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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14c INFORMATION
Information Statement Pursuant to Section 14c of the Securities Exchange Act
of 1934 (Amendment No. )
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14c-5(d)(2))
New England Zenith Fund
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(Name of Registrant as Specified In Its Charter)
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NEW ENGLAND ZENITH FUND
MFS Total Return Series
INFORMATION STATEMENT
This Information Statement is being furnished by the Board of Trustees (the
"Trustees") of New England Zenith Fund (the "Trust") to the shareholders of the
MFS Total Return Series, which was formerly known as the Back Bay Advisors
Managed Series (the "Series"). This Information Statement is being mailed
beginning on or about September 21, 2001 to all of the Series's shareholders of
record as of the close of business on June 30, 2001 (the "Shareholders").
NO SHAREHOLDER VOTE WILL BE TAKEN WITH RESPECT TO THE MATTERS DESCRIBED IN THIS
INFORMATION STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
I. INTRODUCTION
The Trust is an open-end management investment company organized in 1987 as a
business trust under the laws of The Commonwealth of Massachusetts. The Trust is
a series type company with 14 investment portfolios. The Series is one of those
portfolios. MetLife Advisers, LLC (the "Adviser") acts as adviser to the Series.
Prior to July 1, 2001, Back Bay Advisors, L.P. ("Back Bay") acted as subadviser
to the Series pursuant to a subadvisory agreement dated October 30, 2000 between
Back Bay and the Adviser (the "Previous Subadvisory Agreement").
On June 28, 2001, the Trustees approved a new subadvisory agreement (the "New
Subadvisory Agreement") between the Adviser and Massachusetts Financial Services
Company ("MFS") with respect to the Series, which took effect as of July 1,
2001. In connection with the appointment of MFS pursuant to the New Subadvisory
Agreement, the Trustees terminated the Previous Subadvisory Agreement, and as of
July 1, 2001, Back Bay no longer served as subadviser to the Series.
The Investment Company Act of 1940, as amended (the "1940 Act") generally
provides that an investment adviser or subadviser to a mutual fund may act as
such only pursuant to a written contract which has been approved by a vote of
the fund's shareholders, as well as by a vote of a majority of the trustees of
the fund who are not parties to such contract or interested persons of any party
to such contract. The Trust and the Adviser, however, have received from the
Securities and Exchange Commission an exemption from the shareholder approval
voting requirement in certain circumstances (the "SEC Exemption"). Under the SEC
Exemption, the Adviser is permitted, under specified conditions, to enter into
new and amended subadvisory agreements for the management of the portfolio of a
series of the Trust, including agreements with new subadvisers that are not
affiliated persons of the Adviser or the Trust, and agreements with existing
subadvisers if there is a material change in the terms of the subadvisory
agreement or if there is an "assignment," as defined in the 1940 Act, or other
event causing termination of the existing subadvisory agreement, without
obtaining the approval of the Trust's shareholders. Such agreements must
nevertheless be approved by the Trustees, in accordance with the requirements of
the 1940 Act. One of the conditions of the SEC Exemption is that within 90 days
after entering into a new or amended subadvisory agreement without shareholder
approval, the Trust must provide an information statement to the shareholders of
the affected series setting forth substantially the information that would be
required to be contained in a proxy statement for a meeting of shareholders to
vote on the approval of the agreement. In accordance with the SEC Exemption, the
Trust is furnishing this Information Statement to the Shareholders in order to
provide information regarding the New Subadvisory Agreement.
II. THE AGREEMENTS
Description of the Advisory Agreement
The Adviser currently serves as investment adviser to the Series pursuant to an
advisory agreement between the Adviser and the Trust dated August 30, 1996 (the
"Advisory Agreement"). The Advisory Agreement provides that the Adviser will,
subject to its rights to delegate such responsibilities to other parties,
provide to the Series both portfolio management services and administrative
services.
Under the Advisory Agreement, a management fee is payable by the Series to the
Adviser at the annual rate of 0.50% of the Series's average daily net assets.
