<PAGE>
As filed with the Securities and Exchange Commission on November 3, 1995
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. )
[x] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
CGM Mutual Fund Series
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(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):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[ ] 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:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
Preliminary
CGM CAPITAL DEVELOPMENT FUND
CGM MUTUAL FUND
CGM FIXED INCOME FUND
CGM AMERICAN TAX FREE FUND
CGM REALTY FUND
November 17, 1995
Dear Shareholder:
Enclosed is a Proxy Statement for CGM Capital Development Fund, CGM
Mutual Fund, CGM Fixed Income Fund, CGM American Tax Free Fund and CGM Realty
Fund (collectively, the Funds ), along with Proxy Cards for each Fund in which
you own shares. Please complete and return each Proxy Card as soon as possible.
The enclosed Proxy Statement describes two proposals that will be
presented to shareholders on December 29, 1995 at a Special Meeting. Proposal 1
requests approval of an investment advisory agreement between each Fund and
Capital Growth Management Limited Partnership ( CGM ), with no change from the
terms of the existing agreements or fee arrangements and no change in operations
or management of the Funds. Proposal 2 requests shareholder ratification of the
selection of Price Waterhouse LLP as the independent accountants for the Funds
for the year ending December 31, 1995. The Board of Trustees unanimously
recommends that you vote in favor of each proposal described in the proxy
statement.
As described in the Proxy Statement, Proposal 1 is submitted to
shareholders because a contemplated merger of New England Mutual Life Insurance
Company (which indirectly owns a limited partnership interest in CGM) with
Metropolitan Life Insurance Company is being treated as if it would result in a
termination of the existing advisory agreements between CGM and each Fund. Under
Proposal 1 the Funds would continue to operate, following the merger, under
arrangements identical to those that are in effect immediately prior to the
merger, including the same fee arrangements. The merger will not result in any
change in the management of CGM or in the personnel providing advisory services
to the Funds.
Even if you plan to attend the Special Meeting, please vote by
completing, signing and returning each Proxy Card as soon as possible. Your vote
is important. If you have any questions, please call us at 1-800-598-0728.
Sincerely,
Robert L. Kemp, President
223275.c3
<PAGE>
PRELIMINARY
CGM CAPITAL DEVELOPMENT FUND
CGM MUTUAL FUND
CGM FIXED INCOME FUND
CGM AMERICAN TAX FREE FUND
CGM REALTY FUND
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
December 29, 1995
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of CGM
Capital Development Fund and the CGM Mutual Fund, CGM Fixed Income Fund, CGM
American Tax Free Fund and CGM Realty Fund series of the CGM Trust will be held
at the offices of Goodwin, Procter & Hoar, Exchange Place, 53 State Street,
Boston, Massachusetts 02109 on December 29, 1995 at 2 p.m. (Eastern Standard
Time) for the following purposes:
1. To approve an Advisory Agreement between each of CGM Capital
Development Fund, CGM Mutual Fund, CGM Fixed Income Fund, CGM
American Tax Free Fund and CGM Realty Fund (each a Fund and
collectively the Funds ) and Capital Growth Management Limited
Partnership (with no change from the terms of the existing
agreements or fee arrangements and no change in operations or
management of the Funds);
2. To ratify the selection of Price Waterhouse LLP as the Fund's
independent accountants for the fiscal year ending December
31, 1995; and
3. To consider and act upon any other matter incidental to the
foregoing purposes and any other matters which may properly
come before the Special Meeting or any adjournment or
postponement thereof.
Shareholders of record at the close of business on October 31, 1995 are
entitled to receive Notice of and to vote at the Special Meeting.
By order of the President,
LESLIE A. LAKE, Secretary
November 17, 1995
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YOUR VOTE IS IMPORTANT
- --------------------------------------------------------------------------------
PLEASE FILL IN, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED
STAMPED ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING.
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
CGM MUTUAL FUND
CGM FIXED INCOME FUND
CGM AMERICAN TAX FREE FUND
CGM REALTY FUND
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Boards of Trustees (the Trustees ) of CGM Capital Development
Fund and CGM Trust for use at the Special Meeting of Shareholders (the Special
Meeting ) of the CGM Capital Development Fund and the CGM Mutual Fund, CGM Fixed
Income Fund, CGM American Tax Free Fund and CGM Realty Fund series of the CGM
Trust to be held at the offices of Goodwin, Procter & Hoar, Exchange Place, 53
State Street, Boston, Massachusetts 02109 on December 29, 1995 at 2 p.m.
(Eastern Standard Time). CGM Capital Development Fund, CGM Mutual Fund, CGM
Fixed Income Fund, CGM American Tax Free Fund and CGM Realty Fund are each
referred to in their proxy statement as a Fund and collectively as the Funds.
CGM Trust and CGM Capital Development Fund are also each referred to in this
Proxy Statement as a Trust collectively as the Trusts.
