PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Freedom Group of Tax Exempt Funds
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $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:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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FREEDOM GROUP OF MONEY FUNDS
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
October 30, 1996
Dear Shareholder:
I urge you to vote on the important proposals described in the enclosed
proxy material.
If the shareholders of Freedom Cash Management Fund, Freedom Government
Securities Fund, Freedom Tax Exempt Money Fund and Freedom California Tax Exempt
Money Fund (the "Funds") approve these proposals, Freedom Capital Management
Corporation (the "Adviser") will become independent of John Hancock Mutual Life
Insurance Company ("John Hancock") and will be owned by an investor group
including the present management of the Adviser.
The independent non-management trustees of Freedom Mutual Fund and Freedom
Group of Tax Exempt Funds (the "Trusts"), of which the Funds are series, have
unanimously approved the proposals described in the enclosed proxy material and
recommend that the shareholders approve them as well.
TO VOTE ON THESE PROPOSALS, WE ASK THAT YOU SIGN THE ENCLOSED PROXY CARD AND
RETURN IT TO US AS SOON AS POSSIBLE IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
IT IS VERY IMPORTANT THAT WE RECEIVE YOUR CARD SOON, SO THAT THE NECESSARY
QUORUM OF SHAREHOLDERS IS REPRESENTED AT THE DECEMBER 16, 1996 MEETING.
This is your opportunity to voice your opinion on matters that affect your
Fund(s). Your prompt vote will also help to save time and money. If we do not
receive enough votes, we must increase participation with additional mailings.
That's a costly and time consuming process.
John Hancock, through its subsidiary John Hancock Subsidiaries, Inc.
("Hancock Subsidiaries"), owns John Hancock Freedom Securities Corporation
("Freedom Securities") which is the parent company of the Adviser. Hancock
Subsidiaries has decided to transfer substantially all of the stock of Freedom
Securities that it holds to an investor group that includes the management of
Freedom Securities and its subsidiaries, including the Adviser. The investor
group also includes several non-employee outside investors. The investor group
has arranged bank financing to consummate the contemplated transactions. None of
the assets of the Funds will be used to finance the transaction, nor will the
transaction affect the investment objectives or policies of any of the Funds or
the fees paid by any of the Funds.
We support the proposed change in ownership of the Adviser because
management ownership will give us greater flexibility to attract and motivate
professionals to do the best possible job for the Funds and their shareholders.
If you have any questions before you vote, please contact your Tucker
Anthony or Sutro investment executive or call us at 1-800-257-3336. We
will be glad to help you get your vote in quickly.
IT IS IMPORTANT THAT YOU ACT PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD SO THAT WE WILL HAVE THE NECESSARY QUORUM OF SHAREHOLDERS REPRESENTED
FOR EACH FUND AT THE MEETING ON DECEMBER 16, 1996. Of course, we would be
delighted if you could attend the meeting in person and discuss these proposals,
or any other relevant matters, with us personally.
We appreciate your continued support and look forward to receiving your
votes of approval.
Sincerely,
/s/ Dexter A. Dodge
-------------------
DEXTER A. DODGE
Chairman of the Board
FREEDOM CASH MANAGEMENT FUND
FREEDOM GOVERNMENT SECURITIES FUND
EACH A SERIES OF
FREEDOM MUTUAL FUND
FREEDOM TAX EXEMPT MONEY FUND
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
EACH A SERIES OF
FREEDOM GROUP OF TAX EXEMPT FUNDS
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
(800) 257-3336
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NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD DECEMBER 16, 1996
NOTICE IS HEREBY GIVEN that Special Meetings of Shareholders (the
"Meetings") of Freedom Cash Management Fund ("Cash Management Fund") and Freedom
Government Securities Fund ("Government Securities Fund"), each a series of
Freedom Mutual Fund ("Mutual Fund"), and Freedom Tax Exempt Money Fund ("Tax
Exempt Fund") and Freedom California Tax Exempt Money Fund ("California Fund"),
each a series of Freedom Group of Tax Exempt Funds ("Tax Exempt Trust"), will be
held at the principal offices of the Trusts, sixth floor, One Beacon Street,
Boston, Massachusetts 02108 on Monday, December 16, 1996 at 2:00 p.m., Boston
time, and at any adjournment or postponement thereof, for the purposes listed
below. The Mutual Fund and the Tax Exempt Trust, each a Massachusetts business
trust, are collectively referred to within this document as the "Trusts" and
individually as a "Trust." The portfolio series of funds within the Trusts are
collectively referred to as the "Funds" and individually as a "Fund." The
matters to be voted on by the shareholders of the respective Funds are as
follows:
1. All Funds -- To consider and vote on approval of a new Advisory Agreement
between each of the Trusts, on behalf of each Fund, and Freedom Capital
Management Corporation (Proposal One).
2. All Funds -- To elect eight Trustees of each Trust (Proposal Two).
3. All Funds -- To ratify the selection of Price Waterhouse LLP as the
independent accountants of each Trust (Proposal Three).
4. Cash Management Fund Only -- To amend the Fund's fundamental investment
restriction concerning investments in illiquid securities (Proposal
Four).
5. To consider and vote upon such other matters as may properly come before
the Meetings or any adjournment or postponement thereof.
These items are discussed in greater detail in the accompanying Proxy
Statement.
The Boards of Trustees have fixed the close of business on October 18, 1996,
as the record date for determination of shareholders who are entitled to notice
of and to vote at the Meetings and any adjournment or postponement thereof.
By order of the Trustees,
JOHN J. DANELLO
Secretary
Boston, Massachusetts
October 30, 1996
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. WHETHER OR NOT YOU
EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY
CARD(S) AND RETURN IT (THEM) PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO
POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES. IF YOU DESIRE TO VOTE IN
PERSON AT THE MEETING, YOUR PROXY MAY BE REVOKED. THIS PROXY IS BEING SOLICITED
BY THE TRUSTEES OF EACH TRUST.
FREEDOM CASH MANAGEMENT FUND
FREEDOM GOVERNMENT SECURITIES FUND
EACH A SERIES OF
FREEDOM MUTUAL FUND
FREEDOM TAX EXEMPT MONEY FUND
FREEDOM CALIFORNIA TAX EXEMPT MONEY FUND
EACH A SERIES OF
FREEDOM GROUP OF TAX EXEMPT FUNDS
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
(800) 257-3336
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PROXY STATEMENT
FOR SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD DECEMBER 16, 1996
SPECIAL MEETING
This Proxy Statement is being furnished to the shareholders of Freedom Cash
Management Fund ("Cash Management Fund") and Freedom Government Securities Fund
("Government Securities Fund"), each a series of Freedom Mutual Fund ("Mutual
Fund"), and Freedom Tax Exempt Money Fund ("Tax Exempt Fund"), and Freedom
California Tax Exempt Money Fund ("California Fund"), each a series of Freedom
Group of Tax Exempt Funds ("Tax Exempt Trust"). The Mutual Fund and the Tax
Exempt Trust, each a Massachusetts business trust, are collectively referred to
in this Proxy Statement as the "Trusts" and individually as a "Trust." The
portfolio series of funds within the Trusts are collectively referred to herein
as the "Funds" and individually as a "Fund." This Proxy Statement is furnished
in connection with the solicitation of proxies by and on behalf of each Trust's
Trustees for use at the Special Meetings of Shareholders (the "Meetings") to be
held at the principal offices of the Trusts, sixth floor, One Beacon Street,
Boston, Massachusetts 02108 on Monday, December 16, 1996 at 2:00 p.m., Boston
time, and at any adjournment or postponement thereof.
1
As more fully described in this Proxy Statement, the Meetings have been
called for the purposes set forth in the table below. This table identifies each
proposal set forth in the Notice of Special Meeting of Shareholders and the
checkmark (*) indicates which Fund's shareholders are being solicited to
approve which proposal:
<TABLE>
<CAPTION>
FREEDOM FREEDOM
FREEDOM CASH GOVERNMENT FREEDOM TAX CALIFORNIA
MANAGEMENT SECURITIES EXEMPT TAX EXEMPT
PROPOSAL FUND FUND MONEY FUND MONEY FUND
<S> <C> <C> <C> <C>
1. Approval of Advisory
Agreement (All Funds) X X X X
2. Election of Trustees (All
Funds) X X X X
3. Ratification of
Independent Auditors (All
Funds) X X X X
4. Amend Fundamental
Investment Restriction
Concerning Investments in
Illiquid Securities X
</TABLE>
The most recent annual and semiannual reports for the Funds have previously
been sent to shareholders and are available upon request without charge by
calling 1-(800) 257-3336.
This Proxy Statement and the forms of proxy will be mailed to shareholders
of each of the Funds on or about November 4, 1996.
SOLICITATION, REVOCATION AND USE OF PROXIES
HOLDERS OF SHARES OF THE FUNDS ARE REQUESTED TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. If the enclosed
proxy is properly executed and returned in time to be voted at the Meetings, the
shares represented thereby will, unless the proxy has previously been revoked,
be voted in accordance with the instructions marked on the proxy. Unless
instructions to the contrary are marked on the proxy, the proxy will be voted
FOR each Proposal, as described in this Proxy Statement and as set forth in the
accompanying Notice of Special Meetings, and in the discretion of the persons
named as proxies in connection with any other matters as may properly come
before the Meetings or any adjournment or postponement of the Meetings. The
Trustees do not know of any matter to be considered at the Meetings other than
the matters referred to in the Notice of Special Meetings.
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by telephone, telegraph or personal interviews conducted by
Trustees and officers of the Trusts, by personnel of Freedom Capital Management
Corporation, the investment adviser for each of the Funds, by personnel of
Tucker Anthony Incorporated, Sutro & Co. Incorporated and Freedom Distributors
Corporation, the Funds' distributors, and the Funds' transfer agent, John
Hancock Investor Services Corporation, in person or by telephone.
2
A shareholder executing and returning a proxy has the power to revoke it at
any time before it is exercised by filing with the Trusts a written notice of
revocation at the following address: One Beacon Street, Boston, Massachusetts
02108, Attention: John J. Danello, Secretary, or returning a duly executed proxy
bearing a later date prior to the time of the Meetings. Any shareholder who has
executed a proxy but is present at the Meetings and who wishes to vote in person
may revoke his or her proxy by notifying the Secretary of the Trusts (without
complying with any formalities) at any time before it is voted. Presence at the
Meetings alone will not serve to revoke a previously executed and returned
proxy.
A majority of the shares of a Fund entitled to vote at the Meetings shall be
a quorum for the transaction of business by that Fund. In the event a quorum is
not present in person or by proxy at the time any session of the Meetings is
called to order, the persons named as proxies may vote those proxies which have
been received to adjourn the Meetings to a later date. In the event that a
quorum is present but sufficient votes in favor of any of the Proposals have not
been received, the persons named as proxies may propose one or more adjournments
of the Meetings to permit further solicitation of proxies with respect to any of
the Proposals. Any such adjournment will require the affirmative vote of a
majority of those shares present in person or by proxy at the session of the
Meetings to be adjourned. A shareholder vote may be taken on one or more of the
Proposals in the Proxy Statement prior to an adjournment if sufficient votes for
its approval have been received and it is otherwise appropriate.
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 Meetings, abstentions and broker non-votes will
be treated as shares that are present at the Meetings but which have not been
voted. For this reason, abstentions and broker non-votes will assist a Fund in
obtaining a quorum but will have the practical effect of a "no" vote for
purposes of obtaining the requisite vote for approval of Proposals One, Three
and Four.