For the fiscal year ended December 31, 2000, the aggregate management fee
payable by the Series to the Adviser under the Advisory Agreement was
$1,005,439.
VL-166-01
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Description of Previous Subadvisory Agreement
Under the Previous Subadvisory Agreement, the Adviser delegated its portfolio
management responsibilities for the Series to Back Bay. The Previous Subadvisory
Agreement required Back Bay to manage the investment and reinvestment of the
assets of the Series, subject to the supervision of the Adviser. Under the terms
of the Previous Subadvisory Agreement, Back Bay was authorized to effect
portfolio transactions for the Series, using its own discretion and without
prior consultation with the Adviser. Back Bay also was required to report
periodically to the Adviser and the Trustees.
Under the Previous Subadvisory Agreement, an investment subadvisory fee was
payable by the Adviser to Back Bay at the annual rate of 0.25% of the first $50
million of the average daily net assets of the Series and 0.20% of the amount of
such assets in excess of $50 million. For the fiscal year ended December 31,
2000, the aggregate investment subadvisory fee paid by the Adviser to Back Bay
under the Previous Subadvisory Agreement was $ . The Series paid no fee
to Back Bay under the Previous Subadvisory Agreement.
The Trustees approved the Previous Subadvisory Agreement (which approval was
effective as of October 30, 2000) at a meeting held on August 3, 2000.
Shareholders of the Series approved the Previous Subadvisory Agreement at a
meeting held on October 30, 2000. The purpose of the submission of the Previous
Subadvisory Agreement for shareholder approval at such time was to approve it
following the acquisition of Back Bay's parent company, Nvest Companies, L.P. by
CDC Asset Management. This acquisition resulted in the termination pursuant to
the 1940 Act of a predecessor agreement to the Previous Subadvisory Agreement,
which termination was effective as of October 30, 2000. (An interim subadvisory
agreement pursuant to Rule 15a-4 under the 1940 Act was in place for the Series
for a portion of the day on October 30, 2000.)
Description of New Subadvisory Agreement
The New Subadvisory Agreement requires MFS to manage the investment and
reinvestment of the assets of the Series, subject to the supervision of the
Adviser. Under the terms of the New Subadvisory Agreement, MFS is authorized to
effect portfolio transactions for the Series in the discretion of MFS and
without prior consultation with the Adviser. MFS is required to report
periodically to the Adviser and the Trustees. Under the New Subadvisory
Agreement, the Adviser compensates MFS at an annual rate of 0.25% of the first
$50 million of the average daily net assets of the Series and 0.20% of the
amount of such assets in excess of $50 million. This subadvisory fee is the same
as the subadvisory fee payable to Back Bay under the Previous Subadvisory
Agreement.
The New Subadvisory Agreement provides that it will continue in effect for two
years from its date of execution, and from year to year thereafter so long as
such continuance is specifically approved at least annually (i) by the Trustees
or by vote of a majority of the outstanding voting securities of the Series and
(ii) by vote of a majority of the Trustees who are not "interested persons," as
that term is defined in the 1940 Act, of the Trust, the Adviser or MFS, cast in
person at a meeting called for the purpose of voting on such approval. Any
amendment to the New Subadvisory Agreement must be approved by the Adviser and
MFS and, if required by law, by vote of a majority of the Trustees who are not
interested persons of the Trust, the Adviser or MFS, cast in person at a meeting
called for the purpose of voting on such approval, and/or by vote of a majority
of the outstanding voting securities of the Series.
The New Subadvisory Agreement may be terminated without penalty (i) by vote of
the Trustees, including a majority of the Trustees who are not interested
persons of the Trust, the Adviser or MFS, or by vote of a majority of the
outstanding voting securities of the Series, upon 60 days' written notice to
MFS, (ii) by MFS upon 60 days' written notice to the Adviser and the Trust, or
(iii) if approved by the Trustees, by the Adviser upon 60 days' written notice
to MFS. The New Subadvisory Agreement terminates automatically in the event of
its assignment or upon the termination of the Advisory Agreement.
