EXHIBIT NO. 99.4(c)
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT, dated this 29th day of December, 2006,
by and among MFS SERIES TRUST XII, a Massachusetts business trust ("Trust"), on
behalf of its series specified in Appendix A hereto, MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation (the "Adviser") and VALLEY FORGE
CAPITAL ADVISORS, INC., a Delaware corporation (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated
July 26, 2006 with the Trust, an investment company registered under the
Investment Company Act of 1940, as amended ("Investment Company Act"), on behalf
of the Fund;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Advisers Act;
WHEREAS, the Board of Trustees of the Trust and the Adviser desire to retain the
Sub-Adviser to render investment advisory and other services to the series
specified in Appendix A hereto, a series of the Trust (the "Fund"), in the
manner and on the terms hereinafter set forth;
WHEREAS, the Adviser has the authority under the Investment Management Agreement
with the Trust to select sub-advisers for the Fund; and
WHEREAS, the Sub-Adviser is willing to furnish such services to the Adviser and
the Fund;
NOW, THEREFORE, the Adviser and the Sub-Adviser agree as follows:
1. APPOINTMENT OF THE SUB-ADVISER
The Adviser hereby appoints the Sub-Adviser to act as an investment adviser for
the Fund, subject to the supervision and oversight of the Adviser and the
Trustees of the Trust, and in accordance with the terms and conditions of this
Agreement. The Sub-Adviser will be an independent contractor and will have no
authority to
act for or represent the Trust or the Adviser in any way or otherwise be deemed
an agent of the Trust or the Adviser except as expressly authorized in this
Agreement or another writing by the Trust, the Adviser and the Sub-Adviser.
2. ACCEPTANCE OF APPOINTMENT
The Sub-Adviser accepts that appointment and agrees to render the services
herein set forth, for the compensation herein provided.
The assets of the Fund will be maintained in the custody of a custodian (who
shall be identified by the Adviser in writing). The Sub-Adviser will not have
custody of any securities, cash or other assets of the Fund and shall not be
responsible for any functions or responsibilities incident to the role of a
custodian, including safekeeping of assets, collection of income and settlement
of transactions.
3. SERVICES TO BE RENDERED BY THE SUB-ADVISER TO THE TRUST
A. As investment sub-adviser to the Fund, the Sub-Adviser shall manage the
investment and reinvestment of the assets of the Fund and determine the
composition of the assets of the Fund, subject always to the supervision and
control of the Adviser and the Trustees of the Trust.
B. As part of the services it will provide hereunder, the Sub-Adviser will:
(i) obtain and evaluate, to the extent deemed necessary and advisable by the
Sub-Adviser in its discretion, pertinent economic, statistical, financial, and
other information affecting the economy generally and individual companies or
industries, the securities of which are included in the Fund or are under
consideration for inclusion in the Fund;
(ii) formulate and implement a continuous investment program for the Fund;
(iii) take whatever steps are necessary to implement the investment program for
the Fund by arranging, subject to Section 3F, for the purchase and sale of
securities and other investments, including issuing directives to the
administrator of the Fund as necessary for the appropriate implementation of the
investment program of the Fund;
(iv) keep the Trustees of the Trust and the Adviser fully informed in writing at
such times and in such manner as the Adviser shall reasonably request of all
material facts concerning the investment and reinvestment of the assets in the
Fund, the Sub-Adviser and its key investment personnel and operations, make
regular and periodic special written reports of such additional information
concerning the
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same as may reasonably be requested from time to time by the Adviser or the
Trustees of the Trust and the Sub-Adviser will attend meetings with the Adviser
and/or the Trustees, as reasonably requested, to discuss the foregoing. Further,
the Sub-Adviser agrees to provide the Adviser reasonable access to the
Sub-Adviser's records in connection with the services provided hereunder;
provided however, that access to records of the Sub-Adviser containing
information about other clients of the Sub-Adviser (which shall be kept separate
from Fund records) shall exclude information regarding the identity of other
clients of the Sub-Adviser.;
(v) in accordance with procedures and methods established by the Trustees of the
Trust, which may be amended from time to time, provide reasonable assistance in
determining the fair value of all securities and other investments/assets in the
Fund, upon the reasonable request of the Adviser, including using reasonable
efforts to arrange for the provision of valuation information or a price(s) from
a party(ies) independent of the Sub-Adviser for each security or other
investment/asset in the Fund for which market prices are not readily available;
(vi) provide any and all material composite performance information, records and
supporting documentation about accounts the Sub-Adviser manages, if appropriate,
which are relevant to the Fund and that have investment objectives, policies,
and strategies substantially similar to those employed by the Sub-Adviser in
managing the Fund that may be reasonably necessary, under applicable laws, to
allow the Fund or its agent to present information concerning Sub-Adviser's
prior performance in the Trust's Prospectus and SAI (as hereinafter defined) and
any permissible reports and materials prepared by the Fund or its agent; and
(vii) cooperate with and provide reasonable assistance to the Adviser, the
Trust's administrator, the Trust's custodian and foreign custodians, the Trust's
transfer agent and pricing agents and all other agents and representatives of
the Trust and the Adviser, provide prompt responses to reasonable requests made
by such persons and maintain any appropriate interfaces with each so as to
promote the efficient exchange of information.
