<PAGE> 1
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND [FLAG LOGO]
- --------------------------------------------------------------------------------
A money market fund investing in a portfolio of high quality, short-term
securities that generates income generally exempt from federal and California
personal income taxes.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1998
BEGINS ON PAGE 15.
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
(A Series of Freedom Group of Tax Exempt Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights appearing on page 13
of the Prospectus present fairly, in all material respects, the financial
position of the Freedom California Tax Exempt Money Fund (the "Fund") at
December 31, 1998 and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 17, 1999
ANNUAL REPORT
15
<PAGE> 3
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost......................... $122,662,763
Cash................................................... 132,721
Receivable for Fund shares sold........................ 1,451,796
Interest receivable.................................... 542,307
Prepaid expenses....................................... 4,088
------------
TOTAL ASSETS...................................... 124,793,675
------------
LIABILITIES
Payable for Fund shares redeemed....................... 906,859
Dividends payable...................................... 10,567
Accrued expenses:
Investment adviser's fee............................ 46,838
Transfer agent and shareholder servicing fee........ 5,759
Trustees' fee....................................... 6
Other............................................... 18,462
------------
TOTAL LIABILITIES................................. 988,491
------------
NET ASSETS.................................................. $123,805,184
============
NET ASSETS CONSIST OF:
Capital paid in........................................ $123,802,976
Accumulated net realized gain.......................... 2,208
------------
$123,805,184
============
SHARES ISSUED AND OUTSTANDING (UNLIMITED SHARES
AUTHORIZED)........................................... 123,802,976
------------
NET ASSET VALUE PER SHARE.............................. $ 1.00
============
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
16
<PAGE> 4
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INTEREST INCOME............................................. $3,728,244
----------
EXPENSES
Investment adviser's fee............................... 596,156
Transfer agent & shareholder services.................. 44,224
Custodian.............................................. 28,621
Compensation of Trustees............................... 8,965
Audit.................................................. 16,715
Legal.................................................. 16,835
Printing, postage and stationery....................... 18,405
Membership dues........................................ 3,369
Registration expense................................... 640
Insurance expense...................................... 3,487
----------
TOTAL EXPENSES BEFORE WAIVER........................... 737,417
LESS: FEES WAIVED BY ADVISER........................... (80,958)
----------
TOTAL EXPENSES......................................... 656,459
----------
LESS: EXPENSE REDUCTIONS............................... (27,381)
----------
NET EXPENSES................................................ 629,078
----------
NET INVESTMENT INCOME....................................... 3,099,166
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,099,166
==========
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
17
<PAGE> 5
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income................................... $ 3,099,166 $ 3,300,407
------------- -------------
Net increase in net assets resulting from operations.... 3,099,166 3,300,407
------------- -------------
DIVIDENDS TO SHAREHOLDERS.................................. (3,099,166) (3,300,407)
------------- -------------
-- --
------------- -------------
CAPITAL SHARE TRANSACTIONS:
(At Net Asset Value of $1 per share)
Proceeds from sale of shares............................ 368,784,375 336,774,555
Net asset value of shares issued to shareholders in
reinvestment of dividends.............................. 3,038,193 3,231,270
Cost of shares redeemed................................. (362,745,933) (340,613,921)
------------- -------------
Net increase/(decrease) from capital share
transactions........................................... 9,076,635 (608,096)
------------- -------------
Net increase/(decrease) in net assets................... 9,076,635 (608,096)
NET ASSETS:
Beginning of period..................................... 114,728,549 115,336,645
------------- -------------
End of period........................................... $ 123,805,184 $ 114,728,549
============= =============
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
18
<PAGE> 6
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------- ----------- -----
<C> <S> <C>
MUNICIPAL SECURITIES -- 99.1%
$2,890,000 Alameda County Multi-Family
Mortgage Bonds (FNMA)
3.55% 1-06-99............. $ 2,890,000
1,750,000 Cabrillo CCD (FSA) 5.00% 8-
01-99..................... 1,766,843
2,000,000 California C.P.
(Commerzbank/Bank of
America/Bank of Nova
Scotia/National
Westminster LOC's) 2.65%
2-25-99................... 2,000,000
California Health Facilities
Authority (Catholic Health
Care)
900,000 (MBIA/Morgan Guaranty) 3.60%
1-06-99................... 900,000
2,900,000 (MBIA/Rabobank) 3.60% 1-
06-99..................... 2,900,000
3,100,000 (Morgan Guaranty LOC) 3.60%
1-06-99................... 3,100,000
California Health Facilities
Authority (Scripps)
2,000,000 (MBIA/FNB Chicago) 3.80%
1-06-99................... 2,000,000
3,500,000 (MBIA/Morgan Guaranty) 3.75%
1-07-99................... 3,500,000
5,000,000 California RANS 4.00% 6-30-
99........................ 5,020,449
300,000 California Statewide CDA
4.80% 1-04-99............. 300,000
2,000,000 Carlsbad Multi-Family
Mortgage Bonds (La Costa
Apartments) (Bank of
America LOC) 3.45% 1-06-
99........................ 2,000,000
Irvine Assessment District
Improvement Bonds
3,600,000 (Canadian Imperial Bank LOC)
5.10% 1-04-99............. 3,600,000
1,100,000 (National Westminster LOC)
5.10% 1-04-99............. 1,100,000
4,000,000 (Societe Generale LOC) 5.10%
1-04-99................... 4,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------- ----------- -----
<C> <S> <C>
Irvine Ranch Water District
Revenue Bonds
$3,300,000 (Bank of America LOC) 5.10%
1-04-99................... $ 3,300,000
3,450,000 (Landesbank Hessen LOC)
5.10% 1-04-99............. 3,450,000
1,900,000 (Toronto Dominion LOC) 5.10%
1-04-99................... 1,900,000
7,400,000 Kern County Public
Facilities Project (Union
Bank of Switzerland LOC)
3.60% 1-06-99............. 7,400,000
Los Angeles Capital Asset
Leasing Corp. (West
Deutsche Landesbank/
Bayerische Landesbank/
Morgan Guaranty LOC)
1,000,000 2.95% 1-08-99............... 1,000,000
2,000,000 2.85% 1-19-99............... 2,000,000
2,000,000 2.90% 2-24-99............... 2,000,000
4,000,000 2.85% 3-05-99............... 4,000,000
2,580,000 Los Angeles County IDA (Hon
Industries) (Morgan
Guaranty LOC) 3.80% 1-06-
99........................ 2,580,000
Los Angeles County
Metropolitan
Transportation Commission
(Bayerische Landesbank/
Canadian Imperial Bank of
Canada/National
Westminster LOC's)
2,500,000 3.00% 1-07-99............... 2,500,000
1,700,000 2.90% 1-14-99............... 1,700,000
5,000,000 Los Angeles County TRANS
4.50% 6-30-99............. 5,019,731
Los Angeles DWAP (Toronto
Dominion/Bank of Nova
Scotia LOC)
1,000,000 2.85% 1-15-99............... 1,000,000
2,000,000 2.90% 2-17-99............... 2,000,000
1,000,000 Los Angeles Wastewater
System (Union Bank of
Switzerland/Morgan
Guaranty LOC) 2.90% 1-11-
99........................ 1,000,000
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
19
<PAGE> 7
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------- ----------- -----
<C> <S> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
$4,000,000 Oakland Joint Powers Finance
Authority (FSA/
Commerzbank) 3.90% 1-07-
99........................ $ 4,000,000
1,400,000 Orange County Health Systems
Certificates of
Participation (Florence
Crittenton) (Swiss Bank
LOC) 3.80% 1-06-99........ 1,400,000
2,000,000 Orange County Housing
Authority (Costa Mesa
Project) (FNMA) 3.75% 1-
07-99..................... 2,000,000
600,000 Pasadena Certificates of
Participation (Rose Bowl
Project) (Canadian
Imperial Bank of Canada
LOC) 3.80% 1-06-99........ 600,000
3,900,000 Puerto Rico Highway and
Transportation Authority
(AMBAC/Bank of Nova
Scotia) 3.50% 1-06-99..... 3,900,000
1,665,000 Puerto Rico Highway and
Transportation Authority
(United Bank of
Switzerland/Landesbank
Hessen LOC's) 3.60% 1-06-
99........................ 1,665,000
1,000,000 Sacramento County MFHA
Revenue Bonds (Grouse Run)
(Bank of America LOC)
3.65% 1-07-99............. 1,000,000
2,195,000 Sacramento County MFHA
Revenue Bonds (Smoketree)
(FNMA) 3.55% 1-06-99...... 2,195,000
6,200,000 San Bernardino County
Certificates of
Participation (Canadian
Imperial Bank of Commerce
LOC) 3.75% 1-06-99........ 6,200,000
1,500,000 San Bernardino County TRANS
4.50% 9-30-99............. 1,514,500
2,000,000 San Diego County (Helaba
LOC) 2.85% 1-21-99........ 2,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------- ----------- -----
<C> <S> <C>
$2,160,000 San Diego County Teeter
Notes (Helaba LOC) 2.80%
3-10-99................... $ 2,160,000
2,000,000 San Francisco Bay Area Rapid
Transit (United Bank of
Switzerland LOC) 2.95%
1-06-99................... 2,000,000
3,200,000 Santa Clara Electric Revenue
Bonds (National
Westminster LOC) 3.75%
1-06-99................... 3,200,000
3,000,000 South Coast Local Education
Agency (MBIA) 4.50%
6-30-99................... 3,013,530
1,600,000 Southern California MWD
(AMBAC/ABN Amro) 3.75%
1-07-99................... 1,600,000
Southern California MWD
(WestDeutsche Landesbank
LOC)
2,000,000 2.90% 2-05-99............... 2,000,000
2,000,000 2.90% 2-18-99............... 2,000,000
1,000,000 Tulare County TRANS 4.25%
6-30-99................... 1,002,710
3,285,000 Vallejo Multi-Family
Mortgage Bonds (FNMA)
3.55% 1-06-99............. 3,285,000
------------
TOTAL INVESTMENTS -- 99.1%................ 122,662,763(a)
Other Assets & Liabilities, Net -- 0.9%... 1,142,421
------------
TOTAL NET ASSETS -- 100.0%................ $123,805,184
============
</TABLE>
Legend:
CCD -- Community College District
CDA -- Community Development Authority
C.P. -- Commercial Paper
DWAP -- Department of Water & Power
IDA -- Industrial Development Authority
LOC -- Letter of Credit
MFHA -- Multi-Family Housing Authority
MWD -- Metropolitan Water District
RANS -- Revenue Anticipation Notes
TRANS -- Tax and Revenue Anticipation Notes
See Notes to Financial Statements.