Shares do not have cumulative voting rights, which means that in situations
in which shareholders elect Trustees, holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of a Trust's Trustees, and
the holders of less than 50% of the shares voting for the election of Trustees
will not be able to elect any person as a Trustee.
RECORD DATE AND OUTSTANDING SHARES
Only shareholders of the Funds of record as of the close of business on
October 18, 1996 (the "Record Date") are entitled to receive notice of, and to
vote at, the Meetings and any adjournment or postponement of the
3
Meetings. As of the close of business on the Record Date, the following number
of shares of each Fund were outstanding and entitled to vote:
NUMBER OF
SHARES
FUND OUTSTANDING
------ -------------
Cash Management Fund 1,571,315,935.211
Government Securities Fund 300,466,213.570
Tax Exempt Fund 281,076,253.661
California Fund 113,114,084.030
The holder of each full share outstanding as of the close of business on the
Record Date is entitled to one vote for each share held of record upon each
matter properly submitted to the Meetings or any adjournment or postponement
thereof, with a proportionate vote for each fractional share.
PROXY SOLICITATION EXPENSES
The cost of soliciting proxies and all expenses incurred by the Funds in
connection with the Transaction described in Proposal One, including, without
limitation, the expenses relating to the Meetings and to the meetings of the
Trustees at which the proposed Transaction was considered, and the fees and
expenses of counsel to the Funds and counsel to the Trustees of the Trusts who
are not "interested persons" (the "Independent Trustees") (as defined in the
Investment Company Act of 1940 (the "1940 Act") of the Adviser, will be borne by
John Hancock Subsidiaries, Inc. and/or by JHFSC Acquisition Corp., and not by
the Trusts. John Hancock Subsidiaries, Inc. will also reimburse brokerage firms
and others for their expenses in forwarding proxy materials to the beneficial
owners and soliciting them to execute the proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, the Estate of Jane S. Miller, 520 SW Yamhill RG #8,
Portland, OR 97204-1335, was the beneficial owner of approximately 6% of the
shares of the Tax Exempt Fund. To the knowledge of the Mutual Fund and Tax
Exempt Trust, no other person beneficially owns 5% or more of any shares of the
Funds.
PROPOSAL ONE
CONSIDERATION AND APPROVAL OF A
NEW INVESTMENT ADVISORY AGREEMENT BETWEEN THE
TRUSTS, ON BEHALF OF EACH FUND, AND THE ADVISER.
The investment adviser for each of the Trusts is Freedom Capital Management
Corporation, a Massachusetts corporation (the "Adviser"), with offices at One
Beacon Street, Boston, Massachusetts 02108. The Adviser is a registered
investment advisory firm which maintains a securities
4
research department, the efforts of which are made available to the Funds. The
Adviser is a wholly-owned subsidiary of John Hancock Freedom Securities
Corporation ("Freedom Securities"), which is a wholly-owned subsidiary of John
Hancock Subsidiaries, Inc. ("Hancock Subsidiaries"), which is in turn a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company ("John
Hancock"). The head offices of John Hancock, Hancock Subsidiaries and Freedom
Securities are at 200 Clarendon Street, Boston, Massachusetts 02116.
Freedom Distributors Corporation ("Freedom Distributors") and Tucker Anthony
Incorporated ("Tucker Anthony"), affiliates of the Adviser, serve as
distributors and principal underwriters for the Cash Management Fund, Government
Securities Fund and Tax Exempt Fund pursuant to a distribution agreement with
each Trust. Freedom Distributors, Tucker Anthony and Sutro & Co. Incorporated
("Sutro"), also an affiliate of the Adviser, serve as distributors and principal
underwriters for the California Fund pursuant to a Distribution Agreement with
the Tax Exempt Trust. Tucker Anthony and Sutro are brokerage firms which are
members of the New York Stock Exchange. Freedom Distributors, Tucker Anthony and
Sutro are all direct subsidiaries of Freedom Securities and indirect
subsidiaries of John Hancock.
THE TRANSACTION
Under a Contribution Agreement (the "Contribution Agreement") dated as of
October 4, 1996 among Hancock Subsidiaries, JHFSC Acquisition Corp., Thomas H.
Lee Equity Fund III, L.P. ("Lee") and SCP Private Equity Partners, L.P. ("SCP"),
Hancock Subsidiaries, which owns all of the capital stock of Freedom Securities,
will contribute 100% of the issued and outstanding shares of capital stock of
Freedom Securities to JHFSC Acquisition Corp., in exchange for (i) 4.999% of the
issued and outstanding capital stock of JHFSC Acquisition Corp. and (ii)
aggregate consideration of $180,000,000 (subject to reduction to the extent of
certain distributions made prior to closing) (the "Transaction"). Of the
$180,000,000 aggregate consideration paid by JHFSC Acquisition Corp.,
$85,000,000 will be financed through senior debt issued to a syndicate of banks
led by The First National Bank of Boston and $75,000,000 will be financed by the
issuance of common stock of JHFSC Acquisition Corp. (the "Equity Financing"),
with the remainder being funded from working capital. The Equity Financing will
be consummated through the contribution to JHFSC Acquisition Corp. by (i) Lee of
an aggregate of up to $40,000,000, (ii) SCP of an aggregate of up to
$10,000,000, and (iii) certain members of management and employees of Freedom
Securities and its subsidiaries, including the Adviser (the "Employee
Shareholders") of an aggregate of at least $25,000,000, in exchange for shares
of capital stock of JHFSC Acquisition Corp. In connection with the financing
arrangements, the loan from the syndicate of banks led by The First National
Bank of Boston will be secured by a pledge of
5
the outstanding capital stock of one or more of JHFSC Acquisition Corp., Freedom
Securities and their subsidiaries, including the Adviser, Tucker Anthony and
Sutro.
After giving effect to consummation of the transactions contemplated by the
Contribution Agreement, Freedom Securities will become a wholly-owned subsidiary
of JHFSC Acquisition Corp., and the Adviser will remain a wholly-owned
subsidiary of Freedom Securities. It is anticipated that the outstanding capital
stock of JHFSC Acquisition Corp. after the consummation of the Transaction will
be held approximately as follows:
PERCENTAGE
INVESTOR OWNERSHIP
---------- ----------
Thomas H. Lee Equity Fund III, L.P. 49.9%
SCP Private Equity Partners, L.P. 13.0%
John Hancock Subsidiaries, Inc. 4.9%
Employee Shareholders 32.2%
If the Employee Shareholders contribute more than $25,000,000 (up to
$30,000,000), the percentage ownership of Lee and SCP in JHFSC Acquisition Corp.
set forth above will be reduced proportionately.
As a result of the Transaction, Freedom Distributors, Tucker Anthony and
Sutro, which are also subsidiaries of Freedom Securities, will undergo a change
of control similar to the Adviser.
Thomas H. Lee Equity Fund III, L.P. is a Massachusetts limited
partnership. The general partner of Thomas H. Lee Equity Fund III, L.P. is
THL Equity Advisors III Limited Partnership, a Massachusetts limited
partnership. The general partner of THL Equity Advisors III Limited
Partnership is THL Equity Trust III, a Massachusetts business trust. The
sole beneficial owner of THL Equity Trust III is Thomas H. Lee. The
address of Thomas H. Lee Equity Fund III, L.P., THL Equity Advisors III
Limited Partnership and THL Equity Trust III is 75 State Street, Boston,
Massachusetts 02109.
SCP Private Equity Partners, L.P. is a Delaware limited partnership.
The general partner of SCP Private Equity Partners, L.P. is SCP Private
Equity Management, L.P., a Delaware limited partnership. The interests of
SCP Private Equity Management, L.P. are divided equally among its three
general partners: Safeguard Capital Management, Inc. (which is a wholly
owned subsidiary of Safeguard Scientifics, Inc., a publicly held company),
Winston J. Churchill and Samuel A. Plum. The address of SCP Private Equity
Partners, L.P., SCP Private Equity Management, L.P., Safeguard Capital
Management, Inc., Winston J. Churchill and Samuel A. Plum is 435 Devon
Park Drive, Wayne, Pennsylvania 19087.
Consummation of the Transaction is subject to the conditions set forth in
the Contribution Agreement for the Transaction, including, without limitation,
consummation of the financing arrangements, approval by the
6
Trustees of the Trusts of new advisory agreements (which approval has been
obtained) and the receipt of certain governmental and third party approvals. The
Transaction is also conditioned upon the approval by shareholders of the Funds
of Proposal One set forth in this Proxy Statement and the receipt of the
Exemptive Order described below. No assurance can be given that the Transaction
will be consummated.
If the Transaction is consummated and if shareholders of the Funds approve
the proposed New Advisory Agreements with the Adviser, the Adviser will continue
the investment advisory functions it currently performs. If the Transaction is
not consummated, the Funds' Existing Advisory Agreements with the Adviser will
remain in place.
Compliance with Section 15(f) of the 1940 Act. The Trusts intend to adhere
to the provisions of Section 15(f) of the 1940 Act. Section 15(f) of the 1940
Act provides that when a change in control of an investment adviser occurs, the
investment adviser or any of its affiliated persons may receive any amount or
benefit in connection therewith as long as two conditions are satisfied. First,
no unfair burden may be imposed on the investment company as a result of the
transaction relating to the change of control, or any express or implied terms,
conditions or understandings, applicable thereto. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year period
after the change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, receives or is
entitled to received any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). No such compensation arrangements are contemplated in the
Transaction. Hancock Subsidiaries and JHFSC Acquisition Corp. have agreed in the
Contribution Agreement to, and have each represented to the Trustees of the
Trusts that they will use their best efforts to, ensure that the Transaction
will not cause the imposition of an unfair burden on any of the Funds.
The second condition is that during the three-year period immediately
following consummation of the transaction, at least 75% of the investment
company's board of trustees must not be "interested persons" of the investment
adviser or predecessor investment adviser within the meaning of the 1940 Act.
Hancock Subsidiaries and JHFSC Acquisition Corp. have agreed in the Contribution
Agreement to, and have each represented to the Trustees of the Trusts that they
will use their best efforts to, ensure that the second condition is met. The
current nominees for election as Trustees of each of the Trusts, as described
below under Proposal Two of this Proxy Statement, meet this condition of Section
15(f).
7
Change of Control and Exemptive Order Application. As required by the 1940
Act, the Existing Advisory Agreements pursuant to which the Adviser provides
investment advisory services to the Funds provide for their automatic
termination upon their "assignment." The 1940 Act defines "assignment" to
include any direct or indirect transfer or hypothecation of a contract by the
assignor, or of a controlling block of the assignor's outstanding voting
securities by a security holder of the assignor. If the Transaction is
consummated, an indirect change in control of the Adviser would occur, giving
rise to an "assignment" of the Funds Existing Advisory Agreements with the
Adviser within the meaning of the 1940 Act, necessitating shareholder approval
of new investment advisory agreements In addition, if the Transaction is
consummated, Freedom Distributors, Tucker Anthony and Sutro, which are also
subsidiaries of Freedom Securities and affiliates of the Adviser, would also
undergo an indirect change in control similar to the Adviser, giving rise to an
"assignment" of the Funds' current distribution agreements with these
distributors within the meaning of the 1940 Act, necessitating Trustee approval
of new distribution agreements. The Trustees of the Trusts approved new
distribution agreements with the Funds' distributors on October 3, 1996 in
anticipation of the consummation of the Transaction.
