EXHIBIT h(4)
FORM OF
SPECIAL SERVICING AGREEMENT
This SPECIAL SERVICING AGREEMENT (the "Agreement"), is made as of this
[___] day of [_______], 1999 by and among [New England Funds Trust III, a
Massachusetts business trust (the "Trust"), on behalf of its Series designated
[Name of Fund] series (the "Fund"), Nvest Services Company, Inc., a Delaware
corporation ("NSC"), and [Name of Underlying Trust], a Massachusetts business
trust (the "Underlying Trust"), on behalf of its Series designated [Name of
Portfolio] (the "Portfolio").
W I T N E S S E T H:
WHEREAS, the Trust and the Underlying Trust are registered as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust has entered into an agreement with New England Funds
Management, L.P. ("NEFM") (the "Investment Advisory Agreement") for the
provision of advice and services to the Fund;
WHEREAS, the Trust has entered into an agreement with NEFM (the
"Administration Agreement") whereby NEFM has agreed to provide, or to procure
at NEFM's expense, certain services necessary to the operation of the Fund;
WHEREAS, the Trust has entered into an agreement with NSC (the
"Transfer Agency Agreement") under which NSC provides the Fund with shareholder
servicing, account management, transfer and dividend disbursing agency services,
shareholder reports, proxies, prospectuses and similar shareholder communication
services and other related recordkeeping services for the Fund (the "Shareholder
Related Services");
WHEREAS, the Trust has entered into an agreement with New England
Funds, L.P. ("Distribution Agreement") for the provision of distribution
services in connection with shares of the Fund;
WHEREAS, the Fund intends to invest its assets exclusively in the
Portfolio, except for temporary defensive purposes and cash or cash items
pending investment in the Portfolio or necessary to meet current redemptions or
Fund expenses;
WHEREAS, the Fund is expected to provide a means by which the Portfolio
can increase its asset base without adding a substantial number of shareholder
accounts;
WHEREAS, the absence of such additional shareholder accounts can reduce
the expenses of the Portfolio that would otherwise be incurred by the Portfolio
for Shareholder Related Services as a result of such increased asset base; and
WHEREAS, the Board of Trustees of the Underlying Trust, on behalf of
the Portfolio, has determined that by operation of the Fund, it is reasonable to
expect the Shareholder Related Services provided by NSC to the Fund will result
in quantifiable benefits to the Portfolio as a whole and to each class of its
shareholders that are in excess of the fees payable by the Portfolio hereunder;
and such determination by the Board of Trustees is based on some or all of the
following factors, as they apply to the Portfolio:
a. The amount of assets expected to be and/or actually invested in the
Portfolio by the Fund;
b. The fact that the assets invested in the Portfolio by the Fund will
be invested in a single omnibus account;
c. The expenses that the Portfolio would have incurred for such
Shareholder Related Services if the assets invested by individual
investors in the Fund were invested directly by such individual
investors in the Portfolio instead of indirectly through the Fund's
omnibus account position in the Portfolio; and
d. The reduction of the Portfolio's fixed expenses (e.g. accounting,
custodial, auditing and legal services, state qualifications and
filings, director fees and organizational and various miscellaneous
expenses) as a percentage of the Portfolio's net assets attributable to
the investment by the Fund in the Portfolio.
NOW, THEREFORE, in consideration of the promises and mutual covenants
made herein, it is agreed between and among the parties hereto as follows:
1. OMNIBUS ACCOUNT
The Portfolio will have a single omnibus account on its books for the
Fund which will hold shares of the Portfolio.
2. PAYMENT OF TRANSFER AGENCY FEE
In recognition of the benefits to the Portfolio for the Shareholder
Related Services rendered to the Fund under the Transfer Agency
Agreement, the Portfolio will pay to NSC on behalf of the Fund a
portion of the fee due to NSC under the Transfer Agency Agreement, as
set forth in Schedule A hereto. The Treasurer of NSC shall provide an
invoice for the Fund to the Underlying Trust with regards to the
Portfolio at the end of each quarter, and such invoice shall include
the information on which the fee is calculated and such additional
information, as the Underlying Trust may reasonably request, to enable
it to estimate the benefits to each Portfolio from the operation of the
Fund, such as, the number of open and closed shareholder accounts,
transactions processed and telephone calls received, as well as other
shareholder services rendered. The Underlying Trust will use this
information to timely determine if any fee paid pursuant to Schedule A,
paragraph (i) is in excess of such benefits received, as set forth in
paragraph (ii) therein, and timely notify the Fund. The Fund will, in
turn, promptly refund any excess fee paid to the Underlying Trust. The
fee shall be payable within 10 business days following the receipt of
the quarterly invoice. The parties agree that the payment of the fee is
only for the Shareholder Related Services provided by NSC and not for
legal, advisory, distribution or other services.
3. LIABILITIES
No party hereto shall be liable to any other party hereto for any
action taken or thing done by it or its agents or contractors in
carrying out the terms and provisions of this agreement provided such
party has acted in good faith and without negligence or willful
misconduct and selected its agents and contractors with reasonable
care.
