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Registration No. 333-33831
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Back Bay Funds, Inc.
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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):
[X] No fee required
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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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):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] 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
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Notes:
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Back Bay Funds, Inc.
(the "Fund")
600 Fifth Avenue
New York, New York 10020
August 25, 2000
Dear Shareholder:
As we announced to you in July, our parent company has entered into an
agreement to be acquired by CDC Asset Management, a leading French financial
institution, as more fully described in the enclosed proxy statement. As a
result, we are soliciting your vote for approval of certain items as described
in the enclosed proxy statement. Reading this letter completely may make your
review of the proxy statement easier. We ask that you review the proxy
statement and vote your shares promptly. You can vote by returning the
enclosed card or following the instructions located on your proxy card to vote
via the Internet or touch-tone phone.
Q. What are the Proposals about?
Two proposals are described in the enclosed proxy statement. At the front of
the proxy statement is a table that indicates which proposals are relevant to
your Fund.
The first proposal relates to the advisory agreement for the Fund. The laws
governing mutual funds generally require that when an investment adviser
undergoes a change in ownership, the advisory agreement with the fund will
terminate. In order for the Fund to continue with Back Bay Advisors, L.P. as
the investment adviser, shareholders must approve the new form of agreement.
The proposed new agreement is substantially the same as the current agreement.
Fees will not change and no changes are planned to the portfolio managers of
your Fund.
Q. How will the CDC transaction affect the Fund?
The transaction will not affect the daily operations of the Fund or the
investment management activities of Back Bay Advisors, L.P. Back Bay Advisors,
L.P. and the Fund will continue to operate autonomously, but will be part of a
larger organization with the resources of CDC Asset Management. We will
continue to work to meet your expectations for consistent, competitive
performance and high quality customer service. The Fund's investment
objectives, strategies and portfolio managers are not expected to change as a
result of the transaction.
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Remember--Your Vote Counts!
Your vote is extremely important, even if you only own a few Fund shares.
Voting promptly is also important. If we do not receive enough votes, we will
have to resolicit shareholders, which can be time consuming and may delay the
meeting. You may receive a reminder call to return your proxy from D.F. King &
Company, a proxy solicitation firm.
Now you can use the Internet or your telephone, if you want to vote
electronically. Please see your proxy card for more information and the
instructions. If you do vote electronically, you do not need to mail your
proxy card. However, if you want to change your vote you may do so using the
proxy card, telephone or Internet.
Thank you for your cooperation in voting on these important proposals. If
you have questions, please call your financial representative. Or, if your
questions relate specifically to the proxy matters, please call our service
center representatives toll-free at 1-800-221-3079.
Sincerely,
Steven W. Duff
President
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Preliminary Proxy Materials
Back Bay Funds, Inc.
(the "Fund")
600 Fifth Avenue
New York, New York 10020
(212) 830-5220
Notice of Special Meeting of Shareholders
October 10, 2000
A Special Meeting of the shareholders of the Fund will be held at 9:25 a.m.
at the offices of the Fund, 600 Fifth Avenue, New York, New York for these
purposes:
1. To approve a new Investment Management Contract with Back Bay
Advisors, L.P. for the Fund.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund for fiscal year ending November 30, 2000.
3. To consider and act upon any other matters that properly come before
the meeting and any adjourned session of the meeting.
Shareholders of record at the close of business on August 15, 2000 are
entitled to notice of and to vote at the meeting and any adjourned session.
By order of the Board of
Directors
Bernadette N. Finn
Secretary of the Fund
August 25, 2000
Please respond. Your vote is important. Please complete, sign, date and
return the enclosed proxy card, whether or not you plan to attend the
meeting.
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PROXY STATEMENT
Back Bay Funds, Inc.
(the "Fund")
600 Fifth Avenue
New York, New York 10020
(212) 830-5220
The Directors of Back Bay Funds, Inc. are soliciting proxies from
shareholders in connection with a Special Meeting of Shareholders of the Fund
(the "Meeting"). The Meeting has been called to be held on October 10, 2000 at
9:25 a.m. at the offices of the Fund, 600 Fifth Avenue, New York, New York.
The meeting notice, this Proxy Statement and proxy cards are being sent to
shareholders beginning on or about August 25, 2000. Shareholders of record at
the close of business on August 15, 2000 (the "Record Date") are entitled to
notice of and to vote at the Meeting and any adjourned session.
The only items of business that the Directors expect will come before the
Meeting are (i) approval of a new Investment Management Contract for the Fund
(the "New Investment Management Contract") with Back Bay Advisors, L.P. (the
"Manager") and (ii) ratification of PricewaterhouseCoopers LLP as independent
accountants for the Fund for its fiscal year ending November 30, 2000. As
explained below, the proposed New Investment Management Contract for the Fund
is identical (except for its date) to the Investment Management Contract
currently in effect (the "Current Investment Management Contract").
PROPOSAL 1 APPROVAL OF NEW INVESTMENT MANAGEMENT CONTRACTS
The reason the Directors are proposing the New Investment Management
Contract for the Fund is that the Current Investment Management Contract will
terminate when the Manager's parent company, Nvest Companies, L.P. ("Nvest"),
is acquired by a new parent company, CDC Asset Management ("CDC AM"). (A
federal law, the Investment Company Act of 1940, as amended (the "Investment
Company Act"), provides generally that the advisory agreements of mutual funds
automatically terminate when the investment adviser or its parent company
undergo a significant change of ownership.) The Directors have carefully
considered the matter, and have concluded that it is appropriate to enter into
the New Investment Management Contract for the Fund, so that the Manager can
continue to manage the Fund on the same terms as are now in effect, following
the acquisition of Nvest by CDC AM.