With respect to the Existing Advisory Agreements, the Trusts on behalf of
the Funds and the Adviser (together with the Trusts, the "Applicants"), applied
pursuant to Section 6(c) of the 1940 Act, for an order of the SEC to provide the
Applicants an exemption from Section 15(a) of the 1940 Act (the "Exemptive
Order"). Section 15(a) of the 1940 Act generally requires the shareholders to
approve new investment advisory agreements.
The requested exemption would permit the implementation, prior to formal
shareholder approval, of the New Advisory Agreements described below, which are
substantially identical to the Existing Advisory Agreements, between the Trusts
and the Adviser with respect to each Fund. The requested exemption would cover
an interim period of not more than 120 days (the "Interim Period") beginning on
the date of the Transaction and continuing through the date the New Advisory
Agreements are approved or disapproved by the shareholders of the respective
Funds pursuant to this proxy, but in no event later than March 31, 1997. For
each Fund, the aggregate contractual rate chargeable for investment advisory
services will remain the same. During the Interim Period, fees payable by the
Funds for such investment advisory services will be paid into escrow.
Under the Exemptive Order, the Applicants proposed to enter into an escrow
arrangement with an unaffiliated financial institution that will serve as escrow
agent. The arrangement, in substance, will provide that the fees payable to the
Adviser during the Interim Period under the New Advisory Agreements will be paid
into an interest-bearing escrow account maintained by the escrow agent and that
the amounts in the escrow account with respect to each Fund (including interest
earned on such paid fees) will be paid to the Adviser only if shareholders of
the Fund approve the New Advisory
8
Agreements. If shareholders of a Fund fail to approve the New Advisory
Agreements, the escrow agent will pay that Fund its respective share of the
escrow amounts (including any interest earned).
EXISTING ADVISORY AGREEMENTS
Pursuant to investment advisory agreements dated as of June 25, 1982 with
respect to the Mutual Fund and as of September 15, 1982, as amended July 31,
1990, with respect to the Tax Exempt Trust (the "Existing Advisory Agreements")
between the respective Trusts and the Adviser, the Adviser agreed to act as
investment adviser and manager to the Funds. As manager and investment adviser,
the Adviser has: (a) furnished continuously an investment program for the Funds
and determine, subject to the overall supervision and review of the Trustees,
which investments should be purchased, held, sold or exchanged, (b) provided
supervision over all aspects of the Funds' operations except those which are
delegated to a custodian, transfer agent or other agent, and (c) provided the
Trusts with such executive, administrative and clerical personnel, offices and
equipment as are deemed necessary for the conduct of the business of the Funds.
Each Fund bears all costs of its organization and operation, including
expenses of preparing, printing and mailing all shareholders' reports, notices,
prospectuses (except that the expense of printing and mailing prospectuses used
for promotional purposes will not be borne by the Funds), proxy statements and
reports to regulatory agencies; expenses relating to the issuance, registration
and qualification of shares of the Trust; government fees; interest charges;
expenses of furnishing to shareholders their account statements; taxes; expenses
of redeeming shares; brokerage and other expenses connected with the execution
of portfolio securities transactions; fees and expenses of the Trust's
custodian, including those for keeping books and accounts and calculating the
net asset value of shares of each Fund; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent; the
compensation and expenses of its Trustees who are not otherwise affiliated with
the Trust, the Adviser or John Hancock or any of their affiliates; expenses of
Trustees' and shareholders' meetings; trade association memberships; insurance
premiums; and any extraordinary expenses.
The continuation of the Existing Advisory Agreement for the Mutual Fund was
last approved on May 23, 1996 by all of the Trustees, including all of the
Trustees who are not parties to that Existing Advisory Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, and was approved on
June 14, 1982 by the then outstanding shareholders of each of the Cash
Management Fund and the Government Securities Fund. The continuation of the
Existing Advisory Agreement for the Tax Exempt Trust was last approved on May
23, 1996 by all of the Trustees, including all of the Trustees who are not
9
parties to that Existing Advisory Agreement or "interested persons" (as defined
in the 1940 Act) of any such party, and was approved on June 13, 1983 by the
then outstanding shareholders of the Tax Exempt Fund and on April 10, 1991 by
the then outstanding shareholders of the California Fund. The Existing Advisory
Agreements will continue in effect with respect to the Mutual Fund and the Tax
Exempt Trust from year to year, provided that their continuance is approved
annually both (i) by the holders of a majority of the outstanding voting
securities of each Fund or by the Trustees, and (ii) by a majority of the
Trustees who are not parties to the Existing Advisory Agreements or "interested
persons" of any such party. The Existing Advisory Agreements may be terminated
on 60 days' written notice by either party and will terminate automatically if
they are assigned.
Each of the Cash Management Fund, Government Securities Fund, Tax Exempt
Fund and California Fund pays the Adviser a monthly advisory fee in an amount
equal, on an annual basis, to .50% of each Fund's average daily net assets up to
and including $500,000,000 and .45% of each Fund's average daily net assets in
excess of $500,000,000.
For the fiscal year ended December 31, 1995, the Cash Management Fund, the
Government Securities Fund, the Tax Exempt Fund and the California Fund paid the
Adviser investment advisory fees of $5,802,037, $1,391,071, $1,365,700 and
$434,998, respectively. With respect to the California Fund, during the fiscal
year ended December 31, 1995, the Adviser waived $152,510 of the fees
attributable to that Fund.
NEW ADVISORY AGREEMENTS
If the proposed New Advisory Agreements are approved by the shareholders of
the Funds to which the respective agreements relate, the Adviser will continue
to serve as investment adviser to each Fund. Following the Transaction, the
Adviser will continue as a subsidiary of Freedom Securities and will become a
subsidiary of JHFSC Acquisition Corp. The terms and conditions of the proposed
New Advisory Agreements are substantially identical to those of the Existing
Advisory Agreements.
The New Advisory Agreements, if approved, will continue in effect for a two
year period following the later to occur of (i) such approval by the relevant
Fund's shareholders, or (ii) the consummation of the Transaction; provided,
that, if exemptive relief is granted by the SEC, the New Advisory Agreements
will become effective upon the consummation of the Transaction, even if that is
prior to the approval of the New Advisory Agreements by the shareholders of the
Funds. Subsequently the New Advisory Agreements will be subject to annual
approval by the Trustees and by the Independent Trustees, or to approval by the
relevant Fund's shareholders. The New Advisory Agreements may be terminated as
to any Fund, without penalty, by the Trustees or by the
10
shareholders of the relevant Fund upon 60 days' written notice to the Adviser or
by the Adviser upon 60 days' written notice to the Fund. The New Advisory
Agreements will terminate automatically in the event of their "assignment," as
defined in the 1940 Act.
If the proposed New Advisory Agreements are approved, as manager and
investment adviser, the Adviser will: (a) furnish continuously an investment
program for the Funds and determine, subject to the overall supervision and
review of the Trustees, which investments should be purchased, held, sold or
exchanged, (b) provide supervision over all aspects of the Funds' operations
except those which are delegated to a custodian, transfer agent or other agent,
and (c) provide the Trusts with such executive, administrative and clerical
personnel, offices and equipment as are deemed necessary for the conduct of the
business of the Funds.
If the proposed New Advisory Agreements are approved, each Fund will bear
all costs of its organization and operation, including expenses of preparing,
printing and mailing all shareholders' reports, notices, prospectuses (except
that the expense of printing and mailing prospectuses used for promotional
purposes will not be borne by the Funds), proxy statements and reports to
regulatory agencies; expenses relating to the issuance, registration and
qualification of shares of the Trust; government fees; interest charges;
expenses of furnishing to shareholders their account statements; taxes; expenses
of redeeming shares; brokerage and other expenses connected with the execution
of portfolio securities transactions; fees and expenses of the Trust's
custodian, including those for keeping books and accounts and calculating the
net asset value of shares of each Fund; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent; the
compensation and expenses of its Trustees who are not otherwise affiliated with
the Trust, the Adviser or any of their affiliates; expenses of Trustees' and
shareholders' meetings; trade association memberships; insurance premiums; and
any extraordinary expenses.
If the proposed New Advisory Agreements are approved, each of the Cash
Management Fund, Government Securities Fund, Tax Exempt Fund and California Fund
will pay the Adviser a monthly advisory fee in an amount equal, on an annual
basis, to .50% of each Fund's average daily net assets up to and including
$500,000,000 and .45% of each Fund's average daily net assets in excess of
$500,000,000, which is identical to the fee paid under the Existing Advisory
Agreement.
INFORMATION ABOUT THE ADVISER
Information Concerning Directors and Executive Officers of the Adviser. The
names and principal occupations of each director and executive officer of the
Adviser are set forth below. The business address of each person
11
listed below, is One Beacon Street, Boston, Massachusetts 02108, except the
business address for Messrs. Kirshbaum, Lipson, and Hirsch and Ms. Graham- Lyons
is One World Financial Center, New York, NY 10281.
PRINCIPAL OCCUPATION AND POSITION
POSITION OTHER BUSINESS EXPERIENCE WITH THE
NAME WITH ADVISER WITHIN LAST TWO YEARS TRUSTS
------ -------------- ------------------------- --------
Dexter A. Dodge Chairman and Chief Executive Officer, Trustee,
Managing President and Managing Chairman
Director Director of the Adviser and
Chief
Executive
Officer
John J. Danello President and President and Chief President
Managing Operating Officer of the and
Director Adviser Secretary
John Goldsmith Managing Chairman & CEO, John --
Director Hancock Freedom
Securities Corporation
Lawrence G. Kirshbaum Managing Chief Financial Officer Trustee
Director and Executive Vice
President of John
Hancock Freedom
Securities Corporation
Arthur E. McCarthy Managing Managing Director of the --
Director Adviser. Registered
Representative of
Tucker Anthony
Incorporated
Terrence J. Gerlich Managing Managing Director of the --
Director Adviser
Richard V. Howe Managing Managing Director of the --
Director Adviser
Ellen C. Varney Senior Vice Senior Vice President and --
President and Chief Financial Officer
Chief of Adviser since
Financial February 1996.
Officer Financial Manager of
John Hancock from
September 1990 to
December 1995.
Charles B. Lipson President of President and founder of --
the M.D. the M.D. Hirsch
Hirsch Division of the Adviser
Division of since February 1995.
the Advisor President and Chief
Operating Officer.
Officer of the M.D.
Hirsch Division of
Republic Asset
Management Corporation
from February 1991 to
December 1994.
12
PRINCIPAL OCCUPATION AND POSITION
POSITION OTHER BUSINESS EXPERIENCE WITH THE
NAME WITH ADVISER WITHIN LAST TWO YEARS TRUSTS
------ -------------- ------------------------- --------
Michael D. Hirsch Chairman, Chairman, M.D. Hirsch --
M.D. Hirsch Division of the Adviser
Divison of the since February 1995.
Adviser Vice President and
Executive Vice Chairman
and Managing Director,
Portfolio Manager M.D.
Hirsch Division of
Republic Asset
Management Corporation
from June 1993 to
February 1994.
Michelle Graham-Lyons Senior Vice Senior Vice President of --
President of the Adviser since
the Adviser February 1995. First
Vice President M.D.
Hirsch Division of
Republic Asset
Management Corporation
from June 1993 to
February 1994
Contracts with Companies Affiliated with the Adviser. John Hancock Clearing
Corporation has a Service Agreement with both the Mutual Fund and the Tax Exempt
Trust to maintain and service certain shareholder accounts of the Funds held by
shareholders with brokerage accounts with Tucker Anthony or Sutro. John Hancock
Clearing Corporation is an affiliate of the Adviser and Tucker Anthony or Sutro.
