NORTHERN FUNDS
INVESTMENT ADVISORY AND ANCILLARY SERVICES AGREEMENT
AGREEMENT made this 2nd day of August, 2000 between NORTHERN FUNDS, a
Delaware business trust (the "Trust"), and NORTHERN TRUST INVESTMENTS, INC., an
Illinois state-chartered trust company (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial
interest ("Shares") in separate series with each such series representing the
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Trust presently intends to offer shares of beneficial
interest in a new portfolio, known as the Large Cap Value Fund (the "New Fund")
(such Fund together with all other portfolios subsequently established by the
Trust and made subject to this Agreement being herein collectively referred to
as the "Funds"); and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory and ancillary services to the Trust and the New Fund as indicated below
and the Adviser is willing to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. APPOINTMENT OF ADVISER.
(a) The Trust hereby appoints the Adviser to act as
investment adviser to the Trust and the Fund for
the periods and on the terms herein set forth. The
Adviser accepts such appointment and agrees to
render the services herein set forth, for the
compensation herein provided.
(b) In the event that the Trust establishes one or
more portfolios other than the New Fund with
respect to which it desires to retain the Adviser
to act as investment adviser hereunder, it shall
notify the Adviser in writing. If the Adviser is
willing to render such services under this
Agreement it shall notify the Trust in writing
whereupon
such portfolio shall become a Fund hereunder and
shall be subject to the provisions of this
Agreement to the same extent as the New Fund
except to the extent that said provisions
(including those relating to the compensation
payable by the Trust to the Adviser) are modified
with respect to such Fund in writing by the Trust
and the Adviser at the time.
2. DELIVERY OF DOCUMENTS. The Trust has delivered (or will
deliver as soon as is possible) to the Adviser copies of each of the following
documents:
(a) Agreement and Declaration of Trust dated as of
February 7, 2000 (such Agreement and Declaration
of Trust, as presently in effect, is herein called
the "Trust Agreement"), copies of which are also
on file with the Trust;
(b) By-Laws of the Trust (such By-Laws, as presently
in effect, are herein called the "By-Laws");
(c) Co-Administration Agreement between the Trust and
its Co-Administrators;
(d) Distribution Agreement between the Trust and its
Distributor;
(e) Custodian Agreement between the Trust and its
Custodian;
(f) Transfer Agency Agreement between the Trust and
its Transfer Agent;
(g) Prospectus and Statement of Additional Information
for the New Fund (the Prospectus and Statement of
Additional Information, as presently in effect and
as amended, supplemented and/or superseded from
time to time, are herein called "Prospectus" and
"Statement of Additional Information,"
respectively);
(h) Post Effective Amendment No. 34 to the Trust's
Registration Statement on Form N-1A (No. 33-73404)
under the Securities Act of 1933 (the "1933 Act")
and Amendment No. 36 to the Trust's Registration
Statement on such form (No. 811-8236) under the
1940 Act filed as a single document with the
Securities and Exchange Commission (the
"Commission") (such Registration Statement, as
presently in effect and as amended from time to
time, is herein called the "Registration
Statement").
The Trust agrees to promptly furnish the Adviser from time to time
with copies of all amendments of or supplements to or otherwise current versions
of any of the foregoing documents not heretofore furnished.
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3. DUTIES OF ADVISER
(a) Subject to the general supervision of the Trustees
of the Trust, the Adviser shall manage the
investment operations of each of the Funds and the
composition of each Fund's assets, including the
purchase, retention and disposition thereof. In
this regard, the Adviser:
(i) shall provide supervision of the Funds'
assets, furnish a continuous investment
program for such Funds, determine from
time to time what investments or
securities will be purchased, retained
or sold by the Funds, and what portion
of the assets will be invested or held
uninvested as cash;
(ii) 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 in question
is trading. With respect to common and
preferred stocks, in executing portfolio
transactions and selecting brokers or
dealers, the Adviser shall use its best
judgment to obtain the best overall
terms available. In assessing the best
overall terms available for any
transaction, the 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
Adviser may also consider the brokerage
and research services (as those terms
are defined in Section 28(e) of the
Securities Exchange Act of 1934)
provided to any Fund and/or other
account over which the Adviser and/or an
affiliate of the Adviser exercises
investment discretion. With respect to
securities other than common and
preferred stocks, in placing orders with
brokers, dealers or other persons, the
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
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Adviser may, at its discretion but
subject to applicable law, select the
executing broker, dealer or such other
person on the basis of the Adviser's
opinion of the reliability and quality
of such broker, dealer or such other
person;
(iii) may, on occasions when it deems the
purchase or sale of a security to be in
the best interests of a Fund as well as
other fiduciary or agency accounts
managed by the 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 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 Adviser
in the manner it considers to be most
equitable and consistent with its
fiduciary obligations to such Fund and
to such other accounts.