As more fully described in this Proxy Statement, the Special Meeting
has been called for the following purposes:
1. To approve a new Advisory Agreement between each Fund and Capital
Growth Management Limited Partnership ( CGM ) (with no change from the terms of
the existing agreements or fee arrangements and no change in operations or
management of the Funds);
2. To ratify the selection of Price Waterhouse LLP ( Price Waterhouse )
as the Funds' independent accounts for each Trust for the fiscal year ending
December 31, 1995; and
3. To consider and act upon any other matter incidental to the
foregoing purposes and any other matters which may properly come before the
Special Meeting or any adjournment or postponement thereof.
Each shareholder of record on October 31, 1995 is entitled to one vote
for each share of beneficial interest held as of that date. As of that date,
there were issued and outstanding 18,267,398 shares of CGM Capital Development
Fund, 38,595,112 shares of CGM Mutual Fund, 2,841,418 shares of CGM Fixed Income
Fund, 1,214,963 shares of CGM American Tax Free Fund and 4,041,269 shares of CGM
Realty Fund.
This Proxy Statement and the accompanying proxies are being mailed to
shareholders of each of the Funds on or about November 17, 1995. The financial
statements of each Fund for the fiscal year ended December 31, 1994 are included
in such Fund's annual report, which have previously been sent to shareholders.
In addition, each Fund has furnished its shareholders with unaudited financial
information as of the end of each fiscal quarter during 1995. CGM Trust and the
CGM Capital Development Fund will furnish upon request and without charge to any
shareholder a copy of each Fund's annual report and semi-annual report. Requests
should be addressed to The CGM Funds, P.O. Box 449, Boston, MA 02117-0449 or can
be made by calling CGM at 1-800-598-0728.
Shareholders of each Fund will vote separately with respect to Proposal
1 and approval of Proposal 1 with respect to each Fund will require an
affirmative vote of the lesser of (1) more than 50% of its outstanding shares or
(2) 67% or more of its shares represented at the Meeting at which more than 50%
of the outstanding shares are present in person or by proxy (a Majority Vote ).
Shareholders of each of the Funds of CGM Trust will vote together as a single
class, but separately from shareholders of CGM Capital Development Fund, on
Proposal 2 and approval of Proposal 2 will require a majority vote of the shares
of each Trust present and voting at the Meeting.
Forty percent of the shares entitled to vote at the Special Meeting
present in person or represented by proxy constitutes a quorum. For purposes of
determining the presence or absence of a quorum and for determining whether
sufficient votes have been received for approval of any matter to be acted upon
at the Special Meeting, abstentions and broker non-votes will be treated as
shares that are present at the meeting but which have not been voted. For this
reason, abstentions and broker non-votes will assist the Funds in obtaining a
quorum but will have the practical effect of a No vote for purposes of obtaining
the requisite vote for approval of Proposal 1 and Proposal 2.
In the event a quorum is not present in person or by proxy at the
Special Meeting, or in the event a quorum is present at the Special Meeting but
sufficient votes to approve a proposal are not received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such proposal for adjournment will require
the vote of a majority of those shares represented at the Special Meeting in
person or by proxy. A vote may be taken on one or more of the proposals in this
Proxy Statement prior to any such adjournment if a quorum is present and
sufficient votes have been received for approval.
At any time before it has been voted, the enclosed proxy may be revoked
by the signer by a written revocation received by the Secretary of the Fund(s)
in which the signer holds shares, by properly executing a later-dated proxy, or
by attending the Special Meeting, requesting return of any previously delivered
proxy and voting in person. Solicitation of proxies by personal interview, mail,
telephone and telegraph may be made by officers and Trustees of the Funds and
employees of CGM and third-party solicitation agents. All costs incurred in
connection with the Special Meeting, will be paid by CGM. CGM has engaged D.F.
King & Co., Inc. to assist in the solicitation of proxies. It is anticipated
that the cost of the services provided by D.F. King & Co., Inc.
in connection with the Special Meeting will be approximately $70,000.
PROPOSAL 1 - APPROVAL OF ADVISORY AGREEMENTS
CGM is the registered investment adviser that serves as investment
adviser to CGM Capital Development Fund, CGM Mutual Fund, CGM Fixed Income Fund,
CGM American Tax Free Fund and CGM Realty Fund, pursuant to advisory agreements
dated September 1, 1993, September 1, 1993, September 1, 1993, November 8, 1993
and April 28, 1994, respectively. The current advisory agreements for the Funds
are referred to in this Proxy Statement as the
Existing Advisory Agreements.
CGM is a Massachusetts limited partnership organized on December 7,
1989. CGM has one general partner Kenbob, Inc. ( Kenbob ) which currently holds
a 45.0% general partnership interest in CGM. New England Investment Companies,
L.P. ( NEIC ) is a limited partnership, the general partner of which is a wholly
owned subsidiary of New England Mutual Life Insurance Company ( The New England
). The New England holds a majority of the limited partner interests in NEIC.