ANNUAL REPORT
20
<PAGE> 8
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
Insurance Abbreviations:
AMBAC -- American Municipal Bond Assurance
Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
Maturity dates for many bonds and notes represent the next scheduled date at
which the interest rate may be adjusted or a "demand" or "put" feature may be
exercised.
- ------------
(a) Cost for tax purposes is the same.
See Notes to Financial Statements.
ANNUAL REPORT
21
<PAGE> 9
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
(A SERIES OF FREEDOM GROUP OF TAX EXEMPT FUNDS)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES. Freedom Group of Tax Exempt Funds (the
"Trust") is a Massachusetts business trust registered under the Investment
Company Act of 1940, as amended, as an open-end management company. The
Agreement and Declaration of Trust permits the issuance of an unlimited number
of shares of beneficial interest in separate series, with shares of each series
representing interests in a separate portfolio of assets and operating as a
separate distinct fund. The Trust consists of two series: the Freedom California
Tax Exempt Money Fund (the "Fund") and the Freedom Tax Exempt Money Fund. The
financial statements of the Freedom Tax Exempt Money Fund are included in a
separate annual report for that Fund.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation and Transactions. The Fund values its portfolio
securities utilizing the amortized cost valuation method. This method involves
valuing a portfolio security at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal income tax purposes. Investment securities
transactions are accounted for on the date the securities are purchased or sold.
The Fund may purchase or sell securities on a when-issued basis. Payment
and delivery may take place more than a week after the date of the transaction.
The price that will be paid for the underlying securities is fixed at the time
the transaction is negotiated.
Expenses. The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily identifiable
as belonging to a specific fund are allocated in such a manner as deemed
equitable by the Trustees, taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
Trustees' fees of $6,000 per Trust, per year, plus $250 per meeting of the
Board of Trustees and $350 per meeting of any committee thereof, are paid by the
Trust to each Trustee who is not an interested person of the Trust. No
remuneration is paid by the Trust to any Trustee or officer of the Trust who is
affiliated with Freedom Capital Management Corporation, the Trust's advisor.
The Trust has entered into an insurance agreement with ICI Mutual Insurance
Company, under which the Trust pays both an annual insurance premium and a
one-time reserve premium, and is committed to provide additional funds of up to
300% of its initial annual premium if and when called upon.
ANNUAL REPORT
22
<PAGE> 10
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
(A SERIES OF FREEDOM GROUP OF TAX EXEMPT FUNDS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Fund has an agreement with the custodian bank under which $27,381 of
custodian fees have been reduced by balance credits applied during the year
ended December 31, 1998. If the Fund had not entered into this agreement, the
assets not invested, on which these balance credits were earned, could have
produced taxable income.
Federal Income Tax. It is the Fund's policy to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its income to its shareholders. It is also the intention of
the Fund to make sufficient distributions to shareholders to avoid imposition of
excise tax on undistributed amounts under the Internal Revenue Code. Therefore,
no federal income or excise tax provision is required.
Interest Income and Dividends to Shareholders. Interest income is accrued
as earned. Dividends to shareholders are declared daily from net investment
income, which consists of interest accrued or discount earned (including
original issue and market discount) less amortization of premium and the
estimated expenses of the Fund applicable to the dividend period.
Other. There are certain risks arising from geographic concentration in
any state. Certain revenue or tax related events in a state may impair the
ability of certain issuers of municipal securities to pay principal and interest
on their obligations. The Fund may focus its investments in certain industries.
As a result, the Fund may be subject to a greater risk than a fund that is more
fully diversified in various industries.
NOTE 2. INVESTMENT ADVISOR AND OTHER RELATED PARTY TRANSACTIONS. Freedom
Capital Management Corporation ("FCMC") is the parent of Freedom Distributors
Corporation as well as an affiliate of Sutro & Co., Inc. ("Sutro"), Tucker
Anthony Incorporated ("Tucker Anthony") and Freedom Services Corp. All are
wholly owned subsidiaries of Freedom Securities Corporation ("Freedom
Securities").
FCMC, the investment advisor of the Trust, furnishes the Fund with
administration and other services and office facilities in Boston. For these
services and facilities, the Fund pays a monthly fee, based upon the average
daily net asset value of the Fund, at the annual rate of one half of one percent
(.50%) on the first $500 million of average daily net assets and forty-five
hundredths of one percent (.45%) for average daily net assets in excess of that
amount. The Fund itself pays no salaries or compensation to any of its officers.
FCMC may voluntarily waive part or all of its management fee for a period
under the terms of the advisory agreement. Such waivers were provided to the
Fund for the year ended December 31, 1998 and may be discontinued at any time.
Sutro, Tucker Anthony and Freedom Distributors Corporation act as
distributors of the Fund's shares and receive no compensation for such services.
As sub-transfer agent from January 1st through
ANNUAL REPORT
23
<PAGE> 11
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
(A SERIES OF FREEDOM GROUP OF TAX EXEMPT FUNDS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 15th, Freedom Services Corporation received reimbursements of $8,837 for
maintaining and servicing certain shareholder accounts for the year ended
December 31, 1998.
John Hancock Signature Services, Inc. ("JHSS") was transfer agent for the
Funds through June 15, 1998. JHSS received $13,078 for the period ended June 15,
1998.
Effective as of June 16, 1998, Freedom Services Corporation succeeded John
Hancock Signature Services, Inc. as transfer and shareholder services agent for
the Fund. As transfer agent, Freedom Services Corporation received $22,309 for
the period ended December 31, 1998.
NOTE 3. Purchases and sales (including maturities) of investments for the
year ended December 31, 1998 were as follows:
<TABLE>
<S> <C>
Purchases of investments......................... $343,328,060
Sales of investments............................. $334,450,000
</TABLE>
NOTE 4. SHAREHOLDER MEETING RESULTS. -- UNAUDITED. A Special Meeting of
the shareholders of the Freedom California Tax Exempt Money Fund was held on May
20, 1998. On March 30, 1998, the record date for shareholders voting at the
meeting, there were 116,433,423.030 total outstanding shares. The following
items were considered and approved by shareholders and the results of their
voting were as follows:
<TABLE>
<CAPTION>
ABSTENTIONS
AND
BROKER
AGENDA ITEM FOR AGAINST NON-VOTES
----------------------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
1. Approve Master Investment Advisory
Contract between Freedom California
Tax Exempt Money Fund and Freedom
Capital Management Corporation..... 55,968,816.850 1,884,081.190 3,205,278.990
2. Ratify PricewaterhouseCoopers LLP
as Independent Accountants......... 58,857,549.900 2,450.450 2,198,176.680
</TABLE>
ANNUAL REPORT
24
<PAGE> 12
[FREEDOM FUND LOGO]
FREEDOM CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
A money market fund investing in a diversified portfolio of high-grade
money market instruments.
