[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