EXHIBIT G(18)
FORM OF
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:
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(Authorized Officer)
THE NORTHERN TRUST COMPANY
By:
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(Authorized Officer)
