SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of
Commission Only (as permittedby Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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IDEX MUTUAL FUNDS
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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IDEX MUTUAL FUNDS
570 CARILLON PARKWAY
ST. PETERSBURG, FLORIDA 33716
(TOLL-FREE) 1-888-233-4339
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
JUNE 5, 2000
To the shareholders of IDEX AEGON Tax Exempt fund of IDEX Mutual Funds:
Notice is hereby given that a special meeting of the shareholders of the IDEX
AEGON Tax Exempt fund (the "Fund") of IDEX Mutual Funds ("IDEX") will be held at
570 Carillon Parkway, St. Petersburg, Florida 33716, on the 5th day of June 2000
at 11:00 a.m., local time, or any adjournment(s) thereof, for the following
purposes:
1. To approve a new Investment Advisory Agreement between IDEX and Idex
Management, Inc. ("IMI") with respect to the Fund;
2. To approve a new Sub-Advisory Agreement between IMI and Federated
Investment Management Company ("Federated") with respect to the
Fund;
3. To make changes to the Fund's fundamental investment restrictions:
(a) To add a restriction with respect to diversification;
(b) To amend the current restriction #2 regarding concentration;
(c) To delete restriction #3 regarding investments in oil, gas and
minerals;
(d) To delete restriction #6 regarding beneficial ownership of fund
securities;
(e) To delete restriction #7 with respect to investing in securities
of other investment companies;
(f) To delete restriction #10 with respect to put, call, straddle or
spread options; and
(g) To amend restriction #11 regarding commodities.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Trustees of IDEX (the "Board") has fixed the close of business on
March 21, 2000 as the record date for the determination of shareholders of the
Fund that are entitled to notice of, and to vote at, the meeting. You are
entitled to vote at the meeting and any adjournment(s) thereof if you owned
shares of the Fund at the close of business on March 21, 2000. If you attend the
meeting, you may vote your shares in person. If you do not expect to attend the
meeting, please complete, date, sign and return the enclosed proxy card in the
enclosed postage paid envelope. If your shares are held in the name of your
brokerage firm (a street name account), please complete your proxy card and
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return it to your broker. Your vote is still important. If you mail your vote by
proxy ballot and then decide to attend the meeting, you may change your vote in
person at the meeting.
Each proposal set forth above has been unanimously approved by the Board with
respect to the Fund. The Board recommends that you vote shares that you are
entitled to vote "FOR" each proposal. Subject to shareholder approval of
Proposals Nos. 1, 2 and 3 above, effective June 15, 2000 the Fund will be named
IDEX Federated Tax Exempt.
We look forward to your participation, and we thank you for your continued
confidence in IDEX.
By Order of the Board of Trustees,
John K. Carter, Secretary
IDEX Mutual Funds
St. Petersburg, Florida
April 3, 2000
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, date and
sign the card, and return it in the envelope provided. If you sign, date and
return the proxy card but give no voting instructions, your shares will be voted
"FOR" each proposal presented above.
IDEX WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT TO
SHAREHOLDERS UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO IDEX BY
CALLING (888) 233-4339 OR BY WRITING TO IDEX AT P.O. BOX 9015, CLEARWATER, FL
33758-9015.
SHAREHOLDERS OF THE FUND ARE INVITED TO ATTEND THE MEETING IN PERSON. IF YOU DO
NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY CARD, DATE AND SIGN THE PROXY CARD, AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE AND DELAY OF FURTHER SOLICITATION, WE
ASK THAT YOU MAIL YOUR PROXY PROMPTLY.
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PROXY STATEMENT DATED APRIL 3, 2000
IDEX MUTUAL FUNDS
570 CARILLON PARKWAY
ST. PETERSBURG, FLORIDA 33716
(TOLL FREE) 1-888-233-4339
This is a proxy statement for the IDEX AEGON Tax Exempt fund (the "Fund") of
IDEX Mutual Funds ("IDEX"), a series mutual fund consisting of several separate
investment funds. This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Trustees of IDEX (the "Board") to be
used at the IDEX special meeting of shareholders of the Fund or any
adjournment(s) thereof (the "Meeting"). The Meeting will be held on June 5, 2000
at 11:00 a.m., local time, at 570 Carillon Parkway, St. Petersburg, Florida
33716.
The primary purposes of the Meeting are: (1) to permit the shareholders of the
Fund to consider a proposed Investment Advisory Agreement between Idex
Management, Inc. ("IMI") and IDEX with respect to the Fund ("Proposed Advisory
Agreement") to take effect upon the later to occur of June 15, 2000 or obtaining
shareholder approval; (2) to permit shareholders of the Fund to consider a
proposed Sub-Advisory Agreement between IMI and Federated Investment Management
Company ("Federated") with respect to the Fund (the "Proposed Sub-Advisory
Agreement"), to take effect upon the later to occur of, June 15, 2000 or
obtaining shareholder approval; and (3) to approve changes to the Fund's
investment restrictions.
The principal solicitation of proxies will be by the mailing of this Proxy
Statement on or about April 3, 2000, but proxies may also be solicited by
telephone and/or in person by representatives of IDEX and regular employees of
Idex Investor Services, Inc., the transfer agent of IDEX, or its affiliate(s).
Arrangements will be made with brokerage houses and other custodians, nominees,
and fiduciaries to forward proxies and proxy materials to their principals. The
costs of the Meeting, including the preparation and mailing of the notice, Proxy
Statement and proxy, and the solicitation of proxies, including reimbursement to
broker-dealers and others who forward proxy materials to their clients, will be
borne by the shareholders of the Fund.
INTRODUCTION
Currently, IMI acts as investment adviser to the Fund pursuant to an investment
advisory agreement dated April 22, 1992, as amended March 1, 1999 (the "Current
Advisory Agreement"). (Prior to March 1, 1999, InterSecurities, Inc. ("ISI")
served as investment adviser to the Fund.) IMI and ISI are affiliates and one
under common control. On December 7, 1998, the Board approved having IMI succeed
ISI as investment adviser effective March 1, 1999. Under the Current Advisory
Agreement, IMI is responsible for providing investment management and
supervision services to the Fund. With respect to the Fund, IMI has in turn
entered into an Investment Counsel Agreement with AEGON Investment Management,
Inc. ("AIMI") dated April 22, 1992 (the "Current Sub-Advisory Agreement").
AIMI has notified IDEX that it is terminating its sub-advisory services to the
Fund. This will result in termination of the Current Sub-Advisory Agreement
effective June 15, 2000. Thereafter, AIMI
1
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will no longer provide investment management services to the Fund and will not
earn any additional compensation from the Fund. Consequently, beginning June 15,
2000, Federated has agreed to serve as the sole sub-adviser for the Fund, with
no change in the Fund's overall investment management fee schedule, pending
shareholder consideration and approval of the Proposed Sub-Advisory Agreement
(see Proposal No. 2 below). IMI will continue to serve as investment adviser to
the Fund under the Proposed Advisory Agreement, which is substantially identical
to the Current Advisory Agreement (see Proposal 1 below).
Section 15(a) of the Investment Company Act of 1940, as amended (the "1940 Act")
generally provides that no person may serve as an investment adviser to a
registered investment company, such as the Fund, except pursuant to a written
contract that, among other requirements, has been approved by the vote of a
majority of the investment company's outstanding voting securities. Any material
change to an existing advisory contract creates a new advisory agreement that
must be approved in accordance with Section 15(a) of the 1940 Act.
The termination of the Current Sub-Advisory Agreement and the resulting
reallocation of the investment management responsibilities of the Fund from AIMI
to Federated may be deemed to result in a material change to the Current AIMI
Sub-Advisory Agreement under the 1940 Act. As a result, the Proposed
Sub-Advisory Agreement may be deemed to be a new advisory agreement under the
1940 Act that requires shareholder approval. The Board recommends that
shareholders of the Fund VOTE FOR the Proposed Advisory Agreement and VOTE FOR
the Proposed Sub-Advisory Agreement.
VOTING INFORMATION
Shareholders of record of the Fund who own shares of beneficial interest at the
close of business on March 21, 2000 (the "Record Date") will be entitled to vote
at the Meeting, including any adjournment(s) thereof, with respect to the
Proposed Advisory Agreement, Proposed Sub-Advisory Agreement and investment
restriction amendments. With respect to each proposal presented herein,
shareholders are entitled to one vote for each share held and fractional votes
for fractional shares held with no share having cumulative voting rights. With
respect to the Fund, a majority of the shares of beneficial interest outstanding
on the Record Date, represented in person or by proxy, will constitute a quorum
for the Meeting, and therefore must be present for the transaction of business
at the Meeting. Only proxies that are voted, abstentions and "broker non-votes"
(as defined below) will be counted towards establishing a quorum. In the event
that a quorum is not present at the Meeting, or a quorum is present but
sufficient votes to approve the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the Fund shares represented at the Meeting in person or by
proxy (excluding abstentions and "broker non-votes," as defined below ).
The person named as proxies will vote those proxies that they are entitled to
vote FOR the proposals in favor of an adjournment of the Meeting, and will vote
those proxies required to be voted AGAINST any proposal for the Fund against
such adjournment. A shareholder vote may be taken on any proposal prior to any
such adjournment if sufficient votes have been received and it is otherwise
appropriate.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions, if your proxy is received properly executed. If
we receive your proxy, and it is executed
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properly, but you give no voting instructions with respect to any proposal, your
shares will be voted FOR each proposal. The duly appointed proxies may, in their
discretion, vote upon such other matters as may properly come before the
Meeting.