For the year ended December 31, 1995, John Hancock Clearing Corporation received
reimbursements from the Mutual Fund and the Tax Exempt Trust of $1,094,025 and
$99,320 respectively. Effective June 21, 1993, John Hancock Investor Services
Corporation ("JHIS," formerly known as John Hancock Fund Services, Inc.), a
wholly-owned subsidiary of John Hancock and an affiliate of the Adviser, became
transfer agent for the Funds. For the fiscal year ended December 31, 1995, JHIS
received reimbursements from the Mutual Fund and the Tax Exempt Trust of
$1,556,460 and $145,435, respectively.
CONSIDERATION BY THE TRUSTEES
The Trustees, including the Independent Trustees, of each Trust have
approved the New Advisory Agreements on behalf of each Fund, and recommend that
the New Advisory Agreements be approved by shareholders of the Funds.
Since the commencement of negotiations by John Hancock concerning the
Transaction, the Contracts Committee, which is comprised of the Independent
Trustees, met separately and together with the full Board three times. Messrs.
13
Farrell, Kendall and Osterberg have served and continue to serve on this
Committee. In the course of their review, the Trustees, including the
Independent Trustees, requested information of the Adviser and JHFSC Acquisition
Corp. and reviewed the information provided by them. The Independent Trustees
also retained special counsel to assist them in their review of the Transaction
and its anticipated effects upon the Funds and their shareholders.
The Trustees, including the Independent Trustees, of each Trust considered,
among other things, the structure of the Transaction and the terms of the
Contribution Agreement and related agreements, including the representations of
both the Adviser and JHFSC Acquisition Corp. with respect to the Funds. In
particular, the Trustees noted the parties' agreements to use their best efforts
to assure that no unfair burden would be imposed on the Funds as a result of the
Transaction, as well as the fact that the Transaction would be conditioned upon
approval of the New Advisory Agreements by the Trustees of the Trusts. The
Trustees also relied upon representations of the Adviser and JHFSC Acquisition
Corp. that (i) no material changes in the operation of the Trusts are
contemplated as a result of the Transaction, (ii) there is no present intention
on the part of the Adviser or JHFSC Acquisition Corp. to propose any increase in
the rate of fees paid by the Trusts to the Adviser, and (iii) no material
changes in the management of the Adviser are presently contemplated as a result
of the Transaction.
The Trustees, including the Independent Trustees, of each Trust further
considered whether the Transaction could enhance the investment advisory
operations of the Adviser and the level and quality of services provided to the
Funds and their shareholders, as well as the commitments provided by JHFSC
Acquisition Corp. that substantially the same personnel at the Adviser who now
provide advisory services to the Funds would continue to do so after the
Transaction. The Trustees also considered the reputation, financial
responsibility and stability of the owners of JHFSC Acquisition Corp.
The Trustees, including the Independent Trustees, of each Trust also
considered the fact that the advisory fees would remain the same under the New
Advisory Agreements as under the Existing Advisory Agreements and the fact that
the terms of the New Advisory Agreements do not substantially differ from those
of the Existing Advisory Agreements. The Trustees also relied on the
representations of Hancock Subsidiaries and JHFSC Acquisition Corp. that the
Funds and their shareholders would not bear any fees or expenses in connection
with the Transaction. In addition, the Trustees considered, based on the data
available to them, the Adviser's historical profitability with respect to its
management of the Funds as well as its reasonably anticipated profitability
after the Transaction. The Trustees also considered that the New Advisory
Agreements provided that they may be terminated by the shareholders of the
relevant Fund and by the Trustees without the payment of any penalty by such
Fund.
14
In addition, the Trustees considered during the course of their due
diligence process (i) the history, reputation, qualifications and background of
the Adviser, as well as the qualifications of its personnel (ii) the Adviser's
investment performance record with respect to the Funds, and (iii) the benefits,
if any, expected to be realized as a result of the Transaction.
After considering these and other factors, the Trustees, including the
Independent Trustees, of the Trusts, at meetings held in person on October 3,
1996, unanimously approved the proposed New Advisory Agreements with the Adviser
and recommended their approval to the shareholders of the Funds.
THE TRUSTEES OF EACH OF THE TRUSTS, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE FOR PROPOSAL ONE, THE APPROVAL
OF THE NEW ADVISORY AGREEMENT FOR THEIR RESPECTIVE FUND.
REQUIRED VOTE
Approval of the New Advisory Agreements between the Trusts, on behalf of a
Fund, and the Adviser requires the affirmative vote of a majority of the
outstanding shares of each Fund, voting separately as a Fund. Under the 1940
Act, this means that, to be approved by a Fund, this Proposal must receive the
affirmative vote of holders of the lesser of either (a) 67% or more of the
outstanding shares of the applicable Fund, voting as a single class, present at
the Meetings, if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the applicable Fund, voting as a single class.
PROPOSAL TWO
ELECTION OF EIGHT TRUSTEES OF EACH OF THE TRUSTS
At the Meetings, the shareholders of each of the Funds are being asked to
elect the eight nominees of the respective Boards of Trustees as Trustees of
each Trust, to serve during the lifetime of the Trusts except if a Trustee
sooner dies, resigns or is removed as provided in the Agreement and Declaration
of Trust, as amended (the "Agreement and Declaration of Trust"), of each Trust.
After the election by the shareholders at the Meetings, each Board of Trustees
will be a self-perpetuating body until fewer than 50% of the Trustees serving as
such are Trustees who were elected by shareholders. At that time, another
meeting of shareholders will be called to elect Trustees.
All of the nominees named below, except Messrs. Darling, Haack and Veator,
are presently serving as Trustees of each of the Trusts. All shares represented
by valid proxies will be voted in the election of Trustees of the Trusts for the
nominees named below, unless authority to vote for a particular nominee is
withheld. Each nominee has agreed to serve as Trustee if elected. If any such
nominee is not available for election at the time of the Meetings, the persons
named as proxies will vote for such substitute nominee as the Independent
Trustees may recommend.
15
CONSIDERATION BY BOARDS OF TRUSTEES
THE TRUSTEES OF EACH OF THE TRUSTS, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT SHAREHOLDERS OF EACH TRUST VOTE FOR PROPOSAL TWO, THE ELECTION OF
THE NOMINEES BELOW AS TRUSTEES OF EACH OF THE TRUSTS.
INFORMATION AS TO NOMINEES
Set forth below is certain information as of September 30, 1996 regarding
the nominees as Trustees of each Trust, including each nominee's position with
the Trusts, principal occupation for the past five years and age.
<TABLE>
<CAPTION>
TRUSTEE
NAME, AGE, OFFICE WITH EACH OF EACH
TRUST AND BUSINESS EXPERIENCE TRUST SHARES OF EACH FUND
DURING THE PAST FIVE YEARS SINCE BENEFICIALLY OWNED(1)
----------------------------- --------- ----------------------
<S> <C> <C>
DEXTER A. DODGE* (61): Chairman and
Chief Executive Officer of the Trusts. Cash Management Fund
President and Managing Director of the 239,235.95
Adviser since July 1992. Vice
President of Freedom Distributors
Corporation since 1989 and Director
since 1994 1992
RICHARD A. FARRELL (63): Trustee of the Cash Management Fund
Trusts. President since 1980 of 1,815,833(2)
Farrell, Healer & Co., Boston, MA, a
venture capital management firm that
manages The Venture Capital Fund of
New England 1982
ERNEST T. KENDALL (63): Trustee of the Cash Management Fund
Trusts. President, Commonwealth 1,000
Research Group, Boston, MA, a
consulting firm specializing in
microeconomics, regulatory economics
and labor economics, since 1978 1993
RICHARD B. OSTERBERG (52): Trustee of Cash Management Fund
the Trusts. Member of the law firm of 1,290,158.96(3)
Weston, Patrick, Willard & Redding, Government Securities Fund
Boston, MA, since 1978 1993 59,687.55(4)
LAWRENCE G. KIRSHBAUM* (54): Trustee of Cash Management Fund
the Trusts. Chief Financial Officer 133,118(5)
and Executive Vice President of John
Hancock Freedom Securities Corporation
since 1992. Director of Tucker Anthony
Incorporated, Sutro & Co.
Incorporated, John Hancock Clearing
Corporation and Freedom Capital
Management Corporation since 1992.
Formerly Chairman of Prescott, Ball &
Turben, Inc., Cleveland, Ohio, 1987-
1990. Chief Financial Officer of
Prescott, Ball & Turben, Inc.,
1982-1987 1993
16
TRUSTEE
NAME, AGE, OFFICE WITH EACH OF EACH
TRUST AND BUSINESS EXPERIENCE TRUST SHARES OF EACH FUND
DURING THE PAST FIVE YEARS SINCE BENEFICIALLY OWNED(1)
----------------------------- --------- ----------------------
WILLIAM H. DARLING (47): Nominee for Cash Management Fund
Trustee of the Trusts. President, W.H. 1,000
Darling & Co., Inc., managing
corporate general partner to a coal
land lessor, since 1994. Partner of
Sagamore Partners, which provides
trustee services to family and related
trusts, since 1993. Certified Public
Accountant, William A. Darling, CPA
since 1982 N/A
JOHN R. HAACK (54) Nominee for Trustee Cash Management Fund
of the Trust. Vice President of 1,000
Operations, Reliable Transaction
Processing, 1995 to present. Major
General, Assistant to the Commander in
Chief, U.S. Space Command, 1993 to
1995. General Manager, Unilect
Industries, which is an electrical
component manufacture, 1993 to 1994.
Brigadier General, Commander of 102nd
Fighter Interceptor Wing, U.S. Air
Force and Air National Guard, 1986 to
1993 N/A
LAURENCE R. VEATOR, JR. (63): Nominee Cash Management Fund
for Trustee of the Trusts. Currently 115,573
retired. Formerly, President,
Pacific/Interamerican Divisions of
Grace Specialty Chemicals Co. from
1975 to 1987 N/A
Trustees and executive officers of Cash Management Fund
Mutual Fund and Tax Exempt Trust as a 3,594,600.04
group (14 persons) Government Securities Fund
59,687.55
</TABLE>
- -----------
* These nominees as Trustees and/or officers are deemed to be "interested
persons" of the Trusts, as defined in the 1940 Act, inasmuch as they are
affiliated with the Adviser, Freedom Distributors Corporation or John
Hancock Freedom Securities Corporation.
(1) None of the persons listed or the nominees as Trustees and executive
officers as a group beneficially owns in excess of 1% of the outstanding
shares of any Fund. Except as otherwise indicated, the individual indicated
as being the beneficial owner of such shares has sole voting and investment
power with respect to such shares.
(2) Of these shares 1,792,074 shares are owned by The Venture Capital Fund of
New England, The Venture Capital Fund of New England II or The Venture
Capital Fund of New England III, of which Mr. Farrell is
17
either a managing general partner or general partner. The remaining 23,759
shares are held by the Farrell, Healer & Co. PS Plan and the Farrell, Healer
& Co. MPP Plan for which Mr. Farrell acts as Trustee. Mr. Farrell disclaims
beneficial ownership of such shares.
(3) Includes 81,963.44 shares held by various trusts of which Mr. Osterberg
serves as a trustee but is not a beneficiary, 214,319.89 shares held by Mr.
Osterberg as a joint tenant, 723,114.3 shares held by various trusts of
which Mr. Osterberg serves as agent and 99,161.91 shares owned by an estate
of which Mr. Osterberg is the executor.
(4) Includes 10,630.35 shares held by three trusts for his minor children of
which trusts Mr. Osterberg is custodian, as to which shares Mr.