FREEDOM GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
A money market fund investing exclusively in U.S. Government securities.
FREEDOM TAX EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
A money market fund investing in a diversified portfolio of high quality
short-term municipal securities, the income of which generally is exempt from
federal income tax.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
ANNUAL REPORTS
FOR THE YEAR ENDED DECEMBER 31, 1998
BEGIN ON PAGE 17.
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
FREEDOM CASH MANAGEMENT FUND
FREEDOM GOVERNMENT SECURITIES FUND
FREEDOM TAX EXEMPT MONEY FUND
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights appearing on page 15
of the Prospectus present fairly, in all material respects, the financial
position of Freedom Cash Management Fund and Freedom Government Securities Fund,
(each a series of Freedom Mutual Fund) and Freedom Tax Exempt Money Fund (a
series of Freedom Group of Tax Exempt Funds) (the "Funds") at December 31, 1998
and the results of their operations, the changes in their net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 17, 1999
ANNUAL REPORT
17
<PAGE> 14
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FREEDOM FREEDOM FREEDOM
CASH GOVERNMENT TAX EXEMPT
MANAGEMENT SECURITIES MONEY
FUND FUND FUND
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments, at amortized cost........................... $2,281,313,128 $438,602,706 $347,795,132
Cash..................................................... 1,172,426 510,389 451,037
Receivable for Fund shares sold.......................... 61,401,025 6,260,613 7,013,724
Interest receivable...................................... 404,253 89,667 1,938,685
Prepaid expenses......................................... 70,295 13,484 11,804
Other assets............................................. 65,871 18,473 21,495
-------------- ------------ ------------
TOTAL ASSETS............................................. 2,344,426,998 445,495,332 357,231,877
-------------- ------------ ------------
LIABILITIES
Payable for Fund shares redeemed......................... 12,591,316 1,678,044 1,549,370
Dividends payable........................................ 305,355 54,141 44,667
Accrued expenses:
Investment adviser's fee............................. 889,318 187,399 162,936
Transfer agent and shareholder servicing fee......... 237,447 19,948 12,529
Trustees' fee........................................ 2,338 833 1,883
Other................................................ 106,281 38,002 67,478
-------------- ------------ ------------
TOTAL LIABILITIES........................................ 14,132,055 1,978,367 1,838,863
-------------- ------------ ------------
NET ASSETS.................................................. $2,330,294,943 $443,516,965 $355,393,014
============== ============ ============
NET ASSETS CONSIST OF:
Capital paid in.......................................... $2,330,437,074 $443,547,320 $355,375,645
Accumulated net realized gain (loss)..................... (142,131) (30,355) 17,369
-------------- ------------ ------------
$2,330,294,943 $443,516,965 $355,393,014
============== ============ ============
SHARES ISSUED AND OUTSTANDING
(UNLIMITED SHARES AUTHORIZED).......................... 2,330,439,336 443,511,767 355,375,645
-------------- ------------ ------------
NET ASSET VALUE PER SHARE................................ $ 1.00 $ 1.00 $ 1.00
============== ============ ============
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
18
<PAGE> 15
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FREEDOM FREEDOM FREEDOM
CASH GOVERNMENT TAX EXEMPT
MANAGEMENT SECURITIES MONEY
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME............................................. $111,185,853 $21,117,078 $11,386,160
------------ ----------- -----------
EXPENSES
Investment adviser's fee................................. 9,245,499 1,946,255 1,648,108
Transfer agent & shareholder services.................... 2,944,859 238,218 156,797
Custodian................................................ 326,423 65,447 75,920
Compensation of Trustees................................. 60,160 15,420 16,835
Audit.................................................... 61,310 13,120 39,050
Legal.................................................... 50,050 10,950 33,690
Printing, postage and stationery......................... 133,730 19,550 23,845
Membership dues.......................................... 48,939 9,345 8,086
Registration expense..................................... 102,950 53,215 49,745
Insurance expense........................................ 60,785 11,378 10,165
Other.................................................... 1,800 1,825 3,186
------------ ----------- -----------
TOTAL EXPENSES........................................... 13,036,505 2,384,723 2,065,427
------------ ----------- -----------
LESS EXPENSE REDUCTIONS.................................. -- -- (17,645)
------------ ----------- -----------
NET EXPENSES............................................. 13,036,505 2,384,723 2,047,782
------------ ----------- -----------
NET INVESTMENT INCOME....................................... 98,149,348 18,732,355 9,338,378
------------ ----------- -----------
NET REALIZED GAIN ON INVESTMENTS............................ 11,489 4,289 --
------------ ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 98,160,837 $18,736,644 $ 9,338,378
============ =========== ===========
</TABLE>
See Notes to Financial Statements. ANNUAL REPORT
19
<PAGE> 16
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FREEDOM FREEDOM
CASH MANAGEMENT FUND GOVERNMENT SECURITIES FUND
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income................. $ 98,149,348 $ 82,035,689 $ 18,732,355 $ 15,576,097
Net realized gain (loss) from
investments.......................... 11,489 (4,832) 4,289 (5,428)
--------------- --------------- --------------- ---------------
Net increase in net assets resulting
from operations...................... 98,160,837 82,030,857 18,736,644 15,570,669
DIVIDENDS TO SHAREHOLDERS: (98,149,348) (82,035,689) (18,732,355) (15,576,097)
--------------- --------------- --------------- ---------------
11,489 (4,832) 4,289 (5,428)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS:
(At Net Asset Value of $1 per share)
Proceeds from sale of shares.......... 7,790,266,223 6,067,062,337 1,166,074,812 1,063,295,849
Net asset value of shares issued to
shareholders in reinvestment of
dividends............................ 95,982,643 79,934,035 18,427,472 15,263,922
Cost of shares redeemed............... (7,302,802,116) (6,037,440,505) (1,111,347,812) (1,018,134,261)
--------------- --------------- --------------- ---------------
Net increase from capital share
transactions....................... 583,446,750 109,555,867 73,154,472 60,425,510
--------------- --------------- --------------- ---------------
Net increase in net assets............ 583,458,239 109,551,035 73,158,761 60,420,082
NET ASSETS:
Beginning of period................... 1,746,836,704 1,637,285,669 370,358,204 309,938,122
--------------- --------------- --------------- ---------------
End of period......................... $ 2,330,294,943 $ 1,746,836,704 $ 443,516,965 $ 370,358,204
=============== =============== =============== ===============
<CAPTION>
FREEDOM
TAX EXEMPT MONEY FUND
---------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income................. $ 9,338,378 $ 8,500,693
Net realized gain (loss) from
investments.......................... -- 9,609
--------------- ---------------
Net increase in net assets resulting
from operations...................... 9,338,378 8,510,302
DIVIDENDS TO SHAREHOLDERS: (9,338,378) (8,500,693)
--------------- ---------------
-- 9,609
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
(At Net Asset Value of $1 per share)
Proceeds from sale of shares.......... 1,381,810,924 1,124,077,515
Net asset value of shares issued to
shareholders in reinvestment of
dividends............................ 9,099,347 8,269,139
Cost of shares redeemed............... (1,325,421,739) (1,105,540,880)
--------------- ---------------
Net increase from capital share
transactions....................... 65,488,532 26,805,774
--------------- ---------------
Net increase in net assets............ 65,488,532 26,815,383
NET ASSETS:
Beginning of period................... 289,904,482 263,089,099
--------------- ---------------
End of period......................... $ 355,393,014 $ 289,904,482
=============== ===============
</TABLE>
See Notes to Financial Statements. ANNUAL REPORT
20
<PAGE> 17
FREEDOM CASH MANAGEMENT FUND
INVESTMENTS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- --------- ---- -------- -----
<S> <C> <C> <C>
COMMERCIAL PAPER -- 78.6%
ABBEY NATIONAL BANK
$ 4,800,000 5.150% 01/06/1999 $ 4,796,567
25,000,000 5.200% 01/13/1999 24,956,667
25,000,000 5.200% 01/14/1999 24,953,056
15,000,000 4.920% 02/16/1999 14,905,700
30,000,000 4.900% 03/04/1999 29,746,833
AMERICAN EXPRESS CREDIT CORP.
15,000,000 5.050% 01/04/1999 14,993,688
18,000,000 5.110% 01/04/1999 17,992,335
7,500,000 6.000% 01/04/1999 7,496,250
25,000,000 5.110% 01/05/1999 24,985,806
10,000,000 6.100% 01/05/1999 9,993,222
11,000,000 5.200% 01/11/1999 10,984,111
AMERICAN GENERAL FINANCE CORP.