The acquisition of Nvest by CDC AM will occur only if various conditions are
satisfied (or waived by the parties, if permitted by law). These conditions
include, among others, certain government approvals of the acquisition and
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approval of the acquisition by vote of the unitholders of Nvest and Nvest,
L.P. ("Nvest, L.P."), Nvest's advising general partner. Nvest currently
expects that the acquisition will occur during the fourth calendar quarter of
2000, but the acquisition could be delayed. If the acquisition does not occur,
the New Investment Management Contract would not be needed because the
automatic termination of the Current Investment Management Contract would not
occur.
Under the Investment Company Act, the Fund cannot enter into a New
Investment Management Contract unless the shareholders of the Fund vote to
approve the New Investment Management Contract. The Meeting is being held to
seek shareholder approval of the New Investment Management Contract. No change
in advisory fee rate is being proposed.
Each share is entitled to cast one vote, and fractional shares are entitled
to a proportionate fractional vote.
The Directors recommend that the shareholders of the Fund vote to approve
the New Investment Management Contract for the Fund.
Description of the New Investment Management Contract
The New Investment Management Contract for the Fund is identical to the
Current Investment Management Contract, except that the date of the New
Investment Management Contract will be the date that CDC AM acquires Nvest.
Appendix A to this Proxy Statement sets forth information about the Current
Investment Management Contract, including the date of the Current Investment
Management Contract and the advisory fee rates under both the New Investment
Management Contract and the Current Investment Management Contract. Appendix B
to this Proxy Statement contains the form of the Investment Management
Contract. The Current Investment Management Contract and the New Investment
Management Contract match the form in Appendix B, except for the dates. The
next several paragraphs briefly summarize some important provisions of the New
Investment Management Contract, but for a complete understanding of the
Agreement you should read Appendixes A and B.
The New Investment Management Contract essentially provides that the
Manager, under the Directors' supervision, will manage the Fund's portfolio of
securities and make decisions with respect to the purchase and sale of
investments, subject to the general control of the Directors.
The New Investment Management Contract provides that it will continue in
effect for an initial period of two years (beginning on the date CDC AM
acquires Nvest). After that, it will continue in effect from year to year as
long as the continuation is approved at least annually (i) by the Directors or
by vote of a majority of the outstanding voting securities of the Fund, and
(ii) by vote of a majority of the Directors who are not "interested persons,"
as that term is defined
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in the Investment Company Act, of the Fund or the Manager (these Directors who
are not "interested persons" are referred to below as the "Independent
Directors").
The New Investment Management Contract may be terminated without penalty by
vote of the Directors or by vote of a majority of the outstanding voting
securities of the Fund, on sixty days' written notice to the Manager, or by
the Manager upon sixty days' written notice to the Fund, and it terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act. The Investment Company Act defines "assignment" to include, in
general, transactions in which a significant change in the ownership of an
investment adviser or its parent company occur (such as the acquisition of
Nvest by CDC AM).
The New Investment Management Contract provides that the Manager will not be
liable to the Fund or its shareholders, except for liability arising from the
Manager's willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
The Manager at its discretion may waive its rights to any portion of the
management fee and may use any portion of the management fee for purposes of
shareholder and administrative services and distribution of the Fund's shares.
There can be no assurance that such fees will be waived in the future.
Distribution and Service Plan. Pursuant to Rule 12b-1 under the Investment
Company Act, the Securities and Exchange Commission has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule.
The Fund's Board of Directors has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement (the "Distribution Agreement") and a Shareholder Servicing Agreement
(with respect to Class B and Class C shares only) (the "Servicing Agreement"
and, together with the Distribution Agreement, the "Distribution and Servicing
Agreements") with Reich & Tang Distributors, Inc. (the "Distributor") (the
parent of which is also Nvest) as distributor of the Fund's shares. Because
the acquisition of Nvest by CDC AM will be considered to result in the
assignment of the Fund's Distribution and Servicing Agreements with the
Distributor, causing those agreements to terminate upon the acquisition, the
Board of the Fund approved a new Distribution Agreement and a new Servicing
Agreement with the Distributor for the Fund to take effect if a New Investment
Management Agreement is approved by shareholders of the Fund and upon
consummation of the acquisition. The new Distribution and Servicing Agreements
would replace the current Distribution and Servicing Agreements and would be
identical to those agreements, except for the dates of execution and
effectiveness. These new Distribution and Servicing Agreements do not require
the approval of the Fund's shareholders.
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Basis for the Directors' Recommendation
The Directors determined, at a meeting held on July 25, 2000, to recommend
that shareholders vote to approve the New Investment Management Contract for
the Fund.
In coming to this recommendation, the Directors considered a wide range of
information of the type they regularly consider when determining whether to
continue the Fund's advisory agreement as in effect from year to year. The
Directors considered information about, among other things:
. the Manager and its personnel (including particularly those personnel
with responsibilities for providing services to the Fund), resources
and investment process;
. the terms of the investment management contract (in this case, the New
Investment Management Contract);
. the scope and quality of the services that the Manager has been
providing to the Fund;
. the investment performance of the Fund and of similar funds managed by
other advisers;
. the management fee rates payable to the Manager by the Fund and by
other funds and client accounts managed by the Manager, and payable by
similar funds managed by other advisers. There are no other Funds
managed by the Manager with similar objectives;
. the total expense ratios of the Fund and of similar funds managed by
other advisers;
. the Manager's practices regarding the selection and compensation of
brokers and dealers that execute portfolio transactions for the Fund,
and the brokers' and dealers' provision of brokerage and research
services to the Manager (see "Certain Brokerage Matters" below for
more information about these matters); and
. compensation payable by the Fund to affiliates of the Manager for
other services (see Appendix C to this Proxy Statement for more
information about this compensation).