Osterberg disclaims beneficial ownership.
(5) Includes 799 shares held by one trust for his minor child of which
trust Mr. Kirshbaum is custodian, as to which shares Mr. Kirshbaum
disclaims beneficial ownership.
TRUSTEE MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995, the Trustees of each Trust
met four times and each Trustee who was serving as a Trustee or committee member
attended at least 75% of the meetings of the respective Trust and/or any
committees thereof of which he was a member.
Each Board of Trustees has elected members of two standing committees: the
Audit Committee and the Contracts Committee. The Audit Committee of each Trust
is presently composed of Messrs. Farrell (Chairman), Kendall and Osterberg. The
Audit Committee is responsible for conferring with each Trust's independent
accountants, reviewing the scope and procedures of each Trust's year-end audit
and recommending the selection of each Trust's independent accountants. The
Audit Committee of each Trust met two times during the fiscal year ended
December 31, 1995.
The Contracts Committee of each Trust is presently composed of Messrs.
Osterberg (Chairman), Farrell and Kendall. The Contracts Committee of each Trust
is responsible for evaluating the approval or continuation of each Trust's
advisory, distribution, custodial and transfer agent agreements and making
recommendations to the entire Board of Trustees of each Trust. The Contracts
Committees of each Trust met two times during the fiscal year ended December 31,
1995.
OFFICERS OF THE TRUSTS
The following table lists the officers of each Trust who are not also
nominees as Trustees, along with their ages, principal occupations, and business
experience during the past five years. These officers are deemed to
18
be "interested persons" of the Trusts under the 1940 Act inasmuch as they are
affiliated with the Adviser as described herein. Information concerning Mr.
Dodge, who is an officer of the Trust and a nominee as Trustee, is provided
under the section above entitled "Information as to Nominees."
NAME, AGE AND PRINCIPAL OCCUPATION AND
POSITION WITH TRUSTS BUSINESS EXPERIENCE FOR PAST YEARS
---------------------- ------------------------------------
John J. Danello (41) President of the Adviser since February
President and Secretary 1996. Chief Operating Officer of the
Adviser since February 1994. Managing
Director of the Adviser since December
1992. Clerk and General Counsel of the
Adviser since November 1986. President
and Director since February 1989 and
Clerk since February 1987 of Freedom
Distributors Corporation.
Darlene F. Rego (32) Vice President of the Adviser since
Treasurer February 1995. Assistant Vice
President of the Adviser since
December 1992. Assistant Treasurer of
the Trusts from July 1987 until
December 1992.
Mary Jeanne Currie (47) Vice President of the Adviser since
Vice President February 1983.
Michael M. Spencer (46) Senior Vice President and Director of
Vice President Fixed Income Investments of the
Adviser since August 1995. From 1985
to 1995, Portfolio Manager at Shawmut
Investment Advisers.
Paul F. Marandett (54) Senior Vice President of the Adviser
Vice President since 1996. Vice President of the
Adviser 1990 to 1996. From 1980-1990,
Vice President and Manager, Bank of
Boston, Regional Underwriting and
Trading of Tax Exempt Securities.
Maureen M. Renzi (32) Assistant Vice President of the Adviser
Assistant Secretary since February 1995. Assistant Clerk
and Compliance Officer of the Adviser
since July Assistant Secretary 1992.
Vice President of Freedom Distributors
Corporation since February 1995.
Paralegal at New England Securities
from March 1989 to July 1992.
REMUNERATION OF EXECUTIVE OFFICERS AND TRUSTEES
The following table provides information concerning the aggregate
compensation paid to each of the incumbent Trustees nominated for election for
services rendered to the Funds during the year ended December 31, 1995. The
Trusts do not provide any pension or retirement benefits for the Trustees.
19
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL
AGGREGATE AGGREGATE COMPENSATION COMPENSATION COMPENSATION
COMPENSATION COMPENSATION FROM THE FROM THE FROM
FROM THE FROM THE GOVERNMENT CASH FUND COMPLEX
CALIFORNIA TAX EXEMPT SECURITIES MANAGEMENT PAID TO
NAME OF TRUSTEES FUND FUND FUND FUND TRUSTEES(A)
<S> <C> <C> <C> <C> <C>
Richard A. Farrell $2,757 $3,901 $4,018 $10,124 $20,800
Ernest T. Kendall 1,757 2,901 3,018 9,124 20,400
Richard B. Osterberg 1,757 2,901 3,018 9,124 20,400
Dexter A. Dodge 0 0 0 0 0
Lawrence G. Kirshbaum 0 0 0 0 0
</TABLE>
- ---------
(a) The term "Fund Complex" refers to the Funds and the portfolio series of the
FundManager Trust to which the Adviser also provides advisory services.
REQUIRED VOTE
Under each Trust's Agreement and Declaration of Trust, a quorum being
present, those nominees for Trustee of a Trust receiving a plurality of the
votes cast by the shareholders of that Trust, voting separately as a Trust,
shall be elected.
PROPOSAL THREE
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Trustees of the Trusts, including the Independent Trustees, have
selected Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
as the independent accountants for the fiscal year ended December 31, 1996 with
respect to each of the Trusts. At the Meetings, shareholders of each Trust are
being asked to ratify the selection of Price Waterhouse LLP to perform audit
services for the Trusts.
Price Waterhouse LLP, which has no direct or indirect material financial
interest in the Trusts, has served as each Trust's independent accountants since
the Trust's inception. The services provided by Price Waterhouse LLP consist of
(1) examination of each Trust's annual financial statements, (2) assistance and
consultation in connection with Securities and Exchange Commission filings, and
(3) review of the annual income tax returns filed on behalf of the Trusts.
If either Trust receives a written request from any shareholder at least
five days prior to the Meetings stating the shareholder will be present in
person at the Meetings and desires to ask questions of the independent
accountants, that Trust will arrange to have a representative of Price
Waterhouse LLP present at the Meetings to respond to such questions.
CONSIDERATION BY THE TRUSTEES
THE TRUSTEES OF EACH OF THE TRUSTS, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT SHAREHOLDERS OF EACH TRUST VOTE FOR PROPOSAL THREE, THE
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS
OF THE RESPECTIVE TRUSTS.
20
REQUIRED VOTE
Ratification of the selection of Price Waterhouse LLP as the independent
accountants of a Trust requires the affirmative vote of a majority of the
outstanding shares of that Trust, voting separately as a Trust. Under the 1940
Act, this means that, to be approved by a Trust, this Proposal must receive the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Trust, voting as a single class, or (2) 67% or more of the outstanding
shares of the Trust, voting as a single class, present at the Meetings, if the
holders of more than 50% of the outstanding shares of the Trust are present or
represented by proxy.
PROPOSAL FOUR
CASH MANAGEMENT FUND ONLY
PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING INVESTMENT IN ILLIQUID SECURITIES
BACKGROUND
Generally, money market funds, such as the Cash Management Fund, may not
invest more than 10% of their net assets in illiquid securities and other
illiquid assets. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within the course of seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities and includes, among other things, restricted securities
other than those determined to be liquid pursuant to guidelines established by
the Trust's Board of Trustees. The SEC has taken the position that restricted
securities (those which cannot be offered to the public without first being
registered under the Securities Act of 1933 (the "1933 Act")) should generally
be presumed to be illiquid. The SEC has, however, permitted the boards of
directors or trustees of open-end investment companies to determine certain
restricted securities to be liquid if they meet certain criteria. The securities
that may be considered liquid include, among others, foreign securities and Rule
144A securities which may be deemed liquid despite their restricted nature.
In a recent no-action letter, the SEC has taken the position that the boards
of directors/trustees of open-end investment companies may determine that
Section 4(2) paper is liquid. The term "Section 4(2) paper" refers to commercial
paper issued in reliance on Section 4(2) of the 1933 Act, which exempts from
registration "transactions by an issuer not involving a public offering." The
disposition of Section 4(2) paper is restricted because the resale of such
commercial paper must also be effected pursuant to an exempt transaction. In
21
the past, many investment companies had treated Section 4(2) paper as illiquid
and, therefore, limited their investments in such instruments in order to
satisfy the SEC's 90% liquidity requirement for money market funds.
In recent years, however, a large institutional market has developed for
securities and commercial paper that are not registered under the 1933 Act, such
as Section 4(2) paper. Institutional investors will not seek to sell these
instruments to the general public, but instead will often depend either on an
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Thus, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not the only factor that determines whether these
securities are liquid. In light of that fact, as proposed, the reworded
investment restriction set forth below would exclude from the limitation on
illiquid securities those issues of Section 4(2) paper that have been deemed
liquid by the Trustees of the Mutual Fund.
CURRENT AND PROPOSED INVESTMENT RESTRICTIONS
The current fundamental investment restriction placed upon the Cash
Management Fund states that with regard to illiquid securities that Fund may
not:
Purchase securities (other than under repurchase agreements of not more
than one week's duration, considering only the remaining days to maturity of
each existing repurchase agreement) for which there exists no readily
available market, or for which there are legal or contractual restrictions
on resale (excluding restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which the Board of Trustees or
the Adviser has determined under Board-approved guidelines are liquid), if
as a result of any purchase, more than 10% of that Fund's net assets would
be invested in such securities.
The Trustees recommend that the shareholders vote to amend this restriction to
include Section 4(2) paper in the exclusion mentioned above in order to exclude
Section 4(2) paper which have been deemed to be liquid by the Trustees or the
Adviser from the calculation of the amount of illiquid securities held by the
Cash Management Fund. The Trustees approved the amendment (as described below)
to this restriction at a meeting on October 1996.
If the shareholders of the Cash Management Fund were to adopt the proposed
amendment, the new investment restriction would read as follows (with the new
language appearing in italics):
Purchase securities (other than under repurchase agreements of not more
than one week's duration, considering only the remaining days to maturity of
each existing repurchase agreement) for which there exists no readily
available market, or for which there are legal or contractual
22
restrictions on resale (excluding restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 and, with regard to
the Cash Management Fund, commercial paper exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, which the Board of Trustees
or the Adviser has determined under Board-approved guidelines are liquid),
if as a result of any purchase, more than 10% of that Fund's net assets
would be invested in such securities.
In addition, the SEC has indicated that in order for the Cash Management Fund to
determine that a specific issue of Section 4(2) paper is liquid, the Board of
Trustees for the Mutual Fund must determine that the following conditions have
been met: a) the Section 4(2) paper is not being traded flat or in default as to
principal or interest; b) the Section 4(2) paper is (i) rated in one of the two
highest rating categories by two nationally recognized securities rating
organizations ("NRSROs"), or (ii) if only one NRSRO rates that security, then it
must achieve such rating by that NRSRO or (iii) be deemed of equivalent quality
by the Board of Trustees if such Section 4(2) paper is unrated; c) the Board of
Trustees must consider the trading market for the specific security in question,
taking into account all relevant factors. As proposed, the reworded investment
restriction set forth above would exclude from the limitation on illiquid
securities those issues of Section 4(2) paper that have been deemed liquid by
the Trustees of the Freedom Mutual Fund.
In determining whether a particular issue of Section 4(2) paper is liquid,
the Board of Trustees or the Adviser, as the case may be, will follow the
procedures set forth below, which are reasonably designed to establish that an
adequate trading market for resale exists for such securities proposed to be
acquired by the Cash Management Fund. The Trustees or the Adviser, as the case
may be, shall consider the following factors:
1) The frequency of trades and quotes for the specific Section 4(2) paper.
2) The number of dealers willing to purchase or sell such securities and the
number of other potential purchasers.
