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Northern Institutional Funds
FIXED INCOME AND
EQUITY PORTFOLIOS
APRIL 1, 1999
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Northern Institutional Funds
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FIXED INCOME o U.S. GOVERNMENT SECURITIES PORTFOLIO
AND EQUITY ------------------------------------------------------------
PORTFOLIOS o SHORT-INTERMEDIATE BOND PORTFOLIO
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o INTERMEDIATE BOND PORTFOLIO
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o U.S. TREASURY INDEX PORTFOLIO
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o BOND PORTFOLIO
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o INTERNATIONAL BOND PORTFOLIO
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o BALANCED PORTFOLIO
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o EQUITY INDEX PORTFOLIO
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o DIVERSIFIED GROWTH PORTFOLIO
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o FOCUSED GROWTH PORTFOLIO
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o SMALL COMPANY INDEX PORTFOLIO
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o INTERNATIONAL EQUITY INDEX PORTFOLIO
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o INTERNATIONAL GROWTH PORTFOLIO
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Prospectus dated April 1, 1999
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. An investment in a Portfolio involves investment risks, including
possible loss of principal.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
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Contents
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RISK/RETURN Fixed Income Portfolios
SUMMARY ...........................................................................
U.S. GOVERNMENT SECURITIES PORTFOLIO 5
Information about the ...........................................................................
objectives, principal strategies SHORT-INTERMEDIATE BOND PORTFOLIO 6
and risk characteristics ...........................................................................
of each Portfolio INTERMEDIATE BOND PORTFOLIO 7
...........................................................................
U.S. TREASURY INDEX PORTFOLIO 8
...........................................................................
BOND PORTFOLIO 9
...........................................................................
INTERNATIONAL BOND PORTFOLIO 10
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BALANCED PORTFOLIO 11
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Equity Portfolios
...........................................................................
EQUITY INDEX PORTFOLIO 12
...........................................................................
DIVERSIFIED GROWTH PORTFOLIO 13
...........................................................................
FOCUSED GROWTH PORTFOLIO 14
...........................................................................
SMALL COMPANY INDEX PORTFOLIO 15
...........................................................................
INTERNATIONAL EQUITY INDEX PORTFOLIO 16
...........................................................................
INTERNATIONAL GROWTH PORTFOLIO 17
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Principal Investment Risks 18
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Portfolio Performance 20
...........................................................................
U.S. GOVERNMENT SECURITIES PORTFOLIO 21
...........................................................................
SHORT-INTERMEDIATE BOND PORTFOLIO 22
...........................................................................
INTERMEDIATE BOND PORTFOLIO 23
...........................................................................
U.S. TREASURY INDEX PORTFOLIO 24
...........................................................................
BOND PORTFOLIO 25
...........................................................................
INTERNATIONAL BOND PORTFOLIO 26
...........................................................................
BALANCED PORTFOLIO 27
...........................................................................
EQUITY INDEX PORTFOLIO 28
...........................................................................
DIVERSIFIED GROWTH PORTFOLIO 29
...........................................................................
FOCUSED GROWTH PORTFOLIO 30
...........................................................................
SMALL COMPANY INDEX PORTFOLIO 31
...........................................................................
INTERNATIONAL EQUITY INDEX PORTFOLIO 32
...........................................................................
INTERNATIONAL GROWTH PORTFOLIO 33
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Portfolio Fees and Expenses 34
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MANAGEMENT Investment Advisers 41
OF THE --------------------------------------------------------------------------------
PORTFOLIOS Advisory Fees 42
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Details that apply to the Portfolio Management 43
Portfolios as a group --------------------------------------------------------------------------------
Other Portfolio Management Information 44
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Other Portfolio Services 44
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ABOUT YOUR Purchasing and Selling Shares 45
ACCOUNT ...........................................................................
Purchasing Shares 45
How to open, maintain ...........................................................................
and close an account Opening an Account 45
...........................................................................
Selling Shares 46
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Account Policies and Other Information 47
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Purchase and Redemption Minimums 47
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Calculating Share Price 47
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Timing of Purchase Requests 47
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Additional Transaction Fee 47
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Tax Identification Number 48
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In-Kind Purchases and Redemptions 48
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Miscellaneous Purchase Information 48
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Timing of Redemption and Exchange Requests 48
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Miscellaneous Redemption Information 48
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Exchange Privileges 49
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Telephone Transactions 49
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Making Changes to Your Account Information 49
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Business Day 49
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Early Closings 50
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Authorized Intermediaries 50
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Servicing Agents 50
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Dividends and Distributions 51
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Tax Considerations 52
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Year 2000 Issues 53
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APPENDICES Appendix A 54
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Special Risks and Other Considerations 54
...........................................................................
Additional Description of Securities and Common Investment Techniques 59
...........................................................................
Disclaimers 68
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Appendix B 69
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Portfolio Financial Highlights 70
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FOR MORE Annual/Semiannual Report 96
INFORMATION --------------------------------------------------------------------------------
Statement of Additional Information 96
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Northern Institutional Funds (the "Trust") offers a selection of investment
portfolios to institutional investors, each with a distinct investment objective
and risk/reward profile.
The descriptions on the following pages may help you choose the portfolios that
best fit your investment needs. Keep in mind, however, that no portfolio can
guarantee it will meet its investment objective, and no portfolio should be
relied upon as a complete investment program.
This Prospectus describes the six fixed income, one balanced and six equity
portfolios (the "Portfolios") currently offered by the Trust. Each Portfolio is
authorized to offer three classes of shares: Class A, Class C and Class D
Shares. The Trust's four money market portfolios are described in a separate
prospectus.
In addition to the instruments described on the pages below, each Portfolio may
use various investment techniques in seeking its investment objective. You can
learn more about these techniques and their related risks by reading Appendix A
to this Prospectus and the Statement of Additional Information.
4
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RISK/RETURN SUMMARY
U.S. GOVERNMENT SECURITIES PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize total return with minimal reasonable risk.
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PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio will seek capital appreciation and current income in its attempt
to maximize total return. In doing so, the Portfolio will invest, under normal
market conditions, at least 65% of its total assets in a broad range of
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements relating to such securities. These
may include:
o U.S. Treasury bills, notes and bonds
o Obligations of U.S. government agencies and instrumentalities
o Mortgage-related securities issued by U.S. government agencies
o Stripped securities evidencing ownership of future interest or principal
payments on obligations of the U.S. government, its agencies or
instrumentalities
In selecting securities for the Portfolio, the investment management team uses a
relative value approach, emphasizing sectors and securities believed to provide
more than adequate compensation for the risks assumed. In determining whether a
particular sector or security provides relative value, the investment management
team analyzes various economic and market information, including economic
growth, interest and inflation rates, deficit levels, the shape of the yield
curve, sector and quality spreads and risk premiums. It also uses proprietary
valuation models to analyze and compare expected returns and assumed risks.
The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between one and five years.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
5
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SHORT-INTERMEDIATE BOND PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize total return consistent with reasonable risk.
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PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio will seek capital appreciation and current income in its attempt
to maximize total return. In doing so, the Portfolio will invest, under normal
market conditions, at least 65% of its total assets in a broad range of bonds
and other fixed income securities. These may include:
o Obligations of the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations
o Obligations of state, local and foreign governments
o Obligations of domestic and foreign banks and corporations
o Zero coupon bonds, debentures and convertible debentures
o Mortgage and other asset-backed securities
o Stripped securities evidencing ownership of future interest or principal
payments on debt obligations
Although the Portfolio primarily invests in investment grade domestic debt
obligations (i.e., obligations rated within the top four rating categories by a
Nationally Recognized Statistical Rating Organization), it may invest a portion
of its assets in obligations of foreign issuers and in securities that are rated
below investment grade ("junk bonds").
In selecting securities for the Portfolio, the investment management team uses a
relative value approach, emphasizing sectors and securities believed to provide
more than adequate compensation for the risks assumed. In determining whether a
particular sector or security provides relative value, the investment management
team analyzes various economic and market information, including economic
growth, interest and inflation rates, deficit levels, the shape of the yield
curve, sector and quality spreads and risk premiums. It also uses proprietary
valuation models to analyze and compare expected returns and assumed risks.
The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between two and five years.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
6
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RISK/RETURN SUMMARY
INTERMEDIATE BOND PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize total return consistent with reasonable risk.
This objective may be changed without shareholder approval.
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PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio will seek capital appreciation and current income in its attempt
to maximize total return. In doing so, the Portfolio will invest, under normal
market conditions, at least 65% of its total assets in a broad range of bonds
and other fixed income securities. These may include:
o Obligations of the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations
o Obligations of state, local and foreign governments
o Obligations of domestic and foreign banks and corporations
o Zero coupon bonds, debentures and convertible debentures
o Mortgage and other asset-backed securities
o Stripped securities evidencing ownership of future interest or principal
payments on debt obligations
Although the Portfolio primarily invests in investment grade domestic debt
obligations (i.e., obligations rated within the top four rating categories by a
Nationally Recognized Statistical Rating Organization), it may invest a portion
of its assets in obligations of foreign issuers and in securities that are rated
below investment grade ("junk bonds").
In selecting securities for the Portfolio, the investment management team uses a
relative value approach, emphasizing sectors and securities believed to provide
more than adequate compensation for the risks assumed. In determining whether a
particular sector or security provides relative value, the investment management
team analyzes various economic and market information, including economic
growth, interest and inflation rates, deficit levels, the shape of the yield
curve, sector and quality spreads and risk premiums. It also uses proprietary
valuation models to analyze and compare expected returns and assumed risks.
The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between three and ten years.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
7
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U.S. TREASURY INDEX PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to provide investment results approximating the performance
of the Lehman Brothers Treasury Bond Index (the "Lehman Index").
The Lehman Index is an unmanaged index that includes a broad range of U.S.
Treasury obligations and is considered representative of U.S. Treasury bond
performance overall.
Lehman Brothers ("Lehman") does not endorse any of the securities in the Index.
It is not a sponsor of the U.S. Treasury Index Portfolio and is not affiliated
with the Portfolio in any way.
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PRINCIPAL
INVESTMENT
STRATEGIES
Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in a representative sample of the U.S. Treasury obligations
included in the Lehman Index. These securities will be selected based on their
expected contribution to the Portfolio's overall duration and total return as
compared to the Lehman Index and comparable investment characteristics.
The Portfolio is passively managed, which means it tries to duplicate the
investment composition and performance of the Lehman Index by using
sophisticated computer programs and statistical procedures. As a result, the
investment management team does not use traditional methods of fund investment
management for the Portfolio, such as selecting securities on the basis of
economic, financial and market analysis. Because the Portfolio will have fees
and transaction expenses (while the Index has none), returns are likely to be
below those of the Index.
Under normal market conditions, it is expected that the quarterly performance of
the Portfolio will be within a .95 correlation with the Lehman Index, before
expenses.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
8
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RISK/RETURN SUMMARY
BOND PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize total return consistent with reasonable risk.
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PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio will seek capital appreciation and current income in its attempt
to maximize total return. In doing so, the Portfolio will invest, under normal
market conditions, at least 65% of its total assets in a broad range of bonds
and other fixed income securities. These may include:
o Obligations of the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations
o Obligations of state, local and foreign governments
o Obligations of domestic and foreign banks and corporations
o Zero coupon bonds, debentures and convertible debentures
o Mortgage and other asset-backed securities
o Stripped securities evidencing ownership of future interest or principal
payments on debt obligations
Although the Portfolio invests primarily in investment grade domestic debt
obligations (i.e., obligations rated within the top four rating categories by a
Nationally Recognized Statistical Rating Organization), it may invest a portion
of its assets in obligations of foreign issuers and in securities that are rated
below investment grade ("junk bonds").
In selecting securities for the Portfolio, the investment management team uses a
relative value approach, emphasizing sectors and securities believed to provide
more than adequate compensation for the risks assumed. In determining whether a
particular sector or security provides relative value, the investment management
team analyzes various economic and market information, including economic
growth, interest and inflation rates, deficit levels, the shape of the yield
curve, sector and quality spreads and risk premiums. It also uses proprietary
valuation models to analyze and compare expected returns and assumed risks.
The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between five and fifteen years.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
9
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INTERNATIONAL BOND PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize total return consistent with reasonable risk.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio will seek capital appreciation and current income in its attempt
to maximize total return. In doing so, the Portfolio will invest, under normal
market conditions, at least 65% of its total assets in a broad range of bonds
and other fixed income securities of foreign issuers. These may include:
o Obligations of foreign governments, their agencies or instrumentalities
o Obligations of supranational organizations (such as the World Bank)
o Obligations of foreign corporations and banks
o Zero coupon bonds, debentures and convertible debentures of foreign issuers
o Mortgage and other asset-backed securities of foreign issuers
The Portfolio will invest in the securities of issuers located in at least three
different foreign countries. Although the Portfolio primarily invests in mature
markets (such as Germany and Japan), it may also invest in emerging markets
(such as Argentina and China) depending upon the portfolio management team's
outlook for the relative economic growth, expected inflation and other economic
and political prospects of each country or region. It is expected that during
the current fiscal year a substantial portion of the Portfolio's assets will be
invested in foreign governmental obligations because such obligations represent
a substantial portion of the non-U.S. fixed income market.
The Portfolio may also invest a portion of its assets in domestic obligations,
including obligations of the U.S. government, its agencies and instrumentalities
and repurchase agreements collateralized by such obligations. It may also invest
in the obligations of domestic banks and corporations, zero coupon bonds,
debentures and convertible debentures, and mortgage and other asset-backed
securities.
Although the Portfolio primarily invests in investment grade fixed income
securities (i.e., obligations rated within the top four rating categories by a
Nationally Recognized Statistical Rating Organization), it may invest a portion
of its assets in securities that are rated below investment grade ("junk
bonds").
In selecting securities for the Portfolio, the investment management team uses a
relative value approach, emphasizing sectors and securities believed to provide
more than adequate compensation for the risks assumed. In determining whether a
particular sector or security provides relative value, the investment management
team analyzes various economic and market information, including economic
growth, interest and inflation rates, deficit levels, the shape of the yield
curve, sector and quality spreads and risk premiums. It also uses proprietary
valuation models to analyze and compare expected returns and assumed risks.
The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between three and eleven years.
The Portfolio is "non-diversified" under the Investment Company Act of 1940, as
amended (the "1940 Act"), and may invest more of its assets in fewer issuers
than "diversified" mutual funds.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
10
<PAGE>
RISK/RETURN SUMMARY
BALANCED PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to provide long-term capital appreciation and current
income.
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PRINCIPAL
INVESTMENT
STRATEGIES
In seeking long-term capital appreciation and current income, the Portfolio
will, under normal market conditions, invest up to 75% of the value of its total
assets in equity securities and at least 25% in fixed income securities. The
actual mix of assets will vary depending on the investment management team's
analysis of market and economic conditions, including expected earnings, growth
in earnings, long-term interest rates and risk premiums. When, for example, this
analysis indicates that the equity market is overvalued relative to the fixed
income market, the investment management team would allocate a greater
percentage of the Portfolio's assets to fixed income securities.
When investing in equity securities, the Portfolio generally invests in the
equity or equity-related securities ("equity securities") of a broad mix of
companies. Such companies generally will have market capitalizations in excess
of $750 million. Although the Portfolio primarily invests in the common,
preferred and convertible stocks of U.S. companies, it may invest a portion of
its assets in the stocks of foreign issuers. Using fundamental research and
quantitative analysis, the investment management team selects stocks of
companies believed to have favorable growth characteristics. In determining
whether a company has favorable growth characteristics, the investment
management team analyzes factors such as:
o Sales and earnings growth
o Return on equity
o Financial condition
o Market share and product leadership
With respect to the fixed income portion of the Portfolio, the investment
management team uses a relative value approach, emphasizing sectors and
securities believed to provide more than adequate compensation for the risks
assumed. In determining whether a particular sector or security provides
relative value, the investment management team analyzes various economic and
market information, including economic growth, interest and inflation rates,
deficit levels, the shape of the yield curve, sector and quality spreads and
risk premiums. It also uses proprietary valuation models to analyze and compare
expected returns and assumed risks.
The Portfolio invests in a broad range of fixed income securities, including:
o Obligations of the U.S. government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations
o Obligations of state, local and foreign governments
o Obligations of domestic and foreign banks and corporations
o Zero coupon bonds, debentures and convertible debentures
o Mortgage and other asset-backed securities
o Stripped securities evidencing ownership of future interest or principal
payments on debt obligations
Although the Portfolio primarily invests in domestic fixed income obligations
that are investment grade (i.e., obligations rated within the top four rating
categories by a Nationally Recognized Statistical Rating Organization), it may
invest a portion of its assets in fixed income obligations of foreign issuers
and in securities that are rated below investment grade ("junk bonds").
The dollar-weighted average maturity of the fixed income portion of the
Portfolio will, under normal market conditions, range between two and ten years.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
11
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EQUITY INDEX PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to provide investment results approximating the aggregate
price and dividend performance of the securities included in the Standard &
Poor's ("S&P") 500 Composite Stock Price Index ("S&P 500(R) Index").
The S&P 500(R) Index is an unmanaged index which includes 500 companies
operating across a broad spectrum of the U.S. economy, and its performance is
widely considered representative of the U.S. stock market as a whole. The
companies chosen for inclusion in the Index tend to be leaders in important
industries within the U.S. economy. However, companies are not selected by S&P
for inclusion because they are expected to have superior stock price performance
relative to the market in general or other stocks in particular.
S&P does not endorse any stock in the Index. It is not a sponsor of the Equity
Index Portfolio and is not affiliated with the Portfolio in any way.
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PRINCIPAL
INVESTMENT
STRATEGIES
Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in the equity securities of the companies that make up the S&P
500(R) Index, in approximately the same proportions as they are represented in
the Index.
The Portfolio is passively managed, which means it tries to duplicate the
investment composition and performance of the S&P 500(R) Index by using
sophisticated computer programs and statistical procedures. As a result, the
investment management team does not use traditional methods of fund investment
management for this Portfolio, such as selecting securities on the basis of
economic, financial and market analysis. Because the Portfolio will have fees
and transaction expenses (while the Index has none), returns are likely to be
below those of the Index.
Under normal market conditions, it is expected that the quarterly performance of
the Portfolio will be within a .95 correlation with the S&P 500(R) Index, before
expenses.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
12
<PAGE>
RISK/RETURN SUMMARY
DIVERSIFIED GROWTH PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to provide long-term capital appreciation with income a
secondary consideration.
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PRINCIPAL
INVESTMENT
STRATEGIES
In seeking long-term capital appreciation, the Portfolio will, under normal
market conditions, invest at least 65% of its total assets in the equity
securities of a broad mix of companies. Such companies generally will have
market capitalizations in excess of $750 million. Although the Portfolio
primarily invests in the common, preferred and convertible stocks of U.S.
companies, it may invest a portion of its assets in the stocks of foreign
issuers.
Using fundamental research and quantitative analysis, the investment management
team selects stocks of companies believed to have favorable growth
characteristics. In determining whether a company has favorable growth
characteristics, the investment management team analyzes factors such as:
o Sales and earnings growth
o Return on equity
o Financial condition
o Market share and product leadership
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
13
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FOCUSED GROWTH PORTFOLIO
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INVESTMENT
OBJECTIVE
The Portfolio seeks to provide long-term capital appreciation. Any income
received is incidental to this objective.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
In seeking long-term capital appreciation, the Portfolio will, under normal
market conditions, invest at least 65% of its total assets in the equity
securities of a select mix of companies. Such companies generally will have
market capitalizations in excess of $750 million. Although the Portfolio
primarily invests in the common, preferred and convertible stocks of U.S.
companies, it may invest a portion of its assets in the securities of foreign
issuers.
Using fundamental research and quantitative analysis, the investment management
team selects stocks of companies believed to have favorable growth
characteristics. In determining whether a company has favorable growth
characteristics, the investment management team analyzes factors such as:
o Sales and earnings growth
o Return on equity
o Financial condition
o Market share and product leadership
The Portfolio may, from time to time, emphasize particular companies or market
segments in attempting to achieve its investment objective. Many of the
companies in which the Portfolio invests retain their earnings to finance
current and future growth. These companies generally pay little or no dividends.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
14
<PAGE>
RISK/RETURN SUMMARY
SMALL COMPANY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide investment results approximating the aggregate
price and dividend performance of the securities included in the Russell 2000
Small Stock Index ("Russell 2000 Index").
The Russell 2000 Index is a market value-weighted index which includes stocks of
the smallest 2,000 companies in the Russell 3000 Index. The Russell 3000 Index
includes stocks of the 3,000 largest companies based in the U.S. The Russell
2000 Index is widely considered representative of smaller company stock
performance as a whole. The companies in the Russell 2000 Index are selected
according to their total market capitalization. However, companies are not
selected by Frank Russell & Company ("Russell") for inclusion in the Index
because they are expected to have superior stock price performance relative to
the stock market in general or other stocks in particular.
Russell does not endorse any stock in the Index. It is not a sponsor of the
Small Company Index Portfolio and is not affiliated with the Portfolio in any
way.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in the equity securities included in the Russell 2000 Index. These
will be selected on the basis of such factors as:
o Market capitalization
o Liquidity
o Industry sectors
Although the Portfolio attempts to mirror the aggregate investment
characteristics of the Russell 2000 Index as a whole, the number of issues held
by the Portfolio will be determined by the Portfolio's liquidity and size.
The Portfolio is passively managed, which means it tries to duplicate the
investment composition and performance of the Russell 2000 Index by using
sophisticated computer programs and statistical procedures. As a result, the
investment management team does not use traditional methods of fund investment
management for the Portfolio, such as selecting securities on the basis of
economic, financial and market analysis. Because the Portfolio will have fees
and transaction expenses (while the Index has none), returns are likely to be
below those of the Index.
Under normal market conditions, it is expected that the quarterly performance of
the Portfolio will be within a .95 correlation with the Russell 2000 Index,
before expenses.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
15
<PAGE>
INTERNATIONAL EQUITY INDEX PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide investment results approximating the aggregate
price and dividend performance of the securities in the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE Index").
The EAFE Index is a broad-based market capitalization weighted index that
includes more than 1,000 securities in twenty foreign countries. It is widely
considered representative of foreign stock market performance overall.
Morgan Stanley Capital International ("MSCI") does not endorse any of the
securities in the Index. It is not a sponsor of the International Equity Index
Portfolio and is not affiliated with the Portfolio in any way.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
Under normal market conditions, the Portfolio will invest at least 80% of its
total assets in the equity securities included in the EAFE Index. These will be
selected on the basis of such factors as:
o Country weighting
o Market capitalization
o Liquidity
o Industry sectors
Although the Portfolio attempts to mirror the aggregate investment
characteristics of the EAFE Index as a whole, the number of issues held by the
Portfolio will be determined by the Portfolio's liquidity and size. Because the
proportion of assets allocated to each country will approximate the relative
country weights in the EAFE Index, more than 25% of the Portfolio's assets may
be invested in a single country. This may make the Portfolio's performance more
dependent upon the performance of a single country than if the Portfolio
allocated its assets among issuers in a larger number of countries.
The Portfolio is passively managed, which means it tries to duplicate the
investment composition and performance of the EAFE Index by using sophisticated
computer programs and statistical procedures. As a result, the investment
management team does not use traditional methods of fund investment management
for the Portfolio, such as selecting securities on the basis of economic,
financial and market analysis. Because the Portfolio will have fees and
transaction expenses (while the Index has none), returns are likely to be below
those of the Index.
Under normal market conditions, it is expected that the quarterly performance of
the Portfolio will be within a .95 correlation with the EAFE Index, before
expenses.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
16
<PAGE>
RISK/RETURN SUMMARY
INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide long-term capital appreciation. Any income
received is incidental to this objective.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
In seeking long-term capital appreciation, the Portfolio will, under normal
market conditions, invest at least 65% of its total assets in the equity
securities of a broad mix of companies. Such companies generally will have
market capitalizations in excess of $750 million.
Using fundamental research and quantitative analysis, the investment management
team selects stocks of foreign companies believed to have favorable growth
characteristics. In determining whether a company has favorable growth
characteristics, the investment management team analyzes factors such as:
o Sales and earnings growth
o Return on equity
o Financial condition
o Market share and product leadership
The Portfolio will invest in the common, preferred and convertible stocks of
issuers located in at least three different foreign countries. The Portfolio may
invest in mature markets (such as Germany and Japan) as well as in emerging
markets (such as Argentina and China). In determining whether to invest in a
particular country or region, the investment management team looks at a number
of factors, including a country's (or region's):
o Prospects for economic growth
o Expected level of inflation
o Government policies influencing business conditions
o Outlook for currency relationships
o Range of investment opportunities available to international investors
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
17
<PAGE>
Principal Investment Risks
All investments carry some degree of risk which will affect the value of a
Portfolio's investments, its investment performance and the price of its shares.
As a result, loss of money is a risk of investing in each Portfolio.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The following summarizes the principal risks that apply to the Portfolios and
may result in a loss of your investment.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO ALL
PORTFOLIOS
Market risk is the risk that the value of the securities in which a Portfolio
invests may go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or last for
extended periods.
Management risk is the risk that a strategy used by the investment management
team may fail to produce the intended results.
Derivatives risk is the risk that loss may result from a Portfolio's investments
in options, futures, swaps, structured securities and other derivative
instruments, which may be leveraged.
Liquidity risk is the risk that a Portfolio will not be able to pay redemption
proceeds on the next Business Day after shares are redeemed, because of unusual
market conditions, an unusually high volume of redemption requests or other
reasons.
Year 2000 risk is the risk that a Portfolio's operations or value will be
adversely affected by the "Year 2000 Problem." This risk may be of greater
significance with respect to a Portfolio's investments in the securities of
foreign issuers. (For more information, please see "Year 2000 Issues" on page
53.)
- --------------------------------------------------------------------------------
RISKS THAT APPLY
PRIMARILY TO
THE FIXED INCOME
AND BALANCED
PORTFOLIOS
Interest rate/maturity risk is the risk that increases in prevailing interest
rates will cause fixed income securities held by a Portfolio to decline in
value. The magnitude of this decline will often be greater for longer-term fixed
income securities than shorter-term securities.
Credit (or default) risk is the risk that an issuer of fixed income securities
held by a Portfolio may default on its obligation to pay interest and repay
principal. Generally, the lower the credit rating of a security, the greater the
risk that the issuer of the security will default on its obligation. Investment
grade bonds are generally believed to have relatively low degrees of credit
risk.
Prepayment (or call) risk is the risk that an issuer will exercise its right to
pay principal on an obligation held by a Portfolio (such as a mortgage-backed
security) earlier than expected. This may happen during a period of declining
interest rates. Under these circumstances, a Portfolio may be unable to recoup
all of its initial investment and will suffer from having to reinvest in lower
yielding securities. The loss of higher yielding securities and the reinvestment
at lower interest rates can reduce the Portfolio's income, total return and
share price.
18
<PAGE>
RISK/RETURN SUMMARY
Extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by a Portfolio (such as a mortgage-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding securities.
Government securities risk is the risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law.
Non-investment grade (or "junk bond") risk may impact the value of
non-investment grade securities held by a Portfolio. Generally, these
securities, commonly known as "junk bonds," are subject to greater credit risk,
price volatility and risk of loss than investment grade securities. In addition,
there may be less of a market for them, which could make it harder to sell them
at an acceptable price. These and related risks mean that a Portfolio may not
achieve the expected income from non-investment grade securities and that its
share price may be adversely affected by declines in the value of these
securities.
- --------------------------------------------------------------------------------
RISKS THAT APPLY
PRIMARILY TO
THE EQUITY AND
BALANCED PORTFOLIOS
Stock risk is the risk that stock prices have historically risen and fallen in
periodic cycles. As of the date of this Prospectus, U.S. stock markets and
certain foreign stock markets were trading at or close to record high levels.
There is no guarantee that such levels will continue.
- --------------------------------------------------------------------------------
RISKS THAT APPLY
PRIMARILY TO THE
SMALL COMPANY
INDEX PORTFOLIO
Small cap stock risk is the risk that stocks of smaller companies may be subject
to more abrupt or erratic market movements than stocks of larger, more
established companies. Small companies may have limited product lines or
financial resources, or may be dependent upon a small or inexperienced
management group. In addition, small cap stocks typically are traded in lower
volume, and their issuers typically are subject to greater degrees of changes in
their earnings and prospects.
- --------------------------------------------------------------------------------
RISKS THAT APPLY
PRIMARILY TO THE
INTERNATIONAL
BOND PORTFOLIO
Non-diversification risk is the risk that a non-diversified portfolio may be
more susceptible to adverse developments affecting any single issuer, and more
susceptible to greater losses because of these developments.
- --------------------------------------------------------------------------------
RISKS THAT APPLY
PRIMARILY TO THE
INTERNATIONAL BOND,
INTERNATIONAL
EQUITY INDEX AND
INTERNATIONAL
GROWTH PORTFOLIOS
While foreign securities may offer special investment opportunities, they also
involve special risks not typically associated with investments in U.S.
companies or issuers. These risks normally will be greatest when a Portfolio
invests in emerging markets. These risks include:
Currency risk is the potential for price fluctuations in the dollar value of
foreign securities because of changing currency exchange rates.
Country risk is the potential for price fluctuations in foreign securities
because of political, financial and economic events in foreign countries.
Regulatory risk is the risk that a foreign security could lose value because of
less stringent foreign securities regulations and accounting and disclosure
standards.
Concentration risk is the risk that investment of more than 25% of a Portfolio's
total assets in securities of issuers located in one country will subject the
Portfolio to increased country risk with respect to the particular country.
More information about the risks of investing in the Portfolios is provided in
Appendix A to this Prospectus. You should carefully consider the risks discussed
in this section and Appendix A before investing in a Portfolio.
19
<PAGE>
Portfolio Performance
Each Portfolio is authorized to offer three classes of shares - Class A, Class C
and Class D. The bar charts and tables below provide an indication of the risks
of investing in a Portfolio by showing: (a) changes in the performance of a
Portfolio's Class A Shares from year to year; and (b) how the average annual
returns of a Portfolio's outstanding classes of shares compare to those of a
broad-based securities market index.
The bar charts and tables assume reinvestment of dividends and distributions. A
Portfolio's past performance is not necessarily an indication of how the
Portfolio will perform in the future. Performance reflects certain expense
limitations (as set forth in the Footnotes to the Portfolio Fees and Expenses
table on page 38) that were in effect during the periods presented. If expense
limitations were not in place, a Portfolio's performance would have been
reduced. Because the operating expenses of each Portfolio's Class A Shares are
lower than the expenses of its Class C and Class D Shares, the performance of
the Class A Shares is higher than the performance of these other share
classes.
20
<PAGE>
RISK/RETURN SUMMARY
U.S. GOVERNMENT SECURITIES PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -0.71%
1995 11.84%
1996 4.14%
1997 6.76%
1998 6.93%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2`95
+3.51%
Q1`94
-1.11%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 4/5/93) 6.93% 5.71% 5.56%
Merrill Lynch 1-5 Government Index* 7.68% 6.20% 6.07%
- ------------------------------------------------------------------------------------------
Class C (Inception 12/29/95) 6.65% N/A 5.66%
Merrill Lynch 1-5 Government Index* 7.68% N/A 6.41%
- ------------------------------------------------------------------------------------------
Class D (Inception 9/15/94) 6.53% N/A 6.29%
Merrill Lynch 1-5 Government Index* 7.68% N/A 7.25%
- ------------------------------------------------------------------------------------------
</TABLE>
* The Merrill Lynch 1-5 Government Index is an unmanaged index of prices of
U.S. Treasury notes with maturities of one to five years. The Index figures
do not reflect any fees or expenses.
21
<PAGE>
Portfolio Performance continued
SHORT-INTERMEDIATE BOND PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 0.91%
1995 12.06%
1996 4.55%
1997 6.76%
1998 7.69%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2`95
+3.84%
Q1`96
-0.17%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) 7.69% 6.33% 6.35%
Merrill Lynch 1-5 Corporate/Government Bond Index* 7.65% 6.27% 6.39%
- ---------------------------------------------------------------------------------------------------
Class D (Inception 9/14/94) 7.27% N/A 6.80%
Merrill Lynch 1-5 Corporate/Government Bond Index* 7.65% N/A 7.35%
- ---------------------------------------------------------------------------------------------------
</TABLE>
* The Merrill Lynch 1-5 Corporate/Government Bond Index is an unmanaged index
of prices of U.S. government and corporate bonds with maturities of one to
five years. The Index figures do not reflect any fees or expenses.
22
<PAGE>
RISK/RETURN SUMMARY
INTERMEDIATE BOND PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1998 7.11%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q3`98
+2.94%
Q4`98
+0.26%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 8/1/97) 7.11% N/A 6.39%
Lehman Brothers Intermediate
Government/Corporate Bond Index* 8.42% N/A 7.95%
- ---------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index of prices of U.S. government and corporate bonds with
remaining maturities of one to ten years. The Index figures do not reflect
any fees or expenses.
23
<PAGE>
Portfolio Performance continued
U.S. TREASURY INDEX PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -3.41%
1995 17.83%
1996 2.57%
1997 9.64%
1998 9.89%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2 `95
+6.20%
Q1 `96
-2.37%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) 9.89% 7.06% 7.62%
Lehman Brothers Treasury Bond Index* 10.04% 7.21% 7.80%
- ---------------------------------------------------------------------------------------------
Class D (Inception 11/16/94) 9.46% N/A 9.40%
Lehman Brothers Treasury Bond Index* 10.04% N/A 10.05%
- ---------------------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Treasury Bond Index is an unmanaged index of prices of
U.S. Treasury bonds with maturities of one to thirty years. The Index
figures do not reflect any fees or expenses.
24
<PAGE>
RISK/RETURN SUMMARY
BOND PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -3.84%
1995 22.70%
1996 3.39%
1997 10.00%
1998 9.29%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2 `95
+7.66%
Q1 `96
-2.00%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) 9.29% 7.96% 8.53%
Lehman Brothers Government/Corporate Bond Index* 9.46% 7.80% 7.94%
- ------------------------------------------------------------------------------------------------------
Class C (Inception 7/3/95) 9.03% N/A 8.52%
Lehman Brothers Government/Corporate Bond Index* 9.46% N/A 8.18%
- ------------------------------------------------------------------------------------------------------
Class D (Inception 9/14/94) 8.88% N/A 9.86%
Lehman Brothers Government/Corporate Bond Index* 9.46% N/A 9.34%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
of prices of U.S. government and corporate bonds with not less than one
year to maturity. The Index figures do not reflect any fees or expenses.
25
<PAGE>
Portfolio Performance continued
INTERNATIONAL BOND PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1995 20.58%
1996 7.18%
1997 -3.42%
1998 15.45%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q1 `95
+10.89%
Q1 `97
-5.89%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 3/28/94) 15.45% N/A 8.79%
J.P. Morgan Non-U.S. Government Bond Index* 18.28% N/A 9.27%
- ---------------------------------------------------------------------------------------------------
Class D (Inception 11/20/95) 15.36% N/A 6.05%
J.P. Morgan Non-U.S. Government Bond Index* 18.28% N/A 6.08%
- ---------------------------------------------------------------------------------------------------
</TABLE>
* The J.P. Morgan Non-U.S. Government Bond Index is an unmanaged index of
prices of non-U.S. government bonds with maturities of one to thirty years.
The Index figures do not reflect any fees or expenses.
26
<PAGE>
RISK/RETURN SUMMARY
BALANCED PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -6.01%
1995 20.59%
1996 11.23%
1997 20.21%
1998 22.37%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+13.42%
Q3`98
-4.69%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 7/1/93) 22.37% 13.15% 12.90%
Lehman Bros. Intermediate Government/Corporate Bond Index* 8.42% 6.59% 6.43%
S&P 500(R)Index** 28.61% 24.09% 22.72%
- -------------------------------------------------------------------------------------------------------------
Class C (Inception 12/29/95) 22.07% N/A 17.49%
Lehman Bros. Intermediate Government/Corporate Bond Index* 8.42% N/A 7.13%
S&P 500(R)Index** 28.61% N/A 28.22%
- -------------------------------------------------------------------------------------------------------------
Class D (Inception 2/20/96) 21.88% N/A 17.53%
Lehman Bros. Intermediate Government/Corporate Bond Index* 8.42% N/A 7.03%
S&P 500(R)Index** 28.61% N/A 27.88%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index of prices of U.S. government and corporate bonds with
remaining maturities of one to ten years. The Index figures do not reflect
any fees or expenses.
** The S&P 500(R) Index is the Standard & Poor's Composite Index of 500
stocks, a widely recognized, unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
27
<PAGE>
Portfolio Performance continued
EQUITY INDEX PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 1.15%
1995 37.18%
1996 22.65%
1997 32.74%
1998 28.31%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+21.22%
Q3`98
-9.98%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) 28.31% 23.72% 21.67%
S&P 500(R)Index* 28.61% 24.09% 22.04%
- --------------------------------------------------------------------------------------------
Class C (Inception 9/28/95) 28.00% N/A 27.30%
S&P 500(R)Index* 28.61% N/A 28.05%
- --------------------------------------------------------------------------------------------
Class D (Inception 9/14/94) 27.79% N/A 26.97%
S&P 500(R)Index* 28.61% N/A 27.78%
- --------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Index is the Standard & Poor's Composite Index of 500
stocks, a widely recognized, unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
28
<PAGE>
RISK/RETURN SUMMARY
DIVERSIFIED GROWTH PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 -9.37%
1995 24.54%
1996 17.46%
1997 31.36%
1998 34.96%
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+24.51%
Q3`98
-9.77%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) 34.96% 18.64% 17.40%
S&P 500(R)Index* 28.61% 24.09% 22.04%
- -----------------------------------------------------------------------------------------
Class D (Inception 9/14/94) 34.44% N/A 23.07%
S&P 500(R)Index* 28.61% N/A 27.87%
- -----------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Index is the Standard & Poor's Composite Index of 500
stocks, a widely recognized, unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
29
<PAGE>
Portfolio Performance continued
FOCUSED GROWTH PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -6.62%
1995 23.67%
1996 14.26%
1997 33.68%
1998 36.50%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+27.64%
Q3`98
-11.03%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 7/1/93) 36.50% 19.21% 18.88%
S&P 500(R)Index* 28.61% 24.09% 22.72%
- ------------------------------------------------------------------------------------------
Class C (Inception 6/14/96) 36.18% N/A 27.96%
S&P 500(R)Index* 28.61% N/A 29.41%
- ------------------------------------------------------------------------------------------
Class D (Inception 12/8/94) 36.02% N/A 27.33%
S&P 500(R)Index* 28.61% N/A 30.59%
- ------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Index is the Standard & Poor's Composite Index of 500
stocks, a widely recognized, unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
30
<PAGE>
RISK/RETURN SUMMARY
SMALL COMPANY INDEX PORTFOLIO
Calendar Year Total Return* (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1994 -2.28%
1995 27.68%
1996 15.85%
1997 22.16%
1998 -2.85%
</TABLE>
* The returns in the bar chart do not reflect the special transaction fee
charged on the purchase of shares. If they did reflect such fee, returns
would be less than those shown.
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+16.16%
Q3`98
-20.10%
Worst Quarter Return
Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 1/11/93) -3.33% 11.29% 11.23%
Russell 2000 Small Stock Index** -2.44% 11.76% 13.01%
- ---------------------------------------------------------------------------------------------
Class D (Inception 12/8/94) -4.07% N/A 16.02%
Russell 2000 Small Stock Index** -2.44% N/A 16.94%
- ---------------------------------------------------------------------------------------------
</TABLE>
** The Russell 2000 Small Stock Index is an unmanaged index which tracks the
performance of the 2,000 smallest of the 3,000 largest U.S. companies,
based on market capitalization. The Index figures do not reflect any fees
or expenses.
31
<PAGE>
Portfolio Performance continued
INTERNATIONAL EQUITY INDEX PORTFOLIO
Calendar Year Total Return* (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1998 18.94%
</TABLE>
* The return in the bar chart does not reflect the special transaction fee
charged on the purchase of shares. If it did reflect such fee, the return
would be less than that shown.
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+19.82%
Q3`98
-14.10%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 4/1/97) 17.76% N/A 13.70%
MSCI EAFE Index** 20.00% N/A 14.30%
- ---------------------------------------------------------------------------------
</TABLE>
** The MSCI EAFE Index is the Morgan Stanley Capital International Europe,
Australia and Far East Index, an unmanaged index which tracks the
performance of selected equity securities in Europe, Australia, Asia and
the Far East. The Index figures do not reflect any fees or expenses.
32
<PAGE>
RISK/RETURN SUMMARY
INTERNATIONAL GROWTH PORTFOLIO
Calendar Year Total Return (Class A)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1995 2.53%
1996 5.13%
1997 6.46%
1998 24.52%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q4`98
+18.99%
Q3`98
-13.76%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
1-Year 5-Year Inception
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Inception 3/28/94) 24.52% N/A 7.94%
MSCI EAFE Index* 20.00% N/A 8.55%
- -----------------------------------------------------------------------------------
Class D (Inception 11/16/94) 23.95% N/A 7.55%
MSCI EAFE Index* 20.00% N/A 8.94%
- -----------------------------------------------------------------------------------
</TABLE>
* The MSCI EAFE Index is the Morgan Stanley Capital International Europe,
Australia and Far East Index, an unmanaged index which tracks the
performance of selected equity securities in Europe, Australia, Asia and
the Far East. The Index figures do not reflect any fees or expenses.
33
<PAGE>
Portfolio Fees and Expenses
This table describes the fees and expenses that you may pay if you buy
and hold Class A, C or D Shares of the Portfolios. Each class of shares
represents pro rata interests in a Portfolio except that different shareholder
servicing and transfer agency fees are payable due to the varying levels of
administrative support and transfer agency services provided to each class.
Please note that the following information does not reflect any charges which
may be imposed by The Northern Trust Company, its affiliates, correspondent
banks and other institutions on their customers. (For more information, please
see "Account Policies and Other Information" on page 47.)
As indicated below, the Small Company Index and International Equity Index
Portfolios charge an additional transaction fee on the purchase of
shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
--------------------------------------------------------------------------------
Additional
Transaction Sales Charge
Sales Charge Fee (as a (Load)
(Load) percentage Imposed on
Imposed on of amount Deferred Sales Reinvested Redemption Exchange
Portfolio Purchases invested) Charge (Load) Distributions Fees Fees
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY INDEX
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
BOND
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL BOND
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
RISK/RETURN SUMMARY
Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio assets)
-------------------------------------------------------------------------------------------------------
Other Expenses
...................................................... Total Annual
Other Total Other Portfolio
Management Distribution Servicing Transfer Operating Operating Operating
Fees(1) (12b-1) Fees Fees Agency Fees Expenses(2) Expenses Expenses
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
0.60% None None 0.01% 0.25% 0.26% 0.86%
...................................................................................................................
0.60% None 0.15% 0.10% 0.25% 0.50% 1.10%
...................................................................................................................
0.60% None 0.25% 0.15% 0.25% 0.65% 1.25%
- -------------------------------------------------------------------------------------------------------------------
0.60% None None 0.01% 0.15% 0.16% 0.76%
...................................................................................................................
0.60% None 0.15% 0.10% 0.15% 0.40% 1.00%
...................................................................................................................
0.60% None 0.25% 0.15% 0.15% 0.55% 1.15%
- -------------------------------------------------------------------------------------------------------------------
0.60% None None 0.01% 0.48% 0.49% 1.09%
...................................................................................................................
0.60% None 0.15% 0.10% 0.48% 0.73% 1.33%
...................................................................................................................
0.60% None 0.25% 0.15% 0.48% 0.88% 1.48%
- -------------------------------------------------------------------------------------------------------------------
0.40% None None 0.01% 0.36% 0.37% 0.77%
...................................................................................................................
0.40% None 0.15% 0.10% 0.36% 0.61% 1.01%
...................................................................................................................
0.40% None 0.25% 0.15% 0.36% 0.76% 1.16%
- -------------------------------------------------------------------------------------------------------------------
0.60% None None 0.01% 0.14% 0.15% 0.75%
...................................................................................................................
0.60% None 0.15% 0.10% 0.14% 0.39% 0.99%
...................................................................................................................
0.60% None 0.25% 0.15% 0.14% 0.54% 1.14%
- -------------------------------------------------------------------------------------------------------------------
0.90% None None 0.01% 0.61% 0.62% 1.52%
...................................................................................................................
0.90% None 0.15% 0.10% 0.61% 0.86% 1.76%
...................................................................................................................
0.90% None 0.25% 0.15% 0.61% 1.01% 1.91%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
Portfolio Fees and Expenses continued
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
--------------------------------------------------------------------------------
Additional
Transaction Sales Charge
Sales Charge Fee (as a (Load)
(Load) percentage Imposed on
Imposed on of amount Deferred Sales Reinvested Redemption Exchange
Portfolio Purchases invested) Charge (Load) Distributions Fees Fees
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BALANCED
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED GROWTH
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
FOCUSED GROWTH
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY INDEX
Class A None 0.50% None None None None
....................................................................................................................................
Class C None 0.50% None None None None
....................................................................................................................................
Class D None 0.50% None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX
Class A None 1.00% None None None None
....................................................................................................................................
Class C None 1.00% None None None None
....................................................................................................................................
Class D None 1.00% None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH
Class A None None None None None None
....................................................................................................................................
Class C None None None None None None
....................................................................................................................................
Class D None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
RISK/RETURN SUMMARY
Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio assets)
-------------------------------------------------------------------------------------------------------
Other Expenses
...................................................... Total Annual
Other Total Other Portfolio
Management Distribution Servicing Transfer Operating Operating Operating
Fees(1) (12b-1) Fees Fees Agency Fees Expenses(2) Expenses Expenses
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
0.80% None None 0.01% 0.23% 0.24% 1.04%
...................................................................................................................
0.80% None 0.15% 0.10% 0.23% 0.48% 1.28%
...................................................................................................................
0.80% None 0.25% 0.15% 0.23% 0.63% 1.43%
- -------------------------------------------------------------------------------------------------------------------
0.30% None None 0.01% 0.15% 0.16% 0.46%
...................................................................................................................
0.30% None 0.15% 0.10% 0.15% 0.40% 0.70%
...................................................................................................................
0.30% None 0.25% 0.15% 0.15% 0.55% 0.85%
- -------------------------------------------------------------------------------------------------------------------
0.80% None None 0.01% 0.15% 0.16% 0.96%
...................................................................................................................
0.80% None 0.15% 0.10% 0.15% 0.40% 1.20%
...................................................................................................................
0.80% None 0.25% 0.15% 0.15% 0.55% 1.35%
- -------------------------------------------------------------------------------------------------------------------
1.10% None None 0.01% 0.18% 0.19% 1.29%
...................................................................................................................
1.10% None 0.15% 0.10% 0.18% 0.43% 1.53%
...................................................................................................................
1.10% None 0.25% 0.15% 0.18% 0.58% 1.68%
- -------------------------------------------------------------------------------------------------------------------
0.40% None None 0.01% 0.33% 0.34% 0.74%
...................................................................................................................
0.40% None 0.15% 0.10% 0.33% 0.58% 0.98%
...................................................................................................................
0.40% None 0.25% 0.15% 0.33% 0.73% 1.13%
- -------------------------------------------------------------------------------------------------------------------
0.50% None None 0.01% 0.49% 0.50% 1.00%
...................................................................................................................
0.50% None 0.15% 0.10% 0.49% 0.74% 1.24%
...................................................................................................................
0.50% None 0.25% 0.15% 0.49% 0.89% 1.39%
- -------------------------------------------------------------------------------------------------------------------
1.00% None None 0.01% 0.30% 0.31% 1.31%
...................................................................................................................
1.00% None 0.15% 0.10% 0.30% 0.55% 1.55%
...................................................................................................................
1.00% None 0.25% 0.15% 0.30% 0.70% 1.70%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
Portfolio Fees and Expenses continued
- --------------------------------------------------------------------------------
Footnotes
(1) For the fiscal year ended November 30, 1998, The Northern Trust Company and
Northern Trust Quantitative Advisors, Inc. (collectively, the "Investment
Advisers") voluntarily waived a portion of their management fees. As a
result of the fee waiver, actual management fees paid by the U.S.
Government Securities, Short-Intermediate Bond, Intermediate Bond, U.S.
Treasury Index, Bond, International Bond, Balanced, Equity Index,
Diversified Growth, Focused Growth, Small Company Index, International
Equity Index and International Growth Portfolios were 0.25%, 0.25%, 0.25%,
0.15%, 0.25%, 0.70%, 0.50%, 0.10%, 0.55%, 0.80%, 0.20%, 0.25% and 0.80%,
respectively, of the Portfolios' average daily net assets. Fee waivers may
be terminated at any time at the option of the Investment Advisers.
(2) "Other Operating Expenses" include administration fees and all other
ordinary operating expenses of the Portfolios not listed above. For the
fiscal year ended November 30, 1998, Goldman, Sachs & Co. ("Goldman Sachs")
was entitled to an administration fee from each Portfolio at an annual rate
of 0.15% of the average daily net assets of each of the International
Equity Index, International Growth and International Bond Portfolios, and
0.10% of the average daily net assets of each other Portfolio. During the
same period, Goldman Sachs reimbursed expenses (including administration
fees, but excluding management and transfer agency fees, servicing fees and
certain extraordinary expenses) which exceeded on an annualized basis 0.25%
of the International Equity Index, International Growth and International
Bond Portfolios' average daily net assets, and 0.10% of each other
Portfolio's average daily net assets. As a result of the expense
reimbursement, actual other operating expenses paid by the U.S. Government
Securities, Short-Intermediate Bond, Intermediate Bond, U.S. Treasury
Index, Bond, International Bond, Balanced, Equity Index, Diversified
Growth, Focused Growth, Small Company Index, International Equity Index and
International Growth Portfolios were 0.10%, 0.10%, 0.10%, 0.10%, 0.10%,
0.25%, 0.10%, 0.10%, 0.10%, 0.11%, 0.10%, 0.29% and 0.25%, respectively, of
the Portfolios' average daily net assets.