In addition to reviewing these kinds of information, which the Directors
regularly consider on an annual or more frequent basis, the Directors gave
particular consideration to matters relating to the possible effects on the
Manager
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and the Fund of the acquisition of Nvest by CDC AM. Among other things, the
Directors considered:
. the stated intention of Nvest and CDC AM that the Manager will
continue to have a high degree of managerial autonomy from its parent
organizations and from other subsidiaries of Nvest;
. the stated intention of Nvest, CDC AM and the Manager that the
acquisition not change the investment approach or process used by the
Manager in managing the Fund;
. representations of senior executives of the Manager and the portfolio
managers of the Fund that they have no intention of terminating their
employment with the Manager as a result of CDC AM's acquisition of
Nvest, and representations of the Manager, Nvest and CDC AM that they
have no intention of terminating the employment of these executives or
portfolio managers as a result of the acquisition;
. certain actions taken by CDC AM, Nvest and the Manager to help retain
and incent key personnel of Nvest and the Manager;
. assurances from the Manager that it has no plans, as a result of or in
connection with CDC AM's acquisition of Nvest, to change or
discontinue existing arrangements under which it waives fees or bears
expenses of the Fund;
. the general reputation and the financial resources of CDC AM and its
parent organizations; and
. the fact that affiliates of the Manager who currently provide transfer
agency, distribution and shareholder services to the Fund are willing
to continue to do so following the acquisition, and that the
compensation rates payable by the Fund for these services are not
expected to change as a result of the acquisition.
In addition, the Directors considered that the agreement relating to the
acquisition of Nvest by CDC AM provides that CDC AM and its immediate parent
company will (subject to certain qualifications) use their reasonable best
efforts to assure compliance with Section 15(f) of the Investment Company Act.
Section 15(f) provides that a mutual fund investment adviser or its affiliates
can receive benefit or compensation in connection with a change of control of
the investment adviser (such as CDC AM's acquisition of the Manager's parent,
Nvest) if two conditions are satisfied. First, for three years after the
change of control, at least 75% of the members of the board of any registered
investment company advised by the adviser must consist of persons who are not
"interested persons," as defined in the Investment Company Act, of the
adviser. (No changes in the current composition of the Directors are required
to satisfy this condition.) Second, no
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"unfair burden" may be imposed on any such registered investment company as a
result of the change of control transaction or any express or implied terms,
conditions or understandings applicable to the transaction. "Unfair burden"
means any arrangement, during the two years after the transaction, by which
the investment adviser or any "interested person" of the adviser receives or
is entitled to receive any compensation, directly or indirectly, from such
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any other person in connection
with the purchase or sale of securities or other property to, from or on
behalf of such investment company.
After carefully considering the information summarized above, the Directors,
including the Independent Directors, unanimously voted to approve the New
Investment Management Contract for the Fund and to recommend that the Fund's
shareholders vote to approve the New Investment Management Contract.
Information About the Ownership of the Manager and the CDC AM/Nvest
Transaction
The Manager is a limited partnership which has one general partner, Back Bay
Advisors, Inc. (the "Manager General Partner"). J. Michael Gaffney's principal
occupation is President, CEO and Compliance Officer of the Manager. The
address of the Manager, the Manager General Partner and Mr. Gaffney is 399
Boylston Street, Boston, MA 02116. The Manager also advises pension trusts,
profit-sharing trusts and endowments. The Manager General Partner is a direct
wholly-owned subsidiary of Nvest Holdings, Inc. ("Nvest Holdings"), which in
turn is a direct wholly-owned subsidiary of Nvest. Nvest's managing general
partner, Nvest Corporation, is a direct wholly-owned subsidiary of MetLife New
England Holdings, Inc. MetLife New England Holdings, Inc. is a direct wholly-
owned subsidiary of Metropolitan Life Insurance Company ("MetLife"). Nvest
Corporation is also the sole general partner of Nvest, L.P. Nvest, L.P.,
Nvest's advising general partner, is a publicly traded company listed on the
New York Stock Exchange. In addition to owning Nvest Corporation, MetLife
owns, directly or indirectly, approximately a 48% limited partnership interest
in Nvest. Nvest, L.P. owns approximately 15% of Nvest. (These percentages,
which are as of June 30, 2000, do not reflect the vesting and exercise,
described below, of various options held by personnel of Nvest and of its
affiliates, including the Manager, to acquire limited partnership units of
Nvest, L.P.) If the proposed acquisition is completed, Nvest Corporation will
cease to be the managing general partner of Nvest and the general partner of
Nvest, L.P., and MetLife will cease to own any partnership interest in Nvest.
MetLife is a wholly-owned subsidiary of MetLife, Inc., a publicly traded
company listed on the New York Stock Exchange. The address of Nvest, Nvest
Corporation, Nvest Holdings and Nvest, L.P. is 399 Boylston Street, Boston,
Massachusetts 02116. The address of MetLife New England Holdings, Inc.,
MetLife and MetLife, Inc. is One Madison Avenue, New York, New York 10010.
