwise believe to be
desirable. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by a fund with respect to its
business of investing in securities or foreign currencies, generally will
qualify as permissible income under the Income Requirement.
The treatment of income dividends and capital gains distributions by a fund to
shareholders under the various state income tax laws may not parallel that
under the federal law. Qualification as a regulated investment company does not
involve supervision of a fund's management or of its investment policies and
practices by any governmental authority.
Shareholders are urged to consult their own tax advisors with specific
reference to their own tax situations, including their state and local tax
liabilities.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Fund, as of August 11, 2000, no shareholders owned
beneficially or 5% or more of the outstanding shares of beneficial interest of
IDEX Alger Aggressive Growth, IDEX JCC Capital Appreciation and IDEX JCC
Global.
<TABLE>
<CAPTION>
% of Shares of
Name/Address Fund Class Beneficial Interest
---------------------------------- ------------------------------ ------- --------------------
<S> <C> <C> <C>
Aileen S. Jones Trust IDEX GE U.S. Equity M 6.07%
Mesa, AZ
Alan R. Hochstetler Living Trust IDEX GE International Equity M 14.79%
Williamsburg, VA
Amherst Telephone Co. IDEX JCC Flexible Income C 8.88%
Amherst, WI
Arthur L. Carlson IDEX NWQ Value Equity C 12.37%
Bismark, ND
Bills Trucking Inc. IDEX Federated Tax Exempt C 46.25%
San Jose, CA
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
% of Shares of
Name/Address Fund Class Beneficial Interest
------------------------------ ------------------------------------- ------- --------------------
<S> <C> <C> <C>
Butler Implement Co., Inc. IDEX Great Companies - Technology(SM) C 5.32%
Orangeburg, SC
Charles V. Sweeney IDEX Dean Asset Allocation C 7.39%
Stoughton, WI
CONAGRA IDEX JCC Growth T 24.95%
Boston, MA
Country Fresh, Inc. IDEX Dean Asset Allocation A 7.07%
Grand Rapids, MI
Daniel M. Landers IDEX Jennison Equity Opportunity* C 5.66%
Chandler, AZ
David A. Eckenrode IDEX Goldman Sachs Growth C 5.18%
Bismarck, ND
Diana M. Jarvis IDEX Jennison Equity Opportunity* C 11.93%
Forest Park, GA IDEX T. Rowe Price Dividend Growth C 5.67%
Donald R. & Joan C. Galloway IDEX Jennison Equity Opportunity* C 9.07%
Venice, FL IDEX GE International Equity C 6.41%
Donaldson Lufkin Jenrette IDEX AEGON Income Plus C 10.52%
Securities Corp., Inc. IDEX Federated Tax Exempt M 27.01%
Jersey City, NJ IDEX Federated Tax Exempt B 5.05%
IDEX T Rowe Price Dividend Growth C 13.78%
IDEX Goldman Sachs Growth C 12.58%
IDEX NWQ Value Equity C 5.37%
IDEX Pilgrim Baxter Technology C 5.70%
IDEX GE U.S. Equity M 27.75%
IDEX GE U.S. Equity C 9.71%
IDEX Transamerica Equity M 23.06%
IDEX Transamerica Equity C 14.05%
IDEX Transamerica Small Company C 6.43%
IDEX Great Companies - America(SM) C 10.43%
IDEX Great Companies - America(SM) M 6.23%
IDEX Great Companies - Technology(SM) M 11.98%
Dorothy P. Tanner IDEX NWQ Value Equity M 9.22%
Adairsville, GA IDEX Jennison Equity Opportunity* M 5.48%
IDEX T Rowe Price Small Cap M 5.79%
Drs. Lamura & Sweet Trust IDEX GE International Equity C 8.34%
FBO Patricia A. Tagliamonti
Worcester, MA
Dwayne D. Dahlberg IDEX Dean Asset Allocation C 12.63%
Coon Rapids, MN IDEX Jennison Equity Opportunity* C 5.99%
Edward R. Plazek IDEX Great Companies - America(SM) B 5.45%
Olmstead Falls, OH
Eleanor D. Klingaman IDEX Jennison Equity Opportunity* C 6.54%
Richland Center, WI IDEX Jennison Equity Opportunity* C 5.01%
Florence G. Shelley IDEX Federated Tax Exempt B 7.98%
Dallas, TX
Frank & Camillia Mensik IDEX Federated Tax Exempt C 5.66%
Barr Ridge, IL
Gerlach & Co. IDEX AEGON Income Plus A 12.93%
Tampa, FL
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
% of Shares of
Name/Address Fund Class Beneficial Interest
---------------------------------------- ------------------------------------- ------- --------------------
<S> <C> <C> <C>
Grand Lodge Fraternal Order of Police IDEX JCC Flexible Income A 7.91%
Shawnee Mission, KS
Hugh S. Humphries IDEX Great Companies - America(SM) M 5.97%
Gaffney, SC IDEX Great Companies - Technology(SM) M 7.36%
InterSecurities IDEX Federated Tax Exempt C 11.69%
Clearwater, FL IDEX GE U.S. Equity A 7.89%
IDEX GE U.S. Equity B 7.29%
IDEX GE U.S. Equity C 9.73%
IDEX Transamerica Small Company A 6.49%
IDEX Transamerica Small Company M 8.45%
IDEX Transamerica Small Company C 11.95%
IDEX Jennison Equity Opportunity* A 12.33%
IDEX GE International Equity A 19.45%
IDEX NWQ Value Equity A 7.38%
IDEX Goldman Sachs Growth M 8.44%
IDEX T. Rowe Price Dividend Growth M 10.84%