(3) Set forth below for each Portfolio are the total annual operating expenses
actually paid (for share classes that were outstanding) or which would have
been paid (for share classes that were not outstanding) during the fiscal
year ended November 30, 1998 as a result of fee waivers and expense
reimbursements. Fee waivers (and voluntary expense reimbursements, if
applicable) may be terminated at any time at the option of the Investment
Advisers or Goldman Sachs. If this occurs, the Portfolios' total annual
operating expenses may increase without shareholder approval.
<TABLE>
<CAPTION>
Total Annual Operating Expenses
Portfolio Class A Class C Class D
---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES 0.36% 0.60% 0.75%
---------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND 0.36% 0.60% 0.75%
---------------------------------------------------------------------------
INTERMEDIATE BOND 0.36% 0.60% 0.75%
---------------------------------------------------------------------------
U.S. TREASURY INDEX 0.26% 0.50% 0.65%
---------------------------------------------------------------------------
BOND 0.36% 0.60% 0.75%
---------------------------------------------------------------------------
INTERNATIONAL BOND 0.96% 1.20% 1.35%
---------------------------------------------------------------------------
BALANCED 0.61% 0.85% 1.00%
---------------------------------------------------------------------------
EQUITY INDEX 0.21% 0.45% 0.60%
---------------------------------------------------------------------------
DIVERSIFIED GROWTH 0.66% 0.90% 1.05%
---------------------------------------------------------------------------
FOCUSED GROWTH 0.92% 1.16% 1.31%
---------------------------------------------------------------------------
SMALL COMPANY INDEX 0.31% 0.55% 0.70%
---------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX 0.55% 0.79% 0.94%
---------------------------------------------------------------------------
INTERNATIONAL GROWTH 1.06% 1.30% 1.45%
---------------------------------------------------------------------------
</TABLE>
38
38
<PAGE>
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
EXAMPLE
The following Example is intended to help you compare the cost of investing in a
Portfolio (without fee waivers and expense reimbursements) with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated (with reinvestment of all dividends and distributions) and then redeem
all of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that a Portfolio's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES
Class A $88 $274 $477 $1,061
................................................................................
Class C $112 $350 $606 $1,340
................................................................................
Class D $127 $397 $686 $1,511
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND
Class A $78 $243 $422 $942
................................................................................
Class C $102 $318 $552 $1,225
................................................................................
Class D $117 $365 $633 $1,398
- --------------------------------------------------------------------------------
INTERMEDIATE BOND
Class A $111 $347 $601 $1,329
................................................................................
Class C $135 $421 $729 $1,601
................................................................................
Class D $151 $468 $808 $1,768
- --------------------------------------------------------------------------------
U.S. TREASURY INDEX
Class A $79 $246 $428 $985
................................................................................
Class C $103 $322 $558 $1,236
................................................................................
Class D $118 $368 $638 $1,409
- --------------------------------------------------------------------------------
BOND
Class A $77 $240 $417 $930
................................................................................
Class C $101 $315 $547 $1,213
................................................................................
Class D $116 $362 $628 $1,386
- --------------------------------------------------------------------------------
INTERNATIONAL BOND
Class A $155 $480 $829 $1,813
................................................................................
Class C $179 $554 $954 $2,073
................................................................................
Class D $194 $600 $1,032 $2,233
- --------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Example continued
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED
Class A $106 $331 $574 $1,271
................................................................................
Class C $130 $406 $702 $1,545
................................................................................
Class D $146 $452 $782 $1,713
- --------------------------------------------------------------------------------
EQUITY INDEX
Class A $47 $148 $258 $579
................................................................................
Class C $72 $224 $390 $871
................................................................................
Class D $87 $271 $471 $1,049
- --------------------------------------------------------------------------------
DIVERSIFIED GROWTH
Class A $98 $306 $531 $1,178
................................................................................
Class C $122 $381 $660 $1,455
................................................................................
Class D $137 $428 $739 $1,624
- --------------------------------------------------------------------------------
FOCUSED GROWTH
Class A $131 $409 $708 $1,556
................................................................................
Class C $156 $483 $834 $1,824
................................................................................
Class D $171 $530 $913 $1,987
- --------------------------------------------------------------------------------
SMALL COMPANY INDEX
Class A $125 $285 $459 $964
................................................................................
Class C $149 $361 $589 $1,245
................................................................................
Class D $165 $407 $669 $1,418
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX
Class A $201 $415 $647 $1,312
................................................................................
Class C $225 $489 $774 $1,585
................................................................................
Class D $240 $536 $853 $1,752
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH
Class A $133 $415 $718 $1,579
................................................................................
Class C $158 $490 $845 $1,845
................................................................................
Class D $173 $536 $923 $2,009
- --------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Investment Advisers
The Northern Trust Company ("Northern"), an Illinois state-chartered bank and
member of the Federal Reserve System, serves as investment adviser for all
Portfolios except the U.S. Treasury Index, Equity Index, Small Company Index and
International Equity Index Portfolios. Northern Trust Quantitative Advisors,
Inc. ("NTQA"), an Illinois state-chartered trust company, serves as investment
adviser for the U.S. Treasury Index, Equity Index, Small Company Index and
International Equity Index Portfolios.
Northern and NTQA are referred to as the "Investment Advisers." The Investment
Advisers are located at 50 S. LaSalle Street, Chicago, IL 60675 and are wholly
owned subsidiaries of Northern Trust Corporation, a bank holding company. As of
December 31, 1998, Northern Trust Corporation and its subsidiaries had
approximately $27.9 billion in assets, $18.2 billion in deposits and employed
over 8,150 persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $1.26 trillion of
assets as of December 31, 1998, including approximately $236 billion of assets
for which Northern and its affiliates had investment management responsibility.
Under its Advisory Agreement with the Trust, each Investment Adviser, subject to
the general supervision of the Trust's Board of Trustees, is responsible for
making investment decisions for the Portfolios for which it serves as adviser
and for placing purchase and sale orders for portfolio securities.
41
<PAGE>
Advisory Fees
As compensation for its advisory services and its assumption of related
expenses, each Investment Adviser is entitled to an advisory fee, computed daily
and payable monthly, at annual rates set forth in the table below (expressed as
a percentage of each Portfolio's respective average daily net assets). The table
also reflects the advisory fees (after voluntary fee waivers) paid by the
Portfolios for the fiscal year ended November 30, 1998.
<TABLE>
<CAPTION>
Advisory Fee Paid
Contractual for Fiscal Year
Portfolio Rate Ended 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES 0.60% 0.25%
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND 0.60% 0.25%
- --------------------------------------------------------------------------------
INTERMEDIATE BOND 0.60% 0.25%
- --------------------------------------------------------------------------------
U.S. TREASURY INDEX 0.40% 0.15%
- --------------------------------------------------------------------------------
BOND 0.60% 0.25%
- --------------------------------------------------------------------------------
INTERNATIONAL BOND 0.90% 0.70%
- --------------------------------------------------------------------------------
BALANCED 0.80% 0.50%
- --------------------------------------------------------------------------------
EQUITY INDEX 0.30% 0.10%
- --------------------------------------------------------------------------------
DIVERSIFIED GROWTH 0.80% 0.55%
- --------------------------------------------------------------------------------
FOCUSED GROWTH 1.10% 0.80%
- --------------------------------------------------------------------------------
SMALL COMPANY INDEX 0.40% 0.20%
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX 0.50% 0.25%
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH 1.00% 0.80%
- -------------------------------------------------------------------------------
</TABLE>
The difference, if any, between the contractual advisory fees and the actual
advisory fees paid by the Portfolios reflects that the Investment Advisers did
not charge the full amount of the advisory fees to which they would have been
entitled. The Investment Advisers may discontinue or modify their voluntary
limitations in the future at their discretion.
42
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Portfolio Management
The Investment Advisers employ a team approach to the investment management of
the Portfolios, relying upon investment professionals under the leadership of
James M. Snyder, Chief Investment Officer and Executive Vice President of
Northern and Chairman and Chief Executive Officer of NTQA. Below is information
regarding the management of the actively managed Portfolios.
Mark J. Wirth, Senior Vice President of Northern, is the management team leader
for the Bond Portfolio and the Short-Intermediate Bond Portfolio and has had
such responsibility for these Portfolios since 1993. Mr. Wirth joined Northern
in 1986 and during the past five years has managed various fixed income
portfolios.
Mark J. Wirth and Steven M. Schafer, Vice President of Northern, are the
management team leaders for the International Bond Portfolio. Mr. Wirth has had
such responsibility since January 1999 and Mr. Schafer has had such
responsibility since July 1998. Mr. Schafer joined Northern in 1988 and during
the past five years has managed various fixed income portfolios and served as
credit analyst following both industrial and utility companies.
The management team leaders for the U.S. Government Securities Portfolio and the
Intermediate Bond Portfolio are Mark J. Wirth and Steven M. Schafer. Mr. Wirth
has had such responsibility for the Portfolios since 1988. Mr. Schafer has had
such responsibility for the U.S. Government Securities Portfolio since 1995 and
for the Intermediate Bond Portfolio since 1997.
The management team leader for the International Growth Portfolio is Robert A.
LaFleur, Senior Vice President of Northern. Mr. LaFleur has had such
responsibility since 1994. Mr. LaFleur joined Northern in 1982 and during the
past five years has managed various international equity portfolios.
Jon D. Brorson, Senior Vice President of Northern, has led the management teams
for the Diversified Growth Portfolio and Focused Growth Portfolio since 1996,
when he joined Northern. From 1990 to 1996, he was with Hartline Investment
Corp., where his primary responsibilities included portfolio management,
investment research, sales and trading.
The management team leaders for the Balanced Portfolio are Jon D. Brorson and
Monty M. Memler. Mr. Brorson has had such responsibility since 1996 and Mr.
Memler has had such responsibility since 1993. Mr. Memler, Vice President,
joined Northern in 1986 and during the past five years has managed various fixed
income portfolios.
43
<PAGE>
Other Portfolio Management Information
- --------------------------------------------------------------------------------
Prior to April 1, 1998, Northern served as investment adviser to the U.S.
Treasury Index, Equity Index, Small Company Index and International Equity Index
Portfolios pursuant to advisory agreements substantially identical to those
currently in effect for such Portfolios.
On September 2, 1997, the shareholders of the International Growth Portfolio
approved a new investment advisory agreement which would allow this Portfolio to
implement a "manager of managers" structure with Northern and one of its
affiliates, and would allow the Portfolio's investment advisers to enter into
sub-advisory agreements with respect to the Portfolio with other firms in the
future without further shareholder approval. Although the Securities and
Exchange Commission (the "SEC") has granted an exemptive order permitting the
manager of managers structure for the Portfolio, the structure will not be
implemented without final authorization by the Board of Trustees. At present, it
is uncertain when, or if, this structure will become effective.
Other Portfolio Services
- --------------------------------------------------------------------------------
Northern also serves as transfer agent ("Transfer Agent") and custodian for each
Portfolio. As Transfer Agent, Northern performs various administrative servicing
functions, and any shareholder inquiries should be directed to it. Goldman Sachs
serves as the Portfolios' administrator and distributor. The fees that Northern
and Goldman Sachs receive for their services in these capacities are described
on page 34 under "Portfolio Fees and Expenses." Goldman Sachs does not receive
any compensation from the Trust for its distribution services. Pursuant to an
SEC order, the Portfolios may engage in portfolio securities transactions with
Goldman Sachs in the ordinary course of business.
It is expected that on or after May 1, 1999, First Data Distributors, Inc. will
replace Goldman Sachs as the Portfolios' distributor. It is also expected that
Northern and First Data Investor Services Group, Inc. (an affiliate of First
Data Distributors, Inc.) will replace Goldman Sachs to serve as the Portfolios'
co-administrators on or after such date, at substantially the same cost to the
Portfolios.
44
<PAGE>
ABOUT YOUR ACCOUNT
Purchasing and Selling Shares
- --------------------------------------------------------------------------------
PURCHASING
SHARES
Institutional investors, acting on their own behalf or on behalf of their
customers, clients, employees, participants and others ("Customers"), may
purchase shares of the Portfolios through their institutional accounts at
Northern or an affiliate. They may also purchase shares directly from the Trust.
There is no sales charge imposed on purchases of shares. Institutional investors
include:
o Northern and its affiliates;
o Defined contribution plans having at least $30 million in assets or annual
contributions of at least $5 million; and
o Other institutions and organizations.
The Portfolios currently offer a choice of three classes of shares to meet the
special needs of institutional investors ("Institutions").
Class A Shares are designed for Institutions that can obtain information about
their shareholder accounts and do not require the additional services available
to other classes.
Class C Shares are designed for Institutions that require the Transfer Agent and
a Servicing Agent to provide certain account-related services incident to
Customers being the beneficial owners of shares.
Class D Shares are designed for Institutions that require the Transfer Agent and
a Servicing Agent to provide them and their Customers with certain
account-related services and other information.
Different shareholder servicing and transfer agency fees are payable by each
class of shares (see "Portfolio Fees and Expenses" on page 34). In addition, any
person entitled to receive compensation for selling or servicing shares of a
Portfolio may receive different compensation with respect to one particular
class of shares over another in the same Portfolio.
- --------------------------------------------------------------------------------
OPENING AN
ACCOUNT
You can purchase shares of the Portfolios through your institutional account at
Northern (or an affiliate) or you may open an account directly with the Trust.
Through an Institutional Account. If you are opening an institutional account at
Northern, a Northern representative can assist you with all phases of your
investment. The Trust does not require a minimum initial investment for
Institutions that invest through their accounts at Northern. To purchase shares
through your account, contact your Northern representative for further
information.
Directly from the Trust. An Institution may open a shareholder account and
purchase shares directly from the Trust with an aggregate minimum initial
investment of at least $5 million in one or more Portfolios. There is no minimum
for subsequent investments.
- --------------------------------------------------------------------------------
By Mail
Read this prospectus carefully.
Complete and sign the new account application.
Include a certified corporate resolution (or other acceptable evidence of
authority).
Enclose a check or Federal Reserve draft payable to the specific Portfolio. If
investing in more than one Portfolio, please include a separate check for each.
Mail your check, corporate resolution and completed application to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
All checks must be payable in U.S. dollars and drawn on a bank located in the
United States. Cash and third party checks are not acceptable.
45
<PAGE>
Purchasing and Selling Shares continued
- --------------------------------------------------------------------------------
By Telephone
Read this prospectus carefully.
Call the Transfer Agent at 1-800-637-1380.
To open a new account please provide:
o The name of the Portfolio in which you'd like to invest
o The number of shares or dollar amount to be invested
o The method of payment
To add to an existing account, please provide:
o The Institution's name
o Your Account Number
- --------------------------------------------------------------------------------
By Wire or Automated Clearing House Transfer ("ACH Transfer")
To open a new account:
Call the Transfer Agent at 1-800-637-1380 for instructions.
For more information about the purchase of shares, call the Transfer Agent at
1-800-637-1380.
To add to an existing account:
Have your bank wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account No.)
(Reference Shareholder's Name)
- --------------------------------------------------------------------------------
SELLING
SHARES
Through an Institutional Account.
Institutions may sell (redeem) shares through their institutional account by
contacting their Northern account representative.
Directly through the Trust. Institutions that purchase shares directly from the
Trust may redeem their shares through the Transfer Agent in one of the following
ways:
- --------------------------------------------------------------------------------
By Mail
Send a written request to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
The letter of instruction must include:
o The signature of a duly authorized person
o Your account number
o The name of the Portfolio
o The number of shares or the dollar amount to be redeemed
- --------------------------------------------------------------------------------
By Telephone
o Call the Transfer Agent at 1-800-637-1380 for instructions
o During periods of unusual economic or market activity, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow the procedures outlined above under "Selling Shares - By
Mail."
- --------------------------------------------------------------------------------
By Wire
o Call the Transfer Agent at 1-800-637-1380 for instructions.
o You must have given prior authorization for expedited wire redemption.
o The minimum amount that may be redeemed by this method is $10,000.
46
<PAGE>
ABOUT YOUR ACCOUNT
Account Policies and Other Information
- --------------------------------------------------------------------------------
Purchase and Redemption Minimums. There is no purchase minimum for Institutions
purchasing shares through their institutional account at Northern. For
Institutions opening an account directly with the Trust, there is a minimum
initial investment of $5 million in one or more Portfolios. There is no minimum
for subsequent investments. A $10,000 minimum applies for redemptions by wire.
The Trust reserves the right to waive the purchase and redemption minimums and
to determine the manner in which a minimum is satisfied.
Calculating Share Price. The Trust issues shares and redeems shares at net asset
value ("NAV"). The NAV for each share class of a Portfolio is calculated by
dividing the value of the Portfolio's net assets attributed to that class by the
number of outstanding shares of that class. The NAV for each class is calculated
as of 3:00 p.m., Chicago time, each Business Day. The NAV used in determining
the price of your shares is the one calculated after your purchase, exchange or
redemption order is received and accepted as described below.
U.S. and foreign securities held by a Portfolio generally are valued at their
market prices. Shares of an investment company held by a Portfolio are valued at
their net asset value. Any securities, including restricted securities, for
which market prices are not readily available are valued at fair value as
determined by the Investment Advisers. Short-term obligations held by a
Portfolio are valued at their amortized cost which, according to the Investment
Advisers, approximates market value.
A Portfolio may hold foreign securities that trade on weekends or other days
when the Portfolio does not price its shares. Therefore, the value of such
securities may change on days when shareholders will not be able to purchase or
redeem shares.
Timing of Purchase Requests. Requests accepted by the Transfer Agent or other
authorized intermediary by 3:00 p.m., Chicago time, on any Business Day will be
executed the same day, at that day's closing share price (plus any additional
transaction fee) provided that either:
o The Transfer Agent receives the purchase price in Federal or other
immediately available funds prior to 3:00 p.m., Chicago time, on the same
Business Day;
o The order is accepted by an authorized intermediary and payment in Federal
or other immediately available funds is made on the next Business Day
according to procedures authorized by the Trust; or
o Payment in Federal or other immediately available funds is received on the
next Business Day in an institutional account maintained with Northern or
an affiliate.
Orders received by the Transfer Agent or other authorized intermediary on a
non-Business Day or after 3:00 p.m. on a Business Day will be executed on the
next Business Day, at that day's closing share price (plus any additional
transaction fee), provided that payment is made as noted above. If an
Institution pays for shares by check, Federal funds generally will become
available within two Business Days after a purchase order is received.
In certain circumstances, the Trust may advance the time by which purchase
orders must be received. See "Early Closings" on page 50.
Additional Transaction Fee. Purchases of, and exchanges for, shares of the Small
Company Index and International Equity Index Portfolios require the payment of
an additional transaction fee. This fee equals 0.50% and 1.00%, respectively, of
the dollar amount purchased. It does not apply to reinvested dividends or
capital gains distributions.
47
<PAGE>
Account Policies and Other Information continued
- --------------------------------------------------------------------------------
This transaction fee is not a sales charge. It is paid to the Portfolios and is
used to protect existing shareholders by offsetting the transaction costs
associated with new purchases of securities by the Portfolios. Because these
transaction costs are not paid out of their other assets, the Small Company
Index Portfolio and the International Equity Index Portfolio are expected to
track their respective indices more closely.
Tax Identification Number. Federal regulations require you to provide to the
Transfer Agent a taxpayer identification number when you open an account.
Purchase orders without such a number or an indication that a number has been
applied for will not be accepted. If you have applied for a number, you must
provide it to the Transfer Agent within 60 days of the date of the order.
In-Kind Purchases and Redemptions. The Trust reserves the right to accept
payment for shares in the form of securities that are permissible investments
for a Portfolio. The Trust also reserves the right to pay redemptions by a
distribution "in-kind" of securities (instead of cash) from a Portfolio. See the
Statement of Additional Information for further information about the terms of
these purchases and redemptions.
Miscellaneous Purchase Information.
o Institutions are responsible for transmitting purchase orders to the
Transfer Agent and delivering required funds on a timely basis.
o Institutions are responsible for all losses and expenses of a Portfolio in
the event of any failure to make payment according to the procedures
outlined in this Prospectus. Northern may redeem shares from any account it
maintains to protect the Portfolios and Northern against loss. In addition,
a $20 charge will be imposed if a check does not clear.
o The Trust reserves the right to reject any purchase order. The Trust also
reserves the right to change or discontinue any of its purchase procedures.
Timing of Redemption and Exchange Requests. Redemption and exchange requests
received in good order by the Transfer Agent or other authorized intermediary by
3:00 p.m., Chicago time, on a Business Day will be executed on the same day. The
redemption or exchange will be effected at that day's closing share price (plus
any additional transaction fee, in the case of an exchange). Redemption proceeds
will normally be sent or credited on the next Business Day.
Orders received in good order on a non-Business Day or after 3:00 p.m., Chicago
time, on a Business Day will be executed the next Business Day, at that day's
closing share price (plus any additional transaction fee, in the case of an
exchange). The proceeds will normally be sent or credited the second Business
Day. We consider requests to be in "good order" when all required documents are
properly completed, signed and received, including a certified corporate
resolution or other acceptable evidence of authority.
In certain circumstances, the Trust may advance the time by which redemption and
exchange orders must be received. See "Early Closings" on page 50.
Miscellaneous Redemption Information. All redemption proceeds will be sent by
check unless the Transfer Agent is directed otherwise. Redemption proceeds may
also be wired. A redemption request may not be processed if a shareholder has
failed to submit a completed and properly executed new account application,
including a corporate resolution or other acceptable evidence of authority.
48
<PAGE>
ABOUT YOUR ACCOUNT
o The Trust reserves the right to defer crediting, sending or wiring
redemption proceeds for up to 7 days after receiving the redemption order
if, in its judgment, an earlier payment could adversely affect a Portfolio.
o If you are redeeming recently purchased shares, your redemption request may
not be honored until your check or electronic transaction has cleared. This
may delay your transaction for up to 15 days.
o Institutions are responsible for transmitting redemption orders to the
Transfer Agent and crediting their Customers' accounts with redemption
proceeds on a timely basis.
o Redemption requests by mail must be signed by a person authorized by
acceptable documentation on file with the Transfer Agent.
o The Trust reserves the right to redeem shares held by any shareholder who
provides incorrect or incomplete account information or when such
involuntary redemptions are necessary to avoid adverse consequences to the
Trust and its shareholders.
o The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
o The Trust reserves the right to change or discontinue any of its redemption
procedures.
Exchange Privileges. Institutions and their Customers (to the extent permitted
by their account agreements) may exchange shares of a Portfolio for the same
class of shares of another Portfolio. The registration of both accounts involved
must be identical. A $1,000 minimum investment applies. An exchange is a
redemption of shares of one Portfolio and the purchase of shares of another
Portfolio. It is considered a taxable event and may result in a gain or loss.
The Trust reserves the right to change or discontinue the exchange privilege at
any time upon 60 days written notice to shareholders and to reject any exchange
request. Exchanges are only available in states where an exchange can legally be
made. Before making an exchange you should read the prospectus for the shares
you are acquiring.
Telephone Transactions. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, the Transfer Agent has adopted
procedures in an effort to establish reasonable safeguards against fraudulent
telephone transactions. If reasonable measures are taken to verify that
telephone instructions are genuine, the Trust and its service providers will not
be responsible for any loss resulting from fraudulent or unauthorized
instructions received over the telephone. In these circumstances, shareholders
will bear the risk of loss. During periods of unusual market activity, you may
have trouble placing a request by telephone. In this event, consider sending
your request in writing.
The proceeds of redemption orders received by telephone will be sent by check,
wire or transfer according to proper instructions. All checks will be made
payable to the shareholder of record and mailed only to the shareholder's
address of record.
The Trust reserves the right to refuse a telephone redemption.
Making Changes to Your Account Information. You may make changes to wiring
instructions, address of record, or other account information only in writing.
These instructions must be accompanied by a certified corporate resolution,
signature guarantee from an institution participating in the Stock Transfer
Agency Medallion Program ("STAMP"), or other acceptable evidence of authority.
In accordance with SEC regulations, the Trust and Transfer Agent may charge a
shareholder reasonable costs in locating a shareholder's current address.
Business Day. A "Business Day" is each Monday through Friday when the New York
Stock Exchange (the "Exchange") is open for business. A "Business Day" does not
include a holiday observed by the Exchange. In 1999 these days are: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
49
<PAGE>
Account Policies and Other Information continued
- --------------------------------------------------------------------------------
Early Closings. The Portfolios reserve the right to cease, or to advance the
time for, accepting purchase, redemption or exchange orders for same Business
Day credit when Northern or the Exchange closes early as a result of unusual
weather or other conditions. They also reserve this right when The Bond Market
Association recommends that securities markets close or close early.
Authorized Intermediaries. The Trust may authorize certain financial
intermediaries (including banks, trust companies, brokers and investment
advisers), which provide recordkeeping, reporting and processing services, to
accept purchase, redemption and exchange orders from their Customers on behalf
of the Trust. They may also designate other intermediaries to accept such
orders, if approved by the Trust. Authorized intermediaries are responsible for
transmitting orders and delivering funds on a timely basis. A Portfolio will be
deemed to have received an order when the order is accepted by the authorized
intermediary on a Business Day, and the order will be priced at the Portfolio's
per share NAV next determined.
Servicing Agents. Certain Institutions may perform (or arrange to have
performed) various administrative support services for Customers who are the
beneficial owners of Class C or D shares through agreements with the Trust
("Servicing Agents"). These agreements are permitted under the Trust's
Shareholder Servicing Plan. The level of support services required by an
Institution and its Customers generally will determine whether they purchase
Class A, C or D shares.
Administrative support services may include:
o processing purchase and redemption requests from investors;
o placing net purchase and redemption orders with the Transfer Agent;
o providing necessary personnel and facilities to establish and maintain
investor accounts and records; and
o providing information periodically to investors showing their positions in
Portfolio shares.
Servicing Agents will receive fees from the Portfolios for such services at an
annual rate of up to 0.15% and 0.25% of the average daily net asset value of
Class C and Class D shares, respectively. These fees will be borne exclusively
by the beneficial owners of Class C and D shares. Please note that Northern and
NTQA may also provide compensation to certain dealers and other financial
intermediaries who provide services to their Customers who invest in the Trust
or whose Customers purchase significant amounts of a Portfolio's shares. The
amount of such compensation may be made on a one-time and/or periodic basis, and
may represent all or a portion of the annual fees earned by Northern and NTQA as
Investment Advisers (after adjustments). This additional compensation will be
paid by Northern, NTQA or their affiliates and will not represent an additional
expense to the Trust or its shareholders.
Customers purchasing shares through an Institution should read their account
agreements carefully. An Institution's requirements may differ from those listed
in this Prospectus. An Institution may also impose account charges, such as
asset allocation fees, account maintenance fees, and other charges that will
reduce the net return on an investment in a Portfolio. If a Customer has agreed
with a particular Institution to maintain a minimum balance with the Institution
and the balance falls below this minimum, the Customer may be required to redeem
all or a part of his investment in a Portfolio.
Conflict of interest restrictions may apply to the receipt of compensation paid
by the Trust to a Servicing Agent in connection with the investment of fiduciary
funds in Portfolio shares. Banks and other institutions regulated by the Office
of Comptroller of the Currency, Board of Governors of the Federal Reserve System
and state banking commissions, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal counsel before entering into
servicing agreements.
State securities laws regarding the registration of dealers may differ from
Federal law. As a result, Institutions investing in the Portfolios on behalf of
their Customers may be required to register as dealers.
50
<PAGE>
ABOUT YOUR ACCOUNT
Dividends and Distributions
Dividends and capital gain distributions of each Portfolio are automatically
reinvested in additional shares of the same Portfolio without any sales charge
or additional purchase price amount.
You may, however, elect to have dividends or capital gain distributions (or
both) paid in cash or reinvested in the same class of shares of another
Portfolio at their net asset value per share (plus an additional purchase price
amount equal to 0.50% and 1.00% of the amount invested in the case of the Small
Company Index Portfolio and International Equity Index Portfolio, respectively).
If you would like to receive dividends or distributions in cash or have them
reinvested in another Portfolio, you must notify the Transfer Agent in writing
at least two days before the dividend or distribution record date. Dividends and
distributions may only be reinvested in a Portfolio in which you maintain an
account.
The following table summarizes the general distribution policies for each of the
Portfolios:
<TABLE>
<CAPTION>
Dividends, Capital Gains,
if any, if any,
Declared Declared
Portfolio and Paid and Paid
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES Monthly Annually
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND Monthly Annually
- --------------------------------------------------------------------------------
INTERMEDIATE BOND Monthly Annually
- --------------------------------------------------------------------------------
U.S. TREASURY INDEX Monthly Annually
- --------------------------------------------------------------------------------
BOND Monthly Annually
- --------------------------------------------------------------------------------
INTERNATIONAL BOND Quarterly Annually
- --------------------------------------------------------------------------------
BALANCED Quarterly Annually
- --------------------------------------------------------------------------------
EQUITY INDEX Quarterly Annually
- --------------------------------------------------------------------------------
DIVERSIFIED GROWTH Annually Annually
- --------------------------------------------------------------------------------
FOCUSED GROWTH Annually Annually
- --------------------------------------------------------------------------------
SMALL COMPANY INDEX Annually Annually
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX Annually Annually
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH Annually Annually
- --------------------------------------------------------------------------------
</TABLE>
A Portfolio with an annual dividend or distribution policy may, in some years,
make additional dividends or distributions to the extent necessary for the
Portfolio to avoid incurring unnecessary tax liabilities.
51
<PAGE>
Tax Considerations
- --------------------------------------------------------------------------------
Each Portfolio intends to qualify as a regulated investment
company for Federal tax purposes, and to distribute to shareholders
substantially all of its net investment income and net capital gain. The
Portfolios' dividends and distributions will be taxable to you for Federal,
state and local income tax purposes, unless you have a tax-advantaged account.
Dividends and distributions are taxable whether they are received in cash or
reinvested in Portfolio shares. In general, distributions attributable to
interest, dividend, certain foreign exchange gain and short-term capital gain
income of the Portfolios are taxable to you as ordinary income. Distributions
attributable to long-term capital gains of the Portfolios are generally taxable
to you as capital gains. This is true no matter how long you own your shares.
There are certain tax requirements that the Portfolios must follow in order to
avoid Federal taxation. In their efforts to adhere to these requirements, the
Portfolios may have to limit their investment activity in some types of
instruments.
A portion of dividends paid by the Balanced and Equity Portfolios may qualify
for the dividends-received deduction for corporations. It is not expected that
any dividends paid by the Fixed Income Portfolios will qualify for this
deduction.
The sale of Portfolio shares is a taxable event on which a gain or loss may be
recognized. For tax purposes, an exchange is considered the same as a sale. The
amount of gain or loss is based on the difference between your tax basis in the
Portfolio shares and the amount you receive for them upon disposition.
Generally, you will recognize a long-term capital gain or loss if you have held
your Portfolio shares for over twelve months at the time you sell or exchange
them. Shares held six months or less may also generate a long-term capital loss
to the extent of any capital gains distributions received on the shares while
they were held by you.
- --------------------------------------------------------------------------------
TIMING
Dividends and distributions from each Portfolio will generally be taxable to you
in the tax year in which they are paid, with one exception. Dividends and
distributions declared by a Portfolio in October, November or December and paid
in January are taxed as though they were paid by December 31.
Every year, the Trust will send you information detailing the amount of ordinary
income and capital gains distributed to your account for the previous year.
Effect of foreign taxes. So long as more than 50% of the value of the total
assets of the International Bond, International Growth and International Equity
Index Portfolios consists of stock or securities (including debt securities) of
foreign corporations at the close of a taxable year, these Portfolios may elect,
for Federal income tax purposes, to treat certain foreign taxes paid by them,
including generally any withholding and other foreign income taxes, as paid by
their shareholders. Should the Portfolios make this election, the amount of such
foreign taxes paid by the Portfolios will be included in their shareholders'
income pro rata (in addition to taxable distributions actually received by
them), and such shareholders will be entitled either (a) to credit their
proportionate amounts of such taxes against their Federal income tax
liabilities, or (b) to deduct such proportionate amounts from their Federal
taxable income under certain circumstances.
52
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
TAX EFFECT
OF "BUYING
A DIVIDEND"
A Portfolio's share price may, at any time, reflect undistributed capital gains
or income and unrealized appreciation. When these amounts are distributed, they
will be taxable to you. For this reason, you should be especially mindful that
if you buy shares on or just before the record date of a dividend or capital
gains distribution, you will pay the full price for the shares and then receive
back a portion of the money you have just invested in the form of a taxable
dividend or capital gain.
Your investment in the Portfolios could have additional tax consequences. You
should consult your tax professional for information regarding all tax
consequences applicable to your investments in the Portfolios. More tax
information is provided in the Statement of Additional Information. This short
summary is not intended as a substitute for careful tax planning.
- --------------------------------------------------------------------------------
Year 2000 Issues
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000" issues.
Many computer systems use two digits rather than four to identify the year.
Unless adapted, these systems may not be able to correctly distinguish the Year
2000 from the Year 1900. As the Year 2000 approaches, many systems may be unable
to accurately process certain date-based information, which could cause a
variety of operational problems for businesses. This could have a negative
effect on the companies in which the Portfolios invest, thus decreasing the
Portfolios' investment returns.
Northern Trust has implemented steps to prepare its critical computer systems
and processes for Year 2000 processing. It has established a dedicated Year 2000
Project Team whose members have significant systems development and maintenance
experience. Northern Trust's Year 2000 project includes a comprehensive testing
plan of its critical systems. Northern Trust has advised the Trust that it has
substantially completed work on its critical systems and that testing with
outside parties will be conducted during 1999.
Northern Trust also has a program to monitor and assess the efforts of other
parties, such as other service providers to the Portfolios. However, it cannot
control the success of those other parties' efforts. Contingency plans are being
established to provide Northern Trust with alternatives in case these entities
experience significant Year 2000 difficulties that impact Northern Trust.
Furthermore, even if the actions taken by Northern Trust are successful, the
normal operations of the Portfolios may, in any event, be disrupted
significantly by the failure of communications and public utility companies,
governmental entities, financial processors or others to perform their services
as a result of Year 2000 problems.
53
<PAGE>
Appendix A
ADDITIONAL INFORMATION ON PORTFOLIO RISKS,
SECURITIES AND TECHNIQUES
This Appendix takes a closer look at some of the risks that are presented by the
types of securities in which the Portfolios may invest. It also explores the
various investment techniques that the investment management team may, but is
not required to, use. The Portfolios may invest in other securities and are
subject to further restrictions and risks which are described in the Statement
of Additional Information.
- --------------------------------------------------------------------------------
SPECIAL RISKS
AND OTHER
CONSIDERATIONS
Derivatives Risk. Each Portfolio may purchase certain "derivative" instruments.
A derivative is a financial instrument whose value is derived from -- or based
upon --the performance of underlying assets, interest or currency exchange
rates, or indices. Many types of instruments representing a wide range of
potential risks and rewards are derivatives, including futures contracts,
options, interest rate and currency swaps, equity swaps, structured securities,
forward currency contracts and structured debt obligations (including
collateralized mortgage obligations and other types of asset-backed securities,
"stripped" securities and various floating rate instruments, including leveraged
"inverse floaters").
Investment strategy. A Portfolio will invest in derivatives only if the
potential risks and rewards are consistent with the Portfolio's objective,
strategies and overall risk profile. The Portfolios may use derivatives for
hedging purposes to offset a potential loss in one position by establishing
an interest in an opposite position. The Portfolios may also use
derivatives for speculative purposes to invest for potential income or
capital gain.
Special risks. Engaging in derivative transactions involves special risks,
including (a) market risk that the Portfolio's derivatives position will
lose value; (b) credit risk that the counterparty to the transaction will
default; (c) leveraging risk that the value of the derivative instrument
will decline more than the value of the assets on which it is based; (d)
illiquidity risk that a Portfolio will be unable to sell its position
because of lack of market depth or disruption; (e) pricing risk that the
value of a derivative instrument will be difficult to determine; and (f)
operations risk that loss will occur as a result of inadequate systems or
human error. Many types of derivatives have been recently developed and
have not been tested over complete market cycles. For these reasons, a
Portfolio may suffer a loss whether or not the analysis of the investment
management team is accurate.
54
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Foreign Investment Risk. Foreign securities include direct investments in
non-U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include indirect investments such as American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). ADRs are U.S. dollar-denominated receipts representing shares
of foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. EDRs and GDRs are receipts issued by non-U.S.
financial institutions that often trade on foreign exchanges. They represent
ownership in an underlying foreign or U.S. security and are generally
denominated in a foreign currency.
Investment strategy. The International Bond, International Equity Index and
International Growth Portfolios will invest a substantial portion of their
total assets in foreign securities. The Short-Intermediate Bond, Bond,
Intermediate Bond, Balanced, Diversified Growth and Focused Growth
Portfolios may invest up to 25% of their total assets in foreign
securities. The Balanced, Diversified Growth and Focused Growth Portfolios
will not invest more than 20% of their respective assets in ADRs, and will
not invest more than 5% of their respective assets in EDRs and GDRs.
The International Growth and International Bond Portfolios may invest more
than 25% of their total assets in the securities of issuers located in
Japan, the United Kingdom, France, Germany or Switzerland because the
securities markets in those countries are highly developed, liquid and
subject to extensive regulation. The International Equity Index Portfolio
invests in countries according to their weightings in the EAFE Index.
Special risks. Foreign securities involve special risks and costs. Foreign
securities, and in particular foreign debt securities, are sensitive to
changes in interest rates. In addition, investment in the securities of
foreign governments involves the risk that foreign governments may default
on their obligations or may otherwise not respect the integrity of their
debt. The performance of investments in securities denominated in a foreign
currency will also depend, in part, on the strength of the foreign currency
against the U.S. dollar and the interest rate environment in the country
issuing the currency. Absent other events which could otherwise affect the
value of a foreign security (such as a change in the political climate or
an issuer's credit quality), appreciation in the value of the foreign
currency generally results in an increase in value of a foreign
currency-denominated security in terms of U.S. dollars. A decline in the
value of the foreign currency relative to the U.S. dollar generally results
in a decrease in value of a foreign currency-denominated security.
55
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with the level of currency
exchange rates, less complete financial information about the issuers, less
market liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to
different accounting, auditing and recordkeeping requirements.
Additional risks are involved when investing in countries with emerging
economies or securities markets. These countries are located in the
Asia/Pacific region, Eastern Europe, Latin and South America and Africa. In
general, the securities markets of these countries are less liquid, are
subject to greater price volatility, have smaller market capitalizations
and have problems with securities registration and custody. In addition,
because the securities settlement procedures are less developed in these
countries, a Portfolio may be required to deliver securities receiving
payment and may also be unable to complete transactions during market
disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Portfolios.
While the Portfolios' investments may, if permitted, be denominated in
foreign currencies, the portfolio securities and other assets held by the
Portfolios are valued in U.S. dollars. Currency exchange rates may
fluctuate significantly over short periods of time causing a Portfolio's
net asset value to fluctuate as well. Currency exchange rates can be
affected unpredictably by the intervention or the failure to intervene by
U.S. or foreign governments or central banks, or by currency controls or
political developments in the U.S. or abroad. To the extent that a
Portfolio is invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. The Portfolios'
respective net currency positions may expose them to risks independent of
their securities positions.
The introduction of a single currency, the euro, on January 1, 1999 for
participating nations in the European Economic and Monetary Union presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates
for currencies being converted into the euro; the fluctuation of the euro
relative to non-euro currencies during the transition period from January
1, 1999 to December 31, 2001 and beyond; whether the interest rate, tax and
labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other countries
in the European Union ("EU"), such as the United Kingdom and Denmark, into
the euro and the admission of other non-EU countries such as Poland, Latvia
and Lithuania as members of the EU may
56
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
have an impact on the euro. These or other factors, including political and
economic risks, could cause market disruptions, and could adversely affect
the value of securities held by the Portfolios.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
o BBB or higher by Standard and Poor's Ratings Services ("S&P");
o Baa or higher by Moody's Investors Service, Inc. ("Moody's");
o BBB or higher by Duff & Phelps Credit Rating Co. ("Duff"); or
o BBB or higher by Fitch IBCA Inc. ("Fitch").
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment strategy. Except as stated below, fixed income and convertible
securities purchased by the Portfolios will generally be rated investment
grade. The Portfolios may also invest in unrated securities if the
Investment Adviser believes they are comparable in quality.
Special risks. Although securities rated BBB by S&P, Duff or Fitch, or Baa
by Moody's are considered investment grade, they have certain speculative
characteristics. Therefore, they may be subject to a higher risk of default
than obligations with higher ratings. Subsequent to its purchase by a
Portfolio, a rated security may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Portfolio.
The Investment Adviser will consider such an event in determining whether
the Portfolio should continue to hold the security.
Maturity Risk. Each Fixed Income Portfolio will normally maintain the
dollar-weighted average maturity of its portfolio within a specified range.
However, the maturities of certain instruments, such as variable and floating
rate instruments, are subject to estimation. In addition, in calculating average
weighted maturities, the maturity of asset-backed securities will be based on
estimates of average life. As a result, the Portfolios cannot guarantee that
these estimates will, in fact, be accurate or that their average maturities will
remain within their specified limits.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated BB or below by S&P, Duff or Fitch, or
Ba by Moody's.
Investment strategy. All of the Portfolios, except the U.S. Government
Securities, Equity Index, Small Company Index and U.S. Treasury Index
Portfolios, may invest up to 15% of their total assets in non-investment
grade securities when the investment management team determines that such
securities are desirable in light of the Portfolios' investment objectives
and portfolio mix. Such securities may be purchased as long as they are
rated B or higher at the time of purchase by at least one major rating
agency (or if unrated, they are of comparable quality as determined by the
Investment Adviser).
57
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Special risks. Non-investment grade securities (sometimes referred to as
"junk bonds") are subject to greater risk than investment grade securities.
The market value of these low-rated securities tends to be more sensitive
to individual corporate developments and changes in interest rates and
economic conditions than higher-rated securities. In addition, they
generally present a higher degree of credit risk. Issuers of low-rated
securities are often highly leveraged, so their ability to repay their debt
during an economic downturn or periods of rising interest rates may be
impaired. The risk of loss due to default by these issuers is also greater
because low-rated securities generally are unsecured and are generally less
liquid than higher quality securities. If an issuer defaulted, a Portfolio
could incur additional expenses seeking recovery of its investment.
Portfolio Turnover Risk. The investment management team will not consider the
portfolio turnover rate a limiting factor in making investment decisions for a
Portfolio. A high rate of portfolio turnover (100% or more) involves
correspondingly greater expenses which must be borne by a Portfolio and its
shareholders. It may also result in higher short-term capital gains that are
taxable to shareholders. See "Financial Highlights" for the Portfolios'
historical portfolio turnover rates.
Temporary Investment Risk. Short-term obligations refer to U.S. government
securities, high-quality money market instruments (including commercial paper
and obligations of foreign and domestic banks such as certificates of deposit,
bank and deposit notes, bankers' acceptances and fixed time deposits) and
repurchase agreements with maturities of 13 months or less. Generally, these
obligations are purchased to provide stability and liquidity to a Portfolio.
Investment strategy. Each Portfolio may invest all or any portion of its
assets in short-term obligations pending investment, to meet anticipated
redemption requests or as a temporary defensive measure in response to
adverse market or economic conditions (except for the U.S. Treasury Index,
Equity Index, Small Company Index and International Equity Index Portfolios
which generally will not invest in these securities as part of a temporary
defensive strategy to protect against potential stock market declines).
Special risks. A Portfolio may not achieve its investment objective when
its assets are invested in short-term obligations.
Tracking Risk. The Equity Index, Small Company Index, International Equity Index
and U.S. Treasury Index Portfolios (the "Index Portfolios") seek to track the
performance of their respective benchmarks indices.
Investment strategy. Under normal market conditions, the Investment Adviser
expects the quarterly performance of the Index Portfolios to be within a
.95 correlation with their respective benchmarks, before expenses.
Special risks. The Index Portfolios are subject to the risk of tracking
variance. Tracking variance may result from share purchases and
redemptions, transaction costs, expenses and other factors. These may
prevent a Portfolio from achieving its investment objective.
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ADDITIONAL
DESCRIPTION
OF SECURITIES
AND COMMON
INVESTMENT
TECHNIQUES
Asset-Backed Securities. Asset-backed securities are sponsored by entities such
as government agencies, banks, financial companies and commercial or industrial
companies. They represent interests in pools of mortgages or other cash-flow
producing assets such as automobile loans, credit card receivables and other
financial assets. In effect, these securities "pass through" the monthly
payments that individual borrowers make on their mortgages or other assets net
of any fees paid to the issuers. Examples of these include guaranteed mortgage
pass-through certificates, collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits ("REMICs").
Investment strategy. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond and Balanced Portfolios may purchase various types of
asset-backed securities. The U.S. Government Securities Portfolio may only
purchase mortgage-backed securities that are issued by an agency of the
U.S. Government. The Portfolios will invest in asset-backed securities
rated investment grade (rated BBB or better by S&P, Duff or Fitch, or Baa
or better by Moody's) at the time of purchase. They may also invest in
unrated mortgage-backed securities which the Investment Adviser believes
are of comparable quality. The Portfolios will not purchase non-mortgage
asset-backed securities that are unrated by S&P, Duff, Fitch or Moody's.
Special risks. In addition to credit and market risk, asset-backed
securities involve prepayment risk because the underlying assets (loans)
may be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise, the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an
asset-backed security with prepayment features may not increase as much as
that of other fixed income securities. In addition, non-mortgage
asset-backed securities involve certain risks not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured, and the debtors are entitled to
the protection of a number of state and Federal consumer credit laws.
Automobile receivables are subject to the risk that the trustee for the
holders of the automobile receivables may not have an effective security
interest in all of the obligations backing the receivables.
Borrowings and Reverse Repurchase Agreements. The Portfolios can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Portfolio subject to the Portfolio's agreement to
repurchase them at a mutually agreed upon date and price (including interest).
Investment strategy. Each Portfolio may borrow and enter into reverse
repurchase agreements in amounts not exceeding one-third of its total
assets (including the amount borrowed). These transactions may be entered
into as a temporary measure for emergency purposes or to meet redemption
requests. Reverse repurchase agreements may also be entered into when the
investment management team expects that the interest income to be earned
from the investment of the transaction proceeds will be greater than the
related interest expense.
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Appendix A continued
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Special risks. Borrowings and reverse repurchase agreements involve
leveraging. If the securities held by the Portfolios decline in value while
these transactions are outstanding, the net asset value of the Portfolios'
outstanding shares will decline in value by proportionately more than the
decline in value of the securities. In addition, reverse repurchase
agreements involve the risks that the interest income earned by a Portfolio
(from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by
a Portfolio will decline below the price the Portfolio is obligated to pay
to repurchase the securities, and that the securities may not be returned
to the Portfolio.
Convertible Securities. A convertible security is a bond or preferred stock that
may be converted (exchanged) into the common stock of the issuing company within
a specified time period for a specified number of shares. They offer the
Portfolios a way to participate in the capital appreciation of the common stock
into which the securities are convertible, while earning higher current income
than is available from the common stock.
Investment strategy. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond, Balanced, Diversified Growth, Focused Growth,
International Growth and International Equity Index Portfolios may each
acquire convertible securities. These securities are subject to the same
rating requirements as fixed income securities held by a Portfolio. The
Short-Intermediate Bond, Bond, Intermediate Bond and International Bond
Portfolios ordinarily will sell shares of common stock received upon
conversion of convertible securities held by such Portfolios.
Custodial Receipts for Treasury Securities. Custodial receipts are
participations in trusts that hold U.S. Treasury securities and are sold under
names such as TIGRs and CATS. Like other stripped obligations, they entitle the
holder to future interest or principal payments on the U.S. Treasury securities.
Investment strategy. The Fixed Income Portfolios (except the U.S. Treasury
Index and International Bond Portfolios) and Balanced Portfolio may invest
up to 5% of their total assets in custodial receipts.
Special risks. Like other stripped obligations, custodial receipts may be
subject to greater price volatility than ordinary debt obligations because
of the way in which their principal and interest are returned to investors.
Equity Swaps. Equity swaps allow the parties to the swap agreement to exchange
components of return on one equity investment (e.g., a basket of equity
securities or an index) for a component of return on another non-equity or
equity investment, including an exchange of differential rates of return.
Investment strategy. The Balanced Portfolio and the Equity Portfolios may
invest in equity swaps. Equity swaps may be used to invest in a market
without owning or taking physical custody of securities in circumstances
where direct investment may be restricted for legal reasons or is otherwise
impractical. Equity swaps may also be used for other purposes, such as
hedging or seeking to increase total return.
60
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Special risks. Equity swaps are derivative instruments and their values can
be very volatile. To the extent that the investment management team does
not accurately analyze and predict the potential relative fluctuation on
the components swapped with the other party, a Portfolio may suffer a loss.
The value of some components of an equity swap (such as the dividends on a
common stock) may also be sensitive to changes in interest rates.
Furthermore, during the period a swap is outstanding, a Portfolio may
suffer a loss if the counterparty defaults.
