Exhibit (g)(18)
FOREIGN CUSTODY MONITORING AGREEMENT
AGREEMENT made as of May 1, 2001, between NORTHERN INSTITUTIONAL 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")
and Northern is a U.S. Bank as defined in Rule 17f-5 under the 1940 Act;
WHEREAS, the Trust has retained Northern to furnish custodial services;
WHEREAS, the Board of Trustees of the Trust wishes to delegate to Northern
the responsibility of monitoring the Trust's foreign custody arrangements and
custody risks as provided in Rule 17f-5 and Rule 17f-7 under the 1940 Act, and
Northern is willing to undertake such responsibility;
WHEREAS, the Trust desires to place and maintain its Foreign Assets with
one or more Eligible Securities Depositories as provided and defined in Rules
17f-5 and 17f-7 under the 1940 Act;
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
arrangements with Eligible Foreign Custodians (as defined in Rule 17f-5 under
the 0000 Xxx) for the Trust's existing and future investment portfolios in
accordance with Rule 17f-5, and Northern accepts such delegation and agrees to
furnish the services set forth herein.
2. With respect to each Eligible Foreign 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 Eligible Foreign Custodian, after
considering all factors relevant to the safekeeping of such assets,
including, without limitation:
(i) the Eligible Foreign 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 Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Trust's
assets;
(iii) the Eligible Foreign Custodian's general reputation and
standing; and
(iv) whether the Trust will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as
by virtue of the existence of any offices of the Eligible Foreign
Custodian in the United States or the Eligible Foreign
Custodian's consent to service of process in the United States.
(b) determine that the written contract with such Eligible Foreign
Custodian governing the foreign custody arrangements 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
Eligible Foreign 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
-2-
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 Eligible Foreign
Custodian and performance of 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 Eligible Foreign
Custodian and quarterly reports on any material changes to the
Trust's foreign custody arrangements; and
(e) withdraw the Trust's assets from any Eligible Foreign
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.
4. Northern shall provide to the Trust or its investment adviser an
analysis of the custody risks associated with maintaining assets with each
Eligible Securities Depository.
5. Northern shall monitor the custody risk associated with maintaining
assets with each Eligible Securities Depository on a continuing basis and
promptly notify the Trust or its investment adviser of any material change in
these risks.
6. In providing the services set forth in Paragraphs 4 and 5 above,
Northern shall exercise reasonable care, prudence and diligence.
7. If Northern believes that a custody arrangement with an Eligible
Securities Depository no longer meets the requirements of Rule 17f-7, (a)
Northern shall cause the assets maintained with such depository to be withdrawn
as soon as reasonably practical or (b) Northern shall immediately inform the
investment adviser responsible for managing such assets.
-3-
This Agreement is executed by or on behalf of the Trust with respect to
each of the portfolios 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 portfolio-by-portfolio basis,
and the assets of one portfolio shall not be liable for the obligations of
another portfolio.
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 INSTITUTIONAL FUNDS
By: /s/ Xxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Vice President
-----------------------------------
THE NORTHERN TRUST COMPANY
By: /s/ Xxxxxxx X. Xxxxxx III
------------------------------------
Name: Xxxxxxx X. Xxxxxx III
------------------------------------
Title: Vice President
------------------------------------
-4-