25,000,000 5.300% 01/20/1999 24,930,069
18,000,000 5.320% 01/22/1999 17,944,140
22,000,000 5.330% 01/22/1999 21,931,598
14,000,000 5.120% 02/11/1999 13,918,364
14,000,000 5.140% 02/19/1999 13,902,054
11,000,000 5.070% 03/23/1999 10,874,518
AMERICAN HOME PRODUCTS CORP.
12,000,000 5.100% 02/08/1999 11,935,400
25,000,000 5.100% 02/19/1999 24,826,458
9,000,000 5.150% 03/12/1999 8,909,875
2,220,000 5.130% 03/19/1999 2,195,641
ASSOCIATES CORP. OF NORTH AMERICA
10,000,000 4.900% 01/04/1999 9,999,959
25,000,000 5.230% 01/15/1999 24,949,153
25,000,000 5.300% 01/15/1999 24,948,472
4,000,000 5.150% 01/27/1999 3,985,122
25,000,000 5.180% 02/01/1999 24,888,486
14,000,000 5.140% 02/10/1999 13,920,044
4,000,000 5.000% 03/23/1999 3,955,000
BANK OF NOVA SCOTIA
25,000,000 5.480% 01/04/1999 24,988,583
25,000,000 5.180% 01/25/1999 24,913,667
20,000,000 5.120% 02/08/1999 19,891,911
BELLSOUTH CAPITAL FUNDING CORP.
$31,000,000 4.800% 03/12/1999 $30,710,667
15,700,000 4.800% 03/15/1999 15,547,187
CAPITAL ONE CORP.
40,113,000 5.570% 01/07/1999 40,113,000
CHEVRON TRANSPORT CORP.
30,000,000 5.340% 01/20/1999 29,915,450
20,000,000 5.330% 01/21/1999 19,940,778
24,000,000 5.060% 01/22/1999 23,929,160
20,000,000 5.140% 02/17/1999 19,865,789
E.I. DUPONT DE NEMOURS & CO.
25,000,000 5.140% 02/04/1999 24,878,639
FORD MOTOR CREDIT CORP.
25,000,000 5.200% 01/08/1999 24,974,722
15,000,000 5.310% 01/12/1999 14,975,663
25,000,000 5.100% 01/20/1999 24,932,708
19,000,000 5.040% 01/26/1999 18,933,500
12,000,000 5.150% 02/03/1999 11,943,350
GENERAL ELECTRIC CAPITAL CORP.
12,000,000 5.140% 01/12/1999 11,981,153
22,500,000 5.140% 01/19/1999 22,442,175
13,500,000 5.320% 01/19/1999 13,464,090
9,000,000 5.030% 01/21/1999 8,974,850
25,000,000 5.160% 01/28/1999 24,903,250
11,900,000 5.040% 02/05/1999 11,841,690
6,500,000 5.150% 02/12/1999 6,460,946
13,000,000 5.000% 03/22/1999 12,855,556
GLAXO WELLCOME PLC
17,875,000 4.990% 01/21/1999 17,825,447
25,000,000 5.050% 02/22/1999 24,817,639
GOLDEN PEANUT CO.
6,000,000 5.150% 01/13/1999 5,989,700
10,000,000 5.000% 03/02/1999 9,916,667
9,000,000 5.000% 03/04/1999 8,922,500
11,000,000 5.080% 03/12/1999 10,891,344
8,600,000 5.080% 03/15/1999 8,511,410
3,900,000 5.120% 03/17/1999 3,858,400
9,200,000 4.980% 03/24/1999 9,095,641
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
21
<PAGE> 18
FREEDOM CASH MANAGEMENT FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- --------- ---- -------- -----
<S> <C> <C> <C>
COMMERCIAL PAPER -- (CONTINUED)
GOLDMAN SACHS & CO.
$ 9,000,000 5.400% 01/04/1999 $ 8,995,950
10,000,000 5.300% 01/07/1999 9,991,167
24,000,000 5.000% 01/19/1999 23,940,000
10,000,000 5.180% 02/02/1999 9,953,956
25,000,000 5.080% 02/24/1999 24,809,500
10,000,000 5.130% 02/26/1999 9,920,200
25,000,000 5.020% 03/19/1999 24,731,569
HALIFAX PLC
12,000,000 5.050% 02/10/1999 11,932,667
H.J. HEINZ CO.
12,000,000 5.200% 01/11/1999 11,982,667
6,000,000 5.070% 01/22/1999 5,982,255
J.P. MORGAN & CO., INC.
4,000,000 5.040% 01/19/1999 3,989,920
8,000,000 5.070% 02/26/1999 7,936,907
KAMEHAMEHA SCHOOL DISTRICT
6,000,000 5.150% 01/22/1999 5,981,975
LUCENT TECHNOLOGIES INC.
25,000,000 5.300% 01/07/1999 24,977,917
25,000,000 5.150% 01/29/1999 24,899,861
5,000,000 5.100% 02/03/1999 4,976,625
19,000,000 5.130% 02/03/1999 18,910,653
25,000,000 5.120% 02/10/1999 24,857,778
MERRILL LYNCH & CO. INC.
2,235,000 5.520% 01/08/1999 2,232,601
10,000,000 5.130% 01/19/1999 9,974,350
2,500,000 5.330% 01/29/1999 2,489,636
17,000,000 5.170% 02/05/1999 16,914,551
10,000,000 5.000% 02/12/1999 9,941,667
11,500,000 5.200% 02/23/1999 11,411,961
25,000,000 5.200% 02/25/1999 24,801,389
22,000,000 5.000% 03/12/1999 21,786,111
METLIFE FUNDING INC.
$ 3,500,000 5.250% 01/05/1999 $ 3,497,958
26,373,000 5.300% 01/12/1999 26,330,290
25,000,000 5.250% 01/14/1999 24,952,604
19,000,000 5.130% 01/20/1999 18,948,558
20,000,000 5.230% 01/26/1999 19,927,361
15,000,000 5.240% 01/27/1999 14,943,233
4,000,000 5.300% 01/27/1999 3,984,689
MONSANTO CO.
10,000,000 5.090% 02/04/1999 9,951,928
12,650,000 5.020% 03/10/1999 12,530,050
MORGAN GUARANTY TRUST CO. N.Y
25,000,000 5.644% 11/29/1999 24,993,377
PROCTER & GAMBLE CO.
10,000,000 5.100% 01/29/1999 9,960,333
24,000,000 5.280% 01/29/1999 23,901,440
15,000,000 5.080% 02/01/1999 14,934,383
PRUDENTIAL FUNDING CORP.
12,000,000 5.190% 01/06/1999 11,991,350
4,000,000 5.300% 01/14/1999 3,992,344
5,000,000 5.050% 01/19/1999 4,987,375
11,000,000 5.290% 01/20/1999 10,969,289
25,000,000 5.310% 01/21/1999 24,926,250
15,000,000 5.330% 01/21/1999 14,955,583
12,000,000 5.030% 01/22/1999 11,964,790
10,000,000 5.320% 01/22/1999 9,968,967
15,000,000 5.050% 01/25/1999 14,949,500
SHELL FINANCE(UK) PLC
7,000,000 5.120% 02/04/1999 6,966,151
12,000,000 5.120% 02/05/1999 11,940,267
10,000,000 5.120% 02/22/1999 9,926,044
TECO FINANCE INC.
5,600,000 5.200% 02/11/1999 5,566,836
USAA CAPITAL CORP.
15,000,000 5.280% 01/08/1999 14,984,600
5,000,000 5.130% 01/28/1999 4,980,763
12,000,000 5.150% 02/01/1999 11,946,783
5,167,000 5.000% 02/02/1999 5,144,036
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
22
<PAGE> 19
FREEDOM CASH MANAGEMENT FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
--------- ---- -------- -----
<S> <C> <C> <C>
COMMERCIAL PAPER -- (CONTINUED)
WALT DISNEY CO.
$ 6,000,000 4.990% 01/05/1999 $ 5,996,673
13,480,000 5.080% 01/21/1999 13,441,956
11,500,000 5.070% 02/02/1999 11,448,173
WARNER LAMBERT CO.
25,000,000 5.380% 01/15/1999 24,947,694
--------------
TOTAL COMMERCIAL PAPER....................... 1,830,201,281
--------------
MUNICIPAL SECURITIES -- 0.4%
MISSISSIPPI BUSINESS FINANCE CORP. TAXABLE
INDUSTRIAL DEVELOPMENT REVENUE BONDS
10,000,000 5.700% 01/06/1999 10,000,000
--------------
TOTAL MUNICIPAL SECURITIES.................... 10,000,000
--------------
COMMERCIAL PAPER --
STRUCTURED FINANCE -- 18.9%
ASSET SECURITIZATION COOPERATIVE CORP.