Exchange Rate-Related Securities. Exchange rate-related securities represent
certain foreign debt obligations whose principal values are linked to a foreign
currency but which are repaid in U.S. dollars.
Investment strategy. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond and Balanced Portfolios may invest in exchange
rate-related securities.
Special risks. The principal payable on an exchange rate-related security
is subject to currency risk. In addition, the potential illiquidity and
high volatility of the foreign exchange market may make exchange
rate-related securities difficult to sell prior to maturity at an
appropriate price.
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment strategy. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond, Balanced, Diversified Growth, Focused Growth,
International Growth and International Equity Index Portfolios may enter
into forward currency exchange contracts for hedging purposes and to help
reduce the risks and volatility caused by changes in foreign currency
exchange rates. The International Bond and International Growth Portfolios
may also enter into these contracts for speculative purposes (i.e., to
increase total return) or for cross-hedging purposes. Foreign currency
exchange contracts will be used at the discretion of the investment
management team, and no Portfolio is required to hedge its foreign currency
positions.
Special risks. Forward foreign currency contracts are privately negotiated
transactions, and can have substantial price volatility. As a result, they
offer less protection against default by the other party than is available
for instruments traded on an exchange. When used for hedging purposes, they
tend to limit any potential gain that may be realized if the value of a
Portfolio's foreign holdings increases because of currency fluctuations.
When used for speculative purposes, forward currency exchange contracts may
result in losses that would not otherwise be incurred.
61
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Appendix A continued
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Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. For example, a futures contract may obligate a
Portfolio, at maturity, to take or make delivery of certain domestic or foreign
securities, the cash value of a securities index or a stated quantity of a
foreign currency. When a Portfolio purchases an option on a futures contract, it
has the right to assume a position as a purchaser or seller of a futures
contract at a specified exercise price during the option period. When a
Portfolio sells an option on a futures contract, it becomes obligated to
purchase or sell a futures contract if the option is exercised.
Investment strategy. Each Portfolio may invest in futures contracts and
options on futures contracts on domestic or foreign exchanges or boards of
trade. They may be used for hedging purposes, to increase total return or
to maintain liquidity to meet potential shareholder redemptions, invest
cash balances or dividends or minimize trading costs.
The value of a Portfolio's futures contracts may equal up to 100% of its
total assets. However, a Portfolio will not purchase or sell a futures
contract unless, after the transaction, the sum of the aggregate amount of
margin deposits on its existing futures positions and the amount of
premiums paid for related options used for non-hedging purposes is 5% or
less of its total assets.
Special risks. Futures contracts and options present the following risks:
imperfect correlation between the change in market value of a Portfolio's
securities and the price of futures contracts and options; the possible
inability to close a futures contract when desired; losses due to
unanticipated market movements which are potentially unlimited; and the
possible inability of the investment management team to correctly predict
the direction of securities prices, interest rates, currency exchange rates
and other economic factors. Foreign exchanges or boards of trade generally
do not offer the same protections as U.S. exchanges.
Illiquid or Restricted Securities. Illiquid securities include repurchase
agreements and time deposits with notice/termination dates of more than seven
days, certain variable amount master demand notes that cannot be called within
seven days, certain insurance funding agreements (see below), certain unlisted
over-the-counter options and other securities that are traded in the U.S. but
are subject to trading restrictions because they are not registered under the
Securities Act of 1933, as amended (the "1933 Act").
Investment strategy. Each Portfolio may invest up to 15% of its net assets
in securities that are illiquid. If otherwise consistent with their
investment objectives and policies, the Portfolios may purchase
domestically traded securities that are not registered under the 1933 Act
but can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act ("Rule 144A Securities"). These securities will not
be considered illiquid so long as the Investment Advisers determine, under
guidelines approved by the Trust's Board of Trustees, that an adequate
trading market exists.
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Special risks. Because illiquid and restricted securities may be difficult
to sell at an acceptable price, they may be subject to greater volatility
and may result in a loss to a Portfolio. The practice of investing in Rule
144A Securities could increase the level of a Portfolio's illiquidity
during any period that qualified institutional buyers become uninterested
in purchasing these securities.
Insurance Funding Agreements. An insurance funding agreement ("IFA") is an
agreement that requires a Portfolio to make cash contributions to a deposit fund
of an insurance company's general account. The insurance company then credits
interest to the Portfolio for a set time period.
Investment Strategy. The Short-Intermediate Bond, Bond, Intermediate Bond
and Balanced Portfolios may invest in IFAs issued by insurance companies
that meet quality and credit standards established by the Investment
Advisers.
Special risks. IFAs are not insured by a government agency -- they are
backed only by the insurance company that issues them. As a result, they
are subject to default risk. In addition, an active secondary market in
IFAs does not currently exist. This means that it may be difficult to sell
an IFA at an appropriate price.
Interest Rate Swaps, Floors and Caps and Currency Swaps. Interest rate and
currency swaps are contracts that obligate a Portfolio and another party to
exchange their rights to pay or receive interest or specified amounts of
currency, respectively. Interest rate floors entitle the purchasers to receive
interest payments if a specified index falls below a predetermined interest
rate. Interest rate caps entitle the purchasers to receive interest payments if
a specified index exceeds a predetermined interest rate.
Investment strategy. The Fixed Income Portfolios (except the U.S. Treasury
Index Portfolio) and the Balanced Portfolio may enter into interest rate
swaps and purchase interest rate floors or caps to protect against interest
rate fluctuations and fluctuations in the floating rate market. The
International Bond, International Growth and International Equity Index
Portfolios may enter into currency swaps to protect against currency
fluctuations.
Special risks. If the other party to an interest rate swap defaults, a
Portfolio's risk of loss consists of the amount of interest payments that
the Portfolio is entitled to receive. In contrast, currency swaps usually
involve the delivery of the entire principal value of one currency in
exchange for the other currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the other party will default on
its delivery obligations. Like other derivative securities, swaps, floors
and caps can be highly volatile. As a result, they may not always be
successful hedges and they could lower a Portfolio's total return.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the Portfolios may invest in securities issued by other
investment companies, including money market funds, index funds, "country funds"
(i.e., funds that invest primarily in issuers located in a specific foreign
country or region), World Equity Benchmark Shares(SM) issued by The Foreign
Fund, Inc. ("WEBS"), S&P's Depository Receipts ("SPDRs") and similar securities
of other issuers.
63
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Appendix A continued
- --------------------------------------------------------------------------------
Investment strategy. Investments by a Portfolio in other investment
companies will be subject to the limitations of the 1940 Act. Although the
Portfolios do not expect to do so in the foreseeable future, each Portfolio
is authorized to invest substantially all of its assets in a single
open-end investment company or series thereof that has substantially the
same investment objective, policies and fundamental restrictions as the
Portfolio.
Special risks. As a shareholder of another investment company, a Portfolio
would be subject to the same risks as any other investor in that company.
In addition, it would bear a proportionate share of any fees and expenses
paid by that company. These would be in addition to the advisory and other
fees paid directly by the Portfolio.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment strategy. Each Portfolio may write (sell) covered call options,
buy put options, buy call options and write secured put options for hedging
(or cross-hedging) purposes or to earn additional income. Options may
relate to particular securities, foreign or domestic securities indices,
financial instruments or foreign currencies. A Portfolio will not purchase
put and call options in an amount that exceeds 5% of its net assets at the
time of purchase. The total value of a Portfolio's assets subject to
options written by the Portfolio will not be greater than 25% of its net
assets at the time the option is written. A Portfolio may "cover" a call
option by owning the security underlying the option or through other means.
Put options written by a Portfolio are "secured" if the Portfolio maintains
liquid assets in a segregated account in an amount at least equal to the
exercise price of the option up until the expiration date.
Special risks. Options trading is a highly specialized activity that
involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The value of options can
be highly volatile, and their use can result in loss if the investment
management team is incorrect in its expectation of price fluctuations. The
successful use of options for hedging purposes also depends in part on the
ability of the investment management team to predict future price
fluctuations and the degree of correlation between the options and
securities markets.
Each Portfolio will invest and trade in unlisted over-the-counter options
only with firms deemed creditworthy by the Investment Advisers. However,
unlisted options are not subject to the protections afforded purchasers of
listed options by the Options Clearing Corporation, which performs the
obligations of its members which fail to perform them in connection with
the purchase or sale of options.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Portfolio subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price.
Investment strategy. Each Portfolio may enter into repurchase agreements
with financial institutions such as banks and broker-dealers that are
deemed to be creditworthy by the Investment Advisers. Although the
securities subject to a repurchase agreement may have maturities exceeding
one year, settlement of the agreement will never occur more than one year
after a Portfolio acquires the securities.
Special risks. In the event of a default, a Portfolio will suffer a loss to
the extent that the proceeds from the sale of the underlying securities and
other collateral are less than the repurchase price and the Portfolio's
costs associated with delay and
64
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APPENDICES
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enforcement of the repurchase agreement. In addition, in the event of
bankruptcy, a Portfolio could suffer additional losses if a court
determines that the Portfolio's interest in the collateral is not
enforceable.
Securities Lending. In order to generate additional income, the Portfolios may
lend securities on a short-term basis to banks, brokers-dealers, or other
qualified institutions. In exchange, the Portfolios will receive collateral
equal to at least 100% of the value of the securities loaned.
Investment strategy. Securities lending may represent no more than
one-third the value of a Portfolio's total assets (including the loan
collateral). Any cash collateral received by a Portfolio in connection with
these loans may be invested in U.S. government securities and other liquid
high-grade debt obligations.
Special risks. The main risk when lending portfolio securities is that the
borrower might become insolvent or refuse to honor its obligation to return
the securities. In this event, a Portfolio could experience delays in
recovering its securities and may incur a capital loss. In addition, a
Portfolio may incur a loss in reinvesting the cash collateral it receives.
Stripped Obligations. These securities are issued by the U.S. government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include stripped mortgage-backed securities, which are derivative
multi-class mortgage securities.
Investment strategy. The Fixed Income and Balanced Portfolios may purchase
stripped securities.
Special risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal prepayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect a
Portfolio's total returns.
Structured Securities. The value of the principal of and/or interest on such
securities is determined by reference to changes in the value of specific
currencies, interest rates, commodities, indices or other financial indicators
(the "Reference") or the relative change in two or more References. The interest
rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference.
Investment strategy. Each Portfolio may invest in structured securities to
the extent consistent with its investment objective.
Special risks. The terms of some structured securities may provide that in
certain circumstances no principal is due at maturity and, therefore, a
Portfolio could suffer a total loss of its investment. Structured
securities may be positively or negatively indexed, so that appreciation of
the Reference may produce an increase or decrease in the interest rate or
value of the security at maturity. In addition, changes in the interest
rates or the value of the security at maturity may be a multiple of changes
in the value of the Reference. Consequently, structured securities may
entail a greater degree of market risk than other types of securities.
Structured securities may also be more volatile, less liquid and more
difficult to accurately price than less complex securities due to their
derivative nature.
65
<PAGE>
Appendix A continued
United States Government Obligations. These include U.S. Treasury obligations,
such as bills, notes and bonds, which generally differ only in terms of their
interest rates, maturities and time of issuance. These also include obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities. Securities guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities are deemed to include (a)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or an agency or
instrumentality thereof, and (b) participations in loans made to foreign
governments or their agencies that are so guaranteed.
Investment strategy. To the extent consistent with its investment objective,
each Portfolio may invest in a variety of U.S. Treasury obligations. With the
exception of the U.S. Treasury Index Portfolio, each Portfolio also may invest
in obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities.
Special risks. Not all U.S. government obligations carry the same
guarantees. Some, such as those of the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the
United States Treasury. Other obligations, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from
the United States Treasury; and others, such as those issued by the Federal
National Mortgage Association ("FNMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations.
Still others are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial
support to its agencies or instrumentalities if it is not obligated to do
so by law. There is no assurance that these commitments will be undertaken
or complied with in the future. In addition, the secondary market for
certain participations in loans made to foreign governments or their
agencies may be limited.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes and leveraged inverse
floating rate instruments ("inverse floaters"). An inverse floater is leveraged
to the extent that its interest rate varies by an amount that exceeds the amount
of the variation in the index rate of interest.
Investment strategy. Each Portfolio may invest in rated and unrated
variable and floating rate instruments to the extent consistent with its
investment objective. Unrated instruments may be purchased by a Portfolio
if they are determined by the Investment Advisers to be of comparable
quality to rated instruments eligible for purchase by the Portfolio.
Special risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate and
credit risk. The market values of inverse floaters are subject to greater
volatility than other variable and floating rate instruments due to their
higher degree of leverage. Because there is no active secondary market for
certain variable and floating rate instruments, they may be more difficult
to sell if the issuer defaults on its payment obligations or during periods
when the Portfolios are not entitled to exercise their demand rights. As a
result, the Portfolios could suffer a loss with respect to these
instruments.
66
<PAGE>
Warrants. A warrant represents the right to purchase a security at a
predetermined price for a specified period of time.
Investment strategy. The Balanced, Diversified Growth, Focused Growth,
International Growth, Small Company Index and International Equity Index
Portfolios may invest up to 5% of their total assets at the time of
purchase in warrants and similar rights. The Balanced, Diversified Growth,
Focused Growth and International Growth Portfolios may also purchase bonds
that are issued in tandem with warrants.
Special risks. Warrants are derivative instruments that present risks
similar to options.
When-Issued Securities, Delayed Delivery Transactions and Forward Commitments. A
purchase of "when-issued" securities refers to a transaction made conditionally
because the securities, although authorized, have not yet been issued. A delayed
delivery or forward commitment transaction involves a contract to purchase or
sell securities for a fixed price at a future date beyond the customary
settlement period.
Investment strategy. Each Portfolio may purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis. Although the
Portfolios would generally purchase securities in these transactions with
the intention of acquiring the securities, the Portfolios may dispose of
such securities prior to settlement if the investment management team deems
it appropriate to do so.
Special risks. Purchasing securities on a when-issued, delayed delivery or
forward commitment basis involves the risk that the value of the securities
may decrease by the time they are actually issued or delivered. Conversely,
selling securities in these transactions involves the risk that the value
of the securities may increase by the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
Zero Coupon, Pay-In-Kind and Capital Appreciation Bonds. These are securities
issued at a discount from their face value because interest payments are
typically postponed until maturity. Interest payments on pay-in-kind securities
are payable by the delivery of additional securities. The amount of the discount
rate varies depending on factors such as the time remaining until maturity,
prevailing interest rates, a security's liquidity and the issuer's credit
quality. These securities also may take the form of debt securities that have
been stripped of their interest payments.
Investment strategy. Each Portfolio may invest in zero coupon, pay-in-kind
and capital appreciation bonds to the extent consistent with its investment
objective.
Special risks. The market prices of zero coupon, pay-in-kind and capital
appreciation bonds generally are more volatile than the market prices of
interest-bearing securities and are likely to respond to a greater degree
to changes in interest rates than interest-bearing securities having
similar maturities and credit quality. A Portfolio's investments in zero
coupon, pay-in-kind and capital appreciation bonds may require the
Portfolio to sell some of its portfolio securities to generate sufficient
cash to satisfy certain income distribution requirements.
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DISCLAIMERS
The U.S. Treasury Index Portfolio is not sponsored, endorsed, sold or promoted
by Lehman, nor does Lehman guarantee the accuracy and/or completeness of the
Lehman Index or any data included therein. Lehman makes no warranty, express or
implied, as to the results to be obtained by the Portfolio, owners of the
Portfolio, any person or any entity from the use of the Lehman Index or any data
included therein. Lehman makes no express or implied warranties and expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose or use with respect to the Lehman Index or any data included therein.
The Equity Index Portfolio is not sponsored, endorsed, sold or promoted by S&P,
nor does S&P guarantee the accuracy and/or completeness of the S&P 500(R) Index
or any data included therein. S&P makes no warranty, express or implied, as to
the results to be obtained by the Portfolio, owners of the Portfolio, any person
or any entity from the use of the S&P 500(R) Index or any data included therein.
S&P makes no express or implied warranties and expressly disclaims all such
warranties of merchantability or fitness for a particular purpose for use with
respect to the S&P 500(R) Index or any data included therein.
The International Equity Index Portfolio is not sponsored, endorsed, sold or
promoted by MSCI, nor does MSCI guarantee the accuracy and/or completeness of
the EAFE Index or any data included therein. MSCI makes no warranty, express or
implied, as to the results to be obtained by the Portfolio, owners of the
Portfolio, any person or any entity from the use of the EAFE Index or any data
included therein. MSCI makes no express or implied warranties and expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the EAFE Index or any data included therein.
The Small Company Index Portfolio is not sponsored, endorsed, sold or promoted
by Russell, nor does Russell guarantee the accuracy and/or completeness of the
Russell 2000 Index or any data included therein. Russell makes no warranty,
express or implied, as to the results to be obtained by the Portfolio, owners of
the Portfolio, any person or any entity from the use of the Russell 2000 Index
or any data included therein. Russell makes no express or implied warranties and
expressly disclaims all such warranties of merchantability or fitness for a
particular purpose for use with respect to the Russell 2000 Index or any data
included therein.
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APPENDICES
Appendix B
The financial highlights tables are intended to help you understand a
Portfolio's financial performance for the past five years (or, if shorter, the
period of the Portfolio's operations). Certain information reflects financial
results for a single Portfolio share. The total returns in the tables represent
the rate that an investor would have earned or lost on an investment in a
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP, whose report is included in
the Portfolios' annual report along with the Portfolios' financial statements.
The annual report is available upon request and without charge.
69
<PAGE>
Appendix B continued
Financial Highlights
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Class A
.....................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $19.99 $20.07 $20.08 $19.05 $20.07
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 1.17 1.21 1.02 1.05 0.91
....................................................................................................................................
Net realized and unrealized gain (loss) 0.26 (0.07) (0.01) 1.02 (1.02)
....................................................................................................................................
Total income (loss) from investment operations 1.43 1.14 1.01 2.07 (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.15) (1.22) (1.02) (1.04) (0.91)
....................................................................................................................................
Net realized gain -- -- -- -- --
....................................................................................................................................
Return of capital -- -- -- -- --
....................................................................................................................................
Total distributions to shareholders (1.15) (1.22) (1.02) (1.04) (0.91)
....................................................................................................................................
Net increase (decrease) 0.28 (0.08) (0.01) 1.03 (1.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $20.27 $19.99 $20.07 $20.08 $19.05
Total return (c) 7.36% 5.93% 5.15% 11.18% (0.57)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 0.86% 0.85% 0.94% 1.09% 1.12%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 5.51% 5.37% 4.64% 4.70% 3.86%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 6.01% 5.86% 5.22% 5.43% 4.62%
....................................................................................................................................
Portfolio turnover rate 115.55% 95.73% 119.75% 141.14% 45.55%
....................................................................................................................................
Net assets at end of year (in thousands) $48,317 $43,073 $92,351 $56,329 $25,293
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C Shares issue date) through
November 30, 1996.
(b) For the period September 15, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
70
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
................................... ............................................................
1998 1997 1996(a) 1998 1997 1996 1995 1994(b)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$19.98 $20.06 $20.13 $19.94 $20.03 $20.04 $19.05 $19.43
............................................................................................................
1.12 1.14 0.91 1.08 1.16 0.96 0.96 0.22
............................................................................................................
0.26 (0.04) (0.12) 0.28 (0.10) (0.03) 1.00 (0.38)
............................................................................................................
1.38 1.10 0.79 1.36 1.06 0.93 1.96 (0.16)
- ------------------------------------------------------------------------------------------------------------
(1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
............................................................................................................
-- -- -- -- -- -- -- --
............................................................................................................
-- -- -- -- -- -- -- --
............................................................................................................
(1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
............................................................................................................
0.28 (0.08) (0.07) 0.28 (0.09) (0.01) 0.99 (0.38)
- ------------------------------------------------------------------------------------------------------------
$20.26 $19.98 $20.06 $20.22 $19.94 $20.03 $20.04 $19.05
7.10% 5.67% 4.05% 6.96% 5.52% 4.77% 10.66% (0.90)%
............................................................................................................
1.10% 1.09% 1.18% 1.25% 1.24% 1.33% 1.48% 1.51%
............................................................................................................
0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
............................................................................................................
5.27% 5.14% 4.39% 5.05% 5.01% 4.25% 4.35% 3.89%
............................................................................................................
5.77% 5.63% 4.97% 5.55% 5.50% 4.83% 5.08% 4.65%
............................................................................................................
115.55% 95.73% 119.75% 115.55% 95.73% 119.75% 141.14% 45.55%
............................................................................................................
$3,942 $3,118 $3,535 $1,224 $312 $225 $67 $13
- ------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
Appendix B continued
Financial Highlights
SHORT-INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
..............................................
For the Years Ended November 30, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $20.36 $20.70 $20.73
........................................................................................................
Income (loss) from investment operations:
Net investment income 1.84 1.46 1.14
........................................................................................................
Net realized and unrealized gain (loss) (0.36) (0.29) (0.01)
........................................................................................................
Total income (loss) from investment operations 1.48 1.17 1.13
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.78) (1.46) (1.16)
........................................................................................................
Net realized gain (0.03) (0.05) --
........................................................................................................
Return of capital -- -- --
........................................................................................................
Total distributions to shareholders (1.81) (1.51) (1.16)
........................................................................................................
Net increase (decrease) (0.33) (0.34) (0.03)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of year $20.03 $20.36 $20.70
Total return (b) 7.50% 5.95% 5.68%
........................................................................................................
Ratio to average net assets of (c):
Expenses, before waivers and reimbursements 0.76% 0.81% 0.88%
........................................................................................................
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.36%
........................................................................................................
Net investment income, before waivers
and reimbursements 9.21% 7.23% 5.31%
........................................................................................................
Net investment income, net of waivers
and reimbursements 9.61% 7.68% 5.83%
........................................................................................................
Portfolio turnover rate 89.97% 48.49% 47.68%
........................................................................................................
Net assets at end of year (in thousands) $182,999 $201,457 $153,675
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
72
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class D
............................... ........................................................
1995 1994 1998 1997 1996 1995 1994(a)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$19.53 $20.33 $20.31 $20.66 $20.71 $19.53 $19.82
............................................................................................
1.02 0.97 1.78 1.43 1.07 0.94 0.23
............................................................................................
1.19 (0.80) (0.40) (0.34) (0.02) 1.18 (0.29)
............................................................................................
2.21 0.17 1.38 1.09 1.05 2.12 (0.06)
- --------------------------------------------------------------------------------------------
(1.01) (0.97) (1.69) (1.39) (1.10) (0.94) (0.23)
............................................................................................
-- -- (0.03) (0.05) -- -- --
............................................................................................
-- -- -- -- -- -- --
............................................................................................
(1.01) (0.97) (1.72) (1.44) (1.10) (0.94) (0.23)
............................................................................................
1.20 (0.80) (0.34) (0.35) (0.05) 1.18 (0.29)
- --------------------------------------------------------------------------------------------
$20.73 $19.53 $19.97 $20.31 $20.66 $20.71 $19.53
11.58% 0.84% 7.08% 5.54% 5.22% 11.09% (0.30)%
............................................................................................
0.91% 0.95% 1.15% 1.20% 1.27% 1.30% 1.34%
............................................................................................
0.36% 0.36% 0.75% 0.75% 0.75% 0.75% 0.75%
............................................................................................
4.59% 4.25% 8.91% 7.03% 4.44% 4.30% 3.83%
............................................................................................
5.14% 4.84% 9.31% 7.48% 4.96% 4.85% 4.42%
............................................................................................
54.68% 48.67% 89.97% 48.49% 47.68% 54.68% 48.67%
............................................................................................
$158,678 $96,209 $824 $891 $343 $13 $1
- --------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
Appendix B continued
Financial Highlights
INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
......................... .......
For the Years Ended November 30, 1998 1997(a) 1998(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $19.89 $20.00 $20.46
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 1.19 0.38 0.18
....................................................................................................................................
Net realized and unrealized gain (loss) 0.27 (0.15) (0.32)
....................................................................................................................................
Total income (loss) from investment operations 1.46 0.23 (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.20) (0.34) (0.19)
....................................................................................................................................
Net realized gain -- -- --
....................................................................................................................................
Return of capital -- -- --
....................................................................................................................................
Total distributions to shareholders (1.20) (0.34) (0.19)
....................................................................................................................................
Net increase (decrease) 0.26 (0.11) (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $20.15 $19.89 $20.13
Total return (c) 7.55% 1.17% (0.70)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 1.09% 2.28% 1.48%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.75%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 5.46% 3.95% 4.96%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 6.19% 5.87% 5.69%
....................................................................................................................................
Portfolio turnover rate 93.40% 56.99% 93.40%
....................................................................................................................................
Net assets at end of year (in thousands) $30,439 $11,997 $41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
(b) For the period October 5, 1998 (Class D Shares issue date) through November
30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
74
<PAGE>
APPENDICES
This page intentionally left blank.
75
<PAGE>
Appendix B continued
Financial Highlights
U.S. TREASURY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
...................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.81 $20.60 $20.78 $18.77 $21.05
.................................................................................................................................
Income (loss) from investment operations:
Net investment income 1.23 1.26 1.19 1.11 1.15
.................................................................................................................................
Net realized and unrealized gain (loss) 0.97 0.20 (0.18) 2.01 (1.93)
.................................................................................................................................
Total income (loss) from investment operations 2.20 1.46 1.01 3.12 (0.78)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.24) (1.25) (1.19) (1.11) (1.14)
.................................................................................................................................
Net realized gain -- -- -- -- (0.36)
.................................................................................................................................
Return of capital -- -- -- -- --
.................................................................................................................................
Total distributions to shareholders (1.24) (1.25) (1.19) (1.11) (1.50)
.................................................................................................................................
Net increase (decrease) 0.96 0.21 (0.18) 2.01 (2.28)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $21.77 $20.81 $20.60 $20.78 $18.77
Total return (c) 10.92% 7.44% 5.10% 16.95% (3.80)%
.................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 0.77% 0.82% 1.04% 0.89% 0.79%
.................................................................................................................................
Expenses, net of waivers and reimbursements 0.26% 0.26% 0.26% 0.26% 0.26%
.................................................................................................................................
Net investment income, before waivers
and reimbursements 5.22% 5.80% 5.15% 4.46% 5.07%
.................................................................................................................................
Net investment income, net of waivers
and reimbursements 5.73% 6.36% 5.93% 5.09% 5.60%
.................................................................................................................................
Portfolio turnover rate 69.84% 72.61% 42.49% 80.36% 52.80%
.................................................................................................................................
Net assets at end of year (in thousands) $22,085 $33,839 $26,273 $17,674 $37,305
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period October 7, 1998 (Class C Shares issue date) through November
30, 1998.
(b) For the period November 16, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
76
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
............. ..............................................................
1998(a) 1998 1997 1996 1995 1994(b)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$22.28 $20.77 $20.57 $20.75 $18.77 $18.80
..................................................................................................
0.21 1.13 1.20 1.17 1.00 0.09
..................................................................................................
(0.52) 1.00 0.18 (0.24) 2.03 (0.03)
..................................................................................................
(0.31) 2.13 1.38 0.93 3.03 0.06
- --------------------------------------------------------------------------------------------------
(0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
..................................................................................................
-- -- -- -- -- --
..................................................................................................
-- -- -- -- -- --
..................................................................................................
(0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
..................................................................................................
(0.47) 0.97 0.20 (0.18) 1.98 (0.03)
- --------------------------------------------------------------------------------------------------
$21.81 $21.74 $20.77 $20.57 $20.75 $18.77
(1.39) 10.50% 7.03% 4.72% 16.43% 0.37%
..................................................................................................
1.01% 1.16% 1.21% 1.43% 1.28% 1.18%
..................................................................................................
0.50% 0.65% 0.65% 0.65% 0.65% 0.65%
..................................................................................................
4.71% 4.84% 5.51% 4.79% 4.78% 5.52%
..................................................................................................
5.22% 5.35% 6.07% 5.57% 5.41% 6.05%
..................................................................................................
69.84% 69.84% 72.61% 42.49% 80.36% 52.80%
..................................................................................................
$17 $1,721 $1,707 $848 $286 --
- --------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
Appendix B continued
Financial Highlights
BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
............................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $21.08 $20.77 $20.96 $18.29 $20.70
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 1.47 1.34 1.29 1.17 1.42
....................................................................................................................................
Net realized and unrealized gain (loss) 0.62 0.29 (0.19) 2.66 (2.21)
....................................................................................................................................
Total income (loss) from investment operations 2.09 1.63 1.10 3.83 (0.79)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.44) (1.32) (1.26) (1.14) (1.46)
....................................................................................................................................
Net realized gain (0.12) -- -- -- (0.15)
....................................................................................................................................
Return of capital -- -- (0.03) (0.02) (0.01)
....................................................................................................................................
Total distributions to shareholders (1.56) (1.32) (1.29) (1.16) (1.62)
....................................................................................................................................
Net increase (decrease) 0.53 0.31 (0.19) 2.67 (2.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $21.61 $21.08 $20.77 $20.96 $18.29
Total return (c) 10.31% 8.17% 5.57% 21.55% (4.04)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 0.75% 0.77% 0.84% 0.84% 0.87%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 6.68% 6.25% 5.91% 5.46% 6.80%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 7.07% 6.66% 6.39% 5.94% 7.31%
....................................................................................................................................
Portfolio turnover rate 84.80% 76.30% 101.38% 74.19% 103.09%
....................................................................................................................................
Net assets at end of year (in thousands) $605,517 $460,514 $366,850 $286,301 $257,391
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period July 3, 1995 (Class C Shares issue date) through November
30, 1995.
(b) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
78
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
.................................................. ..............................................................
1998 1997 1996 1995(a) 1998 1997 1996 1995 1994(b)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$21.07 $20.78 $20.96 $20.21 $21.05 $20.76 $20.94 $18.29 $18.74
................................................................................................................................
1.42 1.29 1.25 0.47 1.38 1.24 1.22 1.08 0.28
................................................................................................................................
0.62 0.28 (0.18) 0.74 0.63 0.30 (0.18) 2.66 (0.45)
................................................................................................................................
2.04 1.57 1.07 1.21 2.01 1.54 1.04 3.74 (0.17)
- --------------------------------------------------------------------------------------------------------------------------------
(1.39) (1.28) (1.22) (0.45) (1.36) (1.25) (1.19) (1.09) (0.28)
................................................................................................................................
(0.12) -- -- -- (0.12) -- -- -- --
................................................................................................................................
-- -- (0.03) (0.01) -- -- (0.03) -- --
................................................................................................................................
(1.51) (1.28) (1.25) (0.46) (1.48) (1.25) (1.22) (1.09) (0.28)
................................................................................................................................
0.53 0.29 (0.18) 0.75 0.53 0.29 (0.18) 2.65 (0.45)
- --------------------------------------------------------------------------------------------------------------------------------
$21.60 $21.07 $20.78 $20.96 $21.58 $21.05 $20.76 $20.94 $18.29
10.04% 7.88% 5.33% 6.08% 9.89% 7.74% 5.17% 21.06% (0.94)%
................................................................................................................................
0.99% 1.01% 1.08% 1.08% 1.14% 1.16% 1.23% 1.23% 1.26%
................................................................................................................................
0.60% 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
................................................................................................................................
6.44% 5.98% 5.61% 5.11% 6.31% 5.86% 5.51% 5.00% 5.80%
................................................................................................................................
6.83% 6.39% 6.09% 5.59% 6.70% 6.27% 5.99% 5.48% 6.31%
................................................................................................................................
84.80% 76.30% 101.38% 74.19% 84.80% 76.30% 101.38% 74.19% 103.09%
................................................................................................................................
$61,450 $50,554 $7,342 $3,704 $2,039 $601 $220 $120 $15
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
Appendix B continued
Financial Highlights
INTERNATIONAL BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
..................................................
For the Years Ended November 30, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $20.13 $22.16 $21.74
..........................................................................................................
Income (loss) from investment operations:
Net investment income 0.98 1.02 1.54
..........................................................................................................
Net realized and unrealized gain (loss) 1.33 (1.70) 0.43
..........................................................................................................
Total income (loss) from investment operations 2.31 (0.68) 1.97
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (c) (0.79) (1.01) (1.55)
..........................................................................................................
Net realized gain (0.30) (0.34) --
..........................................................................................................
Return of capital -- -- --
..........................................................................................................
Total distributions to shareholders (1.09) (1.35) (1.55)
..........................................................................................................
Net increase (decrease) 1.22 (2.03) 0.42
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of year $21.35 $20.13 $22.16
Total return (d) 11.85% (3.02)% 9.47%
..........................................................................................................
Ratio to average net assets of (e):
Expenses, before waivers and reimbursements 1.52% 1.52% 1.58%
..........................................................................................................
Expenses, net of waivers and reimbursements 0.96% 0.96% 0.96%
..........................................................................................................
Net investment income, before waivers
and reimbursements 4.71% 5.05% 5.29%
..........................................................................................................
Net investment income, net of waivers
and reimbursements 5.27% 5.61% 5.91%
..........................................................................................................
Portfolio turnover rate 23.76% 29.29% 33.89%
..........................................................................................................
Net assets at end of year (in thousands) $28,568 $26,383 $34,183
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through November
30, 1994.
(b) For the period November 20, 1995 (Class D Shares issue date) through
November 30, 1995.
(c) Distributions to shareholders from net investment income include amounts
relating to foreign currency transactions which are treated as ordinary
income for Federal income tax purposes.
(d) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
80
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class D
.................................. ...................................................
1995 1994(a) 1998 1997 1996 1995(b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$19.93 $20.00 $20.06 $22.14 $21.74 $22.17
........................................................................................................
1.26 0.79 0.93 0.97 1.37 0.02
........................................................................................................
2.28 0.01 1.29 (1.72) 0.51 (0.08)
........................................................................................................
3.54 0.80 2.22 (0.75) 1.88 (0.06)
- --------------------------------------------------------------------------------------------------------
(1.73) (0.87) (0.72) (0.99) (1.48) (0.37)
........................................................................................................
-- -- (0.30) (0.34) -- --
........................................................................................................
-- -- -- -- -- --
........................................................................................................
(1.73) (0.87) (1.02) (1.33) (1.48) (0.37)
........................................................................................................
1.81 (0.07) 1.20 (2.08) 0.40 (0.43)
- --------------------------------------------------------------------------------------------------------
$21.74 $19.93 $21.26 $20.06 $22.14 $21.74
18.20% 4.03% 11.43% (3.38)% 9.04% (0.30)%
........................................................................................................
1.47% 1.49% 1.91% 1.91% 1.97% 1.86%
........................................................................................................
0.96% 0.96% 1.35% 1.35% 1.35% 1.35%
........................................................................................................
5.41% 5.40% 4.34% 4.80% 5.05% 2.75%
........................................................................................................
5.92% 5.93% 4.90% 5.36% 5.67% 3.26%
........................................................................................................
54.46% 88.65% 23.76% 29.29% 33.89% 54.46%
........................................................................................................
$32,673 $26,947 $132 $91 $52 $9
- --------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
Appendix B continued
Financial Highlights
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Class A
............................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.59 $12.24 $11.05 $9.50 $10.22
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 0.38 0.38 0.34 0.34 0.24
....................................................................................................................................
Net realized and unrealized gain (loss) 1.81 1.66 1.19 1.55 (0.72)
....................................................................................................................................
Total income (loss) from investment operations 2.19 2.04 1.53 1.89 (0.48)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.32) (0.38) (0.34) (0.34) (0.22)
....................................................................................................................................
Net realized gain (0.51) (0.31) -- -- (0.02)
....................................................................................................................................
Return of capital -- -- -- -- --
....................................................................................................................................
Total distributions to shareholders (0.83) (0.69) (0.34) (0.34) (0.24)
....................................................................................................................................
Net increase (decrease) 1.36 1.35 1.19 1.55 (0.72)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $14.95 $13.59 $12.24 $11.05 $9.50
Total return (c) 16.90% 17.29% 14.07% 20.22% (4.76)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 1.04% 1.11% 1.20% 1.28% 1.50%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.61% 0.61% 0.61% 0.61% 0.61%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 2.40% 2.49% 2.44% 2.69% 1.68%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 2.83% 2.99% 3.03% 3.36% 2.56%
....................................................................................................................................
Portfolio turnover rate 67.16% 59.06% 104.76% 93.39% 75.69%
....................................................................................................................................
Net assets at end of year (in thousands) $61,969 $51,475 $45,157 $38,897 $31,462
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C Shares issue date) through
November 30, 1996.
(b) For the period February 20, 1996 (Class D Shares issue date) through
November 30, 1996.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
82
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
........................................ .......................................
1998 1997 1996(a) 1998 1997 1996(b)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$13.56 $12.24 $11.12 $13.54 $12.23 $11.34
...............................................................................................
0.37 0.36 0.29 0.40 0.34 0.22
...............................................................................................
1.78 1.64 1.12 1.72 1.64 0.96
...............................................................................................
2.15 2.00 1.41 2.12 1.98 1.18
- -----------------------------------------------------------------------------------------------
(0.29) (0.37) (0.29) (0.27) (0.36) (0.29)
...............................................................................................
(0.51) (0.31) -- (0.51) (0.31) --
...............................................................................................
-- -- -- -- -- --
...............................................................................................
(0.80) (0.68) (0.29) (0.78) (0.67) (0.29)
...............................................................................................
1.35 1.32 1.12 1.34 1.31 0.89
- -----------------------------------------------------------------------------------------------
$14.91 $13.56 $12.24 $14.88 $13.54 $12.23
16.61% 17.00% 12.72% 16.45% 16.82% 10.55%
...............................................................................................
1.28% 1.35% 1.44% 1.43% 1.50% 1.59%
...............................................................................................
0.85% 0.85% 0.85% 1.00% 1.00% 1.00%
...............................................................................................
2.15% 2.25% 2.21% 2.01% 2.10% 2.19%
...............................................................................................
2.58% 2.75% 2.80% 2.44% 2.60% 2.78%
...............................................................................................
67.16% 59.06% 104.76% 67.16% 59.06% 104.76%
...............................................................................................
$5,459 $4,587 $5,997 $752 $322 $232
- -----------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
Appendix B continued
Financial Highlights
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
...........................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.09 $16.79 $13.86 $10.60 $10.78
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 0.28 0.30 0.31 0.30 0.27
....................................................................................................................................
Net realized and unrealized gain (loss) 4.02 4.13 3.36 3.47 (0.18)
....................................................................................................................................
Total income (loss) from investment operations 4.30 4.43 3.67 3.77 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.26) (0.30) (0.31) (0.30) (0.27)
....................................................................................................................................
Net realized gain (1.44) (0.83) (0.43) (0.21) --
....................................................................................................................................
Return of capital -- -- -- -- --
....................................................................................................................................
Total distributions to shareholders (1.70) (1.13) (0.74) (0.51) (0.27)
....................................................................................................................................
Net increase (decrease) 2.60 3.30 2.93 3.26 (0.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $22.69 $20.09 $16.79 $13.86 $10.60
Total return (c) 23.39% 27.93% 27.53% 36.60% 0.87%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 0.46% 0.46% 0.50% 0.54% 0.59%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.21% 0.22% 0.22% 0.22% 0.23%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 1.11% 1.42% 1.84% 2.22% 2.25%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 1.36% 1.66% 2.12% 2.54% 2.62%
....................................................................................................................................
Portfolio turnover rate 15.26% 18.96% 18.02% 15.27% 71.98%
....................................................................................................................................
Net assets at end of year (in thousands) $1,175,112 $844,065 $675,804 $479,763 $281,817
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 28, 1995 (Class C Shares issue date) through
November 30, 1995.
(b) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
84
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
..................................................... ..................................................................
1998 1997 1996 1995(a) 1998 1997 1996 1995 1994(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$20.05 $16.79 $13.86 $13.43 $20.00 $16.77 $13.83 $10.6 $10.96
....................................................................................................................................
0.24 0.26 0.28 0.05 0.21 0.26 0.27 0.25 0.02
....................................................................................................................................
4.01 4.11 3.35 0.45 4.00 4.07 3.36 3.47 (0.31)
....................................................................................................................................
4.25 4.37 3.63 0.50 4.21 4.33 3.63 3.72 (0.29)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.22) (0.28) (0.27) (0.07) (0.19) (0.27) (0.26) (0.28) (0.07)
....................................................................................................................................
(1.44) (0.83) (0.43) -- (1.44) (0.83) (0.43) (0.21) --
....................................................................................................................................
-- -- -- -- -- -- -- -- --
....................................................................................................................................
(1.66) (1.11) (0.70) (0.07) (1.63) (1.10) (0.69) (0.49) (0.07)
....................................................................................................................................
2.59 3.26 2.93 0.43 2.58 3.23 2.94 3.23 (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
$22.64 $20.05 $16.79 $13.86 $22.58 $20.00 $16.77 $13.83 $10.60
23.09% 27.64% 27.24% 3.94% 22.90% 27.45% 27.20% 36.20% (2.68)%
....................................................................................................................................
0.70% 0.70% 0.74% 0.78% 0.85% 0.85% 0.89% 0.93% 0.96%
....................................................................................................................................
0.45% 0.46% 0.46% 0.46% 0.60% 0.61% 0.61% 0.61% 0.60%
....................................................................................................................................
0.87% 1.18% 1.61% 1.97% 0.71% 1.03% 1.50% 1.75% 2.31%
....................................................................................................................................
1.12% 1.42% 1.89% 2.29% 0.97% 1.27% 1.78% 2.07% 2.67%
....................................................................................................................................
15.26% 18.96% 18.02% 15.27% 15.26% 18.96% 18.02% 15.27% 71.98%
....................................................................................................................................
$111,991 $82,982 $53,929 $18,390 $31,703 $30,650 $8,005 $810 $3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
Appendix B continued
Financial Highlights
DIVERSIFIED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
...........................................
For the Years Ended November 30, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $16.20 $14.36 $12.20
....................................................................................................
Income (loss) from investment operations:
Net investment income 0.07 0.11 0.14
....................................................................................................
Net realized and unrealized gain (loss) 3.46 3.33 2.33
....................................................................................................
Total income (loss) from investment operations 3.53 3.44 2.47
- ----------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.11) (0.14) (0.15)
....................................................................................................
Net realized gain (1.86) (1.46) (0.16)
....................................................................................................
Return of capital -- -- --
....................................................................................................
Total distributions to shareholders (1.97) (1.60) (0.31)
....................................................................................................
Net increase (decrease) 1.56 1.84 2.16
- ----------------------------------------------------------------------------------------------------
Net asset value, end of year $17.76 $16.20 $14.36
Total return (b) 25.22% 27.06% 20.83%
....................................................................................................
Ratio to average net assets of (c):
Expenses, before waivers and reimbursements 0.96% 1.03% 1.10%
....................................................................................................
Expenses, net of waivers and reimbursements 0.66% 0.67% 0.66%
....................................................................................................
Net investment income (loss), before waivers
and reimbursements 0.15% 0.40% 0.54%
....................................................................................................
Net investment income, net of waivers
and reimbursements 0.45% 0.76% 0.98%
....................................................................................................
Portfolio turnover rate 37.74% 45.53% 59.99%
....................................................................................................
Net assets at end of year (in thousands) $177,947 $158,383 $142,055
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
86
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class D
................................ ............................................................
1995 1994 1998 1997 1996 1995 1994(a)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$9.88 $10.65 $16.03 $14.26 $12.16 $9.88 $10.41
.............................................................................................................
0.15 0.09 0.03 0.09 0.11 0.11 0.01
.............................................................................................................
2.26 (0.83) 3.40 3.27 2.29 2.25 (0.54)
.............................................................................................................
2.41 (0.74) 3.43 3.36 2.40 2.36 (0.53)
- -------------------------------------------------------------------------------------------------------------
(0.09) (0.01) (0.07) (0.13) (0.14) (0.08) --
.............................................................................................................
-- (0.02) (1.86) (1.46) (0.16) -- --
.............................................................................................................
-- -- -- -- -- -- --
.............................................................................................................
(0.09) (0.03) (1.93) (1.59) (0.30) (0.08) --
.............................................................................................................
2.32 (0.77) 1.50 1.77 2.10 2.28 (0.53)
- -------------------------------------------------------------------------------------------------------------
$12.20 $9.88 $17.53 $16.03 $14.26 $12.16 $9.88
24.55% (6.98)% 24.73% 26.60% 20.39% 24.19% (5.14)%
.............................................................................................................
1.12% 1.08% 1.35% 1.42% 1.49% 1.51% 1.46%
.............................................................................................................
0.69% 0.67% 1.05% 1.06% 1.05% 1.08% 1.05%
.............................................................................................................
0.73% 0.35% (0.24)% 0.01% 0.15% 0.30% 0.53%
.............................................................................................................
1.16% 0.77% 0.06% 0.37% 0.59% 0.73% 0.94%
.............................................................................................................
81.65% 78.94% 37.74% 45.53% 59.99% 81.65% 78.94%
.............................................................................................................
$146,731 $164,963 $1,122 $696 $433 $221 $40
- -------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
Appendix B continued
Financial Highlights
FOCUSED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
...........................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.20 $14.48 $12.53 $9.79 $10.43
....................................................................................................................................
Income (loss) from investment operations:
Net investment income (loss) (0.01) 0.05 0.02 0.05 0.02
....................................................................................................................................
Net realized and unrealized gain (loss) 3.10 3.37 2.17 2.71 (0.66)
....................................................................................................................................
Total income (loss) from investment operations 3.09 3.42 2.19 2.76 (0.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.05) (0.02) (0.05) (0.02) .--
....................................................................................................................................
Net realized gain (2.85) (1.68) (0.19) .-- .--
....................................................................................................................................
Return of capital -- -- -- .-- .--
....................................................................................................................................
Total distributions to shareholders (2.90) (1.70) (0.24) (0.02) .--
....................................................................................................................................
Net increase (decrease) 0.19 1.72 1.95 2.74 (0.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $16.39 $16.20 $14.48 $12.53 $9.79
Total return (c) 24.03% 27.05% 17.82% 28.38% (6.15)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 1.29% 1.34% 1.43% 1.47% 1.55%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.92% 0.92% 0.91% 0.91% 0.91%
....................................................................................................................................
Net investment loss, before waivers
and reimbursements (0.41)% (0.12)% (0.40)% (0.10)% (0.39)%
....................................................................................................................................
Net investment income (loss), net of waivers
and reimbursements (0.04)% 0.30% 0.12% 0.46% 0.24%
....................................................................................................................................
Portfolio turnover rate 79.11% 108.29% 116.78% 85.93% 74.28%
....................................................................................................................................
Net assets at end of year (in thousands) $123,380 $115,802 $106,250 $86,099 $57,801
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period June 14, 1996 (Class C Shares issue date) through November
30, 1996.
(b) For the period December 8, 1994 (Class D Shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
88
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
................................... .....................................................
1998 1997 1996(a) 1998 1997 1996 1995(b)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$16.16 $14.47 $13.46 $16.01 $14.37 $12.48 $9.55
......................................................................................................
(0.05) 0.01 (0.01) (0.05) 0.03 (0.03) 0.02
......................................................................................................
3.09 3.37 1.02 3.04 3.30 2.15 2.93
......................................................................................................
3.04 3.38 1.01 2.99 3.33 2.12 2.95
- ------------------------------------------------------------------------------------------------------
(0.01) (0.01) -- (0.01) (0.01) (0.04) (0.02)
......................................................................................................
(2.85) (1.68) -- (2.85) (1.68) (0.19) --
......................................................................................................
-- -- -- -- -- -- --
......................................................................................................
(2.86) (1.69) -- (2.86) (1.69) (0.23) (0.02)
......................................................................................................
0.18 1.69 1.01 0.13 1.64 1.89 2.93
- ------------------------------------------------------------------------------------------------------
$16.34 $16.16 $14.47 $16.14 $16.01 $14.37 $12.48
23.73% 26.75% 7.51% 23.60% 26.52% 17.42% 30.97%
......................................................................................................
1.53% 1.58% 1.67% 1.68% 1.73% 1.82% 1.86%
......................................................................................................
1.16% 1.16% 1.15% 1.31% 1.31% 1.30% 1.30%
......................................................................................................
(0.66)% (0.36)% (0.64)% (0.81)% (0.51)% (0.80) (0.67)%
......................................................................................................
(0.29)% 0.06% (0.12)% (0.44)% (0.09)% (0.28) (0.11)%
......................................................................................................
79.11% 108.29% 116.78% 79.11% 108.29% 116.78% 85.93%
......................................................................................................
$8,719 $8,325 $6,993 $1,779 $1,206 $656 $489
- ------------------------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
Appendix B continued
Financial Highlights
SMALL COMPANY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
........................................................................
For the Years Ended November 30, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $15.05 $13.97 $12.98 $10.86 $11.29
....................................................................................................................................
Income (loss) from investment operations:
Net investment income 0.13 0.15 0.19 0.16 0.14
....................................................................................................................................
Net realized and unrealized gain (loss) (1.13) 2.69 1.75 2.67 (0.30)
....................................................................................................................................
Total income (loss) from investment operations (1.00) 2.84 1.94 2.83 (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.14) (0.17) (0.14) (0.15) (0.02)
....................................................................................................................................
Net realized gain (0.89) (1.59) (0.81) (0.56) (0.25)
....................................................................................................................................
Return of capital -- -- -- -- --
....................................................................................................................................
Total distributions to shareholders (1.03) (1.76) (0.95) (0.71) (0.27)
....................................................................................................................................