3) Any dealer undertaking to make a market in such securities.
4) The nature of such securities and the nature of the marketplace in which
it trades (e.g., the time needed to dispose of the securities, the method
of soliciting offers and the mechanics of transferring such securities.)
5) Other factors, if any, which the Board of Trustees or the Adviser, as the
case may be, deems relevant to determining the existence of a trading
market for such security.
If, after considering these factors, the Trustees or the Adviser, as the case
may be, reasonably believes that the specific Section 4(2) paper can be disposed
of within seven days in the ordinary course of business at
23
approximately the amount that the Cash Management Fund intends to pay for such
security, then the Cash Management Fund may acquire such security. Once
acquired, the Trustees or the Adviser, as the case may be, will monitor the
liquidity of such security pursuant to the factors listed above.
CONSIDERATION BY THE TRUSTEES
The Trustees of the Mutual Fund have concluded that this amendment to the
Cash Management Fund's fundamental investment restriction regarding illiquid
securities to permit investments in Section 4(2) paper in the manner described
above is in the best interests of that Fund's shareholders.
THE TRUSTEES OF THE MUTUAL FUND, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT SHAREHOLDERS OF THE CASH MANAGEMENT FUND VOTE FOR PROPOSAL FOUR,
THE PROPOSAL TO AMEND THE INVESTMENT RESTRICTION RELATING TO THE RESTRICTION
PLACED UPON THE CASH MANAGEMENT FUND REGARDING INVESTMENT IN ILLIQUID SECURITIES
TO ALLOW THE BOARD OF TRUSTEES OF THE MUTUAL FUND OR THE ADVISER TO, IN THEIR
DISCRETION, DETERMINE THAT SECTION 4(2) COMMERCIAL PAPER IS LIQUID AND THEREFORE
NOT SUBJECT TO THE SEC RESTRICTION ON INVESTMENT BY MONEY MARKET FUNDS IN
ILLIQUID SECURITIES.
REQUIRED VOTE
Adoption of the proposal to amend this fundamental investment restriction of
the Cash Management Fund requires the affirmative vote of a majority of the
outstanding shares of that Fund, voting separately as a Fund. Under the 1940
Act, this means that, to be approved by that Fund, this Proposal must receive
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Cash Management Fund, voting as a single class, or (2) 67% or more
of the outstanding shares of the Cash Management Fund, voting as a single class,
present at the Meetings, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy.
PORTFOLIO TRANSACTIONS
The Advisory Agreements authorize the Adviser (subject to the control of the
Boards of Trustees) to select brokers and dealers to execute purchases and sales
of portfolio securities. The Advisory Agreements direct the Adviser to use its
best efforts to obtain the best overall terms for the Trusts, taking into
account such factors as price (including dealer spread), the size, type and
difficulty of the transaction involved, and the financial condition and
execution capability of the broker or dealer.
The Adviser generally will purchase portfolio securities for the Funds
either directly from the issuer or from dealers who specialize in "money market"
instruments. Usually no brokerage commission is paid, although
24
the price usually includes an undisclosed compensation. Transactions with
primary market makers reflect the spread between bid and asked prices; purchases
of underwritten issues include an underwriting fee paid by the issuer to the
underwriter. During the fiscal year ended December 31, 1995, the Funds paid no
brokerage commissions.
With respect to all of the Funds, to the extent that the execution and price
offered by more than one dealer are comparable, the Adviser may, in its
discretion, effect transactions in portfolio securities with dealers who provide
the Trusts with research services such as credit analysis. Any such research
services would be available for use on all investment advisory accounts of the
Adviser.
Other investment advisory clients advised by the Adviser may also invest in
the same securities as the Trusts. When these clients buy or sell the same
securities at substantially the same time, the Adviser may average the
transactions as to price and allocate the amount of available investments in a
manner which the Adviser believes to be equitable to each client, including any
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by any Fund or the size of the position obtainable for
it. On the other hand, to the extent permitted by law, the Adviser may aggregate
the securities to be sold or purchased for any Fund with those to be sold or
purchased for other clients managed by it in order to obtain best execution.
In no instance will portfolio securities be purchased from or sold to John
Hancock, Tucker Anthony, Sutro or any affiliated person (as defined in the 1940
Act) thereof.
The Board of Trustees of the Mutual Fund has determined that any portfolio
transaction for the Mutual Fund may be executed through Tucker Anthony or Sutro,
if, in the Adviser's judgment, the use of Tucker Anthony or Sutro is likely to
result in price and execution at least as favorable as those of other qualified
brokers, and if, in the transaction, Tucker Anthony or Sutro charges the Mutual
Fund a commission rate consistent with those charged by Tucker Anthony or Sutro
to comparable unaffiliated customers in similar transactions. Neither Tucker
Anthony nor Sutro will participate in commissions in brokerage given by the
Mutual Fund to other brokers or dealers and will not receive any reciprocal
brokerage business resulting therefrom.
OTHER MATTERS
The Trustees do not know of any other matters that will be presented for
action at the Meetings. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
25
SHAREHOLDER PROPOSALS
Under each Trust's Agreement and Declaration of Trust, no annual or special
meetings of shareholders are required. Any shareholder desiring to present a
proposal for consideration at the next meeting of shareholders of one or more of
the Funds should submit the proposal in writing so that it is received by the
Secretary of the Funds at One Beacon Street, Boston, Massachusetts 02108 within
a reasonable time before the meeting.
ADDITIONAL INFORMATION
The principal distributors and underwriters for all of the Funds are Tucker
Anthony Incorporated, which is located at One World Financial Center, New York,
NY 10281 and Freedom Distributors Corporation, which is located at One Beacon
Street, Boston, Massachusetts 02108. Sutro & Co. Incorporated, located at 201
California Street, San Francisco, California 94111, also acts as a principal
distributor and underwriter for the California Fund. The Transfer and
Shareholder Services Agent for all of the Funds is John Hancock Investors
Services Corporation, P.O. Box 9102 Boston, Massachusetts 02205.
The information contained in this Proxy Statement regarding JHFSC
Acquisition Corp., Lee and SCP and the terms of the Transaction was provided by
JHFSC Acquisition Corp., Lee and SCP.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO FILL IN,
DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
26
EXHIBIT A
ADVISORY AGREEMENT
AGREEMENT made as of the day of ________, 1996 between FREEDOM CAPITAL
MANAGEMENT CORPORATION, a corporation organized under the laws of the
Commonwealth of Massachusetts and having its principal place of business in
Boston, Massachusetts (the "Manager"), and FREEDOM MUTUAL FUND, a Massachusetts
business trust having its principal place of business in Boston, Massachusetts
(the "Trust").
WHEREAS, the Trust engages in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is so registered under the Investment
Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust presently offers shares in two series, the Freedom Cash
Management Fund and the Freedom Government Securities Fund (such series (the
"Initial Funds"), together with all other series subsequently established by the
Trust with respect to which the Trust desires to retain the Manager to render
investment advisory services hereunder and the manager is willing so to do,
being herein collectively referred to as the "Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Initial Funds. The Trust hereby appoints the Manager to act as manager
and investment adviser to the Initial Funds for the period and on the terms
herein set forth. The Manager accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Initial Funds with respect to which it desires
to retain the Manger to render management and investment advisory
A-1
services hereunder, it shall so notify the Manager in writing. If the Manager is
willing to render such services on the terms provided for herein, it shall
notify the Trust in writing, whereupon such series of shares shall become a Fund
hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services and
facilities to the Trust:
(a) Investment Program. The Manager will (i) furnish continuously an
investment program for each Fund, (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Fund and what portion, if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf of the Trust in the investments of each Fund. The Manager will also
manage, supervise and conduct the other affairs and business of the Trust and
each Fund thereof and all matters incidental thereto, subject always to the
control of the Board of Trustees of the Trust and to the provisions of the
Trust's Agreement and Declaration of Trust and By-laws and the 1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the Trust necessary
assistance in (i) the preparation of all reports now or hereafter required by
Federal or other laws, and (ii) the preparation of prospectuses, registration
statements, and amendments thereto that may be required by Federal or other laws
or by the rules or regulations of any duly authorized commission or
administrative body.
(c) Office Space and Facilities. The Manager shall furnish to the Trust
office space in the offices of the Manager or in such other place or places as
may be agreed upon from time to time, and all necessary office facilities,
simple business equipment, supplies, utilities, and telephone service.
(d) Services of Personnel. The Manager shall furnish to the Trust all
necessary executive and administrative personnel for managing the affairs and
investments of the Trust, including personnel to perform clerical, bookkeeping,
accounting and other office functions. These services are exclusive of the
necessary records or services of any dividend disbursing agent, transfer agent,
registrar or custodian. The Manager shall compensate all personnel, officers,
and directors of the Trust if such persons are also employees of the Manager or
its affiliates.
(e) Fidelity Bond. The Manager shall arrange for providing and maintaining a
bond issued by a reputable insurance company authorized to do business in the
place where the bond is issued, against larceny and
A-2
embezzlement covering each officer and employee of the Trust who may singly or
jointly with others have access to funds or securities of the Trust, with direct
or indirect authority to draw upon such funds or to direct generally the
disposition of such funds. The bond shall be in such reasonable amount as a
majority of the Trustees who are not "interested persons" of the Trust as
defined in the 1940 Act, shall determine, with due consideration to the
aggregate assets of the Trust to which any such officer or employee may have
access. The premium for the bond shall be payable by the Trust in accordance
with paragraph 3(17).
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the Manager set
forth in Paragraph 2 above, the Trust assumes and shall pay all expenses for all
other Trust operations and activities and shall reimburse the Manager for any
such expenses incurred by the Manager. The expenses to be borne by the Trust
shall include, without limitation:
(1) all expenses of organizing the Trust or a Fund thereof;
(2) all expenses (including information, materials and services other
than services of the Manager) of preparing, printing and mailing all annual,
semiannual and periodic reports, proxy materials and other communications
(including registration statements, prospectuses and amendments and
revisions thereto) furnished to existing shareholders of the Trust and/or
regulatory authorities;
(3) fees involved in registering and maintaining registration of the
Trust and its shares with the Securities and Exchange Commission and state
regulatory authorities;
(4) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(5) expenses, including printing of certificates, relating to issuance of
shares of the Trust;
(6) the expenses of maintaining a shareholder account and furnishing, or
causing to be furnished, to each shareholder a statement of his account
(which in the case of a shareholder whose statement of account is included
on a brokerage account statement of an affiliated distributor, may be a
reasonable portion of such expense), including the expense of mailing;
(7) taxes and fees payable by the Trust to Federal, state or other
governmental agencies;
A-3
(8) expenses related to the redemption of its shares, including expenses
attributable to any program of periodic redemption;
(9) all issue and transfer taxes, brokers' commissions and other costs
chargeable to the Trust in connection with securities transactions to which
the Trust is a party, including any portion of such commissions attributable
to research and brokerage services as defined by Section 28(e) of the
Securities Exchange Act of 1934, as amended form time to time;
(10) the charges and expenses of the custodian appointed by the Trust, or
any depository utilized by such custodian, for the safekeeping of its
property;
(11) charges and expenses of any shareholder servicing agents, transfer
agents and registrars appointed by he Trust, including costs of serving
shareholder investment accounts;
(12) charges and expenses of independent accounts retained by the Trust;
(13) legal fees and expenses in connection with the affairs of the Trust,
including legal fees and expenses in connection with registering and
qualifying its shares with Federal and state regulatory authorities;
(14) compensation and expenses of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
(15) expenses of shareholders' and Trustees' meetings;
(16) membership dues in the Investment Company Institute or similar
organizations;
(17) insurance premiums on fidelity, errors and omissions and other
coverages; and
(18) such other non-recurring expenses of the Trust as may arise,
including expenses of actions, suits, or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify its
Trustees with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager as provided in
Paragraph 2 hereof, the Trust shall pay to the Manager a monthly fee with
respect to each Fund as soon as practical after the last day of each calendar
month, which fee shall be paid at a rate equal to (i) one-half of one percent
(.50%) on an annual basis of the Monthly Average Net Assets of
A-4
each such Fund for such calendar month up to $500 million, and (ii) forty-five
hundredths of one percent (.45%) on an annual basis of the Monthly Average Net
Assets of each Fund for such calendar month in excess of $500 million.