IDEX T Rowe Price Small Cap A 6.87%
IDEX T. Rowe Price Small Cap B 6.74%
IDEX T Rowe Price Small Cap M 20.01%
IDEX GE U.S. Equity M 25.84%
IDEX Transamerica Equity A 7.03%
IDEX Transamerica Equity B 9.23%
IDEX Transamerica Equity M 28.87%
IDEX Transamerica Equity C 18.20%
IDEX Great Companies - America(SM) C 10.43%
IDEX Great Companies - America(SM) M 34.75%
IDEX Great Companies - Technology(SM) B 9.07%
IDEX Great Companies - Technology(SM) M 42.90%
Irby S. Judice, Jr. & Jessie R. Judice IDEX Federated Tax Exempt B 5.80%
Beaumont, TX
James & Barbara Sadowsky IDEX T Rowe Price Small Cap A 5.92%
Longmeadow, MA
James T. Griffing IDEX LKCM Strategic Total Return C 5.31%
Brandon, MS
Jane E. Moore Trust IDEX GE International Equity M 6.59%
Spring Island, SC
Jann M & Susan R. Van Dreser Trust IDEX Transamerica Small Company C 6.86%
Plover, WI IDEX Great Companies - America(SM) C 5.92%
Jerry G. & Anne M. Wilson IDEX T Rowe Price Dividend Growth C 5.37%
Richardson, TX
John M. Coleman III IDEX Great Companies - America(SM) M 6.94%
Grafton, VA
John R. Kenney IDEX Great Companies - America(SM) A 5.43%
Largo, FL
Joseph H. Evans IDEX Great Companies - America(SM) C 12.28%
Tierra Verde, FL
Juanita H. Berry IDEX Goldman Sachs Growth C 9.45%
Louisville, KY
Keith & Toma Collingsworth IDEX Great Companies - Technology(SM) M 7.25%
Tallahassee, FL IDEX Great Companies - America(SM) M 5.49%
Kimberly K. Varellas IDEX Jennison Equity Opportunity* M 5.32%
Earlham, IA
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
% of Shares of
Name/Address Fund Class Beneficial Interest
------------------------------------ ------------------------------------- ------- --------------------
<S> <C> <C> <C>
Lisa Underwood IDEX Great Companies - Technology(SM) M 5.80%
Martinsville, IN
Mack C. Williams, Jr. IDEX Great Companies - America(SM) C 5.01%
Green Cove Springs, FL
Madge Rayne & Lorraine M. Cummings IDEX Dean Asset Allocation C 5.27%
Scarsdale, NY
Maki Electrical Pension Trust IDEX GE U.S. Equity M 9.01%
Worcester, MA IDEX Transamerica Equity M 10.52%
Marlane Investments L P IDEX NWQ Value Equity M 8.30%
Pensacola, FL
Mary Austin IDEX Federated Tax Exempt M 6.17%
Arvada, CO
Matt R. & Susan W. Coben IDEX Transamerica Equity A 5.63%
Charlotte, NC
Michael D. & Lisa D. Kostas IDEX Dean Asset Allocation C 11.36%
Marysville, CA
National Heritage Foundation IDEX GE International Equity A 7.41%
Falls Church, VA
Neil W. & Walana M. Ulrich IDEX Federated Tax Exempt B 5.02%
Clear Lake, WI
Norma J. Terry & Marsha L. Aronow IDEX Jennison Equity Opportunity* C 6.44%
Commerce Twp., MI
Patricia Jennings Bober Trust IDEX AEGON Income Plus M 12.56%
New Vernon, NJ
Peter A. Morgan IDEX GE International Equity C 5.18%
Cotuit, MA
PFL Life Insurance Co. IDEX AEGON Income Plus A 7.61%
Cedar Rapids, IA
Pugleasa Co., Inc. 401(K) IDEX Transamerica Small Company A 7.86%
Denver, CO
Richard D. Klingaman IDEX Dean Asset Allocation C 7.61%
Richland Center, WI
Robert & Jaan Brown IDEX GE U.S. Equity B 5.52%
Conneaut, OH
Robert C. Irvine IDEX AEGON Income Plus C 20.28%
Woodstock GA
Robert H. Kerr IDEX Transamerica Equity B 6.91%
Philadelphia, PA
Ronald B. and Nancy L. S. Yamasaki IDEX Federated Tax Exempt C 6.68%
Santa Rosa, CA
Ronald W. Skeddle IDEX GE U.S. Equity A 11.11%
Perrysburg, OH
Roy Wedge IDEX Federated Tax Exempt B 7.01%
Milwaukee, WI
Russela M. Olin Trust IDEX GE International Equity C 8.58%
Chestnut Hill, MA
Salomon Smith Barney, Inc. IDEX AEGON Income Plus C 9.22%
New York, NY
Sarah F. Timmons IDEX Federated Tax Exempt B 6.67%
Woodruff, SC
Stanley Socha IDEX Great Companies - America(SM) B 5.90%
Brunswick, OH IDEX Great Companies - Technology(SM) B 5.09%
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
% of Shares of
Name/Address Fund Class Beneficial Interest
-------------------------------- ----------------------------------- ------- --------------------
<S> <C> <C> <C>
Stephen P. Elias IDEX Federated Tax Exempt M 12.55%
Amherst, NH
Susan A. Morgan IDEX GE International Equity C 5.18%
Cotuit, MA
Thomas B & Sharon A. Tudor IDEX Federated Tax Exempt C 19.07%
Bismarck, ND
Thomas L. Collins IDEX Jennison Equity Opportunity* M 5.52%
Marietta, GA
Timothy J. & Deborah O'Donnell IDEX GE International Equity M 16.65%
Orlando, FL
US Clearing Corp. IDEX AEGON Income Plus C 9.44%
New York, NY
Van Harte Smith Family Trust IDEX Transamerica Equity A 28.13%
San Carlos, CA
Virginia R. Staas Trust IDEX GE U.S. Equity C 6.14%
Auburn, AL
William E. Podoll Family Trust IDEX Transamerica Equity C 6.71%
Plover, WI
William S. Renaudin IDEX GE U.S. Equity C 7.21%
New Orleans, LA
</TABLE>
------------------------------
* Prior to December 1, 2000, this fund was named IDEX C.A.S.E. Growth.