Net increase (decrease) (2.03) 1.08 0.99 2.12 (0.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.02 $15.05 $13.97 $12.98 $10.86
Total return (c) (7.02)% 23.06% 15.96% 27.76% (1.54)%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 0.74% 0.68% 0.79% 0.81% 0.86%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.31% 0.32% 0.32% 0.32% 0.33%
....................................................................................................................................
Net investment income, before waivers
and reimbursements 0.76% 0.86% 0.89% 0.82% 0.74%
....................................................................................................................................
Net investment income, net of waivers
and reimbursements 1.19% 1.22% 1.36% 1.31% 1.27%
....................................................................................................................................
Portfolio turnover rate 59.21% 42.66% 46.26% 38.46% 98.43%
....................................................................................................................................
Net assets at end of year (in thousands) $139,100 $147,887 $112,856 $94,899 $77,120
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 8, 1998 (Class C Shares issue date) through November
30, 1998.
(b) For the period December 8, 1994 (Class D Shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year and does not
reflect the .75% additional transaction fee that was in effect prior to
April 1, 1998 which would reduce total return. Effective April 1, 1998, the
additional transaction fee has been reduced to .50%.
(d) Annualized for periods less than a full year.
90
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class C Class D
.......... ..............................................
1998(a) 1998 1997 1996 1995(b)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$13.89 $15.01 $13.96 $12.95 $10.51
................................................................................
0.03 0.11 0.17 0.13 0.18
................................................................................
(0.94) (1.19) 2.62 1.83 2.96
................................................................................
(0.91) (1.08) 2.79 1.96 3.14
- --------------------------------------------------------------------------------
-- (0.10) (0.15) (0.14) (0.14)
................................................................................
-- (0.89) (1.59) (0.81) (0.56)
................................................................................
-- -- -- -- --
................................................................................
-- (0.99) (1.74) (0.95) (0.70)
................................................................................
(0.91) (2.07) 1.05 1.01 2.44
- --------------------------------------------------------------------------------
$12.98 $12.94 $15.01 $13.96 $12.95
(6.54) (7.58) 22.68% 16.20% 31.62%
................................................................................
0.98% 1.13% 1.07% 1.18% 1.20%
................................................................................
0.55% 0.70% 0.71% 0.71% 0.71%
................................................................................
0.55% 0.37% 0.40% 0.55% 0.41%
................................................................................
0.98% 0.80% 0.76% 1.02% 0.90%
................................................................................
59.21% 59.21% 42.66% 46.26% 38.46%
................................................................................
$870 $855 $690 $269 $44
- --------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
Appendix B continued
Financial Highlights
INTERNATIONAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
.............................................
For the Years Ended November 30, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $10.52 $10.63 $9.88
...................................................................................................................
Income (loss) from investment operations:
Net investment income 0.09 0.11 0.10
...................................................................................................................
Net realized and unrealized gain (loss) 1.90 0.31 0.87
...................................................................................................................
Total income (loss) from investment operations 1.99 0.42 0.97
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.16) (0.08) (0.22)
...................................................................................................................
Net realized gain (0.57) (0.45) .--
...................................................................................................................
Return of capital -- -- .--
...................................................................................................................
Total distributions to shareholders (0.73) (0.53) (0.22)
...................................................................................................................
Net increase (decrease) 1.26 (0.11) 0.75
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.78 $10.52 $10.63
Total return (c) 20.44% 4.21% 9.96%
...................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 1.31% 1.37% 1.43%
...................................................................................................................
Expenses, net of waivers and reimbursements 1.06% 1.06% 1.06%
...................................................................................................................
Net investment income (loss), before waivers
and reimbursements 0.64% 0.66% 0.36%
...................................................................................................................
Net investment income, net of waivers
and reimbursements 0.89% 0.97% 0.73%
...................................................................................................................
Portfolio turnover rate 160.13% 154.62% 202.47%
...................................................................................................................
Net assets at end of year (in thousands) $111,594 $106,774 $138,182
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through November
30, 1994.
(b) For the period November 16, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
92
<PAGE>
APPENDICES
<TABLE>
<CAPTION>
Class D
............................ ............................................................
1995 1994(a) 1998 1997 1996 1995 1994(b)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.21 $10.00 $10.39 $10.54 $9.83 $10.21 $10.47
..............................................................................................
0.12 0.05 0.09 0.09 0.01 0.19 --
..............................................................................................
(0.36) 0.16 1.83 0.29 0.92 (0.48) (0.26)
..............................................................................................
(0.24) 0.21 1.92 0.38 0.93 (0.29) (0.26)
- ----------------------------------------------------------------------------------------------
(0.05) -- (0.14) (0.08) (0.22) (0.05) --
..............................................................................................
(0.04) -- (0.57) (0.45) -- (0.04) --
..............................................................................................
-- -- -- -- -- -- --
..............................................................................................
(0.09) -- (0.71) (0.53) (0.22) (0.09) --
..............................................................................................
(0.33) 0.21 1.21 (0.15) 0.71 (0.38) (0.26)
- ----------------------------------------------------------------------------------------------
$9.88 $10.21 $11.60 $10.39 $10.54 $9.83 $10.21
(2.32)% 2.11% 19.91% 3.79% 9.59% (2.78) (2.56)%
..............................................................................................
1.38% 1.47% 1.70% 1.76% 1.82% 1.77% 1.78%
..............................................................................................
1.06% 1.04% 1.45% 1.45% 1.45% 1.45% 1.35%
..............................................................................................
0.90% 0.33% 0.34% 0.27% 0.07% 1.69% (0.43)%
..............................................................................................
1.22% 0.76% 0.59% 0.58% 0.44% 2.01% --
..............................................................................................
215.31% 77.79% 160.13% 154.62% 202.47% 215.31% 77.79%
..............................................................................................
$148,704 $133,212 $203 $234 $94 $20 --
- ----------------------------------------------------------------------------------------------
</TABLE>
93
<PAGE>
Appendix B continued
Financial Highlights
INTERNATIONAL EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
............................ .......
For the Years Ended November 30, 1998 1997(a) 1998(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $10.55 $10.00 $9.88
....................................................................................................................................
Income from investment operations:
Net investment income 0.14 0.10 --
....................................................................................................................................
Net realized and unrealized gain 1.46 0.45 2.09
....................................................................................................................................
Total income from investment operations 1.60 0.55 2.09
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (loss) (0.17) -- --
....................................................................................................................................
Net realized gain -- -- --
....................................................................................................................................
Return of capital -- -- --
....................................................................................................................................
Total distributions to shareholders (0.17) -- --
....................................................................................................................................
Net increase 1.43 0.55 2.09
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.98 $10.55 $11.97
Total return (c) 15.50% 5.45% 21.15%
....................................................................................................................................
Ratio to average net assets of (d):
Expenses, before waivers and reimbursements 1.00% 1.08% 1.39%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.55% 0.51% 0.94%
....................................................................................................................................
Net investment income (loss), before waivers
and reimbursements 0.91% 1.18% (0.80)%
....................................................................................................................................
Net investment income (loss), net of waivers
and reimbursements 1.36% 1.75% (0.11)%
....................................................................................................................................
Portfolio turnover rate 41.53% 8.16% 41.53%
....................................................................................................................................
Net assets at end of year (in thousands) $44,940 $34,244 $12
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) For the period October 5, 1998 (Class D Shares issue date) through November
30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year and does not
reflect the 1.00% additional transaction fee which would reduce total
return.
(d) Annualized for periods less than a full year.
94
<PAGE>
This page intentionally left blank.
95
<PAGE>
For More Information
- --------------------------------------------------------------------------------
ANNUAL/
SEMIANNUAL
REPORT
Additional information about the Portfolios' investments is available in
the Portfolios' annual and semiannual reports to shareholders. In the
Portfolios' annual reports, you will find a discussion of the market conditions
and investment strategies that significantly affected the Portfolios'
performance during their last fiscal year.
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL
INFORMATION
Additional information about the Portfolios and their policies is also available
in the Portfolios' Statement of Additional Information ("SAI"). The SAI is
incorporated by reference into this Prospectus (is legally considered part of
this Prospectus).
The Portfolios' annual and semiannual reports, and the SAI, are available free
upon request by calling 1-800-637-1380.
To obtain other information and for shareholder inquiries:
By telephone -- Call 1-800-637-1380
By mail -- Northern Institutional Funds
P.O. Box 75943
Chicago, IL 60675
On the Internet -- Text-only versions of the Portfolios' documents are available
on the SEC's website at http://www.sec.gov
You may review and obtain copies of Trust documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Trust documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Northern
Institutional Funds
811-3605
96
<PAGE>
INVESTMENT ADVISERS
The Northern Trust Company
Northern Trust Quantitative Advisors, Inc.
50 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT
AND CUSTODIAN
The Northern Trust Company
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
NORTHERN INSTITUTIONAL FUNDS
4900 Sears Tower
Chicago, Illinois 60606
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERMEDIATE BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
This Statement of Additional Information dated April 1, 1999 (the
"Additional Statement") is not a prospectus. Copies of the prospectus dated
April 1, 1999 for the U.S. Government Securities, Short-Intermediate Bond, U.S.
Treasury Index, Bond, Intermediate Bond and International Bond Portfolios (the
"Portfolios") of Northern Institutional Funds (the "Prospectus") may be obtained
without charge by calling 1-800-637-1380 (toll-free) or by writing to the
address stated above. Capitalized terms not otherwise defined have the same
meaning as in the Prospectus.
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 are incorporated herein
by reference in the section entitled "Financial Statements." No other parts of
the annual report are incorporated herein by reference. Copies of the annual
report may be obtained upon request and without charge by calling 1-800-637-1380
(toll-free).
B-1
<PAGE>
INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION.........................................B-3
Classification and History.......................................B-3
Investment Objectives, Strategies and Risks......................B-3
Investment Restrictions.........................................B-17
ADDITIONAL TRUST INFORMATION.............................................B-20
Trustees and Officers...........................................B-20
Investment Advisers, Transfer Agent and Custodian...............B-26
Portfolio Transactions..........................................B-32
Portfolio Valuation.............................................B-33
Administrator and Distributor...................................B-33
Shareholder Servicing Plan......................................B-36
Counsel and Auditors............................................B-37
In-Kind Purchases and Redemptions...............................B-37
PERFORMANCE INFORMATION..................................................B-38
TAXES ...................................................................B-47
General.........................................................B-47
Foreign Investors...............................................B-48
Conclusion......................................................B-49
DESCRIPTION OF SHARES....................................................B-49
OTHER INFORMATION........................................................B-54
FINANCIAL STATEMENTS.....................................................B-55
APPENDIX A................................................................1-A
APPENDIX B................................................................1-B
----------------
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering made by the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust or its distributor. The Prospectus does not constitute
an offering by the Trust or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. An investment in a Portfolio involves investment risks, including
possible loss of principal.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Classification and History
Northern Institutional Funds (the "Trust") is an open-end, management
investment company. Each Portfolio (other than the International Bond Portfolio)
is classified as diversified under the Investment Company Act of 1940, as
amended (the "1940 Act"). The International Bond Portfolio is classified as
non-diversified under the 1940 Act.
Each Portfolio is a series of the Trust, which was formed as a Delaware
business trust on July 1, 1997 under an Agreement and Declaration of Trust (the
"Trust Agreement"). The Trust, formerly known as The Benchmark Funds, changed
its name to Northern Institutional Funds on July 15, 1998. The Portfolios were
formerly series of The Benchmark Funds, a Massachusetts business trust, and were
reorganized into the Trust on March 31, 1998.
Investment Objectives, Strategies and Risks
The following supplements the investment objectives, strategies and risks
of the Portfolios as set forth in the Prospectus. The investment objective of
the Intermediate Bond Portfolio may be changed without shareholder approval. The
investment objective of each other Portfolio may not be changed without the vote
of the majority of the Portfolio's outstanding shares. Except as expressly noted
below, however, each Portfolio's investment policies may be changed without
shareholder approval.
U.S. Government Obligations. Examples of the types of U.S. Government
obligations that may be acquired by the Portfolios include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Federal National Mortgage Association,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, and the Maritime Administration.
Supranational Bank Obligations. Each Portfolio (other than the U.S.
Treasury Index Portfolio) may invest in obligations of supranational banks.
Supranational banks are international banking institutions designed or supported
by national governments to promote economic reconstruction, development or trade
between nations (e.g., the World Bank). Obligations of supranational banks may
be supported by appropriated but unpaid commitments of their member countries
and there is no assurance that these commitments will be undertaken or met in
the future.
Stripped Securities. Each Portfolio may purchase stripped securities. The
Treasury Department has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and principal payments on Treasury securities through the
Federal Reserve book-entry record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Each Portfolio may purchase
securities
B-3
<PAGE>
registered in the STRIPS program. Under the STRIPS program, a Portfolio will be
able to have its beneficial ownership of zero coupon securities recorded
directly in the book-entry record-keeping system in lieu of having to hold
certificates or other evidences of ownership of the underlying U.S. Treasury
securities.
In addition, each Portfolio (other than the U.S. Treasury Index Portfolio)
may acquire U.S. Government obligations and their unmatured interest coupons
that have been separated ("stripped") by their holder, typically a custodian
bank or investment brokerage firm. Having separated the interest coupons from
the underlying principal of the U.S. Government obligations, the holder will
resell the stripped securities in custodial receipt programs with a number of
different names, including "Treasury Income Growth Receipts" ("TIGRs") and
"Certificate of Accrual on Treasury Securities" ("CATS"). The stripped coupons
are sold separately from the underlying principal, which is usually sold at a
deep discount because the buyer receives only the right to receive a future
fixed payment on the security and does not receive any rights to periodic
interest (cash) payments. The underlying U.S. Treasury bonds and notes
themselves are held in book-entry form at the Federal Reserve Bank or, in the
case of bearer securities (i.e., unregistered securities which are ostensibly
owned by the bearer or holder), in trust on behalf of the owners. Counsel to the
underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government obligations for Federal tax purposes. The Trust is
not aware of any binding legislative, judicial or administrative authority on
this issue.
To the extent consistent with its investment objectives, each Portfolio may
purchase stripped mortgage-backed securities ("SMBS"). SMBS are usually
structured with two or more classes that receive different proportions of the
interest and principal distributions from a pool of mortgage-backed obligations.
A common type of SMBS will have one class receiving all of the interest, while
the other class receives all of the principal. However, in some instances, one
class will receive some of the interest and most of the principal while the
other class will receive most of the interest and the remainder of the
principal. If the underlying obligations experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on other
mortgage-backed obligations because their cash flow patterns are also volatile
and there is a risk that the initial investment will not be fully recouped. SMBS
issued by the U.S. Government (or a U.S. Government agency or instrumentality)
may be considered liquid under guidelines established by the Trust's Board of
Trustees if they can be disposed of promptly in the ordinary course of business
at a value reasonably close to that used in the calculation of the net asset
value per share.
Asset-Backed Securities. The U.S. Government Securities Portfolio may
purchase securities that are secured or backed by mortgages and issued by an
agency of the U.S. Government, and the Short-Intermediate Bond, Bond,
Intermediate Bond and International Bond Portfolios may purchase asset-backed
securities, which are securities backed by mortgages, installment contracts,
credit card receivables or other assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
payments made by the individual
B-4
<PAGE>
borrowers on the assets that underlie the securities, net of any fees paid to
the issuer or guarantor of the securities. The average life of asset-backed
securities varies with the maturities of the underlying instruments, and the
average life of a mortgage-backed instrument, in particular, is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities as a result of mortgage prepayments. For this and other reasons,
an asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.
If an asset-backed security is purchased at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if an asset-backed security is purchased at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will decrease, yield to maturity. In calculating the
average weighted maturity of the U.S. Government Securities, Short-Intermediate
Bond, Bond, Intermediate Bond and International Bond Portfolios, the maturity of
asset-backed securities will be based on estimates of average life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments.
Asset-backed securities acquired by a Portfolio may include collateralized
mortgage obligations ("CMOs") issued by private companies. CMOs provide the
holder with a specified interest in the cash flow of a pool of underlying
mortgages or other mortgage-backed securities. Issuers of CMOs ordinarily elect
to be taxed as pass-through entities known as real estate mortgage investment
conduits ("REMICs"). CMOs are issued in multiple classes, each with a specified
fixed or floating interest rate and a final distribution date. The relative
payment rights of the various CMO classes may be structured in a variety of
ways. The Portfolios will not purchase "residual" CMO interests, which normally
exhibit greater price volatility.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the U.S. Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal
B-5
<PAGE>
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, the FHLMC may remit
the amount due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
Foreign Securities. Unanticipated political, economic or social
developments may affect the value of a Portfolio's investments in emerging
market countries and the availability to the Portfolio of additional investments
in these countries. Some of these countries may have in the past failed to
recognize private property rights and may have at times nationalized or
expropriated the assets of private companies. The small size and inexperience of
the securities markets in certain of such countries and the limited volume of
trading in securities in those countries may make the Portfolio's investments in
such countries illiquid and more volatile than investments in Japan or most
Western European countries, and the Portfolio may be required to establish
special custodial or other arrangements before making certain investments in
those countries. There may be little financial or accounting information
available with respect to issuers located in certain of such countries, and it
may be difficult as a result to assess the value or prospects of an investment
in such issuers.
Investors should understand that the expense ratio of the International
Bond Portfolio can be expected to be higher than those of funds investing in
domestic securities. The costs attributable to investing abroad are usually
higher for several reasons, such as the higher cost of investment research,
higher cost of custody of foreign securities, higher commissions paid on
comparable transactions on foreign markets and additional costs arising from
delays in settlements of transactions involving foreign securities. Countries in
which the Portfolio may invest include, but
B-6
<PAGE>
are not limited to: Argentina, Australia, Austria, Belgium, Brazil, Canada,
Chile, Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary,
Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Peru, the Philippines, Poland, Portugal,
Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, the United Kingdom and Venezuela.
The end of the Cold War, the reunification of Germany, the accession of new
Western European members to the European Economic and Monetary Union and the
aspirations of Eastern European states to join and other political and social
events in Europe have caused considerable economic, social and political
dislocation. In addition, events in the Japanese economy, as well as political
and social developments there have affected Japanese securities and currency
markets, and the relationship of the Japanese yen with other currencies and with
the U.S. dollar. Future political, economic and social developments in Japan and
in the Asia/Pacific regional context can be expected to produce continuing
effects on securities and currency markets.
Foreign Currency Transactions. In order to protect against a possible loss
on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Short-Intermediate Bond, Bond, Intermediate Bond and
International Bond Portfolios are authorized to enter into forward foreign
currency exchange contracts. These contracts involve an obligation to purchase
or sell a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the values
of portfolio securities but rather allow a Portfolio to establish a rate of
exchange for a future point in time.
When entering into a contract for the purchase or sale of a security, a
Portfolio may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When the investment management team anticipates that a particular foreign
currency may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, a Portfolio may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Portfolio's securities denominated
in such foreign currency. Similarly, when the obligations held by a Portfolio
create a short position in a foreign currency, the Portfolio may enter into a
forward contract to buy, for a fixed amount, an amount of foreign currency
approximating the short position. A Portfolio's net long and short foreign
currency exposure will not exceed its total asset value. With respect to any
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by that contract and the value of the securities
involved due to the changes in the values of such securities resulting from
market movements between the date the forward contract is entered into and the
date it matures. In addition, while forward contracts may offer protection from
losses resulting from declines or appreciation in the value of a particular
foreign currency, they also limit potential gains which might result from
changes in the value of such currency. A Portfolio may also incur costs in
B-7
<PAGE>
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
In addition, the International Bond Portfolio may purchase or sell forward
foreign currency exchange contracts to seek to increase total return or for
cross-hedging purposes. The Portfolio may engage in cross-hedging by using
forward contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency if the investment management team
believes that there is a pattern of correlation between the two currencies.
Liquid assets equal to the amount of a Portfolio's assets that could be
required to consummate forward contracts will be segregated except to the extent
the contracts are otherwise "covered." The segregated assets will be valued at
market or fair value. If the market or fair value of such assets declines,
additional liquid assets will be segregated daily so that the value of the
segregated assets will equal the amount of such commitments by the Portfolio. A
forward contract to sell a foreign currency is "covered" if a Portfolio owns the
currency (or securities denominated in the currency) underlying the contract, or
holds a forward contract (or call option) permitting the Portfolio to buy the
same currency at a price that is (i) no higher than the Portfolio's price to
sell the currency or (ii) greater than the Portfolio's price to sell the
currency provided the Portfolio segregates liquid assets in the amount of the
difference. A forward contract to buy a foreign currency is "covered" if a
Portfolio holds a forward contract (or call option) permitting the Portfolio to
sell the same currency at a price that is (i) as high as or higher than the
Portfolio's price to buy the currency or (ii) lower than the Portfolio's price
to buy the currency provided the Portfolio segregates liquid assets in the
amount of the difference.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Portfolios
(other than the U.S. Treasury Index Portfolio) may enter into interest rate
swaps or purchase interest rate floors or caps for hedging purposes and not for
speculation. Interest rate swaps involve the exchange by a Portfolio with
another party of their respective commitments to pay or receive interest, such
as an exchange of fixed rate payments for floating rate payments. A Portfolio
will typically use interest rate swaps to preserve a return on a particular
investment or portion of its portfolio or to shorten the effective duration of
its portfolio investments. The purchase of an interest rate floor or cap
entitles the purchaser to receive payments of interest on a notional principal
amount from the seller, to the extent the specified index falls below (floor) or
exceeds (cap) a predetermined interest rate. The Portfolios will only enter into
interest rate swaps or interest rate floor or cap transactions on a net basis;
i.e., the two payment streams are netted out, with a Portfolio receiving or
paying, as the case may be, only the net amount of the two payments.
The International Bond Portfolio may enter into currency swaps, which
involve the exchange of the rights of the Portfolio and another party to make or
receive payments in specified currencies. Currency swaps usually involve the
delivery of the entire principal value of one designated currency in exchange
for the other designated currency.
Inasmuch as interest rate and currency swaps are entered into for good
faith hedging purposes, the Trust and The Northern Trust Company ("Northern")
believe that such transactions do not constitute senior securities as defined in
the 1940 Act and, accordingly, will not treat them as being subject to the
Portfolio's borrowing restrictions. The net amount of the excess, if any, of a
B-8
<PAGE>
Portfolio's obligations over its entitlements with respect to interest rate or
currency swaps will be accrued on a daily basis and an amount of liquid assets
having an aggregate net asset value at least equal to such accrued excess will
be segregated by the Portfolio.
The Portfolios will not enter into an interest rate or currency swap or
interest rate floor or cap transaction unless the unsecured commercial paper,
senior debt or the claims-paying ability of the other party thereto is rated
either A or A-1 or better by S&P, Duff or Fitch, or A or P-1 or better by
Moody's. If there is a default by the other party to such transaction, the
Portfolios will have contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid in comparison with markets for other similar
instruments which are traded in the interbank market.
Options. Each Portfolio may buy put options and call options and write
covered call and secured put options. Such options may relate to particular
securities, financial instruments, foreign currencies, foreign or domestic
securities indices or (in the case of the International Bond Portfolio) the
yield differential between two securities ("yield curve options") and may or may
not be listed on a domestic or foreign securities exchange (an "Exchange") or
issued by the Options Clearing Corporation. A call option for a particular
security or currency gives the purchaser of the option the right to buy, and a
writer the obligation to sell, the underlying security or currency at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security or currency. The premium paid to the writer is
in consideration for undertaking the obligation under the option contract. A put
option for a particular security or currency gives the purchaser the right to
sell the security or currency at the stated exercise price to the expiration
date of the option, regardless of the market price of the security or currency.
In contrast to an option on a particular security, an option on an index
provides the holder with the right to make or receive a cash settlement upon
exercise of the option. The amount of this settlement will be equal to the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.
Options trading is a highly specialized activity which entails greater than
ordinary investment risk. Options on particular securities may be more volatile
than the underlying instruments and, therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying instruments themselves.
The Portfolios will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are segregated) upon conversion or exchange of other securities
or instruments held by it. For a call option on an index, the option is covered
if a Portfolio maintains with its custodian, a portfolio of securities
substantially replicating the movement of the index, or liquid assets equal to
the contract value. A call option is also covered if a Portfolio holds a call on
the same security, currency or index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise price of the
call written, or (ii) greater than the exercise price of the call written
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provided the Portfolio segregates liquid assets in the amount of the difference.
The Portfolios will write put options only if they are "secured" by segregated
liquid assets in an amount not less than the exercise price of the option at all
times during the option period.
With respect to yield curve options, a call (or put) option is covered if
the International Bond Portfolio holds another call (or put) option on the
spread between the same two securities and segregates liquid assets sufficient
to cover the Portfolio's net liability under the two options. Therefore, the
Portfolio's liability for such a covered option is generally limited to the
difference between the amount of the Portfolio's liability under the option
written by the Portfolio less the value of the option held by the Portfolio.
Yield curve options may also be covered in such other manner as may be in
accordance with the requirements of the counterparty with which the option is
traded and applicable laws and regulations.
A Portfolio's obligation to sell a security or currency subject to a
covered call option written by it, or to purchase a security or currency subject
to a secured put option written by it, may be terminated prior to the expiration
date of the option by the Portfolio's execution of a closing purchase
transaction, which is effected by purchasing on an exchange an option of the
same series (i.e., same underlying security or currency, exercise price and
expiration date) as the option previously written. Such a purchase does not
result in the ownership of an option. A closing purchase transaction will
ordinarily be effected to realize a profit on an outstanding option, to prevent
an underlying security or currency from being called, to permit the sale of the
underlying security or currency or to permit the writing of a new option
containing different terms on such underlying security. The cost of such a
liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Portfolio will have
incurred a loss in the transaction. There is no assurance that a liquid
secondary market will exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able to sell the
underlying security or currency (in the case of a covered call option) or
liquidate the segregated assets (in the case of a secured put option) until the
option expires or the optioned security or currency is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline or appreciation in the security or currency during such
period.
When a Portfolio purchases an option, the premium paid by it is recorded as
an asset of the Portfolio. When the Portfolio writes an option, an amount equal
to the net premium (the premium less the commission) received by the Portfolio
is included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by the Portfolio expires unexercised, the Portfolio realizes a loss
equal to the premium paid. If the Portfolio enters into a closing sale
transaction on an option purchased by it, the Portfolio will realize a gain if
the premium received by the Portfolio on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is less. If an option
written by the Portfolio expires on the stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option written by the Portfolio is exercised, the
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proceeds of the sale will be increased by the net premium originally received
and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain options.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded
over-the-counter or on an Exchange, may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an Exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an Exchange; the facilities of an Exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
value; or one or more Exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that Exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
Futures Contracts and Related Options. Each Portfolio may invest in futures
contracts and interest rate futures contracts and may purchase and sell call and
put options on futures contracts for hedging purposes, for speculative purposes
(to seek to increase total return), or for liquidity management purposes. When
used as a hedge, a Portfolio may sell a futures contract in order to offset a
decrease in the market value of its portfolio securities that might otherwise
result from a market decline or currency exchange fluctuations. A Portfolio may
do so either to hedge the value of its portfolio of securities as a whole, or to
protect against declines, occurring prior to sales of securities, in the value
of the securities to be sold. Conversely, a Portfolio may purchase a futures
contract as a hedge in anticipation of purchases of securities. In addition, a
Portfolio may utilize futures contracts in anticipation of changes in the
composition of its portfolio holdings. For a detailed description of futures
contracts and related options, see Appendix B to this Additional Statement.
Securities Lending. Collateral for loans of portfolio securities made by a
Portfolio may consist of cash, cash equivalents, securities issued or guaranteed
by the U.S. Government or its agencies or irrevocable bank letters of credit (or
any combination thereof). The borrower of securities will be required to
maintain the market value of the collateral at not less than the market value of
the loaned securities, and such value will be monitored on a daily basis. When a
Portfolio lends its securities, it continues to receive dividends and/or
interest on the securities loaned and may simultaneously earn interest on the
investment of the cash collateral which will be invested in readily marketable,
high quality, short-term obligations. Although voting rights, or rights to
consent, attendant to securities on loan pass to the borrower, such loans will
be called so that the securities may be voted by a Portfolio if a material event
affecting the investment is to occur.
Forward Commitments, When-Issued Securities and Delayed Delivery
Transactions. When a Portfolio purchases securities on a when-issued, delayed
delivery or forward commitment basis,
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the Portfolio will segregate liquid assets until three days prior to the
settlement date having a value (determined daily) at least equal to the amount
of the Portfolio's purchase commitments, or will otherwise cover its position.
In the case of a forward commitment to sell portfolio securities, the Portfolio
will segregate the portfolio securities themselves. These procedures are
designed to ensure that the Portfolio will maintain sufficient assets at all
times to cover its obligations under when-issued purchases, forward commitments
and delayed delivery transactions. For purposes of determining a Portfolio's
average dollar-weighted maturity, the maturity of when-issued or forward
commitment securities will be calculated from the commitment date.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time
Deposits and Bank Notes. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party. Bank notes rank junior to deposit liabilities of banks and pari passu
with other senior, unsecured obligations of the bank. Some states have
"depositor preference" laws that give depositors of their state chartered banks
priority over holders of bank notes and other general creditors. In addition,
the U.S. Congress has adopted legislation which creates a Federal "depositor
preference" law providing the claims of certain creditors of an insured
depository institution (including its depositors) with priority over the claims
of that institution's unsecured creditors (including holders of its notes), in
the event of that institution's insolvency or other resolution. Bank notes are
classified as "other borrowings" on a bank's balance sheet, while deposit notes
and certificates of deposit are classified as deposits. Bank notes are not
insured by the Federal Deposit Insurance Corporation or any other insurer.
Deposit notes are insured by the Federal Deposit Insurance Corporation to the
extent of $100,000 per depositor per bank.
A Portfolio may invest a portion of its assets in the obligations of
foreign banks and foreign branches of domestic banks. Such obligations include
Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs") which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs") which are U.S.
dollar-denominated bankers' acceptances issued by a U.S. branch of a foreign
bank and held in the United States.
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Commercial paper and other short-term obligations acquired by a Portfolio
will be rated A-2 or higher by S&P, P-2 or higher by Moody's, D-2 or higher by
Duff, or F-2 or higher by Fitch at the time of purchase or, if unrated,
determined to be of comparable quality by the Investment Advisers.
Insurance Funding Agreements. The Short-Intermediate Bond, Bond and
Intermediate Bond Portfolios may invest in insurance funding agreements
("IFAs"). An IFA is normally a general obligation of the issuing insurance
company and not a separate account. The purchase price paid for an IFA becomes
part of the general assets of the insurance company, and the contract is paid
from the company's general assets. Generally, IFAs are not assignable or
transferable without the permission of the issuing insurance companies, and an
active secondary market in IFAs may not exist.
Zero Coupon, Pay-in-Kind and Capital Appreciation Bonds. To the extent
consistent with their respective investment objectives, each Portfolio may
invest in zero coupon bonds, capital appreciation bonds and pay-in-kind ("PIK")
securities. Zero coupon and capital appreciation bonds are debt securities
issued or sold at a discount from their face value and which do not entitle the
holder to any periodic payment of interest prior to maturity or a specified
date. The original issue discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, the liquidity of the
security and the perceived credit quality of the issuer. These securities also
may take the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves or receipts or certificates
representing interests in such stripped debt obligations or coupons. The market
prices of zero coupon bonds, capital appreciation bonds and PIK securities
generally are more volatile than the market prices of interest bearing
securities and are likely to respond to a greater degree to changes in interest
rates than interest bearing securities having similar maturities and credit
quality.
PIK securities may be debt obligations or preferred shares that provide the
issuer with the option of paying interest or dividends on such obligations in
cash or in the form of additional securities rather than cash. Similar to zero
coupon bonds, PIK securities are designed to give an issuer flexibility in
managing cash flow. PIK securities that are debt securities can either be senior
or subordinated debt and generally trade flat (i.e., without accrued interest).
The trading price of PIK debt securities generally reflects the market value of
the underlying debt plus an amount representing accrued interest since the last
interest payment.
Zero coupon bonds, capital appreciation bonds and PIK securities involve
the additional risk that, unlike securities that periodically pay interest to
maturity, a Portfolio will realize no cash until a specified future payment date
unless a portion of such securities is sold and, if the issuer of such
securities defaults, a Portfolio may obtain no return at all on its investment.
In addition, even though such securities do not provide for the payment of
current interest in cash, the Portfolios are nonetheless required to accrue
income on such investments for each taxable year and generally are required to
distribute such accrued amounts (net of deductible expenses, if any) to avoid
being subject to tax. Because no cash is generally received at the time of the
accrual, a Portfolio may be required to liquidate other portfolio securities to
obtain sufficient cash to satisfy federal tax distribution requirements
applicable to the Portfolio.
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Variable and Floating Rate Instruments. With respect to the variable and
floating rate instruments that may be acquired by the Portfolios, the investment
management team will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments and, if the instruments
are subject to demand features, will monitor their financial status and ability
to meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument meets the Portfolios' quality requirements, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
Variable and floating rate instruments eligible for purchase by the
Portfolios include variable amount master demand notes, which permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate, and leveraged inverse floating rate debt
instruments ("inverse floaters"). The interest rate on an inverse floater resets
in the opposite direction from the market rate of interest to which the inverse
floater is indexed. An inverse floater may be considered to be leveraged to the
extent that its interest rate varies by a magnitude that exceeds the magnitude
of the charge in the index rate of interest. The higher degree of leverage
inherent in inverse floaters is associated with greater volatility in their
market values. Accordingly, the duration of an inverse floater may exceed its
stated final maturity. The Portfolios may deem the maturity of variable and
floating rate instruments to be less than their stated maturities based on their
variable and floating rate features and/or their put features. Unrated variable
and floating rate instruments will be determined by Northern to be of comparable
quality at the time of purchase to rated instruments which may be purchased by
the Portfolios.
Variable and floating rate instruments including inverse floaters held by a
Portfolio will be subject to the Portfolio's 15% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days absent a reliable trading market.
Investment Companies. With respect to the investments of the Portfolios in
the securities of other investment companies, such investments will be limited
so that, as determined after a purchase is made, either (a) not more than 3% of
the total outstanding stock of such investment company will be owned by a
Portfolio, the Trust as a whole and their affiliated persons (as defined in the
1940 Act); or (b)(i) not more than 5% of the value of the total assets of a
Portfolio will be invested in the securities of any one investment company, (ii)
not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group, and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Portfolio.
Certain investment companies whose securities are purchased by the
Portfolios may not be obligated to redeem such securities in an amount exceeding
1% of the investment company's total outstanding securities during any period of
less than 30 days. Therefore, such securities that exceed this amount may be
illiquid.
If required by the 1940 Act, each Portfolio expects to vote the shares of
other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
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A Portfolio may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policies and restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. A Portfolio may adhere
to more restrictive limitations with respect to its investments in securities
issued by other investment companies if required by the SEC or deemed to be in
the best interests of the Trust.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
with financial institutions, such as banks and broker/dealers, as are deemed
creditworthy by Northern and Northern Trust Quantitative Advisors, Inc. ("NTQA"
and collectively with Northern, the "Investment Advisers") under guidelines
approved by the Trust's Board of Trustees. The repurchase price under the
repurchase agreements will generally equal the price paid by a Portfolio plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Trust's
custodian (or subcustodian), in the Federal Reserve/Treasury book-entry system
or by another authorized securities depository. The seller under a repurchase
agreement will be required to maintain the value of the securities which are
subject to the agreement and held by a Portfolio in an amount that exceeds the
agreed upon repurchase price (including accrued interest). Repurchase agreements
are considered to be loans by a Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds as a
temporary measure for emergency purposes or to meet redemption requests by
selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). The Portfolios may use the proceeds of
reverse repurchase agreements to purchase other securities either maturing, or
under an agreement to resell, at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Portfolio may
decline below the repurchase price. The Portfolios will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Portfolio will segregate liquid assets in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. Reverse repurchase agreements are considered
to be borrowings by a Portfolio under the 1940 Act.
Risks Related to Lower-Rated Securities. While any investment carries some
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of these
securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per share.
There remains some uncertainty about the performance level of the market
for lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the markets for lower-rated securities (resulting
B-15
<PAGE>
in a greater number of bond defaults) and the value of lower-rated securities
held in a portfolio of investments.
The economy and interest rates can affect lower-rated securities
differently than other securities. For example, the prices of lower-rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher-rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security defaults, a Portfolio may incur additional
expenses to seek recovery. In addition, periods of economic uncertainty would
likely result in increased volatility for the market prices of lower-rated
securities as well as a Portfolio's net asset value. In general, both the prices
and yields of lower-rated securities will fluctuate.
In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower-rated
securities held by a Portfolio, especially in a thinly traded market. Illiquid
or restricted securities held by the Portfolio may involve special registration
responsibilities, liabilities and costs, and could involve other liquidity and
valuation difficulties.
The rating assigned by a rating agency evaluates the safety of a
lower-rated security's principal and interest payments, but does not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, the Investment Advisers perform their own analysis
of the issuers whose lower-rated securities the Portfolios hold. Because of
this, the Portfolios' performance may depend more on their own credit analysis
than in the case of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, the Investment Advisers consider
factors such as those relating to the creditworthiness of issuers, the ratings
and performance of the securities, the protections afforded the securities and
the diversity of a Portfolio's investment portfolio. The Investment Advisers
monitor the issuers of lower-rated securities held by a Portfolio for their
ability to make required principal and interest payments, as well as in an
effort to control the liquidity of the Portfolio so that it can meet redemption
requests.
Yields and Ratings. The yields on certain obligations, including the
instruments in which the Portfolios may invest, are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P,
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Moody's, Duff, Fitch and TBW represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices. For a
more complete discussion of ratings, see Appendix A to this Additional
Statement.
Subject to the limitations stated in the Prospectus, if a security held by
a Portfolio undergoes a rating revision, the Portfolio may continue to hold the
security if the Investment Advisers determine such retention is warranted.
Tracking Variance. As discussed in the Prospectus, the U.S. Treasury Index
Portfolio is subject to the risk of tracking variance. Tracking variance may
result from share purchases and redemptions, transaction costs, expenses and
other factors. Share purchases and redemptions may necessitate the purchase and
sale of securities by the Portfolio and the resulting transaction costs which
may be substantial because of the number and the characteristics of the
securities held. In addition, transaction costs are incurred because sales of
securities received in connection with spin-offs and other corporate
reorganizations are made to conform the Portfolio's holdings with its investment
objective. Tracking variance may also occur due to factors such as the size of
the Portfolio, the maintenance of a cash reserve pending investment or to meet
expected redemptions, changes made in the Portfolio's designated Index or the
manner in which the Index is calculated or because the indexing and investment
approach of the Investment Adviser does not produce the intended goal of the
Portfolio. In the event the performance of the Portfolio is not comparable to
the performance of its designated Index, the Board of Trustees will evaluate the
reasons for the deviation and the availability of corrective measures. If
substantial deviation in the Portfolio's performance were to continue for
extended periods, it is expected that the Board of Trustees would consider
recommending to shareholders possible changes to the Portfolio's investment
objective.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
Portfolios is calculated by dividing the lesser of purchases or sales of
portfolio investments for the reporting period by the monthly average value of
the portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares and by requirements which
enable the Portfolios to receive favorable tax treatment.
Investment Restrictions
Each Portfolio is subject to the fundamental investment restrictions
enumerated below which may be changed with respect to a particular Portfolio
only by a vote of the holders of a majority of such Portfolio's outstanding
shares.
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No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent a
Portfolio from investing directly or indirectly in portfolio instruments secured
by real estate or interests therein or acquiring securities of real estate
investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that each Portfolio
may, to the extent appropriate to its investment policies, purchase securities
of companies engaging in whole or in part in such activities, enter into futures
contracts and related options, and enter into forward currency contracts in
accordance with its investment objective and policies.
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial instruments, currencies and indices of
securities (and in the case of the International Bond Portfolio, yield curve
options); futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps (and
in the case of the International Bond Portfolio, currency swaps); and pair-off
transactions (except in the case of the International Bond Portfolio). (This
restriction does not apply to any type of option, futures contract, forward
contract, short sale, swap or pair-off transaction unless it involves a put,
call or combination thereof written by a Portfolio.)
(8) Purchase securities (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if such purchase would cause
more than 25% in the aggregate of the market value of the total assets of a
Portfolio to be invested in the securities of one or more issuers having their
principal business activities in the same industry.
For the purposes of this restriction, as to utility companies, the gas,
electric, water and telephone businesses are considered separate industries;
personal credit finance companies and business credit finance companies are
deemed to be separate industries; and wholly-owned finance companies are
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents.
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<PAGE>
(9) Borrow money (other than pursuant to reverse repurchase agreements),
except (a) as a temporary measure, and then only in amounts not exceeding 5% of
the value of the Portfolio's total assets or (b) from banks, provided that
immediately after any such borrowing all borrowings of the Portfolio do not
exceed one-third of the Portfolio's total assets. No purchases of securities
will be made if borrowings subject to this restriction exceed 5% of the value of
the Portfolio's assets. The exceptions in (a) and (b) to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purposes or to facilitate management of the Portfolios by enabling the
Trust to meet redemption requests when the liquidation of Portfolio instruments
is deemed to be disadvantageous or not possible. If due to market fluctuations
or other reasons the total assets of a Portfolio fall below 300% of its
borrowings, the Trust will promptly reduce the borrowings of such Portfolio in
accordance with the 1940 Act.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio may
(a) purchase securities of other investment companies to the full extent
permitted under Section 12 of the 1940 Act (or any successor provision thereto)
or under any regulation or order of the Securities and Exchange Commission; and
(b) invest all or substantially all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objective, policies and fundamental restrictions as the Portfolio.
In addition, with respect to the U.S. Government Securities, Short-Intermediate,
U.S. Treasury Index, Bond and Intermediate Bond Portfolios:
(11) The Portfolio may not make any investment inconsistent with the
Portfolio's classification as a diversified investment company under the 1940
Act, provided that this restriction does not apply to the International Bond
Portfolio.
In applying Restriction No. 8 above, a security is considered to be issued
by the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by the Portfolio, does not exceed 10% of the value of the Portfolio's
total assets.
Except to the extent otherwise provided in Investment Restriction No. 8 for
the purpose of such restriction, in determining industry classification the
Trust intends to use the industry classification titles in the Standard
Industrial Classification Manual (except that the International Bond Portfolio
will use the Morgan Stanley Capital International industry classification
titles). Securities held in escrow or separate accounts in connection with a
Portfolio's investment practices described in this Additional Statement and in
the Prospectus are not deemed to be mortgaged, pledged or hypothecated for
purposes of the foregoing Investment Restrictions.
In addition, as a matter of fundamental policy, the International Bond
Portfolio will not issue senior securities except as stated in the Prospectus or
this Additional Statement.
B-19
<PAGE>
As a non-fundamental investment restriction that can be changed without
shareholder approval, the International Bond Portfolio may not, at the end of
any tax quarter, hold more than 10% of the outstanding voting securities of any
one issuer, except that up to 50% of the total value of the assets of the
Portfolio may be invested in any securities without regard to this 10%
limitation so long as no more than 25% of the total value of its assets is
invested in the securities of any one issuer (except the U.S. Government). In
addition, the International Bond Portfolio may not, at the end of any tax
quarter, invest more than 5% of the total value of its assets in the securities
of any one issuer (except U.S. Government securities), except that up to 50% of
the total value of the Portfolio's assets may be invested in any securities
without regard to this 5% limitation so long as no more than 25% of the total
value of its assets is invested in the securities of any one issuer (except U.S.
Government securities).
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
ADDITIONAL TRUST INFORMATION
Trustees and Officers
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. Information pertaining to the
Trustees and officers of the Trust is set forth below.
B-20
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
William H. Springer 69 Chairman Director of Walgreen Co. (a retail drug store business)
701 Morningside Drive and since 1988; Director of Baker, Fentress & Co. (a
Lake Forest, IL 60045 Trustee closed-end, non-diversified management investment company)
since 1992; Trustee of Goldman Sachs Trust since 1989.
Richard Gordon Cline 64 Trustee Chairman and Director of Hussman International Inc.
4200 Commerce Court, Suite 300 (commercial refrigeration company) since January 1998;
Lisle, IL 60532 Chairman of Hawthorne Inc. (a management advisory services
and private investment company) since January 1996; Chairman,
President and CEO of NICOR Inc. (a diversified public utility
holding company) from 1985 to 1996; Chairman and Director of the
Federal Reserve Bank of Chicago from 1992 to 1995; Director of
Central DuPage Health System, Pet Incorporated, Whitman
Corporation (a diversified holding company), Kmart Corporation (a
retailing company), Ryerson Tull, Inc. (a metals distribution
company) and University of Illinois Foundation.
Edward J. Condon, Jr. 58 Trustee Chairman and CEO of The Paradigm Group, Ltd. (a financial
Sear Tower, Suite 9650 advisor) since July 1993; within the last five years he
233 S. Wacker Drive has served as: Vice Chairman and Director of Energenics
Chicago, IL 60606 L.L.C.; Director of Financial Pacific Company; Member of
the Board of Managers of The Liberty Hampshire Company, LLC;
Member of Advisory Board of Real-Time USA, Inc.; Member of the
Board of Directors of University Eldercare, Inc.; Member of the
Board of Directors of the Girl Scouts of Chicago; and Member of
the Board of Trustees of Dominican University.
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
John W. English 66 Trustee Private Investor since 1993; Vice President and Chief
50-H New England Ave. Investment Officer of The Ford Foundation (a charitable
P.O. Box 640 trust) from 1981 to 1993; Trustee of The China Fund, Inc.,
Summit, NJ 07902-0640 American Red Cross in Greater New York, Mote Marine
Laboratory, State Street's Select Sector SPDR Trust, Washington
Mutual's WM Funds and United Board for Christian Higher Education
in Asia. Director of University of Iowa Foundation, Blanton-Peale
Institutes of Religion and Health, Community Foundation of
Sarasota County and Duke Management Company.
Sandra Polk Guthman 55 Trustee President and CEO of Polk Bros. Foundation (an Illinois
420 N. Wabash Avenue not-for-profit corporation) from 1993 to present; Director
Suite 204 of Business Transformation from 1992-1993 and Midwestern
Chicago, IL 60611 Director of Marketing from 1988-1992 for IBM Corporation;
Director of MBIA Insurance Corporation of Illinois (bank holding
company) since 1994 and Avondale Financial Corporation (a stock
savings and loan holding company) since 1995.
Frederick T. Kelsey 71 Trustee Consultant to Goldman Sachs from December 1985 through
3133 Laughing Gull Court February 1988; Director of Goldman Sachs Funds Group and
Johns Island, SC 29455 Vice President of Goldman Sachs from May 1981 until his
retirement in November 1985; President and Treasurer of the Trust
and other investment companies affiliated with Goldman Sachs
through August 1985; President from 1983 to 1985 and Trustee from
1983 to 1994 of The Centerland Funds and its successor, The Pilot
Funds; Trustee of various management investment companies
affiliated with Zurich Kemper Investments.
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
Richard P. Strubel 59 Trustee Managing Director of Tandem Partners, Inc. (a privately
737 N. Michigan Avenue held management services firm) since 1990; President and
Suite 1405 CEO of Microdot, Inc. (a privately held manufacturing
Chicago, IL 60611 firm) from January 1984 to October 1994; Trustee of
Goldman Sachs Trust from 1987 to present; Director of
Kaynar Technologies Inc. (a leading manufacturer of
aircraft fasteners) since March 1997; Trustee of the
University of Chicago; Director of Children's Memorial
Medical Center.
Gordon F. Linke 42 President Vice President of Goldman Sachs Funds Group (sine March
555 California Street 1992); Corporate Finance Officer of Bank of America (prior
San Francisco, CA 94104 thereto).
James A. Fitzpatrick 39 Vice Vice President of Goldman Sachs Asset Management (since
4900 Sears Tower President April 1997); Vice President and General Manager of First
Chicago, IL 60606 Data Corporation - Investors Services Group prior thereto.
Nancy L. Mucker 49 Vice Vice President of Goldman Sachs (since April 1985);
4900 Sears Tower President Co-Manager, Shareholder Servicing of Goldman Sachs Asset
Chicago, IL 60606 Management (since November 1989).
John Perlowski 34 Treasurer Vice President of Goldman Sachs (since July 1995);
One New York Plaza Director of Investors Bank and Trust Company (November
New York, NY 10004 1993 to July 1995); Audit Manager of Arthur Andersen, LLP
(prior thereto).
</TABLE>
B-23
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
Michael J. Richman 38 Secretary General Counsel of the Funds Group, Goldman Sachs Asset
85 Broad Street Management (since December 1997); Associate General
New York, NY 10004 Counsel of Goldman Sachs Asset Management (February 1994
to December 1997); Vice President of Goldman Sachs (since June
1992); Associate General Counsel of Goldman Sachs (since December
1998); Counsel to the Funds Group of Goldman Sachs Asset
Management (since June 1992); Partner of Hale and Dorr, September
1991 to June 1992).
Deborah A. Farrell 27 Assistant Legal Assistant, Goldman Sachs (since January 1996);
85 Broad Street Secretary Executive Secretary, Goldman Sachs (January 1994 to
New York, NY 10004 January 1996); Legal Secretary, Cleary, Gottlieb, Steen &
Hamilton (September 1990 to January 1994).
Steven E. Hartstein 35 Assistant Associate, Goldman Sachs (since December 1998); Legal
85 Broad Street Secretary Products Analyst, Goldman Sachs (June 1993 to December
New York, NY 10004 1998).