Abstentions and "broker non-votes" (as defined below) are counted as shares
eligible to vote at the Meeting in determining whether a quorum is present, but
do not represent votes cast with respect to the proposals. "Broker non-votes"
are shares held by a broker or nominee as to which instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
You may revoke your proxy: (a) at any time prior to its exercise by written
notice of its revocation to the Secretary of IDEX at the above address prior to
the Meeting; (b) by the subsequent execution and return of another proxy prior
to the Meeting; or (c) by being present and voting in person at the Meeting and
giving oral notice of revocation to the Chairman of the Meeting.
As of the Record Date, the Fund had 1,970,466.522 outstanding shares of
beneficial interest.
If a shareholder wishes to participate in the Meeting, such shareholder may
still submit the proxy card originally sent with the Proxy Statement or attend
the Meeting in person. Any proxy given by a shareholder, whether in writing or
by telephone, is revocable. A shareholder may revoke the accompanying proxy at
any time prior to its use by filing with IDEX a written revocation or a duly
executed proxy bearing a later date. In addition, any shareholder who attends
the Meeting in person may vote by ballot at the Meeting, thereby canceling any
proxy previously given.
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PROPOSAL 1:
TO APPROVE THE PROPOSED INVESTMENT ADVISORY AGREEMENT
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IDEX, on behalf of the Fund, entered into the Current Advisory Agreement with
IMI. Pursuant to the Current Advisory Agreement, IMI serves as the investment
adviser to the Fund. Pursuant to the terms of the Current Advisory Agreement,
IMI entered into the Current Sub-Advisory Agreement with AIMI to provide day to
day investment management services with regard to the assets of the Fund.
AIMI has advised IDEX that it will terminate its sub-advisory services with
respect to the Fund and will terminate the Current Sub-Advisory Agreement
effective June 15, 2000. Under the Proposed Sub-Advisory Agreement, Federated
will become the investment sub-adviser to the Fund effective June 15, 2000. For
a more detailed description of the Proposed Sub-Advisory Agreement, please refer
to Proposal No. 2, on page 7.
In anticipation of the termination of the Current Sub-Advisory Agreement and in
order for IMI to continue to serve as the investment adviser to the Fund, the
Proposed Advisory Agreement must be (i) approved by a majority of the Trustees
of IDEX who are not parties to the Proposed Advisory Agreement or interested
persons of any such party or interested persons of IDEX as defined in Section
2(a)(19) of the 1940 Act ("Disinterested Trustees"); and (ii) by the holders of
a majority of the outstanding voting securities (as defined in Section 2(a)(42)
of the 1940 Act ("voting securities")) of the Fund.
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Prior to and at a meeting held on March 20, 2000, the Board, including a
majority of Disinterested Trustees reviewed and, at that Board meeting,
unanimously approved, the terms of the Proposed Advisory Agreement on the basis
that its execution would be in the best interest of the Fund and its
shareholders, and authorized its submission to the shareholders of the Fund for
their approval. If approved by the shareholders of the Fund, the Proposed
Advisory Agreement, as it applies to the Fund, will take effect on June 15,
2000, or as soon thereafter as practicable, following its approval by vote of a
majority of the outstanding voting securities of the Fund.
IDEX MANAGEMENT, INC.
IMI, a Delaware corporation, located at 570 Carillon Parkway, St. Petersburg,
Florida 33716 is a wholly-owned subsidiary of AUSA Holding Company ("AUSA").
AUSA is a holding company, which is wholly-owned by Transamerica Holding
Company, which is wholly-owned by AEGON USA, Inc. ("AEGON USA"), a financial
services holding company. The primary emphasis of the subsidiary companies of
AUSA is generally the sale and servicing of life and health insurance, and
annuity and investment products. AEGON USA is a wholly-owned indirect subsidiary
of AEGON N.V., a Netherlands corporation and publicly traded international
insurance group.
IMI does not currently act as an investment adviser with respect to any
registered investment company other than IDEX.
IMI's directors and principal officers, together with their principal
occupations, are listed below. The address of each is 570 Carillon Parkway, St.
Petersburg, Florida 33716.
<TABLE>
<CAPTION>
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NAME AND POSITION WITH IMI PRINCIPAL OCCUPATION
- ------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
John R. Kenney Trustee and Chairman of IDEX Mutual Funds; Chairman of
Director the Board of WRL Series Fund, Inc.; Director of ISI
Insurance Agency, Inc.; Chairman and Chief Executive
Officer of Western Reserve Life Assurance Co. of Ohio;
Senior Vice President of AEGON USA, Inc.
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Jerome C. Vahl Director and President, Western Reserve Life Assurance
Director Co. of Ohio; Director of Idex Investor Services, Inc.;
Vice President, AEGON USA, Cedar Rapids, Iowa.
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Thomas R. Moriarty Senior Vice President, Treasurer and Principal
Director, President and CEO Financial Officer of IDEX Mutual Funds; President,
Chief Executive Officer and Director of
InterSecurities, Inc. (ISI); Senior Vice President of
ISI Insurance Agency, Inc.; President and CEO of Idex
Investor Services, Inc.; Vice President of Western
Reserve Life Assurance Co. of Ohio; and President and
CEO of AEGON Asset Management Services, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
Thomas E. Pierpan, Esq. Vice President and Assistant Secretary of IDEX Mutual
Assistant Vice President, Compliance Officer and Funds; Vice President and Assistant Secretary of WRL
Assistant Secretary Series Fund, Inc.; Vice President, General Counsel and
Assistant Secretary of Western Reserve Life Assurance
Co. of Ohio.
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</TABLE>
4
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<TABLE>
<CAPTION>
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NAME AND POSITION WITH IMI PRINCIPAL OCCUPATION
- ------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
Christopher G. Roetzer Vice President, Assistant Treasurer and Principal
Assistant Vice President Accounting Officer of IDEX Mutual Funds; Assistant Vice
President of Idex Investor Services, Inc.; Assistant
Vice President of ISI Insurance Agency, Inc.; Assistant
Vice President of ISI; and Vice President and Treasurer
of ISI Insurance Agency.
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William G. Cummings Vice President and Treasurer of ISI; Assistant Vice
Treasurer President and Treasurer of Idex Investor Services, Inc.
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William H. Geiger Secretary of ISI, AEGON Asset Management Services,
Secretary Inc., Idex Investor Services, Inc., WRL Investment
Management, Inc. and WRL Investment Services, Inc.;
Senior Vice President, Secretary, Corporate Counsel,
Group Vice President - Compliance of AEGON USA; and
Assistant Secretary of IDEX Mutual Funds and WRL Series
Fund, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
All officers as set forth above, except Messrs. Vahl and Cummings serve as an
officer or trustee of IDEX. No officer or trustee of IDEX (who is not a director
of IMI) owns securities or has any other material direct or indirect interest in
IMI or is a person controlling, controlled by or under common control with IMI.
THE CURRENT ADVISORY AGREEMENT
IMI has served as the investment adviser of IDEX with respect to the Fund, under
the Current Advisory Agreement since March 1, 1999. Subject to the supervision
and direction of the Board, IMI is generally responsible for managing the Fund
in accordance with its stated investment objective and policies. As compensation
for its services to the Fund, IMI currently is entitled to receive monthly
compensation from IDEX at an annual rate of 0.60% of the Fund's average daily
net assets.
In addition to the investment advisory fee under the Current Advisory Agreement,
the Fund also pays most of its operating costs, including administrative,
bookkeeping, and clerical expenses, legal fees, auditing and accounting fees,
shareholder services and transfer agent fees, custodian fees, costs of complying
with state and federal regulations, preparing, printing and distributing reports
to shareholders, Disinterested Trustees' fees and expenses, interest, insurance,
dues for trade associations and taxes.
IMI voluntarily has agreed to reimburse the Fund, or waive fees, or both, when
the Fund's normal operating expenses, including advisory fees but excluding
interest, taxes, brokerage commissions and 12b-1 fees, exceed, on an annual
basis, 1.00% of the Fund's average daily net assets ("fee cap").
The terms of the Current Advisory Agreement were first approved by the Board,
including by vote of a majority of its Disinterested Trustees cast in person, at
a meeting held on March 15, 1992. On December 7, 1998, the Board approved having
IMI succeed ISI as investment adviser effective March 1, 1999. IMI and ISI are
affiliates and under common control. The Current Advisory Agreement was most
recently approved by the Board on March 20, 2000, and under its terms, will
continue in effect from year to year, so long as such continuance is
specifically approved at least annually by the vote of a majority of the
Disinterested Trustees of IDEX, cast in person at a meeting called for the
purposes
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of voting on the approval of the terms of such renewal, and by either the
Trustees of IDEX or the affirmative vote of a majority of the outstanding voting
securities of the Fund. The Current Advisory Agreement was most recently
submitted to shareholders for their approval on April 22, 1992, the date of its
initial approval. The Current Advisory Agreement may be terminated with respect
to the Fund at any time by the Board of IDEX, or by vote of a majority of the
outstanding voting securities of the Fund, in each case without penalty on 60
days' written notice to IMI, or by IMI on 60 days' written notice to IDEX, and
will automatically terminate in the event of its assignment. The Current
Advisory Agreement may be amended with respect to the Fund only with the
approval of the affirmative vote of a majority of the outstanding voting
securities of the Fund and the approval by the vote of a majority of the
Disinterested Trustees of IDEX, cast in person at a meeting called for the
purposes of voting on the approval of such amendment.
