[Federal Register Volume 61, Number 218 (Friday, November 8, 1996)]
[Notices]
[Pages 57930-57932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28701]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22311; 812-10384]
Freedom Mutual Fund, et al.; Notice of Application
November 1, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Freedom Mutual Fund (``Freedom Mutual''), on behalf of
Freedom Cash Management Fund and Freedom Government Securities Fund
(``Freedom Funds''), Freedom Group of Tax Exempt Funds (``Freedom
Group''), on behalf of Freedom Tax Exempt Money Fund and Freedom
California Tax Exempt Money Fund (``Group Funds''), FundManager Trust
(together with Freedom Mutual and Freedom Group, ``Trusts''), on behalf
of FundManager Aggressive Growth Fund, FundManager Growth Fund,
FundManager Growth & Income Fund, FundManager Bond Fund and FundManager
Managed Total Return Fund (together with the Freedom Funds and the
Group Funds, ``Funds''), and Freedom Capital Management Corporation
(``Adviser'').
RELEVANT ACT SECTION: Exemption requested pursuant to section 6(c) for
an exemption from section 15(a) of the Act.
SUMMARY OF APPLICATION: Applicants request an order permitting
implementation, without formal shareholder approval, of new investment
advisory agreements between the Trusts and the Adviser with respect to
each Fund for an interim period of not more than 120 days, beginning on
the date on which the Adviser's parent is sold to JHFSC Acquisition
Corp. and ending no later than March 31, 1997. The requested order also
would permit the Adviser to receive all fees earned under the New
Agreements following shareholder approval.
FILING DATE: The application was filed on October 8, 1996. Applicants
have agreed to file an amendment during the notice period, the
substance of which is included in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on November 22,
1996, and should be accompanied by proof of service on applicants, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, One Beacon Street, Boston, Massachusetts 02108.
FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Staff Attorney, at
(202) 942-0552, or Mercer E. Bullard, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
Supplementary Information: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. Each Trust is an open-end management investment company
registered under the Act. Freedom Mutual and Freedom Group are
Massachusetts business trusts, and FundManager Trust is a Delaware
business trust. The Adviser, a registered investment adviser under the
Investment Advisers Act of 1940, manages the assets of each Fund
pursuant to an investment advisory agreement with each Trust
(``Existing Agreement''). The Adviser is a wholly owned subsidiary of
John Hancock Freedom Securities Corporation (``JHFSC''), which is
wholly owned by John Hancock Subsidiaries, Inc. (``Hancock
Subsidiaries'').
2. Under a contribution agreement (``Contribution Agreement'')
dated October 4, 1996, among Hancock Subsidiaries, JHFSC Acquisition
Corp. (``Newco''), Thomas H. Lee Equity Fund III, L.P. (``Lee''), and
SCP Private Equity Partners, L.P. (``SCP''), Hancock Subsidiaries will
contribute 100% of the issued and outstanding shares of capital stock
of JHFSC to Newco in exchange for $180,000,000 (subject to reduction to
the extent of certain distributions made prior to closing) and 4.999%
of the issued and outstanding capital stock of Newco (``Transaction'').
As a result of the Transaction, Lee, a Massachusetts limited
partnership, and SCP, a Delaware limited partnership, will hold a
majority of the stock of Newco. JHFSC will become a wholly-owned
subsidiary of Newco, and the Adviser will remain a wholly-owned
subsidiary of JHFSC. Applicants expect to consummate the Transaction on
November 26, 1996, assuming the necessary approvals are received or
waived.
3. Applicants request an exemption to permit implementation,
without shareholder approval, of new advisory agreements between the
Trusts and the Adviser with respect to each Fund (``New Agreements'').
The requested exemption would cover an interim period of not more than
120 days beginning on the date of the Transaction and continuing
through the date a New Agreement is approved or disapproved by the
shareholders of the respective Funds (but in no event later than March
31, 1997) (``Interim Period''). The New Agreements are identical to the
Trusts' Existing Agreements, except for their effective dates and, with
resect to the Freedom Mutual Fund and the Freedom
[[Page 57931]]
Group of Tax Exempt Funds, revisions have been made to reflect the
change of the names of those Trusts from Tucker Anthony Mutual Fund and
Tucker Anthony Group of Tax Exempt Funds, respectively, to their
current names.
4. The Trusts' Boards of Trustees held meetings on September 10,
1996, and October 3, 1996, for the purpose of considering approval of
the New Agreements in accordance with Section 15(c) of the Act. The
Boards received from the Adviser, Hancock Subsidiaries, and Newco such
information as the Trustees deemed reasonably necessary to evaluate
whether the terms of the New Agreements are in the best interests of
the Funds and their shareholders. At the October 3, 1996 meeting, the
Trustees voted unanimously (subject to execution of the Contribution
Agreement) to approve the New Agreements and recommend that
shareholders of each Fund approve the New Agreements.
5. Applicants also request an exemption to permit the Adviser to
receive from each Fund all fees earned under the New Agreements (which
would be the same as all fees that would have been earned under the
Existing Agreements) implemented during the Interim Period if and to
the extent the New Agreements are approved by the shareholders of each
Fund. The fees to be paid during the Interim Period are at the same
rate as the fees currently payable by the Funds.