Howard B. Surloff 33 Assistant General Counsel to the Funds Group (since February 1999);
85 Broad Street Secretary Assistant General Counsel, Goldman Sachs Asset Management
New York, NY 10004 (December 1997 to February 1999); Vice President and
Assistant General Counsel, Goldman Sachs (since November 1993 and
May 1994, respectively); Counsel to the Funds Group, Goldman
Sachs Asset Management (since November 1993); Associate of
Shereff, Friedman, Hoffman & Goodman, LLP (prior thereto).
Valerie A. Zondorak, 33 Assistant Assistant General Counsel, Goldman Sachs Asset Management
85 Broad Street Secretary and the Funds Group (since December 1997); Vice President
New York, NY 10004 and Assistant General Counsel, Goldman Sachs (since
December 1997) and Vice President and Counsel to Goldman Sachs
(since March 1997); Associate of Shereff, Friedman, Hoffman &
Goodman, LLP (prior thereto).
</TABLE>
B-24
<PAGE>
Certain of the Trustees and officers and the organizations with which they
are associated have had in the past, and may have in the future, transactions
with the Investment Advisers, Goldman Sachs and their respective affiliates. The
Trust has been advised by such Trustees and officers that all such transactions
have been and are expected to be in the ordinary course of business and the
terms of such transactions, including all loans and loan commitments by such
persons, have been and are expected to be substantially the same as the
prevailing terms for comparable transactions for other customers. Messrs.
Springer, Kelsey, Strubel, Richman, Perlowski, Fitzpatrick, Surloff and
Hartstein and Mmes. Farrell, Mucker and Zondorak hold similar positions with one
or more investment companies that are advised by Goldman Sachs. As a result of
the responsibilities assumed by the Investment Advisers under the Advisory
Agreements with the Trust, by Northern under its Transfer Agency Agreement,
Custodian Agreement and Foreign Custody Agreement with the Trust and by Goldman
Sachs under its Administration Agreement and Distribution Agreement with the
Trust, the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment
companies of which Goldman Sachs, Goldman Sachs Asset Management or an affiliate
thereof is the investment adviser, administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,750 and the Chairman of the
Board earns a quarterly retainer of $10,125. Each Trustee, including the
Chairman of the Board, earns an additional fee of $2,500 for each meeting
attended, plus reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of
three members including a Chairman of the Committee. The Audit Committee members
are Messrs. Condon, Kelsey and Strubel (Chairman). Each member earns a fee of
$2,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,500.
Each Trustee will hold office for an indefinite term until the earliest of
(1) the next meeting of shareholders if any, called for the purpose of
considering the election or re-election of such Trustee and until the election
and qualification of his or her successor, if any, elected at such meeting; (2)
the date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust; or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
The Trust's officers do not receive fees from the Trust for services in
such capacities, although Goldman Sachs, of which they are also officers,
receives fees from the Trust for administrative services.
B-25
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1998:
<TABLE>
<CAPTION>
Pension or
Retirement Total
Aggregate Benefits Accrued Compensation
Compensation as Part of Trust's from Trust
Name of Trustee from the Trust Expenses Paid to Trustees
- --------------- -------------- -------- ----------------
<S> <C> <C> <C>
William H. Springer $46,750 $0 $46,750
Richard G. Cline $34,000 $0 $34,000
Edward J. Condon, Jr. $37,000 $0 $37,000
John W. English $32,500 $0 $32,500
Sandra Polk Guthman $34,000 $0 $34,000
Frederick T. Kelsey $37,000 $0 $37,000
Richard P. Strubel $42,250 $0 $42,250
</TABLE>
Investment Advisers, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives. NTQA, also a
wholly-owned subsidiary of Northern Trust Corporation, serves as investment
adviser principally to defined benefit and defined contribution plans and
manages over 60 equity and bond commingled and common trust funds. As of
December 31, 1998, the Investment Advisers and their affiliates had
approximately $236 billion in assets under management for clients including
public and private retirement funds, endowments, foundations, trusts,
corporations, other investment companies and individuals.
B-26
<PAGE>
Subject to the general supervision of the Board of Trustees, the Investment
Advisers make decisions with respect to, and place orders for, all purchases and
sales of portfolio securities for each Portfolio. The Advisory Agreements with
the Trust provide that in selecting brokers or dealers to place orders for
transactions, the Investment Advisers shall attempt to obtain best net price and
execution or, with respect to the International Bond and Intermediate Bond
Portfolios, their best judgment to obtain the best overall terms available. In
assessing the best overall terms available for any transaction, the Investment
Advisers are to consider all factors they deem 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
Investment Advisers may consider the brokerage and research services provided to
the Portfolios and/or other accounts over which the Investment Advisers or an
affiliate of Northern exercise investment discretion. A broker or dealer
providing brokerage and/or research services may receive a higher commission
than another broker or dealer would receive for the same transaction. These
brokerage and research services may include industry and company analyses,
portfolio services, quantitative data, market information systems and economic
and political consulting and analytical services.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed. Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Investment
Advisers will normally deal directly with dealers who make a market in the
instruments involved except in those circumstances where more favorable prices
and execution are available elsewhere. The cost of foreign and domestic
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolios will engage in this practice, however, only when the Investment
Advisers believe such practice to be in the Portfolios' interests.
On occasions when the Investment Advisers deem the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by them (including any other Portfolio, investment
company or account for which the Investment Advisers act as adviser), the
Advisory Agreements provide that the Investment Advisers, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
sold or purchased for such Portfolio with those to be sold or purchased for such
other accounts in order to obtain the best net price and execution. 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 Investment Advisers in
the manner they consider to be most equitable and consistent with their
fiduciary obligations to the Portfolio and other accounts involved. In some
instances, this procedure may adversely affect the size of the
B-27
<PAGE>
position obtainable for a Portfolio or the amount of the securities that are
able to be sold for a Portfolio.
The Advisory Agreements provide that the Investment Advisers may render
similar services to others so long as their services under such Agreements are
not impaired thereby. The Advisory Agreements also provide that the Trust will
indemnify the Investment Advisers against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Agreements) or, in lieu thereof, contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, with respect to shares
held by Institutions, Northern has undertaken to perform some or all of the
following services: (1) establish and maintain an omnibus account in the name of
each Institution; (2) process purchase orders and redemption requests from an
Institution, and furnish confirmations and disburse redemption proceeds; (3) act
as the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of shares in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions shareholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to shares held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of shares in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for prospectuses and statements of additional
information, and assistance in the completion of new account applications) from
investors and respond to all requests for information regarding the Trust (such
as current price, recent performance, and yield data) and questions relating to
accounts of investors (such as possible errors in statements, and transactions);
(8) respond to and seek to resolve all complaints of investors with respect to
the Trust or their accounts; (9) furnish proxy statements and proxies, annual
and semi-annual financial statements, and dividend, distribution and tax notices
to investors; (10) furnish the Trust with all pertinent Blue Sky information;
(11) perform all required tax withholding; (12) preserve records; and (13)
furnish necessary office space, facilities and personnel. Northern may appoint
one or more sub-transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer
Agency Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.10% and .15% of the average daily net asset value of the Class A, C and D
Shares, respectively, of the Portfolios.
Under its Custodian Agreement (and in the case of the International Bond
Portfolio, its Foreign Custody Agreement) with the Trust, Northern (1) holds
each Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio,
B-28
<PAGE>
(3) makes receipts and disbursements of funds on behalf of the Portfolio, (4)
receives, delivers and releases securities on behalf of the Portfolio, (5)
collects and receives all income, principal and other payments in respect of the
Portfolio's investments held by Northern under the Agreement, and (6) maintains
the accounting records of the Trust. Northern may employ one or more
subcustodians, provided that Northern, subject to certain monitoring
responsibilities, shall have no more responsibility or liability to the Trust on
account of any action or omission of any subcustodian so employed than such
subcustodian has to Northern and that the responsibility or liability of the
subcustodian to Northern shall conform to the resolution of the Trustees of the
Trust authorizing the appointment of the particular subcustodian (or, in the
case of foreign securities, to the terms of any agreement entered into between
Northern and such subcustodian to which such resolution relates). In addition,
the Trust's custodial arrangements provide, with respect to foreign securities,
that Northern shall not be: (i) responsible for the solvency of any subcustodian
appointed by it with reasonable care; (ii) responsible for any act, omission,
default or for the solvency of any eligible foreign securities depository; and
(iii) liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the subcustodian has otherwise exercised reasonable
care. Northern may also appoint agents to carry out such of the provisions of
the Custodian Agreement and the Foreign Custody Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under either Agreement. Northern has
entered into agreements with financial institutions and depositories located in
foreign countries with respect to the custody of the Portfolios' foreign
securities.
As compensation for the services rendered to the Trust by Northern as
custodian to the U.S. Government Securities, Short-Intermediate Bond, U.S.
Treasury Index, Bond and Intermediate Bond Portfolios, and the assumption by
Northern of certain related expenses, Northern is entitled to payment from the
Trust as follows: (i) $18,000 annually for each Portfolio, plus (ii) 1/100th of
1% annually of each Portfolio's average daily net assets to the extent they
exceed $100 million, plus (iii) a fixed dollar fee for each trade in portfolio
securities, plus (iv) a fixed dollar fee for each time that Northern as
Custodian receives or transmits funds via wire, plus (v) reimbursement of
expenses incurred by Northern as custodian for telephone, postage, courier fees,
office supplies and duplicating. The fees referred to in clauses (iii) and (iv)
are subject to annual upward adjustments based on increases in the Consumer
Price Index for All Urban Consumers, provided that Northern may permanently or
temporarily waive all or any portion of any upward adjustment.
As compensation for the services rendered to the Trust under the Foreign
Custody Agreement with respect to the International Bond Portfolio, and the
assumption by Northern of certain related expenses, Northern is entitled to
payment from the Trust as follows: (i) $35,000 annually for the International
Bond Portfolio, plus (ii) 9/100th of 1% annually of the Portfolio's average
daily net assets, plus (iii) reimbursement for fees incurred by Northern as
foreign custodian for telephone, postage, courier fees, office supplies and
duplicating.
Northern's fees under the Custodian Agreement and Foreign Custody Agreement
are subject to reduction based on the Portfolios' daily uninvested cash balances
(if any).
Unless sooner terminated, the Advisory Agreements, the Custodian Agreement
(or, in the case of the International Bond Portfolio, the Foreign Custody
Agreement) and the Transfer Agency
B-29
<PAGE>
Agreement will continue in effect with respect to a particular Portfolio until
April 30, 1999 and thereafter for successive 12-month periods, provided that the
continuance is approved at least annually (1) by the vote of a majority of the
Trustees who are not parties to the agreement or "interested persons" (as such
term is defined in the 1940 Act) of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval and (2) by the
Trustees or by the vote of a majority of the outstanding shares of such
Portfolio (as defined below under "Other Information"). Each agreement is
terminable at any time without penalty by the Trust (by specified Trustee or
shareholder action) on 60 days' written notice to Northern or NTQA and by
Northern or NTQA on 60 days' written notice to the Trust.
Prior to April 1, 1998, Northern served as investment adviser to the U.S.
Treasury Index Portfolio on the same terms as those described above. For the
fiscal years or periods ended November 30 as indicated, the amount of advisory
fees incurred by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $ 123,385 $214,637 $219,457
Short-Intermediate Bond
Portfolio 498,090 428,876 421,548
U.S. Treasury Index Portfolio 37,969 43,880 26,172
Bond Portfolio 1,454,684 1,086,221 830,217
Intermediate Bond Portfolio (1) 55,413 8,743 N/A
International Bond Portfolio 185,420 200,976 224,098
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
For the fiscal years or periods ended November 30 as indicated, the
Investment Advisers waived advisory fees as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $172,740 $300,491 $307,297
Short-Intermediate Bond
Portfolio 697,327 600,427 589,702
U.S. Treasury Index Portfolio 63,282 73,133 43,719
Bond Portfolio 2,036,562 1,520,709 1,162,601
Intermediate Bond Portfolio (1) 77,578 12,240 N/A
International Bond Portfolio 52,977 57,422 63,958
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
B-30
<PAGE>
For the fiscal years or periods ended November 30 as indicated, the amount
of transfer agency fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $ 9,110 $12,116 $12,058
Short-Intermediate Bond
Portfolio 21,373 17,908 16,929
U.S. Treasury Index Portfolio 5,260 4,802 2,414
Bond Portfolio 112,476 74,971 39,420
Intermediate Bond Portfolio (1) 2,226 347 N/A
International Bond Portfolio 2,837 2,957 3,220
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
For the fiscal years or periods ended November 30 as indicated, the amount
of custodian fees (and, in the case of the International Bond Portfolio, the
foreign custodian fees) incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $21,756 $21,569 $19,709
Short-Intermediate Bond
Portfolio 28,255 29,972 28,060
U.S. Treasury Index Portfolio 21,321 21,465 20,242
Bond Portfolio 76,339 48,245 46,249
Intermediate Bond Portfolio (1) 17,589 7,200 N/A
International Bond Portfolio 54,780 67,525 67,555
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern and NTQA believe that they may perform the services
contemplated by their agreements with the Trust without violation of such
banking laws or regulations, which are applicable to them. It should be noted,
however, that future changes in either Federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as future judicial or administrative decisions or
interpretations of current and future statutes and regulations, could prevent
Northern and NTQA from continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern or NTQA in connection with the provision of
services on behalf of the Trust, the Trust might be required to alter materially
or discontinue its arrangements with Northern or NTQA and
B-31
<PAGE>
change its method of operations. It is not anticipated, however, that any change
in the Trust's method of operations would affect the net asset value per share
of any Portfolio or result in a financial loss to any shareholder. Moreover, if
current restrictions preventing a bank from legally sponsoring, organizing,
controlling or distributing shares of an open-end investment company were
relaxed, the Trust expects that Northern and its affiliates would consider the
possibility of offering to perform some or all of the services now provided by
Goldman Sachs. It is not possible, of course, to predict whether or in what form
such restrictions might be relaxed or the terms upon which Northern and its
affiliates might offer to provide services for consideration by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
Under a Service Mark License Agreement with the Trust, Northern Trust
Corporation has agreed that the name "Northern Institutional Funds" may be used
in connection with the Trust's business on a royalty-free basis. Northern Trust
Corporation has reserved to itself the right to grant the non-exclusive right to
use the name "Northern Institutional Funds" to any other person. The Agreement
provides that at such time as the Agreement is no longer in effect, the Trust
will cease using the name "Northern Institutional Funds."
Portfolio Transactions
To the extent that a Portfolio effects brokerage transactions with Goldman
Sachs or any broker/dealer affiliated directly or indirectly with the Investment
Advisers, such transactions, including the frequency thereof, the receipt of any
commissions payable in connection therewith, and the selection of the affiliated
broker/dealer effecting such transactions, will be fair and reasonable to the
shareholders of the Portfolio.
For the fiscal years ended November 30, 1998, 1997 and 1996, all portfolio
transactions for the Portfolios were executed on a principal basis and,
therefore, no brokerage commissions were paid by the Portfolios. Purchases by
the Portfolios from underwriters of portfolio securities, however, normally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include the spread between the dealer's cost for a given
security and the resale price of the security.
During the fiscal year ended November 30, 1998, the Short-Intermediate Bond
Portfolio did not acquire or sell any securities of its regular broker/dealers
or their parents. At November 30, 1998, the Short-Intermediate Bond Portfolio
owned the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: Donaldson, Lufkin &
Jenrette, Inc., with an approximate aggregate market value of $13,474,000; and
Lehman Brothers, Inc., with an approximate aggregate market value of $1,130,000.
During the fiscal year ended November 30, 1998, the Bond Portfolio did not
acquire or sell any securities of its regular broker/dealers or their parents.
At November 30, 1998, the Bond Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940 Act, or their parents: Donaldson, Lufkin & Jenrette, Inc., with an
B-32
<PAGE>
approximate aggregate market value of $3,996,000; Lehman Brothers, Inc., with an
approximate aggregate market value of $14,123,000; and Morgan Stanley Group,
Inc., with an approximate aggregate market value of $20,502,000.
During the fiscal year ended November 30, 1998, the Intermediate Bond
Portfolio did not acquire or sell any securities of its regular broker/dealers
or their parents. At November 30, 1998, the Intermediate Bond Portfolio owned
the following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Morgan Stanley Group, Inc.,
with an approximate aggregate market value of $364,000.
During the fiscal year ended November 30, 1998, neither the U.S. Government
Securities Portfolio, U.S. Treasury Index Portfolio nor International Bond
Portfolio acquired, sold or owned any securities of their regular broker/dealers
or their parents.
Portfolio Valuation
U.S. and foreign investments held by a Portfolio are valued at the last
quoted sales price on the exchange on which such securities are primarily
traded, except that securities listed on an exchange in the United Kingdom are
valued at the average of the closing bid and ask prices. If any securities
listed on a U.S. securities exchange are not traded on a valuation date, they
will be valued at the last quoted bid price. If securities listed on a foreign
securities exchange are not traded on a valuation date, they will be valued at
the most recent quoted trade price. Securities which are traded in the U.S.
over-the-counter markets are valued at the last quoted bid price. Securities
which are traded in the foreign over-the-counter markets are valued at the last
sales price, except that such securities traded in the United Kingdom are valued
at the average of the closing bid and ask prices. Shares of investment companies
held by the Portfolios will be valued at their respective net asset values. Any
securities, including restricted securities, for which current quotations are
not readily available are valued at fair value as determined in good faith by
the Investment Adviser under the supervision of the Board of Trustees.
Short-term investments are valued at amortized cost which the Investment Adviser
has determined, pursuant to Board authorization, approximates market value.
Securities may be valued on the basis of prices provided by independent pricing
services when such prices are believed to reflect the fair market value of such
securities.
Administrator and Distributor
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as
administrator and distributor for the Portfolios. Under its Administration
Agreement with the Trust, Goldman Sachs, subject to the general supervision of
the Trust's Board of Trustees, acts as the Trust's Administrator. In this
capacity, Goldman Sachs (1) provides supervision of certain aspects of the
Trust's non-investment advisory operations (the parties giving recognition to
the fact that certain of such operations are performed by Northern pursuant to
the Trust's agreements with Northern), (2) provides the Trust, to the extent not
provided pursuant to such agreements, with such personnel as are reasonably
necessary for the conduct of the Trust's affairs, (3) arranges, to the extent
not provided pursuant to such agreements, for the preparation at the Trust's
expense of its tax returns, reports to shareholders, periodic updating of the
prospectuses issued by the Trust, and reports filed
B-33
<PAGE>
with the SEC and other regulatory authorities (including qualification under
state securities or Blue Sky laws of the Trust's shares), and (4) provides the
Trust, to the extent not provided pursuant to such agreements, with adequate
office space and equipment and certain related services in Chicago.
Subject to the limitations described below, as compensation for its
administrative services and the assumption of related expenses, Goldman Sachs is
entitled to a fee from each Portfolio, computed daily and payable monthly, at an
annual rate of .15% of the average daily net assets of the International Bond
Portfolio, and .10% of the average daily net assets of each other Portfolio. For
the fiscal years or periods ended November 30 as indicated, Goldman Sachs
received fees under the Administration Agreement (after fee waivers) in the
amount of:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $49,354 $ 85,432 $ 87,782
Short-Intermediate Bond
Portfolio 199,235 171,514 168,616
U.S. Treasury Index Portfolio 25,313 29,247 17,448
Bond Portfolio 581,869 434,500 332,084
Intermediate Bond Portfolio (1) 22,165 3,470 N/A
International Bond Portfolio 39,733 36,801 32,014
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
Prior to May 1, 1997, Goldman Sachs voluntarily agreed to waive a portion
of its administration fee for each Portfolio then in existence resulting in an
effective fee of .10% of the average daily net assets for each Portfolio. The
effect of these waivers by Goldman Sachs was to reduce administration fees by
the following amounts for the fiscal years or periods ended November 30 as
indicated:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $0 $52,820 $131,975
Short-Intermediate Bond
Portfolio 0 72,454 185,161
U.S. Treasury Index Portfolio 0 17,382 26,353
Bond Portfolio 0 94,064 243,306
Intermediate Bond Portfolio (1) 0 N/A N/A
International Bond Portfolio 0 18,779 48,221
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs agreed that, if its administration fees (less expense
reimbursements paid by Goldman Sachs to the Trust and less certain marketing
expenses paid by Goldman Sachs) exceed a specified amount ($1 million for the
Trust's first twelve investment portfolios plus $50,000 for each additional
portfolio) during the current fiscal year, Goldman Sachs will waive a portion of
its administration fees during the following fiscal year. This undertaking may
be terminated by Goldman Sachs at any time without the consent of the Trust or
the shareholders. There have been no waivers pursuant to this agreement during
the last three fiscal years.
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<PAGE>
Goldman Sachs has agreed for the current fiscal year to reimburse each
Portfolio for its expenses (including fees payable to Goldman Sachs as
administrator, but excluding advisory fees, transfer agency fees, servicing fees
and extraordinary expenses) which exceed on an annualized basis .25% of the
International Bond Portfolio's average daily net assets and .10% of each other
Portfolio's average daily net assets. Prior to May 1, 1997, this undertaking was
voluntary with respect to the Portfolios. As of May 1, 1997, this undertaking is
contractual with respect to all Portfolios. The effect of these reimbursements
by Goldman Sachs for the fiscal years or periods ended November 30 as indicated
were to reduce the expenses of each Portfolio by:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities
Portfolio $72,267 $70,879 $68,799
Short-Intermediate Bond
Portfolio 103,011 102,005 97,056
U.S. Treasury Index Portfolio 66,821 71,652 67,218
Bond Portfolio 222,213 165,969 142,673
Intermediate Bond Portfolio (1) 83,211 54,096 N/A
International Bond Portfolio 95,507 82,249 87,159
</TABLE>
- --------------
(1) Commenced investment operations on July 31, 1997.
Unless sooner terminated, the Administration Agreement will continue in
effect with respect to a particular Portfolio until April 30, 1999, and
thereafter for successive 12-month periods, provided that the agreement is
approved annually (1) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" (as such term is defined by the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the Trustees or by the vote of a
majority of the outstanding shares of such Portfolio (as defined below under
"Other Information"). The Administration Agreement is terminable at any time
without penalty by the Trust (upon specified Trustee or shareholder action) on
60 days' written notice to Goldman Sachs and by Goldman Sachs on 60 days'
written notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman
Sachs, as agent, sells shares of each Portfolio on a continuous basis. Goldman
Sachs is not obligated to sell any certain number of shares of any Portfolio.
Goldman Sachs pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Trust (excluding preparation and typesetting
expenses) and of sales presentations, advertising and other distribution
efforts. No compensation is payable by the Trust to Goldman Sachs for such
distribution services.
The Administration Agreement and the Distribution Agreement provide that
Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
B-35
<PAGE>
Shareholder Servicing Plan
As stated in the Portfolios' Prospectus, Servicing Agents may enter into
servicing agreements with the Trust under which they provide (or arrange to have
provided) support services to their Customers or other investors who
beneficially own such shares in consideration of the Portfolios' payment of not
more than .15% and .25% (on an annualized basis) of the average daily net asset
value of the Class C and D Shares, respectively, beneficially owned by such
Customers or investors.
For the fiscal years or periods ended November 30 as indicated, the
aggregate amount of the Shareholder Service Fee incurred by each class of each
Portfolio then in existence was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities Portfolio
Class C (1) $ 5,132 $ 5,225 $ 5,040
Class D 1,955 710 452
Short-Intermediate Bond Portfolio
Class C N/A N/A N/A
Class D 2,584 1,349 127
U.S. Treasury Index Portfolio
Class C (2) 25 N/A N/A
Class D 4,846 3,353 1,198
Bond Portfolio
Class C 86,693 51,720 6,686
Class D 4,050 887 397
Intermediate Bond Portfolio
Class C N/A N/A N/A
Class D (3) 17 N/A N/A
International Bond Portfolio
Class C N/A N/A N/A
Class D 334 154 30
</TABLE>
- -----------------
(1) Class C Shares were issued on December 29, 1995.
(2) Class C Shares were issued on October 7, 1998.
(3) Class D Shares were issued on October 5, 1998.
Services provided by or arranged to be provided by Servicing Agents under
their servicing agreements may include: (1) establishing and maintaining
separate account records of Customers or other investors; (2) providing
Customers or other investors with a service that invests their assets in shares
of certain classes pursuant to specific or pre-authorized instructions, and
assistance with new account applications; (3) aggregating and processing
purchase and redemption requests for shares of certain classes from Customers or
other investors, and placing purchase and redemption orders with the Transfer
Agent; (4) issuing confirmations to Customers or other investors in accordance
with applicable law; (5) arranging for the timely transmission of funds
representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other investors; (7) providing
information periodically to Customers or other investors showing
B-36
<PAGE>
their positions in shares; (8) responding to Customer or other investor
inquiries (including requests for prospectuses), and complaints relating to the
services performed by the Servicing Agents; (9) acting as liaison with respect
to all inquiries and complaints from Customers and other investors relating to
errors committed by the Trust or its agents, and other matters pertaining to the
Trust; (10) providing or arranging for another person to provide subaccounting
with respect to shares of certain classes beneficially owned by Customers or
other investors; (11) if required by law, forwarding shareholder communications
from the Trust (such as proxy statements and proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers and other investors; (12) providing such office space,
facilities and personnel as may be required to perform their services under the
servicing agreements; (13) maintaining appropriate management reporting and
statistical information; (14) paying expenses related to the preparation of
educational and other explanatory materials in connection with the development
of investor services; (15) developing and monitoring investment programs; and
(16) providing such other similar services as the Trust may reasonably request
to the extent the Servicing Agents are permitted to do so under applicable
statutes, rules and regulations.
The Trust's agreements with Servicing Agents are governed by a Plan (called
the "Shareholder Servicing Plan") which has been adopted by the Board of
Trustees. Pursuant to the Shareholder Servicing Plan, the Board of Trustees will
review, at least quarterly, a written report of the amounts expended under the
Trust's agreements with Servicing Agents and the purposes for which the
expenditures were made. In addition, the arrangements with Servicing Agents must
be approved annually by a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, and have no direct or indirect financial interest in
such arrangements.
The Board of Trustees has approved the arrangements with Servicing Agents
based on information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their shareholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their shares in
an efficient manner.
Counsel and Auditors
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago,
Illinois 60606, have been selected as auditors of the Trust. In addition to
audit services, Ernst & Young LLP reviews the Trust's Federal and state tax
returns, and provides consultation and assistance on accounting, internal
control and related matters.
In-Kind Purchases and Redemptions
Payment for shares of a Portfolio may, in the discretion of Northern, be
made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind
B-37
<PAGE>
securities payment, a Portfolio will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
methods used by the Portfolio and that the Portfolio receive satisfactory
assurances that it will have good and marketable title to the securities
received by it; that the securities be in proper form for transfer to the
Portfolio; and that adequate information be provided concerning the basis and
other tax matters relating to the securities.
Although each Portfolio generally will redeem shares in cash, each
Portfolio reserves the right to pay redemptions by a distribution in kind of
securities (instead of cash) from such Portfolio. The securities distributed in
kind would be readily marketable and would be valued for this purpose using the
same method employed in calculating the Portfolio's net asset value per share.
If a shareholder receives redemption proceeds in kind, the shareholder should
expect to incur transaction costs upon the disposition of the securities
received in the redemption.
PERFORMANCE INFORMATION
The performance of a class of shares of a Portfolio may be compared to
those of other mutual funds with similar investment objectives and to bond,
stock and other relevant indices or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, the performance of a class of shares may be compared
to data prepared by Lipper Analytical Services, Inc. or other independent mutual
fund reporting services. In addition, the performance of a class may be compared
to the Lehman Brothers Government/Corporate Bond Index (or its components,
including the Treasury Bond Index), S&P 500 Index, S&P/Barra Growth Index, the
Russell 2000 Index, the EAFE Index or other unmanaged stock and bond indices,
including, but not limited to, the Merrill Lynch 1-5 Year Government Bond Index,
the Merrill Lynch 1-5 Year Corporate/Government Bond Index, the 3-month LIBOR
Index, the 91-day Treasury Bill Rate, the Composite Index, the J.P. Morgan
Non-U.S. Government Bond Index, and the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industry companies listed on
the New York Stock Exchange. Performance data as reported in national financial
publications such as Money Magazine, Morningstar, Forbes, Barron's, The Wall
Street Journal and The New York Times, or in publications of a local or regional
nature, may also be used in comparing the performance of a class of shares of a
Portfolio.
The Portfolios calculate their total returns for each class of shares
separately on an "average annual total return" basis for various periods as
permitted under the rules of the SEC. Average annual total return reflects the
average annual percentage change in value of an investment in the class over the
measuring period. Total returns for each class of shares may also be calculated
on an "aggregate total return" basis for various periods. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return reflect changes in the price of the shares
and assume that any dividends and capital gain distributions made by the
Portfolio with respect to a class during the period are reinvested in the shares
of that class. When considering average total return figures for periods longer
than one year, it is important to note that the annual total return of a class
for any one year in the period might have been more or less than the average for
the entire period. The Portfolios may also advertise from time to time the total
return of one or more classes of shares on a year-
B-38
<PAGE>
by-year or other basis for various specified periods by means of quotations,
charts, graphs or schedules.
Each Portfolio that advertises an "average annual total return" for a class
of shares computes such return by determining the average annual compounded rate
of return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T= [ERV/P]/to the power of 1 divided by n/ -1
Where: T = average annual total return;
ERV = ending redeemable value at the end of
the applicable period (or fractional
portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5
or 10 year (or other) period;
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed
in terms of years.
Each Portfolio that advertises an "aggregate total return" for a class of
shares computes such return by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T= [(ERV/P)]-1
The calculations set forth below are made assuming that (1) all dividends
and capital gain distributions are reinvested on the reinvestment dates at the
price per share existing on the reinvestment date and (2) all recurring fees
charged to all shareholder accounts are included. The ending redeemable value
(variable "ERV" in the formula) is determined by assuming complete redemption of
the hypothetical investment after deduction of all nonrecurring charges at the
end of the measuring period.
The average annual total returns and aggregate total returns shown below
for the Short-Intermediate Bond, U.S. Treasury Index and Bond Portfolios
include, for periods prior to the commencement of the Portfolios' operations,
the performance of predecessor collective funds adjusted to reflect the higher
estimated fees and expenses applicable to such Portfolios' Class A Shares at the
time of their inception. Although all such predecessor collective funds were
managed by Northern for the periods stated in a manner and pursuant to
investment objectives that were equivalent in all material respects to the
management and investment objectives of the corresponding Portfolios, such
predecessor collective funds were not registered under the 1940 Act and were not
subject to certain investment restrictions imposed by the 1940 Act. If they had
been
B-39
<PAGE>
registered under the 1940 Act, performance might have been adversely affected.
The average annual total returns and aggregate total returns shown for the
Portfolios for their Class C and/or Class D Shares also include, for the periods
prior to the inception of such classes, the performance of the Portfolios' Class
A Shares. Because the fees and expenses of Class C and Class D Shares are,
respectively, 0.24% and 0.39% higher than those of Class A Shares, actual
performance for periods prior to the inception of Class C and Class D Shares
would have been lower if such higher fees and expenses had been taken into
account.
Following commencement of operations of the Portfolios, Goldman Sachs
reimbursed expenses to the Portfolios and voluntarily agreed to reduce a portion
of its administration fee for each Portfolio pursuant to the undertaking
described above under "Additional Trust Information - Administrator and
Distributor" and "- Investment Advisers, Transfer Agent and Custodian," and
Northern waived a portion of its investment advisory fees with respect to the
Portfolios. The average annual total returns and aggregate total returns of each
Portfolio with respect to Class A, Class C and Class D Shares, as applicable,
are shown below with and without such fee waivers and expense reimbursements.
B-40
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond(1)
Class A
with fee waivers and 10.31 8.00 9.71 -- 10.31 46.93 152.62 --
expense reimbursements
without fee waivers and 9.89 7.51 9.19 -- 9.89 43.63 140.90 --
expense reimbursements
Class C
with fee waivers and 10.04 7.82 9.62 -- 10.04 45.71 150.55 --
expense reimbursements
without fee waivers and 9.63 7.33 9.10 -- 9.63 42.43 138.92 --
expense reimbursements
Class D
with fee waivers and 9.89 7.64 9.53 -- 9.89 44.50 148.50 --
expense reimbursements
without fee waivers and 9.47 7.16 9.01 -- 9.47 41.31 136.95 --
expense reimbursements
Intermediate Bond(2)
Class A
with fee waivers and 7.55 -- -- 6.53 7.55 -- -- 8.81
expense reimbursements
without fee waivers and 6.73 -- -- 5.15 6.73 -- -- 7.29
expense reimbursements
Class D
with fee waivers and 7.40 -- -- 6.42 7.40 -- -- 8.65
expense reimbursements
without fee waivers and 6.58 -- -- 5.09 6.58 -- -- 7.14
expense reimbursements
</TABLE>
B-41
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Intermediate Bond(3)
Class A
with fee waivers and 7.50 6.25 7.37 -- 7.50 35.41 103.62 --
expense reimbursements
without fee waivers and 11.41 6.56 7.22 -- 11.41 37.40 100.79 --
expense reimbursements
Class D
with fee waivers and 7.08 5.90 7.19 -- 7.08 33.19 100.24 --
expense reimbursements
without fee waivers and 6.66 5.35 6.61 -- 6.66 29.77 89.66 --
expense reimbursements
U.S. Treasury Index(4)
Class A
with fee waivers and 10.92 7.10 8.98 -- 10.92 40.91 136.30 --
expense reimbursements
without fee waivers and 10.41 6.46 8.32 -- 10.41 36.75 122.38 --
expense reimbursements
Class C
with fee waivers and 10.94 7.10 8.98 -- 10.94 40.91 136.30 --
expense reimbursements
without fee waivers and 10.43 6.47 8.32 -- 10.43 36.82 122.38 --
expense reimbursements
Class D
with fee waivers and 10.50 6.77 8.81 -- 10.50 38.75 132.64 --
expense reimbursements
without fee waivers and 9.99 6.13 8.15 -- 9.99 34.65 118.91 --
expense reimbursements
</TABLE>
B-42
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Securities(5)
Class A
with fee waivers and 7.36 5.74 -- 5.60 7.36 32.19 -- 36.16
expense reimbursements
without fee waivers and 6.84 5.09 -- 4.94 6.84 28.18 -- 31.40
expense reimbursements
Class C
with fee waivers and 7.10 5.59 -- 5.47 7.10 31.25 -- 35.19
expense reimbursements
without fee waivers and 6.58 4.94 -- 4.82 6.58 27.26 -- 30.53
expense reimbursements
Class D
with fee waivers and 6.96 5.38 -- 5.28 6.96 29.95 -- 33.82
expense reimbursements
without fee waivers and 6.44 4.73 -- 4.62 6.44 26.00 -- 29.14
expense reimbursements
International Bond(6)
Class A
with fee waivers and 11.85 -- -- 8.42 11.85 -- -- 46.02
expense reimbursements
without fee waivers and 11.18 -- -- 7.81 11.18 -- -- 42.18
expense reimbursements
Class D
with fee waivers and 11.43 -- -- 8.16 11.43 -- -- 44.35
expense reimbursements
without fee waivers and 10.76 -- -- 7.54 10.76 -- -- 40.53
expense reimbursements
</TABLE>
B-43
<PAGE>
- ----------------------
1. For Class A, C and D Shares, performance information prior to January 11,
1993 (commencement of Portfolio) is that of a predecessor collective fund.
For Class C and D Shares, performance information from January 11, 1993 to
July 3, 1995 (commencement of Class C Shares) and September 14, 1994
(commencement of Class D Shares), respectively, is that of Class A Shares.
Because the fees and expenses of Class C and Class D Shares are .24% and
.39%, respectively, higher than those of Class A Shares, actual performance
would have been lower had such fees and expenses been taken into account.
The predecessor collective fund has been managed in a manner and pursuant
to investment objectives equivalent in all material respects to the
management and investment objective of the Portfolio for the periods shown.
The performance information of the predecessor collective fund is adjusted
to reflect the higher fees and expenses applicable to Class A Shares at the
time of their inception.
2. For Class D Shares, performance information from August 1, 1997 to October
5, 1998 (commencement of Class D Shares) is that of Class A Shares. Class A
Shares commenced operations on August 1, 1997. Because the fees and
expenses of Class D Shares are .39% higher than those of Class A Shares,
actual performance would have been lower had such higher fees and expenses
been taken into account.
3. For Class A and D Shares, performance information prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Shares, performance information from January 11, 1993 to September
14, 1994 (commencement of Class D Shares) is that of Class A Shares.
Because the fees and expenses of Class D Shares are .39% higher than those
of Class A Shares, actual performance would have been lower had such higher
fees and expenses been taken into account. The predecessor collective fund
has been managed in a manner and pursuant to investment objectives
equivalent in all material respects to the management and investment
objective of the Portfolio for the periods shown. The performance
information of the predecessor collective fund is adjusted to reflect the
higher fees and expenses applicable to Class A Shares at the time of their
inception.
4. For Class A, C and D Shares, performance information prior to January 11,
1993 (commencement of Portfolio) is that of a predecessor collective fund.
For Class C and D Shares, performance information from January 11, 1993 to
October 7, 1998 (commencement of Class C Shares) and November 16, 1994
(commencement of Class D Shares), respectively, is that of Class A Shares.
Because the fees and expenses of Class C and Class D Shares are .24% and
.39%, respectively, higher than those of Class A Shares, actual performance
would have been lower had such higher fees and expenses been taken into
account. Performance information of the predecessor collective fund is
shown from January 1, 1987, the date from which the predecessor fund has
been managed in a manner and pursuant to investment objectives equivalent
in all material respects to the management and investment objective of the
Portfolio. The performance information of the predecessor collective fund
is adjusted to reflect the higher fees and expenses applicable to Class A
Shares at the time of their inception.
5. For Class C and D Shares, performance information prior to December 29,
1995 (commencement of Class C Shares), and September 15, 1994 (commencement
of Class D Shares), respectively, is that of Class A Shares. Class A Shares
commenced operations April 5, 1993. Because fees and expenses of Class C
and D Shares are .24% and .39%, respectively, higher than those of Class A
Shares, actual performance would have been lower had such higher fees and
expenses been taken into account.
6. For Class D Shares, performance information prior to November 20, 1995
(commencement of Class D Shares) is that of Class A Shares. Class A Shares
commenced operations on March 28, 1994. Because the fees and expenses of
Class D Shares are .39% higher than those of Class A Shares, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-44
<PAGE>
The yield of a class of shares in the Portfolios is computed based on the
net income of such class during a 30-day (or one month) period (which period
will be identified in connection with the particular yield quotation). More
specifically, a Portfolio's yield for a class of shares is computed by dividing
the per share net income for the class during a 30-day (or one month) period by
the net asset value per share on the last day of the period and annualizing the
result on a semi-annual basis.
The Portfolios' 30-day (or one month) standard yield is calculated for each
class of the Portfolios in accordance with the method prescribed by the SEC for
mutual funds:
Yield=2[(a-b/cd+1)/to the power of 6/-1]
Where: a = dividends and interest earned by a Portfolio during
the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares
outstanding during the period entitled to
receive dividends; and
d = net asset value per share on the last day of
the period.
For the 30-day period ended November 30, 1998, the annualized yields for
the Class A, Class C and Class D Shares of the Portfolios were as follows:
<TABLE>
<CAPTION>
30-Day Yield
------------
<S> <C>
U.S. Government Securities
Portfolio
Class A 5.14%
Class C 4.89
Class D 4.74
Short-Intermediate Bond
Portfolio
Class A 5.31
Class C N/A
Class D 4.92
U.S. Treasury Index Portfolio
Class A 4.85
Class C 4.64
Class D 4.51
</TABLE>
B-45
<PAGE>
<TABLE>
<S> <C>
Bond Portfolio
Class A 5.47
Class C 5.23
Class D 5.08
Intermediate Bond Portfolio
Class A 5.29
Class C N/A
Class D 4.90
International Bond Portfolio
Class A 3.17
Class C N/A
Class D 2.78
</TABLE>
The information set forth in the foregoing table reflects certain fee
reductions and expense limitations. See "Investment Advisers, Transfer Agent and
Custodian" and "Administrator and Distributor" under "Additional Trust
Information." In the absence of such fee reductions and expense limitations, the
annualized 30-day yields of each Portfolio with respect to Class A, Class C and
Class D Shares would have been as follows:
<TABLE>
<CAPTION>
30-Day Yield
------------
<S> <C>
U.S. Government Securities
Portfolio
Class A 4.64%
Class C 4.39
Class D 4.24
Short-Intermediate Bond Portfolio
Class A 4.91
Class C N/A
Class D 4.52
U.S. Treasury Index Portfolio
Class A 4.34
Class C 4.13
Class D 4.00
Bond Portfolio
Class A 5.08
Class C 4.84
Class D 4.69
</TABLE>
B-46
<PAGE>
<TABLE>
<S> <C>
Intermediate Bond Portfolio
Class A 4.56
Class C N/A
Class D 4.17
International Bond Portfolio
Class A 2.61
Class C N/A
Class D 2.22
</TABLE>
Because of the different servicing fees and transfer agency fees payable
with respect to Class A, C and D Shares in a Portfolio, performance quotations
for shares of Class C and D of the Portfolio will be lower than the quotations
for Class A Shares of the Portfolio, which will not bear any fees for
shareholder support services and will bear minimal transfer agency fees.
The performance of each class of shares of the Portfolios is based on
historical earnings, will fluctuate and is not intended to indicate future
performance. The investment return and principal value of an investment in a
class will fluctuate so that when redeemed, shares may be worth more or less
than their original cost. Performance information may not provide a basis for
comparison with bank deposits and other investments which provide a fixed yield
for a stated period of time. Total return data should also be considered in
light of the risks associated with a Portfolio's composition, quality, maturity,
operating expenses and market conditions. Any fees charged by Institutions
directly to their Customer accounts in connection with investments in a
Portfolio will not be included in calculations of performance information.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their shareholders that are not described in the
Portfolios' Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Portfolios or their shareholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situations.
General
Each Portfolio will elect to be taxed separately as a regulated investment
company (a "RIC"). To qualify as a RIC, each Portfolio generally must distribute
an amount equal to at least 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gain over net
long-term capital loss), if any, for each year (the "Distribution Requirement")
and satisfy certain other requirements. Each Portfolio must derive at least 90%
of its gross income from dividends, interest, certain payments with respect to
securities loans and gains from the sale or other disposition of stock or
securities or foreign currencies, or from other income derived with respect to
its business of investing in such stock, securities or currencies. Also, at the
close of each quarter of the taxable year, it is generally required that at
least 50% of the
B-47
<PAGE>
value of each Portfolio's assets must consist of cash and cash items, U.S.
Government securities, securities of other RICs, and securities of other issuers
(as to which the Portfolio has not invested more than 5% of the value of its
total assets in securities of such issuer and as to which the Portfolio does not
hold more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of each Portfolio's total assets may be invested in
the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which such Portfolio controls and which are engaged in the same or similar
trades or businesses. Each Portfolio intends to comply with these RIC
requirements.
If for any taxable year any Portfolio were not to qualify as a RIC, all of
its taxable income would be subject to tax at regular corporate rates without
any deduction for distributions to shareholders. In such event, all
distributions by the Portfolio would be taxable to shareholders as ordinary
income to the extent of the Portfolio's current and accumulated earnings and
profits, and would be eligible for the dividends-received deduction in the case
of corporate shareholders.
The Internal Revenue Code imposes a nondeductible 4% excise tax on RICs
that fail currently to distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and capital
gain net income each calendar year to avoid liability for this excise tax. Each
Portfolio also intends to make sufficient distributions or deemed distributions
each year to avoid liability for corporate income tax. If a Portfolio were to
fail to make sufficient distributions, it could be liable for corporate income
tax and for excise tax.
The Trust will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross sale proceeds
paid to any shareholder (i) who has provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service for prior failure to report the
receipt of taxable interest or dividend income properly, or (iii) who has failed
to certify to the Trust, when required to do so, that he is not subject to
backup withholding or that he is an "exempt recipient."
Foreign Investors
Foreign shareholders generally will be subject to U.S. withholding tax at a
rate of 30% (or a lower treaty rate, if applicable) on distributions by a
Portfolio of net investment income, other ordinary income, and the excess, if
any, of net short-term capital gain over net long-term capital loss for the
year, regardless of the extent, if any, to which the income or gain is derived
from non-U.S. investments of the Portfolio. For this purpose, foreign
shareholders include individuals other than U.S. citizens, residents and certain
nonresident aliens, and foreign corporations, partnerships, trusts and estates.
A foreign shareholder generally will not be subject to U.S. income or
withholding tax in respect of proceeds from or gain on the redemption of shares
or in respect of capital gain dividends (i.e., dividends attributable to
long-term capital gains of a Portfolio), provided such shareholder submits a
statement, signed under penalties of perjury, attesting to such shareholder's
exempt status. Different tax consequences apply to a foreign shareholder engaged
in a U.S. trade or business or present in the U.S. for 183 days or more in a
year. Foreign shareholders
B-48
<PAGE>
should consult their tax advisers regarding the U.S. and foreign tax
consequences of investing in a Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which
are in effect on the date of this Additional Statement. Such laws and
regulations may be changed by legislative or administrative action. No attempt
is made to present a detailed explanation of the tax treatment of the Portfolio
or its shareholders, and the discussion here and in the Prospectus is not
intended as a substitute for careful tax planning. Shareholders are advised to
consult their tax advisers with specific reference to their own tax situation,
including the application of state and local taxes.
Although each Portfolio expects to qualify as a RIC and to be relieved of
all or substantially all Federal taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
DESCRIPTION OF SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trustees may hereafter create series in addition to the Trust's
seventeen existing series, which represent interests in the Trust's seventeen
respective portfolios, six of which are discussed in this Additional Statement.
The Trust Agreement also permits the Board of Trustees to classify or reclassify
any unissued shares into classes within a series. Pursuant to such authority,
the Trustees have authorized the issuance of an unlimited number of shares of
beneficial interest in three separate classes of shares in each of the Trust's
non-money market portfolios: Class A, C and D Shares.
Under the terms of the Trust Agreement, each share of each Portfolio is
without par value, represents an equal proportionate interest in the particular
Portfolio with each other share of its class in the same Portfolio and is
entitled to such dividends and distributions out of the income belonging to the
Portfolio as are declared by the Trustees. Upon any liquidation of a Portfolio,
shareholders of each class of a Portfolio are entitled to share pro rata in the
net assets belonging to that class available for distribution. Shares do not
have any preemptive or conversion rights. The right of redemption is described
under "About Your Account -- Selling Shares" in the Prospectus. In addition,
pursuant to the terms of the 1940 Act, the right of a shareholder to redeem
shares and the date of payment by a Portfolio may be suspended for more than
seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the shareholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.
In
B-49
<PAGE>
addition, shares of each Portfolio are redeemable at the unilateral option of
the Trust if the Trustees determine in their sole discretion that failure to so
redeem may have material adverse consequences to the shareholders of the
Portfolio. Shares when issued as described in the Prospectus are validly issued,
fully paid and nonassessable, except as stated below. In the interests of
economy and convenience, certificates representing shares of the Portfolios are
not issued.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying assets
of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust. Expenses with respect to the Portfolios
are normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding shares of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees are
exempt from the separate voting requirements stated above. In addition,
shareholders of each of the classes in a particular investment portfolio have
equal voting rights except that only shares of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to shareholder servicing expenses and transfer
agency fees that are payable by that class.
The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees and,
accordingly, the holders of more than 50% of the aggregate voting power of the
Trust may elect all of the Trustees, irrespective of the vote of the other
shareholders. Meetings of shareholders of the Trust, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the shares entitled to vote at such
meeting. To the extent required by law, the Trust will assist in shareholder
communications in connection with a meeting called by shareholders. The
shareholders of the Trust will have voting rights only with
B-50
<PAGE>
respect to the limited number of matters specified in the Trust Agreement and
such other matters as the Trustees may determine or may be required by law.
The Trust Agreement authorizes the Trustees, without shareholder approval
(except as stated in the next paragraph), to cause the Trust, or any series
thereof, to merge or consolidate with any corporation, association, trust or
other organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement also authorizes the Trustees, in connection with the
merger, consolidation, termination or other reorganization of the Trust or any
series or class, to classify the shareholders of any class into one or more
separate groups and to provide for the different treatment of shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of shareholders that are so
classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement
without a shareholder vote. However, shareholders of the Trust have the right to
vote on any amendment (i) that would adversely affect the voting rights of
shareholders; (ii) that is required by law to be approved by shareholders; (iii)
that would amend the voting provisions of the Trust Agreement; or (iv) that the
Trustees determine to submit to shareholders.