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On June 16, 2000, Nvest and CDC AM announced that they and certain of their
respective affiliated companies had entered into an Agreement and Plan of
Merger (the "Merger Agreement"). Under the Merger Agreement, CDC AM would
acquire all of the outstanding units of partnership interest in both Nvest and
Nvest, L.P., at a price of $40 per unit. This price is subject to reduction
(but not below $34 per unit) based in part on a formula that takes into
account the investment advisory fees payable to the Adviser and other Nvest
affiliates by their mutual fund and other investment advisory clients that
have consented to the transaction. Under this formula, the price per unit that
CDC AM will pay to acquire Nvest, including the price it will pay to those
Fund Directors and officers who hold or have been granted options to acquire
units (see below), could be reduced if the Fund's shareholders do not approve
the New Investment Management Contract. Assuming a transaction price of $40
per unit, and the number of units and options outstanding as of June 30, 2000,
the aggregate price payable by CDC AM to acquire all of the units of Nvest
will be approximately $1.5 billion, and the aggregate price payable by CDC AM
to acquire all of the units of Nvest, L.P. (including payments with respect to
units subject to options) will be approximately $375 million.
The transaction will not occur unless various conditions are satisfied (or
waived by the parties, if permitted by law). One of these conditions is
obtaining approval or consent from investment advisory clients of the Manager
and other Nvest affiliates (including mutual fund clients) whose advisory fees
represent a specified percentage of the total advisory fee revenues of the
Nvest organization. Because of this condition, approval or disapproval by the
Fund's shareholders of a New Investment Management Contract, taken together
with other clients' consents or approvals, could affect whether or not the
transaction occurs. As described below, certain Directors and officers of the
Fund will receive certain material payments or benefits if the transaction
occurs. The transaction will result in the automatic termination of the
Current Investment Management Contract. If for some reason the transaction
does not occur, the automatic termination of the Current Investment Management
Contract will not occur, and the New Investment Management Contracts will not
be entered into, even if it has been approved by the Fund's shareholders.
As a result of the acquisition, Nvest and Nvest, L.P. would become indirect
wholly-owned subsidiaries of CDC AM, which in turn is 60% owned by CDC
Finance, a subsidiary of Caisse des depots et Consignations ("CDC"). Founded
in 1816, CDC is a major diversified financial institution with a strong global
presence in the banking, insurance, investment banking, asset management and
global custody industries. In addition to its 60% ownership of CDC AM through
CDC Finance, CDC owns 40% of CNP Assurances, the leading French insurance
company, which itself owns 20% of CDC AM. CDC also owns 35% of Caisse National
des Caisses d'Epargne, which also owns 20% of CDC AM. CDC is 100%
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owned by the French state. The main place of business of CDC AM is 7, place
des Cinq Martyrs du Lycee Buffon, 75015 Paris, France. The registered address
of CDC Finance is 56 rue de Lille, 75007 Paris, France. The registered address
of CDC is 56 rue de Lille, 75007 Paris, France. The registered address of CNP
Assurances is 4, place Raoul Dautry, 75015 Paris, France. The registered
address of Caisse National des Caisses d'Epargne is 5, rue Masseran, 75007
Paris, France. Following the acquisition, it is expected that Nvest will be
renamed CDC Asset Management-North America.
Various personnel of Nvest and of its affiliates, including the Manager,
have previously been granted options to purchase limited partnership units of
Nvest, L.P. ("Nvest L.P. Units"). The Merger Agreement provides that these
options will vest and become fully exercisable immediately before CDC AM's
acquisition of Nvest and Nvest, L.P., even though some of these options would
not otherwise have vested or been exercisable at that time. Each option will
be converted into the right to receive cash from Nvest in an amount equal to
the difference between the option's exercise price and the transaction price
of $40 per unit (subject to reduction, but not below $34 per unit, as
explained above).
Certain Relationships and Interests of Fund Directors and Officers
J. Michael Gaffney, a Director of the Fund, is also an officer and employee
of the Manager and a director of the Manager's General Partner. Each of Mr.
Gaffney and Steven W. Duff, the President of the Fund, owns partnership units
in Nvest or Nvest, L.P. or has the right to acquire partnership units under
options and, upon completion of CDC AM's acquisition of Nvest, will receive
the consideration provided in the Merger Agreement for the partnership units
he owns or has the right to acquire under options. The amount of consideration
each receives for these units will be substantial. Also, in connection with
CDC AM's acquisition of Nvest, CDC AM will establish a retention program under
which Mr. Duff may receive a retention award payable in cash over one to three
years. To receive this award, which is in addition to regular salary and bonus
payments and may be substantial in amount, Mr. Duff must remain employed by an
affiliate of Nvest for specified periods and must agree to refrain from
competing with such affiliate and soliciting clients of such affiliate.
