Exhibit (d)(32)
NORTHERN FUNDS
SUB-ADVISORY AGREEMENT
MULTI-MANAGER SMALL CAP FUND
Sub-Advisory Agreement (this "Agreement") entered into as of the 22nd day of
June 2006, by and among Northern Trust Investments, N.A. and Northern Trust
Global Advisors, Inc. (together, the "Advisers"), and Xxxxxxx Xxxxx Asset
Management, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Advisers have entered into an Investment Advisory
and Ancillary Services Agreement dated May 5, 2006 (the "Advisory Agreement")
with Northern Funds (the "Trust"), relating to the provision of portfolio
management and administrative services to the Multi-Manager Small Cap Fund (the
"Fund");
WHEREAS, the Advisory Agreement provides that the Advisers may
delegate any or all of their portfolio management responsibilities under the
Advisory Agreement to one or more sub-advisers;
WHEREAS, the Advisers and the Trustees of the Trust desire to
retain the Sub-Adviser to render portfolio management services to the Fund in
the manner and on the terms set forth in this Agreement, and the Sub-Adviser is
willing to provide such services.
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Sub-Advisory Services.
(a) The Advisers hereby appoint the Sub-Adviser to act as an
investment adviser to the Fund for the periods and on the
terms herein set forth. The Sub-Adviser accepts such
appointment and agrees to render the services herein set
forth, for the compensation herein provided.
(b) The Sub-Adviser shall, subject to the supervision and
oversight of the Advisers, manage the investment and
reinvestment of such portion of the assets of the Fund, as the
Advisers may from time to time allocate to the Sub-Adviser for
management (the "Sub-Advised Assets"). The Sub-Adviser shall
manage the Sub-Advised Assets in conformity with (i) the
investment objective, policies and restrictions of the Fund
set forth in the Trust's prospectus and statement of
additional information relating to the Fund, as they may be
amended from time to time, any additional policies or
guidelines, including without limitation compliance policies
and procedures, established by the Advisers, the Trust's Chief
Compliance Officer, or by the Trust's Board of Trustees
("Board") that have been
furnished in writing to the Sub-Adviser, (ii) the asset
diversification tests applicable to regulated investment
companies pursuant to section 851(b)(3) of the Internal
Revenue Code, (iii) the written instructions and directions
received from the Advisers and the Trust as delivered; and
(iv) the requirements of the Investment Company Act of 1940
(the "1940 Act"), the Investment Advisers Act of 1940
("Advisers Act"), and all other federal and state laws
applicable to registered investment companies and the
Sub-Adviser's duties under this Agreement, all as may be in
effect from time to time. The foregoing are referred to below
together as the "Policies."
For purposes of compliance with the Policies, the Sub-Adviser
shall be entitled to treat the Sub-Advised Assets as though
the Sub-Advised Assets constituted the entire Fund, and the
Sub-Adviser shall not be responsible in any way for the
compliance of any assets of the Fund, other than the
Sub-Advised Assets, with the Policies. Subject to the
foregoing, the Sub-Adviser is authorized, in its discretion
and without prior consultation with the Advisers, to buy,
sell, lend and otherwise trade in any stocks, bonds and other
securities and investment instruments on behalf of the Fund,
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
Sub-Advised Assets 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(b), however, (i) the
Sub-Adviser shall, upon and in accordance with written
instructions from either of the Advisers, effect such
portfolio transactions for the Sub-Advised Assets as the
Adviser shall determine are necessary in order for the Fund to
comply with the Policies, and (ii) upon notice to the
Sub-Adviser, the Advisers may effect in-kind redemptions with
shareholders of the Fund with securities included within the
Sub-Advised Assets.
(c) Absent instructions from the Advisers or the officers of the
Trust to the contrary, the Sub-Adviser shall place orders
pursuant to its determinations either directly with the issuer
or with any broker and/or dealer or other person who deals in
the securities in which the Fund is trading. With respect to
common and preferred stocks, in executing portfolio
transactions and selecting brokers or dealers, the Sub-Adviser
shall use its best judgment to obtain the best overall terms
available (and not necessarily best price). In assessing the
best overall terms available for any transaction, the
Sub-Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, both for the specific transaction and
on a continuing basis. In evaluating the best overall terms
available and in selecting the broker or dealer to execute a
particular transaction, the Sub-Adviser may also consider the
brokerage
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and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other account over which the Sub-Adviser and/or an
affiliate of the Sub-Adviser exercises investment discretion.