During the fiscal year ended October 31, 1999, IDEX paid IMI an aggregate
investment advisory fee of approximately $151,000.00 for investment management
and supervision services and for certain administrative services, on behalf of
the Fund. The Fund did not pay IMI for any other services than those stipulated
in the Current Advisory Agreement.
THE PROPOSED ADVISORY AGREEMENT
The Proposed Advisory Agreement is substantially identical to the Current
Advisory Agreement, except that: (i) AIMI will no longer serve as a sub-adviser
of the Fund; (ii) the date of effectiveness will be the later to occur of (a)
obtaining shareholder approval or (b) June 15, 2000; and (iii) it reflects
certain non-material, clarifying and stylistic changes. The Proposed Advisory
Agreement does not contemplate any changes in the nature of services provided by
the Adviser or in the fees payable to IMI under the terms of the Agreement. The
description herein of the terms of the Proposed Advisory Agreement is qualified
by reference to the full text of the Form of Proposed Advisory Agreement itself,
which appears as Exhibit A to this Proxy Statement.
BOARD EVALUATION
In evaluating the Proposed Advisory Agreement, the Board considered that, except
as described above and as set forth in the Proposed Advisory Agreement which is
attached hereto as Exhibit A, the terms of the Proposed Advisory Agreement are
substantially identical to the terms of the Current Advisory Agreement. The
Board also considered the nature, quality and extent of services provided under
the Current Advisory Agreement and the skills and the capabilities of IMI
regarding its continued ability to provide such services. As part of its
analysis and evaluation of the Proposed Advisory Agreement and the fees paid to
IMI thereunder, the Board reviewed information regarding the costs and
profitability of IMI's operations, comparative information with respect to
advisory fees and total expenses paid by other comparable investment companies
over a range of asset sizes, and information with respect to recent developments
and trends with respect to mutual funds with similar investment objectives and
policies. Accordingly, the Board expects the Fund and its shareholders to
receive the same level and quality of investment management and supervision
services under the Proposed Advisory Agreement as it receives under the Current
Advisory Agreement.
Based upon the Board's review and evaluation of the information presented, and
in consideration of all factors the Board deemed relevant to their
deliberations, the Board determined that the Proposed Advisory Agreement is
fair, reasonable, and in the best interest of the Fund and its shareholders.
Accordingly, the Board, including the Disinterested Trustees, unanimously
approved the terms of the Proposed Advisory Agreement and determined to submit
the Proposed Advisory Agreement for
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consideration by the shareholders of the Fund.
To become effective, the proposed Advisory Agreement must be approved by a "vote
of the majority of the outstanding securities" of the Fund, as defined in the
1940 Act. The "vote of a majority of the outstanding voting securities" means
the lesser of the vote of (i) 67% or more of the shares of the Fund entitled to
vote thereon present at the Meeting if the holders of more than 50% of such
outstanding shares are present in person or represented by proxy; or (ii) more
than 50% of such outstanding shares of the Fund entitled to vote thereon.
If the Proposed Advisory Agreement is not approved by the shareholders of the
Fund, the Board will consider such alternative measures as the Board deems
prudent and in the best interest of the Fund and its shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL NO. 1
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PROPOSAL NO. 2:
TO APPROVE THE PROPOSED SUB-ADVISORY AGREEMENT
BETWEEN IMI AND FEDERATED
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IMI, on behalf of the Fund, has entered into the Current Sub-Advisory Agreement
with AIMI pursuant to which AIMI provides investment management services with
respect to assets of the Fund. The shareholders of the Fund are being asked to
approve the Proposed Sub-Advisory Agreement between IMI and Federated with
respect to the Fund that will take effect upon the later to occur of (a)
obtaining shareholder approval or (b) June 15, 2000. Under the Proposed
Sub-Advisory Agreement, Federated would become the investment sub-adviser with
respect to the assets of the Fund. The terms and conditions of the Proposed
Sub-Advisory Agreement are substantially identical to the terms and conditions
of the Current Sub-Advisory Agreement. The Proposed Sub-Advisory Agreement
appears as Exhibit B to this Proxy Statement.
FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated is located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222. Federated's investment adviser and other subsidiaries of
Federated advise approximately 176 mutual funds and separate accounts. Federated
was established in 1955 and is one of the largest mutual fund investment
managers in the United States. As of December 31, 1999, Federated's investment
adviser managed approximately over $125 billion in assets in mutual funds and
separate accounts.
Federated is a wholly-owned subsidiary of FII Holdings, Inc., which is in turn a
wholly-owned subsidiary of Federated Investors, Inc. Delaware Corp. and
Federated Investors, Inc. - PA Corp. are controlling parties of FII Holdings,
Inc.
Federated's investment advisers provide investment management and related
services to other mutual fund portfolios and individual, corporate, and
retirement accounts. The following registered investment company portfolio
advised by Federated has an investment objective similar to that of the IDEX
AEGON Tax Exempt fund; the table identifies and sets forth the size of such
portfolio as of January 31, 2000, along with the management fee expressed as a
percentage of average net assets for
7
<PAGE>
the portfolio. Federated receives the fees in exchange for providing investment
services, which are comprised of investment advisory services or administrative
services, or both.
<TABLE>
<CAPTION>
- ------------------------------------------ ----------------------------------- ----------------------------
NAME OF ITS PORTFOLIO/FUND WITH NET ASSETS AS OF ANNUAL MANAGEMENT FEE RATE
SIMILAR INVESTMENT OBJECTIVE JANUARY 31, 2000
- ------------------------------------------ ----------------------------------- ----------------------------
<S> <C> <C>
Federated Municipal Securities Fund, Inc. $547,801,886 0.55%
- ------------------------------------------ ----------------------------------- ----------------------------
DIRECTORS AND OFFICERS OF FEDERATED. The following table sets forth certain
information concerning the principal executive officers and trustees of
Federated. The address of each of the following persons is Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA, 15222.
<CAPTION>
PRINCIPAL OCCUPATION/POSITION WITH
NAME FEDERATED
- ------------------------------------------------------- -----------------------------------------------------
John F. Donahue Chairman of the Board and Trustee
J. Christopher Donahue President, Chief Executive Officer,
Chief Operations Officer and Trustee
William D. Dawson, III Executive Vice President and Trustee
Henry A. Frantzen Executive Vice President and Trustee
J. Thomas Madden Executive Vice President and Trustee
Thomas R. Donahue Trustee
Mark D. Olson Trustee
</TABLE>
No officer or director of IDEX is an officer, employee, director or shareholder
of Federated. No officer or director of IDEX owns securities or has any other
material direct or indirect interest in Federated or is a person controlling,
controlled by or under common control with Federated.
CURRENT SUB-ADVISORY AGREEMENT
AIMI has served as sub-adviser of the Fund since April 22, 1992. Pursuant to the
Current Sub-Advisory Agreement, IMI contracts with AIMI for investment
sub-advisory services for the Fund.
Under the terms of the Current Sub-Advisory Agreement, AIMI provides investment
advisory assistance and portfolio management advice to IMI. Subject to the
review and supervision of IMI and the Board, AIMI is responsible for the actual
management of the Fund and for making decisions to buy, sell or hold any
particular security, and AIMI places orders to buy or sell securities on behalf
of the Fund. AIMI bears all of its expenses in connection with the performance
of its services, such as compensating and furnishing office space for its
officers and employees connected with investment and economic research, trading
and investment management of the Fund.
The Current Sub-Advisory Agreement also stipulate that the sub-adviser may place
orders with broker-dealers for the purchase or sale of the Fund's portfolio
securities and it should attempt to obtain quality execution at favorable
security prices, but it may, in its discretion, agree to pay a broker-dealer
that furnishes brokerage or research services a higher commission than that
which might have been charged by another broker-dealer for effecting the same
transactions, if the sub-adviser determines in good faith that such commission
is reasonable in relation to the brokerage or research services
8
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provided.
For its services, AIMI receives monthly compensation from IMI in the amount of
50% of the investment management fees received by IMI with respect to the Fund,
less 50% of any amount reimbursed pursuant to its expense limitation.
During the most recent fiscal year of the Fund, AIMI received sub-advisory fees
of approximately $61,5000.00 for its services under the Current Sub-Advisory
Agreement.
The Current Sub-Advisory Agreement for the Fund were last approved by the Board
on March 20, 2000, and was most recently submitted to shareholders for approval
on April 22, 1992, the date of its initial approval. Under the terms of the
Current Sub-Advisory Agreement it will continue in effect from year to year so
long as such continuance is specifically approved annually by the vote of a
majority of the Disinterested Trustees of IDEX, cast in person at a meeting
called for the purpose of voting on the approval of the terms of such renewal,
and by either the Board, or the affirmative vote of a majority of the
outstanding voting securities of the Fund (as that phrase is defined in the 1940
Act). The Current Sub-Advisory Agreement may be terminated with respect to the
Fund at any time, without penalty, by AIMI, the Board, or by shareholders of the
Fund acting by vote of at least a majority of its outstanding voting securities
on 60 days' written notice to the sub-adviser or by the sub-adviser on 60 days'
written notice to IMI and IDEX. In addition, the Current Sub-Advisory Agreement
terminates automatically upon its assignment. The Current Sub-Advisory Agreement
may be amended with respect to the Fund only with the approval of the
affirmative vote of a majority of the outstanding voting securities of the Fund
and the approval by the vote of a majority of the Disinterested Trustees of
IDEX, cast in person at a meeting called for the purpose of voting on the
approval of such amendment.