Certain Brokerage Matters
In their consideration of the New Investment Management Contract, the
Directors took account of the Manager's practices regarding the selection and
compensation of brokers and dealers that execute portfolio transactions for
the Fund, and the brokers' and dealers' provision of brokerage and research
services to the Manager. The Manager has informed the Directors that it does
not expect to change these practices as a result of CDC AM's acquisition of
Nvest. The following is a summary of these practices:
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The Manager makes the Fund's portfolio decisions and determines the broker
to be used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with
the objective of obtaining best execution, brokerage may be directed to
persons or firms supplying investment information to the Manager or portfolio
transactions may be effected by the Manager. Neither the Fund nor the Manager
has entered into agreements or understandings with any brokers regarding the
placement of securities transactions because of research services they
provide. To the extent that such persons or firms supply investment
information to the Manager for use in rendering investment advice to the Fund,
such information may be supplied at no cost to the Manager and, therefore, may
have the effect of reducing the expenses of the Manager in rendering advice to
the Fund. While it is impossible to place an actual dollar value on such
investment information, its receipt by the Manager probably does not reduce
the overall expenses of the Manager to any material extent. Consistent with
the Conduct Rules of the National Association of Securities Dealers, Inc., and
subject to seeking best execution, the Manager may consider sales of shares of
the Fund as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The investment information provided to the Manager is of the type described
in Section 28(e) of the Securities Exchange Act of 1934 and is designed to
augment the Manager's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Manager in carrying out its
investment management responsibilities with respect to all its clients'
accounts. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if the Manager
determines in good faith that the amount of such transaction cost is
reasonable in relation to the value of brokerage and research services
provided by the executing broker.
The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where
transactions are executed in the over-the-counter market or the third market,
the Fund will seek to deal with the primary market makers; but when necessary
in order to obtain best execution, it will utilize the services of others. In
all cases the Fund will attempt to negotiate best execution.
The Distributor may from time to time effect transactions in the Fund's
portfolio securities. In such instances, the placement of orders with the
Distributor would be consistent with the Fund's objective of obtaining best
execution. With respect to orders placed with the Distributor for execution on
a national securities
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exchange, commissions received must conform to Section 17(e)(2)(A) of the
Investment Company Act and Rule 17e-1 thereunder, which permit an affiliated
person of a registered investment company (such as the Fund) to receive
brokerage commissions from such registered investment company provided that
such commissions are reasonable and fair compared to commissions received by
other brokers in connection with comparable transactions involving similar
securities during a comparable period of time. In addition, pursuant to
Section 11(a) of the Securities Exchange Act of 1934, the Distributor is
restricted as to the nature and extent of the brokerage services it may
perform for the Fund. The Securities and Exchange Commission has adopted rules
under Section 11(a) which permit a distributor to a registered investment
company to receive compensation for effecting, on a national securities
exchange, transactions in portfolio securities of such investment company,
including causing such transactions to be transmitted, executed, cleared and
settled and arranging for unaffiliated brokers to execute such transactions.
To the extent permitted by such rules, the Distributor may receive
compensation relating to transactions in portfolio securities of the Fund
provided that the Fund enters into a written agreement, as required by such
rules, with the Distributor authorizing it to retain compensation for such
services. Transactions in portfolio securities placed with the Distributor
authorizing it to retain compensation for services transactions in portfolio
securities placed with the Distributor which are executed on a national
securities exchange must be effected in accordance with procedures adopted by
the Board of Directors of the Fund pursuant to Rule 17e-1.
No portfolio transactions are executed with the Manager or its affiliates
acting as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its
affiliates.
PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Directors recommend that the shareholders ratify the selection of
PricewaterhouseCoopers LLP, independent public accountants, to audit the
accounts of the Fund for the fiscal year ending November 30, 2000.
PricewaterhouseCoopers LLP performed the audit for the Fund's fiscal year
ended November 30, 1999. The accounting firm of McGladrey & Pullen LLP or its
predecessors had audited the accounts of the Fund since inception. Effective
August 13, 1999, McGladrey & Pullen LLP resigned as the Fund's independent
accountants because its Investment Company Group had joined
PricewaterhouseCoopers LLP. At that time, PricewaterhouseCoopers LLP was
recommended to the Board by the Audit Committee and appointed as independent
accountants by the Directors. PricewaterhouseCoopers LLP does not have any
direct financial interest or any material indirect financial interest in the
Fund.
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A representative of PricewaterhouseCoopers LLP is not expected to be present
at the shareholders' meeting. If the shareholders do not ratify the Directors'
recommendation, the Directors will submit another proposal to the shareholders
with a recommendation for independent public accountants.
Other Information
Principal Distributor's Address. The address of the Fund's principal
distributor, Reich & Tang Distributors, Inc., is 600 Fifth Avenue, New York,
New York, 10020.
Fund Annual and Semi-Annual Reports. The Fund has previously sent its Annual
and Semi-Annual Reports to its shareholders. You can obtain a copy of these
Reports without charge by writing to the Fund at 600 Fifth Avenue, New York,
New York 10020 or by calling 1-800-221-3079.
Certain Purchases and Sales of Securities of Nvest, Nvest, L.P. and MetLife,
Inc. No Board Member had any purchases or sales of any securities of the
Manager, Nvest or MetLife, Inc. since the beginning of the Fund's most
recently completed fiscal year, except purchases or sales that represented one
percent or less of the outstanding securities of any class of those companies.
Outstanding Shares and Significant Shareholders. Appendix D to this Proxy
Statement lists for the Fund the total number of shares outstanding as of
August 15, 2000 for each class of the Fund's shares entitled to vote at the
Meeting. It also identifies holders of more than 5% of any class of shares of
the Fund, and contains information about the shareholdings in the Fund of the
Directors and the executive officers of the Fund. Only shareholders of record
at the close of business on August 15, 2000 are entitled to vote at the
Meeting.
Information About Proxies and the Conduct of the Meeting
Solicitation of Proxies. Proxies will be solicited primarily by mailing this
Proxy Statement and its enclosures, but proxies may also be solicited through
further mailings, telephone calls, personal interviews or e-mail by officers
of the Fund or by employees or agents of the Manager or of Nvest and its
affiliated companies. In addition, D. F. King & Co., Inc. has been engaged to
assist in the solicitation of proxies, at an estimated cost of $ .