NEIC currently holds a limited partnership interest in CGM of 53.8%. Two
additional employees of CGM, who are neither officers nor trustees of the Funds,
hold a limited partnership interest in CGM of 1.2% in the aggregate. Under the
terms of the limited partnership agreement, the limited partners have no power
with respect to the operations of CGM and no right to remove or replace the
general partner of CGM.
In August 1995, The New England and Metropolitan Life Insurance Company
( Metropolitan Life ) entered into an agreement providing for the merger The New
England into Metropolitan Life (the Transaction ). The Transaction will not
result in any change in the personnel, operations or financial conditions of CGM
or in any changes in the investment approaches or styles of CGM with respect to
the Funds. However, as a result of the Transaction, Metropolitan Life would
become the owner (directly or through a wholly owned subsidiary) of the limited
partnership interest in NEIC. Because NEIC currently owns more than 25% of the
limited partnership interests of CGM, an issue has arisen as to whether the
Transaction may be deemed to result in a technical change in control of CGM.
As required by Investment Company Act of 1940, as amended (the 1940
Act ), each of the Existing Advisory Agreements between the Funds and CGM
provides for its automatic termination upon its assignment. The 1940 Act defines
assignment to include any direct or indirect transfer of a controlling block of
the assignor's outstanding voting securities by a security holder of the
assignor. There is a presumption under the 1940 Act that ownership of 25% or
more of the voting securities of a company constitutes control. CGM, upon advice
of its counsel, believes that NEIC's interests in CGM are not voting securities
and, therefore, that the Transaction does not result in a change in control of
CGM; however, the issue is not free from doubt and, for this reason, the
Transaction is being treated as if it were resulting in a change in control of
CGM. Accordingly, Proposal 1 asks shareholders to approve a new advisory
agreement with respect to each Fund (such new advisory agreements being referred
to in this Proxy Statement as the Proposed Advisory Agreements and, together
with each Existing Advisory Agreements, the Advisory Agreements ). Each of the
Proposed Advisory Agreements is identical to the corresponding Existing Advisory
Agreements (with the exception of the date of effectiveness and termination) and
the Proposed Advisory Agreements do not effect any change in personnel or
operations from the Existing Advisory Agreements. A form of Proposed Advisory
Agreement applicable to CGM Capital Development Fund is attached hereto as
Exhibit A and a form of Proposed Advisory Agreement applicable to each other
Fund is attached hereto as Exhibit B.
THE EFFECT OF PROPOSAL 1 IS THAT THE FUNDS WOULD CONTINUE TO OPERATE,
FOLLOWING THE TRANSACTION, UNDER ARRANGEMENTS IDENTICAL TO THOSE THAT ARE IN
EFFECT IMMEDIATELY PRIOR TO THE TRANSACTION. PROPOSAL 1 WILL NOT RESULT IN ANY
CHANGE IN CGM OR IN THE PERSONNEL PROVIDING ADVISORY SERVICES TO THE FUNDS OR IN
THE FEES PAYABLE BY THE FUNDS.
THE BOARDS OF TRUSTEES OF EACH OF THE FUNDS, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMEND THAT SHAREHOLDERS OF THE FUNDS VOTE FOR THE APPROVAL OF THE
ADVISORY AGREEMENTS BETWEEN EACH FUND AND CGM.
DESCRIPTION OF THE ADVISORY AGREEMENTS.
The following discussion of the Advisory Agreements is qualified in its
entirety by reference to the text of the Proposed Advisory Agreement as set
forth in Exhibits A and B. The Proposed Advisory Agreements are identical to the
Existing Advisory Agreements in all respects (except the date of effectiveness).
The Advisory Agreements provide that CGM shall manage the investment
and reinvestment of the assets of each Fund, subject to the supervision and
control of the Boards of Trustees of CGM Capital Development Fund and CGM Trust.
The Advisory Agreements also provide that CGM shall furnish to the Funds or pay
the expenses of the Funds for the following with respect to each Fund:
(a) office space, facilities and equipment;
(b) necessary executive and other personnel for managing the
affairs of the Fund (exclusive of (i) expenses for personnel performing
bookkeeping, accounting, internal auditing and financial reporting
functions and related clerical functions relating to the Fund, (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and
notices, proxy solicitation material furnished to shareholders of the
fund or regulatory authorities and reports and questionnaires for
Securities and Exchange Commission compliance and (iii) services
related to and to be performed under contract for custodial, transfer,
dividend and other services by the bank selected to perform under
contract for custodial, transfer, dividend and other services by the
bank selected to perform such services); and
(c) compensation of Trustees of each of CGM Capital Development
Fund and CGM Trust who are partners, directors, officers or employees
of CGM or its affiliates (other than registered investment companies).
Under the Advisory Agreements, each Fund is obligated to pay all its
expenses other than those paid by CGM as set forth above, including taxes and
charges for auditing and legal services, fees of the custodian and transfer
agent, expenses of shareholder and Trustees meetings, registration, filing and
other fees in connection with requirements of regulatory authorities, and the
printing and mailing of reports to shareholders.