C. In furnishing services hereunder, the Sub-Adviser shall be subject to, and
shall perform in accordance with the following: (i) the Trust's Declaration of
Trust, as the same may be hereafter modified and/or amended from time to time
("Trust Declaration"); (ii) the By-Laws of the Trust, as the same may be
hereafter modified and/or amended from time to time ("By-Laws"); (iii) the
currently effective Prospectus and Statement of Additional Information of the
Trust filed with the Securities and Exchange Commission ("SEC") and delivered to
the Sub-Adviser, as the same may be hereafter modified, amended and/or
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supplemented ("Prospectus and SAI"); (iv) the Investment Company Act and the
Advisers Act and the rules under each, and all other federal and state laws or
regulations applicable to the Trust and the Fund; (v) the Trust's Compliance
Manual and other policies and procedures adopted from time to time by the
Adviser or the Board of Trustees of the Trust; and (vi) the written instructions
of the Adviser. Prior to the commencement of the Sub-Adviser's services
hereunder, the Adviser shall provide the Sub-Adviser with current copies of the
Trust Declaration, By-Laws, Prospectus and SAI, Compliance Manual and other
relevant policies and procedures that are adopted by the Board of Trustees or
the Adviser.
D. In furnishing services hereunder, the Sub-Adviser will not consult with any
other adviser to (i) the Fund, (ii) any other Fund of the Trust or (iii) any
other investment company holding itself out to investors as a related company to
the Trust for purposes of investment or investor services concerning
transactions of the Fund in securities or other assets. (This shall not be
deemed to prohibit the Sub-Adviser from consulting with any of its affiliated
persons concerning transactions in securities or other assets. This shall also
not be deemed to prohibit the Sub-Adviser from consulting with any of the other
covered advisers concerning compliance with paragraphs a and b of Rule 12d3-1
under the Investment Company Act.)
E. The Sub-Adviser, at its expense, will furnish: (i) all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement; and (ii)
administrative facilities, including bookkeeping, and all equipment necessary
for the efficient conduct of the Sub-Adviser's duties under this Agreement.
F. If and to the extent that the Adviser and the Trust's Board of Trustees
delegate responsibility to effect portfolio transactions to the Sub-Adviser (it
being understood that the Adviser shall have such responsibility until the Board
authorizes the Adviser to delegate such responsibility), the Sub-Adviser will
select brokers and dealers to effect all portfolio transactions subject to the
conditions set forth herein. If the Sub-Adviser is authorized in writing by the
Adviser to effect portfolio transactions, the Sub-Adviser will place all
necessary orders with brokers, dealers, or issuers, and will negotiate brokerage
commissions, if applicable. The Sub-Adviser is directed at all times to seek to
execute transactions for the Fund (i) in accordance with the Sub-Adviser's
written policies, practices or procedures that have been approved by the Board
of Trustees or the Adviser. In placing any orders for the purchase or sale of
investments for the Fund, in the name of the Fund or its nominees, the
Sub-Adviser shall use its best efforts to obtain for the Fund "best execution",
considering all of the circumstances, and shall maintain records adequate to
demonstrate compliance with this requirement. In no instance will portfolio
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securities be purchased from or sold to the Sub-Adviser, or any affiliated
person thereof, except in accordance with the Investment Company Act, the
Advisers Act and the rules under each, and all other federal and state laws or
regulations applicable to the Trust and the Fund.
