ADVISORY AGREEMENT
AGREEMENT made as of the 29th day of November, 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 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 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).
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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 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;
(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;
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(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
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
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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.
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
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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
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
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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 0000 Xxx) 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 0000 Xxx) 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 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 0000 Xxx) 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
0000 Xxx) 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 0000 Xxx) 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.
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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.
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
FREEDOM GROUP OF TAX EXEMPT FREEDOM CAPITAL MANAGEMENT
FUNDS CORPORATION
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxx Xxxxxxx
------------------------- -----------------------
President President
ATTEST: ATTEST:
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxx X. Xxxxx
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Assistant Secretary Assistant Clerk
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