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FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
Supplement dated October 18, 1996
to the Prospectus dated February 22, 1996
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Change in Control of Adviser
John Hancock Subsidiaries, Inc. ("Hancock Subsidiaries") has decided to
sell approximately 95% of its interest in John Hancock Freedom Securities
Corporation ("Freedom Securities"), the parent company of Freedom Capital
Management Corporation, the Adviser of the Funds of Freedom Mutual Fund and
Freedom Group of Tax Exempt Funds, to JHFSC Acquisition Corp., a newly formed
Delaware corporation, organized by an investor group which will include certain
members of management and employees of Freedom Securities and its subsidiaries,
including the Adviser (the "Employee Shareholders"). To accomplish the sale,
Hancock Subsidiaries, JHFSC Acquisition Corp., Thomas H. Lee Equity Fund III,
L.P. ("Lee") and SCP Private Equity Partners, L.P. ("SCP"), entered into a
Contribution Agreement on October 4, 1996, pursuant to which Hancock
Subsidiaries will contribute 100% of the issued and outstanding shares of
capital stock of Freedom Securities to JHFSC Acquisition Corp., in exchange for
(i) 4.999% of the issued and outstanding capital stock of JHFSC Acquisition
Corp. and (ii) aggregate consideration of $180,000,000 (subject to reduction to
the extent of certain distributions made prior to closing).
After giving effect to the consummation of the transactions
contemplated by the Contribution Agreement, Freedom Securities will become a
wholly-owned subsidiary of JHFSC Acquisition Corp., and the Adviser will remain
a wholly-owned subsidiary of Freedom Securities. It is anticipated that the
outstanding capital stock of JHFSC Acquisition Corp. after the consummation of
the Transaction will be held approximately as follows:
Investor Percentage Ownership
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Thomas H. Lee Equity Fund III, L.P. 49.9%
SCP Private Equity Partners, L.P. 13.0%
John Hancock Subsidiaries, Inc. 4.9%
Employee Shareholders 32.2%
If the Employee Shareholders contribute more than currently
anticipated, the percentage ownership of Lee and SCP in JHFSC Acquisition Corp.
set forth above will be reduced proportionately.
Thomas H. Lee Equity Fund III, L.P. is a Massachusetts limited
partnership. The general partner of Thomas H. Lee Equity Fund III, L.P. is THL
Equity Advisors III Limited Partnership, a Massachusetts limited partnership.
The general partner of THL Equity Advisors III Limited Partnership is THL Equity
Trust III, a Massachusetts business trust. The sole beneficial owner of THL
Equity Trust III is Thomas H. Lee. The address of Thomas H. Lee Equity Fund III,
L.P., THL Equity Advisors III Limited Partnership and THL Equity Trust III is 75
State Street, Boston, Massachusetts 02109.
SCP Private Equity Partners, L.P. is a Delaware limited partnership.
The general partner of SCP Private Equity Partners, L.P. is SCP Private Equity
Management, L.P., a Delaware limited partnership. The interests of SCP Private
Equity Management, L.P. are divided equally among its three general partners:
Safeguard Capital Management, Inc. (which is a wholly owned subsidiary of
Safeguard Scientifics, Inc., a publicly held company), Winston J. Churchill and
Samuel A. Plum. The address of SCP Private Equity Partners, L.P., SCP Private
Equity Management, L.P., Safeguard Capital Management, Inc., Winston J.
Churchill and Samuel A. Plum is 435 Devon Park Drive, Wayne, Pennsylvania 19087.
The consummation of the Transaction will result in a change of control
of the Adviser, causing the Advisory Agreement between the Adviser and the
Trust, on behalf of each of the Funds, to be "assigned," as such term is defined
under the Investment Company Act of 1940 (the "1940 Act"). This assignment will
necessitate approval of a new Advisory Agreement by the shareholders of the
Funds. A proxy statement seeking shareholder approval of a new Advisory
Agreement is expected to be mailed to shareholders of the Funds shortly. The new
Master Investment Advisory Contract, if approved, will be substantially similar
to the existing Advisory Agreement and the services and fees described in the
Prospectus will remain unchanged.
Consummation of the Transaction is subject to the conditions set forth
in the Contribution Agreement. No assurance can be given that the Transaction
will be consummated. If the Transaction is consummated and if shareholders of
the Funds approve the proposed New Advisory Agreement with the Adviser, the
Adviser will continue the investment advisory functions it currently performs.
If the Transaction is not consummated, the Funds' Existing Advisory Agreement
with the Adviser will remain in place.
In connection with the Transaction, the Trusts on behalf of the Funds
and the Adviser (together with the Trust, the "Applicants"), have also applied
for an order of the Securities and Exchange Commission to provide the Applicants
an exemption from Section 15(a) of the 1940 Act. The requested exemption would
permit the implementation, prior to formal shareholder approval, of the new
Advisory Agreement described above, which is substantially identical to the
existing Advisory Agreement, between each of the Trusts and the Adviser with
respect to each Fund. The requested exemption would cover an interim period of
not more than 120 days beginning on the date of the Transaction and continuing
through the date a new Advisory Agreement is approved or disapproved by the
shareholders of the respective Funds, but in no event later than March 31, 1997.
For each Fund, the aggregate contractual rate chargeable for investment advisory
services will remain the same. If the requested exemptive relief is granted, the
investment advisory fees collected during the interim period will be paid into
an interest-bearing escrow account maintained by the escrow agent and that the
amounts in the escrow account with respect to each Fund (including interest
earned on such paid fees) will be paid to the Adviser only if shareholders of
the Fund approve the new Advisory Agreement. If shareholders of a Fund fail to
approve the new Advisory Agreement, the escrow agent will pay that Fund its
respective share of the escrow amounts (including any interest earned). If the
Transaction is not consummated, the Funds' existing Advisory Agreement with the
Adviser will remain in place.