MISCELLANEOUS
ORGANIZATION
Each fund is a series of the IDEX Mutual Funds, a Massachusetts business trust
that was formed by a Declaration of Trust dated January 7, 1986. The Trust
currently is governed by a Restatement of Declaration of Trust ("Declaration of
Trust") dated as of August 30, 1991.
On October 1, 1993, in a tax-free reorganization, IDEX JCC Flexible Income
acquired all of the assets and assumed all of the liabilities of IDEX Total
Income Trust ("IDEX Total") in exchange for shares of IDEX JCC Flexible Income
which were then distributed to IDEX Total shareholders. All historical
financial and performance information set forth in this SAI relates to IDEX
Total prior to the date it was reorganized into the IDEX JCC Flexible Income.
On September 20, 1996 in a tax-free reorganization, IDEX JCC Growth (formerly
IDEX II Growth Fund) acquired all of the assets and assumed all of the
liabilities of IDEX Fund and IDEX Fund 3 in exchange for Class T shares of IDEX
JCC Growth which were then distributed on a pro rata basis to the respective
shareholders of IDEX Fund and IDEX Fund 3. Upon closing of the reorganization,
IDEX II Series Fund changed its name to IDEX Series Fund. IDEX Series Fund
became IDEX Mutual Funds effective March 1, 1999.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Fund to issue an unlimited number of
shares of beneficial interest. Shares of the Fund are fully paid and
nonassessable when issued. Shares of the Fund have no preemptive, cumulative
voting, conversion or subscription rights. Shares of the Fund are fully
transferable but the Fund is not bound to recognize any transfer until it is
recorded on the books.
The shares of beneficial interest of each fund are divided into four classes,
Class A, Class B, Class C and Class M shares; IDEX JCC Growth includes a fifth
class, Class T shares. Each class represents interests in the same assets of
the fund and differ as follows: each class of shares has exclusive voting
rights on matters pertaining to its plan of distribution or any other matter
appropriately limited to that class; Class A shares are subject to an initial
sales charge and are subject to a CDSC on purchases of $1 million or more if
redeemed within 24 months of purchase; Class B shares are subject to a CDSC, or
back-end load, at a declining rate; Class C shares are not subject to an
initial sales charge or CDSC; Class M shares are subject to an initial sales
charge and are subject to a CDSC if redeemed within 18 months of purchase;
Class B, Class C and Class M shares are subject to higher ongoing distribution
and service fees;
78
<PAGE>
each class may bear differing amounts of certain class-specific expenses; and
each class has a separate exchange privilege. Class T shares of the IDEX JCC
Growth are subject to an initial sales charge and are subject to a CDSC if
redeemed with 24 months of purchase. Class T shares have no annual distribution
and service fees. Class T shares are NOT available to new investors; only
existing Class T shareholders (who were shareholders of IDEX Fund or IDEX Fund
3 on September 20, 1996) may purchase additional Class T shares. The Fund does
not anticipate that there will be any conflicts between the interests of
holders of the different classes of shares of the same fund by virtue of these
classes. On an ongoing basis, the Board of Trustees will consider whether any
such conflict exists and, if so, take appropriate action. On any matter
submitted to a vote of shareholders of a series or class, each full issued and
outstanding share of that series or class has one vote.
The Declaration of Trust provides that each of the Trustees will continue in
office until the termination of the Trust or his earlier death, resignation,
bankruptcy or removal. A meeting will be called for the election of trustees
upon the written request of holders of 10% or more of the outstanding shares of
the Fund. Vacancies may be filled by a majority of the remaining trustees,
subject to certain limitations imposed by the 1940 Act. Therefore, it is not
anticipated that annual or regular meetings of shareholders normally will be
held, unless otherwise required by the Declaration of Trust or the 1940 Act.
Subject to the foregoing, shareholders have the power to vote for the election
and removal of trustees, to terminate or reorganize the Fund, to amend the
Declaration of Trust, on whether to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Fund's bylaws or the Trustees.
LEGAL COUNSEL AND INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as counsel to the Fund and certain of its affiliates.
PricewaterhouseCoopers LLP, 400 N. Ashley Street, Suite 2800 Tampa, Florida
33602-4319 serves as independent certified public accountants for the Fund.
REGISTRATION STATEMENT
This SAI and the prospectus for the Fund does not contain all the information
set forth in the registration statement and exhibits relating thereto, which
the Fund has filed with the SEC, Washington, D.C. under the 1933 Act and the
1940 Act, to which reference is hereby made.
PERFORMANCE INFORMATION
Quotations of average annual total return for a particular class of shares of a
fund will be expressed in terms of the average annual compounded rate of return
of a hypothetical investment in the fund over periods of 1, 5, and 10 years.
These are the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value. These rates of return
are calculated pursuant to the following formula:
P(1 + T)n = ERV
(where P = a hypothetical initial investment of $1,000; T = the average annual
total return; N = the number of years; and ERV = the ending redeemable value of
a hypothetical $1,000 investment made at the beginning of the period). All
average annual total return figures reflect the deduction of a proportionate
share of each fund's expenses on an annual basis, and assume that the maximum
sales load (Class A, M and Class T shares) is deducted from the initial $1,000
investment and all dividends and distributions are paid in additional shares.
(No information is included for the new Class C shares as the Fund began
offering those shares on November 1, 1999.)