G. Subject to the appropriate policies and procedures approved by the Board of
Trustees, the Sub-Adviser may, to the extent authorized by Section 28(e) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and if authorized
by the Adviser to effect portfolio transactions for the Fund, cause the Fund to
pay a broker or dealer that provides brokerage or research services to the
Adviser, the Sub-Adviser and the Fund an amount of commission for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Sub-Adviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided viewed
in terms of that particular transaction or the Sub-Adviser's overall
responsibilities to the Fund or its other advisory clients. To the extent
authorized by Section 28(e) and the Trust's Board of Trustees, the Sub-Adviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action. Subject
to seeking best execution, the Board of Trustees or the Adviser may direct the
Sub-Adviser to effect transactions in portfolio securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
H. If and to the extent that the Adviser and the Trust's Board of Trustees
delegate responsibility to effect portfolio transactions to the Sub-Adviser (it
being understood that the Adviser shall have such responsibility until the Board
authorizes the Adviser to delegate such responsibility), on occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients of the Sub-Adviser, the Sub-Adviser to the
extent permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and efficient
execution. Allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Sub-Adviser in the
manner which the Sub-Adviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to its other clients over time.
The Adviser agrees that the Sub-Adviser and its affiliates may give advice and
take action in the performance of their duties with respect to any of their
other clients that may differ from advice given, or the timing or nature of
actions taken, with respect to the Fund. The Adviser also acknowledges that the
Sub-Adviser and its affiliates are fiduciaries to other entities, some of which
have the same or similar investment objectives (and will hold the same or
similar
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investments) as the Fund, and that the Sub-Adviser will carry out its duties
hereunder together with its duties under such relationships. Nothing in this
Agreement shall be deemed to confer upon the Sub-Adviser any obligation to
purchase or to sell or to recommend for purchase or sale for the Fund any
investment that the Sub-Adviser, its affiliates, officers or employees may
purchase or sell for its or their own account or for the account of any client,
if in the sole and absolute discretion of the Sub-Adviser it is for any reason
impractical or undesirable to take such action or make such recommendation for
the Fund.
I. The Sub-Adviser will maintain all accounts, books and records with respect to
the Fund required by sub-paragraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the Investment Company Act (or any successor
provisions thereto) (collectively, "Rule 31a-1 Records") and as are required of
an investment adviser of a registered investment company pursuant to the
Advisers Act and the rules thereunder (collectively "Advisers Act Records"),
shall preserve for the periods described by Rule 31a-2 under the Investment
Company Act all Rule 31a-1 Records, shall preserve for the periods described by
the Advisers Act and rules thereunder all Advisers Act Records.and shall file
with the SEC all forms pursuant to Section 13 of the Exchange Act, with respect
to its duties as are set forth herein.
J. The Sub-Adviser will, solely to the extent so directed by the Adviser or the
Board of Trustees in writing, exercise all rights of security holders with
respect to securities held by the Fund, including, but not limited to: voting
proxies, converting, tendering, exchanging or redeeming securities; acting as a
claimant in class action litigation (including litigation with respect to
securities previously held); and exercising rights in the context of a
bankruptcy or other reorganization.
K. The Sub-Adviser shall be subject to the MFS Funds Board Portfolio Holdings
Disclosure Policy ("Portfolio Holdings Policy"), as may be amended from time to
time and provided to the Sub-Adviser, in connection with the disclosure of
portfolio holdings information for the Fund. In complying with the Portfolio
Holdings Policy with respect to any selective disclosure of portfolio holdings
of the Fund, the Sub-Adviser agrees to enter into written confidentiality
agreements with third parties in compliance with applicable law (including only
under circumstances where legitimate business purposes for the selective
disclosure exist and where the recipients of the selective disclosure are
subject to a duty of confidentiality, including a duty not to trade on
non-public information). The Sub-Adviser agrees to provide an annual
certification with respect to compliance with the Portfolio Holdings Policy.