The following is a summary of the annual rate of compensation payable
to CGM by each Fund, respectively.
CONTRACTUAL ANNUAL RATES
OF COMPENSATION TO CGM
(BASED ON EACH FUND'S AVERAGE
FUND DAILY NET ASSETS)
---- -------------------------------
CGM Capital Development Fund 0.75% of the first $200,000,000;
0.70% of the next $300,000,000; and
0.65% of such assets in excess of
$500,000,000.
CGM Mutual Fund 0.75% of the first $200,000,000;
0.70% of the next $300,000,000; and
0.65% of such assets in excess of
$500,000,000.
CGM Fixed Income Fund 0.55% of the first $200,000,000;
0.45% of the next $300,000,000; and
0.35% of such assets in excess of
$500,000,000.
CGM American Tax Free Fund 0.60% of the first $500,000,000;
0.55% of the next $500,000,000; and
0.45% of such assets in excess of
$1,000,000,000.
CGM Realty Fund .085% of the first $500,000,000;
.075% of such assets in excess of
$500,000,000.
The following table is a summary of the advisory fees paid to CGM by
each of the Funds for the fiscal year ended December 31, 1994 and the Net Assets
of the Funds at September 30, 1995:
1994 NET ASSETS AS OF
FUND ADVISORY FEES SEPTEMBER 30, 1995
- ---- ------------- ------------------
CGM Capital Development Fund $3,539,323 $502,217,744
CGM Mutual Fund $7,523,197 $1,172,896,966
CGM Fixed Income Fund1 $ 0 $31,176,336
CGM American Tax Free Fund2 $ 0 $11,361,518
CGM Realty Fund3 $ 0 $42,595,394
- ------------------------------
1. With respect to CGM Fixed Income Fund, CGM has voluntarily agreed, until
December 31, 1995 and thereafter until further notice to CGM Fixed Income
Fund, to limit its management fees, and, if necessary, to bear certain
expenses associated with the operation of CGM Fixed Income Fund in order to
limit the Fund's total operating expenses to an annual rate of 0.85% of the
Fund's average net assets.
2. CGM has voluntarily agreed, until December 31, 1995 and thereafter until
further notice to CGM American Tax Free Fund to waive its management fees
and bear all of the expenses thereof.
3. CGM voluntarily agreed to waive its advisory fee for services to the CGM
Realty Fund from May 13, 1994 through December 31, 1994. CGM has
voluntarily agreed until December 31, 1995 and thereafter until further
notice, to limit its management fees and, if necessary, to bear certain
expenses associated with operating the Fund, in order to limit the Fund's
total operating expenses to an annual rate of 1% of the Fund's average net
assets.
Each of the Advisory Agreements provides that it will continue in
effect for an initial term of two years from the date of its execution, and
thereafter from year to year so long as its continuance is approved at least
annually (i) by the Trustees of the Fund or by a Majority Vote of shareholders
of the Fund, and (ii) by vote of a majority of the Independent Trustees of the
Fund, cast in person at a meeting called for that purpose. Any amendment to the
Advisory Agreements must be approved by a Majority Vote of shareholders of the
Fund and by vote of a majority of the Independent Trustees of the Trusts. Each
Advisory Agreement may be terminated without penalty by vote of the Board of
Trustees of the respective Trust or by a Majority Vote of shareholders of the
Fund on sixty days' written notice to CGM or by CGM on ninety days' written
notice to the Fund, and will terminate automatically if assigned. The Advisory
Agreements provide that CGM shall not be subject to any liability in connection
with the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The Advisory Agreements provide that, upon termination by either party
or upon violation of any provision by the respective Trust, such Trust will, at
the request of CGM made within sixty days after CGM has knowledge of such
termination or violation, change its name so as to eliminate all reference to
Capital Growth Management or CGM.
A majority of the Trustees of each of CGM Capital Development Fund and
CGM Trust, including a majority of the Trustees who are not interested persons
within the meaning of the 1940 Act (the Independent Trustees ), most recently
approved the Existing Advisory Agreements between CGM Capital Development Fund,
CGM Mutual Fund, CGM Fixed Income Fund and CGM American Tax Free Fund,
respectively, and CGM on April 27, 1995 and the Existing Agreement between CGM
Realty Fund and CGM on April 28, 1994. The Existing Advisory Agreements with
respect to CGM Capital Development Fund, CGM Mutual Fund and CGM Fixed Income
Fund were approved by shareholders of those Funds on August 19, 1993 in
connection with a change in control resulting from the contribution by the New
England to NEIC (which was then known as Reich & Tang, L.P.) of certain assets
of one of its subsidiaries (including an interest in CGM) and the simultaneous
conversion of NEIC's interest in CGM from a general partner interest to a
limited partner interest. The Existing Advisory Agreement with respect to CGM
American Tax Free Fund was approved by shareholders of that Fund on November 10,
1993 prior to the commencement of operations and the Existing Advisory Agreement
with respect to CGM Realty Fund was approved by shareholders of that Fund on May
12, 1994 prior to the commencement of operations. The Proposed Advisory
Agreements will be executed and become effective on the later of the date the
Transaction is consummated or the approval of the Proposed Advisory Agreements
by shareholders.