FEDERATED'S INVESTMENT STRATEGY
Federated pursues its objective by investing in a portfolio of tax exempt
securities so that at least 80% of its annual interest income is exempt from
federal regular income tax. Interest income from Federated's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). Federated invests primarily in long term, investment grade, tax exempt
securities.
PROPOSED SUB-ADVISORY AGREEMENT AND RECOMMENDATION OF THE
BOARD OF TRUSTEES
The following description of the Proposed Sub-Advisory Agreement is qualified by
reference to Exhibit B, which consists of the Proposed Sub-Advisory Agreement.
THE PROPOSED SUB-ADVISORY AGREEMENT IS SUBSTANTIALLY IDENTICAL TO THE CURRENT
AIMI SUB-ADVISORY AGREEMENT EXCEPT THAT: (I) THE EFFECTIVE DATE WILL BE THE
LATER TO OCCUR OF (A) OBTAINING SHAREHOLDER APPROVAL OR (B) JUNE 15, 2000; (II)
THE INITIAL TERM WILL END TWO YEARS FROM THE EFFECTIVE DATE; (III) FEDERATED
WILL SERVE AS THE SUB-ADVISER FOR THE FUND; AND (IV) THE AGREEMENT REFLECTS
NON-MATERIAL STYLISTIC AND CLARIFYING CHANGES. THE PROPOSED SUB-ADVISORY
AGREEMENT DOES NOT CONTEMPLATE ANY CHANGES IN THE NATURE OF SERVICES PREVIOUSLY
PROVIDED BY, OR COMPENSATION PAID TO, AIMI. ASSUMING THAT THE PROPOSED
SUB-ADVISORY AGREEMENT IS APPROVED BY SHAREHOLDERS, FEDERATED WILL SERVE AS THE
INVESTMENT SUB-ADVISER TO THE FUND PURSUANT TO THE TERMS OF THE PROPOSED
SUB-ADVISORY AGREEMENT UNTIL SUCH TIME AS THE
9
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AGREEMENT IS AMENDED OR TERMINATED IN ACCORDANCE WITH ITS TERMS.
EVALUATION BY THE BOARD
Prior to and at a meeting of the Board on March 20, 2000, the Board, including
the Disinterested Trustees, reviewed information regarding the Proposed
Sub-Advisory Agreement.
In evaluating the Proposed Sub-Advisory Agreement, the Board took into account
that the Current Sub-Advisory Agreement, including the terms relating to the
services to be provided thereunder and the expenses payable by the Fund, is
substantially identical to the Proposed Sub-Advisory Agreement, except for the
dates of execution, effectiveness and termination, and that Federated will serve
as the sub-adviser for the Fund. The Board also considered the reputation,
expertise and resources of Federated and its affiliates in the domestic
financial market.
After consideration of the factors discussed in Proposal No. 1, above, and such
other factors and information that the Board deemed relevant, the Board,
including the Disinterested Trustees, unanimously approved the Proposed
Sub-Advisory Agreement and voted to recommend approval of the agreement to the
shareholders of the Fund.
To become effective, the proposed Sub-Advisory Agreement must be approved by a
"vote of the majority of the outstanding securities" of the Fund, as defined in
the 1940 Act. The "vote of a majority of the outstanding voting securities"
means the lesser of the vote of (i) 67% or more of the shares of the Fund
entitled to vote thereon present at the meeting if the holders of more than 50%
of such outstanding shares are present in person or represented by proxy; or
(ii) more than 50% of such outstanding shares of the Fund entitled to vote
thereon.
In the event that the Proposed Sub-Advisory Agreement is not approved by the
shareholders of the Fund, the Board will consider such alternative measures as
the Board deems prudent and in the best interest of the Fund and its
shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 2
- --------------------------------------------------------------------------------
PROPOSAL NO. 3:
TO APPROVE CHANGES TO THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The 1940 Act (which was adopted to protect mutual fund shareholders) requires
investment companies such as the fund to adopt certain specific investment
restrictions that can be changed only by shareholder vote. These are referred to
as "fundamental policies." They limit the investment activities of the Fund's
investment adviser.
When the Fund was established, certain restrictions were imposed by state laws
and regulations which were included in the fundamental restrictions. The
National Securities Markets Improvement Act of 1996 ("NSMIA") preempted many of
these restrictions and they no longer apply.
10
<PAGE>
The proposed sub-adviser for the Fund, Federated, requested that certain of the
other restrictions be amended so that it could manage the Fund in the same
manner it manages other similar funds.
Accordingly, the Board has authorized the submission to the Fund's shareholders
for their approval the amendment or deletion of certain of the Fund's
fundamental restrictions.
BOARD EVALUATION
By reducing the number of restrictions that can be changed only by shareholder
vote, the Board determined that costs and delays associated with holding future
shareholder meetings to revise fundamental restrictions that may become outdated
or inappropriate. The Trustees also believe that the sub-adviser's ability to
manage fund assets in a changing investment environment will be enhanced and
that investment management opportunities will be increased by these changes.
The Board does not anticipate that the changes, individually or in the
aggregate, will result at this time in a material change in the level of
investment risk associated with investment in the Fund. Nor does the Board
anticipate that the proposed changes in fundamental investment policies, will,
individually or in the aggregate, change materially the manner in which the Fund
is managed.
The recommended changes are specified below. The text and a summary description
of the proposed change are included. Please note: any non-fundamental policy may
be modified without approval of shareholders. Change of non-fundamental policies
requires only Board approval.
Presently, if the fund adheres to a fundamental or non-fundamental percentage
restriction at the time of investment or transaction, a later increase or
decrease in the percentage resulting from a change in the value of the fund's
portfolio securities or the amount of its total assets does not create a
violation of the restriction. This policy will continue to apply for any of the
proposed changes that are approved.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
ALL SUB-SECTIONS OF PROPOSAL NO. 3
- --------------------------------------------------------------------------------
PROPOSAL NO. 3(A):
TO ADD A FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING DIVERSIFICATION
- --------------------------------------------------------------------------------
Upon approval of the Fund's shareholders, the fundamental investment restriction
governing diversification will be adopted:
IDEX FEDERATED TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
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
11
<PAGE>
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.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(A)
- --------------------------------------------------------------------------------
PROPOSAL NO. 3(B):
TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
# 2 REGARDING CONCENTRATION
- --------------------------------------------------------------------------------
Shareholders are being asked to approve a revised fundamental restriction with
respect to concentration.
CURRENT RESTRICTION:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
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.
PROPOSED RESTRICTION:
IDEX FEDERATED TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
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.
The principal risks of investing in industrial development bonds include credit
risks, interest rate risks and sector risks. Prices of fixed income securities
rise and fall in response to changes in the interest rate paid by similar
securities. Generally, when interest rates rise, prices of fixed income
securities fall. However, market factors, such as the demand for particular
fixed income securities, may cause the price of certain fixed income securities
to fall while the prices of other securities rise or remain unchanged.
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
A substantial part of the Fund's portfolio may be comprised of securities issued
by banks or companies with similar characteristics. As a result, the Fund will
be more susceptible to any economic, business, political, or other developments
which generally affect these issuers.
The following will be added with respect to concentration to the Statement of
Additional Information directly after the Investment Restrictions:
12
<PAGE>
The fund applies its concentration of investment restriction as follows:
o Utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a
separate industry;
o Financial service companies will be classified according to the end users
of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and
o Asset-backed securities will be classified according to the underlying
assets securing such securities.
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.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(B)
- --------------------------------------------------------------------------------
PROPOSAL NO. 3(C):
TO DELETE FUNDAMENTAL RESTRICTION # 3 REGARDING INVESTMENTS IN
OIL, GAS AND MINERALS
- --------------------------------------------------------------------------------
The Fund is not required to have a fundamental restriction with respect to oil,
gas or mineral investments under NSMIA. Upon shareholders' approval of Proposal
No. 3(c), the following restriction will be deleted:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
# 3: INVEST IN ANY DIRECT INTEREST IN AN OIL, GAS OR OTHER MINERAL
EXPLORATION OR DEVELOPMENT PROGRAM.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(C)
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 3(D):
TO DELETE FUNDAMENTAL RESTRICTION # 6 REGARDING BENEFICIAL
OWNERSHIP OF FUND SECURITIES
- --------------------------------------------------------------------------------
The Fund is not required to have a fundamental restriction with respect to
beneficial ownership of fund securities under NSMIA. Upon shareholders' approval
of proposal No. 3(d), the following restriction will be deleted:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
# 6: PURCHASE OR RETAIN THE SECURITIES OF ANY ISSUER, IF, TO THE FUND'S
KNOWLEDGE, THOSE OFFICERS AND DIRECTORS OF THE MANAGER OR SUB-ADVISER WHO
INDIVIDUALLY OWN BENEFICIALLY MORE THAN 0.5% OF THE OUTSTANDING SECURITIES OF
SUCH ISSUER TOGETHER OWN BENEFICIALLY MORE THAN 5% OF SUCH OUTSTANDING
SECURITIES.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(D)
- --------------------------------------------------------------------------------
PROPOSAL NO. 3(E):
TO DELETE FUNDAMENTAL INVESTMENT RESTRICTION #7 WITH RESPECT TO
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
The Fund is not required to have a fundamental restriction with respect to
investing in securities of other investment companies under NSMIA. Upon
shareholders' approval of Proposal No. 3(e), the following restriction will be
deleted:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
#7. INVEST IN SECURITIES OF OTHER INVESTMENT COMPANIES, EXCEPT IN THE
EVENT OF MERGER OR REORGANIZATION WITH ANOTHER INVESTMENT COMPANY.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(E)
PROPOSAL NO. 3(F):
TO DELETE FUNDAMENTAL INVESTMENT RESTRICTION # 10 WITH RESPECT
TO PUT, CALL, STRADDLE OR SPREAD OPTIONS
- --------------------------------------------------------------------------------
To align the Fund's investment restrictions with those of Federated's similarly
managed fund, shareholders' are asked to delete the following fundamental
investment restriction. Upon shareholders' approval, the following investment
restriction will be deleted:
14
<PAGE>
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
# 10: WRITE, PURCHASE OR SELL PUT, CALL, STRADDLE OR SPREAD OPTIONS,
EXCEPT FOR HEDGING PURPOSES ONLY, IN ACCORDANCE WITH SUCH NON-FUNDAMENTAL
POLICIES THAT THE BOARD OF TRUSTEES MAY FROM TIME TO TIME ADOPT.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(F)
PROPOSAL NO. 3(G):
TO AMEND INVESTMENT RESTRICTION #11 REGARDING COMMODITIES
- --------------------------------------------------------------------------------
