EXHIBIT 10.4
SUB-ADVISORY AGREEMENT
MFS RESEARCH MANAGERS SERIES
This Sub-Advisory Agreement (this "Agreement") is entered into as of
April 28, 1999 by and between New England Investment Management, Inc., a
Massachusetts corporation (the "Manager"), Massachusetts Financial Services
Company, a Delaware corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated as of
April 28, 1999 (the "Advisory Agreement") with New England Zenith Fund (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to the MFS Research Managers Series (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser to render portfolio
management services in the manner and on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
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a. The Sub-Adviser shall, subject to the supervision of the Manager
and in cooperation with any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets of the
Series. Subject to paragraph 1.g. below, the Sub-Adviser shall manage the Series
in conformity with (1) the investment objective, policies and restrictions of
the Series set forth in the Trust's prospectus and statement of additional
information, as revised or supplemented from time to time, relating to the
Series (the "Prospectus"), (2) any additional policies or guidelines established
by the Manager or by the Trust's trustees that have been furnished in writing to
the Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code) and "segregated asset accounts" (as defined in Section 817 of the Code),
all as from time to time in effect (collectively, the "Policies"), and with all
applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations thereunder. Subject to the foregoing,
the Sub-Adviser is authorized, in its discretion and without prior consultation
with the Manager, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the Series, without
regard to the length of time the securities have been held and the resulting
rate of portfolio turnover or any tax considerations; and the majority or the
whole of the Series may be invested in such proportions of stocks, bonds, other
securities or investment instruments, or cash, as the Sub-Adviser shall
determine. Notwithstanding the foregoing provisions of this Section 1.a,
however, the Sub-Adviser shall, upon written instructions from the Manager,
effect such portfolio transactions for the Series as the Manager shall determine
are necessary in order for the Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
daily, weekly, monthly, quarterly and/or annual reports concerning transactions
and performance of the Series in such form as may be mutually agreed upon, and
agrees to review the Series and discuss the management of the Series with
representatives or agents of the Manager, the Administrator or the Trust at
their reasonable request. The Sub-Adviser shall permit all books and records
with respect to the Series to be inspected and audited by the Manager and the
Administrator at all reasonable times during normal business hours, upon
reasonable notice. The Sub-Adviser shall also provide the Manager, the
Administrator or the Trust with such other information and reports as may
reasonably be requested by the Manager, the Administrator or the Trust from time
to time, including without limitation all material as reasonably may be
requested to the Trustees of the Trust pursuant to Section 15(c) of the 1940
Act.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and as
amended from time to time and a list of the persons whom the Sub-Adviser wishes
to have authorized to give written and/or oral instructions to custodians of
assets of the Series.
d. The Sub-Adviser will consult with and assist the Series' pricing
agent regarding the valuation of securities that are not registered for public
sale, not traded on any securities markets, or otherwise may be deemed illiquid
for purposes of the 1940 Act and for which market quotations are not readily
available.
e. Unless the Manager gives the Sub-Adviser written instructions to
the contrary, the Sub-Adviser shall use its good faith judgment in a manner
which it reasonably believes best serves the interest of the Series'
shareholders to vote or abstain from voting all proxies solicited by or with
respect to the issuers of securities in which assets of the Series are invested.
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f. The Manager shall provide the Sub-Adviser with a list of entities
with which the Sub-Adviser is restricted from engaging in transactions on behalf
of the Series. The Sub-Adviser shall be responsible for complying with this
restricted list and any changes thereto 10 business days after its receipt.
g. The Manager acknowledges that the Sub-Adviser is not the
compliance agent for the Series and does not have access to all of the Series'
books and records necessary to perform certain compliance testing. However, the
Sub-Adviser shall perform compliance testing with respect to the Series based
upon information in its possession and upon written instructions, if any,
received from the Manager or the Administrator and shall not be held in breach
of this Agreement so long as it performs in accordance with such information and
instructions.