79
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
IDEX Alger Aggressive Growth IDEX GE International Equity IDEX JCC Capital Appreciation
As of October 31, 1999 Class Class**** Class
-------------------------------------- ----------------------------- ---------------------------- ------------------------------
A B M*** A B M*** A B M***
--------- --------- --------- ---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 12/2/94 10/1/95 12/2/94 2/1/97 2/1/97 2/1/97 12/2/94 10/1/95 12/2/94
Sales Charge* 5.50% * 1.00% 5.50% * 1.00% 5.50% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90% 0.35% 1.00% 0.90%
Average Annual Total Return Including
Sales Charges:
1 year 46.93% 49.88% 52.42% 12.57% 13.45% 16.37% 91.07% 96.72% 98.77%
5 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
Inception 30.94% 21.43% 31.80% 7.61% 8.23% 8.88% 29.88% 28.28% 30.62%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 55.49% 54.88% 54.97% 19.12% 18.45% 18.55% 102.19% 101.72% 101.79%
5 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
Inception 32.45% 21.56% 32.07% 9.86% 9.18% 9.28% 31.38% 28.39% 30.89%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 55.49% 54.88% 54.97% 19.12% 18.45% 18.55% 102.19% 101.72% 101.79%
5 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A N/A N/A N/A
Inception 298.26% 121.97% 292.59% 29.36% 27.17% 27.51% 282.71% 177.54% 275.67%
</TABLE>
<TABLE>
<CAPTION>
IDEX JCC Global IDEX JCC Growth
As of October 31, 1999 Class Class
-------------------------------------- -------------------------------------- -------------------------------------------------
A B M*** A B M*** T**
------------ ------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception Date 10/1/92 10/1/95 10/1/93 5/8/86 10/1/95 10/1/93 6/4/85
Sales Charge* 5.50% * 1.00% 5.50% * 1.00% 8.50%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90% 0%
Average Annual Total Return Including
Sales Charges:
1 year 32.59% 34.62% 37.33% 52.14% 55.36% 57.85% 47.63%
5 years 20.38% N/A 21.26% 30.75% N/A 31.65% 30.23%
10 years N/A N/A N/A 20.11% N/A N/A 20.14%
Inception 22.33% 23.33% 21.06% 20.14% 31.05% 24.56% 20.26%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 40.31% 39.62% 39.73% 61.00% 60.36% 60.45% 61.34%
5 years 21.75% N/A 21.51% 32.24% N/A 31.91% 32.57%
10 years N/A N/A N/A 20.79% N/A N/A 21.21%
Inception 23.31% 23.47% 21.26% 20.65% 31.16% 24.77% 21.01%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 40.31% 39.62% 39.73% 61.00% 60.36% 60.45% 61.34%
5 years 167.54% N/A 164.84% 304.39% N/A 299.42% 309.40%
10 years N/A N/A N/A 561.06% N/A N/A 584.43%
Inception 340.53% 136.54% 222.88% 1155.64% 202.73% 284.04% 1459.51%
<CAPTION>
IDEX Equity
As of October 31, 1999 Opportunity Class*****
-------------------------------------- -----------------------------------
A B M***
----------- ----------- -----------
<S> <C> <C> <C>
Inception Date 2/1/96 2/1/96 2/1/96
Sales Charge* 5.50% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90%
Average Annual Total Return Including
Sales Charges:
1 year 22.92% 24.45% 27.25%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 9.76% 10.38% 10.59%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 30.07% 29.45% 29.54%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 11.42% 10.79% 10.89%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 30.07% 29.45% 29.54%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 50.00% 46.81% 47.30%
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
IDEX NWQ Value Equity IDEX LKCM Strategic Total Return
As of October 31, 1999 Class Class
------------------------------------ ----------------------------------- --------------------------------------
A B M*** A B M***
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 2/1/97 2/1/97 2/1/97 12/2/94 10/1/95 12/2/94
Sales Charge* 5.50% * 1.00% 5.50% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year (1.40)% (1.32)% (1.75)% 5.47% 5.91% 8.91%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 3.47% 3.97% 4.70% 14.36% 13.46% 14.83%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 4.34% 3.68% 3.79% 11.61% 10.91% 11.02%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 5.63% 4.98% 5.08% 15.68% 13.63% 15.07%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 4.34% 3.68% 3.79% 11.61% 10.91% 11.02%
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 16.17% 14.24% 14.54% 104.70% 68.52% 99.40%
<CAPTION>
IDEX Dean Asset Allocation
As of October 31, 1999 Class
------------------------------------ --------------------------------------
A B M***
------------ ------------ ------------
<S> <C> <C> <C>
Inception Date 10/1/95 10/1/95 10/1/95
Sales Charge* 5.50% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year (9.03)% (9.14)% (6.17)%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 6.98% 7.59% 7.62%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year (3.74)% (4.36)% (4.26)%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 8.48% 7.78% 7.89%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year (3.74)% (4.36)% (4.26)%
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 39.42% 35.81% 36.36%
</TABLE>
<TABLE>
<CAPTION>
IDEX JCC Balanced IDEX JCC Flexible Income
As of October 31, 1999 Class Class
-------------------------------------- ----------------------------------- -----------------------------------
A B M*** A B M***
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 12/2/94 10/1/95 12/2/94 6/29/87 10/1/95 10/1/93
Sales Charge* 5.50% * 1.00% 4.75% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90%
Average Annual Total Return Including
Sales Charge:
1 year 23.26% 24.64% 27.46% (3.13)% (3.99)% (0.90)%
5 years N/A N/A N/A 7.17% N/A 7.40%