Costs of Solicitation. All of the costs of the Meeting, including the costs
of soliciting proxies, will be paid by the Manager, Nvest or CDC AM. None of
these costs will be borne by the Fund.
Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy. If no instructions are
given, the proxy will be voted in favor of each proposal. You can revoke your
proxy by sending a signed, written letter of revocation to the Secretary of
the Fund, by properly executing and submitting a later-dated proxy or by
attending the Meeting and voting in person.
11
<PAGE>
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). One-third of
the shares of the Fund outstanding on the record date, present in person or
represented by proxy, constitutes a quorum for the transaction of business by
the shareholders of the Fund at the Meeting. In determining whether a quorum
is present, the Tellers will count shares represented by proxies that reflect
abstentions, and "broker non-votes," as shares that are present and entitled
to vote. Since these shares will be counted as present, but not as voting in
favor of any proposal, these shares will have the same effect as if they cast
votes against the proposal. "Broker non-votes" are shares held by brokers or
nominees as to which (i) the broker or nominee does not have discretionary
voting power or (ii) the broker or nominee has not received instructions from
the beneficial owner or other person who is entitled to instruct how the
shares will be voted.
Required Vote. For the Fund, the vote required to approve the New Investment
Management Contract is the lesser of (1) 67% of the shares of the Fund that
are present at the Meeting, if the holders of more than 50% of the shares of
the Fund outstanding as of the record date are present or represented by proxy
at the Meeting, or (2) more than 50% of the shares of the Fund outstanding on
the record date. If the required vote is not obtained for any Fund, the
Directors will consider what other actions to take in the best interests of
the Fund. For each Fund, the vote required to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants is a majority of the
shares of that Fund present at the Meeting in person or by proxy.
Adjournments; Other Business. If a quorum is not present at the Meeting, or
if a quorum is present but sufficient votes to approve any of the proposals
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the proposals that are the subject of the Meeting,
the percentage of votes actually cast, the percentage of negative votes
actually cast, the nature of any further solicitation and the information to
be provided to shareholders with respect to the reasons for the solicitation.
Any adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. A shareholder vote
may be taken on one or more of the proposals in this proxy statement prior to
any adjournment if sufficient votes have been received for approval.
The Meeting has been called to transact any business that properly comes
before it. The only items of business that management of the Fund intends to
present or knows that others will present are (i) the approval of the New
Investment Management Contract and (ii) ratification of PricewaterhouseCoopers
LLP as independent accountants for the Fund for its fiscal year ending
November 30, 2000.
12
<PAGE>
If any other matters properly come before the Meeting, and on all matters
incidental to the conduct of the Meeting, the persons named as proxies intend
to vote the proxies in accordance with their judgment, unless the Secretary of
the Fund has previously received written contrary instructions from the
shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. The Fund does not hold annual or
other regular meetings of shareholders. Shareholder proposals to be presented
at any future meeting of shareholders of the Fund must be received by the Fund
in writing a reasonable amount of time before the Fund solicits proxies for
that meeting, in order to be considered for inclusion in the proxy materials
for that meeting.
13
<PAGE>
Appendix A
<TABLE>
<CAPTION>
Description
of Directors
Action
Regarding
Current
Investment Date of Last
Management Submission of
Date of Contract Current Investment
Current Since Management Contract
Advisory Investment Beginning of for Shareholder
Name of Fee Rate Management Fund's Last Approval and Reason
Fund Schedule Contract Fiscal Year for Submission
------- ------------- ------------ ------------- --------------------
<S> <C> <C> <C> <C>
Back Bay .35% per December 17, Continuance December 1, 1997
Funds, Inc. annum of 1997 approved (approved by sole
average daily July 25, 2000 shareholder)
net assets
</TABLE>
A-1
<PAGE>
Appendix B
FORM OF INVESTMENT MANAGEMENT CONTRACT
Back Bay Funds, Inc.
the "Fund"
Total Return Bond Fund
(the "Portfolio")
600 Fifth Avenue
New York, New York 10020
, 2000
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116-3310
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and reinvesting our
assets in securities of the type, and in accordance with the limitations,
specified in our Articles of Incorporation, By-Laws and Registration Statement
filed with the Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933, including the
Prospectus forming a part thereof (the "Registration Statement"), all as from
time to time in effect, and in such manner and to such extent as may from time
to time be authorized by our Board of Directors. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you to manage the investment and reinvestment of
our assets as above specified, and, without limiting the generality of the
foregoing, to provide the investment management services specified below.
(b) Subject to the general control of our Board of Directors, you will
make decisions with respect to all purchases and sales of the portfolio
securities. To carry out such decisions, you are hereby authorized, as our
agent and attorney-in-fact for our account and at our risk and in our
name, to place orders for the investment and reinvestment of our assets.
In all purchases, sales and other transactions in our portfolio securities
you are authorized to exercise full discretion and act for us in the same
manner and with the same force and effect as our Fund itself might or
could do with respect to such purchases, sales or other transactions, as
well as with respect to all other things
B-1
<PAGE>
necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions.