Federated has requested that the following investment restriction with respect
to commodities be amended:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
# 11: PURCHASE OR SELL COMMODITIES OR COMMODITY CONTRACTS.
Upon shareholders' approval, the following restriction will be adopted:
IDEX FEDERATED TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
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 that settle by payment of cash are mot
deemed to be investments in commodities.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL NO. 3(G)
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
As a general matter, IDEX does not hold annual meetings of shareholders.
Shareholders wishing to submit proposals to be considered at an upcoming meeting
or for inclusion in a proxy statement for a subsequent shareholders' meeting
should send their written proposals to the Secretary of IDEX Mutual Funds, 570
Carillon Parkway, St. Petersburg, Florida 33716.
ANNUAL REPORTS
IDEX will furnish, without charge, a copy of its most recent annual report to
shareholders upon request. Any such request should be directed to IDEX by
calling (888) 233-4339 or by writing to IDEX at P.O. Box 9015, Clearwater, FL
33758-9015.
15
<PAGE>
ADDITIONAL INFORMATION
The Fund's investment adviser, Idex Management, Inc., its transfer agent, Idex
Investor Services, Inc., and its principal underwriter/distributor,
InterSecurities, Inc., are located at 570 Carillon Parkway, St. Petersburg,
Florida 33716.
OTHER BUSINESS
Management knows of no business to be presented to the Meeting other than the
matters set forth in this Proxy Statement, but should any other matter requiring
a vote of shareholders arise, the proxies will vote thereon according to their
best judgment in the interests of IDEX and its shareholders.
By Order of the Board of Trustees,
John K. Carter, Esq., Secretary
IDEX Mutual Funds
St. Petersburg, Florida
Exhibit A - Proposed Investment Advisory Agreement
Exhibit B - Proposed Sub-Advisory Agreement
16
<PAGE>
EXHIBIT A
PROPOSED INVESTMENT ADVISORY AGREEMENT
IDEX MUTUAL FUNDS
This Agreement, entered into between IDEX Mutual Funds, a Massachusetts
business trust (referred to herein as the "Fund") and Idex Management, Inc., a
Delaware corporation (referred to herein as "Idex Management"), to provide
certain advisory services with respect to the series of shares of beneficial
interest in the Fund as listed on the attached Schedule A to this Agreement
(each a "fund," collectively the "funds").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and consists of
more than one series of shares, including the funds. In managing the funds, as
well as in the conduct of certain of its affairs, the Fund wishes to have the
benefit of the investment advisory services of Idex Management and its
assistance in performing certain management, administrative and promotional
functions. Idex Management desires to furnish such services to the Fund and to
perform the functions assigned to it under this Agreement for the considerations
provided. Schedule A, which may be amended from time to time, lists the
effective date and the termination date of this Agreement for each fund of the
Fund. Accordingly, the parties have agreed as follows:
1. APPOINTMENT. The Fund hereby appoints Idex Management as the funds'
investment adviser and administrator for the period and on the terms set forth
in this Agreement. Idex Management accepts such appointment and agrees to render
or cause to be rendered the services set forth for the compensation herein
specified. In all matters relating to the performance of this Agreement, Idex
Management will act in conformity with the Fund's Declaration of Trust, Bylaws
and registration statement applicable to the funds and with the instructions and
direction of the Board of Trustees of the Fund, and will conform to and comply
with the 1940 Act and all other applicable federal or state laws and
regulations.
2. INVESTMENT ADVISORY SERVICES. In its capacity as investment adviser
to the funds, Idex Management shall have the following responsibilities:
(a) to provide a continuous investment program for each fund including
advice as to the acquisition, holding or disposition of any or all of
the securities or other assets which the funds may own or contemplate
acquiring from time to time, consistent with the Fund's Declaration of
Trust and each fund's investment objective and policies adopted and
declared by the Board of Trustees and stated in the Fund's current
Prospectus;
(b) to cause its officers to attend meetings and furnish oral or
written reports, as the Fund may reasonably require, in order to keep
the Trustees and appropriate officers of the Fund fully informed as to
the conditions of each investment portfolio of the funds, the
investment recommendations of Idex Management, and the investment
considerations which have given rise to those recommendations;
(c) to supervise the purchase and sale of securities as directed by the
appropriate officers
<PAGE>
of the Fund, including the selection of brokers and dealers to execute
such transactions, consistent with paragraph 8 hereof; and
(d) to maintain all books and records required to be maintained by the
Investment Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions on
behalf of the Fund. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Idex Management hereby agrees: (i) that all records
that it maintains for the Fund are the property of the Fund, (ii) to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be
maintained by Rule 31a-1 under the 1940 Act and (iii) agrees to
surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, Idex Management may
retain copies of such records.
It is understood and agreed that Idex Management may, and intends to,
enter into Sub-Advisory Agreements with duly registered investment advisers (the
"Sub-Advisers") for each fund, under which each Sub-Adviser will, under the
supervision of Idex Management, furnish investment information and advice with
respect to one or more funds to assist Idex Management in carrying out its
responsibilities under this Section 2. The compensation to be paid to each
Sub-Adviser for such services and the other terms and conditions under which the
services shall be rendered by the Sub-Adviser shall be set forth in the
Sub-Advisory Agreement between Idex Management and each Sub-Adviser; provided,
however, that such Agreement shall be approved by the Board of Trustees and by
the holders of the outstanding voting securities of each fund in accordance with
the requirements of Section 15 of the 1940 Act, and shall otherwise be subject
to, and contain such provisions as shall be required by, the 1940 Act.
3. MANAGEMENT AND ADMINISTRATIVE SERVICES. Idex Management shall
furnish or make available to the funds the services of executive and management
personnel to supervise the performance of all administrative, recordkeeping,
shareholder relations, regulatory reporting and compliance, and all other
functions of the funds, including supervising and coordinating the services of
the funds' custodian and transfer agent. Idex Management shall also assist in
the preparation of reports to shareholders of the funds and prepare sales
literature promoting sale of the funds' shares as requested by the Fund.
4. ALLOCATION OF EXPENSES. During the term of this Agreement, each fund
will bear all expenses not expressly assumed by Idex Management incurred in the
operation of each fund and the offering of its shares. Without limiting the
generality of the foregoing:
(a) Each fund shall pay (i) fees payable to Idex Management pursuant to
this Agreement; (ii) the cost (including brokerage commissions, if any)
incurred in connection with purchases and sales of each fund's
portfolio securities; (iii) expenses of organizing the fund; (iv)
filing fees and expenses relating to registering and qualifying and
maintaining the registration and qualification of a fund's shares for
sale under federal and state securities laws; (v) its allocable share
of the compensation, fees and reimbursements paid to the Fund's
non-interested Trustees; (vi) custodian and transfer agent fees; (vii)
legal and accounting expenses allocable to each fund, including costs
for local representation in Massachusetts and fees of special counsel,
if any, for the independent Trustees; (viii) all federal, state and
local tax (including stamp, excise, income and franchise taxes and the
preparation and filing
<PAGE>
of all returns and reports in connection therewith; (ix) cost of
certificates and delivery to purchasers; (x) expenses of preparing and
filing reports with federal and state regulatory authorities; (xi)
expenses of shareholders' meetings and of preparing, printing and
distributing proxy statements (unless otherwise agreed to by the Fund
and Idex Management); (xii) costs of any liability, uncollectible items
of deposit and other insurance or fidelity bonds; (xiii) any costs,
expenses or losses arising out of any liability of or claim for damage
or other relief asserted against the Fund for violation of any law;
(xiv) expenses of preparing, typesetting and printing prospectuses and
supplements thereto for existing shareholders and of reports and
statements to shareholders; (xv) fees and expenses in connection with
membership in investment company organizations; and (xvi) any
extraordinary expenses incurred by the Fund on behalf of the funds.