REVIEW PROCESS OF THE TRUSTEES
At the meeting of the Boards of Trustees of the each of the Trusts held
on October 26, 1995, the respective Trustees approved the Proposed Advisory
Agreement for each Fund and recommended that the Proposed Advisory Agreements be
submitted to shareholders for approval. In connection with such approvals, the
Independent Trustees of the respective Trusts, acting as a committee of the
respective Boards of Trustees (the Committees ), received information from CGM
for the use of each such Committee in reviewing the Proposed Advisory
Agreements. During the review process the Committee consulted with each Trust's
legal counsel, Goodwin, Procter & Hoar, which also serves as counsel to the
respective Independent Trustees of the Trusts.
The Committees examined the nature, quality and scope of the services
provided to each Fund by CGM and noted that they are not expected to change as a
result of the Transaction. The Committees considered CGM's qualifications to act
as investment adviser to the Funds in terms of the ability of its personnel, the
quality and extent of the investment advisory and other services rendered to
each Fund by CGM, and CGM's commitment to its mutual fund advisory activities.
Among other things, the Committees reviewed information relating to the
performance of each Fund relative to the performance of other funds with
comparable objectives and polices. The Committees considered the fact that the
Funds' advisory fee rates do not change. The Committees considered the
profitability to CGM of its relationship with the Funds (which is not expected
to change as a result of the Transaction). In this regard, the Committees
considered the advisory fees paid by each Fund as well as other benefits which
CGM derives from its relationship with each Fund. The Committees considered the
impact of the Transaction on the ability of CGM to manage the Funds and noted
that all of the investment management personnel of CGM who currently have
responsibility for the management of each Fund will retain such responsibility
following the Transaction. The Committees noted that there is no change in the
advisory personnel, policies, fees, operations or portfolio management expected
as a result of or in connection with the Transaction. The Committees determined
that the Transaction would not have any effect on the ability of CGM to perform
its obligations under the Proposed Advisory Agreements.
CONCLUSIONS, ACTION OF THE BOARDS OF TRUSTEES AND RECOMMENDED SHAREHOLDER ACTION
The Committees and the Boards of Trustees have concluded that it is
appropriate to continue to engage CGM as investment adviser to each Fund
following the Transaction and that the proposed fee rate and the other
provisions of each Proposed Advisory Agreement are fair and reasonable. The
Trustees of each of the Funds, including the respective Independent Trustees
thereof, have voted to approve the Proposed Advisory Agreement with respect to
each Fund. The Boards of Trustees recommend that shareholders vote FOR approval
of the Proposed Advisory Agreement. If the shareholders of any Fund do not
approve the Proposed Advisory Agreement, the Trustees will consider any
alternative actions that they may regard as appropriate and in the best
interests of that Fund.
OWNERSHIP AND MANAGEMENT OF CGM AND RELATED MATTERS
CGM currently has one general partner Kenbob, Inc. ( Kenbob ). Kenbob
is a corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner.
Messrs. Kemp and Heebner are employees of CGM, and are officers and Trustees of
both CGM Capital Development Fund and CGM Trust. Messrs. Kemp and Heebner are
the directors of Kenbob and also serve as President and Chairman, respectively,
of Kenbob. The address of CGM and of Kenbob is One International Place, Boston,
Massachusetts 02110.
Kenbob purchased an initial 23.874% interest in CGM's profits and
losses (subject to certain further payments (the Special Allocation ) from
Loomis Sayles & Company Incorporated ( Loomis Sayles ) in 1990 for a cash
payment of $4,340,727 and an additional amount of $589,506 payable in four
installments through March 31, 1994. The capital growth management division of
Loomis Sayles, an indirect subsidiary of The New England, had served as
investment adviser to CGM Capital Development Fund and CGM Mutual Fund prior to
March 10, 1990, when such division was reorganized to create CGM. CGM is
governed by an agreement of limited partnership (the Partnership Agreement )
which sets forth the rights and responsibility of the partners as well as
certain operational issue. The Partnership Agreement also obligates Kenbob to
purchase each year from NEIC a portion of NEIC's interest in CGM's profits and
losses (excluding the amount of the Special Allocation), until such time as the
combined interest of NEIC has been reduced to 50% of CGM's profits and losses
(the Minimum Ownership Percentage ). The price of this interest is 9% of CGM's
annual earnings (after certain adjustments) for each 1% interest in CGM's
profits and losses. Pursuant to these provisions, on April 28, 1994, Kenbob paid
NEIC $4,745,613 for an additional 4.129% interest in CGM's profits and losses
and on April 30, 1995 Kenbob paid NEIC $4,711,821 for an additional 3.76%
interest in CGM's profits and losses. Currently, Kenbob holds a 45.0% interest
in CGM's profits and losses while NEIC holds a 53.8% interest in such profits
and losses.