10 years N/A N/A N/A 7.38% N/A N/A
Inception 20.17% 21.28% 20.67% 7.46% 6.27% 5.60%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 30.43% 29.64% 29.76% 1.70% 1.01% 1.11%
5 years N/A N/A N/A 8.22% N/A 7.62%
10 years N/A N/A N/A 7.91% N/A N/A
Inception 21.56% 21.41% 20.92% 7.89% 6.47% 5.77%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 30.43% 29.64% 29.76% 1.70% 1.01% 1.11%
5 years N/A N/A N/A 48.42% N/A 44.33%
10 years N/A N/A N/A 114.06% N/A N/A
Inception 161.16% 120.85% 154.48% 155.22% 29.19% 40.66%
<CAPTION>
IDEX AEGON Income Plus
As of October 31, 1999 Class
-------------------------------------- -----------------------------------
A B M***
----------- ----------- -----------
<S> <C> <C> <C>
Inception Date 6/14/85 10/1/95 10/1/93
Sales Charge* 4.75% * 1.00%
12b-1 Fee 0.35% 1.00% 0.90%
Average Annual Total Return Including
Sales Charge:
1 year (3.71)% (4.62)% (1.46)%
5 years 7.43% N/A 7.66%
10 years 8.33% N/A N/A
Inception 9.16% 5.59% 5.43%
Average Annual Total Return Without
Deduction of Sales Charge:
1 year 1.09% 0.38% 0.54%
5 years 8.48% N/A 7.88%
10 years 8.86% N/A N/A
Inception 9.53% 5.80% 5.61%
Cumulative Total Return Without
Deduction of Sales Charge:
1 year 1.09% 0.38% 0.54%
5 years 50.21% N/A 46.13%
10 years 133.69% N/A N/A
Inception 270.15% 25.86% 39.33%
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
IDEX Federated Tax Exempt IDEX Pilgrim Baxter Mid Cap Growth
As of October 31, 1999 Class****** Class
------------------------------------ --------------------------------------- -----------------------------------
A B M*** A B M
------------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 4/1/85 10/1/95 10/1/93 3/1/99 3/1/99 3/1/99
Sales Charge* 4.75% * 1.00% 5.50% * 1.00%
12B-1 Fee 0.35% 1.00% 0.60% 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year (10.69)% (11.55)% (8.42)% N/A N/A N/A
5 years 3.93% N/A 4.45% N/A N/A N/A
10 years 4.99% N/A N/A N/A N/A N/A
Inception 6.74% 2.93% 3.30% N/A N/A N/A
Average Annual Total Return Without
Deduction of Sales Charge:
1 year (6.23)% (6.89)% (6.56)% N/A N/A N/A
5 years 4.95% N/A 4.66% N/A N/A N/A
10 years 5.50% N/A N/A N/A N/A N/A
Inception 7.10% 3.15% 3.47% N/A N/A N/A
Cumulative Total Return Without
Deduction of Sales Charge:
1 year (6.23)% (6.89)% (6.56)% N/A N/A N/A
5 years 27.30% N/A 25.59% N/A N/A N/A
10 years 70.83% N/A N/A N/A N/A N/A
Inception 171.85% 13.49% 23.05% 48.06% 47.63% 47.70%
<CAPTION>
IDEX T. Rowe Price Small Cap
As of October 31, 1999 Class
------------------------------------ -----------------------------------
A B M
----------- ----------- -----------
<S> <C> <C> <C>
Inception Date 3/1/99 3/1/99 3/1/99
Sales Charge* 5.50% * 1.00%
12B-1 Fee 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception N/A N/A N/A
Average Annual Total Return Without
Deduction of Sales Charge:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception N/A N/A N/A
Cumulative Total Return Without
Deduction of Sales Charge:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 10.13% 9.70% 9.77%
</TABLE>
<TABLE>
<CAPTION>
IDEX T. Rowe Price Dividend Growth IDEX Goldman Sachs Growth
As of October 31, 1999 Class Class
-------------------------------- ----------------------------------- -----------------------------------
A B M A B M
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 3/1/99 3/1/99 3/1/99 3/1/99 3/1/99 3/1/99
Sales Charge 5.50% * 1.00% 5.50% * 1.00%
12B-1 Fee 0.35% 1.00% 0.90% 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year N/A N/A N/A N/A N/A N/A
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception N/A N/A N/A N/A N/A N/A
Average Annual Total Return
Without
Deduction of Sales Charge:
1 year N/A N/A N/A N/A N/A N/A
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception N/A N/A N/A N/A N/A N/A
Cumulative Total Return Without
Deduction of Sales Charge:
1 year N/A N/A N/A N/A N/A N/A
5 years N/A N/A N/A N/A N/A N/A
10 years N/A N/A N/A N/A N/A N/A
Inception 2.79% 2.00% 2.12% 13.97% 13.54% 13.61%
<CAPTION>
IDEX Salomon All Cap
As of October 31, 1999 Class
-------------------------------- -----------------------------------
A B M
----------- ----------- -----------
<S> <C> <C> <C>
Inception Date 3/1/99 3/1/99 3/1/99
Sales Charge 5.50% * 1.00%
12B-1 Fee 0.35% 1.00% 0.90%
Average Annual Total Return
Including Sales Charges:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception N/A N/A N/A
Average Annual Total Return
Without
Deduction of Sales Charge:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception N/A N/A N/A
Cumulative Total Return Without
Deduction of Sales Charge:
1 year N/A N/A N/A
5 years N/A N/A N/A
10 years N/A N/A N/A
Inception 17.03% 16.60% 16.67%
</TABLE>
--------------
* The contingent deferred sales charge on redemption of Class B shares is
5% during the first year, 4% during the second year, 3% during the third
year, 2% during the fourth year, 1% during the fifth and sixth years and
0% during the seventh year and later. The contingent deferred sales
charge on Class M shares is 1% during the first 18 months. The Class A
and T shares are subject to a 1% contingent deferred sales charge in
certain circumstances.
** Performance of Class T Shares of IDEX JCC Growth is based on the
historical performance of IDEX Fund from its inception on June 4, 1985
until the reorganization of IDEX Fund and IDEX Fund 3 into Class T Shares
of IDEX Series Fund Growth Portfolio on September 20, 1996; and the
historical performance of Class T Shares of IDEX JCC Growth thereafter.
*** Effective March 1, 1999, Class C shares became Class M shares.
**** Prior to March 1, 2000, Scottish Equitable Investment Management Limited
co-managed this fund.