(b) Idex Management shall pay (i) all expenses incurred by it in the
performance of its duties under this Agreement; and (ii) compensation,
fees and expenses of officers and Trustees of the Fund, except for such
Trustees who are not interested persons (as defined in the 1940 Act) of
Idex Management; and
(c) If, for any fiscal year, the total expenses of a fund, including
but not limited to: the fees to Idex Management, compensation to its
custodian, transfer agent, registrar, auditors and legal counsel,
printing expense, and fees, compensation and expenses to Trustees who
are not interested persons, exceed any expense limitation imposed by
applicable state law, Idex Management shall reimburse a fund for such
excess in the manner and to the extent required by applicable state
law; provided, however, that Idex Management shall reimburse each fund
for the amount of expenses that exceed the percentage of the fund's
average daily net assets as specified on Schedule A. For purposes of
this sub-paragraph, "total expenses" shall not include interest, taxes,
litigation expenses, brokerage commissions or other costs incurred in
acquiring or disposing of any of a fund's portfolio securities,
expenses incurred pursuant to a fund's Plan of Distribution under Rule
12b-1 of the 1940 Act, or any costs arising other than in the ordinary
and necessary course of a fund's business.
5. OBLIGATIONS OF FUND. The Fund shall have the following obligations
under the Agreement:
(a) to keep Idex Management continuously and fully informed as to the
composition of its investment portfolio of each fund and the nature of
all of its assets and liabilities from time to time;
(b) to furnish Idex Management with a certified copy of any financial
statement or report prepared for a fund by certified or independent
public accountants, and with copies of any financial statements or
reports made to its shareholders or to any governmental body or
securities exchange;
(c) to furnish Idex Management with any further materials or
information which Idex Management may reasonably request to enable it
to perform its functions under this Agreement; and
(d) to compensate Idex Management for its services in accordance with
the provisions of
<PAGE>
Section 6 hereof.
6. COMPENSATION. Each fund shall pay to Idex Management for its
services a fee, computed daily and paid monthly, payable on the last day of each
month during which or part of which this Agreement is in effect, as set forth on
Schedule A attached to this Agreement, as it may be amended from time to time in
accordance with Section 15 below. For the month during which this Agreement
becomes effective and the month during which it terminates, however, there shall
be an appropriate pro-ration of the fee payable for such month based on the
number of calendar days of such month during which this Agreement is effective.
7. TREATMENT OF INVESTMENT ADVICE. With respect to a fund, the Fund
shall retain full control over its own investment policies. However, the
Trustees of the Fund may delegate to the appropriate officers of the Fund, or to
a committee of Trustees, the power to authorize purchases, sales or other
actions affecting each fund in the interim between meetings of the Trustees,
provided such action is consistent with the established investment policy of the
Trustees and is reported to the Trustees at their next meeting.
8. BROKERAGE COMMISSIONS. For purposes of this Agreement, brokerage
commissions paid by a fund upon the purchase or sale of its portfolio securities
shall be considered a cost of securities of the fund and shall be paid by the
fund. Idex Management is authorized and directed to place a fund's securities
transactions, or to delegate to the Sub-Advisers the authority and direction to
place a fund's securities transactions, only with brokers and dealers who render
satisfactory service in the execution of orders at the most favorable prices and
at reasonable commission rates; provided, however, that Idex Management or the
Sub-Advisers, may pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Idex Management or
the Sub-Advisers determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer viewed in terms of either that particular
transaction or the overall responsibilities of Idex Management or the
Sub-Advisers. Idex Management and the Sub-Advisers are also authorized to
consider sales of fund shares (which shall be deemed to include also shares of
other registered investment companies with the same investment adviser) by a
broker-dealer or the recommendation of a broker-dealer to its customers that
they purchase fund shares as a factor in selecting broker-dealers to execute the
fund's securities transactions, provided that in placing portfolio business with
such broker-dealers, Idex Management and the Sub-Advisers shall seek the best
execution of each transaction and all such brokerage placement shall be
consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. Notwithstanding the foregoing, the Fund shall retain the right to
direct the placement of all securities transactions of each fund, and the
Trustees may establish policies or guidelines to be followed by Idex Management
and the Sub-Advisers in placing portfolio transactions for each fund pursuant to
the foregoing provisions. Idex Management shall report on the placement of
portfolio transactions each quarter to the Trustees of the Fund.
9. PURCHASES BY AFFILIATES. Neither Idex Management nor any officer or
Director thereof shall take a long or short position in the securities issued by
the funds. This prohibition, however, shall not prevent the purchase from a fund
of shares issued by the Fund on behalf of the fund, by the officers or Directors
of Idex Management (or by deferred benefit plans established for their benefit)
at the current price available to the public, or at such price with reductions
in sales charge
<PAGE>
as may be permitted by the Fund's current prospectus, in accordance with Section
22(d) of the 1940 Act.
10. TERM. This Agreement shall continue in effect, unless sooner
terminated in accordance with its terms, for an initial term as specified on
Schedule A, and shall continue in effect from year to year thereafter, provided
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees of the Fund who are not parties hereto or interested
persons (as that term is defined in Section 2(a)(19) of the 1940 Act, as
amended) of any such party, cast in person at a meeting called for the purpose
of voting on the approval of the terms of such renewal, and by either the
Trustees of the Fund or the affirmative vote of a majority of the outstanding
voting securities of each fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act.
11. TERMINATION. This Agreement may be terminated at any time, without
penalty, by the Trustees of the Fund, or with respect to a fund, by the
shareholders of such fund acting by vote of at least a majority of its
outstanding voting securities (as that phrase is defined in Section 2(a)(42) of
the 1940 Act), provided in either case that 60 days' written notice of
termination be given to Idex Management at its principal place of business. This
Agreement may be terminated by Idex Management at any time by giving 60 days'
written notice of termination to the Fund, addressed to its principal place of
business.
12. USE OF NAME. If this Agreement is terminated and Idex Management no
longer serves as investment adviser to the funds, Idex Management reserves the
right to withdraw from the Fund the use of the name "IDEX" with respect to the
funds or any name misleadingly implying a continuing relationship between the
funds and Idex Management or any of its affiliates.
13. LIABILITY OF IDEX MANAGEMENT. Idex Management may rely on
information reasonably believed by it to be accurate and reliable. Except as may
otherwise be provided by the 1940 Act, neither Idex Management nor its officers,
directors, employees or agents shall be subject to any liability to the Fund or
the funds or any shareholder of the funds for any error of judgment, mistake of
law or any loss arising out of any investment or other act or omission in the
course of, connected with or arising out of any service to be rendered
hereunder, except by reason of willful misfeasance, bad faith or gross
negligence in its performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement.
14. ASSIGNMENT. This Agreement shall terminate automatically in the
event of any assignment (as that term is defined in Section 2(a)(4) of the 1940
Act) of this Agreement.
15. AMENDMENTS. This Agreement may be amended only with the approval by
the affirmative vote of a majority of the outstanding voting securities of each
affected fund (as that phrase is defined in Section 2(a)(42) of the 1940 Act)
and the approval by the vote of a majority of Trustees of the Fund who are not
parties hereto or interested persons (as that phrase is defined in Section
2(a)(19) of the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on the approval of such amendment.
16. PRIOR AGREEMENTS. This Agreement supersedes all prior agreements
between the parties relating to the subject matter hereof, and all such prior
agreements are deemed terminated upon the effectiveness of this Agreement.
<PAGE>
17. LIMITATION OF LIABILITY. A copy of the Fund's Declaration of Trust
is on file with the Secretary of The Commonwealth of Massachusetts, and notice
is hereby given that this Agreement is executed on behalf of the Trustees as
Trustees of the Fund and not individually, and that the obligations under this
Agreement are not binding upon any of the Trustees, officers, shareholders,
agents or employees of the Fund individually, but binding only upon the assets
and property of the funds.
ATTEST: IDEX MANAGEMENT, INC.
_______________________ By: ______________________
William H. Geiger, Secretary Thomas R. Moriarty
President and Chief
Executive Officer
ATTEST: IDEX MUTUAL FUNDS
________________________ By: ______________________
John K. Carter, Secretary John R. Kenney
Chairman of the Board
<PAGE>
Effective Date: June 15, 2000
---------------------
SCHEDULE A
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- -------------------------- --------------------------
PERCENTAGE OF
FUND MONTHLY EXPENSE TERMINATION
AVERAGE DAILY LIMITATION DATE
NET ASSETS
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
IDEX Federated 0.60% of the fund's 1.00% April 30, 2002
Tax Exempt average daily net assets
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
IDEXINVADV.DOC
<PAGE>
EXHIBIT B
PROPOSED
SUB-ADVISORY AGREEMENT
BETWEEN
IDEX MANAGEMENT, INC.
AND
FEDERATED INVESTMENT MANAGEMENT COMPANY
SUB-ADVISORY AGREEMENT made as of the 15th day of June, 2000, between
Idex Management, Inc. ("Investment Adviser"), a corporation organized and
existing under the laws of the State of Delaware and Federated Investment
Management Company ("Sub-Adviser"), a business trust organized and existing
under the laws of the State of Delaware.