With respect to securities other than common and preferred
stocks, in placing orders with brokers, dealers or other
persons, the Sub-Adviser shall attempt to obtain the best net
price and execution of its orders, provided that to the extent
the execution and price available from more than one broker,
dealer or other such person are believed to be comparable, the
Sub-Adviser may, at its discretion but subject to applicable
law, select the executing broker, dealer or such other person
on the basis of the Sub-Adviser's opinion of the reliability
and quality of such broker, dealer or such other person;
broker or dealers selected by the Sub-Adviser for the purchase
and sale of securities or other investment instruments for the
Sub-Advised Assets may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rules
17e-1 and 10f-3 under the 1940 Act and the Trust's Rule 17e-1
and Rule 10f-3 Procedures, respectively, in all respects, or
any other applicable exemptive rules or orders applicable to
the Sub-Adviser. Notwithstanding the foregoing, the
Sub-Adviser will not effect any transaction with a broker or
dealer that is an "affiliated person" (as defined under the
0000 Xxx) of the Sub-Adviser or the Advisers without the prior
approval of the Advisers. The Advisers shall provide the
Sub-Adviser with a list of brokers or dealers that are
affiliated persons of the Advisers.
(d) The Sub-Adviser acknowledges that the Advisers and the Trust
may rely on Rules 17a-7, 17a-10, 10f-3 and 17e-1 under the
1940 Act, and the Sub-Adviser hereby agrees that it shall not
consult with any other investment adviser to the Trust with
respect to transactions in securities for the Sub-Advised
Assets or any other transactions in the Trust's assets, other
than for the purposes of complying with the conditions of
paragraphs (a) and (b) of Rule 12d3-1 under the 1940 Act.
(e) The Sub-Adviser has provided the Advisers with a copy of its
key compliance policies for compliance with "federal
securities laws" (as such term is defined under Rule 38a-1 of
the 0000 Xxx) and Rule 206(4)-7 of the Advisers Act with
respect to the services provided to the Trust, as well as a
copy of matrix summarizing the key policies, procedures and
controls with respect to such services (the "Sub-Adviser
Compliance Policies"). The Sub-Adviser's chief compliance
officer ("Sub-Adviser CCO") shall provide, within a reasonable
time, to the Trust's Chief Compliance Officer ("Trust CCO") or
his or her delegatee the following:
(i) a notification of any material changes to the
Sub-Adviser Compliance Policies;
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(ii) a report of any "material compliance matters," as
defined by Rule 38a-1 under the 1940 Act, that have
occurred in connection with the Sub-Adviser Compliance
Policies;
(iii) a copy of the Sub-Adviser CCO's report with respect to
the annual review of the Sub-Adviser Compliance Policies
pursuant to Rule 38a-1 of the Investment Company Act
which requires the Trust to oversee the adequacy of the
policies and procedures of its major service providers;
and
(iv) an annual (or more frequently as the Trust CCO may
request) certification regarding the Sub-Adviser's
compliance with Rule 206(4)-7 under the Advisers Act and
Section 38a-1 of the 1940 Act as well as the foregoing
sub-paragraphs (i) - (iii).
(f) The Sub-Adviser may, on occasions when it deems the purchase
or sale of a security to be in the best interests of the Fund
as well as other fiduciary or agency accounts managed by the
Sub-Adviser, aggregate, to the extent permitted by applicable
laws and regulations, the securities to be sold or purchased
in order to obtain the best overall terms available (and not
necessarily best price) and execution with respect to common
and preferred stocks and the best net price and execution with
respect to other securities. In such event, 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 it considers to be most fair and equitable over
time to the Fund and to its other accounts.
(g) The Sub-Adviser, in connection with its rights and duties with
respect to the Fund and the Trust shall use the care, skill,
prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of
a like character and with like aims.
(h) The services of the Sub-Adviser hereunder are not deemed
exclusive and the Sub-Adviser shall be free to render similar
services to others (including other investment companies) so
long as its services under this Agreement are not impaired
thereby. [Material Redacted: Confidential Treatment
Requested].