The Trust Agreement permits the termination of the Trust or of any series
or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust, or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders
are not personally liable for obligations of the Trust. The Delaware Act
entitles shareholders of the Trust to the same limitation of liability as is
available to shareholders of private for-profit corporations. However, no
similar statutory or other authority limiting business trust shareholder
liability exists in many other states. As a result, to the extent that the Trust
or a shareholder is subject to the jurisdiction of courts in such other states,
those courts may not apply Delaware law and may subject the shareholders to
liability. To offset this risk, the Trust Agreement (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into or executed by the Trust or its Trustees and (ii)
provides for indemnification out of the property of the applicable series of the
Trust of any shareholder held personally liable for the obligations of the Trust
solely by reason of being or having been a shareholder and not because of the
shareholder's acts or
B-51
<PAGE>
omissions or for some other reason. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which all of the following factors are present: (1)
a court refuses to apply Delaware law; (2) the liability arises under tort law
or, if not, no contractual limitation of liability is in effect; and (3) the
applicable series of the Trust is unable to meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any
person other than the Trust or a shareholder and that a Trustee will not be
liable for any act as a Trustee. However, nothing in the Trust Agreement
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Trust Agreement provides for indemnification of Trustees, officers and
agents of the Trust unless the recipient is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agreement
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis
of such claim. The Trust Agreement also provides that no person, other than the
Trustees, who is not a shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to retain
counsel or other advisers in considering the merits of the request and may
require an undertaking by the shareholders making such request to reimburse the
Trust for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the Trust
Agreement with respect to such series or class; and/or (c) may have no power or
authority with respect to any other series or class. The Trustees are not
currently considering the appointment of Series Trustees for the Trust.
As of January 5, 1999, substantially all of the Portfolios' outstanding
shares were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, Northern possessed sole or shared voting and/or
investment power for its customer accounts with respect to less than
B-52
<PAGE>
10% of the Trust's outstanding shares. As of the same date, the Trust's Trustees
and officers as a group owned beneficially less than 1% of the outstanding
shares of each class of each Portfolio. Northern has advised the Trust that the
following persons (whose mailing address is: c/o The Northern Trust Company, 50
South LaSalle, Chicago, IL 60675) beneficially owned five percent or more of the
outstanding shares of the Portfolios' classes as of January 5, 1999:
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
--------- ---------
<S> <C> <C>
BOND PORTFOLIO
Class A
Northern Trust Thrift Incentive Plan 2,231,292 7.58%
North Trust Pension Plan 2,185,139 7.42%
Lannan Foundation 1,708,186 5.80%
Class C
Phycor-Benchmark 2,412,365 81.23%
Tuthill 401K Plan 230,551 7.76%
Kitch Profit Sharing Plan 168,076 5.66%
Class D
Bank of Illinois Trust Company 73,345 77.26%
First National Bank of La Grange 13,563 14.29%
Westport Bank & Trust 5,800 6.11%
INTERMEDIATE BOND PORTFOLIO
Class A
Masco 2,999,105 64.51%
Illinois Masonic 331,783 7.14%
Class D
Peoples National Bank & Trust 2,040 100.00%
INTERNATIONAL BOND PORTFOLIO
Class A
Northern Trust Pension Plan 904,832 65.58%
Doe Run Resources 226,477 16.41%
Class D
Fort Wayne National Corporation 2,399 77.61%
Citizens Bank 692 22.39%
SHORT-INTERMEDIATE BOND PORTFOLIO
Class A
Emerson 575,630 6.24%
</TABLE>
B-53
<PAGE>
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
--------- ---------
<S> <C> <C>
U.S. TREASURY INDEX PORTFOLIO
Class A
Moody Bible Institute 351,577 31.92%
Herget National Bank 123,391 11.17%
Hubbell Incorporated Defined Contribution Master Trust
98,529 8.91%
Old Second National Bank 92,582 8.38%
Accreditation Council for Graduate Medical Education
Class C 79,637 7.21%
Wilson Sporting Goods 8,480 100.00%
U.S. GOVERNMENT SECURITIES PORTFOLIO
Class A
Electrical Insurance Trustees Sub Fund 590,235 24.51%
Sheet Metal Workers' Health & Welfare Plan 529,112 21.97%
MCG Rabbi 396,086 16.44%
Illinois State Painters Welfare Plan 298,239 12.38%
Class D
First Bankers Trust 33,353 58.63%
Westport Bank & Trust 9,042 15.89%
First National Bank of La Grange 8,616 15.15%
Enjayco fbo Schlueter Company 5,877 10.33%
</TABLE>
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the rules and
regulations of the SEC. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern,
NTQA and Goldman Sachs, brokerage fees and commissions, fees for the
registration or qualification of Portfolio shares under Federal or state
securities laws, expenses of the organization of the Portfolio, taxes, interest,
costs of liability insurance, fidelity bonds, indemnification or contribution,
any costs, expenses or losses arising out of any liability of, or claim for
damages or other relief asserted against, the Trust for violation of any law,
legal, tax and auditing fees and expenses, servicing fees, expenses of
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<PAGE>
preparing and printing prospectuses, statements of additional information, proxy
materials, reports and notices and the printing and distributing of the same to
the Trust's shareholders and regulatory authorities, compensation and expenses
of its Trustees, expenses for industry organizations such as the Investment
Company Institute, miscellaneous expenses and extraordinary expenses incurred by
the Trust.
The term "majority of the outstanding shares" of either the Trust or a
particular Portfolio means, with respect to the approval of an investment
advisory agreement or a change in a fundamental investment policy, the vote of
the lesser of (i) 67% or more of the shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as
to the contents of any contract or other documents referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 (the "Annual Report")
are hereby incorporated herein by reference and attached hereto. No other parts
of the Annual Report, including without limitation, "Management's Discussion of
Portfolio Performance," are incorporated by reference herein. Copies of the
Annual Report may be obtained by writing to Goldman, Sachs & Co., Funds Group,
4900 Sears Tower, Chicago, Illinois 60606, or by calling Goldman Sachs toll-free
at 800-621-2550.
B-55
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--12.0%
Automotive--5.1%
Banc One Auto
Grantor Trust,
Series 1997-B, Class
A
$10,329 6.29% 7/20/04 $10,455
WFS Financial Owner
Trust,
Series 1997-A, Class
A-3
7,680 6.50 9/20/01 7,766
Series 1997-D, Class
A-3
16,000 6.25 3/20/02 16,140
-------
34,361
-------
Home Equity Loans--4.5%
Contimortgage Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1998-1, Class
A10I
-- 6.50 9/15/00 10,550
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
6,851 7.92 3/16/28 6,740
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class
A(/1/)
9,333 7.41 11/26/28 8,889
The Money Store
Trust, Series 1997-
1(/1/)
3,744 7.36 5/16/01 3,743
-------
29,922
-------
Other--2.4%
California
Infrastructure &
Economic
Development, Series
1997-1, Class A4
15,785 6.22 3/25/04 16,258
- -------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $84,124) $80,541
- -------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
7.9%
American Southwest
Financial Securities
Corp., Series 1996
FHA-1, Class A-1
$ 41 6.675% 11/25/38 $ 41
Delta Funding Corp.,
Interest Only
Stripped Security,
Series 1991-1, Class
A-4(/1/)
-- 18.00 1/1/06 9
Donaldson, Lufkin, &
Jenrette
Mortgage Acceptance
Corp.,
Adjustable Rate,
Interest Only
Stripped Security,
Series 1995-QE10
-- 6.814 11/25/25 445
Donaldson, Lufkin, &
Jenrette
Mortgage Acceptance
Corp.,
Series 1994-Q8,
Class 2-A1
3,505 7.25 5/25/24 3,551
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
<S> <C> <C> <C>
First Union-Lehman
Brothers-Bank of
America Commercial
Mortgage Trust,
Series 1998-C2,
Class A-2
$ 11,840 6.50% 5/15/07 $ 12,225
Lehman FHA Title
Loan Trust,
Interest Only
Stripped Security,
Series 1996-2, Class
S
-- 0.586 5/25/17 1,898
Morgan Stanley
Capital I,
Series 1998-WF1,
Class A2
20,000 6.55 12/15/07 20,502
PNC Mortgage
Securities Corp.,
Series 1996-PR1,
Class A(/1/)
7,387 5.85 4/28/27 7,673
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
6,354 7.00 10/25/27 6,354
- -------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $52,619) $ 52,698
- -------------------------------------------------------------------
CORPORATE AND FOREIGN GOVERNMENT
BONDS--17.3%
Beverages--2.5%
Coca-Cola Co.
$ 14,935 6.70% 10/15/36 $ 16,421
--------
Insurance--3.3%
Anthem
Insurance(/1/)
6,000 9.00 4/1/27 6,485
Lumberman's Mutual Casualty
Co.
7,050 9.15 7/1/26 8,300
4,830 8.30 12/1/37 5,153
1,960 8.45 12/1/97 2,007
--------
21,945
--------
Retail--2.3%
Penney (J.C.) & Co.,
Inc.
15,000 6.90 8/15/26 15,507
--------
Sanitary Services--2.4%
WMX Technologies,
Inc.(/1/)
15,300 7.10 8/01/26 16,241
--------
Sovereign--6.0%
Asian Development
Bank
20,360 6.375 10/1/28 22,126
Quebec (Province
of), Canada
Medium-Term Note
15,450 7.22 7/22/36 17,907
--------
40,033
--------
Transportation Services--0.8%
Burlington Northern
Santa Fe Corp.
5,000 6.53 7/15/37 5,121
- -------------------------------------------------------------------
TOTAL CORPORATE AND FOREIGN
GOVERNMENT BONDS (Cost
$110,560) $115,268
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------
Bond Portfolio--Continued
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--10.9%
COLLATERALIZED MORTGAGE OBLIGATIONS--
1.1%
Fannie Mae REMIC Trust--0.8%
Series 1996-M4,
Class A
$ 2,277 7.75% 3/17/17 $ 2,343
Series 1992-73,
Class G
3,111 7.50 4/25/21 3,128
--------
Fannie Mae REMIC Trust 5,471
--------
Interest Only Stripped Securi-
ties--0.3%
Series 278, Class 2
-- 1.252 8/01/25 462
Series 1997-20,
Class IO
-- 1.84 3/25/27 1,532
--------
1,994
--------
Fannie Mae REMIC Trust
Principal Only Stripped Secu-
rities--0.0%
Series 1994-9, Class
G
215 5.15 11/25/23 207
--------
MORTGAGE-BACKED SECURITIES--
9.8%
Fannie Mae--4.8%
Pool #452480
$ 32,623 6.00% 11/1/28 $ 32,195
--------
Freddie Mac--5.0%
Pool #252649
1 6.50 6/1/04 1
Pool #C18118
16,004 6.00 11/1/28 15,804
Pool #G00767
16,970 7.50 8/1/27 17,426
--------
33,231
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $75,573) $ 73,098
- -------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
40.2%
U.S. Treasury Bonds--19.7%
$ 92,600 7.125% 2/15/23 $114,983
15,000 6.00 2/15/26 16,477
--------
131,460
--------
U.S. Treasury Inflation Index
Notes--5.0%
33,555 3.625 1/15/08 33,702
--------
U.S. Treasury Notes--15.5%
34,415 6.625 7/31/01 36,120
58,795 7.50 2/15/05 67,348
--------
103,468
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $256,297) $268,630
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Shares/
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
<C> <S> <C> <C>
PREFERRED STOCKS--2.8%
Agency--2.2%
15,000 Home Ownership
Funding Corp. $ 14,614
Real Estate--0.6%
4,600 Tier One Properties,
Inc. 4,411
- --------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost
$19,600) $ 19,025
- --------------------------------------------------------
FLOATING RATE BANK NOTES--3.9%
Lloyds Bank PLC
$14,950 6.00% 12/15/98 $ 12,355
Midland Bank PLC
2,500 6.00 12/29/98 1,914
National Westminster
Bank
15,300 5.375 2/26/99 12,113
- --------------------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $28,032) $ 26,382
- --------------------------------------------------------
SHORT-TERM INVESTMENT--3.6%
Societe Generale,
Paris
$23,771 5.375% 12/1/98 $ 23,771
- --------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $23,771) $ 23,771
- --------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $650,576) $659,413
- --------------------------------------------------------
Other assets, less liabili-
ties--1.4% 9,593
- --------------------------------------------------------
NET ASSETS--100.0% $669,006
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $49,780 (7.4% of net assets), with an aggregate cost basis of
$49,357. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
Intermediate Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--12.8%
Automotive--7.0%
Chevy Chase
Automobile
Receivables Trust,
Series 1997-4, Class
A
$ 377 6.25% 6/15/04 $ 380
Olympic Automobile
Receivables Trust,
Series 1996-D, Class
A-4
500 6.05 8/15/02 504
Western Financial
Owner Trust,
Series 1997-D, Class
A-3
500 6.25 3/20/02 504
Series 1998-B, A-3
750 5.95 7/20/02 754
-------
2,142
-------
Financial--2.3%
California
Infrastructure &
Economic
Development, Series
1997-1, Class A-4
690 6.22 3/25/04 711
-------
Home Equity Loans--3.5%
Advanta Mortgage
Loan Trust, Interest
Only Stripped
Security,
Series 1998-1 Class
AI0
-- 5.00 10/25/00 403
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
208 7.92 3/16/28 205
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class
A
364 7.41 11/26/28 347
The Money Store
Trust, Series 1997-
1(/1/)
84 7.36 5/16/01 85
-------
1,040
- -------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,016) $ 3,893
- -------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
7.2%
First Union-Lehman
Brothers-Bank of
America Commercial
Mortgage Trust,
Series 1998-C1,
Class A-2
$ 500 6.56% 11/18/08 $ 516
GE Capital Mortgage
Services, Inc.,
Series 1997-5, Class
A2
500 7.50 6/25/27 509
Morgan Stanley
Capital I,
Series 1998-WF1,
Class A2
355 6.55 12/15/07 364
Mortgage Capital
Funding,
Series 1998-MC1,
Class A2
540 7.00 1/18/08 567
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
258 7.00 10/25/27 258
- -------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $2,169) $ 2,214
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--16.0%
Beverages--4.0%
Coca-Cola (The) Co.
$1,100 6.70% 10/15/36 $ 1,209
--------
Diversified Financial Servic-
es--3.3%
CIT Group Holdings,
Inc.
1,000 5.85 5/26/00 1,006
--------
Environmental Control--1.5%
WMX Technologies,
Inc.
440 7.10 8/1/26 467
--------
Insurance--2.4%
Lumberman's Mutual
Casualty Co.(/1/)
545 9.15 7/1/26 642
105 8.45 12/1/97 108
--------
750
--------
Retail--1.4%
Penney (J.C.) & Co.,
Inc.
400 7.40 4/1/37 443
--------
Transportation--3.4%
Burlington Northern
Santa Fe Corp.
1,000 6.53 7/15/37 1,024
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$4,835) $ 4,899
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--8.7%
Fannie Mae--4.4%
Pool #440700
$ 1,364 6.00% 11/01/28 $ 1,346
--------
Freddie Mac--4.3%
Pool #G00767
676 7.50 8/01/27 694
Pool #C18079
618 6.00 11/1/28 610
--------
1,304
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $2,649) $ 2,650
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
42.0%
U.S. Treasury Inflation Index--
4.4%
$ 1,350 3.625% 1/15/08 $ 1,356
--------
U.S. Treasury Notes--37.6%
1,250 5.75 8/15/03 1,307
3,350 7.50 2/15/05 3,837
6,000 6.625 7/31/01 6,297
--------
11,441
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $12,785) $ 12,797
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------------
Intermediate Bond Portfolio (Continued)
<C> <S> <C> <C>
FLOATING RATE BANK NOTES--4.0%
Lloyds Bank PLC
$ 750 6.00% 12/15/98 $ 620
National Westminster
Bank
750 5.375 11/30/49 594
- ------------------------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,359) $ 1,214
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--12.1%
Federal Home Loan
Bank
$ 2,457 5.45% 12/1/98 $ 2,457
Societe Generale,
Paris
1,213 5.375 12/1/98 1,213
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,670) $ 3,670
- -----------------------------------------------------------
TOTAL INVESTMENTS--102.8%
(Cost $31,483) $31,337
- -----------------------------------------------------------
Liabilities, less other as-
sets--(2.8)% (857)
- -----------------------------------------------------------
NET ASSETS--100.0% $30,480
===========================================================
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $1,040 (3.4% of net assets), with an aggregate cost basis of
$1,064. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local
Currency/
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
International Bond Portfolio
<C> <S> <C> <C>
DEBT OBLIGATIONS--96.7%
Australian Dollar--2.5%
Commonwealth of
Australia
980 10.00% 10/15/02 $ 731
-------
Belgian Franc--2.3%
Kingdom of Belgium
18,275 7.50 7/29/08 657
-------
British Pound Sterling--16.4%
Abbey National PLC
825 6.00 8/10/99 1,356
BAA PLC
525 7.875 2/10/07 975
Lloyds Bank PLC
800 7.375 3/11/04 1,396
Treasury of Great
Britain
400 8.00 6/7/21 979
-------
4,706
-------
Canadian Dollar--2.6%
Province of Ontario
1,050 7.25 9/27/05 752
-------
Danish Krone--6.7%
Kingdom of Denmark
10,100 8.00 3/15/06 1,926
-------
European Currency Unit--4.9%
Electricite de
France
1,214 3.75 10/28/03 1,406
-------
German Mark--15.6%
Federal Republic of
Germany
1,795 6.25 1/4/24 1,275
LKB Global Bond
1,500 6.00 5/10/99 896
Republic of Austria
1,670 8.00 1/30/02 1,114
Republic of Finland
1,920 5.50 2/9/01 1,184
-------
4,469
-------
Italian Lira--10.2%
Republic of Italy
4,000,000 8.50 4/1/04 2,917
-------
Japanese Yen--14.5%
Asian Development
Bank
90,000 5.00 2/5/03 863
European Bank for
Reconstruction and
Development
95,000 5.875 11/26/99 817
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local
Currency/
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
<C> <S> <C> <C>
International Bank
for Reconstruction
and Development
100,000 4.50% 3/20/03 $ 950
Japan Development
Bank
160,000 6.50 9/20/01 1,521
-------
4,151
-------
Netherlands Guilder--1.4%
Kingdom of the
Netherlands
700 5.75 2/15/07 411
-------
Spanish Peseta--4.7%
Kingdom of Spain
120,000 11.30 1/15/02 1,022
35,000 10.00 2/28/05 323
-------
1,345
-------
Swedish Krona--2.0%
Kingdom of Sweden
3,700 10.25 5/5/03 571
-------
United States Dollar--12.9%
U.S. Treasury Bond
2,150 7.125 2/15/23 2,670
U.S. Treasury Note
900 7.50 2/15/05 1,031
-------
3,701
- ------------------------------------------------------
TOTAL DEBT OBLIGATIONS (Cost
$26,597) $27,743
- ------------------------------------------------------
SHORT-TERM INVESTMENT--0.4%
United States Dollar
Societe Generale,
Paris, France
$ 111 5.375% 12/1/98 $ 111
- ------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $111) $ 111
- ------------------------------------------------------
TOTAL INVESTMENTS--97.1%
(Cost $26,708) $27,854
- ------------------------------------------------------
Other assets, less liabili-
ties--2.9% 846
- ------------------------------------------------------
NET ASSETS--100.0% $28,700
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
Short-Intermediate Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--31.8%
Automotive--9.8%
Chevy Chase
Automobile
Receivables Trust,
Series 1991-4, Class
A
$ 3,212 6.25% 6/15/04 $ 3,235
Olympic Automobile
Receivables Trust,
Interest Only
Stripped Security,
Series 1995-D, Class
I
-- 7.187 1/15/99 25
Olympic Automobile
Receivables Trust,
Series 1995-A, Class
A
833 7.875 7/15/01 839
Series 1996-D, Class
A-4
4,075 6.05 8/15/02 4,111
Western Financial
Automobile Loan
Trust, Series 1994-
4, Class A-1
248 7.10 1/1/00 249
WFS Financial Owner
Trust,
Series 1997-A, Class
A-3
4,454 6.50 9/20/01 4,504
Series 1997-D, Class
A-3
5,000 6.25 3/20/02 5,044
--------
18,007
--------
Home Equity Loans--5.8%
Contimortgage Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1998-1, Class
A10I
-- 6.50 9/15/00 3,709
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
2,583 7.92 3/16/28 2,541
Delta Funding Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1997-2, Class
AIO
-- 6.50 5/25/12 1,920
Lehman FHA Title I
Loan Trust,
Interest Only
Stripped Security,
Series 1995-6, Class
S
-- 0.493 11/25/16 1,130
The Money Store
Trust, Series 1997-
1(/1/)
1,377 7.36 5/16/01 1,377
--------
10,677
--------
Financial--16.2%
Associates Corp.
5,000 5.85 1/15/01 5,045
California Infrastructure
Pacific Gas & Electric,
Series 1997-1, Class A-3
7,250 6.15 6/25/02 7,354
California Infrastructure &
Economic
Development, Series 1997-1,
Class A-4
5,925 6.22 3/25/04 6,102
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
<C> <S> <C> <C>
IMC Excess Cashflow
Securities Trust
Series 1997-A, Class A
$ 3,098 7.41% 11/26/28 $ 2,951
MBNA Master Credit
Card Trust
5,800 5.25 2/15/06 5,798
Southern Pacific
Secured Asset Corp.,
Series 1997-2, Class
AIO
95,800 1.784 7/25/00 2,545
--------
29,795
- --------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $63,214) $ 58,479
- --------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
20.5%
AAMES Mortgage
Trust,
Interest Only
Stripped Security,
Series 1997-B, Class
AIO
$ -- 5.50% 7/15/00 $ 1,472
BA Mortgage
Securities, Inc.
8,250 6.50 8/25/28 8,310
Donaldson, Lufkin &
Jenrette
Mortgage Acceptance
Corp.,
Interest Only
Stripped Security,
Series 1997-CF2,
Class CP
-- 7.43 11/15/04 5,545
Series 1994-Q8,
Class 2A1
-- 7.25 5/25/24 1,527
Financial Asset
Securitization,
Inc.,
Series 1997-NAMC,
Class FXA-3
1,619 7.35 4/25/27 1,616
GE Capital Mortgage
Services, Inc.,
Series 1994-15,
Class A-16
4,789 6.00 4/25/09 4,738
PNC Mortgage
Securities Corp.,
Series 1996-PR1,
Class A(/1/)
2,183 5.847 4/28/27 2,268
Prudential Home
Mortgage Securities
Co.,
Series 1994-1, Class
A-3
6,963 6.00 2/25/09 6,889
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
2,577 7.00 10/25/27 2,577
Series 1998-A1,
Class A-6
2,970 0.00 1/1/28 2,732
- --------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $39,574) $ 37,674
- --------------------------------------------------------
CORPORATE BONDS--8.9%
Brokerage Services--3.5%
Donaldson, Lufkin &
Jenrette, Inc.
Medium Term Note
$ 6,500 5.625% 2/15/16 $ 6,402
--------
Electrical Utility--2.1%
Tenaga Nasional
Berhad
4,800 7.20 4/29/07 3,958
--------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
<C> <S> <C> <C>
Telecommunications--3.3%
Worldcom, Inc.
$ 5,900 6.125% 8/15/01 $ 6,008
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$17,177) $ 16,368
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--1.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--
1.0%
Fannie Mae REMIC Trust--0.9%
Series 1996-M4,
Class A
$ 1,518 7.75% 3/17/17 $ 1,562
--------
Fannie Mae REMIC Trust
Principal Only Stripped Security--0.1%
Series 1994-9, Class
G
215 5.15 11/25/23 207
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $1,710) $ 1,769
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
34.9%
U.S. Treasury Notes--34.9%
$ 9,500 3.63% 1/15/08 $ 9,542
41,000 5.75 10/31/02 42,550
11,500 6.25 1/31/02 12,032
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $62,760) $ 64,124
- -------------------------------------------------------------------
SHORT-TERM INVESTMENT--1.7%
Societe Generale,
Paris
$ 3,200 5.375% 12/1/98 $ 3,200
- -------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,200) $ 3,200
- -------------------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(Cost $187,635) $181,614
- -------------------------------------------------------------------
Other assets, less liabili-
ties--1.2% 2,209
- -------------------------------------------------------------------
NET ASSETS--100.0% $183,823
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $6,186 (3.4% of net assets), with an aggregate cost basis of
$6,183. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
29
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------
U.S. Government Securities Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--62.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--
27.7%
Fannie Mae REMIC Trust--15.5%
Series 1998-M2,
Class CPI,
Interest Only
Stripped Security
$ -- 6.25% 2/17/02 $ 513
Series 1997-M1,
Class A
2,582 6.78 1/17/03 2,657
Series 1998-14,
Class F
64 9.20 12/25/17 65
Series 1993-133,
Class EZ
3,262 5.85 2/25/17 3,259
Series 1996-M4,
Class A
1,012 7.75 3/17/17 1,041
Series 1992-2000,
Class E
473 6.25 6/25/17 472
Series 1997-20,
Class IO,
Interest Only
Stripped Security
-- 6.15 3/25/27 249
--------
8,256
--------
Freddie Mac--12.2%
Series 1227, Class G
2,311 10.40 5/15/99 2,373
Series 1296, Class H
1,432 11.61 7/15/99 1,488
Series 1520, Class F
414 5.65 9/15/04 413
Series 2028, Class
PE
2,250 6.00 11/15/21 2,266
--------
6,540
--------
14,796
--------
MORTGAGE-BACKED SECURITIES--17.5%
Fannie Mae--8.8%
Pool #124945
$2,020 7.49% 12/1/98 $ 2,056
Pool #452480
2,727 6.00 11/1/28 2,691
--------
4,747
--------
Freddie Mac--8.7%
Pool #410092
214 7.57 11/1/24 218
Pool #G00767
2,282 7.50 8/1/27 2,343
Pool #C18079
2,101 6.00 11/1/28 2,074
--------
4,635
--------
$ 9,382
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------
<C> <S> <C> <C>
AGENCY OBLIGATIONS--16.8%
Fannie Mae--9.5%
$ 2,250 5.625% 3/15/01 $ 2,286
2,750 5.25 1/15/03 2,777
--------
5,063
--------
Freddie Mac--4.3%
2,250 5.75 7/15/03 2,317
--------
Tennessee Valley Authority--3.0%
1,500 6.24 7/15/45 1,576
--------
$ 8,956
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $33,097) $ 33,134
- ----------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--31.6%
U.S. Treasury Notes--26.5%
$ 9,000 6.63% 7/31/01 $ 9,446
1,250 6.25 1/31/02 1,308
3,000 7.50 2/15/05 3,436
--------
14,190
--------
U.S. Treasury Inflationary In-
dex--5.1%
2,700 3.63% 1/15/08 2,712
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $16,864) $ 16,902
- ----------------------------------------------------------
SHORT-TERM INVESTMENT--7.2%
Federal Home Loan
Bank Discount Note
$ 3,866 5.150% 12/1/98 $ 3,866
- ----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,866) $ 3,866
- ----------------------------------------------------------
TOTAL INVESTMENTS--100.8%
(Cost $53,827) $ 53,902
- ----------------------------------------------------------
Liabilities, less other as-
sets--(0.8)% (419)
- ----------------------------------------------------------
NET ASSETS--100.0% $ 53,483
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. Treasury Index Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--
98.4%
U.S. Treasury Notes--48.8%
$2,300 7.75% 1/31/00 $ 2,379
1,450 4.50 9/30/00 1,448
1,900 6.50 5/31/01 1,983
1,400 6.25 2/15/03 1,483
1,000 6.50 8/15/05 1,101
1,525 6.25 2/15/07 1,674
1,500 5.75 8/15/23 1,568
-------
11,636
-------
U.S. Treasury Bonds--49.6%
1,000 11.75 2/15/01 1,148
1,400 7.50 11/15/01 1,510
1,000 6.00 7/31/02 1,046
65 13.875 5/15/11 101
660 14.00 11/15/11 1,048
490 13.25 5/15/14 812
1,450 7.25 5/15/16 1,774
1,025 8.125 5/15/21 1,395
700 8.00 11/15/21 944
1,400 6.25 8/15/23 1,577
400 6.50 11/15/26 469
-------
11,824
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $22,076) $23,460
- ------------------------------------------------------
SHORT-TERM INVESTMENT--1.5%
Federal Home Loan
Bank Discount Note
$ 353 5.15% 12/1/98 $ 353
- ------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $353) $ 353
- ------------------------------------------------------
TOTAL INVESTMENTS--99.9%
(Cost $22,429) $23,813
- ------------------------------------------------------
Other assets, less liabili-
ties--0.1% 10
- ------------------------------------------------------
NET ASSETS--100.0% $23,823
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in securi-
ties, at cost $650,576 $31,483 $26,708 $187,635 $53,827 $22,429
- ------------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $659,413 $31,337 $27,854 $181,614 $53,902 $23,813
Cash and foreign curren-
cies 654 -- 46 274 -- 1
Receivables:
Interest 9,391 412 805 2,099 651 254
Fund shares sold 738 5 -- 83 126 3
Investment securities
sold -- -- -- -- 8 977
Foreign tax reclaims -- -- 17 -- -- --
Administrator 60 26 6 12 17 15
Deferred organization
costs, net -- -- 5 -- -- --
Other assets 6 -- 2 1 -- --
- ------------------------------------------------------------------------------------------------
Total assets 670,262 31,780 28,735 184,083 54,704 25,063
- ------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- 1,269 -- -- 1,166 --
Payable for:
Fund shares redeemed 873 -- -- 188 24 13
Investment securities
purchased -- -- -- -- -- 1,212
Accrued expenses:
Advisory fees 135 6 17 38 11 3
Administration fees 54 2 4 15 4 2
Transfer agent fees 10 -- -- 2 1 --
Custodian fees 3 2 6 -- 2 1
Other liabilities 181 21 8 17 13 9
- ------------------------------------------------------------------------------------------------
Total liabilities 1,256 1,300 35 260 1,221 1,240
- ------------------------------------------------------------------------------------------------
Net assets $669,006 $30,480 $28,700 $183,823 $53,483 $23,823
- ------------------------------------------------------------------------------------------------
Analysis of net assets:
Paid-in capital $637,446 $30,290 $26,988 $186,617 $52,652 $22,739
Accumulated undistrib-
uted net investment in-
come 1,259 33 354 702 37 23
Accumulated net realized
gains (losses) on
investments and foreign
currency transactions 21,464 303 197 2,525 719 (323)
Net unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions 8,837 (146) 1,146 (6,021) 75 1,384
Net unrealized gain on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- 15 -- -- --
- ------------------------------------------------------------------------------------------------
Net assets $669,006 $30,480 $28,700 $183,823 $53,483 $23,823
- ------------------------------------------------------------------------------------------------
Total shares outstanding
(no par value), unlim-
ited shares authorized
Class A 28,021 1,511 1,338 9,137 2,384 1,014
Class C 2,845 -- -- -- 195 1
Class D 94 2 6 41 60 79
- ------------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per share
Class A $ 21.61 $ 20.15 $ 21.35 $ 20.03 $ 20.27 $ 21.77
Class C $ 21.60 -- -- -- $ 20.26 $ 21.81
Class D $ 21.58 $ 20.13 $ 21.26 $ 19.97 $ 20.22 $ 21.74
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $43,266 $1,453 $1,651(a) $19,862 $3,143 $1,516
- ------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 3,491 133 238 1,195 296 101
Administration fees 582 22 40 199 49 25
Transfer agent fees 112 2 3 22 9 5
Shareholder servicing
fees 91 -- -- 3 7 5
Custodian fees 76 18 55 28 22 21
Registration fees 71 40 28 40 22 21
Professional fees 32 4 7 11 7 6
Trustee fees and ex-
penses 14 1 3 5 3 3
Amortization of deferred
organization costs 2 3 16 2 5 2
Other 28 18 13 16 14 14
- ------------------------------------------------------------------------------------------------
Total expenses 4,499 241 403 1,521 434 203
Less voluntary waivers
of investment advisory
fees (2,037) (78) (53) (697) (173) (63)
Less expenses reimburs-
able by Administrator (222) (83) (95) (103) (72) (67)
- ------------------------------------------------------------------------------------------------
Net expenses 2,240 80 255 721 189 73
- ------------------------------------------------------------------------------------------------
Net investment income 41,026 1,373 1,396 19,141 2,954 1,443
Net realized gains
(losses) on:
Investment transactions 21,659 324 271 1,538 786 732
Foreign currency trans-
actions -- -- (51) -- -- --
Net change in unrealized
appreciation (deprecia-
tion) on investments,
forward foreign cur-
rency contracts and
foreign currency
transactions (6,108) (85) 1,365 (6,078) (228) 445
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- -- 17 -- -- --
- ------------------------------------------------------------------------------------------------
Net increase in net as-
sets resulting from op-
erations $56,577 $1,612 $2,998 $14,601 $3,512 $2,620
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $7 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
33
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Intermediate
Bond Bond
Portfolio Portfolio
------------------ -----------------
1998 1997 1998 1997 (a)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 41,026 $ 28,861 $ 1,373 $ 204
Net realized gains (losses) on
investments, forward foreign currency
contracts and foreign currency
transactions 21,659 3,869 324 (21)
Net change in unrealized appreciation
(depreciation) on investments, forward
foreign currency contracts and foreign
currency transactions (6,108) 4,710 (85) (61)
Net change in unrealized gains on
translations of other assets and
liabilities denominated in foreign
currencies -- -- -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 56,577 37,440 1,612 122
- ------------------------------------------------------------------------------
Distributions to Class A shareholders
from:
Net investment income (35,543) (25,700) (1,358) (185)
Net realized gain on investment
transactions (2,645) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class A
shareholders (38,188) (25,700) (1,358) (185)
- ------------------------------------------------------------------------------
Distributions to Class C shareholders
from:
Net investment income (3,794) (2,140) -- --
Net realized gain on investment
transactions (295) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class C
shareholders (4,089) (2,140) -- --
- ------------------------------------------------------------------------------
Distributions to Class D shareholders
from:
Net investment income (107) (23) (1) --
Net realized gain on investment
transactions (6) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class D
shareholders (113) (23) (1) --
- ------------------------------------------------------------------------------
Class A share transactions:
Proceeds from the sale of shares 217,204 155,583 27,967 11,875
Reinvested distributions 32,297 22,888 1,346 185
Cost of shares redeemed (117,228) (92,369) (11,125) --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from
Class A share transactions 132,273 86,102 18,188 12,060
- ------------------------------------------------------------------------------
Class C share transactions:
Proceeds from the sale of shares 30,139 60,626 -- --
Reinvested distributions 4,089 2,140 -- --
Cost of shares redeemed (24,755) (21,561) -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class C share
transactions 9,473 41,205 -- --
- ------------------------------------------------------------------------------
Class D share transactions:
Proceeds from the sale of shares 2,529 657 41 --
Reinvested distributions 113 22 1 --
Cost of shares redeemed (1,238) (306) -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class D share
transactions 1,404 373 42 --
- ------------------------------------------------------------------------------
Net increase (decrease) 157,337 137,257 18,483 11,997
Net assets--beginning of year 511,669 374,412 11,997 --
- ------------------------------------------------------------------------------
Net assets--end of year $669,006 $511,669 $30,480 $11,997
- ------------------------------------------------------------------------------
Undistributed net investment income $ 1,259 $ 338 $ 33 $ 19
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short- U.S. Government
International Intermediate Securities U.S. Treasury
Bond Portfolio Bond Portfolio Portfolio Index Portfolio
- ---------------- ------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,396 $ 1,608 $ 19,141 $ 13,180 $ 2,954 $ 5,026 $ 1,443 $ 1,856
220 97 1,538 (623) 786 76 732 (56)
1,365 (2,827) (6,078) (2,110) (228) (46) 445 382
17 3 -- -- -- -- -- --
- -----------------------------------------------------------------------------
2,998 (1,119) 14,601 10,447 3,512 5,056 2,620 2,182
- -----------------------------------------------------------------------------
(1,024) (1,390) (17,379) (12,516) (2,583) (4,820) (1,370) (1,746)
(385) (520) (267) (414) -- -- -- --
- -----------------------------------------------------------------------------
(1,409) (1,910) (17,646) (12,930) (2,583) (4,820) (1,370) (1,746)
- -----------------------------------------------------------------------------
-- -- -- -- (188) (204) (1) --
-- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------
-- -- -- -- (188) (204) (1) --
- -----------------------------------------------------------------------------
(5) (3) (87) (39) (42) (17) (105) (79)
(2) (1) (1) (1) -- -- -- --
- -----------------------------------------------------------------------------
(7) (4) (88) (40) (42) (17) (105) (79)
- -----------------------------------------------------------------------------
2,261 1,168 125,815 121,515 12,721 68,991 15,301 20,990
1,217 1,525 14,872 11,648 2,336 4,525 458 1,197
(2,867) (7,465) (156,030) (82,865) (10,457) (122,819) (28,575) (14,944)
- -----------------------------------------------------------------------------
611 (4,772) (15,343) 50,298 4,600 (49,303) (12,816) 7,243
- -----------------------------------------------------------------------------
-- -- -- -- 1,687 1,328 184 --
-- -- -- -- 188 204 1 --
-- -- -- -- (1,094) (1,940) (164) --
- -----------------------------------------------------------------------------
-- -- -- -- 781 (408) 21 --
- -----------------------------------------------------------------------------
65 47 454 638 1,026 111 445 1,106
6 4 75 27 29 6 53 40
(38) (7) (578) (110) (155) (29) (570) (321)
- -----------------------------------------------------------------------------
33 44 (49) 555 900 88 (72) 825
- -----------------------------------------------------------------------------
2,226 (7,761) (18,525) 48,330 6,980 (49,608) (11,723) 8,425
26,474 34,235 202,348 154,018 46,503 96,111 35,546 27,121
- -----------------------------------------------------------------------------
$28,700 $26,474 $183,823 $202,348 $53,483 $ 46,503 $ 23,823 $ 35,546
- -----------------------------------------------------------------------------
$ 354 $ 38 $ 702 $ 56 $ 37 $ -- $ 23 $ 56
- -----------------------------------------------------------------------------
</TABLE>
35
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Bond Portfolio
<TABLE>
<CAPTION>
Class A
------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 21.08 $ 20.77 $ 20.96 $ 18.29 $ 20.70
Income (loss) from invest-
ment operations:
Net investment income 1.47 1.34 1.29 1.17 1.42
Net realized and unrealized
gain (loss) 0.62 0.29 (0.19) 2.66 (2.21)
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 2.09 1.63 1.10 3.83 (0.79)
- --------------------------------------------------------------------------------
Distributions to sharehold-
ers from:
Net investment income (1.44) (1.32) (1.26) (1.14) (1.46)
Net realized gain (0.12) -- -- -- (0.15)
Return of capital -- -- (0.03) (0.02) (0.01)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.56) (1.32) (1.29) (1.16) (1.62)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.53 0.31 (0.19) 2.67 (2.41)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.61 $ 21.08 $ 20.77 $ 20.96 $ 18.29
- --------------------------------------------------------------------------------
Total return (c) 10.31% 8.17% 5.57% 21.55% (4.04)%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.75% 0.77% 0.84% 0.84% 0.87%
Net investment income, net
of waivers and reimburse-
ments 7.07% 6.66% 6.39% 5.94% 7.31%
Net investment income, be-
fore waivers and reim-
bursements 6.68% 6.25% 5.91% 5.46% 6.80%
Portfolio turnover rate 84.80% 76.30% 101.38% 74.19% 103.09%
Net assets at end of year
(in thousands) $605,517 $460,514 $366,850 $286,301 $257,391
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------- -----------------------------------------
1998 1997 1996 1995(a) 1998 1997 1996 1995 1994 (b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 21.07 $ 20.78 $ 20.96 $20.21 $21.05 $20.76 $ 20.94 $18.29 $ 18.74
Income (loss) from in-
vestment operations:
Net investment income 1.42 1.29 1.25 0.47 1.38 1.24 1.22 1.08 0.28
Net realized and
unrealized gain (loss) 0.62 0.28 (0.18) 0.74 0.63 0.30 (0.18) 2.66 (0.45)
- --------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 2.04 1.57 1.07 1.21 2.01 1.54 1.04 3.74 (0.17)
- --------------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.39) (1.28) (1.22) (0.45) (1.36) (1.25) (1.19) (1.09) (0.28)
Net realized gain (0.12) -- -- -- (0.12) -- -- -- --
Return of capital -- -- (0.03) (0.01) -- -- (0.03) -- --
- --------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.51) (1.28) (1.25) (0.46) (1.48) (1.25) (1.22) (1.09) (0.28)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.53 0.29 (0.18) 0.75 0.53 0.29 (0.18) 2.65 (0.45)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 21.60 $ 21.07 $ 20.78 $20.96 $21.58 $21.05 $ 20.76 $20.94 $ 18.29
- --------------------------------------------------------------------------------------------------------
Total return (c) 10.04% 7.88% 5.33% 6.08% 9.89% 7.74% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.99% 1.01% 1.08% 1.08% 1.14% 1.16% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and
reimbursements 6.83% 6.39% 6.09% 5.59% 6.70% 6.27% 5.99% 5.48% 6.31%
Net investment income,
before waivers and
reimbursements 6.44% 5.98% 5.61% 5.11% 6.31% 5.86% 5.51% 5.00% 5.80%
Portfolio turnover rate 84.80% 76.30% 101.38% 74.19% 84.80% 76.30% 101.38% 74.19% 103.09%
Net assets at end of
year (in thousands) $61,450 $50,554 $ 7,342 $3,704 $2,039 $ 601 $ 220 $ 120 $ 15
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period July 3, 1995 (Class C shares issue date) through November
30, 1995.
(b) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
36
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Year Ended November 30,
Intermediate Bond Portfolio
<TABLE>
<CAPTION>
Class A Class D
------------------ --------
1998 1997 (a) 1998 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 19.89 $ 20.00 $20.46
Income (loss) from investment operations:
Net investment income 1.19 0.38 0.18
Net realized and unrealized gain (loss) 0.27 (0.15) (0.32)
- -------------------------------------------------------------------------------
Total income from investment operations 1.46 0.23 (0.14)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.20) (0.34) (0.19)
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.20) (0.34) (0.19)
- -------------------------------------------------------------------------------
Net increase (decrease) $ 0.26 $ (0.11) $(0.33)
- -------------------------------------------------------------------------------
Net asset value, end of year $ 20.15 $ 19.89 $20.13
- -------------------------------------------------------------------------------
Total return (c) 7.55% 1.17% (0.70)%
Ratio to average net assets of (d):
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.75%
Expenses, before waivers and reimbursements 1.09% 2.28% 1.48%
Net investment income, net of waivers and reim-
bursements 6.19% 5.87% 5.69%
Net investment income, before waivers and reim-
bursements 5.46% 3.95% 4.96%
Portfolio turnover rate 93.40% 56.99% 93.40%
Net assets at end of year (in thousands) $30,439 $11,997 $ 41
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through
November 30, 1997.
(b) For the period October 5, 1998 (Class D share issue date) through November
30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
37
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Bond Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------
1998 1997 1996 1995 1994(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.13 $ 22.16 $ 21.74 $ 19.93 $ 20.00
Income (loss) from investment op-
erations:
Net investment income 0.98 1.02 1.54 1.26 0.79
Net realized and unrealized gain
(loss) 1.33 (1.70) 0.43 2.28 0.01
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.31 (0.68) 1.97 3.54 0.80
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (c) (0.79) (1.01) (1.55) (1.73) (0.87)
Net realized gain (0.30) (0.34) -- -- --
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (1.09) (1.35) (1.55) (1.73) (0.87)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.22 (2.03) 0.42 1.81 (0.07)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.35 $ 20.13 $ 22.16 $ 21.74 $ 19.93
- --------------------------------------------------------------------------------
Total return (d) 11.85% (3.02)% 9.47% 18.20% 4.03%
Ratio to average net assets of
(e):
Expenses, net of waivers and re-
imbursements 0.96% 0.96% 0.96% 0.96% 0.96%
Expenses, before waivers and re-
imbursements 1.52% 1.52% 1.58% 1.47% 1.49%
Net investment income, net of
waivers and reimbursements 5.27% 5.61% 5.91% 5.92% 5.93%
Net investment income, before
waivers and reimbursements 4.71% 5.05% 5.29% 5.41% 5.40%
Portfolio turnover rate 23.76% 29.29% 33.89% 54.46% 88.65%
Net assets at end of year (in
thousands) $28,568 $26,383 $34,183 $32,673 $26,947
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------
1998 1997 1996 1995(b)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $20.06 $22.14 $21.74 $22.17
Income (loss) from investment operations:
Net investment income 0.93 0.97 1.37 0.02
Net realized and unrealized gain (loss) 1.29 (1.72) 0.51 (0.08)
- ------------------------------------------------------------------------------
Total income (loss) from investment opera-
tions 2.22 (0.75) 1.88 (0.06)
- ------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (c) (0.72) (0.99) (1.48) (0.37)
Net realized gain (0.30) (0.34) -- --
- ------------------------------------------------------------------------------
Total distributions to shareholders (1.02) (1.33) (1.48) (0.37)
- ------------------------------------------------------------------------------
Net increase (decrease) 1.20 (2.08) 0.40 (0.43)
- ------------------------------------------------------------------------------
Net asset value, end of year $21.26 $20.06 $22.14 $21.74
- ------------------------------------------------------------------------------
Total return (d) 11.43% (3.38)% 9.04% (0.30)%
Ratio to average net assets of (e):
Expenses, net of waivers and reimbursements 1.35% 1.35% 1.35% 1.35%
Expenses, before waivers and reimbursements 1.91% 1.91% 1.97% 1.86%
Net investment income, net of waivers and
reimbursements 4.90% 5.36% 5.67% 3.26%
Net investment income, before waivers and
reimbursements 4.34% 4.80% 5.05% 2.75%
Portfolio turnover rate 23.76% 29.29% 33.89% 54.46%
Net assets at end of year (in thousands) $ 132 $ 91 $ 52 $ 9
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 20, 1995 (Class D shares issue date) through
November 30, 1995.
(c) Distributions to shareholders from net investment income include amounts
relating to foreign currency transactions which are treated as ordinary
income for Federal income tax purposes.
(d) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
38
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Short-Intermediate Bond Portfolio
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.36 $ 20.70 $ 20.73 $ 19.53 $ 20.33
Income (loss) from investment
operations:
Net investment income 1.84 1.46 1.14 1.02 0.97
Net realized and unrealized
gain (loss) (0.36) (0.29) (0.01) 1.19 (0.80)
- --------------------------------------------------------------------------------
Total income from investment
operations 1.48 1.17 1.13 2.21 0.17
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (1.78) (1.46) (1.16) (1.01) (0.97)
Net realized gain (0.03) (0.05) -- -- --
- --------------------------------------------------------------------------------
Total distributions to share-
holders (1.81) (1.51) (1.16) (1.01) (0.97)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.33) (0.34) (0.03) 1.20 (0.80)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 20.03 $ 20.36 $ 20.70 $ 20.73 $ 19.53
- --------------------------------------------------------------------------------
Total return (b) 7.50% 5.95% 5.68% 11.58% 0.84%
Ratio to average net assets of
(c):
Expenses, net of waivers and
reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers and
reimbursements 0.76% 0.81% 0.88% 0.91% 0.95%
Net investment income, net of
waivers and reimbursements 9.61% 7.68% 5.83% 5.14% 4.84%
Net investment income, before
waivers and reimbursements 9.21% 7.23% 5.31% 4.59% 4.25%
Portfolio turnover rate 89.97% 48.49% 47.68% 54.68% 48.67%
Net assets at end of year (in
thousands) $182,999 $201,457 $153,675 $158,678 $96,209
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------
1998 1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.31 $20.66 $20.71 $19.53 $19.82
Income (loss) from investment opera-
tions:
Net investment income 1.78 1.43 1.07 0.94 0.23
Net realized and unrealized gain
(loss) (0.40) (0.34) (0.02) 1.18 (0.29)
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.38 1.09 1.05 2.12 (0.06)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.69) (1.39) (1.10) (0.94) (0.23)
Net realized gain (0.03) (0.05) -- -- --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.72) (1.44) (1.10) (0.94) (0.23)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.34) (0.35) (0.05) 1.18 (0.29)
- -------------------------------------------------------------------------------
Net asset value, end of year $19.97 $20.31 $20.66 $20.71 $19.53
- -------------------------------------------------------------------------------
Total return (b) 7.08% 5.54% 5.22% 11.09% (0.30)%
Ratio to average net assets of (c):
Expenses, net of waivers and reim-
bursements 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waivers and reim-
bursements 1.15% 1.20% 1.27% 1.30% 1.34%
Net investment income, net of waivers
and reimbursements 9.31% 7.48% 4.96% 4.85% 4.42%
Net investment income, before waivers
and reimbursements 8.91% 7.03% 4.44% 4.30% 3.83%
Portfolio turnover rate 89.97% 48.49% 47.68% 54.68% 48.67%
Net assets at end of year (in thou-
sands) $ 824 $ 891 $ 343 $ 13 $ 1
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
See accompanying notes to financial statements.