The "Monthly Average Net Assets" of any Fund of the Trust for any calendar
month shall be equal to the quotient produced by dividing (i) the sum of the net
assets of such Fund, determining in accordance with procedures established from
time to time by or under the direction of the Board of Trustees of the Trust in
accordance with the Agreement and Declaration of Trust of the Trust, as of the
time of day on which net asset value per share is determined on each day during
such month on which such net asset value is determined, by (ii) the number of
such days.
In the case of termination of this Agreement with respect to any Fund during
any calendar month, the fee with respect to such Fund for that month shall be
reduced proportionately based upon the number of calendar days during which it
is in effect and the fee shall be computed upon the average net assets of such
Fund for the days during which it is so in effect.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of any Fund (exclusive of
interest, taxes, brokerage expenses and extraordinary items) for any fiscal year
of the Trust exceed the lowest expense limitation imposed in any jurisdiction in
which that Fund is making sales of its shares or has qualified its shares for
sale, the Manager will pay or reimburse such Fund for that excess up to the
amount of its advisory fee payable with respect to that Fund during that fiscal
year. The amount of the monthly advisory fee payable under Paragraph 4 hereof
shall be reduced to the extent that the annualized expenses of any Fund for that
month exceed the foregoing limitation. At the end of each fiscal year of the
Trust, if the aggregate annual expenses chargeable to any Fund for that year
exceed the foregoing limitation based upon the average of the Monthly Average
Net Assets of that Fund for the year, the Manager will promptly reimburse that
Fund for the amount of such excess, but if such expenses are within the
foregoing limitation, any excess amount previously withheld from the advisory
fee during that fiscal year will be promptly paid over to the Manager.
In the event that this Agreement is terminated with respect to any one or
more Funds as of a date other than the last day of the fiscal year of the Trust,
the Manager shall pay to, or receive from, the Trust a pro rata portion of the
amount that the Manager would have been required to pay or would have received,
if any, had this Agreement remained in effect for the full fiscal year.
A-5
6. TRUST PORTFOLIO.
(a) In connection with the management of the investment and reinvestment of
the assets of the Trust, the Manager acting by its own officers, directors, or
employees or by a duly authorized subcontractor is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the
Trust. In executing portfolio transactions and selecting brokers of dealers, if
any, the manager will use its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Manager shall consider all factors it deems relevant, including
the breadth of the market in and the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular transaction, the
Manager may also consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
the Fund and/or other accounts over which the Manager or an affiliate of the
Manager exercises investment discretion. With the prior approval of the
Trustees, the Manager may pay to a broker or dealer who provides such brokerage
and research services a commission for executing a Fund portfolio transaction
which is in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if, but only if, the Manger
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided.
(b) The Manager agrees that neither it nor any of its officers or directors
will take any long or short term position in the shares of the Trust; provided,
however, that such prohibitions: (i) shall not prevent any affiliate of the
Manager which acts as a distributor of Trust shares pursuant to a written
contract from purchasing shares of the Trust in such capacity; and (ii) shall
not prevent the purchase of shares of the Trust by any of the persons above
described for their own account and for investment at the price at which such
shares are available to the public at the time of purchase or as part of the
initial capitalization of the Trust.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Agreement and Declaration of Trust and
By-laws of the Trust and the Articles of Incorporation and By-laws of the
Manager, it is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in the Manager (or any successor thereof) as
directors, officers, or otherwise, that directors,
A-6
officers, agents and shareholders of the Manager are or may be interested in the
Trust as trustees, officers, shareholders or otherwise, that the Manager (or any
such successor) is or maybe interested in the Trust as a shareholder or
otherwise and that the effect of any such adverse interests shall be governed by
said Agreement and Declaration of Trust, Articles of Incorporation and By-laws.
8. LIABILITY OF MANAGER.
The Manager shall not be liable to the Trust for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Advisory Agreement relates; provided that no provision of
this Agreement shall be deemed to protect the Manager against any liability to
the Trust or its shareholders to which it might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations and duties under this
Agreement. Nor shall any provision hereof be deemed to protect any Trustee or
Officer of the Trust against any such liability to which he might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of his duties or the reckless disregard of his obligations and
duties. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
Initial Funds on the date hereof and, with respect to any additional Fund, on
the date of receipt by the Trust of notice from the Manager in accordance with
Paragraph 1(b) hereof that the Manager is willing to serve as Manager with
respect to such Fund. Unless terminated as herein provided, this Agreement shall
remain in full force and effect (a) with respect to the Initial Funds, until the
second anniversary of its effectiveness, and (b) with respect to each Additional
Fund, until the December 31 following the date on which such Fund becomes a Fund
hereunder. Unless terminated as herein provided, this Agreement shall continue
in full force and effect for periods of one year thereafter with respect to each
Fund so long as such continuance with respect to any such Fund is approved at
least annually (a) by either the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of such Fund,
and (b) in either event by the vote of a majority of the Trustees of the Trust
who are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that the continuance of this
Agreement
A-7
with respect to any Additional Fund is subject to the approval of this Agreement
by a majority of the outstanding voting securities of that Fund at the first
annual or special meeting of shareholders after this Agreement becomes effective
with respect to that Fund.
(b) Amendment. Any amendment to this Agreement shall become effective with
respect to any Fund upon approval of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with respect to any Fund
at any time, without payment of any penalty, by vote of the Trustees or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of that Fund, or by the Manager, on sixty (60) days' written notice to the other
party.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
(e) Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (A) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and (B) that such action has not been approved by the vote of
a majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
10. NAME OF TRUST.
It is understood that the name "Freedom", and any logo associated with that
name, is the valuable property of Freedom Capital Management Corporation, and
that the Trust has the right to include "Freedom" as a part of its name only so
long as an affiliate of Freedom Capital Management Corporation or its successor
or assign is the investment adviser to the Trust. Upon termination of this
Agreement, the Trust shall forthwith cease to use the Freedom name and logos.
11. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
A-8
12. LIMITATION OF LIABILITY.
The term "Freedom Mutual Fund" means and refers to the Trustees from time to
time serving under the Agreement and Declaration of Trust of the Fund dated
December 22, 1980 as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust, as provided in the Agreement and
Declaration of Trust of the Trust. The execution and delivery of this Agreement
have been authorized by the Trustees and the initial shareholder of the Trust
and signed by the President of the Trust, acting as such, and neither such
authorization by such Trustees and shareholder nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
FREEDOM MUTUAL FUND FREEDOM CAPITAL MANAGEMENT CORPORATION
By: By:
---------------------- ------------------------
President President
ATTEST: ATTEST:
---------------------- ------------------------
Assistant Secretary Clerk
A-9
EXHIBIT B
ADVISORY AGREEMENT
AGREEMENT made as of the day of _______, 1996 between FREEDOM CAPITAL
MANAGEMENT CORPORATION, a corporation organized under the laws of the
Commonwealth of Massachusetts and having its principal place of business in
Boston, Massachusetts (the "Manager"), and FREEDOM GROUP OF TAX EXEMPT FUNDS, a
Massachusetts business trust having its principal place of business in Boston,
Massachusetts (the "Trust").
WHEREAS, the Trust proposes to engage in business as an open-end management
investment company and is so registered under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is so registered under the Investment
Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust presently offers shares in two series, the Freedom Tax
Exempt Money Fund and the Freedom California Tax Exempt Money Fund (such series
(the "Initial Funds"), together with all other series subsequently established
by the Trust with respect to which the Trust desires to retain the Manager to
render investment advisory services hereunder and with respect to which the
Manager is willing so to do, being herein collectively referred to as the
"Funds");
NOW THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Initial Funds. The Trust hereby appoints the Manager to act as manager
and investment adviser to the Initial Funds for the period and on the terms
herein set forth. The Manager accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Initial Funds with respect to which it desires
to retain the Manager to render management and investment
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advisory services hereunder, it shall so notify the Manager in writing. If the
Manager is willing to render such services on the terms provided for herein, it
shall notify the Trust in writing, whereupon such series of shares shall become
a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services and
facilities to the Trust:
(a) Investment Program. The Manager will (i) furnish continuously an
investment program for each Fund, (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Fund and what portion if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf of the Trust in the investments of each Fund. The Manager will also
manage, supervise and conduct the other affairs and business of the Trust and
each Fund thereof and all matters incidental thereto, subject always to the
control of the Board of Trustees of the Trust and to the provisions of the
Trust's Agreement and Declaration of Trust and By-laws and the 1940 Act.
(b) Regulatory Reports. The Manager shall furnish to the Trust necessary
assistance in (i) the preparation of all reports now or hereafter required by
Federal or other laws, and (ii) the preparation of prospectuses, registration
statements and amendments thereto that may be required by Federal or other laws
or by the rules or regulations of any duly authorized commission or
administrative body.
(c) Office Space and Facilities. The Manager shall furnish to the Trust
office space in the offices of the Manager or in such other place or places as
may be agreed upon from time to time, and all necessary office facilities,
simple business equipment, supplies, utilities and telephone service.
(d) Services of Personnel. The Manager shall furnish to the Trust all
necessary executive and administrative personnel for managing the affairs and
investments of the Trust, including personnel to perform clerical, bookkeeping,
accounting and other office functions. These services are exclusive of the
necessary records or services of any dividend disbursing agent, transfer agent,
registrar or custodian. The Manager shall compensate all personnel, officers,
and directors of the Trust if such persons are also employees of the Manager or
its affiliates.
(e) Fidelity Bond. The Manager shall arrange for providing and maintaining a
bond issued by a reputable insurance company authorized to do business in the
place where the bond is issued against larceny and
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embezzlement covering each officer and employee of the Trust who may singly or
jointly with others have access to funds or securities of the Trust, with direct
or indirect authority to draw upon such funds or to direct generally the
disposition of such funds. The bond shall be in such reasonable amount as a
majority of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, shall determine, with due consideration to the
aggregate assets of the Trust to which any such officer or employee may have
access. The premium for the bond shall be payable by the Trust in accordance
with paragraph 3(17).