***** Prior to December 1, 2000, C.A.S.E. Management, Inc. served as
sub-adviser to this fund and this fund was named IDEX C.A.S.E. Growth.
****** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser for this fund.
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<PAGE>
Information is not included for IDEX Pilgrim Baxter Technology, IDEX GE U.S.
Equity, IDEX Transamerica Small Company, and IDEX Transamerica Equity as they
did not commence operations until March 1, 2000; for IDEX Great Companies --
America(SM) and IDEX Great Companies -- Technology(SM) as they commenced
operations July 14, 2000; for IDEX Great Companies -- Global(2) and IDEX Gabelli
Global Growth as they commenced operations on September 1, 2000; and for IDEX
JCC Growth & Income and IDEX Munder Capital as they commenced operations on
December 1, 2000.
The current yield for a particular class of shares of each of IDEX JCC Flexible
Income, IDEX Federated Tax Exempt, IDEX AEGON Income Plus, IDEX JCC Balanced,
IDEX AEGON Income Plus, IDEX Dean Asset Allocation or IDEX LKCM Strategic Total
Return is computed in accordance with a standardized method prescribed by rules
of the SEC. The yield is computed by dividing the fund'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.
CURRENT YIELD
<TABLE>
<CAPTION>
30 Day Period
Ended 10/31/99
---------------
<S> <C>
IDEX LKCM Strategic Total Return
Class A 1.52%
Class B 0.95%
Class M* 1.04%
IDEX JCC Balanced
Class A 5.99%
Class B 5.69%
Class M* 5.73%
IDEX JCC Flexible Income
Class A 6.14%
Class B 5.79%
Class M* 5.83%
IDEX Federated Tax Exempt**
Class A 3.96%
Class B 3.50%
Class M* 3.87%
IDEX AEGON Income Plus
Class A 7.00%
Class B 6.70%
Class M* 6.65%
IDEX Dean Asset Allocation
Class A 2.78%
Class B 2.28%
Class M* 2.35%
</TABLE>
------------------------------
* All shares designated as Class C shares prior to March 1, 1999 were renamed
as Class M shares on that date. Effective November 1, 1999, each fund began
offering a new Class C share that has different fees and expenses than the
previous Class C share. Information is not included for the new Class C
share because the Fund began offering those shares on November 1, 1999.
** Prior to June 15, 2000, AEGON USA Investment Management, Inc. served as
sub-adviser to this fund.
The tax equivalent yield of IDEX Federated Tax Exempt 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 fund's yield that is not tax-exempt. The tax equivalent yield of IDEX
Federated Tax Exempt Class A, Class B and Class M shares based on a 30-day
period ended October 31, 1999 was 2.85%, 2.52% and 2.79%, respectively.
From time to time in advertisements or sales material, a fund may present and
discuss its performance rankings and/or ratings or other information as
published by recognized mutual fund statistical services or by publications of
general interest such as Wall Street Journal, Boston Globe, New York Times, Los
Angeles Times, Christian Science Monitor, USA Today, Tampa Tribune, St.
Petersburg Times, Financial Times, Hartford Current, International Herald
Tribune, Investor's Business Daily,
83
<PAGE>
Boston Herald, Washington Post, Kiplinger's Washington Letter, Kiplinger's Tax
Report, Kiplinger's Personal Finance Magazine, Barron's, Business Week,
Financial Services Week, National Underwriter, Time, Newsweek, Pensions &
Investments, U.S. News and World Report, Morningstar Mutual Fund Values,
Economist, Bank Letter, Boston Business Journal, Research Recommendations, Facs
of the Week, Money, Modern Maturity, Forbes, Fortune, Financial Planner,
American Banker, U.S. Banker, ABA Banking Journal, Institutional Investor
(U.S./Europe), Registered Representative, Independent Agent, American
Demographics, Trusts & Estates, Credit Union Management, Personal Investor, New
England Business, Business Month, Gentlemen's Quarterly, Employee Research
Report, Employee Benefit Plan Review, ICI Mutual Fund News, Succeed, Johnson
Charts, Weisenberger Investment Companies Service, Mutual Fund Quarterly,
Financial World Magazine, Consumer Reports, Babson-United Mutual Fund Selector
and Mutual Fund Encyclopedia (Dearborn Financial Publishing). A fund may also
advertise non-standardized performance information which is for a period in
addition to those required to be presented, or which provides actual
year-by-year return, or any combination thereof, or both. For Class A, Class M
and Class T shares, non-standardized performance may also be that which does
not reflect deduction of the maximum sales charge applicable to Class A, Class
M and Class T shares or the contingent deferred sales charge applicable to
Class B and under certain circumstances Class A, Class M and Class T shares. In
addition, a fund may, as appropriate, compare its performance to that of other
types of investments such as certificates of deposit, savings accounts and U.S.
Treasuries, or to certain interest rate and inflation indices, such as the
Consumer Price Index. A fund may also advertise various methods of investing
including, among others, dollar cost averaging, and may use compounding
illustrations to show the results of such investment methods. The Fund or the
Distributor may also from time to time in advertisements or sales material
present tables or other information comparing tax-exempt yields to the
equivalent taxable yields, whether with specific reference to IDEX Federated
Tax Exempt or otherwise.
FINANCIAL STATEMENTS
Unaudited financial statements for IDEX Alger Aggressive Growth, IDEX GE
International Equity, IDEX JCC Capital Appreciation, IDEX JCC Global, IDEX JCC
Growth, IDEX Jennison Equity Opportunity (formerly IDEX C.A.S.E. Growth), IDEX
NWQ Value Equity, IDEX LKCM Strategic Total Return, IDEX Dean Asset Allocation,
IDEX JCC Balanced, IDEX JCC Flexible Income, IDEX AEGON Income Plus, IDEX
Federated Tax Exempt, IDEX Goldman Sachs Growth, IDEX T. Rowe Price Dividend
Growth, IDEX Salomon All Cap, IDEX Pilgrim Baxter Mid Cap Growth and IDEX T.