5,000,000 5.600% 01/11/1999 4,992,222
2,600,000 5.450% 01/20/1999 2,592,521
10,000,000 5.120% 01/27/1999 9,963,022
25,000,000 5.230% 02/09/1999 24,858,354
20,000,000 5.200% 02/11/1999 19,881,556
10,000,000 5.330% 02/18/1999 9,928,933
17,000,000 5.300% 02/19/1999 16,877,364
12,000,000 5.050% 03/01/1999 11,900,683
11,500,000 5.200% 03/11/1999 11,385,383
COOPERATIVE ASSOCIATION OF TRACTOR DEALERS INC.
$ 3,100,000 5.400% 01/06/1999 $ 3,097,675
10,599,000 5.370% 01/07/1999 10,589,514
4,000,000 5.170% 01/08/1999 3,995,979
2,000,000 5.620% 01/08/1999 1,997,814
5,000,000 5.370% 01/11/1999 4,992,542
11,000,000 5.550% 01/12/1999 10,981,346
8,000,000 5.520% 01/15/1999 7,982,827
3,000,000 5.500% 01/19/1999 2,991,675
5,000,000 5.650% 01/19/1999 4,985,875
9,500,000 5.410% 01/22/1999 9,470,020
2,000,000 5.150% 01/27/1999 1,992,561
11,800,000 5.370% 01/28/1999 11,752,476
3,000,000 5.120% 01/29/1999 2,988,053
10,000,000 5.020% 02/01/1999 9,956,772
3,000,000 5.370% 02/09/1999 2,982,548
5,100,000 5.220% 02/10/1999 5,070,420
5,400,000 5.200% 03/08/1999 5,348,520
4,900,000 5.320% 03/08/1999 4,852,209
7,000,000 5.150% 03/17/1999 6,924,896
DELAWARE FUNDING CORP.
15,108,000 5.350% 01/05/1999 15,099,019
10,000,000 5.350% 01/13/1999 9,982,167
20,421,000 5.500% 01/15/1999 20,377,322
25,000,000 5.330% 02/16/1999 24,829,736
15,210,000 5.330% 02/17/1999 15,104,160
25,000,000 5.180% 02/18/1999 24,827,333
3,267,000 5.150% 03/03/1999 3,238,491
SHEFFIELD RECEIVABLES CORP.
8,000,000 5.350% 01/13/1999 7,985,733
10,000,000 5.380% 01/19/1999 9,973,100
8,000,000 5.300% 02/05/1999 7,958,776
15,000,000 5.100% 02/12/1999 14,910,750
12,000,000 5.110% 02/16/1999 11,921,648
25,000,000 5.280% 02/17/1999 24,827,667
1,000,000 5.380% 03/05/1999 990,585
24,000,000 5.400% 03/11/1999 23,751,600
--------------
TOTAL COMMERCIAL PAPER
STRUCTURED FINANCE.......................... 441,111,847
--------------
TOTAL INVESTMENTS -- 97.9%.................... 2,281,313,128(a)
Other Assets & Liabilities, Net -- 2.1%....... 48,981,815
--------------
TOTAL NET ASSETS -- 100.0%.................... $2,330,294,943
==============
</TABLE>
- -----------
(a) COST FOR TAX PURPOSES IS THE SAME.
See Notes to Financial Statements.
ANNUAL REPORT
23
<PAGE> 20
FREEDOM GOVERNMENT SECURITIES FUND
INVESTMENTS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
--------- ---- -------- -----
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ISSUES -- 98.9%
FEDERAL FARM CREDIT BANK DISCOUNT NOTES -- 1.3%
$ 3,400,000 5.050% 01/07/99 $3,397,138
2,490,000 5.030% 02/01/99 2,479,215
------------
TOTAL FEDERAL FARM CREDIT BANK
DISCOUNT NOTES.................................. 5,876,353
------------
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 91.9%
$25,000,000 5.030% 01/04/99 $ 24,989,521
10,000,000 5.080% 01/04/99 9,995,767
4,900,000 5.365% 01/06/99 4,896,349
10,000,000 5.010% 01/13/99 9,983,300
2,700,000 4.730% 01/19/99 2,693,615
16,000,000 4.730% 01/19/99 15,962,160
16,000,000 4.730% 01/20/99 15,960,058
14,521,000 5.070% 01/20/99 14,482,144
3,150,000 4.780% 01/22/99 3,141,217
2,500,000 4.945% 01/22/99 2,492,789
20,000,000 4.740% 01/26/99 19,934,167
12,000,000 4.860% 01/29/99 11,954,640
34,000,000 4.960% 02/03/99 33,845,413
1,000,000 5.050% 02/03/99 995,371
18,000,000 4.990% 02/05/99 17,912,675
16,000,000 5.000% 02/05/99 15,922,222
7,000,000 5.040% 02/05/99 6,965,700
5,200,000 4.930% 02/10/99 5,171,516
13,600,000 5.000% 02/10/99 13,524,444
5,500,000 5.020% 02/10/99 5,469,322
3,000,000 4.700% 02/12/99 2,983,550
6,200,000 4.900% 02/12/99 6,164,557
15,300,000 4.820% 02/17/99 15,203,721
$ 6,300,000 4.900% 02/19/99 6,257,983
11,560,000 4.900% 02/19/99 11,482,901
8,400,000 4.920% 02/19/99 8,343,748
12,000,000 4.940% 02/24/99 11,911,080
4,800,000 4.960% 02/26/99 4,762,965
15,000,000 4.990% 02/26/99 14,883,567
1,510,000 5.030% 02/26/99 1,498,185
10,000,000 4.920% 03/03/99 9,916,633
1,500,000 4.920% 03/03/99 1,487,495
1,000,000 4.930% 03/12/99 990,414
1,500,000 4.930% 03/12/99 1,485,618
18,000,000 4.940% 03/12/99 17,827,100
1,570,000 4.950% 03/12/99 1,554,889
25,000,000 4.920% 03/17/99 24,743,750
15,000,000 4.940% 03/17/99 14,845,625
14,261,000 4.940% 03/19/99 14,110,317
1,000,000 4.960% 03/26/99 988,427
------------
407,734,915
------------
FEDERAL HOME LOAN BANK FLOATING RATE
NOTES -- 5.7%(b)
25,000,000 5.380% 01/04/99 24,991,438
------------
TOTAL FEDERAL HOME LOAN BANK
FLOATING RATE NOTES........................... 24,991,438
------------
TOTAL U.S. GOVERNMENT AGENCY
ISSUES -- 98.9%............................... 438,602,706(a)
Other Assets & Liabilities Net -- 1.1%.......... 4,914,259
------------
TOTAL NET ASSETS -- 100.0%...................... 443,516,965
============
</TABLE>
- ------------
(a) COST FOR TAX PURPOSES IS THE SAME.
(b) FLOATING RATE SECURITY RATE SHOWN IS AS OF 12/31/98.
See Notes to Financial Statements.