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the Manager set
forth in Paragraph 2 above, the Trust assumes and shall pay all expenses for all
other Trust operations and activities and shall reimburse the Manager for any
such expense incurred by the Manager. The expenses to be borne by the Trust
shall include, without limitation:
(1) all expenses of organizing the Trust or forming any series thereof;
(2) all expenses (including information, materials and services other
than services of the Manager) of preparing, printing and mailingall annual,
semiannual and periodic reports, proxy materials and other communications
(including registration statements, prospectuses and amendments and
revisions thereto) furnished to existing shareholders of the Trust and/or
regulatory authorities;
(3) fees involved in registering and maintaining registration of the
Trust and its shares with the Securities and Exchange Commission and state
regulatory authorities;
(4) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(5) expenses, including printing of certificates, relating to issuance of
shares of the Trust;
(6) the expenses of maintaining a shareholder account and furnishing, or
causing to be furnished, to each shareholder a statement of his account
(which in the case of a shareholder whose statement of account is included
on a brokerage account statement of an affiliated distributor, may be a
reasonable portion of such expense), including the expense of mailing;
(7) taxes and fees payable by the Trust to Federal, state or other
governmental agencies;
B-3
(8) expenses related to the redemption of its shares, including expenses
attributable to any program of periodic redemption;
(9) all issue and transfer taxes, brokers' commissions and other costs
chargeable to the Trust in connection with securities transactions to which
the Trust is a party, including any portion of such commissions attributable
to research and brokerage services as defined by Section 28(e) of the
Securities Exchange Act of 1934, as amended from time to time;
(10) the charges and expenses of the custodian appointed by the Trust, or
any depository utilized by such custodian, for the safekeeping of its
property;
(11) charges and expenses of any shareholder servicing agents, transfer
agents and [registrars] appointed by the Trust, including costs of servicing
shareholder investment accounts;
(12) charges and expenses of independent accountants retained by the
Trust;
(13) legal fees and expenses in connection with the affairs of the Trust,
including legal fees and expenses in connection with registering and
qualifying its shares with Federal and state regulatory authorities;
(14) compensation and expenses of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
(15) expenses of shareholders' and Trustees' meetings;
(16) membership dues in, and assessments of, the Investment Company
Institute or similar organizations;
(17) insurance premiums on fidelity, errors and omissions and other
coverages; and
(18) such other non-recurring expenses of the Trust as may arise,
including expenses of actions, suits, or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify its
Trustees or shareholders with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager as set forth
in Paragraph 2 hereof, the Trust shall pay to the Manager a monthly fee with
respect to each Fund as soon as practical after the last day of each calendar
month, which fee shall be paid at a rate equal to (i) one-half of one percent
(.50%) on an annual basis of the Monthly Average Net Assets of each such
B-4
Fund for such calendar month up to $500 million, and (ii) forty-five hundredths
of one percent (.45%) on an annual basis of the Monthly Average Net Assets of
each Fund for such calendar month in excess of $500 million.
The "Monthly Average Net Assets" of any Fund of the Trust for any calendar
month shall be equal to the quotient produced by dividing (i) the sum of the net
assets of such Fund, determined in accordance with procedures established from
time to time by or under the direction of the Board of Trustees of the Trust in
accordance with the Agreement and Declaration of Trust, as of the time of day on
which net asset value per share is determined on each day during such month on
which such net asset value is determined, by (ii) the number of such days.
In the case of commencement or termination of this Agreement with respect to
any Fund during any calendar month, the fee with respect to such Fund for that
month shall be reduced proportionately based upon the number of calendar days
during which it is in effect and the fee shall be computed upon the average net
assets of such Fund for the days during which it is in effect.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of any Fund (exclusive of
interest, taxes, brokerage expenses and extraordinary items) for any fiscal year
of the Trust exceed the lowest expense limitation imposed in any jurisdiction in
which that Fund is then making sales of its shares or in which its shares are
then qualified for sale, the Manager will pay or reimburse such Fund for that
excess up to the amount of its advisory fee payable with respect to that Fund
during that fiscal year. The amount of the monthly advisory fee payable under
Paragraph 4 hereof shall be reduced to the extent that the annualized expenses
of any Fund for that month exceed the foregoing limitation. At the end of each
fiscal year of the Trust, if the aggregate a annual expenses chargeable to any
Fund for that year exceed the foregoing limitation based upon the average of the
Monthly Average Net Assets of that Fund for the year, the Manager will promptly
reimburse that Fund for the amount of such excess, but if such expenses are
within the foregoing limitation, any excess amount previously withheld from the
advisory fee during that fiscal year will be promptly paid over to the Manager.
In the event that this Agreement is terminated with respect to any one or
more Funds as of a date other than the last day of the fiscal year of the Trust,
then the expenses shall be annualized and the Manager shall pay to, or receive
from, the Trust a pro rata portion of the amount that the Manager would have
been required to pay or would have received, if any, had this Agreement remained
in effect for the full fiscal year.
B-5
6. PORTFOLIO TRANSACTIONS.
In connection with the management of the investment and reinvestment of the
assets of the Trust, the Manager, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the
Trust. In executing portfolio transactions and selecting brokers or dealers, if
any, the Manager will use its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Manager shall consider all factors it deems relevant, including
the breadth of the market in and the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular transaction, the
Manager may also consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
any Fund of the Trust and/or other accounts over which the Manager or an
affiliate of the Manager exercises investment discretion. With the prior
approval of the Trustees, the Manager may pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if, but only if, the
Manager determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Agreement and Declaration of Trust and
By-laws of the Trust and the Articles of Incorporation and By-laws of the
Manager, it is understood that Trustees, officers, agents and shareholders of
the Trust are or may be interested in the Manager (or any successor thereof) as
directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Manager (or any successor) are or may be interested in the
Trust as Trustees, officers, shareholders or otherwise, that the Manager (or any
such successor) is or may be interested in the Trust as a shareholder or
otherwise and that the effect of any such adverse interests shall be governed by
said Agreement and Declaration of Trust, Articles of Incorporation and By-laws.
The Manager agrees that neither it nor any of its officers or directors will
take any long or short term position in the shares of the Trust; provided,
however, that such prohibition: (i) shall not prevent any affiliate of the
B-6
Manager which acts as a distributor of the Trust shares pursuant to a written
contract from purchasing shares of the Trust in such capacity; and (ii) shall
not prevent the purchase of shares of the Trust by any of the persons above
described for their own account and for investment at the price at which such
shares are available to the public at the time of purchase or as part of the
initial capitalization of the Trust.
8. LIABILITY OF MANAGER.
The Manager shall not be liable to the Trust for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Advisory Agreement relates; provided that no provision of
this Agreement shall be deemed to protect the Manager against any liability to
the Trust or its shareholders to which it might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations and duties under this
Agreement. Nor shall any provision hereof be deemed to protect any Trustee or
Officer of the Trust against any such liability to which he might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of his duties or the reckless disregard of his obligations and
duties. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
Initial Funds on the date on the date first above written and, with respect to
any additional Fund, on the date of receipt by the Trust of notice from the
Manager in accordance with Paragraph l(b) hereof that the Manager is willing to
serve as Manager with respect to such Fund. Unless terminated as herein
provided, this Agreement shall remain in full force and effect (a) with respect
to the Initial Funds, until the second anniversary of its effectiveness, and (b)
with respect to each additional Fund, until the December 31 following the date
on which such Fund becomes a Fund hereunder. Unless terminated as herein
provided, this Agreement shall continue in full force and effect for periods of
one year thereafter with respect to each Fund so long as such continuance with
respect to any such Fund is approved at least annually (a) by either the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of such Fund, and (b) in either event by
the vote of a majority of the Trustees of the Trust who are not parties to this
Agreement of "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that the continu-
B-7
ance of this Agreement with respect to any additional Fund is subject to the
approval of this Agreement by a majority of the outstanding voting securities of
that Fund at the first annual or special meeting of shareholders after this
Agreement becomes effective with respect to that Fund.
(b) Amendment. Any amendment to this Agreement shall become effective with
respect to any Fund upon approval of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with respect to any Fund
at any time, without payment of any penalty, by vote of the Trustees or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of that Fund, or by the Manager, on sixty (60) days' written notice to the other
party.
(d) Automatic Termination.This Agreement shall automatically and immediately
terminate in the event of its assignment.
(e) Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and (ii) that such action has not been approved by the vote of
a majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
10. NAME OF TRUST.
It is understood that the name "Freedom", and any logo associated with that
name, is the valuable property of Freedom Capital Management Corporation, and
that the Trust has the right to include "Freedom" as a part of its name only so
long as an affiliate of Freedom Capital Management Corporation or its successor
or assign is the investment adviser to the Trust. Upon termination of this
Agreement, the Trust shall forthwith cease to use the Freedom name and logos.
11. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
B-8
12. LIMITATION OF LIABILITY.
The term "Freedom Group of Tax Exempt Funds" means and refers to the
Trustees from time to time serving under the Agreement and Declaration of Trust
of the Fund dated June 1, 1982 as the same may subsequently thereto have been,
or subsequently hereto may be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust, as provided in
the Agreement and Declaration of Trust of the Trust. The execution and delivery
of this Agreement have been authorized by the Trustees and the initial
shareholder of the Trust and signed by the President of the Trust, acting as
such, and neither such authorization by such Trustees and shareholder nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
FREEDOM GROUP OF FREEDOM CAPITAL MANAGEMENT
TAX EXEMPT FUNDS CORPORATION
By: By:
---------------------- ------------------------
President President
ATTEST: ATTEST:
---------------------- ------------------------
Assistant Secretary Clerk
B-9
VOTE THIS PROXY CARD TODAY!
(Please detach at perforation before mailing)
FUND NAME WILL PRINT HERE PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking all previous proxies, hereby appoint(s)
Dexter A. Dodge and John J. Danello and each of them, attorneys with full power
of substitution in each, to vote all the shares of beneficial interest of
above-referenced Fund (the "Fund"), a portfolio series of the above-referenced
Trust (the "Trust"), which the undersigned is (are) entitled to vote at the
Special Meeting of Shareholders (the "Meeting") of the Fund to be held at the
offices of the Trust, sixth floor, One Beacon Street, Boston, Massachusetts
02108, on Monday, December 16, 1996 at 2:00 p.m., Boston time, and at any
adjournment or postponement thereof. All powers may be exercised by a majority
of said proxy holders or substitutes voting or acting, or, if only one votes and
acts, then by that one. Receipt of the Proxy Statement is hereby acknowledged.
If not revoked in the manner described in the Proxy Statement, this proxy shall
be voted as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date: , 1996
--------------------
NOTE: Signature(s) should agree with name(s)
printed herein. Executors, Administrators, Trustees,
etc. should so indicate.
-----------------------------------------------
Signatures
VOTE THIS PROXY CARD TODAY!
(Please detach at perforation before mailing)
- --------------------------------------------------------------------------------
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) PROPOSALS (1), (2), (3)
AND (4) IF NO SPECIFICATION IS MADE BELOW. AS TO ANY OTHER MATTER, SAID PROXY OR
PROXIES SHALL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT. (The following
proposals are numbered to correspond to the numbering of proposals contained in
the Proxy Statement). Please vote by filing in the appropriate boxes below, as
shown, using blue or black ink or dark pencil. Do not use red ink.
1. To consider and vote on approval of a new Investment Advisory Agreement
between the Trust, on behalf of the Fund, and Freedom Capital Management
Corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To elect eight trustees of the Trust. Nominees: Dexter A. Dodge, Richard
A. Farrell, Ernest T. Kendall, Richard B. Osterberg, Lawrence G.
Kirshbaum, William H. Darling, John R. Haack and Laurence R. Vestor, Jr.
FOR all [ ] WITHHOLD AUTHORITY [ ]
nominees listed from all nominees except as
herein noted to the contrary below
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), BY WRITING THE NOMINEE(S)
NAME(S) ON THE LINE BELOW.
- --------------------------------------------------------------------------------
3. To ratify the selection of Price Waterhouse LLP as the independent
auditors of the Trust.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To approve an amendment to the Cash Management Fund's fundamental
investment restriction regarding illiquid securities.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In the discretion of said proxy or proxies, to act upon such other matters as
may properly come before the Meeting or any adjournment or postponement thereof