(i) The Sub-Adviser shall furnish the Advisers and the
administrators of the Trust (together, the "Administrators")
monthly, quarterly and annual reports concerning portfolio
transactions and performance of the Sub-Advised Assets as the
Advisers may reasonably determine in such form as may be
mutually agreed upon, and agrees to review the Sub-Advised
Assets with the Advisers and discuss the management of them.
The Sub-Adviser shall promptly respond to requests by the
Advisers, the Administrators to the Trust, and the Trust CCO
or their delegatees for
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copies of the pertinent books and records maintained by the
Sub-Advisers relating directly to the Fund. The Sub-Adviser
shall also provide the Advisers with such other information
and reports, including information and reports related to
compliance matters, as may reasonably be requested by them
from time to time, including without limitation all material
requested by or required to be delivered to the Board.
(j) Unless otherwise instructed by the Advisers, the Sub-Adviser
shall not have the power, discretion or responsibility to vote
any proxies in connection with securities in which the
Sub-Advised Assets may be invested, and the Advisers shall
retain such responsibility.
(k) The Sub-Adviser shall cooperate promptly and fully with the
Advisers and/or the Trust in responding to any regulatory or
compliance examinations or inspections (including any
information requests) relating to the Trust, the Fund or
either of the Advisers brought by any governmental or
regulatory authorities. The Sub-Adviser shall provide the
Trust CCO or his or her delegatee with notice within a
reasonable period of any deficiencies or other issues
identified by the United States Securities and Exchange
Commission ("SEC") in an examination or otherwise that relate
to or that may materially affect the Sub-Adviser's
responsibilities with respect to the Fund.
(l) The Sub-Adviser shall be responsible for the preparation and
filing of Schedule 13G and Form 13F on behalf of the
Sub-Advised Assets. The Sub-Adviser shall not be responsible
for the preparation or filing of any other reports required on
behalf of the Sub-Advised Assets, except as may be expressly
agreed to in writing.
(m) The Sub-Adviser shall maintain detailed records of all matters
pertaining to the Sub-Advised Assets, including, without
limitation, brokerage and other records of all securities
transactions. Any records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1 and Rule
31a-2 promulgated under the 1940 Act that are prepared or
maintained by the Sub-Adviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the
Trust upon request. The Sub-Adviser further agrees to preserve
for the periods prescribed in Rule 31a-2 under the 1940 Act
the records required to be maintained under Rule 31a-1 under
the 1940 Act.
(n) The Sub-Adviser shall promptly notify the Advisers of any
financial condition that is likely to impair the Sub-Adviser's
ability to fulfill its commitments under this Agreement.
2. Representations and Warranties of the Parties
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(a) The Sub-Adviser represents and warrants to the Advisers as
follows:
(i) The Sub-Adviser is a registered investment adviser under
the Advisers Act;
(ii) The Form ADV that the Sub-Adviser has previously
provided to the Advisers is a true and complete copy of
the form as currently filed with the SEC, and the
information contained therein is accurate and complete
in all material respects and does not omit to state any
material fact necessary in order to make the statements
made, in light of the circumstances under which they are
made, not misleading. The Sub-Adviser will promptly
provide the Advisers and the Trust with a complete copy
of all subsequent amendments to its Form ADV;
(iii) The Sub-Adviser will carry at all times, and with
companies rated by A.M. Best Company with at least an
A-VII rating, or its equivalent, professional errors and
omissions liability insurance covering services provided
hereunder by the Sub-Adviser in an appropriate amount,
which insurance shall be primary to any insurance policy
carried by the Advisers;
(iv) The Sub-Adviser will furnish the Advisers with
certificates of insurance in forms and substance
reasonably acceptable to the Advisers evidencing the
coverages specified in paragraph 2(a)(iii) hereof and
will provide notice of termination of such coverages, if
any, to the Advisers and the Trust, all as promptly as
reasonably possible. The Sub-Adviser will notify the
Advisers promptly, and in any event within 10 business
days, when the Sub-Adviser receives notice of any
termination of the specified coverage; and
(v) This Agreement has been duly authorized and executed by
the Sub-Adviser.
(b) Each Adviser represents and warrants to the Sub-Adviser as
follows:
(i) Each Adviser is registered under the Advisers Act and
has complied in all material respects, with all
registrations required by and will comply, in all
material respects, with all applicable rules and
regulations of the Securities and Exchange Commission.
