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EXHIBIT 8(r)
FOREIGN CUSTODY MONITORING AGREEMENT
AGREEMENT made as of February 18, 1998 between NORTHERN FUNDS, a
Massachusetts 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;
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(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
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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.
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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/ Xxxxxx X. Xxxxxxx
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(Authorized Officer)
THE NORTHERN TRUST COMPANY
By /s/ Xxxxx X. Xxxxxxxx
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(Authorized Officer)