(c) You will report to our Board of Directors at each meeting thereof
all changes in our portfolio since your prior report, and will also keep
us in touch with important developments affecting our portfolio and, on
your initiative, will furnish us from time to time with such information
as you may believe appropriate for this purpose, whether concerning the
individual entities whose securities are included in our portfolio, the
activities in which such entities engage, Federal income tax policies
applicable to our investments, or the conditions prevailing in the money
market or the economy generally. You will also furnish us with such
statistical and analytical information with respect to our portfolio
securities as you may believe appropriate or as we may reasonably request.
In making such purchases and sales of our portfolio securities, you will
comply with the policies set from time to time by our Board of Directors
as well as the limitations imposed by our Articles of Incorporation and by
the provisions of the Internal Revenue Code and the 1940 Act relating to
regulated investment companies and the limitations contained in the
Registration Statement.
(d) It is understood that you will from time to time employ, subcontract
with or otherwise associate with yourself, entirely at your expense, such
persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder.
(e) You or your affiliates will also furnish us, at your own expense,
such investment advisory supervision and assistance as you may believe
appropriate or as we may reasonably request subject to the requirements of
any regulatory authority to which you may be subject. You and your
affiliates will also pay the expenses of promoting the sale of our shares
(other than the costs of preparing, printing and filing our registration
statement, printing copies of the prospectus contained therein and
complying with other applicable regulatory requirements), except to the
extent that we are permitted to bear such expenses under a plan adopted
pursuant to Rule 12b-1 under the 1940 Act or a similar rule.
3. We agree, subject to the limitations described below, to be responsible
for, and hereby assume the obligation for payment of, all our expenses,
including: (a) brokerage and commission expenses, (b) Federal, state or local
taxes, including issue and transfer taxes incurred by or levied on us, (c)
commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian, (f) charges, expenses
and payments relating to the issuance, redemption, transfer and dividend
disbursing functions for us, (g) recurring and nonrecurring legal and
accounting expenses, including those of the bookkeeping agent, (h)
telecommunications expenses, (i) the costs of organizing
B-2
<PAGE>
and maintaining our existence as a corporation, (j) compensation, including
directors' fees, of any of our directors, officers or employees who are not
your officers or officers of your affiliates, and costs of other personnel
providing clerical, accounting supervision and other office services to us as
we may request, (k) costs of shareholder's services including, charges and
expenses of persons providing confirmations of transactions in our shares,
periodic statements to shareholders, and recordkeeping and shareholders'
services, (l) costs of shareholders' reports, proxy solicitations, and Fund
meetings, (m) fees and expenses of registering our shares under the
appropriate Federal securities laws and of qualifying such shares under
applicable state securities laws, including expenses attendant upon the
initial registration and qualification of such shares and attendant upon
renewals of, or amendments to, those registrations and qualifications, (n)
expenses of preparing, printing and delivering our prospectus to existing
shareholders and of printing shareholder application forms for shareholder
accounts, (o) payment of the fees and expenses provided for herein, under the
Administrative Services Agreement, and pursuant to the Shareholder Servicing
Agreement, with respect to the Class B and C shares only, and Distribution
Agreement, and (p) any other distribution or promotional expenses contemplated
by an effective plan adopted by us pursuant to Rule 12b-1 under the Act.
4. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at the annual
rate of .35% of the Fund's average daily net assets. Your fee will be accrued
by us daily, and will be payable on the last day of each calendar month for
services performed hereunder during that month or on such other schedule as
you shall request of us in writing. You may use any portion of this fee for
distribution of our shares, or for making servicing payments to organizations
whose customers or clients are our shareholders. You may waive your right to
any fee to which you are entitled hereunder, provided such waiver is delivered
to us in writing. Any reimbursement of our expenses, to which we may become
entitled pursuant to paragraph 3 hereof, will be paid to us at the same time
as we pay you.
6. This Agreement will become effective on the date hereof and shall
continue in effect until and thereafter for successive twelve-month
periods (computed from each ), provided that such continuation is
specifically
B-3
<PAGE>
approved at least annually by our Board of Directors or by a majority vote of
the holders of our outstanding voting securities, as defined in the 1940 Act
and the rules thereunder, and, in either case, by a majority of those of our
directors who are neither party to this Agreement nor, other than by their
service as directors of the Fund, interested persons, as defined in the 1940
Act and the rules thereunder, of any such person who is party to this
Agreement. Upon the effectiveness of this Agreement, it shall supersede all
previous Agreements between us covering the subject matter hereof. This
Agreement may be terminated at any time, without the payment of any penalty,
(a) on sixty days' written notice to you (i) by vote of a majority of our
outstanding voting securities, as defined in the 1940 Act and the rules
thereunder, or (ii) by a vote of a majority of our entire Board of Directors,
or (b) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by
governing law and in applicable rules or regulations of the Securities and
Exchange Commission.
8. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the right
of any of your employees or the officers and directors of your general
partner, who may also be a director, officer or employee of ours, or of a
person affiliated with us, as defined in the 1940 Act, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or
association.
B-4
<PAGE>
If the foregoing is in accordance with your understanding, will you kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
BACK BAY FUNDS, INC.
TOTAL RETURN BOND FUND
By: ____________________________
Name:
Title:
ACCEPTED: , 2000
BACK BAY ADVISORS, L.P.