(ii) Each Adviser and the Trust has duly authorized the
execution of this Agreement by the Advisers.
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3. Obligations of the Advisers.
(a) The Advisers shall provide (or cause the Fund's Custodian (as
defined in Section 3 hereof) to provide) timely information to
the Sub-Adviser regarding such matters as the composition of
the Sub-Advised Assets, cash requirements and cash available
for investment in the Sub-Advised Assets, and all other
information as may be reasonably necessary for the Sub-Adviser
to perform its responsibilities hereunder.
(b) The Advisers have furnished the Sub-Adviser with a copy of the
prospectus and statement of additional information of the Fund
and they agree 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 Advisers agree to furnish
the Sub-Adviser with copies of any financial statements or
reports made by the Fund to its shareholders, and any further
materials or information that the Sub-Adviser may reasonably
request to enable it to perform its functions under this
Agreement.
4. Custodian. The Advisers shall provide the Sub-Adviser with a copy of
the Fund's agreement with the custodian designated to hold the assets of
the Fund (the "Custodian") and any material modifications thereto (the
"Custody Agreement") that may affect the Sub-Adviser's duties, copies of
such modifications to be provided to the Sub-Adviser reasonably in advance
of the effectiveness of such modifications. The Sub-Advised Assets 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 have no liability for the acts or omissions of the
Custodian, unless such act or omission is taken solely 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 Fund shall be delivered directly to the Custodian.
5. Use of Name. During the term of this Agreement, the Advisers shall have
permission to use the Sub-Adviser's name in the marketing of the Fund, and
agree to furnish the Sub-Adviser, for its prior approval (which approval
shall not be unreasonably withheld) at its principal office all
prospectuses, proxy statements and reports to shareholders prepared for
distribution to shareholders of the Fund or the public that refer to the
Sub-Adviser in any way. If Advisers do not receive a response from the
Sub-Adviser with respect to such materials within five business days of
its submission for approval, such materials shall be deemed accepted by
the Sub-Adviser. The Advisers and Sub-Adviser agree that (i) Advisers may
request that the Sub-Adviser approve use of a certain type, and that
Advisers need not provide for approval each additional piece of marketing
material that is of substantially the same type and (ii) the Advisers and
Sub-Advisers will identify materials which they jointly determine do not
require the Sub-Advisers' approval.
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During the term of this Agreement, the Sub-Adviser shall not use the
Advisers' names or the Trust's name without the prior consent of the
Advisers.
6. Expenses. During the Term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with the performance of its
duties under paragraph 1 hereof other than the cost (including taxes,
brokerage commissions and other transaction costs, if any) of the
securities or other investment instruments purchased or sold for the Fund.
7. Compensation of the Sub-Adviser. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid the fees in the amounts and in
the manner set forth in Appendix A hereto.
8. Independent Contractor Status. 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 Advisers in any way or otherwise be deemed an
agent of the Fund or the Advisers.
9. Liability and Indemnification.
(a) Liability. The duties of the Sub-Adviser shall be confined to
those expressly set forth herein with respect to the
Sub-Advised Assets. The Sub-Adviser shall not be liable for
any loss arising out of any portfolio investment or
disposition hereunder, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. Under no circumstances shall
the Sub-Adviser be liable for any loss arising out of any act
or omission taken by another sub-adviser, or any other third
party, in respect of any portion of the Trust's assets not
managed by the Sub-Adviser pursuant to this Agreement.
(b) Indemnification.
(i) The Sub-Adviser shall indemnify the Advisers, the Trust
and the Fund, and their respective affiliates and
controlling persons (the "Adviser Indemnified Persons")
for any liability and expenses, including reasonable
attorneys' fees, which the Advisers, the Trust or the
Fund and their respective affiliates and controlling
persons may sustain as a result of the Sub-Adviser's
breach of this Agreement or representations and
warranties herein or as a result of the Sub-Adviser's
willful misfeasance, bad faith, gross negligence, or
reckless disregard of its duties hereunder or violation
of applicable law; provided, however, that the Adviser
Indemnified Persons shall not be indemnified for any
liability or expenses that may be sustained as a result
of the either of the
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Advisers' willful misfeasance, bad faith, gross
negligence, or reckless disregard of their duties
hereunder.