4. COMPENSATION OF ADVISER
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The Adviser will pay the Sub-Adviser an advisory fee with respect to the Fund as
specified in Appendix A to this Agreement. Payments shall be made to the
Sub-Adviser on or about the fifth day of each month; however, this advisory fee
will be calculated daily for the Fund based on the net assets of the Fund on
each day and accrued on a daily basis. The Fund shall have no responsibility for
any fee payable to the Sub-Adviser. The method for determining net assets of the
Fund for purposes hereof shall be the same as the method for determining net
assets for purposes of establishing the offering and redemption prices of Fund
shares as described in the Fund's Prospectus and SAI. In the event of
termination of this Agreement, the fee provided in this Section shall be
computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the number
of days elapsed in the current month as a percentage of the total number of days
in such month. In the event that the fee paid to the Adviser for managing the
Fund is reduced by regulatory authorities or the Board of Trustees for any
reason whatsoever, the fee hereunder shall be subject to the same percentage
reduction.
5. LIABILITY AND INDEMNIFICATION
A. Except as may otherwise be provided by the Investment Company Act or any
other federal securities law, neither the Sub-Adviser nor any of its officers,
directors or employees (its "Affiliates") shall be liable for any losses,
claims, damages, liabilities or litigation (including legal and other expenses)
incurred or suffered by the Adviser, the Trust or the Fund as a result of any
error of judgment or mistake of law by the Sub-Adviser or its Affiliates with
respect to the Fund, except that nothing in this Agreement shall operate or
purport to operate in any way to exculpate, waive or limit the liability of the
Sub-Adviser or its Affiliates for, and the Sub-Adviser shall indemnify and hold
harmless the Trust, the Adviser, all affiliated persons thereof (within the
meaning of Section 2(a)(3) of the Investment Company Act) and all controlling
persons (as described in Section 15 of the Securities Act of 1933, as amended
("1933 Act")) (collectively, "Adviser Indemnitees") against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which any of the Adviser Indemnitees may become subject under the
1933 Act, the Investment Company Act, the Advisers Act, or under any other
statute, or common law or otherwise arising out of or based on (i) any willful
misfeasance, bad faith, reckless disregard or gross negligence of the
Sub-Adviser in the performance of any of its duties or obligations hereunder,
(ii) the Sub-Adviser being in violation of any applicable federal or state law,
rule or regulation or any investment policy or restriction set forth in the
Fund's Registration Statement on Form N-1A or any written guidelines or
instruction provided in writing by the Board of Trustees or the Adviser, (iii)
the Fund's failure to satisfy the diversification or source of income
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requirements of Subchapter M of the Code by reason of any action or omission of
the Sub-Adviser, unless acting at the direction of the Adviser, (iv) the Fund
being in material violation of any applicable federal or state law, rule or
regulation or any investment policy or restriction set forth in the Fund's
Registration Statement or any written guidelines or instruction provided in
writing by the Board of Trustees or the Adviser, by reason of any action or
omission of the Sub-Adviser, or (v) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports, advertisements,
sales literature, or other materials pertaining to the Fund or the omission to
state therein a material fact known to the Sub-Adviser which was required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished to
the Adviser or the Trust by the Sub-Adviser for use therein (collectively,
"Sub-Adviser Culpable Conduct").
B. The Adviser shall indemnify and hold harmless the Sub-Adviser, all affiliated
persons thereof (within the meaning of Section 2(a)(3) of the Investment Company
Act) and controlling persons, if any (collectively, the "Sub-Adviser
Indemnitees"), from and against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) to which any of
the Sub-Adviser Indemnitees may become subject under the 1933 Act, the
Investment Company Act, the Advisers Act, or under any other statute, or common
law or otherwise arising out of or based on any violation by the Adviser or the
Trust of any applicable law, rule or regulation, or any provision of this
Agreement (collectively, "Losses"), PROVIDED, HOWEVER, that the Adviser shall
not be required to indemnify or hold harmless any Sub-Adviser Indemnitee against
any Losses other than those arising out of or based on the willful misconduct,
bad faith, reckless disregard or gross negligence of the Adviser (collectively,
"Adviser Culpable Conduct"), and PROVIDED, FURTHER, that the Adviser shall not
be required to indemnify or hold harmless any Sub-Adviser Indemnitee against any
Losses arising out of or based on Adviser Culpable Conduct if and to the extent
that such Losses would not have occurred absent Sub-Adviser Culpable Conduct.