The New Subadvisory Agreement provides that MFS and its officers, directors,
employees or agents (the "Indemnified Parties") shall not be subject to any
liability in connection with the performance of services thereunder in the
absence of willful misfeasance, bad faith or gross negligence in the performance
of MFS's duties or by reason of reckless disregard by MFS of its obligations and
duties thereunder. Furthermore, the Adviser has agreed to indemnify the
Indemnified Parties for any loss arising from shareholder claims that are not
based upon the obligations of MFS with respect to the Series under the New
Subadvisory Agreement.
Comparison of Previous and New Subadvisory Agreements
The New Subadvisory Agreement is substantially similar to the Previous
Subadvisory Agreement, except (1) references to Back Bay have been changed to
references to MFS and (2) certain other minor differences. If the New
Subadvisory Agreement had been in effect during the fiscal year ended December
31, 2000, the subadvisory fee payable to MFS would have been the same as was
payable to Back Bay under the Previous Subadvisory Agreement (and its
predecessor agreements) for this period. The advisory fee payable by the Series
to the Adviser would have been the same whether the New Subadvisory Agreement or
the
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Previous Subadvisory Agreement (and its predecessor agreements) had been in
effect during the fiscal year ended December 31, 2000.
NO CHANGE IN THE ADVISORY FEE RATE PAYABLE BY THE SERIES TO THE ADVISER OR IN
THE SUBADVISORY FEE RATE PAYABLE BY THE ADVISER IS BEING PROPOSED.
III. INFORMATION ABOUT MFS
Trustee Review
Based on a review of the investment approach and investment practices used by
Back Bay in managing the Series's portfolio, the Series's performance record
under Back Bay's management, the determination by Back Bay's corporate parent to
wind up Back Bay's affairs, the performance record of MFS in managing funds with
investment objectives similar to those of the Series and the performance of
other funds with investment objectives similar to those of the Series, the
Adviser recommended, and the Trustees determined, that it would be appropriate
for MFS to assume responsibility for the day-to-day management of the Series's
portfolio. As a result, on April 25, 2001, the Trustees approved the termination
of the Previous Subadvisory Agreement, such termination to take effect 60 days
following the provision of notice to Back Bay in accordance with the terms of
the Previous Subadvisory Agreement.
In connection with the change of subadviser, the Series's name was changed from
"Back Bay Advisors Managed Series" to "MFS Total Return Series".
In determining to approve the appointment of MFS as subadviser to the Series,
the Trustees considered numerous additional factors that they considered
relevant, including the qualifications of MFS and its personnel and their
ability to provide portfolio management services to the Series. The Trustees
also considered extensive information about the Series, MFS's management style
and MFS's proposed approach to managing the Series's portfolio, including
information about MFS's organizational structure, investment and legal and
compliance personnel, compliance procedures and financial condition. In
addition, the Trustees considered MFS's status as a respected investment adviser
and the fact that the Previous Subadvisory Agreement and the New Subadvisory
Agreement are substantially similar to each other, including providing for the
same subadvisory fee rate.
The Trustees also considered MFS's policies for placing portfolio transactions
of the Series with broker-dealers that furnish brokerage and research services
to MFS, as described below. The Trustees also took into account MFS's
substantial experience and reputation as a manager of equity and fixed income
investments, and the prominence of the MFS name in the marketplace for
investment advice, as possible factors that might enhance the marketability of
the insurance products that invest in the Series, and thus lead to growth in the
size of the Series, although such growth cannot be assured.
Based on this review, the Trustees concluded that it was appropriate and
desirable for MFS to assume responsibility for the management of the Series
under the New Subadvisory Agreement.
Changes in Investment Style
The investment approach used by MFS in managing the Series's portfolio is
expected to be similar to the approach previously used by Back Bay in managing
the Series's portfolio. Back Bay previously managed, and MFS currently manages,
the Series as a "balanced" portfolio, with portions of the Series's assets
invested in both equities and fixed income securities.
In managing the Series's portfolio, MFS generally intends to maintain about a
60% weighting in equities and about a 40% weighting in fixed income securities.