(ii) Each Adviser shall indemnify the Sub-Adviser, its
affiliates and its controlling persons (the "Sub-Adviser
Indemnified Persons") for any liability and expenses,
including reasonable attorneys' fees, arising from, or
in connection with, such Adviser's breach of this
Agreement or their representations and warranties herein
or as a result of such Adviser's willful misfeasance,
bad faith, gross negligence, reckless disregard of their
duties hereunder or violation of applicable law;
provided, however, that the Sub-Adviser Indemnified
Persons shall not be indemnified for any liability or
expenses that may be sustained as a result of the
Sub-Adviser's willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties
hereunder.
10. Effective Date and Termination. This Agreement shall become effective
as of the date of its execution, and:
(a) unless otherwise terminated, this Agreement shall continue in
effect until August 31, 2007, and from year to year thereafter
so long as such continuance is specifically approved at least
annually (i) by the Board or by vote of a majority of the
outstanding voting securities of the Fund, and (ii) by vote of
a majority of the Trustees of the Trust who are not interested
persons of the Trust, either of the Advisers or 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 60 days'
written notice to the Sub-Adviser either by vote of the Board
or by vote of a majority of the outstanding voting securities
of the Fund;
(c) this Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Advisory
Agreement; and
(d) this Agreement may be terminated by the Sub-Adviser on 30
days' written notice to the Advisers and the Trust, or by the
Advisers immediately upon notice to the Sub-Adviser.
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 consent
of the Advisers 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 Fund and by vote of a majority of the
Trustees of the Trust who are not interested
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persons of the Trust, either of the Advisers, or the Sub-Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
12. Assignment. The Sub-Adviser may not assign this Agreement and this
Agreement shall automatically terminate in the event of an "assignment,"
as such term is defined in Section 2(a)(4) of the 1940 Act. The
Sub-Adviser shall notify the Advisers in writing sufficiently in advance
of any proposed change of "control," as defined in Section 2(a)(9) of the
1940 Act, so as to enable the Trust and/or the Advisers to: (a) consider
whether an assignment will occur, (b) consider whether to enter into a new
Sub-Advisory Agreement with the Sub-Adviser, and (c) prepare, file, and
deliver any disclosure document to the Fund's shareholders as may be
required by applicable law.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be construed in
accordance with applicable federal law and the laws of the State of
Illinois and shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors (subject to paragraph 10
(c) hereof) and, to the extent provided in paragraph 9 hereof, each
Sub-Adviser and Advisers Indemnified Person. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to
require, or to impose any duty upon, either of the parties to do anything
in violation of any applicable laws or regulations. Any provision in this
Agreement requiring compliance with any statute or regulation shall mean
such statute or regulation as amended and in effect from time to time.
14. Regulation S-P. In accordance with Regulation S-P, if non-public
personal information regarding any party's customers or consumers is
disclosed to the other party in connection with this Agreement, the other
party receiving such information will not disclose or use that information
other than as necessary to carry out the purposes of this Agreement.
15. Confidentiality. Any information or recommendations supplied by either
the Advisers or the Sub-Adviser, that are not otherwise in the public
domain or previously known to the other party in connection with the
performance of its obligations and duties hereunder, including without
limitation portfolio holdings of the Trust, financial information or other
information relating to a party to this Agreement, are to be regarded as
confidential ("Confidential Information") and held in the strictest
confidence. Except as may be required by applicable law or rule as
requested by regulatory authorities having jurisdiction over a party rule
or as requested by regulatory authorities having jurisdiction over a party
to this Agreement, Confidential Information may be used only by the party
to which said information has been communicated and such other persons as
that party believes are necessary to carry out the purposes of this
Agreement, the Custodian, and such persons as the Advisers may designate
in connection with the Sub-Advised Assets.
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16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Illinois.
NORTHERN TRUST GLOBAL ADVISORS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: President
NORTHERN TRUST INVESTMENTS, N.A.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
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Appendix A
Sub-Advisory Fees
As full compensation for the services and the expenses assumed by the
Sub-Adviser pursuant to this Agreement, the Advisers shall pay the Sub-Adviser a
fee at the annual rate of [Material Redacted: Confidential Treatment Requested].
Such compensation will be computed based on net assets on each day and
will be payable monthly in arrears.