6. REPRESENTATIONS OF THE SUB-ADVISER
The Sub-Adviser represents, warrants and agrees as follows:
A. The Sub-Adviser (i) is registered as an investment adviser under the Advisers
Act and will continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the Investment Company Act, the Advisers
Act or other law, regulation or order from performing the services contemplated
by this Agreement; (iii) has met and will seek to continue to meet for so long
as this Agreement remains in effect, any other applicable federal or state
8
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into and perform
the services contemplated by this Agreement; and (v) will promptly notify the
Adviser of the occurrence of any event that would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the Investment Company Act or otherwise. The Sub-Adviser will
also promptly notify the Fund and the Adviser if it is served or otherwise
receives notice of any action, suit, proceeding, inquiry or investigation, at
law or in equity, before or by any court, public board or body, involving the
affairs of the Fund.
B. The Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Investment Company Act and Rule 204A-1
under the Advisers Act and will provide the Adviser and the Board with a copy of
such code of ethics, together with evidence of its adoption. Within forty-five
days of the end of the last calendar quarter of each year that this Agreement is
in effect, and as otherwise reasonably requested, the president, Chief Operating
Officer, Chief Compliance Officer or a vice-president of the Sub-Adviser shall
certify to the Adviser that the Sub-Adviser has complied with the requirements
of Rule 17j-1 and Rule 204A-1 during the previous year and that there has been
no material violation of the Sub-Adviser's code of ethics or, if such a material
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Adviser, the Sub-Adviser shall permit
the Adviser, its employees or its agents to examine the reports required to be
made to the Sub-Adviser by Rule 17j-1(c)(1) and Rule 204A-1(b) and all other
records relevant to the Sub-Adviser's code of ethics.
C. The Sub-Adviser has provided the Trust and the Adviser with a copy of its
Form ADV, which as of the date of this Agreement is its Form ADV as most
recently filed with the SEC and promptly will furnish a copy of all amendments
to the Trust and the Adviser at least annually. Such amendments shall reflect
all changes in the Sub-Adviser's organizational structure, professional staff or
other significant developments affecting the Sub-Adviser, as required by the
Advisers Act.
D. The Sub-Adviser will notify the Trust and the Adviser of any assignment of
this Agreement or change of control of the Sub-Adviser, as applicable, and any
changes in the portfolio manager(s) of the Fund or senior management of the
Sub-Adviser, in each case prior to or promptly after, such change. The
Sub-Adviser agrees to bear all reasonable expenses of the Trust, if any, arising
out of an assignment or change in control, other than an assignment or change in
control that results in control of the Sub-Adviser by the Adviser, or a company
controlling, controlled by or under common control with, the Adviser, provided
that if the Trust is required to seek the approval of Fund shareholders in
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connection with any such change of control, the Adviser agrees to bear all
expenses related to such shareholder approval.
E. The Sub-Adviser agrees to maintain an appropriate level of errors and
omissions or professional liability insurance coverage. The Sub-Adviser shall
provide prior written notice to the Adviser (i) of any material changes in its
insurance policies or insurance coverage; or (ii) if any claims will be made
under its insurance policies. Furthermore, it shall upon request provide to the
Adviser any information it may reasonably require concerning the amount of or
scope of such insurance.
F. The Sub-Adviser agrees that neither it, nor any of its affiliates, will
knowingly in any way refer directly or indirectly to its relationship with the
Trust, the Fund, the Adviser or any of their respective affiliates in offering,
marketing or other promotional materials without the express written consent of
the Adviser, except as required by rule, regulation or upon the request of a
governmental authority. However, the Sub-Adviser may use the performance of the
Fund in its composite performance.