WHEREAS, the Investment Adviser has entered into an Investment Advisory
Agreement dated as of the 15th day of June, 2000 ("Advisory Agreement") with the
IDEX Mutual Funds ("IDEX"), a Massachusetts business trust which is engaged in
business as an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the IDEX Federated
Tax Exempt (a "Fund"), a separate series of IDEX;
WHEREAS, the Sub-Adviser is engaged principally in the business of
rendering investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act");
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to the Fund and the Sub-Adviser is willing to furnish such
services.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein set forth, the parties hereto agree as follows:
1. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Fund for the period and on the terms set forth
in this Agreement. The Sub-Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. Investment Sub-Advisory Services. Subject to the
supervision of IDEX Board of Trustees ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and without prior
consultation shall supervise and direct the investments of the fund in
accordance with the fund's investment objective, policies, and restrictions as
provided in the IDEX Prospectus and Statement of Additional Information, as
currently in effect and as amended or supplemented from time to time
(hereinafter referred to as the "Prospectus"), and such other reasonable
investment limitations as directed by the
<PAGE>
appropriate officers of the Investment Adviser or IDEX by notice in writing to
the Sub-Adviser. The Sub-Adviser shall obtain and evaluate such information
relating to the economy, industries, businesses, securities markets, and
securities as it may deem necessary or useful in the discharge of its
obligations hereunder and shall formulate and implement a continuing program for
the management of the assets and resources of the Fund in a manner consistent
with IDEX investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Fund, is authorized, in its
discretion and without prior consultation with the Fund or the Investment
Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
B. Additional Duties of Sub-Adviser. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the fund may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of IDEX and furnish oral
or written reports, as IDEX may reasonably require, in order to
keep IDEX and its officers and Board fully informed as to the
condition of the investment securities of the Fund, the investment
recommendations of the Sub-Adviser, and the investment
considerations which have given rise to those recommendations; and
(3) furnish such statistical and analytical information and
reports as may reasonably be required by IDEX from time to time.
C. Further Duties of Sub-Adviser. In all matters relating to
the performance of this Agreement, the Sub-Adviser shall act in conformity with
the IDEX Declaration of Trust and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the REASONABLE written instructions and directions of the Board and the
Investment Adviser, and shall comply with the requirements of the 1940 Act, the
Advisers Act, the rules thereunder, and all other applicable federal and state
laws and regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to 0.30% of the Fund's average daily net assets. The
management fee shall be payable by the Investment Adviser monthly to the
Sub-Adviser upon receipt by the Investment Adviser from the Fund of advisory
fees payable to the Investment Adviser. If this Agreement becomes effective or
terminates before the end of any month, the investment management fee for the
period from the effective date to the end of such month or from the beginning of
such month to the date of termination, as the case may be, shall be pro-rated
according to the pro-ration which such period bears to the full month in which
such effectiveness or termination occurs.
<PAGE>
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with
copies of each of the following documents and will furnish to the Sub-Adviser at
its principal office all future amendments and supplements to such documents, if
any, as soon as practicable after such documents become available:
(1) The Declaration of Trust of IDEX, as filed with the State
of Massachusetts, as in effect on the date hereof and as
amended from time to time ("Declaration");
(2) The By-Laws of IDEX as in effect on the date hereof and as
amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of IDEX authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this
Agreement;
(4) The IDEX Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A, as filed
with the Securities and Exchange Commission ("SEC") relating
to the Fund and its shares and all amendments thereto
("Registration Statement");
(5) The Notification of Registration of IDEX under the 1940
Act on Form N-8A as filed with the SEC and any amendments
thereto;
(6) The IDEX Prospectus (as defined above); and
(7) A certified copy of any publicly available financial
statement or report prepared for IDEX by certified or
independent public accountants, and copies of any financial
statements or reports made by the Fund to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser
shall furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Fund or the public, which refer
to the Sub-Adviser or investment companies or other advisory accounts advised or
sponsored by the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser in any way, prior to the use thereof,
and the Investment Adviser shall not use any such materials if the Sub-Adviser
reasonably objects in writing fifteen business days (or such other time as may
be mutually agreed upon) after receipt thereof.
<PAGE>
5. BROKERAGE.
A. The Sub-Adviser agrees that, in placing orders with
broker-dealers (which may include broker-dealers that are affiliated persons of
sub-adviser) for the purchase or sale of portfolio securities, it shall attempt
to obtain quality execution at favorable security prices (best price and
execution); provided that, on behalf of IDEX, the Sub-Adviser may, in its
discretion, agree to pay a broker-dealer that furnishes brokerage or research
services as such services are defined under Section 28(e) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), a higher commission than that
which might have been charged by another broker-dealer for effecting the same
transactions, if the Sub-Adviser determines in good faith that such commission
is reasonable in relation to the brokerage and research services provided by the
broker-dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Sub-Adviser with respect to the accounts as to
which it exercises investment discretion (as such term is defined under Section
3(a)(35) of the 1934 Act). In no instance will portfolio securities be purchased
from or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rule and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or
sale of a security to be in the best interest of IDEX as well as other clients
of the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be purchased or sold to attempt to obtain a more favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner the
Sub-Adviser considers to be the most equitable and consistent with its fiduciary
obligations to IDEX and to its other clients. The Investment Adviser hereby
acknowledges that such aggregation of orders may not result in a more favorable
price or lower brokerage commissions in all instances.
C. In addition to the foregoing, the Sub-Adviser agrees that
orders with broker-dealers for the purchase or sale of portfolio securities by
the Fund shall be placed in accordance with the standards set forth in the
Advisory Agreement, provided, however, that, as long as the Sub-Adviser is
acting in good faith and in accordance with its sub-advisory responsibilities
under this Agreement with regard to the placement of securities transactions,
the Investment Adviser, IDEX and the Fund will not direct the placement of
securities transactions for the Fund, and provided further, that any policies or
guidelines provided by the Trustees of the Fund in this regard shall be
reasonable.
6. LIMITED POWER OF ATTORNEY.
Subject to any other written instructions of the Investment Adviser and
IDEX, Sub-Adviser is hereby appointed the Fund's agent and attorney-in-fact for
the limited purposes of executing account documentation, agreements, contracts
and other documents as Sub-Adviser shall be requested by brokers, dealers,
counter parties and other persons in connection with its management of the
Fund's assets. The Investment Adviser and IDEX hereby ratify and confirm as good
and effectual, at law or in equity, all that Sub-Adviser and its officers and
employees, may do in its capacity as attorney-in-fact, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser.
However, nothing herein shall be construed as imposing a duty on the Sub-Adviser
to act or assume responsibility for any matters in its capacity as
attorney-in-fact for the Fund. Any person, partnership, corporation or other
legal entity dealing with Sub-Adviser in its capacity as attorney-in-fact
hereunder for the Fund is hereby expressly put on notice that Sub-Adviser is
<PAGE>
acting solely in the capacity as an agent of the Fund and that any such person,
partnership, corporation or other legal entity must look solely to the Fund for
enforcement of any claim against Fund, as Sub-Adviser assumes no personal
liability whatsoever for obligations of the Fund entered into by in its capacity
as attorney-in-fact for the Fund, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser.
7. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
8. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions on behalf of
IDEX. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees: (i) that all records that it maintains for IDEX are
the property of IDEX, (ii) to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any records that it maintains for IDEX and that are required
to be maintained by Rule 31a-1 under the 1940 Act and (iii) agrees to surrender
promptly to IDEX any records that it maintains for IDEX upon request by IDEX;
provided, however, the Sub-Adviser may retain copies of such records.
9. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment Adviser, as
appropriate, may mutually agree upon from time to time.
10. SERVICES TO OTHERS CLIENTS.
Nothing contained in this Agreement shall limit or restrict (i) the
freedom of the Sub-Adviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other
persons, firms, or corporations, or to engage in any other business activities,
or (ii) the right of any director, officer, or employee of the Sub-Adviser, who
may also be a director, officer, or employee of IDEX, to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a dissimilar
nature.
11. SUB-ADVISER'S USE OF THE SERVICES OF OTHERS.
The Sub-Adviser may (at its cost except as contemplated by Paragraph 5 of this
Agreement) employ, retain, or otherwise avail itself of the services or
facilities of other persons or organizations for the purpose of
<PAGE>
obtaining such statistical and other factual information, such advice regarding
economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as the
Sub-Adviser may deem necessary, appropriate, or convenient for the discharge of
its obligations hereunder or otherwise helpful to the Company, as appropriate,
or in the discharge of Sub-Adviser's overall responsibilities with respect to
the other accounts that it serves as investment manager or counselor, provided
that the Sub-Adviser shall at all times retain responsibility for making
investment recommendations with respect to the Fund.
12. LIMITATION OF LIABILITY OF THE SUB-ADVISER.
Neither the Sub-Adviser nor any of its officers, directors, or employees, nor
any person performing executive, administrative, trading, or other functions for
the Company, IDEX (at the direction or request of the Sub-Adviser) or the
Sub-Adviser in connection with the Sub-Adviser's discharge of its obligations
undertaken or reasonably assumed with respect to this Agreement, shall be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company or IDEX or any error of fact or mistake of law contained in any report
or date provided by the Sub-Adviser, except for any error, mistake or loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or his duties on behalf of the Company or IDEX or from
reckless disregard by the Sub-Adviser or any such person of the duties of the
Sub-Adviser pursuant to this Agreement.
13. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify the Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and has
provided the Investment Adviser and IDEX with a copy of such code of ethics,
together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and
IDEX with a copy of its Form ADV as most recently filed with the SEC and will,
promptly after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to the Investment Adviser.
14. INDEMNIFICATION.
A. The Investment Adviser agrees to indemnify the Sub-Adviser,
its officers and directors, and any person who controls the Sub-Adviser within
the meaning of Section 15 of the 1933 Act for any loss or expense (including
attorney's fees) arising out of any claim, demand, action or suit in the event
that the
<PAGE>
Sub-Adviser has been found to be without fault and the Investment Adviser or any
other investment sub-adviser to the fund, or any person who controls the
Investment Adviser or such other investment sub-adviser within the meaning of
Section 15 of the 1933 Act has been found at fault (i) by the final judgment of
a court of competent jurisdiction or (ii) in any order of settlement of any
claim, demand, action or suit that has been approved by the Board of Trustees of
the Investment Adviser, such other investment sub-adviser or such other
controlling person.
