NORTHERN FUNDS
INVESTMENT ADVISORY AND ANCILLARY SERVICES AGREEMENT
AGREEMENT made this 31st day of July, 2000 between NORTHERN FUNDS,
a Delaware business trust (the "Trust"), and THE NORTHERN TRUST COMPANY, an
Illinois state bank (the "Adviser").
WITNESSETH:
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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 fourteen portfolios, known as the Growth Equity Fund, Income
Equity Fund, Small Cap Value Fund (formerly known as the Small Cap Fund),
Select Equity Fund, International Growth Equity Fund, International Select
Equity Fund, Global Fixed Income Fund (formerly known as International Fixed
Income Fund), Fixed Income Fund, U.S. Government Fund, Intermediate
Tax-Exempt Fund, Tax-Exempt Fund, Money Market Fund, U.S. Government Money
Market Fund and Municipal Money Market Fund (such Funds [the "Current Funds"]
together with all other funds 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 each of its
Current Funds 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 each of its Current Funds 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.
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(b) In the event that the Trust establishes
one or more portfolios other than the
Current Funds 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 Current Funds 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
each of the Current Funds (each such 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. 30/31 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. 32 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
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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.
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
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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 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 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;
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(iv) provide assistance as requested by the
Trust or its Administrator concerning
the regulatory requirements applicable
to investors that invest in the Trust;
(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.
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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 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 .60 of 1% of the average daily net
assets of each of the Money Market, Municipal Money
Market and U.S. Government Money Market Funds; .75 of
1% of the average daily net assets of each of the Fixed
Income, U.S. Government, Intermediate Tax-Exempt and
Tax-Exempt Funds; .90 of 1% of the average daily net
assets of the Global Fixed Income Fund; 1.00 of 1% of
the average daily net assets of each of the Growth
Equity and Income Equity Funds; and
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1.20 of 1% of the average daily net assets of each of
the Small Cap Value, Select Equity, International Growth
Equity and International Select Equity Funds.
(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.
(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
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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,
damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the
relative benefits received by the Trust and such
Indemnified Parties in connection with the operation of
the Trust, the relative fault of the Trust and such
Indemnified Parties, and 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.
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8. DURATION AND TERMINATION. Insofar as the holders of Shares
representing the interests in the Current Funds 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 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.
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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 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
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Title: Vice-President
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THE NORTHERN TRUST COMPANY
ATTEST:
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxxxxx Xxxx
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Title: Senior Vice-President
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