G. The Sub-Adviser shall ensure that sufficient and competent investment
management, administrative and compliance staff experienced in managing accounts
similar to the Fund shall have charge at all times of the conduct of, and shall
maintain close supervision of, the investment and management of the Fund. For
the avoidance of doubt, the Sub-Adviser shall ensure that any affiliate or third
party to whom its duties have been delegated, shall comply with the foregoing.
H. The Sub-Adviser shall act honestly, in good faith and in the best interests
of the Fund including requiring any of its personnel with knowledge of the
Fund's activities to place the interest of the Fund first, ahead of their own
interests, in all personal trading scenarios that may involve a conflict of
interest with the Fund.
I. The Sub-Adviser has reviewed and will in the future review, the Registration
Statement, and any amendments or supplements thereto, the annual or semi-annual
reports to shareholders, other reports filed with the Commission and any
marketing material of the Fund provided to the Sub-Adviser by the Adviser or the
Trust (collectively the "Disclosure Documents") and represents and warrants that
with respect to disclosure about the Sub-Adviser, the manner in which the Fund
is managed or information relating directly or indirectly to the Sub-Adviser
(collectively, the "Sub-Adviser Information"), such Disclosure Documents contain
or will contain, as of the date thereof, no untrue statement of any material
fact and does not omit any statement of material fact which was required to be
stated therein or necessary to make the statements contained therein not
misleading. The Adviser will review with or identify for the Sub-Adviser any
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changes to the Sub-Adviser Information that the Sub-Adviser has previously
supplied or reviewed.
J. With respect to those activities that it performs for or on behalf of the
Fund, the Sub-Adviser has adopted policies and procedures reasonably designed to
prevent the Fund from violating the "Federal Securities Laws", as such term is
defined in Rule 38a-1 under the 1940 Act;
K. The Sub-Adviser shall provide, upon reasonable request of the Fund, all
reports and assistance regarding:
(i) the adequacy of its policies and procedures; and
(ii) the effectiveness of their implementation.
L. The Sub-Adviser shall promptly notify the Fund regarding:
(i) any material changes made to its policies and procedures since the date of
the last report delivered pursuant to paragraph K of this Section 6;
(ii) any material changes to the policies and procedures recommended as a result
of the annual review conducted pursuant to paragraph K of this Section 6; and
(iii) each (A) material violation of the Federal Securities Laws by the
Sub-Adviser; (B) material violation by the Sub-Adviser of the Sub-Adviser's, the
Fund's or the Adviser's policies and procedures to the extent the Board would
reasonably need to know to oversee Fund compliance; and (C) known weakness in
the design or implementation of the Sub-Adviser's policies and procedures.
7. NON-EXCLUSIVITY
The services of the Sub-Adviser to the Adviser, the Fund and the Trust are not
to be deemed to be exclusive, and the Sub-Adviser shall be free, subject to
limitations in any other agreement between the Adviser and the Sub-Adviser, to
render investment advisory or other services to others and to engage in other
activities. It is understood and agreed that, subject to limitations in any
other agreement between the Adviser and the Sub-Adviser or such persons, the
directors, officers, and employees of the Sub-Adviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors, trustees, or employees
of any other firm or corporation.
8. REGULATION
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The Sub-Adviser shall furnish to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports, or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
The Sub-Adviser shall promptly inform the Adviser of any routine (conducted on a
periodic basis) or cause (conducted when there is reason to believe there is a
problem at the Sub-Adviser) regulatory examination or investigation of the
Sub-Adviser, shall inform the Adviser in due course of any sweep (special
reviews focusing on a single issue) regulatory examination or investigation to
which the Sub-Adviser becomes subject, and promptly supply the Adviser with a
copy of any written correspondence from the regulatory or investigatory body and
the Sub-Adviser's responses thereto, if any, and any additional information
reasonably requested by the Adviser that the Adviser represents is material to
the Adviser's understanding of the subject matter of such examination or
investigation.
