FOREIGN CUSTODY MONITORING AGREEMENT
AGREEMENT made as of July 31, 2000 between NORTHERN FUNDS, a Delaware
business trust (the "Trust"), and THE NORTHERN TRUST COMPANY, an Illinois state
bank ("Northern").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained Northern to furnish investment advisory,
custodial and other services;
WHEREAS, the Board of Trustees of the Trust wishes to delegate to Northern
the responsibility of monitoring the Trust's foreign custody arrangements as
provided in Rule 17f-5 under the 1940 Act, and Northern is willing to undertake
such responsibility;
WHEREAS, the Board of Trustees of the Trust has determined that it is
reasonable to rely on Northern to perform the responsibilities delegated to it
under this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and intending to be legally bound, the parties hereto agree as follows:
1. The Trust hereby delegates to Northern the responsibility of monitoring
foreign custody arrangements for the Trust's existing and future investment
portfolios in accordance with Rule 17f-5 under the 1940 Act, and Northern
accepts such delegation and agrees to furnish the services set forth herein.
2. With respect to each foreign sub-custodian that holds assets of any
investment portfolio of the Trust, Northern shall:
(a) determine that the Trust's assets will be subject to reasonable
care, based on the standards applicable to custodians in the relevant
market, if maintained with such foreign sub-custodian, after
considering all factors relevant to the safekeeping of such assets,
including, without limitation:
(i) the foreign sub-custodian's practices, procedures and
internal controls, including but not limited to, the physical
protections available for certificated securities (if
applicable), the method of keeping custodial records and the
security and data protection practices;
(ii) whether the foreign sub-custodian has the requisite
financial strength to provide reasonable care for the Trust's
assets;
(iii) the foreign sub-custodian's general reputation and standing
and, in the case of a foreign securities depository, the
depository's operating history and number of participants; and
(iv) whether the Trust will have jurisdiction over and be able to
enforce judgments against the foreign sub-custodian, such as by
virtue of the existence of any offices of the foreign
sub-custodian in the United States or the foreign sub-custodian's
consent to service of process in the United States.
(b) determine that the written contract with such foreign sub-custodian
governing the foreign custody arrangements (or, in the case of a foreign
securities depository, that a written contract, the rules or established
practices or procedures of the depository or any combination of the
foregoing) will provide reasonable care for the Trust's assets based on the
standards specified in paragraph 2(a) above, and that such contract
includes provisions that at least provide the following; provided, however,
that such contract may contain, in lieu of any or all of the provisions
specified in (b)(i) through (b)(v), such other provisions that Northern
determines will provide, in their entirety, the same or a greater level of
care and protection for the Trust's assets as those provided in (b)(i)
through (b)(v) in their entirety:
(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the Trust will be
adequately protected against the risk of loss of assets held in
accordance with such contract;
(ii) that the Trust's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
the foreign sub-custodian or its creditors except a claim of
payment for their safe custody or administration or, in the case
of cash deposits, liens or rights in favor of creditors of the
sub-custodian arising under bankruptcy, insolvency, or similar
laws;
(iii) that beneficial ownership for the Trust's assets will be
freely transferable without the payment of money or value other
than for safe custody or administration;
(iv) that adequate records will be maintained identifying the
assets as belonging to the Trust or as being held by a third
party for the benefit of the Trust and that the Trust's
independent public accountants will be given access to those
records or confirmation of the contents of those records; and
(v) that the Trust will receive periodic reports with respect to
the safekeeping of the Trust's assets, including, but not limited
to, notification of any transfer to or from the Trust's account
or a third party account containing assets held for the benefit
of the Trust.
(c) establish a system to monitor the appropriateness of maintaining the
Trust's assets with such foreign sub-custodian and the contract governing
the Trust's foreign custody arrangements;
(d) provide to the Trust's Board of Trustees, at least annually, written
reports notifying the Board of the placement of the Trust's assets with a
particular foreign sub-custodian and quarterly reports on any material
changes to the Trust's foreign custody arrangements; and
(e) withdraw the Trust's assets from any foreign sub-custodian as soon as
reasonably practicable, if the foreign custody arrangement no longer meets
the requirement of Rule 17f-5.
3. In providing the services set forth above, Northern agrees to exercise
reasonable care, prudence and diligence such as a person having responsibility
for the safekeeping of the Trust's assets would exercise.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
NORTHERN FUNDS
By: /s/ Xxxxxxxxx Xxxx
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(Authorized Officer)
THE NORTHERN TRUST COMPANY
By: /s/ Xxxxxxxxx Xxxx
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(Authorized Officer)