(b) In addition, the Adviser shall provide the
following ancillary services under this Agreement:
(i) review the preparation of reports and
proxy statements to the Trust's
shareholders, the periodic updating of
the Trust's Prospectus, Statement of
Additional Information and Registration
Statement, and the preparation of other
reports and documents required to be
filed by the Trust with the Securities
and Exchange Commission;
(ii) in connection with its management of the
Funds, monitor anticipated purchases and
redemptions by shareholders and new
investors;
(iii) provide information and assistance as
requested by the Administrator of the
Trust in connection with the
registration of the Trust's shares in
accordance with state and foreign
securities requirements;
(iv) provide assistance as requested by the
Trust or its Administrator concerning
the regulatory requirements applicable
to investors that invest in the Trust;
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(v) develop and monitor investor programs
for shareholders of the Trust, and
assist in the coordination of such
programs with programs offered
separately by the Adviser to its
clients;
(vi) provide assistance in connection with
the operations of the Trust generally;
and
(vii) provide other similar services as
reasonably requested from time to time
by the Board of Trustees of the Trust.
(c) The Adviser, in connection with its rights and
duties with respect to the Trust:
(i) 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; and
(ii) shall act in conformity with the Trust
Agreement, By-Laws, Registration
Statement, Prospectus and Statement of
Additional Information, and instructions
and directions of the Trustees of the
Trust, and will use its best efforts to
comply with and conform to the
requirements of the 1940 Act and all
other applicable federal and state laws,
regulations and rulings.
(d) The Adviser shall:
(i) comply with all applicable Rules and
Regulations of the Securities and
Exchange Commission and will in addition
conduct its activities under this
Agreement in accordance with other
applicable law; and
(ii) maintain a policy and practice of
conducting its investment advisory
services hereunder independently of its
commercial banking operations and those
of any affiliated bank of the Adviser.
When the Adviser makes investment
recommendations for a Fund, its
investment advisory personnel will not
inquire or take into consideration
whether the issuer of securities
proposed for purchase or sale for the
Fund's account
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are customers of its commercial banking
department or the commercial banking
department of any affiliated bank of
the Adviser.
(e) The Adviser shall not, unless permitted by the
Securities and Exchange Commission:
(i) permit the Funds to execute transactions
with the Adviser's Bond Department; or
(ii) permit the Funds to purchase
certificates of deposit of the Adviser
or its affiliate banks, commercial paper
issued by the Adviser's parent holding
company or other securities issued or
guaranteed by the Adviser, its parent
holding company or their subsidiaries or
affiliates.
(f) The Adviser shall render to the Trustees of the
Trust such periodic and special reports as the
Trustees may reasonably request.
(g) The services of the Adviser hereunder are not
deemed exclusive and the 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.
4. EXPENSES. During the term of this Agreement, the Adviser
shall pay all costs incurred by it in connection with the
performance of its duties under paragraph 3 hereof, other
than the cost (including taxes, brokerage commissions and
other transactions costs, if any) of securities purchased or
sold for each of the Funds.
5. COMPENSATION.
(a) For the services provided and the expenses assumed
by the Adviser pursuant to this Agreement, the
Trust shall pay to the Adviser as full
compensation therefor a fee at an annual rate of
1.00% of the average daily net assets of the New
Fund.
(b) The fee will be computed based on net assets on
each day and will be paid to the Adviser monthly.
6. BOOKS AND RECORDS. The Adviser agrees to maintain, and
preserve for the periods prescribed by Rule 31a-2 of the
Commission under the 1940 Act, such records as are required
to be maintained by Rule 31a-1 of the Commission under the
1940 Act (other than clause (b) (4) and paragraphs (c), (d)
and (e) thereof). The Adviser further agrees that all
records which it maintains for the Trust are the property of
the Trust and it shall surrender promptly to the Trust any
of such records upon the Trust's request.
7. INDEMNIFICATION.
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(a) The Trust hereby agrees to indemnify and hold
harmless the Adviser, its directors, officers, and
employees and each person, if any, who controls
the Adviser (collectively, the "Indemnified
Parties") against any and all losses, claims,
damages or liabilities, joint or several, to which
they or any of them may become subject under the
1933 Act, the Securities Exchange Act of 1934, the
1940 Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are
based upon:
(i) any untrue statement or alleged untrue
statement of a material fact or any
omission or alleged omission to state a
material fact required to be stated or
necessary to make the statements made
not misleading in the Registration
Statement, the Prospectus, the Statement
of Additional Information, or any
application or other document filed in
connection with the qualification of the
Trust or Shares of the Trust under the
Blue Sky or securities laws of any
jurisdiction ("Application"), except
insofar as such losses, claims, damages
or liabilities (or actions in respect
thereof) arise out of or are based upon
any such untrue statement or omission or
alleged untrue statement or omission
either pertaining to a breach of the
Adviser's duties in connection with this
Agreement or made in reliance upon and
in conformity with information furnished
by, through or on behalf of the Adviser
for use in connection with the
Registration Statement, any Application,
the Prospectus or the Statement of
Additional Information; or
(ii) subject to clause (i) above, the Adviser
acting in accordance with the terms
hereof;
and the Trust will reimburse each Indemnified
Party for any legal or other expense incurred by
such Indemnified Party in connection with
investigating or defending any such loss, claim,
damages, liability or action.