9. RECORDS
The records relating to the services provided under this Agreement shall be the
property of the Trust and shall be under its control; however, the Trust shall
furnish to the Sub-Adviser such records and permit it to retain such records
(either in original or in duplicate form) as it shall reasonably require in
order to carry out its business. In the event of the termination of this
Agreement, such other records shall promptly be returned to the Trust by the
Sub-Adviser free from any claim or retention of rights therein, provided that
the Sub-Adviser may retain any such records that are required by law or
regulation.
10. CONFIDENTIALITY.
The Adviser and the Sub-Adviser shall keep confidential any and all materials
and information furnished by the other party in connection with this Agreement
or otherwise obtained in connection with the non-disclosing party's duties
hereunder. The parties agree that the provisions of this section shall not apply
to any information that is: (a) independently developed by the receiving party,
provided the receiving party can satisfactorily demonstrate such independent
development with appropriate documentation; (b) known to the receiving party
prior to disclosure by the disclosing party; (c) lawfully disclosed to the
receiving party by a third party not under a separate duty of confidentiality
with respect thereto to the disclosing party; (d) expressly required or
requested by applicable federal or state regulatory authorities; (e) required to
be disclosed under applicable law, regulatory inquiry or judicial process; or
(f) otherwise publicly available through no fault or breach by the receiving
party.
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11. DURATION OF AGREEMENT
This Agreement shall become effective upon the date of its execution and will
continue for an initial period of two years from the effective date, unless
sooner terminated as provided in Section 12. This Agreement will continue in
effect for a period more than two years from the date of its execution only so
long as such continuance is specifically approved at least annually by the Board
of Trustees provided that in such event such continuance shall also be approved
by the vote of a majority of the Independent Trustees cast in person at a
meeting called for the purpose of voting on such approval.
12. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Trustees, including a majority of the Independent
Trustees, by the vote of a majority of the outstanding voting securities of the
Fund, on sixty (60) days' written notice to the Adviser and the Sub-Adviser, or
by the Adviser or Sub-Adviser on sixty (60) days' written notice to the Trust
and the other party. This Agreement will automatically terminate, without the
payment of any penalty, (i) in the event of its assignment (as defined in the
Investment Company Act), or (ii) in the event the Investment Advisory Agreement
between the Adviser and the Trust is assigned (as defined in the Investment
Company Act) or terminates for any other reason. This Agreement will also
terminate upon written notice to the other party that the other party is in
material breach of this Agreement, unless the other party in material breach of
this Agreement cures such breach to the reasonable satisfaction of the party
alleging the breach within thirty (30) days after written notice.
13. USE OF THE SUB-ADVISER'S NAME
The parties agree that the name of the Sub-Adviser, the names of any affiliates
of the Sub-Adviser and any derivative or logo or trademark or service xxxx or
trade name are the valuable property of the Sub-Adviser and its affiliates. The
Adviser and the Trust shall have the right to use such name(s), derivatives,
logos, trademarks or service marks or trade names only with the prior written
approval of the Sub-Adviser, which approval shall not be unreasonably withheld
or delayed so long as this Agreement is in effect.
Upon termination of this Agreement, the Adviser and the Trust shall forthwith
cease to use such name(s), derivatives, logos, trademarks or service marks or
trade names. The Adviser and the Trust agree that they will review with the
Sub-Adviser any advertisement, sales literature, or notice prior to its use that
makes reference to the Sub-Adviser or its affiliates or any such name(s),
derivatives, logos, trademarks, service marks or trade names so that the
Sub-Adviser may
13
review the context in which it is referred to, it being agreed that the
Sub-Adviser shall have no responsibility to ensure the adequacy of the form or
content of such materials for purposes of the Investment Company Act or other
applicable laws and regulations. If the Adviser or the Trust makes any
unauthorized use of the Sub-Adviser's names, derivatives, logos, trademarks or
service marks or trade names, the parties acknowledge that the Sub-Adviser shall
suffer irreparable harm for which monetary damages may be inadequate and thus,
the Sub-Adviser shall be entitled to injunctive relief, as well as any other
remedy available under law.