6. Applicants propose to enter into an escrow arrangement with an
unaffiliated financial institution that will serve as escrow agent. The
arrangement, in substance, will provide as described below. The fees
payable to the Adviser during the Interim Period under the New
Agreements will be paid into an interest-bearing escrow account
maintained by an escrow agent. Amounts in the escrow account with
respect to the Funds (including interest earned on such paid fees) will
be paid to the Adviser only if shareholders of the Funds approve the
New Agreements. If shareholders of the Funds fail to approve the New
Agreements, the escrow agent will pay the Funds the escrow amounts
(including any interest earned). The escrow agent will release the
moneys as provided above only upon receipt of certificates from
officers of the Funds (none of whom is an affiliate of the Adviser)
stating, if the moneys are to be delivered to the Adviser, that the New
Agreements have received the requisite Fund shareholder vote, or, if
the moneys are to be delivered to the Funds, that the Interim Period
has ended and the New Agreements have not been approved by the
requisite Fund shareholder vote. Before any such certificate is sent,
the trustees of the relevant Trust who are hot ``interested persons''
of the Trust within the meaning of Section 2(a)(19) of the Act
(``Independent Trustees'') will be notified.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in pertinent part, that it
shall be unlawful for any person to serve or act as investment adviser
of a registered investment company, except pursuant to a written
contract that has been approved by the vote of a majority of the
outstanding voting securities of such company. Section 15(a) further
requires that such written contract provide for automatic termination
in the event of its assignment. Section 2(a)(4) of the Act defines
``assignment'' to include any direct or indirect transfer of a contract
by the assignor.
2. Applicants state that, upon completion of the Transaction,
Hancock Subsidiaries, the Adviser's indirect parent, will no longer
control JHFSC. Applicants therefore believe that the Transaction will
result in an indirect ``assignment'' of the Existing Agreements within
the meaning of section 2(a)(4), terminating the Existing Agreements
according with their terms.
3. Rule 15a-4 provides, among other things, that if an investment
advisory contract with an investment company is terminated by
assignment, the adviser may continue to act as such for 120 days under
a written contract that has not been approved by the company's
shareholders, if the new contract is approved by the board of directors
(or trustees) of the investment company (including a majority of
trustees that are not ``interested persons'' of the investment
company), the compensation to be paid under the new contract does not
exceed the compensation which would have been paid under the contract
most recently approved by shareholders of the investment company, and
neither the investment adviser nor any controlling person of the
investment adviser ``directly or indirectly receives money or other
benefit'' in connection with the assignment. Applicants state that they
cannot rely on rule 15a-4 because of the benefits to Hancock
Subsidiaries arising from the Transaction.
4. Applicants contend that the Trusts have prepared the required
proxy materials as expeditiously as possible and shareholder meetings
are expected to be held on or about December 16, 1996. Applicants
believe that the timing of the shareholder meetings may not provide an
adequate solicitation period to obtain approval of the New Agreements
by the shareholders of each Fund prior to effecting the Transaction,
particularly because shareholders of investment companies frequently do
not return proxies.
5. Applicants submit that the scope and quality of services
provided for the Funds during the Interim Period will not be
diminished. During the Interim Period, each Fund would operate under
the New Agreements, which are, except as noted above, the same as the
Existing Agreements. Applicants are not aware of any material changes
in the personnel who will provide investment management services during
the Interim Period.
6. Applicants assert that the best interests of Fund shareholders
would be served if the Adviser receives fees for services during the
Interim Period as provided in the application. Applicants contend that
these fees are a substantial part of the Adviser's total revenues and,
thus, are essential to maintaining its ability to provide services to
the Funds.
7. Section 6(c) of the Act provides that the SEC may exempt any
person, security, or transaction from any provision of the Act, if and
to the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act. For
the reasons stated above, applicants believe that the requested relief
meets this standard.
Applicants' Conditions
Applicants agree as conditions to the issuance of the exemptive
order requested by this application that:
1. The New Agreements will have the same terms and conditions as
the Existing Agreements, except for their effective dates and, with
respect to the Freedom Mutual Fund and the Freedom Group of Tax Exempt
Funds, revisions have been made to reflect the change of the names of
those Trusts from Tucker Anthony Mutual Fund and Tucker Anthony Group
of Tax Exempt Funds, respectively, to their current names.
2. Fees earned by the Adviser in respect of the New Agreements
during the Interim Period will be maintained in an interest-bearing
escrow account, and amounts in the account (including interest earned
on such paid fees) will be paid: (a) to the Adviser in accordance with
the New Agreements, after the requisite approvals are obtained, or (b)
to the respective Fund, in the absence of such approvals.
3. The Funds will hold meetings of shareholders to vote on approval
of the New Agreements on or before the 120th
[[Page 57932]]
day following the termination of the Existing Agreements (but in no
event later than March 31, 1997).
4. Newco and/or Hancock Subsidiaries will bear the costs of
preparing and filing the application and the costs relating to the
solicitation of Fund shareholder approval necessitated by the
Transaction.
5. The Adviser will take all appropriate steps so that the scope
and quality of advisory and other services provided to the Funds during
the Interim Period will be at least equivalent, in the judgment of the
Boards, including a majority of the Independent Trustees, to the scope
and quality of services previously provided. If personnel providing
material services during the Interim Period change materially, the
Adviser will apprise and consult with the Boards to assure that they,
including a majority of the Independent Trustees of each Trust, are
satisfied that the services provided will not be diminished in scope or
quality.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-28701 Filed 11-7-96; 8:45 am]
BILLING CODE 8010-01-M