ANNUAL REPORT
24
<PAGE> 21
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
-------- ----------- -----
<S> <C> <C>
MUNICIPAL SECURITIES -- 97.9%
ALABAMA -- 1.5%
$ 2,000,000 Birmingham-Carroway Special
Care Finance Authority
(AmSouth LOC) 4.00%
1-06-99............................. $ 2,000,000
3,200,000 Daphne Villa Special Care
Facilities Authority
(AmSouth LOC) 4.00%
1-06-99............................. 3,200,000
------------
5,200,000
------------
ARIZONA -- 5.1%
13,000,000 Apache County IDA (Barclays
Bank LOC) 4.00% 1-06-99............. 13,000,000
Maricopa County PCR
2,550,000 (Barclays Bank LOC) 4.00%
1-06-99............................. 2,550,000
1,500,000 (Morgan Guaranty LOC) 5.10%
1-04-99............................. 1,500,000
1,000,000 Mesa Municipal Development
Corp. (West Deutsche
Landesbank LOC) 3.20%
2-12-99............................. 1,000,000
------------
18,050,000
------------
ARKANSAS -- 2.1%
7,600,000 Arkansas Development Finance
Authority (Citibank LOC)
3.90% 1-07-99....................... 7,600,000
------------
CALIFORNIA -- 3.2%
2,000,000 California Higher Education
Loan Authority (National
Westminster LOC) 3.80%
5-01-99............................. 2,000,000
3,000,000 California Higher Education
Loan Authority (SLMA) 3.65%
7-01-99............................. 3,000,000
1,300,000 California Student Loan
Corporation (Dresdner LOC)
4.15% 1-07-99....................... 1,300,000
5,000,000 Los Angeles County TRANS
4.50% 6-30-99....................... 5,019,731
------------
11,319,731
------------
COLORADO -- 1.0%
$ 1,000,000 Colorado HFA (MBIA/Credit
Suisse) 3.95% 1-07-99............... $ 1,000,000
1,485,000 Colorado HFA (MBIA/ Rabobank)
3.90% 1-07-99.............. ........ 1,485,000
1,200,000 Moffat County PCR (AMBAC/Bank
of New York) 5.15%
1-04-99............................. 1,200,000
------------
3,685,000
------------
DELAWARE -- 0.6%
2,000,000 Delaware EDA (MBIA/Morgan
Stanley) 4.25% 1-06-99.............. 2,000,000
------------
DISTRICT OF COLUMBIA -- 2.5%
8,800,000 District of Columbia
(National Westminster LOC)
5.20% 1-04-99................... ... 8,800,000
------------
FLORIDA -- 4.4%
5,000,000 Orange County Health
Facilities Authority
(MBIA/Suntrust) 3.20%
1-19-99............................. 5,000,000
5,065,000 Putnam County PCR (NRUCFC)
2.85% 6-15-99....................... 5,065,000
West Orange Memorial Hospital
Tax District (Rabobank LOC)
3,600,000 3.00% 1-28-99....................... 3,600,000
2,000,000 3.00% 3-09-99....................... 2,000,000
------------
15,665,000
------------
GEORGIA -- 8.4%
5,250,000 Burke County Development
Authority PCR
(FGIC/Canadian Imperial
Bank of Commerce) 3.85%
1-06-99............................. 5,250,000
1,500,000 Downtown Savannah Authority
(Wachovia LOC) 3.95%
1-06-99............................. 1,500,000
5,000,000 Georgia Municipal Electric
Authority (ABN Amro LOC)
4.15% 1-06-99....................... 5,000,000
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
25
<PAGE> 22
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<C> <S> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
GEORGIA -- (CONTINUED)
Georgia Municipal Electric
Authority (Morgan
Guaranty/Bayerische
Landesbank/West Deutsche
Landesbank/Wachovia LOC's)
$ 2,000,000 3.00% 2-10-99........................ $ 2,000,000
2,300,000 3.05% 3-11-99........................ 2,300,000
13,780,000 Georgia Municipal Gas
Authority (Wachovia/ Morgan
Guaranty/Bank of
America/Landesbank-
Hessen/Bayerische
Landesbank LOC's) 3.90%
1-06-99.............................. 13,780,000
-----------
29,830,000
-----------
IDAHO -- 0.6%
2,000,000 IDAHO TANS Series 96 4.50%
6-30-99.............................. 2,008,565
-----------
ILLINOIS -- 9.0%
4,000,000 Chicago (Morgan Guaranty LOC)
3.55% 2-04-99........................ 4,000,000
1,300,000 Chicago O'Hare International
Airport Authority (Societe
Generale LOC) 4.00%
1-06-99.............................. 1,300,000
Illinois Development Finance
Authority
1,000,000 (Canadian Imperial Bank of
Canada LOC) 4.25% 1-06-99............ 1,000,000
3,000,000 (LaSalle National Bank LOC)
4.05% 1-06-99........................ 3,000,000
5,300,000 (Northern Trust LOC) 4.05%
1-06-99.............................. 5,300,000
3,200,000 Illinois Health Facilities
Authority (AMBAC/FNB
Chicago) 4.05% 1-06-99............... 3,200,000
Illinois Health Facilities
Authority
$ 1,000,000 (MBIA/Bank of America)
3.20% 2-09-99........................ $ 1,000,000
2,000,000 (MBIA/Morgan Guaranty)
3.10% 2-10-99........................ 2,000,000
1,000,000 (MBIA/Morgan Guaranty)
3.00% 2-18-99........................ 1,000,000
4,300,000 Illinois Toll Highway
Authority (MBIA/Societe
Generale) 3.85% 1-06-99.............. 4,300,000
1,000,000 Joliet PCR 5.10% 1-04-99............... 1,000,000
5,000,000 Lisle Health Facilities
Authority (FNMA) 4.25%
1-06-99.............................. 5,000,000
-----------
32,100,000
-----------
INDIANA -- 4.9%
2,800,000 Indiana HEFA (FNB-Chicago
LOC) 3.95% 1-06-99................... 2,800,000
3,300,000 Indiana Municipal Power
Authority (Toronto Dominion
LOC) 3.95% 1-06-99................... 3,300,000
5,290,000 Mt. Vernon PCR 3.15%
1-14-99.............................. 5,290,000
4,035,000 Rockport PCR (AMBAC/Bank of
New York) 5.15% 1-04-99.............. 4,035,000
1,000,000 Sullivan (NRUCFC) 2.95%
2-24-99.............................. 1,000,000
1,000,000 Whiting Economic Development
Revenue 3.65% 2-15-99................ 1,000,000
-----------
17,425,000
-----------
IOWA -- 0.6%
2,000,000 Iowa School Corp. (FSA) 4.50%
6-25-99.............................. 2,007,863
-----------
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
26
<PAGE> 23
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
LOUISIANA -- 3.8%
$ 5,900,000 Ascension Parish IDA (Credit
Suisse LOC) 4.00%
1-06-99................................... $ 5,900,000
400,000 East Baton Rouge IDA
(Wachovia LOC) 3.90%
1-07-99................................... 400,000
1,100,000 Lake Charles Harbor &
Terminal District (Canadian
Imperial Bank of Commerce
LOC) 4.00% 1-06-99........................ 1,100,000
1,200,000 Plaquemines Port Harbor &
Terminal Authority (Morgan
Guaranty LOC) 3.60%
3-15-99................................... 1,200,000
2,000,000 West Baton Rouge PCR 3.25%
1-07-99................................... 2,000,000
3,000,000 West Baton Rouge PCR 3.15%
1-25-99................................... 3,000,000
-----------
13,600,000
-----------
MAINE -- 1.1%
3,935,000 Maine HEFA (State Street Bank
LOC) 4.00% 1-06-99........................ 3,935,000
-----------
MARYLAND -- 0.6%
1,100,000 Maryland HEFA (FNB Chicago
LOC) 3.95% 1-06-99........................ 1,100,000
1,000,000 Prince Georges County
(Escrowed in U.S.
Government Securities)
7.20% 2-01-99............................. 1,012,972
-----------
2,112,972
-----------
MASSACHUSETTS -- 3.1%
5,800,000 Massachusetts Bay Transit
Authority (State Street
Bank LOC) 3.45% 3-01-99................... 5,800,000
1,000,000 Massachusetts Bay Transit
Authority (WestDeutsche
Bank LOC) 3.05% 3-11-99................... 1,000,000
4,460,000 Massachusetts Water Pollution
Authority Trust 4.25%
8-01-99 4,491,698
-----------
11,291,698
-----------
MICHIGAN -- 0.6%
$ 1,000,000 Ingham Economic Development
Corp. (National Australia
Bank LOC) 4.05% 1-06-99................... $ 1,000,000
1,000,000 Michigan Public Power Agency
(Escrowed in U.S.
