EXHIBIT D(1)
FORM OF
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.
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(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.
(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 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 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.
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(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 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;
(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.
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.
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(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 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.
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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, 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 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 loss 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 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.
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
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By:
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Title:
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ATTEST: THE NORTHERN TRUST COMPANY
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By:
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Title:
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