Under Back Bay's management of the Series, the weightings typically were in this
same range.
Back Bay previously used an economic model that took various factors and
indicators into account to adjust the asset mix of the Series. MFS has informed
the Adviser that it does not expect to use such a model, but that it typically
adjusts the mix of equities and fixed income securities held by the Series based
on its outlook for the relative performance of these two asset classes.
MFS has informed the Adviser that it anticipates an annual equity portfolio
turnover rate of approximately 90% for the Series, but that the actual rate
might be higher or lower than that. Under Back Bay's management of the Series,
portfolio turnover was 48% in the year ended December 31, 2000 and 49% in the
year ended December 31, 1999. Higher portfolio turnover rates can cause the
Series to incur greater transaction costs, which can lead to lower investment
returns.
Under MFS's management, the equity portion of the Series is expected to have a
more explicit orientation toward value stocks, which are stocks whose prices are
considered to be low relative to earnings expectations for such companies. Under
Back Bay's management, the equity portion of the Series was managed primarily in
an effort to replicate or slightly exceed the performance of the Standard &
Poor's 500 Index, a commonly used benchmark for equity performance, with
somewhat greater emphasis on the value of stock components of that index than
would result from strictly replicating the makeup of the index.
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Portfolio Transactions and Brokerage
Portfolio transactions for the Series will be placed with those securities
brokers and dealers that MFS believes will provide the best value in transaction
and research services for the Series, either in a particular transaction or over
a period of time. MFS does not currently have any registered broker dealer
affiliates.
In valuing brokerage services, MFS makes a judgment as to which brokers are
capable of providing the most favorable net price (not necessarily the lowest
commission) and the best execution in a particular transaction. Best execution
connotes not only general competence and reliability of a broker, but specific
expertise and effort of a broker in overcoming the anticipated difficulties in
fulfilling the requirements of particular transactions, because the problems of
execution and the required skills and effort vary greatly among transactions.
Although some transactions involve only brokerage services, many involve
research services as well. In valuing research services, MFS makes a judgment of
the usefulness of research and other information provided by a broker to MFS in
managing the Series's investment portfolio. In some cases, the information
(e.g., data or recommendations concerning particular securities) relates to the
specific transaction placed with the broker, but typically the research consists
of a wide variety of information concerning companies, industries, investment
strategy and economic, financial and political conditions and prospects, which
information may be useful to MFS in advising the Series.
MFS will be the principal source of information and advice to the Series and
will be responsible for making and initiating the execution of the investment
decisions for the Series. The Trustees recognize, however, that it is important
for MFS, in performing its responsibilities to the Series, to continue to
receive and evaluate the broad spectrum of economic and financial information
that many securities brokers have customarily furnished in connection with
brokerage transactions, and that in compensating brokers for their services, it
is in the interest of the Series to take into account the value of the
information received for use in advising the Series. Consequently, the
commission paid to brokers providing research services may be greater than the
amount of commission another broker would charge for the same transaction. The
extent, if any, to which the obtaining of such information may reduce the
expenses of MFS in providing management services to the Series will not be
determinable. In addition, it is understood by the Trustees that other clients
of MFS might also benefit from the information obtained for the Series, in the
same manner that the Series might also benefit from information obtained by MFS
in performing services for other MFS clients.
MFS Operations
MFS is a professional investment management firm that provides services to
investment companies, employee benefit plans, endowments, foundations and other
institutions and individuals. MFS has provided investment advisory services
since 1924. As of June 30, 2001, MFS had approximately $140 billion in total
assets under management. MFS is a Delaware corporation that is headquartered at
500 Boylston Street, Boston, Massachusetts 02116.
MFS acts as investment adviser or subadviser to the following other mutual funds
that have similar investment objectives to that of the Series:
<Table>
<Caption>
ANNUAL MANAGEMENT (OR APPROXIMATE NET ASSETS
SUBADVISORY) FEE RATE AS OF , 2001
FUND (AS A % OF NET ASSETS) ($ MILLIONS)
---- ---------------------- ----------------------
</Table>
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* Indicate whether MFS has waived, reduced or otherwise agreed to reduce its
compensation for any of the funds listed in this table.