Government Securities)
6.40% 1-01-99............................. 1,000,000
-----------
2,000,000
-----------
MINNESOTA -- 0.3%
1,000,000 Duluth PCR (Wachovia LOC)
3.90% 1-07-99............................. 1,000,000
-----------
MISSISSIPPI -- 2.2%
7,700,000 Jackson County 5.10%
1-04-99................................... 7,700,000
-----------
MISSOURI -- 2.2%
2,550,000 Columbia (Insurance Reserve
Bonds) (Toronto Dominion
LOC) 3.95% 1-06-99........................ 2,550,000
Missouri Environmental
Improvement Bonds (United
Bank of Switzerland LOC)
1,200,000 3.15% 1-14-99............................. 1,200,000
1,000,000 3.10% 2-11-99............................. 1,000,000
3,045,000 3.00% 3-18-99............................. 3,045,000
-----------
7,795,000
-----------
NEVADA -- 2.2%
Las Vegas Valley Water
District (United Bank of
Switzerland/West Deutsche
Landesbank LOC's)
2,300,000 3.40% 1-11-99............................. 2,300,000
5,700,000 2.95% 2-08-99............................. 5,700,000
-----------
8,000,000
-----------
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
27
<PAGE> 24
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
NEW MEXICO -- 1.6%
$ 4,000,000 Farmington PCR (Barclays Bank
LOC) 4.00% 1-06-99.......................... $ 4,000,000
1,700,000 Gasden ISD (FGIC) 4.25%
8-15-99..................................... 1,705,317
-----------
5,705,317
-----------
NEW YORK -- 1.7%
4,000,000 New York Energy Research &
Development Authority
(Morgan Guaranty LOC) 3.58%
3-15-99..................................... 4,000,000
2,000,000 New York Energy Research &
Development Authority
(United Bank of Switzerland
LOC) 3.00% 12-01-99......................... 2,000,000
-----------
6,000,000
-----------
NORTH CAROLINA -- 3.8%
1,000,000 North Carolina Eastern
Municipal Power (Morgan
Guaranty/United Bank of
Switzerland LOC's) 3.00%
1-12-99..................................... 1,000,000
2,200,000 North Carolina Educational
Facilities (Nationsbank
LOC) 3.90% 1-06-99.......................... 2,200,000
5,000,000 North Carolina Educational
Facilities (Wachovia Bank
LOC) 3.95% 1-07-99.......................... 5,000,000
3,500,000 North Carolina Medical Care
(Nationsbank LOC) 5.10%
1-04-99..................................... 3,500,000
2,000,000 Wake County IFA (Wachovia
LOC) 4.00% 1-06-99.......................... 2,000,000
-----------
13,700,000
OHIO -- 3.7%
3,000,000 Clinton County Hospital
Finance Program (Fifth
Third Bank LOC) 4.00%
1-06-99..................................... 3,000,000
$ 2,000,000 Dublin City School District
3.99% 4-14-99............................... $ 2,002,135
3,125,000 Franklin County Hospital
Revenue (Morgan Guaranty
LOC) 4.05% 1-07-99.......................... 3,125,000
3,000,000 Ohio Air Quality Development
Authority (Toronto Dominion
LOC) 3.65% 2-01-99.......................... 3,000,000
2,000,000 Toledo Special Assessment
Revenue (Canadian Imperial
Bank of Commerce LOC) 4.00%
1-07-99..................................... 2,000,000
-----------
13,127,135
-----------
PENNSYLVANIA -- 4.1%
6,435,000 Delaware Valley Finance
Authority (Credit Suisse
LOC) 3.90% 1-06-99.......................... 6,435,000
5,200,000 Delaware Valley RFA (Credit
Suisse LOC) 3.90%
1-06-99..................................... 5,200,000
2,000,000 Philadelphia School District
(First Union Bank LOC)
4.25% 6-30-99............................... 2,005,901
1,000,000 Philadelphia School District
(PNC Bank LOC) 4.25%
6-30-99..................................... 1,002,950
-----------
14,643,851
-----------
PUERTO RICO -- 1.1%
4,000,000 Puerto Rico Commonwealth
TRANS 3.50% 7-30-99......................... 4,014,761
-----------
SOUTH CAROLINA -- 1.6%
5,540,000 York County (NRUCFC) 3.55%
2-15-99..................................... 5,540,000
-----------
SOUTH DAKOTA -- 0.3%
1,000,000 Yankton IDR (Bank of America
LOC) 4.00% 1-07-99.......................... 1,000,000
-----------
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
28
<PAGE> 25
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
TENNESSEE -- 0.9%
$ 1,100,000 Hamilton County (Nationsbank
LOC) 4.05% 1-07-99...................... $ 1,100,000
2,000,000 Nashville-Davidson Counties
HEFA (Nationsbank LOC)
4.05% 1-07-99........................... 2,000,000
-----------
3,100,000
-----------
TEXAS -- 9.2%
3,650,000 Austin County IDA (Citibank
LOC) 3.95% 1-06-99...................... 3,650,000
4,000,000 Austin Utilities System
(Morgan Guaranty LOC) 3.35%
1-07-99................................. 4,000,000
5,000,000 Brazos River Navigational
District 5.15% 1-04-99.................. 5,000,000
1,550,000 Brazos River Navigational
District 3.05% 2-17-99.................. 1,550,000
1,000,000 Brazos River Navigational
District 3.10% 2-17-99.................. 1,000,000
1,000,000 Brownsville Utilities System
(Toronto Dominion LOC)
3.25% 1-21-99........................... 1,000,000
1,000,000 Dallas 4.45% 2-15-99...................... 1,001,010
Dallas Area Rapid Transit
District (WestDeutsche
Landesbank/Bayerische
Landesbank/United Bank of
Switzerland LOC's)
2,000,000 3.00% 1-20-99............................. 2,000,000
5,000,000 3.15% 2-01-99............................. 5,000,000
1,915,000 Gulf Coast IDA 3.00%
6-01-99................................. 1,915,000
3,500,000 Lower Neches Valley Authority
PCR 4.00% 1-06-99....................... 3,500,000
1,000,000 Richardson ISD (Texas
Permanent School Fund
Guaranty) (United Bank of
Switzerland) 4.00%
1-07-99................................. 1,000,000
2,000,000 Sabine River PCA (AMBAC/Bank
of New York) 5.15%
1-04-99................................. 2,000,000
-----------
32,616,010
-----------
UTAH -- 5.0%
$ 4,000,000 Intermountain Power Agency
(Bank of America LOC) 2.95%
2-22-99................................. $ 4,000,000
6,100,000 State Board of Regents
Student Loan Revenue
(AMBAC/Dresdner) 3.95%
1-06-99................................. 6,100,000
3,500,000 State of Utah (Toronto
Dominion LOC) 3.35%
1-13-99................................. 3,500,000
1,000,000 Utah County Environmental
Improvement Revenue
(Wachovia LOC) 3.00%
6-01-99................................. 1,000,000
3,100,000 Utah Transit Authority
(Bayerische Landesbank LOC)
3.90% 1-07-99........................... 3,100,000
-----------
17,700,000
-----------
VIRGINIA -- 1.5%
2,000,000 Harrisonburg Virginia
Redevelopment and Housing
Revenue Bonds (Bank One
LOC) 4.00% 1-07-99...................... 2,000,000
3,400,000 Louisa County IDA
(Nationsbank LOC) 4.05%
1-07-99................................. 3,400,000
-----------
5,400,000
-----------
</TABLE>
See Notes to Financial Statements.
ANNUAL REPORT
29
<PAGE> 26
FREEDOM TAX EXEMPT MONEY FUND
INVESTMENTS AS OF DECEMBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------- ----------- -----
<S> <C> <C>
MUNICIPAL SECURITIES -- (CONTINUED)
WASHINGTON -- 1.3%
$ 3,100,000 Seattle Water System Revenue
Bonds (Bayerische
Landesbank LOC) 4.00%
1-06-99.................................. $ 3,100,000
1,465,000 Washington Public Power
Supply System (Escrowed in
U.S. Government Securities)
7.50% 7-01-99............................ 1,522,229
------------
4,622,229
------------
WISCONSIN -- 1.0%
3,500,000 Wisconsin Health and
Education Facilities
(Toronto Dominion LOC)
4.00% 1-06-99............................ 3,500,000
------------
WYOMING -- 1.1%
4,000,000 Uinta County PCR 5.10%
1-04-99.................................. 4,000,000
------------
TOTAL INVESTMENTS -- 97.9%............................... 347,795,132(a)
Other Assets & Liabilities, Net -- 2.1%.................. 7,597,882
------------
TOTAL NET ASSETS -- 100.00%.............................. $355,393,014
============
</TABLE>
Legend:
EDA -- Economic Development Authority
HEFA -- Health Education Finance Authority
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IFA -- Industrial Finance Agency
ISD -- Independent School District
LOC -- Letter of Credit
NRUCFC -- National Rural Utilities Cooperative Finance Corp.
PCA -- Pollution Control Authority
PCR -- Pollution Control Revenue
RFA -- Regional Finance Authority
TANS -- Tax Anticipation Notes
TRANS -- Tax & Revenue Anticipation Notes
Insurance Abbreviations:
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance Inc.
MBIA -- Municipal Bond Investors Assurance
SLMA -- Student Loan Marketing Association
Maturity dates for many bonds and notes represent the next scheduled date at
which the interest rate may be adjusted or a "demand" or "put" feature may be
exercised.
- ------------
(a) Cost for tax purposes is the same.
See Notes to Financial Statements.
ANNUAL REPORT
30
<PAGE> 27
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES. Freedom Mutual Fund and Freedom Group of Tax
Exempt Funds (the "Trusts") are Massachusetts business trusts registered under
the Investment Company Act of 1940, as amended, as open-end management
companies. The Agreements and Declarations of Trust permit the issuance of an
unlimited number of shares of beneficial interest in separate series, with
shares of each series representing interests in a separate portfolio of assets
and operating as a separate distinct fund (a "Fund"). The Freedom Mutual Fund
consists of the Freedom Cash Management Fund and the Freedom Government
Securities Fund. The Freedom Group of Tax Exempt Funds consists of the Freedom
Tax Exempt Money Fund and the Freedom California Tax Exempt Money Fund. The
financial statements of the Freedom California Tax Exempt Money Fund are
included in a separate annual report for that Fund.