By: _______________ , as General Partner
By: ____________________________________
Name:
Title:
B-5
<PAGE>
Appendix C
<TABLE>
<CAPTION>
Brokerage
Commissions on Percentage of
Fund's Fund's Total
Distribution Portfolio Brokerage
and Shareholder Transactions Commissions
Servicing (12b-1) Paid to Paid to
Management Management Administrative Administrative Fees Paid to Manager's Manager's
Fee Paid Fee Waived by Fees Paid to Fees Waived by Managers' Brokerage Brokerage
Name of Fund to Manager Manager Manager Manager Affiliates Affiliates Affiliates
------------ ---------- ------------- -------------- -------------- ----------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Back Bay Funds, Inc. $150,595 $150,595 0 0 $ 6 $ 0 $ 0
</TABLE>
C-1
<PAGE>
Appendix D
Shares Outstanding and Entitled to Vote
For each class of the Fund's shares entitled to vote at the Meeting, the
number of shares outstanding as of August 15, 2000 was as follows:
<TABLE>
<CAPTION>
Number
Name of Fund of Shares
------------ ----------
<S> <C>
Back Bay Funds, Inc..................................................
</TABLE>
Ownership of Shares
As of July 31, 2000, the Fund believes that the Directors and officers of
the Fund, as a group, owned less than one percent of each class of shares of
the Fund as a whole. As of July 31, 2000, the following persons owned of
record or beneficially 5% more of the noted class of shares of the noted Fund:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of Class
Fund and Class Owned Owned
-------------- ------------ ---------------
<S> <C> <C>
Back Bay Funds, Inc...............................
Fund A
Class 1
[name and address of beneficial owner.] (1)(2).... [ ] [ ]
</TABLE>
-----------
(1) Entity owned 25% or more of the outstanding shares of the Fund, and
therefore may be presumed to "control" the Fund, as that term is defined
in the Investment Company Act of 1940.
(2)Shares are believed to be held only as nominee.
D-1
<PAGE>
SAMPLE PROXY CARD
PLEASE VOTE YOUR PROXY TODAY
Prompt response will save the expense of additional solicitations
CHOOSE THE VOTING METHOD THAT IS MOST CONVENIENT FOR YOU.
1. VOTE BY MAIL: Sign and date your proxy card and return it in the enclosed
------------
postage paid envelope.
NOTE: Your proxy is not valid unless it is signed.
-------------------------------------------
2. VOTE BY TOUCH-TONE PHONE: Dial 1-800-690-6903, enter the CONTROL NUMBER
------------------------
printed on the upper portion of your proxy card and follow the simple
instructions. Telephone voting is available 24 hours a day, 7 days a week.
THE CALL IS TOLL-FREE. If you received more than one proxy card, you can
---------------------
vote each card during the call. Each card has a different control number.
3. VOTE VIA THE INTERNET: Log on to www.proxyvote.com, enter your CONTROL
---------------------
NUMBER and follow the instructions on the screen. If you received more
than one proxy card, you may vote them all during the same session. Each
card has a different control number.
IF YOU VOTE BY PHONE, FAX OR INTERNET,
PLEASE DO NOT RETURN YOUR PROXY CARD.
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL-FREE 1-800-690-6903
OR LOG ON TO www.proxyvote.com
Please fold and detach card at perforation before mailing
<PAGE>
FORM OF PROXY
BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE PROXIES
TO VOTE EACH PROPOSAL AS MARKED, OR, IF NOT MARKED TO VOTE, "FOR" EACH PROPOSAL
AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY COME BEFORE
THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE MEETING, PLEASE
COMPLETE, DETACH AND MAIL THE LOWER PORTION OF THIS CARD AT ONCE IN THE ENCLOSED
ENVELOPE.
BACK BAY FUNDS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS - October 10, 2000
THE UNDERSIGNED SHAREHOLDER OF BACK BAY FUNDS, INC. (THE "FUND") HEREBY
APPOINTS RICHARD DE SANCTIS AND BERNADETTE N. FINN, AND EACH OF THEM, AS
ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH POWER OF SUBSTITUTION, TO VOTE
ALL OF THE SHARES OF COMMON STOCK OF THE FUND STANDING IN THE NAME OF THE
UNDERSIGNED AT THE CLOSE OF BUSINESS ON AUGUST 15, 2000 AT THE SPECIAL MEETING
OF SHAREHOLDERS OF THE FUND TO BE HELD AT THE OFFICES OF THE CORPORATION AT 600
FIFTH AVENUE, NEW YORK, NY 10020 AT 9:25 A.M. ON OCTOBER 10, 2000, AND AT ALL
ADJOURNMENTS THEREOF, WITH ALL OF THE POWERS THE UNDERSIGNED WOULD POSSESS IF
THEN AND THERE PERSONALLY PRESENT AND ESPECIALLY (BUT WITHOUT LIMITING THE
GENERAL AUTHORIZATION AND POWER THEREBY GIVEN) TO VOTE AS INDICATED ON THE
PROPOSALS. AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT FOR THE MEETING, AND
VOTE AND ACT ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED "FOR"
THE PROPOSALS LISTED BELOW UNLESS OTHERWISE INDICATED.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS |X|
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BACK BAY FUNDS, INC.
VOTE ON PROPOSALS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
|_| |_| |_| 1. TO APPROVE A NEW INVESTMENT MANAGEMENT CONTRACT
|_| |_| |_| 2. TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT ACCOUNTANTS OF THE FUND FOR ITS FISCAL
YEAR ENDING NOVEMBER 30, 2000
-------------------------------------------------- --------------------------------------------------
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
</TABLE>
PLEASE SIGN NAME OR NAMES AS PRINTED ABOVE TO AUTHORIZE THE VOTING OF YOUR
SHARES AS INDICATED ABOVE, WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL
JOINT OWNERS SHOULD SIGN. PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD SO INDICATE.