The general partner of NEIC is New England Investment Companies, Inc.
( NEIC-GP ), a wholly owned subsidiary of The New England. The address of each
of NEIC and NEIC-GP is 399 Boylston Street, Boston, Massachusetts 02116 and the
address of The New England is 501 Boylston Street, Boston, Massachusetts 02116.
Following the Transaction, NEIC-GP will be a wholly owned subsidiary of
Metropolitan Life. Metropolitan Life was incorporated under the laws of New York
in 1866 and since 1868 has been engaged in the life insurance business under its
present name. By early 1900s, it had become the largest life insurance company
in the United States and is currently the second largest life insurance company
in the United States in terms of total assets. Metropolitan Life's assets as of
June 30, 1995 were over $130 billion, and its adjusted capital as of that date
exceeded $8 billion. Subsidiaries of Metropolitan Life manage over $25 billion
of assets for mutual funds, institutional and other investment advisory clients.
The address of Metropolitan Life is One Madison Avenue, New York, New York
10010.
The following table lists persons who are officers or Trustees of the
Trusts and are also employees of CGM. CGM has no officers or directors because
it is organized as a limited partnership.
Position with
Capital Position with
Name Development Fund CGM Trust
---- ---------------- -------------
Robert L. Kemp Trustee and Trustee and
President President
G. Kenneth Heebner Trustee and Vice Trustee and Vice
President President
Kathleen S. Haughton Vice President Vice President
Leslie A. Lake Vice President Vice President
and Secretary and Secretary
Martha I. Maguire Vice President Vice President
Janice H. Saul --- Vice President
Mary L. Stone Assistant Vice Assistant Vice
President President
Frank N. Strauss Treasurer Treasurer
W. Dugal Thomas Vice President Vice President
OTHER INVESTMENT COMPANY PORTFOLIOS ADVISED BY CGM
In addition to serving as investment adviser to the Funds, CGM serves
as investment adviser to the following investment company portfolios for which
CGM reviewed the following fees for the year ended December 31, 1994:
<TABLE>
<CAPTION>
CONTRACTUAL ANNUAL
RATES OF COMPENSATION
TOTAL NET TO CGM ( BASED ON
ASSETS AS OF EACH FUND'S AVERAGE
INVESTMENT COMPANY PORTFOLIO SEPTEMBER 30, 1995 DAILY NET ASSETS)
- ---------------------------- ------------------ -----------------
<S> <C> <C> <C>
TNE Growth Fund................................ $1,208,685,000 0.75% of the first $200,000,000
0.70% of the next $300,000,00; and
0.65% of such assets in excess of
$500,000,000
New England Variable Annuity Fund.............. $ 61,430,000 .3066% of such assets
New England Zenith Fund (Capital Growth Series) $903,503,000 0.70% of the first $200,000,000;
0.65% of the next $300,000,000; and
0.60% of such assets in excess of $500,000,000.
</TABLE>
CGM also provides investment advisory services to other institutional
clients as well as certain private investment accounts.
Various officers and Trustees of the Trusts may also serve as officers,
directors or trustees of other investment companies or other corporate or
fiduciary clients which CGM advises. The other investment companies and clients
served by CGM may sometimes invest in securities in which the Funds also invest.
If a Fund and such other investment companies or clients of CGM (which may
include accounts of The New England and its affiliates), desire to buy or sell
the same portfolio securities at about the same time, purchases and sales will
be allocated to the extent practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold for each. It is recognized that in some
cases the practices described in this paragraph could have a detrimental effect
on the price or amount of the securities which a Fund purchases or sells. In
other cases, however, it is believed that these practices may benefit the Funds.
It is the opinion of the Trustees that the desirability of continuing to engage
CGM as adviser for the Funds following the Transaction outweighs the
disadvantages, if any, which might result from these practices.
2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Boards of Trustees of CGM Capital Development Fund and CGM Trust,
including a majority of the Independent Trustees of each Trust, has selected
Price Waterhouse as the independent accountants for CGM Capital Development
Fund, CGM Mutual Fund, CGM Fixed Income Fund, CGM American Tax Free Fund and CGM
Realty Fund for the fiscal year ending December 31, 1995. At the Special
Meeting, shareholders of the Funds are being asked to ratify the selection of
Price Waterhouse to perform audit services for each of the Funds. A
representative of Price Waterhouse is not expected to attend the Special Meeting
but will be available to participate by telephone during the Meeting.
Price Waterhouse has been the independent accountants for each of the
Funds for the fiscal year ended December 31, 1994. Price Waterhouse has no
relationship to any of the Funds, material or otherwise, other than serving as
its independent accountants. The services provided by Price Waterhouse consist
of examination of each Fund's annual financial statements and limited review of
each Fund's unaudited semi-annual and quarterly financial statements, assistance
in the preparation of each Fund's federal and state income tax returns and
consultation with the Funds as to matters of accounting and federal and state
income taxation, and assistance and consultation in connection with Securities
and Exchange Commission filings.