2. Obligations of the Manager.
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a. The Manager shall provide (or cause the Trust's custodian to
provide) timely information to the Sub-Adviser regarding such matters as the
composition of assets in the Series, cash requirements and cash available for
investment in the Series, and all other information as may be reasonably
necessary for the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
Prospectus and statement of additional information of the Series and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Sub-Adviser shall not be
responsible for managing the Series in accordance with changes reflected in any
such revision or supplement until the Sub-Adviser has received such revision or
supplement. The Manager agrees to furnish the Sub-Adviser with relevant
sections of minutes of meetings of the Trustees of the Trust applicable to the
Series to the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports of the Trust with respect to the
Series which are provided to the Series' shareholders, and any further materials
or information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
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the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall provide timely instructions directly to the
Trust's custodian, in the manner and form as required by the Trust's custodian
agreement (including with respect to exchange offerings and
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other corporate actions) necessary to effect the investment and reinvestment of
the Series' assets. The Sub-Adviser shall have no liability for the acts or
omissions of the Custodian, unless such act or omission is required by and taken
in reliance upon instruction given to the Custodian by a representative of the
Sub-Adviser properly authorized to give such instruction under the Custody
Agreement. Any assets added to the Series shall be delivered directly to the
Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-
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Adviser is the sole owner of the name and ▇▇▇▇ "MFS". Without the prior review
and approval of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Trust not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of the "MFS" ▇▇▇▇ as soon as reasonably
practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
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paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any expenses of the Manager or the Trust including, without limitation, (a)
interest and taxes, (b) brokerage commissions and other costs in connection with
the purchase or sale of securities or other investment instruments with respect
to the Series, and (c) custodian fees and expenses. The Sub-Adviser will pay
its own expenses incurred in furnishing the services to be provided by it
pursuant to this Agreement.
6. Purchase and Sale of Assets. Absent instructions from the Manager to
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the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Series with brokers or dealers selected by the Sub-
Adviser, which may include brokers or dealers affiliated with the Sub-Adviser,
provided such orders comply with Rule 17e-1 (or any successor regulations) under
the 1940 Act in all respects. To the extent consistent with applicable law,
purchase or sell orders for the Series may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Adviser. The Sub-Adviser
shall use its best efforts to obtain execution of transactions for the Series at
prices which are advantageous to the Series and at commission rates that are
reasonable in relation to the benefits received.
7. Compensation of the Sub-Adviser. As full compensation for all
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services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.400% of the first $150 million of the average daily net assets of the
Series, 0.375% of the next $150 million of such assets and 0.350% of such assets
in excess of $300 million. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Manager is paid by the Series pursuant to the Advisory Agreement. If the Sub-
Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. The Manager may from time to time waive the
compensation it is entitled to receive from the Trust,
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however, any such waiver will have no effect on the Manager's obligation to pay
the Sub-Adviser the compensation provided for herein.
8. Non-Exclusivity. The Manager and the Series agree that the services
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of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Trust or the
Manager in any way or otherwise be deemed an agent of the Trust or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
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other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Indemnified Parties against any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or demand
by any past or present shareholder of the Series that is not based upon the
obligations of the Sub-Adviser with respect to the Series under this Agreement.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or that the Series will perform
comparably with any standard or index, including other clients of the Sub-
Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
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as of the date of its execution, and
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a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager, the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty
days' written notice to the Manager and the Trust, or, if approved by the Board
of Trustees of the Trust, by the Manager on sixty days' written notice to the
Sub-Adviser; and
e. if the Sub-Adviser requires the Series to change its name so as
to eliminate all references to the word "MFS" then this Agreement shall
automatically terminate at the time of such change unless the continuance of
this Agreement after such change shall have been specifically approved by vote
of a majority of the outstanding voting securities of the Series and by vote of
a majority of the Trustees of the Trust who are not interested persons of the
Trust or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
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consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
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"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
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13. General.
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a. The Sub-Adviser may perform its services through any of its
employees, officers or agents, and the Manager shall not be entitled to the
advice, recommendation or judgment of any specific person; provided, however,
that the persons identified in the prospectus of the Series shall perform the
portfolio management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of The Commonwealth of Massachusetts.
NEW ENGLAND INVESTMENT MANAGEMENT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Senior Vice President
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Senior Executive Vice President
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