The Fund acknowledges and agrees that the Underlying Trust, any of its
series, trustees, officers (each an "[Name of Underlying Trust] Party")
shall not be responsible for: (i) any information contained in any
registration statement, prospectus, statement of additional
information, periodic reports to shareholders, proxy statements,
supplements, or advertising or marketing materials prepared by or on
behalf of the Trust or the Fund, except for information provided to the
Fund by any [Name of Underlying Trust] Party for that purpose; or (ii)
the compliance or failure to comply by the Fund or its agents with
applicable federal or state law, rule or regulation of any
administrative or self-regulatory organization with jurisdiction over
the Fund or any such agent, except to the extent that the Fund's or
such agent's failure to comply with such law, rule or regulation is
caused by any [Name of Underlying Trust] Party's failure to comply with
any applicable law, rule or regulation.
The Fund shall indemnify, defend and protect each [Name of Underlying
Trust] Party and hold them harmless from and against any and all
claims, demands, actions, losses, damages, liabilities, cost, charges,
reasonable counsel fees and expenses of any nature it or they incur
arising out of or from: (i) any statement or representation or omission
of material fact that the Fund or its officers, directors, employees or
agents make concerning the Portfolio that is inconsistent with or not
included in the Portfolio's current prospectus, statement of additional
information, periodic reports, proxy statements or supplements or
provided by any [Name of Underlying Trust] Party in writing to the
Fund; or (ii) any failure by the Fund or its agents to comply with any
applicable federal or state law, rule or regulation of any
administrative or self-regulatory organization with jurisdiction over
the Fund or its agent, except to the extent that the Fund's or such
agent's failure to comply with such law, rule or regulation is caused
by the failure of any [Name of Underlying Trust] Party to comply with
any applicable law, rule or regulation.
The Portfolio shall indemnify, defend and protect the Trust, any of its
series, trustees or officers (each a "Trust Party"), and hold them
harmless from any and all claims, demands, actions losses, damages,
liabilities, cost, charges, reasonable attorney fees and expenses of
any nature it or they may incur arising out of or from: (i) any untrue
statement of material fact contained in the Portfolio's current
prospectus, statement of additional information, periodic reports to
shareholders, proxy statements or supplements; or any omission
therefrom of a material fact required to be stated therein or necessary
to make the statement therein not misleading; or (ii) any failure by
any [Name of Underlying Trust] Party to comply with applicable federal
or state law, rule or regulation of any administrative or
self-regulatory organization with jurisdiction over the Fund or its
agents, except to the extent that such failure is caused by any Trust
Party.
4. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue
in effect for one year from the date of its execution, and
from year to year thereafter only so long as such continuance
is specifically approved at least annually (i) by the Board of
Trustees of the Underlying Trust, and (ii) by vote of a
majority of the Trustees of the Underlying Trust who are not
"interested persons" of the Underlying Trust, as that term is
defined in the 1940 Act (the "Independent Trustees");
(b) this Agreement may at any time be terminated on sixty
days' written notice to the other parties by either the Trust
or the Underlying Trust by vote of the terminating party's
Board of Trustees; and
(c) this Agreement shall not be assigned or transferred,
either voluntarily or involuntarily, by operation of law or
otherwise, without the prior written consent of the Trust's
and the Underlying Trust's respective Boards of Trustees and
shall automatically and immediately terminate in the event of
its assignment without the prior written consent of the
parties hereto.
Termination of this Agreement pursuant to this section 4 shall be
without payment of any penalty.
5. AMENDMENT OF THE AGREEMENT
This Agreement may be modified or amended from time to time by mutual
written agreement between the parties hereto, with the approval of the
Board of Trustees of the Underlying Trust, including a majority of the
Independent Trustees.
6. NOTICE
Any notice under this Agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid, to
the other party at such address as such other party may designate for
the receipt of such notices.
7. INTERPRETIVE PROVISIONS
In connection with the operation of this Agreement, the parties may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions are to be signed by all
parties and annexed hereto, but no such provisions shall contravene any
applicable Federal or State law or regulation.
8. STATE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts.
9. CAPTIONS
The captions in the Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Notice
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust III is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's ________ series on behalf of the Trust by officers of the
Trust as officers and not individually and that the obligations of or arising
out of this Agreement are not binding upon any of the trustees, officers or
shareholders individually but are binding only upon the assets and property
belonging to the Fund.
A copy of the Agreement and Declaration of Trust establishing the
Underlying Trust is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Underlying Trust's ________ series on behalf of the Underlying
Trust by officers of the Underlying Trust as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Portfolio.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the day and year first above written.
NEW ENGLAND FUNDS TRUST III, [Name of Underlying Trust],
on behalf of its [Name of Fund] series on behalf of its [Name of
Underlying Fund] series
By: _______________________ By: ______________________
Name: Name:
Title: Title:
NVEST SERVICES COMPANY, INC.
By: ______________________
Name:
Title:
SCHEDULE A
For the services rendered to the Fund, the Portfolio agrees to pay NSC
a quarterly fee equal to the lesser of (i) 0.12% (at an annual rate) of the
average daily net asset value of shares of the Portfolio held in the Fund during
the calendar quarter or (ii) the amount of the estimated fees for the quarter
that would have been payable by the Portfolio to its transfer agent with regard
to the accounts of the shareholders of the Fund if their accounts had been
registered directly on the books of the Portfolio with the Portfolio's transfer
agent, as determined by the Portfolio.