THE BOARDS OF TRUSTEES OF ALL OF THE FUNDS, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMEND THAT SHAREHOLDERS OF THE FUNDS VOTE FOR RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS OF THE FUNDS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1995.
3. OTHER BUSINESS
In the event that sufficient votes in favor of the foregoing proposals
are not received by December 29, 1995, the persons named as proxies may vote on
those matters as to which sufficient votes have been received and may propose
one or more adjournments or postponements of the Special Meeting to a later date
to permit further solicitation of proxies for any or all of such items as to
which sufficient votes have not been received. Any such adjournment will require
the affirmative vote of a majority of the shares present in person or by proxy
and voting at the session of the meeting to be adjourned. The persons named as
proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the underlying proposal. They will vote against any
such adjournment those proxies required to be voted against the underlying
proposal and will not vote any proxies that direct them to abstain from voting
on such underlying proposal.
Although the Special Meeting is called to transact any other business
that may properly come before it, the only business that management intends to
present or knows that others will present is the business mentioned in the
Notice of Special Meeting of Shareholders. However, if any additional matters
properly come before the Special Meeting, and on all matters incidental to the
conduct of the Special Meeting, it is the intention of the persons named in the
enclosed proxy to vote the proxy in accordance with their judgment on such
matters, unless previously instructed to the contrary by means of written
instructions from a shareholder received by the Secretary of the respective
Trust.
Shareholder proposals to be presented at any future meeting of
shareholders of the Funds must be received by each Fund a reasonable time before
the Fund's solicitation of proxies in order for such proposals to be considered
for inclusion in the proxy materials relating to that meeting.
218533.c5
<PAGE>
EXHIBIT A
FORM OF
ADVISORY AGREEMENT FOR CAPITAL DEVELOPMENT FUND
AGREEMENT made this ___ day of _____________, 199_ by and between CGM
CAPITAL DEVELOPMENT FUND, a Massachusetts business trust (the Fund ), and
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP, a Massachusetts partnership (the
Adviser ).
WITNESSETH:
WHEREAS, the Fund and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Fund;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Original Series of the Fund (the Series ) and
to perform the other services herein set forth, subject to the supervision of
the Board of Trustees of the Fund. The Adviser hereby accepts such employment
and agrees, at its own expense, to render the services and to assume the
obligations herein set forth, for the compensation herein provided. The Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Fund at the Adviser's own
expense or pay the expenses of the Fund for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Fund who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Fund and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Fund who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Fund for custodial services;
(e) charges and expenses of independent accountants retained
by the Fund;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Fund;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Fund in connection with securities transactions to
which the Fund is a party;
(h) taxes and fees payable by the Fund to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the Fund;
(j) expenses of meetings of shareholders and Trustees of the
Fund;
(k) charges and expenses of legal counsel retained by the
Fund;
(l) interest, including interest on borrowings by the Fund;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Fund's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Fund, and notices and proxy solicitation
material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund
or to the shareholders thereof; and
(n) the Fund's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Fund hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
--------------- ----------------------
0.75% the first $200 million
0.70% the next $300 million
0.65% in excess of $500 million
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Fund may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Fund's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Fund as a whole (including investment advisory fees but excluding taxes
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund and the
Partnership Agreement of the Adviser, respectively, or by specific provisions of
applicable law.
10. The Adviser consents to the use by the Fund of the names CGM
Capital Development Fund and CGM Mutual Fund, or other names embodying the words
Capital Growth Management or CGM in such forms as the Adviser shall in writing
approve, but only on condition that so long as this Agreement shall remain in
force the Fund shall fully perform, fulfill and comply with all provisions of
this Agreement expressed herein to be performed, fulfilled or complied with by
it. No such name shall be used by the Fund at any time or in any place for any
purposes or under any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Fund, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
Capital Growth Management or CGM and will not thereafter transact any business
in a name containing Capital Growth Management or CGM in any form or combination
whatsoever, or designate itself as the same business trust as or successor to a
business trust of such name, or otherwise use the name Capital Growth Management
or CGM or any other reference to the Adviser. Such covenants on the part of the
Fund shall be binding upon it, its Trustees, officers, shareholders, creditors
and all other persons claiming under or through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Fund or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this, Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Fund who are not
interested persons of the Fund or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms vote of a majority of
the outstanding voting securities, interested person, affiliated person and
assignment shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities belonging to the Series shall
have the meaning defined in the Fund's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Fund, to any shareholder of the Fund or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM CAPITAL DEVELOPMENT FUND
By:----------------------------
Title:
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
By:----------------------------
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM
Capital Development Fund is on file with the Secretary of State of the
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Series on behalf of the Fund by officers of the
Fund as officers and not individually and that the obligations of or arising out
of this Agreement are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property
belonging to the Series.