[ADDITIONAL INFORMATION REGARDING MFS TO BE INSERTED]
IV. OTHER INFORMATION
Information About the Adviser
The Adviser is a Delaware limited liability company. New England Life Holdings,
Inc. ("NELHI") owns all of the voting interests in the Adviser. NELHI is a
wholly-owned subsidiary of New England Life Insurance Company ("New England
Financial"), which in turn is a wholly-owned subsidiary of MetLife New England
Holdings, Inc. ("MetLife Holdings"). MetLife Holdings is wholly owned by
Metropolitan Life Insurance Company ("MetLife"), which in turn is a wholly-owned
subsidiary of MetLife, Inc., a publicly traded company. The members of the
Adviser, other than NELHI, include each insurance company the separate accounts
of which invest in registered investment companies to which the Adviser serves
as investment adviser. The Chairman of the
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Board and President of the Adviser is Anne M. Goggin. Ms. Goggin and John F.
Guthrie, Jr. are the Adviser's directors. Ms. Goggin is the Chairman of the
Board and President of the Trust, and her principal occupation is Senior Vice
President and General Counsel of New England Financial. Mr. Guthrie is a Senior
Vice President of the Trust, and his principal occupation is Vice President of
New England Financial. The address of the Adviser, New England Life Holdings,
Inc., New England Financial, Ms. Goggin and Mr. Guthrie is 501 Boylston Street,
Boston, Massachusetts 02116. The address of MetLife, MetLife Holdings and
MetLife, Inc. is One Madison Avenue, New York, New York 10010.
Information About the Trust
COPIES OF THE ANNUAL REPORT OF THE TRUST FOR THE FISCAL YEAR ENDED DECEMBER 31,
2000 AND THE SEMI-ANNUAL REPORT OF THE TRUST FOR THE PERIED ENDED JUNE 30, 2001
MAY BE OBTAINED WITHOUT CHARGE BY CALLING (800) 356-5015 OR BY WRITING TO THE
SECRETARY OF THE TRUST AT 501 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116.
Ownership of Shares
Shares of the Series are available for purchase only by separate accounts
established by New England Financial, MetLife and their affiliates. The Trust
serves as the investment vehicle for variable insurance, variable annuity and
group annuity products of New England Financial, MetLife or their affiliates.
Shares of the Series are not offered for direct purchase by the investing
public. The number of shares of beneficial interest of the Series issued and
outstanding as of June 30, 2001 was .
Record Ownership
As of June 30, 2001, all of the shares of the Series were owned by one of: (1)
New England Variable Life Separate Account ("NEVL Account"), a separate account
of New England Financial; (2) The New England Variable Account ("TNE Account"),
a separate account of MetLife; (3) New England Variable Annuity Separate Account
("NEVA Account"), a separate account of New England Financial; (4) certain
separate accounts of MetLife established for the pooling of contributions under
certain tax-qualified group annuity contracts ("MetLife Accounts"); and (5)
certain separate accounts of New England Financial established for the pooling
of contributions under certain tax-qualified group annuity contracts ("NEF
Accounts"). The table below sets out the number of shares and percentage of the
Series's shares represented by such number for each separate account. The
percentage of shares outstanding may not total 100% due to rounding.
<Table>
<Caption>
NEVL ACCOUNT TNE ACCOUNT NEVA ACCOUNT METLIFE ACCOUNT NEF ACCOUNT
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
NUMBER OF % NUMBER OF % NUMBER OF % NUMBER OF % NUMBER OF %
SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING
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</Table>
New England Financial and MetLife have informed the Trust that, as of June 30,
2001, other than as set forth above, no person or company beneficially owned 5%
or more of the shares of the Series. As of June 30, 2001, the Trust's officers
and Trustees as a group owned less than 1% of the outstanding shares of the
Series.
Principal Underwriter
New England Securities Company, the principal underwriter of the Trust, is
located as 399 Boylston Street, Boston, MA 02116.
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