Rowe Price Small Cap for the fiscal period ended April 30, 2000 are
incorporated by reference from the Fund's Semi-Annual Report dated April 30,
2000. (Information is not included for IDEX Great Companies -- America(SM) and
IDEX Great Companies -- Technology(SM) which commenced operations July 14, 2000;
for IDEX Great Companies -- Global(2) and IDEX Gabelli Global Growth which
commenced operations on September 1, 2000; or for IDEX JCC Growth & Income and
IDEX Munder Net50 as they commenced operations on December 1, 2000.)
84
<PAGE>
APPENDIX A
CERTAIN SECURITIES IN WHICH THE FUNDS MAY INVEST
I. MUNICIPAL OBLIGATIONS IN WHICH IDEX FEDERATED TAX EXEMPT 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 option 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 IDEX
Federated Tax Exempt 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 IDEX Federated Tax Exempt 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
IDEX Federated Tax Exempt may sell the municipal bonds before the settlement
date, it will ordinarily do so only for investment management reasons.
Ordinarily, the IDEX Federated Tax Exempt 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 IDEX Federated Tax Exempt will
direct the fund's custodian to segregate cash, U.S. government securities or
other appropriate debt obligations owned by the fund that are at least equal in
value to the amount the IDEX Federated Tax Exempt 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 fund's purchase
commitment.
B. Municipal Notes
The IDEX Federated Tax Exempt may invest in the following types of municipal
notes, subject to the quality requirements described in the prospectus:
A-1
<PAGE>
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 IDEX
Federated Tax Exempt. 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 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 IDEX Federated Tax Exempt 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
IDEX Federated Tax Exempt 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 fund 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
A-2
<PAGE>
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 IDEX Federated Tax Exempt.
E. Participation Interests
IDEX Federated Tax Exempt 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 fund'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 IDEX Federated Tax Exempt. The fund 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 fund's participation interest in the tax-exempt security, plus
accrued interest. The fund 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 fund and the
bank at which the instruments were purchased by the IDEX Federated Tax Exempt.
The sub-adviser will monitor the pricing, quality and liquidity of the variable
rate demand instruments held by the IDEX Federated Tax Exempt, 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 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 FUND MAY INVEST
(UNLESS OTHERWISE NOTED)
The funds may invest in the following obligations for temporary defensive
purposes or as otherwise described in the prospectus.
A. U.S. Government Obligations
As described in the prospectus, a fund may invest in some or all of the
following types of direct obligations of the federal government, issued by the
Department of the Treasury, and backed by the full faith and credit of the
federal government.
Treasury Bills. Treasury bills are issued with maturities of up to one year.
They are issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
Treasury Notes. Treasury notes are longer-term interest bearing obligations
with original maturities of one to seven years.
Treasury Bonds. Treasury bonds are longer-term interest bearing obligations
with original maturities from 5 to 30 years.
B. Obligations of Federal Agencies, Instrumentalities and Authorities
Certain federal agencies have been established as instrumentalities of the
United States government to supervise and finance certain types of activities.
These agencies include, but are not limited to, the Banks for Cooperatives,
Federal
A-3
<PAGE>
Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks
("FHLB"), Federal National Mortgage Association ("FNMA"), Government National
Mortgage Association ("GNMA"), Export-Import Bank of the United States, and
Tennessee Valley Authority ("TVA"). Issues of these agencies, while not direct
obligations of the United States government, are either backed by the full
faith and credit of the United States (e.g., GNMA Certificates or certain TVA
bonds) or are guaranteed by the Treasury (e.g., certain other TVA bonds) or
supported by the issuing agencies' right to borrow from the Treasury (e.g.,
FHLB and FNMA bonds). There can be no assurance that the United States
government itself will pay interest and principal on securities as to which it
is not legally obligated to do so.
C. Certificates of Deposit and Time Deposits
A time deposit is a non-negotiable interest-bearing deposit with a bank which
generally cannot be withdrawn prior to a specified maturity date without
substantial interest penalties. A certificate of deposit ("CD") is a negotiable
instrument issued by a bank against a time deposit. CDs normally can be traded
in the secondary market prior to maturity, and are thus more liquid than other
forms of time deposits. The funds will only invest in U.S. dollar denominated
time deposits and CDs representing deposits in U.S. banks with assets of $1
billion or more, whose deposits are insured by the Federal Deposit Insurance
Corporation.
D. Commercial Paper
Commercial paper refers to short-term unsecured promissory notes issued by
commercial and industrial corporations to finance their current operations.
Commercial paper may be issued at a discount and redeemed at par, or issued at
par with interest added at maturity. The interest or discount rate depends on
general interest rates, the credit standing of the issuer, and the maturity of
the note, and generally moves in tandem with rates on large CDs and Treasury
bills. An established secondary market exists for commercial paper,
particularly that of stronger issuers which are rated by Moody's Investors
Service, Inc. and Standard and Poor's Ratings Group. Investments in commercial
paper are subject to the risks that general interest rates will rise, that the
credit standing and outside rating of the issuer will fall, or that the
secondary market in the issuer's notes will become too limited to permit their
liquidation at a reasonable price.
E. Bankers' Acceptances
A bankers' acceptance is a negotiable short-term draft, generally arising from
a bank customer's commercial transaction with another party, with payment due
for the transaction on the maturity date of the customer's draft. The draft
becomes a bankers' acceptance when the bank, upon fulfillment of the
obligations of the third party, accepts the draft for later payment at
maturity, thus adding the bank's guarantee of payment to its customer's own
obligation. In effect, a bankers' acceptance is a post-dated certified check
payable to its bearer at maturity. Such acceptances are highly liquid, but are
subject to the risk that both the customer and the accepting bank will be
unable to pay at maturity. A fund may invest in U.S. dollar denominated
bankers' acceptances issued by U.S. banks, their foreign branches, and by U.S.
branches of foreign banks.