(b) If the indemnification provided for in paragraph
7(a) is due in accordance with the terms of such
paragraph but is for any reason held by a court to
be unavailable from the Trust, then the Trust
shall contribute to the aggregate amount paid or
payable by the Trust and the Indemnified Parties
as a result of such losses, claims,
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damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to
reflect (i) the relative benefits received by the
Trust and such Indemnified Parties in connection
with the operation of the Trust, (ii) the relative
fault of the Trust and such Indemnified Parties,
and (iii) any other relevant equitable
considerations. The Trust and the Adviser agree
that it would not be just and equitable if
contribution pursuant to this subparagraph (b)
were determined by pro rata allocation or other
method of allocation which does not take account
the equitable considerations referred to above in
this subparagraph (b). The amount paid or payable
as a result of the losses, claims, damages or
liabilities (or actions in respect thereof)
referred to above in this subparagraph (b) shall
be deemed to include any legal or other expense
incurred by the Trust and the Indemnified Parties
in connection with investigating or defending any
such loss, claim, damage, liability or action. No
person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any
person who was not guilty of such fraudulent
misrepresentation.
(c) It is understood, however, that nothing in this
paragraph 7 shall protect any Indemnified Party
against, or entitle any Indemnified Party to
indemnification against, or contribution with
respect to, any liability to the Trust or its
Shareholders to which such Indemnified Party is
subject, by reason of its willful misfeasance, bad
faith or gross negligence in the performance of
its duties, or by reason of a reckless disregard
to its obligations and duties, under this
Agreement or otherwise, to an extent or in a
manner inconsistent with Section 17 of the 1940
Act.
8. DURATION AND TERMINATION. Insofar as the holders of Shares
representing the interests in the New Fund are affected by this Agreement, it
shall continue, unless sooner terminated as provided herein, until March 31,
2001, and, insofar as the holders of Shares representing the interests in each
of the other Funds are affected by this Agreement, it (as supplemented by the
terms specified in any notice and agreement pursuant to paragraph 1(b) hereof)
shall continue (assuming approval by the initial holder(s) of Shares of such
Fund) until March 31 of the year following the year in which the Fund becomes a
Fund hereunder, and with respect to each Fund thereafter shall continue
automatically for periods of one year so long as each such latter continuance is
approved at least annually by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or interested persons (as defined by
the 0000 Xxx) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and by the Trustees of the Trust or by vote
of a majority of the outstanding Shares (as defined with respect to voting
securities in the 1940 Act) representing the interests in such Fund; provided,
however, that this Agreement may be terminated by the Trust as to any Fund at
any time, without the payment of any penalty, by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding Shares (as so
defined) representing the interests in the
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Fund affected thereby on 60 days' written notice to the Adviser, or by the
Adviser at any time, without the payment of any penalty, on 60 days' written
notice to the Trust. This Agreement shall automatically and immediately
terminate in the event of its assignment (as defined by the 1940 Act).
9. NAME OF THE TRUST. The Adviser agrees that the name "Northern" may
be used in the name of the Trust and that such name, any related logos and any
service marks containing the word "Northern" may be used in connection with the
Trust's business only for so long as this Agreement (including any continuance
or amendment hereof) remains in effect and that such use shall be royalty free.
At such time as this Agreement shall no longer be in effect, the Trust will
cease such use. The Trust acknowledges that it has no rights to the name
"Northern," such logos or service marks other than those granted in this
paragraph and that the Adviser reserves to itself the right to grant the
nonexclusive right to use the name "Northern," such logos or service marks to
any other person, including, but not limited to, another investment company.
10. STATUS OF ADVISER AS INDEPENDENT CONTRACTOR. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Trustees of the Trust
from time to time, have no authority to act for or represent the Trust in any
way or otherwise be deemed an agent of the Trust.
11. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent but, except as otherwise permitted by the 1940 Act and interpretations
thereof by the Commission and its staff, the consent of the Trust must be
approved by vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons (as defined in the 0000 Xxx) of
any such party, cast in person at a meeting called for the purpose of voting on
such amendment, and by vote of a majority of the outstanding Shares (as defined
with respect to a voting securities by the 1940 Act) representing the interests
in each Fund affected by such amendment.
12. SHAREHOLDER LIABILITY. This Agreement is executed by or on behalf
of the Trust with respect to each of the Funds and the obligations hereunder are
not binding upon any of the Trustees, officers or Shareholders of the Trust
individually but are binding only upon the Trust and its assets and property.
All obligations of the Trust under this Agreement shall apply only on a
Fund-by-Fund basis, and the assets of one Fund shall not be liable for the
obligations of another Fund.
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 (except as to paragraph 12 hereof which shall be
construed in accordance with the laws of the State of Delaware) 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 the last sentence
of paragraph 8) and, to the extent provided in paragraph 7 hereof, each
Indemnified Party. Anything herein to the contrary notwithstanding, this
Agreement shall not be construed to
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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. 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
ATTEST: NORTHERN FUNDS
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxxxxx Xxxx
------------------ ------------------
Title: Vice-President
ATTEST: NORTHERN TRUST INVESTMENTS, INC.
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxx Xxxxxx
------------------ ---------------
Title: Senior Vice-President
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