The following is a summary of significant accounting policies followed by
the Trusts in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation and Transactions. Each Trust values its portfolio
securities utilizing the amortized cost valuation method. This method involves
valuing a portfolio security at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal income tax purposes. Investment securities
transactions are accounted for on the date the securities are purchased or sold.
Expenses. The majority of the expenses of each Trust are directly
identifiable to an individual Fund. Expenses which are not readily identifiable
as belonging to a specific Fund are allocated in such a manner as deemed
equitable by the Trustees, taking into consideration, among other things, the
nature and type of expense and the relative sizes of the Funds.
Trustees' fees of $6,000 per Trust, per year, plus $250 per meeting of the
Board of Trustees and $350 per meeting of any committee thereof, are paid to
each Trustee who is not an interested person of the Trusts. No remuneration is
paid by either Trust to any Trustee or officer of that Trust who is affiliated
with Freedom Capital Management Corporation, the Trusts' advisor.
The Trusts have entered into an insurance agreement with ICI Mutual
Insurance Company under which each Trust pays both an annual insurance premium
and a one-time reserve premium, and is committed to provide additional funds of
up to 300% of its initial annual premium if and when called upon.
ANNUAL REPORT
31
<PAGE> 28
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Freedom Tax Exempt Money Fund has an agreement with the custodian bank
under which $17,645 of custodian fees have been reduced by balance credits
applied during the year ended December 31, 1998. If the Fund had not entered
into this agreement, the assets not invested, on which these balance credits
were earned, could have produced taxable income.
Federal Income Tax. It is each Fund's policy to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its income to its shareholders. It is also the intention of
the Funds to make sufficient distributions to shareholders to avoid imposition
of excise tax on undistributed amounts under the Internal Revenue Code.
Therefore, no federal income or excise tax provision is required.
As of December 31, 1998, the Freedom Cash Management Fund had $142,131 of
capital loss carry-forwards of which $38,142, $95,472 and $8,517 expire on
December 31, 1999, December 31, 2001 and December 31, 2005, respectively. As of
December 31, 1998 the Freedom Government Securities Fund had $30,355 of capital
loss carry-forwards of which $20,095 and $10,260 expire on December 31, 2002 and
December 31, 2005, respectively.
Interest Income and Dividends to Shareholders. Interest income is accrued
as earned. Dividends to shareholders are declared daily from net investment
income, which consists of interest accrued or discount earned (including
original issue and market discount) less amortization of premium and the
estimated expenses of the Fund applicable to the dividend period.
Other. The custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Funds in the event of default by the seller.
In connection with transactions in repurchase agreements, if the seller defaults
and the collateral declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be limited or delayed.
The Funds may purchase or sell securities on a when-issued basis. Payment
and delivery may take place more than a week after the date of the transaction.
The price that will be paid for the underlying securities is fixed at the time
the transaction is negotiated.
NOTE 2. INVESTMENT ADVISOR AND OTHER RELATED PARTY TRANSACTIONS. Freedom
Capital Management Corporation ("FCMC") is the parent of Freedom Distributors
Corporation as well as an affiliate of Sutro & Co., Inc. ("Sutro"), Tucker
Anthony Incorporated ("Tucker Anthony") and Freedom Services Corp. All are
wholly owned subsidiaries of Freedom Securities Corporation ("Freedom
Securities").
FCMC, the investment advisor of the Funds, furnishes the Funds with
administration and other services and office facilities in Boston. For these
services and facilities, each Fund pays a monthly fee,
ANNUAL REPORT
32
<PAGE> 29
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
computed separately for each Fund, based upon the average daily net asset value
of each Fund, at the annual rate of one half of one percent (.50%) on the first
$500 million of average daily net assets and forty-five hundredths of one
percent (.45%) for average daily net assets in excess of that amount. The Funds
themselves pay no salaries or compensation to any of their officers.
Tucker Anthony, Sutro and Freedom Distributors Corporation act as
distributors of the Trusts' shares and receive no compensation for such
services. As sub-transfer agent from January 1st through June 15th, Freedom
Services Corp. received reimbursements from the Funds for maintaining and
servicing certain shareholder accounts for the year ended December 31, 1998 as
follows:
<TABLE>
<CAPTION>
CASH GOVERNMENT TAX
MANAGEMENT SECURITIES EXEMPT MONEY
FUND FUND FUND
---------- ---------- ------------
<S> <C> <C>
$ 693,567 $ 56,734 $36,206
========= ======== =======
</TABLE>
John Hancock Signature Services, Inc. ("JHSS") was transfer agent for the
Funds through June 15, 1998. JHSS received the following from the Funds for the
period ended June 15, 1998:
<TABLE>
<CAPTION>
CASH GOVERNMENT TAX
MANAGEMENT SECURITIES EXEMPT MONEY
FUND FUND FUND
---------- ---------- ------------
<S> <C> <C>
$ 694,823 $ 57,296 $45,954
========= ======== =======
</TABLE>
Effective as of June 16, 1998, Freedom Services Corporation succeeded John
Hancock Signature Services, Inc. as transfer and shareholder services agent for
the Funds. As transfer agent, Freedom Services Corporation received the
following from the Funds for the period ended December 31, 1998:
<TABLE>
<CAPTION>
CASH GOVERNMENT TAX
MANAGEMENT SECURITIES EXEMPT MONEY
FUND FUND FUND
---------- ---------- ------------
<S> <C> <C>
$1,556,469 $124,188 $74,637
========== ======== =======
</TABLE>
ANNUAL REPORT
33
<PAGE> 30
FREEDOM MUTUAL FUND
FREEDOM GROUP OF TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. Purchases and sales (including maturities) of investments
(excluding repurchase agreements) for the year ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
TAX
CASH GOVERNMENT EXEMPT
MANAGEMENT SECURITIES MONEY
FUND FUND FUND
-------------- -------------- ------------
<S> <C> <C> <C>
Purchases
U.S. Government........................... -- $2,172,501,146 --
Other..................................... $9,553,404,240 -- $993,972,227
Sales
U.S. Government........................... -- 2,112,706,020 --
Other..................................... 9,084,997,952 -- 932,335,865
</TABLE>
NOTE 4. SHAREHOLDER MEETING RESULTS. -- UNAUDITED. A Special Meeting of
the shareholders of the Freedom Group of Money Funds was held on May 20, 1998.
On March 30, 1998, the record date for shareholders voting at the meeting, there
were 2,727,659,905.77 total outstanding shares. The following items were
considered and approved by shareholders and the results of their voting were as
follows:
<TABLE>
<CAPTION>
ABSTENTIONS
AND
BROKER
AGENDA ITEM FOR AGAINST NON-VOTES
- ------------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
1. Approve Master Investment Advisory
Contract between Freedom Group of
Money Funds and Freedom Capital
Management Corporation...............
Freedom Cash Management Fund......... 881,860,681.282 16,628,657.980 46,676,748.850
Freedom Government Securities Fund... 187,081,271.710 2,547,507.800 12,001,801.490
Freedom Tax Exempt Money Fund........ 152,662,425.050 5,509,389.510 10,842,432.230
2. Ratify PricewaterhouseCoopers LLP as
Independent Accountants..............
Freedom Cash Management Fund......... 908,734,662.402 8,337,851.090 28,093,614.620
Freedom Government Securities Fund... 192,871,058.460 2,003,042.550 6,756,479.990
Freedom Tax Exempt Money Fund........ 162,123,348.970 2,754,035.110 4,136,862.710
</TABLE>
ANNUAL REPORT
34
<PAGE> 31
NO SALES OR REDEMPTION CHARGES
DISTRIBUTORS
Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Telephone Toll Free
800-453-8206
Sutro & Co. Incorporated
201 California Street
San Francisco, California 94111
INVESTMENT ADVISER
Freedom Capital Management Corporation
One Beacon Street
Boston, Massachusetts 02108-3105
TRANSFER AND SHAREHOLDER
SERVICES AGENT
Freedom Services Corporation
cOne World Financial Center
200 Liberty Street
New York, New York 10281
Telephone Toll Free
800-453-8206
[FREEDOM GROUP OF MONEY FUNDS LOGO]
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the
offering made by this Prospectus and, if given or made, such information, or
representation must not be relied upon as having been authorized by the Fund or
its Distributor. This Prospectus does not constitute an offering by the Fund or
by the Distributor in any jurisdiction in which such offering may not lawfully
be made.
F01APD 0299
[FREEDOM GROUP OF MONEY FUNDS LOGO]
FREEDOM
CASH MANAGEMENT
FUND
*
FREEDOM
GOVERNMENT
SECURITIES FUND
*
FREEDON
TAX EXEMPT
MONEY FUND
---------------------------------
ANNUAL REPORT - December 31, 1998
---------------------------------