F. Repurchase Agreements for U.S. Government Securities
Subject to its investment restrictions, a fund may enter into repurchase
agreements with banks and dealers for securities of or guaranteed by the U.S.
government, under which the fund purchases securities and agrees to resell the
securities at an agreed upon time and at an agreed upon price. The difference
between the amount a fund pays for the securities and the amount it receives
upon resale is accrued as interest and reflected in the fund's net investment
income. When a fund enters into repurchase agreements, it relies on the seller
to repurchase the securities. Failure to do so may result in a loss for the
fund if the market value of the securities is less than the repurchase price.
Under the 1940 Act, repurchase agreements may be considered collateralized
loans by a fund.
At the time a fund enters into a repurchase agreement, the value of the
underlying security including accrued interest will be equal to or exceed the
value of the repurchase agreement and, for repurchase agreements that mature in
more than one day, the seller will agree that the value of the underlying
security including accrued interest will continue to be at least equal to the
value of the repurchase agreement.
Although repurchase agreements carry certain risks not associated with direct
investment in securities, a fund intends to enter into repurchase agreements
only with banks and dealers in transactions which the fund's sub-adviser
believes
A-4
<PAGE>
present minimal credit risks in accordance with guidelines adopted by the
Trustees. To the extent that proceeds from any sales of collateral upon a
default in the counterparty's obligation to repurchase were less than the
repurchase price, the fund would suffer a loss. If the counterpart's petitions
for bankruptcy or otherwise becomes subject to bankruptcy or liquidation
proceedings, there might be restrictions on a fund's ability to sell the
collateral and the fund could suffer a loss.
III. OTHER SECURITIES IN WHICH THE FUNDS MAY INVEST
A. Corporate Debt Securities
A fund may invest in corporate bonds, notes and debentures of long and short
maturities and of various grades, including unrated securities. Corporate debt
securities exist in great variety, differing from one another in quality,
maturity, and call or other provisions. Lower grade bonds, whether rated or
unrated, usually offer higher interest income, but also carry increased risk of
default. Corporate bonds may be secured or unsecured, senior to or subordinated
to other debt of the issuer, and, occasionally, may be guaranteed by another
entity. In addition, they may carry other features, such as those described
under "Convertible Securities" and "Variable or Floating Rate Securities," or
have special features such as the right of the holder to shorten or lengthen
the maturity of a given debt instrument, rights to purchase additional
securities, rights to elect from among two or more currencies in which to
receive interest or principal payments, or provisions permitting the holder to
participate in earnings of the issuer or to participate in the value of some
specified commodity, financial index, or other measure of value.
B. International Agency Obligations
A fund may invest in bonds, notes or Eurobonds of international agencies.
Examples are securities issued by the Asian Development Bank, the European
Economic Community, and the European Investment Bank. The funds may also
purchase obligations of the International Bank for Reconstruction and
Development which, while technically not a U.S. government agency or
instrumentality, has the right to borrow from the participating countries,
including the United States.
C. Bank Obligations or Savings and Loan Obligations
Subject to its investment restrictions, a fund may purchase certificates of
deposit, bankers' acceptances and other debt obligations of commercial banks
and certificates of deposit and other debt obligations of savings and loan
associations ("S&L's"). Certificates of deposit are receipts from a bank or an
S&L for funds deposited for a specified period of time at a specified rate of
return. Bankers' acceptances are time drafts drawn on commercial banks by
borrowers, usually in connection with international commercial transactions.
These instruments may be issued by institutions of any size, may be of any
maturity, and may be insured or uninsured. The quality of bank or savings and
loan obligations may be affected by such factors as (a) location -- the
strength of the local economy will often affect financial institutions in the
region, (b) asset mix -- institutions with substantial loans in a troubled
industry may be weakened by those loans, and (c) amount of equity capital --
under-capitalized financial institutions are more vulnerable when loan losses
are suffered. The sub-adviser will evaluate these and other factors affecting
the quality of bank and savings and loan obligations purchased by a fund, but
the fund is not restricted to obligations or institutions which satisfy
specified quality criteria.
D. Variable or Floating Rate Securities
Subject to its investment restrictions, a fund may purchase variable rate
securities that provide for automatic establishment of a new interest rate at
fixed intervals (e.g., daily, monthly, semi-annually, etc.). Floating rate
securities provide for automatic adjustment of the interest rate whenever some
specified interest rate index changes. The interest rate on variable and
floating rate securities is ordinarily determined by reference to, or is a
percentage of, a bank's prime rate, the 90-day U.S. Treasury bill rate, the
rate of return on commercial paper or bank certificates of deposit, an index of
short-term interest rates, or some other objective measure.
E. Preferred Stocks
Subject to a fund's investment restrictions, a fund may purchase preferred
stocks. Preferred stocks are securities which represent an ownership interest
in a corporation and which give the owner a prior claim over common stock on
the corporation's earnings and assets. Preferred stock generally pays quarterly
dividends. Preferred stocks may differ in many of their provisions. Among the
features that differentiate preferred stocks from one another are the dividend
rights, which
A-5
<PAGE>
may be cumulative or non-cumulative and participating or non-participating,
redemption provisions, and voting rights. Such features will establish the
income return and may affect the prospects for capital appreciation or risks of
capital loss.
F. Convertible Securities
Subject to its investment restrictions, a fund may invest in debt securities
convertible into or exchangeable for equity securities, or debt securities that
carry with them the right to acquire equity securities, as evidenced by
warrants attached to such securities or acquired as part of units of the
securities. Such securities normally pay less current income than securities
without conversion features, but add the potential opportunity for appreciation
from enhanced value for the equity securities into which they are convertible,
and the concomitant risk of loss from declines in those values.
G. Common Stocks
Subject to its investment restrictions, a fund may invest in common stocks.
IDEX JCC Flexible Income 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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