39
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
U.S. Government Securities Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 19.99 $ 20.07 $ 20.08 $ 19.05 $ 20.07
Income (loss) from invest-
ment operations:
Net investment income 1.17 1.21 1.02 1.05 0.91
Net realized and
unrealized gain (loss) 0.26 (0.07) (0.01) 1.02 (1.02)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.43 1.14 1.01 2.07 (0.11)
- --------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.15) (1.22) (1.02) (1.04) (0.91)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.15) (1.22) (1.02) (1.04) (0.91)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.28 (0.08) (0.01) 1.03 (1.02)
- --------------------------------------------------------------------------------
Net asset value, end of
year $ 20.27 $ 19.99 $ 20.07 $ 20.08 $ 19.05
- --------------------------------------------------------------------------------
Total return (c) 7.36% 5.93% 5.15% 11.18% (0.57)%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.86% 0.85% 0.94% 1.09% 1.12%
Net investment income,
net of waivers and reim-
bursements 6.01% 5.86% 5.22% 5.43% 4.62%
Net investment income,
before waivers and reim-
bursements 5.51% 5.37% 4.64% 4.70% 3.86%
Portfolio turnover rate 115.55% 95.73% 119.75% 141.14% 45.55%
Net assets at end of year
(in thousands) $48,317 $43,073 $92,351 $56,329 $25,293
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------- ----------------------------------------
1998 1997 1996 (a) 1998 1997 1996 1995 1994 (b)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $19.98 $20.06 $ 20.13 $ 19.94 $20.03 $20.04 $19.05 $19.43
Income (loss) from in-
vestment operations:
Net investment income 1.12 1.14 0.91 1.08 1.16 0.96 0.96 0.22
Net realized and
unrealized gain (loss) 0.26 (0.04) (0.12) 0.28 (0.10) (0.03) 1.00 (0.38)
- ----------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.38 1.10 0.79 1.36 1.06 0.93 1.96 (0.16)
- ----------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) 0.28 (0.08) (0.07) 0.28 (0.09) (0.01) 0.99 (0.38)
- ----------------------------------------------------------------------------------------------
Net asset value, end of
year $20.26 $19.98 $ 20.06 $ 20.22 $19.94 $20.03 $20.04 $19.05
- ----------------------------------------------------------------------------------------------
Total return (c) 7.10% 5.67% 4.05% 6.96% 5.52% 4.77% 10.66% (0.90)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 1.10% 1.09% 1.18% 1.25% 1.24% 1.33% 1.48% 1.51%
Net investment income,
net of waivers and re-
imbursements 5.77% 5.63% 4.97% 5.55% 5.50% 4.83% 5.08% 4.65%
Net investment income,
before waivers and re-
imbursements 5.27% 5.14% 4.39% 5.05% 5.01% 4.25% 4.35% 3.89%
Portfolio turnover rate 115.55% 95.73% 119.75% 115.55% 95.73% 119.75% 141.14% 45.55%
Net assets at end of
year (in thousands) $3,942 $3,118 $ 3,535 $ 1,224 $ 312 $ 225 $ 67 $ 13
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C shares issue date) through
November 30, 1996.
(b) For the period September 15, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
40
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
U.S. Treasury Index Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.81 $ 20.60 $ 20.78 $ 18.77 $ 21.05
Income (loss) from investment op-
erations:
Net investment income 1.23 1.26 1.19 1.11 1.15
Net realized and unrealized gain
(loss) 0.97 0.20 (0.18) 2.01 (1.93)
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.20 1.46 1.01 3.12 (0.78)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (1.24) (1.25) (1.19) (1.11) (1.14)
Net realized gain -- -- -- -- (0.36)
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (1.24) (1.25) (1.19) (1.11) (1.50)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.96 0.21 (0.18) 2.01 (2.28)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.77 $ 20.81 $ 20.60 $ 20.78 $ 18.77
- --------------------------------------------------------------------------------
Total return (c) 10.92% 7.44% 5.10% 16.95% (3.80)%
Ratio to average net assets of
(d):
Expenses, net of waivers and re-
imbursements 0.26% 0.26% 0.26% 0.26% 0.26%
Expenses, before waivers and re-
imbursements 0.77% 0.82% 1.04% 0.89% 0.79%
Net investment income, net of
waivers and reimbursements 5.73% 6.36% 5.93% 5.09% 5.60%
Net investment income, before
waivers and reimbursements 5.22% 5.80% 5.15% 4.46% 5.07%
Portfolio turnover rate 69.84% 72.61% 42.49% 80.36% 52.80%
Net assets at end of year (in
thousands) $22,085 $33,839 $26,273 $17,674 $37,305
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------- -----------------------------------------
1998 (a) 1998 1997 1996 1995 1994 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 22.28 $ 20.77 $20.57 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 0.21 1.13 1.20 1.17 1.00 0.09
Net realized and
unrealized gain (loss) (0.52) 1.00 0.18 (0.24) 2.03 (0.03)
- -------------------------------------------------------------------------------
Total income from invest-
ment operations (0.31) 2.13 1.38 0.93 3.03 0.06
- -------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
- -------------------------------------------------------------------------------
Total distributions to
shareholders (0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.47) 0.97 0.20 (0.18) 1.98 (0.03)
- -------------------------------------------------------------------------------
Net asset value, end of
year $ 21.81 $ 21.74 $20.77 $20.57 $20.75 $18.77
- -------------------------------------------------------------------------------
Total return (c) (1.39)% 10.50% 7.03% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.50% 0.65% 0.65% 0.65% 0.65% 0.65%
Expenses, before waivers
and reimbursements 1.01% 1.16% 1.21% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and
reimbursements 5.22% 5.35% 6.07% 5.57% 5.41% 6.05%
Net investment income,
before waivers and
reimbursements 4.71% 4.84% 5.51% 4.79% 4.78% 5.52%
Portfolio turnover rate 69.84% 69.84% 72.61% 42.49% 80.36% 52.80%
Net assets at end of year
(in thousands) $ 17 $ 1,721 $1,707 $ 848 $ 286 $ --
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period October 7, 1998 (Class C shares issue date) through
November 30, 1998.
(b) For the period November 16, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the year. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
41
<PAGE>
The Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Balanced Portfolio
<C> <S> <C>
COMMON STOCKS--54.6%
Advertising--0.6%
11,000 Snyder Communications, Inc. $ 391
-------
Banking--1.1%
5,000 Banc One Corp. 257
3,500 First Union Corp. 213
2,400 State Street Corp. 165
4,000 Wells Fargo Co. 145
-------
780
-------
Beverages--2.1%
2,000 Anheuser-Busch Companies, Inc. 121
5,000 Coca-Cola (The) Co. 350
14,400 PepsiCo, Inc. 557
8,200 Starbucks Corp.* 378
-------
1,406
-------
Chemicals--0.3%
3,700 Du Pont (E.I.) de Nemours & Co. 217
-------
Commercial Services--0.9%
12,000 Paychex, Inc. 597
-------
Communications--0.5%
5,500 AT&T Corp. 342
-------
Computers--3.5%
8,925 Cisco Systems, Inc.* 673
11,600 Computer Sciences Corp.* 663
4,500 Dell Computer Corp.* 274
2,000 EMC Corp.* 145
3,800 International Business Machines Corp. 627
-------
2,382
-------
Cosmetics and Personal Care--1.5%
7,000 Gillette Co. 322
7,800 Procter & Gamble Co. 683
-------
1,005
-------
Diversified Financial Services--4.5%
2,100 American Express Co. 210
14,900 Fannie Mae 1,084
12,500 Freddie Mac 756
6,000 MBNA Corp. 136
1,200 Merrill Lynch & Co. 90
5,000 Price (T. Rowe) Associates 179
11,000 Schwab (Charles) Corp. 620
-------
3,075
-------
Electric--0.5%
4,000 Cinergy Corp. 138
3,500 Duke Energy Corp. 219
-------
357
-------
Electrical Components and Equipment--0.7%
7,500 Emerson Electric Co. 488
-------
Electronics--0.7%
7,000 Solectron Corp.* 463
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Food--0.3%
3,000 Albertson's Inc. $ 171
-------
Health Care--3.2%
6,000 Becton, Dickinson & Co. 255
1,000 Guidant Corp. 86
28,725 Health Management Associates, Inc., Class A* 623
6,200 Johnson & Johnson Co. 504
10,400 Medtronic, Inc. 703
-------
2,171
-------
Housewares--0.6%
10,000 Newell Co. 443
-------
Insurance--2.3%
3,200 Allstate Corp. 130
10,650 American International Group, Inc. 1,001
4,900 MBIA, Inc. 317
2,000 Nationwide Financial Services 96
-------
1,544
-------
Leisure Time--0.7%
13,000 Carnival Corp., Class A 449
-------
Media--1.0%
4,900 Disney (Walt) Co. 158
8,300 Fox Entertainment Group, Inc.* 196
30,200 Time Warner, Inc. 338
-------
692
-------
Miscellaneous Manufacturing--2.1%
12,400 General Electric Co. 1,121
5,000 Tyco International Ltd. 329
-------
1,450
-------
Office and Business Equipment--1.3%
14,000 Pitney Bowes, Inc. 784
1,200 Xerox Corp. 129
-------
913
-------
Oil and Gas Producers--3.9%
6,000 Chevron Corp. 502
14,000 Conoco, Inc.* 332
11,400 Exxon Corp. 856
3,700 Mobil Corp. 319
13,800 Royal Dutch Petroleum Co. 649
-------
2,658
-------
Oil and Gas Services--0.6%
9,600 Schlumberger Ltd. ADR 429
-------
Pharmaceuticals--5.9%
2,800 Bristol-Myers Squibb Co. 343
9,000 Cardinal Health, Inc. 618
6,000 Elan Corp. PLC ADR* 409
3,700 Eli Lilly & Co. 332
4,900 Merck & Co., Inc. 759
4,900 Pfizer, Inc. 547
1,700 Schering-Plough Corp. 181
10,800 Warner-Lambert Co. 815
-------
4,004
-------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
Retail--6.7%
6,300 Dayton Hudson Corp. $ 284
2,500 Gap, Inc. 184
19,300 Home Depot (The), Inc. 960
4,100 Kohls Corp.* 202
21,050 Staples, Inc.* 735
19,000 Walgreen Co. 1,020
15,500 Wal-Mart Stores, Inc. 1,167
-------
4,552
-------
Semiconductors--1.4%
5,900 Intel Corp. 635
2,500 Motorola, Inc. 155
1,800 Texas Instruments, Inc. 137
-------
927
-------
Software--1.9%
9,500 Microsoft Corp.* 1,159
4,000 Oracle Corp.* 137
-------
1,296
-------
Telecommunication Equipment--1.5%
6,000 Lucent Technologies, Inc. 516
1,000 Nokia OYJ 98
8,000 Tellabs, Inc.* 433
-------
1,047
-------
Telephone--2.4%
10,200 Ameritech Corp. 552
5,400 Bell Atlantic Corp. 300
2,000 Bellsouth Corp. 175
5,000 MCI WORLDCOM, Inc.* 295
7,000 SBC Communications, Inc. 336
-------
1,658
-------
Textiles--0.5%
6,400 Cintas Corp. 352
-------
Tobacco--1.4%
12,700 Phillip Morris Co., Inc. 710
6,000 UST, Inc. 209
-------
919
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $23,107) $37,178
- -------------------------------------------------------------------------------
PREFERRED STOCK--1.4%
Agency--1.4%
1,000 Home Ownership Funding Corp. $ 974
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $1,000) $ 974
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.4%
Automotive--2.7%
Chevy Chase Auto Receivables Trust, Series 1997-4, Class A
$ 686 6.25%Due 6/15/04 $ 691
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
Olympic Automobile Receivable Trust, Series 1996-D, Class
A-4
$ 600 6.05%Due 8/15/02 $ 605
Western Financial Grantor Trust, Series 1994-4, Class A-1
25 7.10Due 1/11/00 25
Series 1995-5, Class A-1
182 5.875Due 3/1/02 183
Western Financial Owner Trust, Series 1997-A, Class A-3
307 6.50Due 9/20/01 311
-------
1,815
-------
Credit Card--1.5%
Circuit City Credit Card Master Trust, Series 1994-2,
Class A
1,000 8.00Due 11/15/03 1,026
-------
Home Equity Loans--0.2%
The Money Store Trust, Series 1997-1
161 7.36Due 5/16/01 161
- ------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (Cost $2,988) $ 3,002
- ------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--2.4%
Donaldson, Lufkin & Jenrette
Mortgage Acceptance Corp.,
Series 1994-Q8, Class 2-A1
$ 199 7.25%Due 5/25/24 $ 202
Financial Asset Securitization, Inc.,
Series 1997-NAMC, Class FXA-3
240 7.35Due 4/25/27 239
First Union-Lehman Brothers-Bank of America Commercial
Mortgage Trust, Series 1998-C2, Class A2
510 6.56Due 5/15/07 527
Mortgage Capital Funding, Inc. Commercial Mortgage Backed
Security, Series 1998-MC1, Class A2
605 7.00Due 1/18/08 636
- ------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $1,562) $1,604
- ------------------------------------------------------------------------------
CORPORATE AND FOREIGN GOVERNMENT BONDS--8.7%
Financial--3.6%
Lehman Brothers Holdings, Inc.
Medium Term Note
$ 305 6.90%Due 1/29/01 $ 310
Lumbermens Mutual Casualty Co.
460 9.15Due 7/1/26 542
90 8.45Due 12/1/97 92
Ford Motor Credit Co.
800 6.00Due 1/14/03 812
Salomon, Inc. Medium Term Note
650 6.65Due 7/15/01 667
-------
2,423
-------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
The Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------
Balanced Portfolio--Continued
<C> <S> <C>
Industrial--1.2%
Penney (J.C.), Inc.
$ 830 6.90%Due 8/15/26, putable 08/15/03 $ 858
-------
Sanitary Services--1.7%
WMX Technologies, Inc.
285 8.25Due 11/15/99 292
800 7.10Due 8/1/26, putable 08/01/03 849
-------
1,141
-------
Sovereign--1.0%
Quebec Province, Canada Medium Term Note
600 7.22Due 7/22/36, putable 7/22/06 and 7/22/16 695
-------
Utility--1.2%
Tenaga Nasional Berhad
1,000 7.20Due 4/29/07, putable 4/29/02 825
- -------------------------------------------------------------------
TOTAL CORPORATE AND FOREIGN GOVERNMENT BONDS (Cost
$5,943) $ 5,942
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--4.3%
Fannie Mae REMIC Trust--2.5%
Series 1991-37, Class G
$ 27 8.15%Due 8/25/05 $ 27
Series 1996-M4, Class A
190 7.75Due 3/17/17 195
Series 92-200, Class E
236 6.25Due 6/25/17 236
Pool #440700
1,313 6.00Due 11/1/28 1,296
-------
1,754
-------
Freddie Mac REMIC Trust--1.8%
Pool #G00767
620 7.50Due 8/1/27 636
Pool #C18079
571 6.00Due 11/1/28 564
-------
1,200
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $2,938) $ 2,954
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--13.1%
U.S. Treasury Notes--13.1%
$ 700 5.625%Due 10/31/99 $ 706
500 7.75Due 1/31/00 517
1,925 7.75Due 2/15/01 2,050
1,470 6.625Due 7/31/01 1,542
2,475 7.50Due 2/15/05 2,835
1,300 3.625Due 1/15/08 1,306
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $8,849) $ 8,956
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ----------------------------------------------
<C> <S> <C>
FLOATING RATE BANK NOTES--1.9%
Lloyds Bank PLC
$ 800 6.00%Due 12/15/98 $ 661
National Westminster Bank
800 5.375Due 11/30/98 633
- ----------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,417) $ 1,294
- ----------------------------------------------
SHORT-TERM INVESTMENT--8.5%
Societe Generale, Paris
$5,828 5.375%Due 12/1/98 $ 5,828
- ----------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$5,828) $ 5,828
- ----------------------------------------------
TOTAL INVESTMENTS--99.3%
(Cost $53,632) $67,732
- ----------------------------------------------
Other assets, less liabilities--0.7% 448
- ----------------------------------------------
NET ASSETS--100.0% $68,180
- ----------------------------------------------
- ----------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
44
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Diversified Growth Portfolio
<C> <S> <C>
COMMON STOCKS--94.6%
Advertising--1.4%
14,000 Interpublic Group of Cos., Inc. $ 963
44,100 Snyder Communications, Inc. 1,567
-------
2,530
-------
Banking--2.4%
23,000 Banc One Corp. 1,180
6,000 Fifth Third Bancorp 398
17,500 First Union Corp. 1,063
9,200 State Street Corp. 631
26,000 Wells Fargo & Co. 936
-------
4,208
-------
Beverages--3.5%
14,000 Anheuser-Busch Cos., Inc. 849
28,000 Coca-Cola (The) Co. 1,962
40,800 PepsiCo, Inc. 1,578
42,000 Starbucks Corp.* 1,936
-------
6,325
-------
Chemicals--0.6%
18,000 du Pont (E.I.) de Nemours & Co. 1,058
-------
Commercial Services--2.0%
33,400 Cintus Corp. 1,837
35,000 Paycheck, Inc. 1,741
-------
3,578
-------
Computers--5.9%
41,175 Cisco Systems, Inc.* 3,104
44,800 Computer Sciences Corp.* 2,559
21,600 Dell Computer Corp.* 1,314
10,500 EMC Corp. 761
17,500 International Business Machines Corp. 2,888
-------
10,626
-------
Consumer Products--2.5%
64,000 Philip Morris Cos., Inc. 3,580
28,000 UST, Inc. 973
-------
4,553
-------
Cosmetics and Personal Care--2.2%
26,000 Gillette Co. 1,194
31,500 Procter & Gamble Co. 2,759
-------
3,953
-------
Diversified Financial Services--7.3%
12,600 American Express Co. 1,261
65,700 Fannie Mae 4,779
56,000 Freddie Mac 3,388
23,000 MBNA Corp. 522
6,800 Merrill Lynch & Co. 510
18,000 Price (T. Rowe) Associates, Inc. 644
34,000 Schwab (Charles) Corp. 1,917
-------
13,021
-------
Electric--1.0%
22,000 Cinergy Corp. 760
17,000 Duke Energy Corp. 1,064
-------
1,824
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Electrical Components and Equipment--0.9%
25,000 Emerson Electric Co. $ 1,625
-------
Electronics--0.8%
22,000 Solectron Corp.* 1,456
-------
Health Care--4.6%
34,000 Becton Dickinson & Co. 1,445
5,500 Guidant Corp. 472
87,800 Health Management Associates, Inc., Class A* 1,904
30,000 Johnson & Johnson Co. 2,438
28,000 Medtronic, Inc. 1,895
-------
8,154
-------
Housewares--0.9%
36,700 Newell Co. 1,624
-------
Insurance--4.2%
20,000 Allstate Corp. 815
48,775 American International Group, Inc. 4,584
26,800 MBIA, Inc. 1,735
8,000 Nationwide Financial Services, Class A 385
-------
7,519
-------
Leisure Time--1.0%
53,800 Carnival Corp., Class A 1,856
-------
Media--2.2%
38,000 Disney (The Walt) Co. 1,223
50,200 Fox Entertainment Group, Inc.* 1,186
15,000 Time Warner, Inc. 1,586
-------
3,995
-------
Miscellaneous Manufacturing--3.9%
61,500 General Electric Co. 5,566
21,800 Tyco International Ltd. 1,435
-------
7,001
-------
Office and Business Equipment--0.4%
6,500 Xerox Corp. 699
-------
Oil and Gas Producers--10.5%
32,000 Chevron Corp. 2,676
72,000 Conoco, Inc.* 1,706
60,800 Exxon Corp. 4,564
54,700 Mobil Corp. 4,714
63,800 Royal Dutch Petroleum Co. ADR 2,999
48,800 Schlumberger Ltd. ADR 2,181
-------
18,840
-------
Pharmaceuticals--10.0%
19,000 Bristol-Myers Squibb Co. 2,329
27,000 Cardinal Health, Inc. 1,853
31,000 Elan Corp. PLC* 2,112
24,000 Lilly (Eli) & Co. 2,153
24,400 Merck & Co., Inc. 3,779
27,000 Pfizer, Inc. 3,014
11,800 Schering-Plough Corp. 1,255
18,000 Warner-Lambert Co. 1,359
-------
17,854
-------
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
Diversified Growth Portfolio--Continued
<C> <S> <C>
Retail--9.9%
14,000 Albertson's, Inc. $ 799
34,000 Dayton-Hudson Corp. 1,530
14,000 Gap (The), Inc. 1,030
72,100 Home Depot (The), Inc. 3,587
36,000 Kohl's Corp.* 1,771
53,775 Staples, Inc.* 1,879
48,000 Walgreen Co. 2,577
62,700 Wal-Mart Stores, Inc. 4,722
--------
17,895
--------
Semiconductors--2.7%
32,800 Intel Corp. 3,530
11,000 Motorola, Inc. 682
7,500 Texas Instruments, Inc. 573
--------
4,785
--------
Software--3.6%
47,000 Microsoft Corp.* 5,734
19,000 Oracle Corp.* 651
--------
6,385
--------
Telecommunication Equipment--2.6%
30,000 Lucent Technologies, Inc. 2,582
4,000 Nokia OYJ 392
30,000 Tellabs, Inc.* 1,622
--------
4,596
--------
Telephone--7.6%
48,000 Ameritech Corp. 2,598
32,700 AT&T Corp. 2,037
28,600 Bell Atlantic Corp. 1,591
34,000 BellSouth Corp. 2,967
33,000 MCI WORLDCOM, Inc.* 1,947
50,000 SBC Communications, Inc. 2,397
--------
13,537
- -----------------------------------------------------------
TOTAL COMMON STOCKS (Cost
$101,757) $169,497
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
OTHER INVESTMENT--0.9%
$14,000 Standard and Poor's 500 Depository Receipt Unit Trust,
Series I 1,626
- -----------------------------------------------------------------------------
TOTAL OTHER INVESTMENT
(Cost $1,557) $ 1,626
- -----------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
$365 U.S. Treasury Bill #
4.57% Due 1/28/99 $ 362
- -----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION (Cost $361) $ 362
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENT--4.3%
$7,649 Societe Generale, Paris, France
5.375% Due 12/1/98 $ 7,649
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $7,649) $ 7,649
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $111,324) $179,134
- -----------------------------------------------------------------------------
Liabilities, less other assets--0.0% (65)
- -----------------------------------------------------------------------------
NET ASSETS--100.0% $179,069
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS:
Number
of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P
500 24 $ 6,975 Long 12/18/98 $ 348
- --------------------------------------------------------
</TABLE>
*Non-income producing security.
#Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
Equity Index Portfolio
<C> <S> <C>
COMMON STOCKS--98.9%
Advertising--0.2%
18,900 Interpublic Group Cos., Inc. $ 1,299
23,600 Omnicom Group, Inc. 1,261
--------
2,560
--------
Aerospace and Defense--1.5%
78,100 AlliedSignal, Inc. 3,436
140,600 Boeing (The) Co. 5,712
17,600 General Dynamics Corp. 1,022
10,300 Goodrich (B.F.) Co. 391
27,254 Lockheed Martin Corp.* 2,828
9,600 Northrop Grumman Corp. 780
47,100 Raytheon Co., Class B 2,608
31,700 United Technologies Corp. 3,398
--------
20,175
--------
Airlines--0.3%
25,400 AMR Corp.* 1,675
21,100 Delta Air Lines, Inc. 1,133
46,675 Southwest Airlines Co. 1,004
13,100 U.S. Airways Group, Inc.* 681
--------
4,493
--------
Apparel--0.2%
10,000 Fruit of the Loom, Inc., Class A* 147
9,200 Liz Clairborne, Inc. 312
40,000 Nike, Inc. Class B 1,600
7,900 Reebok International Ltd.* 126
5,000 Russell Corp. 119
16,900 VF Corp. 829
--------
3,133
--------
Auto Manufacturers--1.2%
168,600 Ford Motor Co. 9,315
91,000 General Motors Corp. 6,370
9,320 Navistar International Corp.* 241
10,920 PACCAR, Inc. 497
--------
16,423
--------
Auto Parts and Equipment--0.3%
10,800 Cooper Tire & Rubber Co. 211
22,984 Dana Corp. 896
24,875 Genuine Parts Co. 819
21,800 Goodyear Tire & Rubber (The) Co. 1,237
17,000 TRW, Inc. 936
--------
4,099
--------
Banks--6.9%
104,000 Bank of New York Co., Inc. 3,562
162,942 Bank One Corp. 8,361
241,786 BankAmerica Corp. 15,761
40,900 BankBoston Corp. 1,702
13,400 Bankers Trust Corp. 1,166
39,800 BB&T Corp. 1,470
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
119,192 Chase Manhattan Corp. $ 7,561
21,600 Comerica, Inc. 1,393
37,275 Fifth Third Bancorp 2,474
134,856 First Union Corp. 8,192
79,002 Fleet Financial Group, Inc. 3,293
29,450 Huntington Bancshares, Inc. 872
61,200 KeyCorp 1,878
36,300 Mellon Bank Corp. 2,285
21,100 Mercantile Bancorp, Inc. 930
24,600 Morgan (J.P.) & Co., Inc. 2,629
45,900 National City Corp. 3,087
42,000 PNC Bank Corp. 2,166
29,800 Regions Financial Corp. 1,155
15,000 Republic New York Corp. 701
22,500 State Street Corp. 1,544
24,200 Summit Bancorp 1,012
29,100 SunTrust Banks, Inc. 2,032
36,600 Synovus Financial Corp. 807
103,417 U.S. Bancorp 3,807
17,700 Union Planters Corp. 843
28,800 Wachovia Corp. 2,515
225,060 Wells Fargo & Co.* 8,102
--------
91,300
--------
Beverages--3.0%
67,100 Anheuser-Busch Cos., Inc. 4,068
9,600 Brown-Forman Corp., Class B 698
343,100 Coca-Cola (The) Co. 24,038
56,300 Coca-Cola Enterprises 2,129
5,100 Coors (Adolph) Co., Class B 254
204,900 PepsiCo, Inc. 7,927
--------
39,114
--------
Biotechnology--0.6%
35,300 Amgen, Inc. 2,656
83,600 Monsanto Co. 3,788
33,600 Pioneer Hi-Bred International, Inc. 1,006
--------
7,450
--------
Building Materials--0.2%
5,600 Armstrong World Industries, Inc. 373
47,300 Masco Corp. 1,366
7,500 Owens Corning Corp. 280
--------
2,019
--------
Chemicals--1.5%
32,200 Air Products & Chemicals, Inc. 1,228
31,200 Dow Chemical Co. 3,038
157,500 Du Pont (E.I.) de Nemours & Co. 9,253
11,075 Eastman Chemical Co. 642
20,087 Engelhard Corp. 388
8,200 Great Lakes Chemical Corp. 327
13,200 Hercules, Inc. 434
18,100 Morton International Inc. 533
9,200 Nalco Chemical Co. 308
22,000 Praxair, Inc. 840
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
24,800 Rohm & Haas Co. $ 866
24,100 Sherwin-Williams Co. 684
14,000 Sigma-Aldrich Corp. 450
18,800 Union Carbide Corp. 841
10,600 W.R. Grace & Company* 175
--------
20,007
--------
Commercial Services--0.6%
14,000 H & R Block, Inc. 629
119,411 Cendant Corp.* 2,269
11,200 Deluxe Corp. 389
23,800 Dun & Bradstreet (The) Corp. 718
18,000 Ecolab, Inc. 557
20,600 Equifax, Inc. 855
22,700 Paychex, Inc. 1,129
35,800 Service Corp. International 1,338
--------
7,884
--------
Computers--6.6%
49,900 3Com Corp.* 1,931
18,700 Apple Computer, Inc.* 597
30,000 Ascend Communications, Inc.* 1,686
22,900 Cabletron Systems, Inc.* 321
10,100 Ceridian Corp.* 657
216,375 Cisco Systems, Inc.* 16,309
232,557 Compaq Computer Corp. 7,558
22,000 Computer Sciences Corp.* 1,257
6,900 Data General Corp.* 125
176,100 Dell Computer Corp.* 10,709
68,500 Electronic Data Systems Corp. 2,671
69,500 EMC Corp.* 5,039
21,700 Gateway 2000, Inc.* 1,218
144,600 Hewlett-Packard Co. 9,074
129,800 International Business Machines Corp. 21,417
33,800 Seagate Technology, Inc.* 997
26,300 Silicon Graphics, Inc.* 322
52,700 Sun Microsystems, Inc.* 3,903
35,400 Unisys Corp.* 1,009
--------
86,800
--------
Cosmetics and Personal Care--2.5%
7,700 Alberto-Culver Co., Class B 197
36,600 Avon Products, Inc. 1,487
41,100 Colgate-Palmolive Co. 3,519
156,200 Gillette Co. 7,175
14,900 International Flavors & Fragrances, Inc. 624
76,184 Kimberly-Clark Corp. 4,009
186,600 Procter & Gamble Co. 16,351
--------
33,362
--------
Diversified Financial Services--5.0%
63,500 American Express Co. 6,354
48,207 Associates First Capital Corp., Class A 3,754
15,800 Bear Stearns Cos., Inc. 664
9,200 Capital One Financial Corp. 1,012
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
318,087 Citigroup, Inc.* $ 15,964
15,500 Countrywide Credit Industries, Inc. 767
144,300 Fannie Mae 10,498
35,200 Franklin Resources, Inc. 1,505
94,400 Freddie Mac 5,711
68,499 Household International, Inc. 2,680
16,500 Lehman Brothers Holdings, Inc. 824
104,630 MBNA Corp. 2,374
48,500 Merrill Lynch & Co., Inc. 3,637
81,449 Morgan Stanley, Dean Witter & Co. 5,681
13,200 Providian Financial Corp. 1,212
37,150 Schwab (Charles) Corp. 2,094
23,300 SLM Holding Corp. 1,025
--------
65,756
--------
Electric--2.5%
24,500 AES Corp.* 1,121
19,100 Ameren Corp. 787
26,600 American Electric Power Co. 1,234
20,700 Baltimore Gas & Electric Co. 635
21,100 Carolina Power & Light Co. 979
29,600 Central & South West Corp. 814
22,010 Cinergy Corp. 761
32,500 Consolidated Edison Co. of New York, Inc. 1,651
27,300 Dominion Resources, Inc. 1,261
20,200 DTE Energy Co. 881
50,243 Duke Energy Corp. 3,143
49,200 Edison International 1,353
34,300 Entergy Corp. 1,005
33,000 FirstEnergy Corporation 1,021
25,200 FPL Group, Inc. 1,544
17,800 GPU, Inc. 780
41,218 Houston Industries, Inc. 1,304
15,500 New Century Energies, Inc. 745
26,100 Niagara Mohawk Power Corp.* 401
21,100 Northern States Power Co. 574
41,400 PacifiCorp 776
31,000 Peco Energy Co. 1,244
53,200 PG&E Corp. 1,646
21,000 PP&L Resources, Inc. 574
32,300 Public Service Enterprise Group, Inc. 1,260
97,100 Southern Co. 2,864
38,912 Texas Utilities Co. 1,734
30,200 Unicom Corp. 1,138
--------
33,230
--------
Electrical Components and Equipment--0.3%
61,300 Emerson Electric Co. 3,985
--------
Electronics--0.4%
30,456 AMP, Inc. 1,473
6,400 EG&G, Inc. 179
17,600 Honeywell, Inc. 1,407
11,800 Johnson Controls, Inc. 683
6,100 Millipore Corp. 172
15,425 Parker Hannifin Corp. 536
6,800 Perkin-Elmer Corp. 634
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
6,600 Tektronix, Inc. $ 177
7,900 Thomas & Betts Corp. 342
--------
5,603
--------
Engineering and Construction--0.0%
11,000 Fluor Corp. 471
5,700 Foster Wheeler Corp. 98
--------
569
--------
Entertainment--0.0%
14,100 Harrah's Entertainment, Inc.* 219
25,000 Mirage Resorts, Inc.* 372
--------
591
--------
Environmental Control--0.3%
24,200 Browning-Ferris Industries, Inc. 714
79,585 Waste Management, Inc. 3,412
--------
4,126
--------
Food--2.8%
34,200 Albertson's, Inc. 1,952
38,200 American Stores Co. 1,282
83,370 Archer-Daniels-Midland Co. 1,532
40,000 Bestfoods 2,325
62,500 Campbell Soup Co. 3,570
67,900 ConAgra, Inc. 2,135
21,500 General Mills, Inc. 1,623
5,300 Great Atlantic & Pacific Tea Co., Inc. 145
50,400 Heinz (H.J.) Co. 2,939
19,900 Hershey Foods Corp. 1,338
56,600 Kellogg Co. 2,073
35,700 Kroger Co.* 1,894
19,900 Quaker Oats Co. 1,166
43,400 Ralston-Ralston Purina Group 1,511
67,700 Safeway, Inc.* 3,575
65,000 Sara Lee Corp. 3,794
16,800 Supervalu, Inc. 434
47,000 Sysco Corp. 1,266
20,700 Winn-Dixie Stores, Inc. 834
16,200 Wrigley (W.M.) Jr. Co. 1,428
--------
36,816
--------
Forest Products and Paper--0.7%
7,800 Boise Cascade Corp. 247
13,300 Champion International Corp. 553
30,700 Fort James Corp. 1,201
13,000 Georgia-Pacific Corp. 738
42,735 International Paper Co. 1,856
15,300 Louisiana-Pacific Corp. 260
14,400 Mead Corp. 437
4,000 Potlatch Corp. 151
396 Smurfit-Stone Container Corp. 6
7,700 Temple-Inland, Inc. 413
9,600 Union Camp Corp. 621
14,050 Westvaco Corp. 395
27,700 Weyerhaeuser Co. 1,388
15,500 Willamette Industries, Inc. 542
--------
8,808
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Gas--0.1%
3,100 Eastern Enterprises $ 126
6,600 NICOR, Inc. 278
4,400 ONEOK, Inc. 153
4,900 Peoples Energy Corp. 185
33,493 Sempra Energy* 839
--------
1,581
--------
Hand and Machine Tools--0.2%
12,900 Black & Decker Corp. 699
13,600 Grainger (W.W.), Inc. 575
5,500 Milacron, Inc. 111
8,200 Snap-On, Inc. 279
12,400 Stanley Works (The) 379
--------
2,043
--------
Health Care--2.7%
9,100 Allergan, Inc. 554
7,800 Bard (C.R.), Inc. 357
7,800 Bausch & Lomb, Inc. 433
39,700 Baxter International, Inc. 2,523
34,400 Becton, Dickinson & Co. 1,462
15,600 Biomet, Inc. 597
27,200 Boston Scientific Corp.* 1,346
89,795 Columbia/HCA Healthcare Corp. 2,211
21,000 Guidant Corp. 1,802
58,800 HEALTHSOUTH Corp.* 790
23,200 Humana, Inc.* 460
187,100 Johnson & Johnson 15,202
10,200 Mallinckrodt, Inc. 330
15,050 Manor Care, Inc.* 478
65,300 Medtronic, Inc. 4,420
11,700 St. Jude Medical, Inc.* 340
42,900 Tenet Healthcare Corp.* 1,268
27,200 United Healthcare Corp. 1,227
--------
35,800
--------
Holding Companies--Diversified--0.1%
48,200 Seagram (The) Co. Ltd. 1,654
--------
Home Builders--0.1%
8,300 Centex Corp. 296
4,800 Fleetwood Enterprises Inc. 162
5,500 Kaufman & Broad Home Corp. 139
6,000 Pulte Corp. 153
--------
750
--------
Home Furnishings--0.1%
12,700 Maytag Corp. 687
10,600 Whirlpool Corp. 594
--------
1,281
--------
Household Products and Wares--0.9%
9,800 American Greetings Corp., Class A 415
16,300 Avery-Dennison Corp. 781
14,500 Clorox Co. 1,610
24,000 Fortune Brands, Inc. 818
5,100 Jostens, Inc. 120
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
12,300 Moore Corp. Ltd. $ 135
20,900 Rubbermaid, Inc. 691
8,000 Tupperware Corp. 140
89,100 Unilever N.V., New York Shares 6,889
--------
11,599
--------
Housewares--0.1%
22,600 Newell Co. 1,000
--------
Insurance--3.9%
20,057 Aetna, Inc. 1,551
115,330 Allstate Corp. 4,700
35,170 American General Corp. 2,477
146,068 American International Group, Inc. 13,730
23,500 AON Corp. 1,354
23,000 Chubb (The) Corp. 1,611
29,500 CIGNA Corp. 2,295
23,300 Cincinnati Financial Corp. 910
43,463 Conseco, Inc. 1,440
10,500 General Re Corp. 2,452
32,500 Hartford Financial Services Group, Inc. 1,794
14,737 Jefferson-Pilot Corp. 1,006
14,000 Lincoln National Corp. 1,172
16,000 Loews Corp. 1,600
35,550 Marsh & McLennan Cos., Inc. 2,069
13,800 MBIA, Inc. 894
15,800 MGIC Investment Corp. 694
10,100 Progressive Corp. 1,499
18,800 Provident Companies, Inc. 723
19,600 SAFECO Corp. 842
32,844 St. Paul Cos., Inc. 1,158
28,800 SunAmerica, Inc. 2,282
19,500 Torchmark Corp. 741
8,700 Transamerica Corp. 924
19,200 UNUM Corp. 1,034
--------
50,952
--------
Iron and Steel--0.1%
27,427 Allegheny Teledyne, Inc. 564
500 Armco, Inc. 2
18,000 Bethlehem Steel Corp.* 149
12,300 Nucor Corp. 517
12,300 USX-U.S. Steel Group, Inc. 301
--------
1,533
--------
Leisure Time--0.0%
13,800 Brunswick Corp. 304
--------
Lodging--0.1%
36,300 Hilton Hotels Corp. 790
34,800 Marriott International, Inc. 1,022
--------
1,812
--------
Machinery--Construction and Mining--0.2%
10,400 Case Corp. 252
50,800 Caterpillar, Inc. 2,511
6,600 Harnischfeger Industries, Inc. 66
--------
2,829
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
Machinery--Diversified--0.3%
3,400 Briggs & Stratton Corp. $ 171
5,400 Cummins Engine Co., Inc. 200
34,100 Deere & Co. 1,191
31,000 Dover Corp. 1,104
22,950 Ingersoll-Rand Co. 1,074
8,200 McDermott International, Inc. 220
1,100 NACCO Industries, Inc., Class A 96
23,100 Thermo Electron Corp.* 390
--------
4,446
--------
Media--3.3%
99,600 CBS Corp.* 2,969
34,600 Clear Channel Communications, Inc.* 1,618
51,400 Comcast Corp., Class A 2,499
285,100 Disney (The Walt) Co. 9,177
19,400 Donnelley (R.R.) & Sons Co. 823
13,000 Dow Jones & Co., Inc. 622
39,600 Gannett Co., Inc. 2,557
10,200 King World Productions, Inc.* 278
11,000 Knight-Ridder, Inc. 566
13,800 McGraw-Hill Cos., Inc. 1,235
84,800 MediaOne Group, Inc.* 3,434
7,300 Meredith Corp. 283
26,400 New York Times Co., Class A 820
72,800 Tele-Communications, Inc., Class A 3,076
83,400 Time Warner, Inc. 8,820
12,100 Times Mirror Co., Class A 709
17,000 Tribune Co. 1,090
49,800 Viacom, Inc., Class B* 3,315
--------
43,891
--------
Metal Fabricate and Hardware--0.0%
8,700 Timken (The) Co. 167
13,475 Worthington Industries, Inc. 164
--------
331
--------
Metals--Diversified--0.4%
31,700 Alcan Aluminium Ltd. 844
26,000 Aluminum Co. of America 1,927
5,500 ASARCO, Inc. 107
25,000 Freeport-McMoRan Copper & Gold, Inc., Class B 327
23,100 Inco Ltd. 267
8,200 Phelps Dodge Corp. 465
34,800 Placer Dome, Inc. 507
10,000 Reynolds Metals Co. 549
--------
4,993
--------
Mining--0.2%
51,900 Barrick Gold Corp. 1,038
32,000 Battle Mountain Gold Co. 150
13,050 Cyprus Amax Minerals Co. 148
29,400 Homestake Mining Co. 316
23,297 Newmont Mining Corp. 463
--------
2,115
--------
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
Miscellaneous Manufacturing--5.1%
3,900 Aeroquip-Vickers, Inc. $ 142
16,200 Cooper Industries, Inc. 796
32,300 Corning, Inc. 1,296
9,600 Crane Co. 310
18,600 Danaher Corp. 849
44,900 Eastman Kodak Co. 3,258
9,900 Eaton Corp. 676
4,800 FMC Corp.* 279
452,700 General Electric Co. 40,969
34,800 Illinois Tool Works, Inc. 2,212
16,500 ITT Industries, Inc. 594
56,200 Minnesota Mining & Manufacturing Co. 4,514
5,800 National Service Industries, Inc. 224
17,266 Pall Corp. 401
6,100 Polaroid Corp. 130
24,600 PPG Industries, Inc. 1,505
11,700 Raychem Corp. 399
23,600 Tenneco, Inc. 841
22,800 Textron, Inc. 1,771
89,644 Tyco International Ltd. 5,900
--------
67,066
--------
Office and Business Equipment--0.6%
11,100 Harris Corp. 421
38,200 Pitney Bowes, Inc. 2,139
45,700 Xerox Corp. 4,913
--------
7,473
--------
Oil and Gas Producers--6.2%
12,700 Amerada Hess Corp. 705
132,800 Amoco Corp. 7,827
16,700 Anadarko Petroleum Corp. 471
13,700 Apache Corp. 315
10,600 Ashland, Inc. 515
44,700 Atlantic Richfield Co. 2,973
24,652 Burlington Resources, Inc. 878
91,100 Chevron Corp. 7,618
29,600 Coastal Corp. 1,032
339,300 Exxon Corp. 25,469
7,000 Helmerich & Payne, Inc. 121
6,600 Kerr-McGee Corp. 261
108,800 Mobil Corp. 9,377
49,100 Occidental Petroleum Corp. 994
14,800 Oryx Energy Co.* 204
6,600 Pennzoil Co. 245
36,000 Phillips Petroleum Co. 1,512
11,900 Rowan Cos., Inc.* 117
298,400 Royal Dutch Petroleum Co. 14,025
13,000 Sunoco, Inc. 440
74,600 Texaco, Inc. 4,294
34,976 Union Pacific Resources Group, Inc. 391
33,600 Unocal Corp. 1,138
42,800 USX-Marathon Group, Inc. 1,214
--------
82,136
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
Oil and Gas Services--0.5%
44,240 Baker Hughes, Inc. $ 810
61,100 Halliburton Co. 1,795
75,700 Schlumberger Ltd. 3,383
--------
5,988
--------
Packaging and Containers--0.2%
4,200 Ball Corp. 180
7,400 Bemis Co. 280
17,300 Crown Cork & Seal Co., Inc. 584
21,600 Owens-Illinois, Inc.* 694
11,606 Sealed Air Corp.* 512
--------
2,250
--------
Pharmaceuticals--9.3%
214,300 Abbott Laboratories 10,286
12,000 ALZA Corp.* 627
183,100 American Home Products Corp. 9,750
138,400 Bristol-Myers Squibb Co. 16,963
27,850 Cardinal Health, Inc. 1,911
153,196 Lilly (Eli) & Co. 13,740
165,700 Merck & Co., Inc. 25,663
181,800 Pfizer, Inc. 20,293
70,720 Pharmacia & Upjohn, Inc. 3,682
102,100 Schering-Plough Corp. 10,861
114,200 Warner-Lambert Co. 8,622
--------
122,398
--------
Pipelines--0.5%
11,600 Columbia Energy Group 658
13,300 Consolidated Natural Gas Co. 722
45,800 Enron Corp. 2,407
15,300 Sonat, Inc. 454
59,100 Williams (The) Cos., Inc. 1,703
--------
5,944
--------
Retail--6.1%
21,300 Autozone, Inc.* 642
13,900 Circuit City Stores, Inc. 503
15,200 Consolidated Stores Corp.* 327
30,103 Costco Cos., Inc.* 1,889
54,200 CVS Corp. 2,676
19,400 Darden Restaurants, Inc. 307
61,100 Dayton-Hudson Corp. 2,750
15,400 Dillards, Inc., Class A 529
25,700 Dollar General 612
29,300 Federated Department Stores, Inc.* 1,221
21,400 Fred Meyer, Inc.* 1,089
54,700 Gap (The), Inc. 4,024
9,900 Harcourt General, Inc. 512
204,500 Home Depot (The), Inc. 10,174
18,900 IKON Office Solutions, Inc. 184
68,500 KMart Corp.* 1,045
22,000 Kohl's Corp.* 1,082
31,700 Limited (The), Inc. 917
5,400 Longs Drug Stores, Inc. 192
48,900 Lowe's Cos., Inc. 2,066
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
32,100 MAY Department Stores Co. $ 1,936
95,300 McDonald's Corp. 6,677
20,700 Nordstrom, Inc. 771
35,200 Penney (J.C.) Co., Inc. 1,936
8,900 Pep Boys-Manny, Moe & Jack 126
36,000 Rite Aid Corp. 1,670
54,600 Sears, Roebuck & Co. 2,590
40,000 Staples, Inc.* 1,398
14,000 Tandy Corp. 631
44,100 TJX Cos., Inc. 1,130
36,400 Toys "R" Us, Inc.* 719
21,230 Tricon Global Restaurants* 967
18,800 Venator Group, Inc* 148
69,200 Walgreen Co. 3,715
311,100 Wal-Mart Stores, Inc. 23,430
17,700 Wendy's International, Inc. 354
--------
80,939
--------
Savings and Loans--0.3%
8,000 Golden West Financial Corp. 758
82,461 Washington Mutual, Inc. 3,195
--------
3,953
--------
Semiconductors--3.1%
20,000 Advanced Micro Devices, Inc.* 554
51,000 Applied Materials, Inc.* 1,976
233,800 Intel Corp. 25,163
12,100 KLA-Tencor Corp.* 412
19,600 LSI Logic Corp.* 304
29,600 Micron Technology, Inc.* 1,223
83,200 Motorola, Inc. 5,158
22,900 National Semiconductor Corp.* 329
26,600 Rockwell International Corp. 1,302
54,300 Texas Instruments, Inc. 4,147
--------
40,568
--------
Software--4.7%
9,400 Adobe Systems, Inc. 421
6,500 Autodesk, Inc. 236
41,900 Automatic Data Processing, Inc. 3,226
28,700 BMC Software, Inc.* 1,465
78,125 Computer Associates International, Inc. 3,457
62,200 First Data Corp. 1,660
60,000 HBO & Co. 1,496