218533.c5
<PAGE>
EXHIBIT B
FORM OF
ADVISORY AGREEMENT FOR CGM TRUST
AGREEMENT made this __ day of ____________, 199_ by and between CGM
TRUST, a Massachusetts business trust (the Trust), with respect to its [name of
series] (the Series), and CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP, a
Massachusetts partnership (the Adviser ).
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series, investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the bank selected to perform such services and
exclusive of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (m) of this section 5, except as otherwise
provided in any agreement between the Trust and its principal
underwriter in effect from time to time relating to distribution of
shares of the Series;
(b) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the
Trust for custodial services;
(e) charges and expenses of independent accountants retained
by the Trust;
(f) charges and expenses of any transfer agents, paying
agents, plan agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to
which the Trust is a party;
(h) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(i) the cost of certificates representing shares of the
Series;
(j) expenses of meetings of shareholders and Trustees of the
Trust;
(k) charges and expenses of legal counsel retained by the
Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's registration
statements and prospectuses with respect to shares of the Series,
including amendments and revisions thereto, annual, semiannual and
other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders of the Trust or regulatory
authorities, to the extent that any such materials relate to the Series
or to the shareholders thereof; and
(n) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses with
respect to the Series.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
[CGM Mutual Fund 0.75% of the first $200,000,000;
0.70% of the next $300,000,000; and
0.65% of such assets in excess of
$500,000,000.]
[CGM Fixed Income Fund 0.55% of the first $200,000,000;
0.45% of the next $300,000,000; and
0.35% of such assets in excess of
$500,000,000.]
[CGM American Tax Free Fund 0.60% of the first $500,000,000;
0.55% of the next $500,000,000; and
0.45% of such assets in excess of
$1,000,000,000.]
[CGM Realty Fund .085% of the first $500,000,000;
.075% of such assets in excess of
$500,000,000.]
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Trust may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Trust's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Trust shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. The Adviser consents to the use by the Trust of the names CGM Trust
and [name of Series], or other names embodying the words Capital Growth
Management or CGM in such forms as the Adviser shall in writing approve, but
only on condition that so long as this Agreement shall remain in force the Trust
shall fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such name
shall be used by the Trust at any time or in any place for any purposes or under
any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
Capital Growth Management or CGM and will not thereafter transact any business
in a name containing Capital Growth Management or CGM in any form or combination
whatsoever, or designate itself as the same business trust as or successor to a
business trust of such name, or otherwise use the name Capital Growth Management
or CGM or any other reference to the Adviser. Such covenants on the part of the
Trust shall be binding upon it, its Trustees, officers, shareholders, creditors
and all other persons claiming under or through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date
of its execution this Agreement shall continue in effect only so long
as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this, Agreement may at any time be terminated on sixty
days written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days written notice to the Trust.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms vote of a majority of
the outstanding voting securities, interested person, affiliated person and
assignment shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities belonging to the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM TRUST on behalf of its
[name of Series]
By:----------------------------
Title:
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
By:----------------------------
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Series on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
218533.c5
<PAGE>
APPENDIX
[FORM OF PROXY CARD]
PROXY FOR BENEFICIAL INTEREST
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
The undersigned shareholder of [Name of Fund], hereby appoints G. Kenneth
Heebner and Robert L. Kemp, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote for and on behalf of the
undersigned, as indicated herein, all of the shares of such Fund standing in the
name of the undersigned at the close of business on October 31, 1995 at a
Special Meeting of Shareholders to be held at the offices of Goodwin, Procter &
Hoar, Exchange Place, 53 State Street, Boston, Massachusetts 02109 on December
29, 1995 at 2 p.m. (EST), and at any and all adjournments thereof, with all of
the powers the undersigned would possess if then and there personally present
and especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the Proposals, as more fully described in the
Proxy Statement for the Special Meeting. The undersigned hereby acknowledges
receipt of the Notice of the Special Meeting of Stockholders and the Proxy
Statement.
FOR AGAINST ABSTAIN 1. To approve a new investment advisory agreement
[ ] [ ] [ ] between [Name of Fund] and CGM Growth
Management Limited Partnership.
FOR AGAINST ABSTAIN 2. To ratify the selection of Price Waterhouse LLP
[ ] [ ] [ ] as independent accountants for the [Fund/Trust]
for the fiscal year ending December 31, 1995.
3. To consider and act upon any matters incidental
in the foregoing or any matters which may
properly come before the Special Meeting or any
adjournment or postponements thereof.
(Continued on Other Side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTION IS INDICATED WITH RESPECT TO
PROPOSALS 1 AND 2, THE UNDERSIGNED'S VOTES WILL BE CAST IN FAVOR OF SUCH
MATTERS. PLEASE DATE AND SIGN AND PROMPTLY RETURN IN THE ENCLOSED ENVELOPE.
- ------------------------------ -------------------------- -------------
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
Signature(s) should be exactly as names(s) appear(s) on this proxy. If shares
are held jointly, each holder should sign. If signature is by attorney,
executor, administrator, trustee or guardian, please give full title.
225003.c1