14. AMENDMENTS TO THE AGREEMENT
Except to the extent permitted by the Investment Company Act or the rules or
regulations thereunder or pursuant to exemptive relief granted by the SEC, this
Agreement may be amended by the parties only if such amendment, if material, is
specifically approved by the vote of a majority of the outstanding voting
securities of the Fund (unless such approval is not required by Section 15 of
the Investment Company Act as interpreted by the SEC or its staff or unless the
SEC has granted an exemption from such approval requirement) and by the vote of
a majority of the Independent Trustees cast in person at a meeting called for
the purpose of voting on such approval.
15. ASSIGNMENT
Any assignment (as that term is defined in the Investment Company Act) of this
Agreement made by the Sub-Adviser without the prior written consent of the Trust
and/or the Adviser shall result in the automatic termination of this Agreement,
as provided in Section 12 hereof.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the parties
with respect to the Fund.
17. HEADINGS
The headings in the sections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
18. NOTICES
All notices required to be given pursuant to this Agreement shall be delivered
or mailed to the address listed below of each applicable party in person or by
registered or certified mail or a private mail or delivery service providing the
14
sender with notice of receipt or such other address as specified in a notice
duly given to the other parties. Notice shall be deemed given on the date
delivered or mailed in accordance with this paragraph.
For: MASSACHUSETTS FINANCIAL SERVICES COMPANY
Xxxx X. Xxxxxxxx, Executive Vice President and General Counsel
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
For: MFS Series Trust XII
Xxxxx Xxxxxx, Assistant Secretary
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
For: VALLEY FORGE CAPITAL ADVISORS, INC.
G. Xxxxxxx Xxxx
83 General Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
19. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in law or
in equity, the Agreement shall be construed, insofar as is possible, as if such
portion had never been contained herein.
20. TRUST AND SHAREHOLDER LIABILITY
A copy of the Trust Declaration is on file with the Secretary of State of the
Commonwealth of Massachusetts. Each of the Adviser and the Sub-Adviser
acknowledges that the obligations of or arising out of this Agreement are not
binding upon any of the Trust's Trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust. Each of the Adviser and the Sub-Adviser further acknowledges that
the assets and liabilities of the Fund are separate and distinct from the assets
and liabilities of any other Fund of the Trust and that the obligations of or
arising out of this Agreement concerning the Fund or class thereof are binding
solely upon the assets or property of the Fund or class thereof and not upon the
assets or property of any other Fund, or, as appropriate, any other class of
such Fund.
21. GOVERNING LAW
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions thereof,
15
except that questions of interpretation shall be resolved in accordance with the
provisions of Section 22 below.
22. INTERPRETATION
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the Investment
Company Act shall be resolved by reference to such term or provision of the
Investment Company Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the
Investment Company Act. Specifically, the terms "vote of a majority of the
outstanding voting securities," "interested persons," "control", "assignment,"
and "affiliated persons," as used herein shall have the meanings assigned to
them by Section 2(a) of the Investment Company Act. In addition, where the
effect of a requirement of the Investment Company Act reflected in any provision
of this Agreement is relaxed by a rule, regulation or order of the SEC, whether
of special or of general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the date first mentioned above.
MASSACHUSETTS FINANCIAL SERVICES VALLEY FORGE CAPITAL ADVISORS, COMPANY INC.
By: XXXXXX X. XXXXXXX By: G. XXXXXXX XXXX
--------------------------------- ------------------------------------
Name: Xxxxxx X. Xxxxxxx Name: G. Xxxxxxx Xxxx
Title: Chief Executive Officer Title: President
MFS SERIES TRUST XII,
on behalf of the Fund
By: XXXXX X. XXXXX
---------------------------------
Name: Xxxxx X. Xxxxx
Title: President
16
APPENDIX A
TO
INVESTMENT ADVISORY AGREEMENT
The Adviser shall pay the Sub-Adviser monthly compensation computed daily at an
annual rate equal to the following:
FUND ANNUAL ADVISORY FEE
---- -------------------
MFS Sector Rotational Fund 0.35% of the Fund's average daily net assets up
to $1 billion; 0.30% of the Fund's average
daily net assets from $1 billion to $2.5
billion; 0.25% of the Fund's average daily net
assets from $2.5 billion to $5 billion and
0.20% of the Fund's average daily net assets in
excess of $5 billion.