B. The Sub-Adviser agrees to indemnify the Investment Adviser,
its officers and directors, and any person who controls the Investment Adviser
within the meaning of Section 15 of the 1933 Act for any loss or expense
(including attorney's fees) arising out of any claim, demand, action or suit in
the event that the Investment Adviser has been found to be without fault and the
Sub-Adviser or any person who controls the Sub-Adviser within the meaning of
Section 15 of the 1933 Act has been found at fault (i) by the final judgment of
a court of competent jurisdiction or (ii) in any order of settlement of any
claim, demand, action or suit that has been approved by the Board of Trustees of
the Sub-Adviser or such other controlling person.
15. TERM OF AGREEMENT.
This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the fund's outstanding voting securities. Unless sooner
terminated as provided herein, this Agreement shall continue in effect an
initial term ending April 30, 2002. Thereafter, this Agreement shall continue in
effect from year to year, with respect to the Fund, subject to the termination
provisions and all other terms and conditions hereof, so long as such
continuation shall be specifically approved at least annually (a) by either the
Board, or by vote of a majority of the outstanding voting securities of the
Fund; and (b) in either event, by the vote, cast in person at a meeting called
for the purpose of voting on such approval, of a majority of the Trustees of
IDEX who are not parties to this Agreement or interested persons of any such
party. The Sub-Adviser shall furnish to IDEX, promptly upon its request such
information as may reasonably be necessary to evaluate the terms of this
Agreement or any extension, renewal, or amendment hereof.
16. TERMINATION OF AGREEMENT.
Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Fund on at least 60 days'
prior written notice to the Sub-Adviser. This Agreement may also be terminated
by the Investment Adviser: (i) on at least 60 days' prior written notice to the
Sub-Adviser, without the payment of any penalty; or (ii) if the Sub-Adviser
becomes unable to discharge its duties and obligations under this Agreement. The
Sub-Adviser may terminate this Agreement at any time, or preclude its renewal
without the payment of any penalty, on at least 60 days' prior notice to the
Investment Adviser. This Agreement shall terminate automatically in the event of
its assignment or upon termination of the Advisory Agreement.
<PAGE>
17. AMENDMENT OF AGREEMENT.
No provision of this Agreement may be changed, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge, or termination is
sought, and no amendment of this Agreement shall be effective until approved by
vote of a majority of the Fund's outstanding voting securities and a vote of a
majority of those Trustees of IDEX who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such amendment, unless otherwise permitted in accordance
with the 1940 Act.
18. MISCELLANEOUS.
A. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Massachusetts without giving effect to
the conflicts of laws principles thereof, and the 1940 Act. To the extent that
the applicable laws of the State of Massachusetts conflict with the applicable
provisions of the 1940 Act, the latter shall control.
B. Captions. The captions contained in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
C. Entire Agreement. This Agreement represents the entire
agreement and understanding of the parties hereto and shall supersede any prior
agreements between the parties relating to the subject matter hereof, and all
such prior agreements shall be deemed terminated upon the effectiveness of this
Agreement.
D. Interpretation. Nothing herein contained shall be deemed to
require IDEX to take any action contrary to its Declaration or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of its responsibility for
and control of the conduct of the affairs of IDEX.
E. Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations, or orders of the SEC validly issued pursuant to the 1940
Act. As used in this Agreement, the terms "majority of the outstanding voting
securities," "affiliated person," "interested person," "assignment," "broker,"
"investment adviser," "net assets," "sale," "sell," and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the SEC by any rule, regulation, or order. Where the effect
of a requirement of the federal securities laws reflected in any provision of
this Agreement is made less restrictive by a rule, regulation, or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation, or order, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
Attest: IDEX MANAGEMENT, INC.
By:
- ------------------------------------ ------------------------------------
William H. Geiger, Secretary Name: Thomas R. Moriarty
Title: President and Chief
Executive Officer
Attest: FEDERATED INVESTMENT MANAGEMENT COMPANY
By
- ------------------------------------ ------------------------------------
Name:
Title:
<PAGE>
[LOGO]
IDEX
MUTUAL FUNDS
PO Box 9015
Clearwater, FL 33758-9015
PROXY BALLOT
IDEX AEGON TAX EXEMPT FUND
PLEASE MAIL YOUR VOTED BALLOT IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE.
The undersigned hereby appoints Thomas R. Moriarty and John K. Carter, or any of
them, as proxies each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all shares of the
IDEX AEGON Tax Exempt fund (the "fund") of IDEX Mutual Funds ("IDEX"), that the
undersigned is entitled to vote at the Special Meeting of Shareholders to be
held Monday, June 5, 2000 at 11:00 a.m. Eastern Daylight Savings Time, at 570
Carillon Parkway, St. Petersburg, Florida 33716, and at any and all adjournments
thereof, with respect to the matters set forth below and described in the Notice
of Meeting and Proxy Statement dated April 3, 2000, receipt of which is hereby
acknowledged:
(1) To approve a Proposed Investment Advisory Agreement between IDEX and Idex
Management, Inc. ("IMI") with respect to the IDEX AEGON Tax Exempt fund.
FOR { } AGAINST { } ABSTAIN { }
(2) To approve a Proposed Sub-Advisory Agreement between IMI and Federated
Investment Management Company ("Federated") with respect to the IDEX AEGON
Tax Exempt fund.
FOR { } AGAINST { } ABSTAIN { }
TO VOTE ALL SECTIONS OF PROPOSAL 3, PLEASE CHECK ONE OF THE FOLLOWING AND
PROCEED TO PROPOSAL 4 ON THE REVERSE SIDE OF THIS BALLOT:
FOR { } AGAINST { } ABSTAIN { }
(3)(a) To add a fundamental investment restriction with respect to
diversification.
FOR { } AGAINST { } ABSTAIN { }
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.
(3)(b) To amend the current fundamental investment restriction with respect to
concentration.
FOR { } AGAINST { } ABSTAIN { }
CURRENT RESTRICTION:
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.
PROPOSED RESTRICTION:
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.
THIS PROXY ISBEING SOLICITED BY AND SUBMITTED ON BEHALF OF THE BOARD OF
TRUSTEES OF IDEX MUTUAL FUNDS
<PAGE>
(3)(c) To delete the current fundamental investment restriction regarding
investments in oil, gas and minerals:
FOR { } AGAINST { } ABSTAIN { }
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL
POLICY:
INVEST IN ANY DIRECT INTEREST IN AN OIL, GAS OR OTHER MINERAL
EXPLORATION OR DEVELOPMENT PROGRAM.
(3)(d) To delete the current fundamental investment restriction
regarding beneficial ownership of fund securities:
FOR { } AGAINST { } ABSTAIN { }
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL
POLICY:
PURCHASE OR RETAIN THE SECURITIES OF ANY ISSUER, IF, TO THE FUND'S
KNOWLEDGE, THOSE OFFICERS AND DIRECTORS OF THE MANAGER OR SUB-ADVISER
WHO INDIVIDUALLY OWN BENEFICIALLY MORE THAN 0.5% OF THE OUTSTANDING
SECURITIES OF SUCH ISSUER TOGETHER OWN BENEFICIALLY MORE THAN 5% OF
SUCH OUTSTANDING SECURITIES.
(3)(e) To delete the current fundamental investment restriction with
respect to put, call, straddle or spread options:
FOR { } AGAINST { } ABSTAIN { }
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL
POLICY:
WRITE, PURCHASE OR SELL PUT, CALL, STRADDLE OR SPREAD OPTIONS, EXCEPT
FOR HEDGING PURPOSES ONLY, IN ACCORDANCE WITH SUCH NON-FUNDAMENTAL
POLICIES THAT THE BOARD OF TRUSTEES MAY FROM TIME TO TIME ADOPT.
(3)(f) To delete the current fundamental investment restriction with respect
to investing in securities of other investment companies:
FOR { } AGAINST { } ABSTAIN { }
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL
POLICY:
INVEST IN SECURITIES OF OTHER INVESTMENT COMPANIES, EXCEPT IN THE EVENT
OF A MERGER OR REORGANIZATION WITH ANOTHER INVESTMENT COMPANY
(3)(g) To amend the current fundamental investment restriction regarding
commodities.
FOR { } AGAINST { } ABSTAIN { }
CURRENT RESTRICTION:
IDEX AEGON TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
PURCHASE OR SELL COMMODITIES OR COMMODITY CONTRACTS.
PROPOSED RESTRICTION:
IDEX FEDERATED TAX EXEMPT MAY NOT, AS A MATTER OF FUNDAMENTAL POLICY:
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 THAT SETTLE BY PAYMENT OF CASH ARE NOT
DEEMED TO BE INVESTMENTS IN COMMODITIES.
(4) In the discretion of IDEX, transact such other business as may
properly come before the meeting or any adjournments thereof.
I HEREBY REVOKE ANY AND ALL PROXIES WITH RESPECT TO SUCH SHARES, IF ANY,
PREVIOUSLY GIVEN BY ME. I ACKNOWLEDGE RECEIPT OF THE PROXY STATEMENT DATED APRIL
3, 2000. THIS INSTRUCTION WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THIS INSTRUCTION WILL BE VOTED "FOR" EACH PROPOSAL.
___________________________ ________________ _______________
AUTHORIZED SIGNATURE(S) DATE
THIS PROXY IS BEING SOLICITED BY AND SUBMITTED ON BEHALF OF THE BOARD OF
TRUSTEES OF INDEX MUTUAL FUNDS
