<PAGE>
As filed with the Securities and Exchange Commission on November 17, 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:
[ ] Preliminary Proxy Statement
[x] 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):
[ ] $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:
- -------------------------------------------------------------------------------
[x] 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:
- -------------------------------------------------------------------------------
<PAGE>
[FENCER LOGO] THE CGM FUNDS CGM CAPITAL DEVELOPMENT FUND
CGM MUTUAL FUND
CGM FIXED INCOME FUND
CGM AMERICAN TAX FREE FUND
CGM REALTY FUND
Post Office Box 449
Boston, Massachusetts 02117
800-345-4048 * 617-859-7295 (fax)
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 Boards of Trustees of the Funds
unanimously recommend 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 and include 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,
/s/ Robert L. Kemp
Robert L. Kemp
President
<PAGE>
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 Funds'
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
- ------------------------------------------------------------------------------
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 accountants 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 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 Special 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 Special 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 partnership
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 of
The New England into Metropolitan Life (the "Transaction"). It is not known
when or whether the transaction will occur; it is currently expected to occur
no earlier than the first calendar quarter of 1996. 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 New England's 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 the 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 will become effective, if approved by shareholders, upon
the occurrence of the Transaction. Each of the Proposed Advisory Agreements is
identical to the corresponding Existing Advisory Agreements (with the
exception of the dates 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 A MAJORITY OF THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS WITHIN THE MEANING OF THE 1940 ACT
(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 dates of
effectiveness and termination).
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 Board of Trustees of CGM Capital Development Fund or CGM Trust,
as the case may be. 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 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
FUND (BASED ON EACH FUND'S AVERAGE DAILY NET ASSETS)
- ------------------------ -----------------------------------------------
CGM Capital Development 0.75% of the first $200,000,000;
Fund 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 0.60% of the first $500,000,000;
Fund 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 Fund(1) $ 0 $ 31,176,336
CGM American Tax Free Fund(2) $ 0 $ 11,361,518
CGM Realty Fund(3) $ 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 daily 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 CGM
Realty Fund, 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 daily
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 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 partnership interest to a limited
partnership 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 Board of Trustees of 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 Independent Trustees of the respective 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 will not change as a result of the
Transaction. 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 of such Fund 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 who are also employees of CGM. CGM has no officers or directors because
it is organized as a limited partnership.
POSITION WITH POSITION WITH
NAME CAPITAL DEVELOPMENT FUND CGM TRUST
- --------------------------- --------------------------- --------------------
Robert L. Kemp Trustee and President Trustee and
President
G. Kenneth Heebner Trustee and Vice President Trustee and Vice
President
Kathleen S. Haughton Vice President Vice President
Leslie A. Lake Vice President and Vice President and
Secretary Secretary
Martha I. Maguire Vice President Vice President
Janice H. Saul -- Vice President
Mary L. Stone Assistant Vice President Assistant Vice
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 received 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>
TNE Growth Fund $1,208,685,000 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.
New England Variable Annuity Fund $ 61,430,000 0.3066% 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 Special
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 EACH 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.
EXHIBIT A
FORM OF ADVISORY AGREEMENT
FOR CGM 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
Series;
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 Series;
(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 Fund 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 Fund 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 name "CGM Capital
Development 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 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;
(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 Fund.
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: --------------------------------------------------------
[Title], 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.
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] 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:(4)
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 0.60% of the first $500,000,000;
Fund 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; and
.075% of such assets in excess of
$500,000,000.]
- ---------------
(4) Each Series of the Trust will enter into a separate advisory agreement
with CGM in this form.
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: --------------------------------------------------------
[Title], 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.
<PAGE>
[FENCER LOGO] THE CGM FUNDS
Please mark, sign, date and return this proxy promptly -------------------
using the enclosed envelope. Date
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- -------Shareholder sign here-----------------------Co-owner sign here----------
1. To approve a new investment advisory agreement For Against Abstain
between the Fund and Capital Growth Management [ ] [ ] [ ]
Limited Partnership.
2. To ratify the selection of Price Waterhouse LLP For Against Abstain
as independent accountants for the Trust for [ ] [ ] [ ]
the fiscal year ending December 31, 1995.
3. To consider and act upon any matters incidental For Against Abstain
in the foregoing or any matters which may [ ] [ ] [ ]
properly come before the Special Meeting or any
adjournment thereof.
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.
Mark box at right if comments or address change have been
noted on the reverse side of this card. [ ]
PLEASE READ BOTH SIDES OF THIS CARD. IF YOU RECEIVE MORE
THAN ONE CARD PLEASE RETURN EACH CARD.
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PROXY PROXY
FORM OF
PROXY FOR BENEFICIAL INTEREST
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
The signer(s) of this proxy hereby appoint G. Kenneth Heebner and Robert L.
Kemp, and each of them, the attorneys and proxies of the signator with full
power of substitution, to vote as indicated in this proxy, all of the shares of
such Fund held in the signator's name 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 signator would possess if then and there personally
present and especially (but without limiting the general authorization and power
hereby given) to vote as indicated of the Proposals, as more fully described in
the Proxy Statement for the Special Meeting. The signer(s) hereby acknowledges
receipt of the Notice of the Special Meeting of Stockholders and the Proxy
Statement.
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PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
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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.)
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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IMPORTANT
PLEASE RETURN YOUR PROXY IMMEDIATELY.
IN ORDER TO ASSURE A QUORUM BEING REPRESENTED AT THE SPECIAL MEETING OF
SHAREHOLDERS, YOU ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY IMMEDIATELY.
YOUR VOTE IS IMPORTANT AND WE APPRECIATE YOUR COOPERATION.
PLEASE CALL US AT 1-800-598-0728 IF YOU HAVE ANY QUESTIONS.
CGM PROXY