23,100 IMS Health, Inc. 1,533
342,900 Microsoft Corp.* 41,834
49,200 Novell, Inc.* 815
135,400 Oracle Corp.* 4,637
37,900 Parametric Technology Corp.* 644
32,100 Peoplesoft, Inc.* 660
3,700 Shared Medical Systems Corp. 194
--------
62,278
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<S> <C> <C>
Telecommunication Equipment--1.7%
12,030 Andrew Corp.* $ 192
21,000 General Instrument Corp.* 591
182,928 Lucent Technologies, Inc. 15,743
90,760 Northern Telecom Ltd. 4,237
10,400 Scientific-Atlanta, Inc. 202
27,000 Tellabs, Inc.* 1,460
--------
22,425
--------
Telecommunications--0.6%
79,800 AirTouch Communications, Inc.* 4,564
23,900 Frontier Corp. 720
39,800 Nextel Communications, Inc., Class A 856
57,450 Sprint Corp. (PCS Group)* 919
--------
7,059
--------
Telephone--7.2%
38,100 Alltel Corp. 2,019
153,400 Ameritech Corp. 8,303
251,300 AT&T Corp. 15,659
216,160 Bell Atlantic Corp. 12,024
136,900 Bellsouth Corporation 11,945
134,100 GTE Corp. 8,314
247,170 MCI WORLDCOM, Inc.* 14,583
272,312 SBC Communications, Inc. 13,054
59,800 Sprint Corp. (FON Group) 4,350
69,832 U.S. West, Inc. 4,347
--------
94,598
--------
Textiles--0.0%
2,600 Springs Industries, Inc. 101
--------
Tobacco--1.6%
338,400 Philip Morris Companies, Inc. 18,929
45,200 RJR Nabisco Holdings Corp. 1,302
25,800 UST, Inc. 897
--------
21,128
--------
Toys, Games and Hobbies--0.2%
18,275 Hasbro, Inc. 641
40,745 Mattel, Inc. 1,408
--------
2,049
--------
Transportation--0.6%
65,795 Burlington Northern Santa Fe Corp. 2,237
30,400 CSX Corp. 1,267
20,560 FDX Corp.* 1,334
45,900 Laidlaw, Inc. 456
52,700 Norfolk Southern Corp. 1,601
34,400 Union Pacific Corp. 1,673
--------
8,568
--------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------------
<C> <S> <C>
Trucking and Leasing--0.0%
10,200 Ryder System, Inc. $ 291
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $856,202) $1,304,429
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.1%
U.S. Treasury Bill #
$ 1,710 4.37% Due 01/07/99 $ 1,691
- ----------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $1,691) $ 1,691
- ----------------------------------------------------------------
SHORT-TERM INVESTMENT--4.6%
Societe Generale, Paris
$60,575 5.375%, 12/01/98 $ 60,575
- ----------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $60,575) $ 60,575
- ----------------------------------------------------------------
TOTAL INVESTMENTS--103.6%
(Cost $918,468) $1,366,695
- ----------------------------------------------------------------
Liabilities, less other assets--
(3.6)% (47,889)
- ----------------------------------------------------------------
NET ASSETS--100.0% $1,318,806
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 47 $13,397 Long December, 1998 $262
- --------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
53
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
Focused Growth Portfolio
<C> <S> <C>
COMMON STOCKS--99.8%
Advertising--1.0%
40,400 Snyder Communications, Inc. $ 1,437
--------
Airlines--0.4%
25,000 Southwest Airlines Co. 538
--------
Banks--2.3%
29,200 State Street Corp. 2,004
31,650 Wells Fargo Co. 1,139
--------
3,143
--------
Beverages--3.2%
9,750 Anheuser-Busch Cos., Inc. 591
24,350 Coca-Cola (The) Co. 1,706
19,100 PepsiCo, Inc. 739
26,800 Starbucks Corp.* 1,236
--------
4,272
--------
Biotechnology--0.6%
12,200 Genentech, Inc.* 855
--------
Commercial Services--3.5%
10,000 Ceridian Corp. 650
29,200 Cintas Corp. 1,606
14,600 H & R Block, Inc. 656
35,000 Paychex, Inc. 1,741
--------
4,653
--------
Computers--5.7%
35,050 Cisco Systems, Inc.* 2,642
29,200 Computer Sciences Corp.* 1,668
12,200 Dell Computer Corp.* 742
9,750 EMC Corp. 707
8,750 International Business Machines Corp. 1,444
10,000 Synopsys, Inc.* 474
--------
7,677
--------
Consumer Products--2.3%
36,900 Philip Morris Cos., Inc. 2,065
29,200 UST, Inc. 1,015
--------
3,080
--------
Cosmetics and Personal Care--1.1%
17,550 Procter & Gamble Co. 1,538
--------
Diversified Financial Services--8.8%
9,750 Capital One Financial Corp. 1,072
36,250 Fannie Mae 2,637
34,750 Freddie Mac 2,102
80,350 MBNA Corp. 1,823
24,350 Merrill Lynch & Co. 1,826
40,000 Schwab (Charles) Corp. 2,255
--------
11,715
--------
Electrical Components and Equipment--0.5%
20,000 Molex, Inc. 721
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Electronics--1.3%
10,000 Honeywell, Inc. $ 799
14,600 Solectron Corp.* 966
--------
1,765
--------
Health Care--5.8%
30,200 Becton, Dickinson & Co. 1,284
18,100 Guidant Corp. 1,553
97,400 Health Management Associates, Inc., Class A 2,112
9,750 Johnson & Johnson 792
30,200 Medtronic, Inc. 2,044
--------
7,785
--------
Housewares--1.3%
38,950 Newell Co. 1,724
--------
Insurance--4.3%
29,200 American International Group, Inc. 2,745
22,700 MBIA, Inc. 1,470
10,250 Progressive Corp. 1,521
--------
5,736
--------
Leisure Time--1.0%
38,950 Carnival Corp., Class A 1,344
--------
Media--3.8%
12,200 Clear Channel Communications, Inc.* 570
20,000 Disney (The Walt) Co. 644
53,200 Fox Entertainment Group, Inc.* 1,257
29,200 MediaOne Group, Inc.* 1,183
13,150 Time Warner, Inc. 1,391
--------
5,045
--------
Miscellaneous Manufacturing--4.4%
48,700 General Electric Co. 4,407
22,400 Tyco International Ltd. 1,474
--------
5,881
--------
Office and Business Equipment--1.3%
11,700 Pitney Bowes, Inc. 655
9,750 Xerox Corp. 1,048
--------
1,703
--------
Oil and Gas Producers--4.7%
43,850 Conoco, Inc.* 1,039
36,550 Exxon Corp. 2,744
29,200 Mobil Corp. 2,517
--------
6,300
--------
Oil and Gas Services--0.4%
12,800 Schlumberger Ltd. 572
--------
Pharmaceuticals--11.6%
29,250 Cardinal Health, Inc. 2,007
34,350 Elan Corp. PLC ADR* 2,340
24,350 Lilly (Eli) & Co. 2,184
16,550 Merck & Co., Inc. 2,563
24,350 Omnicare, Inc. 697
14,100 Pfizer, Inc. 1,574
22,900 Schering-Plough Corp. 2,436
21,900 Warner-Lambert Co. 1,653
--------
15,454
--------
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------
Focused Growth Portfolio -- Continued
<C> <S> <C>
Pipelines--1.2%
31,650 Enron Corp. $ 1,664
--------
Retail--11.7%
16,550 Albertson's, Inc. 944
24,350 Dayton-Hudson Corp. 1,096
65,000 Home Depot (The), Inc. 3,234
43,850 Kohl's Corp.* 2,157
75,000 Staples, Inc.* 2,620
29,200 Walgreen Co. 1,568
53,550 Wal-Mart Stores, Inc. 4,033
--------
15,652
--------
Semiconductors--2.4%
14,600 Intel Corp. 1,571
12,650 Linear Technology Corp. 886
12,500 Motorola, Inc. 775
--------
3,232
--------
Software--6.6%
9,700 America Online, Inc.* 849
19,500 BMC Software* 996
14,600 Fiserv, Inc.* 645
33,100 Microsoft Corp.* 4,038
34,100 Oracle Corp.* 1,168
29,200 Sterling Commerce, Inc.* 1,059
--------
8,755
--------
Telecommunication Equipment--2.4%
19,500 Lucent Technologies, Inc. 1,678
25,000 Newbridge Networks Corp.* 731
13,400 Tellabs, Inc.* 724
--------
3,133
--------
Telecommunications--1.7%
19,500 Qwest Communications International* 780
9,750 Vodafone Group PLC ADR 1,440
--------
2,220
--------
Telephone--4.5%
34,100 Ameritech Corp. 1,846
23,400 Bellsouth Corp. 2,042
35,000 MCI WORLDCOM, Inc.* 2,065
--------
5,953
- ----------------------------------------------------------
TOTAL COMMON STOCKS (Cost $91,612) $133,547
- ----------------------------------------------------------
SHORT-TERM INVESTMENT--0.2%
Societe Generale, Paris, France
$278 5.375%Due 12/1/98 $ 278
- ----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $278) $ 278
- ----------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $91,890) $133,825
- ----------------------------------------------------------
Other assets, less liabilities--0.0% 53
- ----------------------------------------------------------
NET ASSETS--100.0% $133,878
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
55
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
International Equity Index Portfolio
<C> <S> <C>
COMMON STOCKS--96.7%
Australia--2.2%
600 Aberfoyle Ltd. $ 1
4,400 Amcor Ltd. 19
1,800 Ashton Mining Ltd. 1
2,282 Australian Gas Light Co. Ltd. 17
5,100 Australian National Industries Ltd. 3
7,999 Boral Ltd. 12
1,600 Brambles Industries Ltd. 39
14,420 Broken Hill Proprietary Co. Ltd. 115
3,500 Burns Philp & Co. Ltd. 0
5,872 Coca-Cola Amatil Ltd. 20
8,052 Coles Myer Ltd. 42
6,400 Crown Ltd.* 2
7,200 CSR Ltd. 17
2,600 David Jones Ltd. 3
1,300 Delta Gold NL 2
2,001 Email Ltd. 3
1,022 Faulding (F.H.) & Co. Ltd. 5
11,900 Foster's Brewing Group Ltd. 31
3,209 Futuris Corp. Ltd. 4
9,134 General Property Trust Units 18
4,416 Gio Australia Holdings Ltd. 14
8,917 Goodman Fielder Ltd. 10
1,911 Great Central Mines Ltd. 1
2,800 Hardie (James) Industries Ltd. 5
408 Homestake Mining Co. 5
1,700 Leighton Holdings Ltd. 7
1,750 Lend Lease Corp. Ltd. 43
11,497 M.I.M. Holdings Ltd. 6
1,200 Metal Manufactures Ltd. 2
9,900 National Australia Bank 148
1,600 Newcrest Mining Ltd. 2
13,646 News Corp. Ltd. 96
11,570 Normandy Mining Ltd. 11
5,230 North Ltd. 10
1,885 Orica Ltd. 10
7,100 Pacific Dunlop Ltd. 13
6,200 Pioneer International Ltd. 13
2,698 QBE Insurance Group Ltd. 12
4,315 QCT Resources Ltd. 3
1,400 Resolute Ltd. 1
1,400 RGC Ltd. 3
2,300 Rio Tinto Ltd. 30
800 Rothmans Holdings Ltd. 5
4,200 Santos Ltd. 12
2,800 Schroders Property Fund 5
1,300 Smith (Howard) Ltd. 8
724 Sons of Gwalia Ltd. 2
4,326 Southcorp Holdings Ltd. 14
2,599 Stockland Trust Group 6
89 Stockland Trust Group (New)* 0
2,100 TABCORP Holdings Ltd. 14
8,916 Westfield Trust 21
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------
<C> <S> <C>
13,169 Westpac Banking Corp. Ltd. $ 88
7,855 WMC Ltd. 25
260 Zimbabwe Platinum Mines Ltd. 0
-------
999
-------
Austria--0.3%
19 Austria Mikro Systeme International A.G. 1
168 Austrian Airlines Osterreichische LuftverkehrsA.G.* 5
639 Bank Austria A.G. 33
63 Bank Austria A.G. (Partial Certificates) 3
30 Bau Holdings A.G. 1
70 Bohler-Uddeholm A.G. 3
12 BWT A.G. 3
135 Flughafen Wien A.G. 6
45 Generali Holding Vienna A.G. 10
26 Lenzing 2
78 Mayr-Melnhof Karton A.G. 4
58 Oesterreichische Brau-Beteiligungs A.G. 3
200 Oesterreichische Elektrizitaetswirtschafts A.G. 31
175 OMV A.G. 17
90 Radex-Heraklith Industriebeteiligungs A.G. 2
72 Steyr-Daimler-Puch A.G. 2
33 Universale-Bau A.G. 1
97 VA Technologies A.G. 8
56 Wienerberger Baustoffindustrie A.G. 11
-------
146
-------
Belgium--1.6%
100 Barco Industries 27
18 Bekaert N.V. 10
220 Cimenteries CBR Cementbedrisven 19
100 Compagnie Maritime Belge S.A. 5
435 Delhaize-Le Lion 36
400 Electrabel S.A. 155
300 Fortis A.G. 95
100 Generale de Banque S.A. 37
100 Gevaert N.V. Warrants* 1
50 Glaverbel S.A. 6
200 Groupe Bruxelles Lambert S.A. 38
970 KBC Bancassurance Holding 70
160 Petrofina S.A. 65
118 Royale Belge 19
625 Solvay S.A. 44
625 Tractebel 105
150 Union Miniere Group 7
-------
739
-------
Denmark--0.9%
12 Aarhus Oliefabrik A/S, Class A 1
12 Aarhus Oliefabrik A/S, Class B, Limited Voting 1
20 Aktieselskabet Korn-OG Foderstof KompagnietA/S 0
64 Bang & Olufsen Holdings A/S, Class B 4
231 Carlsberg A/S, Class A 13
178 Carlsberg A/S, Class B 10
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
7 Dampskibsselskabet af 1912 A/S, Class B $ 48
5 Dampskibsselskabet Svendborg A/S, Class B 47
385 Danisco A/S 20
300 Den Danske Bank 40
85 Det Ostasiatiske Kompagni A/S* 0
280 FLS Industries A/S, Class B 6
206 GN Store Nord A/S 7
156 International Service System A/S, Class B 10
6 Lauritzen (J.) Holding A/S 0
29 NKT Holdings A/S 2
471 Novo-Nordisk A/S, Class B 54
45 Radiometer A/S, Class B 2
257 SAS Danmark A/S 3
164 Superfos A/S 2
799 Tele Danmark A/S 90
342 Unidanmark A/S, Class A 28
-------
388
-------
Finland--1.2%
200 Amer Group Ltd. 2
300 Cultor Oy 3
100 Instrumentarium Group, Class A 4
100 Instrumentarium Group, Class A Rights* 1
900 Kemira Oy 6
700 Kesko 9
5,700 Merita Ltd., Class A 33
100 Metra Oy, Class A 2
300 Metra Oy, Class B 5
3,100 Nokia AB, Class A 304
900 Nokia AB, Class K 88
1,000 Outokumpu Oy, Class A 10
100 Pohjola Insurance Group, Class A 5
100 Pohjola Insurance Group, Class B 5
400 Sampo Insurance Co. Ltd., Class A 14
200 Stockman AB, Class A 5
200 Stockman AB, Class B 4
1,800 Upm-Kymmene Corp. 47
-------
547
-------
France--9.5%
200 Accor S.A. 44
1,080 Air Liquide 184
1,170 Alcatel Alsthom 155
27 Assurances Generales de France S.A. Warrants* 0
2,100 AXA-UAP 272
1,321 Banque Nationale de Paris 101
10 Bongrain S.A. 4
150 Bouygues 28
190 Canal Plus 44
400 Cap Gemini S.A. 59
235 Carrefour S.A. 167
50 Chargeurs S.A. 3
100 Club Mediterranee* 8
50 Coflexip Stena Offshore 4
557 Compagnie de Saint Gobain 83
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
100 Compagnie Francaise d'Etudes et de Construction Technip $ 8
50 Compagnie Generale de Geophysique S.A.* 3
75 Compagnie Parisienne de Reescompte 4
455 Danone 133
600 Dassault Systemes S.A. 24
1,700 Elf Aquitaine S.A. 213
165 Eridania Beghin-Say S.A. 31
60 Essilor International S.A. 23
450 Etablissements Economiques du Casino Guichard-Perrachon S.A. 43
4,925 France Telecom S.A. 343
4,925 France Telecom S.A. Rights* 0
100 Groupe GTM 11
100 Imetal S.A. 9
410 L'OREAL 256
1,300 Lafarage S.A. 122
750 Lagardere S.C.A. 31
170 Legrand S.A. 46
540 LVMH Moet Hennessy Louis Vuitton 105
848 Michelin, Class B 37
100 Natexis 6
100 Nord-Est S.A. 3
1,000 Paribas 89
50 Pathe 11
300 Pechiney S.A. 10
350 Pernod-Ricard 23
725 Pinault Printemps-Redoute S.A. 124
150 Primagaz Cie 14
120 Promodes 79
300 PSA Peugeot Citroen 48
2,300 Rhone-Poulenc, Class A 115
30 Sagem S.A. 21
650 Sanofi S.A. 116
950 Schneider S.A. 59
50 SEB S.A. 5
300 SEITA 17
200 Sidel S.A. 15
125 Simco S.A. 11
100 Skis Rossignol S.A. 1
350 Societe BIC S.A. 22
25 Societe Eurafrance S.A. 16
50 Societe Francaise d'Investissements Immobiliers et de Gestion 3
640 Societe Generale, Class A 101
210 Sodexho Alliance S.A. 41
150 Sommer-Allibert 4
942 Suez Lyonnaise des Eaux 187
1,500 Total S.A., Class B 186
900 Thomson CSF 34
50 Union du Credit-Bail Immobilier 7
50 Union du Immobiliere de France 5
1,600 Usinor Sacilor 18
454 Valeo S.A. 39
970 Vivendi 220
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
France--Continued
300 Vivendi Warrants* $ 1
20 Zodiac S.A. 5
-------
4,254
-------
Germany--9.6%
300 Adidas-Salomon A.G. 33
250 AGIV A.G. 6
1,510 Allianz A.G. 545
50 AMB Aachener & Muenchener Beteilgungs-A.G. (Bearer) 6
250 AMB Aachener & Muenchener Beteilgungs-A.G. (Registered) 39
150 Axa Colonia Konzern A.G. 18
3,900 BASF A.G. 148
4,550 Bayer A.G. 187
2,587 Bayerische HypoVereinsbank A.G. 225
500 Beiersdorf A.G. 33
250 Bilfinger & Berger Bau A.G. 6
50 Brau Und Brunnen A.G. 4
700 Continental A.G. 17
3,568 DaimlerChrysler A.G. 336
550 Degussa A.G. 27
3,300 Deutsche Bank A.G. 204
2,350 Deutsche Lufthansa A.G. (Registered) 52
13,650 Deutsche Telekom A.G. 384
400 Deutz A.G.* 4
200 Douglas Holdings A.G. 13
3,200 Dresdner Bank A.G. 144
400 FAG Kugelfischer Georg Schaefer A.G. 4
320 Heidelbergerzement A.G. 24
450 Hochtief A.G. 17
70 Karstadt A.G. 33
70 Linde A.G. 40
50 Man A.G. 14
2,400 Mannesmann A.G. 260
1,050 Merck KGaA 43
1,360 Metro A.G. 85
1,510 Metro A.G. Rights* 3
500 Muenchener Ruckversicherungs-Gesellschaft A.G. 231
120 Preussag A.G. 44
100 Rheinmetall A.G. 2
2,350 RWE A.G. 125
400 SAP A.G. 182
400 Schering A.G. 50
150 SGL Carbon A.G. 9
3,550 Siemens A.G. 248
210 Thyssen A.G. 38
3,100 VEBA A.G. 172
150 Viag A.G. 93
1,950 Volkswagen A.G. 159
-------
4,307
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
Hong Kong--2.3%
10,000 Applied International Holdings* $ 0
9,200 Bank of East Asia Ltd.* 17
23,000 Cathay Pacific Airways 22
15,000 Cheung Kong Holdings Ltd. 108
16,000 China Light & Power Co. Ltd. 84
12,000 Chinese Estates Holdings 2
2,400 Chinese Estates Holdings Warrants* 0
2,000 Dickson Concepts International Ltd 2
5,000 Elec & Eltek International Holdings Ltd. 1
6,000 Giordano International Ltd. 1
9,000 Hang Lung Development Co. 11
12,600 Hang Seng Bank Ltd. 111
7,500 Hong Kong & Shanghai Hotels Ltd. 6
1,200 Hong Kong Aircraft Engineering Co. Ltd. 2
28,720 Hong Kong China Gas Co. Ltd. 38
1,260 Hong Kong China Gas Co. Ltd. Warrants* 0
78,400 Hong Kong Telecommunications Ltd. 150
28,000 Hopewell Holdings Ltd. 4
25,000 Hutchinson Whampoa Ltd. 179
7,083 Hysan Development Co. Ltd. 10
700 Hysan Development Co. Ltd. Warrants* 0
6,800 Johnson Electric Holdings Ltd. 15
3,000 Kumagai Gum Ltd. 1
600 Kumagai Gum Ltd. Warrants* 0
4,000 Miramar Hotel & Investment Ltd. 4
12,879 New World Development Co. Ltd. 31
12,000 Oriental Press Group 1
2,000 Playmates Toys Holdings 0
26,400 Regal Hotels International 4
13,000 Shangri-La Asia Ltd. 12
12,000 Shun Tak Holdings Ltd. 2
20,741 Sino Land Co. 11
12,000 South China Morning Post Holdings Ltd. 7
2,000 Stelux Holdings 0
16,000 Sun Hung Kai Properties Ltd. 115
10,000 Swire Pacific Ltd. 45
5,000 Tai Cheung Holdings Ltd. 1
12,000 Tan Chong International Ltd.* 1
3,000 Television Broadcasts Ltd. 8
2,000 Varitronix International Ltd. 4
15,000 Wharf Holdings Ltd. 24
750 Wharf Holdings Ltd. Warrants* 0
1,500 Wing Lung Bank 5
------
1,039
------
Ireland--0.5%
5,837 Allied Irish Banks PLC 90
272 Clondalkin Group PLC Units 2
293 Crean (James) PLC Units 0
2,626 CRH PLC 40
540 DCC PLC 5
1,912 Fyffes PLC 4
1,245 Greencore Group PLC 6
1,696 Independent Newspapers PLC 6
168 Irish Continental Group PLC 2
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
2,175 Irish Life PLC $ 19
611 Irish Permanent PLC 8
564 Jurys Hotel Group PLC 4
1,118 Kerry Group PLC, Class A 16
1,300 Ryanair Holdings PLC* 7
7,532 Smurfit (Jefferson) Group PLC 15
1,489 Tullow Oil PLC* 1
4,995 Waterford Wedgewood PLC Units 5
-------
230
-------
Italy--5.0%
7,000 Assicurazioni Generali* 262
12,000 Banca Commerciale Italiana 82
11,000 Banca Intesa S.p.A. 62
5,000 Banca Intesa-RNC S.p.A. 15
2,000 Banco Popolare di Milano 18
10,000 Benetton Group S.p.A. 18
2,000 Bulgari S.p.A. 11
1,000 Burgo (Cartiere) S.p.A. 6
2,000 Cementir S.p.A. 2
4,000 Edison S.p.A. 40
52,000 ENI S.p.A. 324
1,000 Falck Acciaierie & Ferriere Lombarde 8
24,400 Fiat S.p.A. 75
5,300 Fiat-RNC S.p.A. 10
4,000 Impregilo S.p.A. 3
26,000 Istituto Nationale Assicurazioni 69
1,000 Italcementi S.p.A. 10
1,000 Italcementi-RNC S.p.A. 5
5,000 Italgas S.p.A. 25
1,000 La Rinascente S.p.A. 10
4,200 Magneti Marelli 7
8,000 Mediaset S.p.A. 57
4,000 Mediobanca S.p.A. 49
1,000 Mondadori (Arnoldo) Editore S.p.A. 13
33,000 Montedison S.p.A. 40
6,000 Montedison-RNC S.p.A. 5
18,240 Olivetti Group* 48
10,000 Parmalat Finanziaria S.p.A. 19
13,000 Pirelli S.p.A. 41
1,000 Pirelli-RNC S.p.A. 2
1,000 Reno de Medici S.p.A. 3
3,000 Riunione Adriatic di Sicurta S.p.A. 40
1,000 Riunione Adriatica di Sicurta-RNC S.p.A. 10
9,180 San Paolo-IMI S.p.A. 151
1,000 Sirti S.p.A. 6
5,000 Snia BPD S.p.A. 7
1,000 Snia BPD-RNC S.p.A. 1
1,000 Societa Assicuratrice Industriale S.p.A. 11
43,000 Telecom Italia Mobile S.p.A. 283
10,000 Telecom Italia Mobile-RNC S.p.A. 42
24,111 Telecom Italia S.p.A. 196
5,488 Telecom Italia-RNC S.p.A. 34
19,000 Unicredito Italiano S.p.A. 108
26,000 Unione Immobiliare S.p.A. 13
-------
2,241
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Japan--20.6%
2,000 77 Bank $ 19
900 Acom Co. Ltd. 55
600 Advantest Corp. 40
4,000 Ajinomoto Co. 36
1,000 Alps Electric Co. Ltd. 16
2,000 Amada Co. Ltd. 10
1,000 Amano Corp. 9
3,000 Aoki Corp.* 2
100 Aoyama Trading 3
400 Arabian Oil Co. 5
14,000 Asahi Bank Ltd. 54
3,000 Asahi Breweries Ltd. 43
9,000 Asahi Chemical Industry Co. Ltd. 37
7,000 Asahi Glass Co. Ltd. 41
4,000 Ashikaga Bank Ltd. 7
300 Autobacs Seven Co. Ltd. 9
27,000 Bank of Tokyo-Mitsubishi Ltd. 294
8,000 Bank of Yokohama Ltd. 17
5,000 Bridgestone Corp. 117
2,000 Brother Industries Ltd. 6
5,000 Canon, Inc. 111
2,000 Casio Computer Co. Ltd. 15
5,000 Chiba Bank Ltd. 19
1,000 Chiyoda Corp. 2
1,000 Chugai Pharmaceutical Co. Ltd. 9
2,000 Citizen Watch Co. Ltd. 13
4,000 Cosmo Oil Co. Ltd. 6
1,000 Credit Saison Co. Ltd. 23
500 CSK Corp. 12
5,000 Dai Nippon Ink & Chemicals, Inc. 13
5,000 Dai Nippon Printing Co. Ltd. 73
1,000 Dai Nippon Screen MFG Co. Ltd. 3
3,000 Daicel Chemical Industry Ltd. 7
3,000 Daido Steel Co. Ltd. 5
5,000 Daiei, Inc. 13
1,000 Daifuku Co. Ltd. 5
2,000 Daiichi Pharmaceutical 31
2,000 Daikin Industries Ltd. 18
1,000 Daikyo, Inc. 1
2,000 Daimaru, Inc. 5
1,100 Daito Trust Construction Co. 9
3,000 Daiwa House Industry Co. Ltd. 32
1,000 Daiwa Kosho Lease Co. Ltd. 4
9,000 Daiwa Securities Co. Ltd. 32
3,000 Denki Kagaku Kogyo Kabushiki Kaisha 5
5,000 Denso Corp. 97
24 East Japan Railway Co. 140
2,000 Ebara Corp. 17
2,000 Eisai Co. Ltd. 31
1,000 Ezaki Glico Co. Ltd. 5
1,400 Fanuc 44
18,000 Fuji Bank Ltd. 71
3,000 Fuji Photo Film Co. 112
2,000 Fujikura Ltd. 11
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Japan--Continued
3,000 Fujita Corp. $ 2
1,000 Fujita Kanko, Inc. 10
11,000 Fujitsu Ltd. 127
4,000 Furukawa Electric Co. Ltd. 14
1,000 Gakken Co. Ltd. 1
3,000 Gunma Bank 22
2,000 Gunze Ltd. 4
6,000 Hankyu Corp. 24
1,000 Hankyu Department Stores, Inc. 7
3,000 Haseko 2
2,000 Hazama Corp. 1
2,000 Higo Bank 8
200 Hirose Electric 13
20,000 Hitachi Ltd. 121
7,000 Hitachi Zosen Corp. 11
5,000 Hokuriku Bank 9
6,000 Honda Motor Co. Ltd. 216
1,000 House Foods Corp. 15
1,000 Hoya Corp. 42
2,000 Inax 11
16,000 Industrial Bank of Japan 87
1,000 Isetan 10
2,000 Ishihara Sangyo Kaisha 3
3,000 Ito-Yokado Co. 184
10,000 Itochu Corp. 19
2,000 Itoham Foods 10
2,000 Iwataini International Corp. 4
1,000 JACCS Co., Ltd. 4
11,000 Japan Airlines 28
8,000 Japan Energy Corp. 8
1,000 Japan Metals & Chemicals* 2
3,000 Japan Steel Works 4
1,000 JGC Corp. 3
6,000 Joyo Bank 22
2,000 JUSCO Co. 38
6,000 Kajima Corp. 16
1,000 Kaken Pharmaceutical Co. 3
2,000 Kamigumi Co. Ltd. 9
1,000 Kandenko Co. Ltd. 7
4,000 Kanebo Ltd.* 4
2,000 Kaneka Corp. 14
6,000 Kansai Electric Power Co., Inc. 121
2,000 Kansai Paint 5
4,000 Kao Corp. 76
8,000 Kawasaki Heavy Industries Ltd. 20
4,000 Kawasaki Kisen Kaisha Ltd. 6
21,000 Kawasaki Steel Corp. 32
3,000 Keihin Electric Expesss Railway Co. Ltd. 9
1,000 Kikkoman Corp. 6
2,000 Kinden Corp. 27
10,000 Kinki Nippon Railway 50
6,000 Kirin Brewery Co. Ltd. 62
1,000 Kokuyo Co. Ltd. 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
6,000 Komatsu Ltd. $ 31
300 Konami Co. Ltd. 8
2,000 Konica Corp. 9
1,000 Koyo Seiko Co. 6
9,000 Kubota Corp. 21
5,000 Kumagai Gumi Co. Ltd. 4
2,000 Kurabo Industries 2
2,000 Kurary Co. Ltd. 21
1,000 Kureha Chemical Industry 3
1,000 Kurita Water Industries Ltd. 14
1,100 Kyocera Corp. 52
3,000 Kyowa Hakko Kogyo 15
2,000 Lion Corp. 8
1,000 Maeda Road Construction Co. Ltd. 6
1,000 Makino Milling Machine Co. Ltd. 6
1,000 Makita Corp. 11
10,000 Marubeni Corp. 18
2,000 Maruha Corp. 2
2,000 Marui Co. Ltd. 36
13,000 Matsushita Electric Industrial Co. Ltd. 209
2,000 Meiji Milk Products Co. Ltd. 6
3,000 Meiji Seika 11
2,000 Minebea Co. Ltd. 22
1,000 Misawa Homes Co. Ltd. 3
14,000 Mitsubishi Chemical Corp. 26
10,000 Mitsuibishi Corp. 64
14,000 Mitsubishi Electric Corp. 36
8,000 Mitsubishi Estate Co. Ltd. 77
3,000 Mitsubishi Gas Chemical Co. 8
21,000 Mitsubishi Heavy Industries Ltd. 79
1,000 Mitsubishi Logistics Corp. 11
8,000 Mitsubishi Materials Corp. 14
3,000 Mitsubishi Oil Co. Ltd. 5
2,000 Mitsubishi Paper Mills 4
4,000 Mitsubishi Rayon Co. 11
8,000 Mitsubishi Trust & Banking Corp. 58
10,000 Mitsui & Co. 57
6,000 Mitsui Engineering & Shipbuilding Co. Ltd.* 6
5,000 Mitsui Fudosan Co. Ltd. 38
5,000 Mitsui Marine & Fire Insurance Co. Ltd. 25
3,000 Mitsui Mining & Smelting 14
8,000 Mitsui O.S.K. Lines Ltd. 13
1,000 Mitsui Soko Co. Ltd. 4
8,000 Mitsui Trust & Banking Co. Ltd. 11
3,000 Mitsukoshi Ltd. 8
1,000 Mori Seiki Co. Ltd. 11
1,000 Murata Manufacturing Co. Ltd. 39
2,000 Mycal Corp. 13
1,000 Nagase & Co. Ltd. 3
5,000 Nagoya Railroad Co. Ltd. 17
400 Namco Ltd. 8
3,000 Nankai Electric Railway 13
10,000 NEC Corp. 85
2,000 NGK Insulators Ltd. 22
1,000 NGK Spark Plug Co. 9
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
3,000 Nichido Fire & Marine Insurance $ 15
2,000 Nichirei Corp. 5
2,000 Niigata Engineering Co. Ltd.* 2
2,000 Nikon Corp. 19
1,000 Nippon Beet Sugar Manufacturing Co. Ltd. 2
1,000 Nippon Comsys Corp. 13
7,000 Nippon Express Co. Ltd. 36
4,000 Nippon Fire & Marine Insurance 14
4,000 Nippon Light Metal Co. 4
1,000 Nippon Meat Packers, Inc. 14
8,000 Nippon Oil Co. Ltd. 26
6,000 Nippon Paper Industries Co. 26
1,000 Nippon Sharyo Ltd. 3
3,000 Nippon Sheet Glass Co. Ltd. 7
2,000 Nippon Shinpan Co. 4
1,000 Nippon Shokubai K.K. Co. 6
42,000 Nippon Steel Corp. 77
2,000 Nippon Suisan Kaisha Ltd.* 2
73 Nippon Telegraph & Telephone Corp. 546
8,000 Nippon Yusen Kabushiki Kaisha 24
2,000 Nishimatsu Construction 11
15,000 Nissan Motor Co. Ltd. 46
2,000 Nisshinbo Industries, Inc. 7
1,000 Nissin Food Products 20
1,000 Nitto Denko Corp. 15
25,000 NKK Corp. 18
1,000 NOF Corp. 2
12,000 Nomura Securities Co. Ltd. 117
1,000 Noritake Co. Ltd. 5
4,000 NSK Ltd. 16
3,000 NTN Corp. 9
5,000 Obayashi Corp. 23
5,000 Odakyu Electric Railway 16
6,000 Oji Paper Co. Ltd. 27
1,000 Okamoto Industries Inc. 2
1,000 Okuma Corp. 5
2,000 Okumura Corp. 7
2,000 Olympus Optical Co. Ltd. 22
2,000 Omron Corp. 24
1,000 Onward Kasiyama Co. Ltd. 12
2,000 Orient Corp. 5
400 Orix Corp. 29
15,000 Osaka Gas Co. Ltd. 44
300 Oyo Corp. 4
2,000 Penta-Ocean Construction 4
1,000 Pioneer Electronic Corp. 16
1,000 Q.P. Corp. 7
2,000 Renown, Inc.* 1
1,000 Rohm Co. Ltd. 85
24,000 Sakura Bank Ltd. 61
1,000 Sanden Corp. 6
2,000 Sankyo Aluminium Industry Co. 2
3,000 Sankyo Co. Ltd. 68
2,000 Sanwa Shutter Corp. 9
12,000 Sanyo Electric Co. 34
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
2,000 Sapporo Breweries Ltd. $ 9
2,000 Sato Kogyo 2
1,000 Secom Co. Ltd. 74
700 Sega Enterprises 17
1,000 Seino Transportation Co. Ltd. 6
1,000 Seiyu Ltd. 3
3,000 Sekisui Chemical Co. Ltd. 18
4,000 Sekisui House Ltd. 39
7,000 Sharp Corp. 62
300 Shimachu Co., Ltd. 6
1,000 Shimano Inc. 26
5,000 Shimizu Corp. 16
2,000 Shin-Etsu Chemical Co. Ltd. 45
2,000 Shionogi & Co. 14
3,000 Shiseido Co. Ltd. 34
5,000 Shizuoka Bank 54
7,000 Showa Denko K.K. 6
1,000 Skylark Co. Ltd. 12
400 SMC Corp. 30
2,000 Snow Brand Milk Products 8
2,500 Sony Corp. 183
19,000 Sumitomo Bank Ltd. 212
10,000 Sumitomo Chemicals Co. 35
7,000 Sumitomo Corp. 38
4,000 Sumitomo Electric Industries 44
1,000 Sumitomo Forestry Co. Ltd. 7
4,000 Sumitomo Heavy Industries Ltd. 8
4,000 Sumitomo Marine & Fire Insurance 24
21,000 Sumitomo Metal Industries 25
4,000 Sumitomo Metal Mining Co. 14
3,000 Sumitomo Osaka Cement Co. Ltd. 6
6,400 Taiheiyo Cement Corp. 15
6,000 Taisei Corp. 11
2,000 Taisho Pharmaceutical Co. 50
1,000 Taiyo Yuden Co. Ltd. 11
1,000 Takara Shuzo 5
1,000 Takara Standard Co. Ltd. 7
2,000 Takashimaya Co. Ltd. 17
5,000 Takeda Chemical Industries 169
6,000 Teijin Ltd. 22
2,000 Teikoku Oil Co. Ltd. 6
1,000 Toa Corp. 2
6,000 Tobu Railway Co. 17
1,000 Toei Co. Ltd. 3
100 Toho Co. 12
3,100 Tohoku Electric Power 50
12,000 Tokai Bank 61
9,000 Tokio Marine & Fire Insurance Co. 102
1,000 Tokyo Broadcasting System Inc. 10
1,000 Tokyo Dome Corp. 5
8,300 Tokyo Electric Power Co. 190
1,000 Tokyo Electron Ltd. 37
18,000 Tokyo Gas Co. Ltd. 42
1,200 Tokyo Steel Manufacturing 5
1,000 Tokyo Style Co. Ltd. 11
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Japan--Continued
2,000 Tokyo Tatemono Co. Ltd. $ 4
2,000 Tokyotokeiba 3
7,000 Tokyu Corp. 18
4,000 Toppan Printing Co. Ltd. 48
9,000 Toray Industries, Inc. 43
4,000 Tosoh Corp. 6
1,000 Tostem Corp. 17
2,000 Toto Ltd. 15
1,000 Toyo Engineering Corp. 1
1,000 Toyo Seikan Kaisha 17
5,000 Toyobo Ltd. 6
2,000 Toyoda Automatic Loom Works 34
22,000 Toyota Motor Corp. 558
200 Trans Cosmos Inc. 5
1,000 Tsubakimoto Chain 2
6,000 Ube Industries Ltd. 8
500 Uni-Charm Corp. 21
3,000 Unitika Ltd.* 2
1,000 Uny Co. Ltd. 17
1,000 Wacoal Corp. 11
1,000 Yamaguchi Bank 9
1,000 Yamaha Corp. 11
5,000 Yamaichi Securities Co. Ltd. 0
2,000 Yamanouchi Pharmaceutical Co. Ltd. 59
3,000 Yamato Transport Co. Ltd. 37
1,000 Yamazaki Baking Co. Ltd. 12
8,000 Yasuda Trust & Banking 8
2,000 Yokogawa Electric 10
-------
9,237
-------
Malaysia--0.4%
2,200 AMMB Holdings Berhad 2
8,000 Amsteel Corp. Berhad 1
2,000 Antah Holdings Berhad 0
2,000 Aokam Perdana Berhad* 0
6,000 Berjaya Group Berhad 1
4,000 Berjaya Land Berhad 1
5,000 Commerce Asset Holdings Berhad 2
2,000 Edaran Otomobil Nasional Berhad 2
4,000 Ekran Berhad* 1
6,000 Golden Hope Plantations Berhad 3
1,000 Golden Plus Holdings Berhad 0
2,000 Guinness Anchor Berhad 1
4,000 Highlands & Lowlands Berhad 2
2,000 Hong Leong Industries Berhad 1
4,000 Hong Leong Properties Berhad 1
2,000 Hume Industries Berhad 1
4,000 Idris Hydraulic Berhad* 1
3,000 IGB Corp. Berhad 1
5,000 IOI Corp. Berhad 2
2,000 Jaya Tiasa Holdings Berhad 2
2,000 Johan Holdings Berhad 0
3,000 Kedah Cement Holdings Berhad 1
1,000 Kelanamas Industries Berhad* 0
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
3,000 Kemayan Corp. Berhad $ 0
1,000 Kian Joo Can Factory Berhad 1
5,000 Kuala Lumpur Kepong Berhad 5
3,000 Land and General Berhad 1
3,000 Landmarks Berhad 0
3,000 Leader Universal Holdings Berhad 1
9,000 Magnum Corp. Berhad 3
13,200 Malayan Banking Berhad 15
3,000 Malayan Cement Berhad 1
12,000 Malayan United Industries Berhad 2
1,500 Malayawata Steel Berhad 0
24,000 Malaysia International Shipping Berhad 20
5,000 Malaysia Mining Corp. Berhad 2
5,000 Malaysian Airline System Berhad 2
2,000 Malaysian Mosaics Berhad 1
1,000 Malaysian Oxygen Berhad 1
2,000 Malaysian Pacific Industries 2
5,666 Malaysian Resources Corp. Berhad 2
5,000 MBF Capital Berhad 1
5,000 Metroplex Berhad 1
6,000 Mulpha International Berhad 1
5,000 Multi-Purpose Holdings 1
3,000 Mycom Berhad 0
2,000 Nestle Berhad 5
2,000 New Straits Times Press Berhad 1
2,600 Oriental Holdings Berhad 2
1,000 Palmco Holdings Berhad 0
5,000 Pan-Malaysia Cement Works Berhad 1
3,000 Perlis Plantations Berhad 2
4,000 Perusahaan Otomolbil Nasional Berhad 4
2,000 Petaling Garden Berhad 1
2,000 Pilecon Engineering Berhad 0
4,000 Promet Berhad* 0
3,600 Public Bank Berhad 1
25,600 Public Bank Berhad (Foreign Market) 8
2,000 R.J. Reynolds Berhad 1
3,000 Rashid Hussain Berhad 2
7,000 Resorts World Berhad 5
12,000 RHB Capital Berhad 4
1,800 Rothmans of Pall Mall Berhad 7
2,000 Selangor Properties Berhad 1
2,000 Shell Refining Co. Berhad 2
280 Silverstone Berhad* 0
14,000 Sime Darby Berhad 9
3,000 Sungei Way Holdings Berhad 1
5,000 Ta Enterprise Berhad 1
4,000 Tan Chong Motor Holdings Berhad 1
5,000 Technology Resources Industries Berhad 2
17,500 Telekom Malaysia Berhad 24
18,000 Tenaga Nasional Berhad 17
5,000 Time Engineering Berhad 1
2,000 UMW Holdings Berhad 1
5,000 United Engineers (Malaysia) Ltd. 3
8,000 YTL Corp. Berhad 6
-------
202
-------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
Netherlands--5.1%
9,888 ABN AMRO Holdings N.V. $ 204
1,856 Akzo Nobel 76
233 ASR Verzekeringsgroep N.V. 19
540 Buhrmann N.V. 9
4,334 Elsevier N.V. 57
558 Getronics N.V. 25
2,037 Heineken N.V. 104
215 Hollandsche Beton Groep N.V. 3
78 IHC Caland N.V. 3
6,121 ING Groep N.V. 351
479 KLM N.V. 13
1,681 Koninklijke Ahold N.V. 58
241 Koninklijke Hoogovens N.V. 8
3,422 Koninklijke KPN N.V. 148
148 Koninklijke Nedlloyd N.V. 2
209 Koninklijke Pakhoed N.V. 5
530 Oce-Van Der Grinten N.V. 19
2,371 Philips Electronics N.V. 150
12,440 Royal Dutch Petroleum Co. 598
199 Stork N.V. 5
1,422 TNT Post Group N.V. 36
4,162 Unilever N.V. 326
449 Wolters Kluwer N.V. 86
-------
2,305
-------
New Zealand--0.2%
17,500 Brierley Investments Ltd. 4
11,200 Carter Holt Harvey Ltd. 11
800 Fisher & Paykel Industries Ltd. 2
2,218 Fletcher Challenge Building 3
2,292 Fletcher Challenge Energy 5
5,317 Fletcher Challenge Forests 2
4,200 Fletcher Challenge Paper 3
3,600 Lion Nathan Ltd. 9
11,400 Telecom Corp. of New Zealand Ltd. 49
-------
88
-------
Norway--0.4%
400 Aker RGI ASA 5
140 Aker RGI ASA, Class B 1
300 ASK ASA* 2
300 Bergesen d.y. ASA, Class A 4
100 Bergesen d.y. ASA, Class B 1
3,600 Christiania Bank Og Kreditkasse 13
4,200 Den norske Bank ASA 16
200 Dyno Industrier ASA 3
300 Elkem ASA 3
500 Hafslund ASA, Class A 3
200 Hafslund ASA, Class B 1
100 Helicopter Services Group ASA 1
200 Kvaerner ASA 3
100 Kvaerner ASA, Class B 1
200 Leif Hoegh & Co. ASA 3
600 Merkantildata ASA 7
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
1,600 NCL Holdings ASA* $ 3
1,500 Norsk Hydro ASA 56
200 Norske Skogindustrier ASA, Class A 6
100 Norske Skogindustrier ASA, Class B 2
1,000 Orkla ASA, Class A 17
300 Orkla ASA, Class B 4
600 Petroleum Geo-Services ASA* 9
300 SAS Norge ASA, Class B 3
400 Schibsted ASA 5
200 Smedvig, Class A 1
100 Smedvig, Class B 1
1,800 Storebrand ASA* 13
300 Tomra System ASA 9
100 Unitor ASA 1
-------
197
-------
Portugal--0.6%
1,200 Banco Comercial Portugues S.A. (Registered) 37
600 Banco Espirito Santo e Comercial de Lisboa S.A. (Registered) 19
400 Banco Totta & Acores S.A. (Registered) 10
500 BPI-SGPS S.A. (Registered) 16
500 Brisa-Auto Estradas de Portugal S.A. 27
500 Cimpor-Cimentos de Portugal SGPS S.A. 16
100 Colep-Companhia Portuguesa de Embalagens* 1
100 Companhia de Seguros Tranquilidade (Registered) 3
100 Corticeira Amorim S.A. 1
2,300 EDP-Electricidade de Portugal S.A. 51
100 EFACEC-Empresa Fabril de MaquinasElectricas S.A. 1
100 Engil-SGPS 1
100 INAPA Investimentos Participacoes e Gestao S.A. 1
100 INAPA Investimentos Participacoes e Gestao S.A. Rights* 0
400 Jeronimo Martins SGPS S.A. 20
700 Portucel Industral-Empresa Produtora deCelulose S.A. 5
1,200 Portugal Telecom S.A. (Registered) 52
100 Sociedade de Construcoes Soares da Costa S.A. 0
100 Sociedade de Construcoes Soares da Costa S.A. Bonus Rights* 0
100 Somague-SGPS S.A. 1
200 Sonae Investmentos-SGPS S.A. 10
100 UNICER-Uniao Cervejeira S.A. 2
-------
274
-------
Singapore--0.9%
1,000 Chuan Hup Holdings Ltd. 0
3,000 City Developments Ltd. 14
2,000 Comfort Group Ltd. 1
1,000 Cycle & Carriage Ltd. 3
3,000 DBS Land Ltd. 4
10,900 Development Bank of Singapore Ltd.* 83
1,000 First Capital Corp. Ltd. 1
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Singapore--Continued
1,000 Fraser & Neave Ltd. $ 3
2,000 Goldtron Ltd. 0
2,000 Hai Sun Hup Group Ltd. 1
1,000 Haw Par Brothers International Ltd. 1
1,000 Hotel Properties Ltd. 1
1,000 Inchcape Marketing Services Ltd.* 1
1,000 Inchape Motors Ltd. 1
6,000 IPC Corp. 0
2,250 Keppel Corp. Ltd. 6
2,400 Lum Chang Holdings Ltd. 1
1,000 NatSteel Ltd. 1
3,000 Neptune Orient Lines Ltd. 1
16,600 Overseas Chinese Banking Corp. Ltd. (Foreign) 102
1,000 Overseas Union Enterprise Ltd. 2
1,000 Parkways Holdings Ltd. 2
1,000 Sembawang Marine and Logistics 1
5,494 Sembcorp Industries Ltd.* 7
10,000 Singapore Airlines Ltd. 70
1,893 Singapore Press Holdings Ltd. 20
17,000 Singapore Telecommunications Ltd. 28
1,000 Straits Trading Co. Ltd. 1
4,000 United Industrial Corp. Ltd. 2
8,000 United Overseas Bank Ltd. (Foreign) 46
2,000 United Overseas Land Ltd. 1
-------
405
-------
Spain--3.3%
375 Acerinox S.A. 9
3,050 Argentaria, Caja Postal y Banco Hipotecario de Espana S.A. 71
1,550 Autopistas Concesionaria ESP 24
12,656 Banco Bilbao Vizcaya S.A. 200
6,840 Banco Central Hispanoamericano 79
8,384 Banco Santander S.A. 172
75 Corporacion Financiera Alba 10
393 Corporacion Mapfre 11
372 Dragados & Construcciones S.A. 12
400 Ebro Agricolas Compania de Alimentacion S.A.* 9
200 El Aguila S.A.* 2
150 Empresa Nacional de Celulosas S.A. 2
6,100 Empresa Nacional de Electricidad S.A. 160
900 Ercros S.A.* 1
375 Fomenta de Construcciones S.A. 22
925 Gas Natural SDG S.A., Class E 78
5,601 Iberdrola S.A. 93
250 Inmobiliaria Urbis S.A.* 4
300 Metrovacesa S.A. 8
125 Portland Valderrivas S.A. 5
400 Prosegur CIA de Seguridad S.A. (Registered) 5
1,875 Repsol S.A. 107
453 Sarrio S.A. 2
275 Sociedade General de Aguas de Barcelona S.A. 16
1,175 Tabacalera S.A., Class A 29
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------
<C> <S> <C>
6,279 Telefonica de Espana $ 296
1,884 Union Electrica Fenosa S.A. 28
350 Uralita S.A. 4
825 Vallehermoso S.A. 10
150 Viscofan Industria Navarra de Envolturas Celulosicas S.A. 5
350 Zardoya Otis S.A. 11
-------
1,485
-------
Sweden--3.0%
4,400 ABB AB, Class A 48
1,800 ABB AB, Class B 19
900 AGA AB, Class A 11
700 AGA AB, Class B 8
250 Asticus AB* 2
8,766 Astra AB, Class A 161
2,000 Astra AB, Class B 36
800 Atlas Copco AB, Class A 18
400 Atlas Copco AB, Class B 9
400 Diligentia AB 3
700 Drott AB, Class B* 5
2,440 Electrolux AB, Class B 37
100 Esselte AB, Class A 1
100 Esselte AB, Class B 2
2,300 ForeningsSparbanken AB 65
192 Granges AB 3
1,400 Hennes & Mauritz AB, Class B 104
700 Netcom Systems AB, Class B* 27
500 Om Gruppen AB 7
1,200 Sandvik AB, Class A 22
500 Sandvik AB, Class B 9
2,000 Securitas AB, Class B 30
3,405 Skandia Forsakrings AB 48
3,900 Skandinaviska Enskilda Banken, Class A 44
700 Skanska AB, Class B 20
300 SKF AB, Class A 4
411 SKF AB, Class B 5
1,700 Stora Kopparbergs Bergslags Aktiebolag,
Class A 21
400 Stora Kopparbergs Bergslags Aktiebolag,
Class B 5
1,300 Svenska Cellulosa AB, Class B 29
1,400 Svenska Handelsbanken, Class A 57
100 Svenska Handelsbanken, Class B 4
500 Svenskt Stal AB, Class A 4
200 Svenskt Stal AB, Class B 2
2,800 Swedish Match AB 9
12,800 Telefonaktiebolaget LM Ericsson, Class B 357
800 Trelleborg AB, Class B 7
900 Volvo AB, Class A 20
2,000 Volvo AB, Class B 47
500 Wm-Data AB, Class B 21
-------
1,331
-------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
Switzerland--8.0%
55 ABB A.G. (Bearer)* $ 69
25 ABB A.G. (Registered) 6
110 Adecco S.A. 48
40 Alusuisse-Lonza Holdings A.G. (Registered) 50
1,745 Credit Suisse Group (Registered) 301
15 Fischer (Georg) A.G. (Registered) 5
30 Holderbank Financiere Glarus A.G., (Bearer) 35
50 Holderbank Financiere Glarus A.G. (Registered) 12
2 Kuoni Reisen A.G., Category B (Registered) 8
265 Nestle S.A. (Registered) 552
50 Novartis A.G. (Bearer) 93
360 Novartis A.G. (Registered) 678
10 Roche Holdings A.G. (Bearer) 180
47 Roche Holdings A.G. (Genusss) 554
100 Sairgroup (Registered) 22
10 Schindler Holding A.G. (Registered) 17
100 Schweizerische Reuckversicherungs-Gesellschaft (Registered) 254
15 SGS Societe Generale de Surveillance Holdings S.A (Bearer) 12
10 SGS Societe Generale de Surveillance Holdings S.A
(Registered) 2
20 Sulzer (Registered) 11
20 Swatch Group A.G. (Bearer) 11
100 Swatch Group A.G. (Registered) 13
1,394 Union Bank of Switzerland (Registered) 421
25 Valora Holding A.G. 7
300 Zurich Allied A.G. 215
-------
3,576
-------
United Kingdom--21.1%
9,000 Abbey National PLC 182
9,205 Allied Zurich PLC* 132
1,031 AMEC PLC 3
439 Amstrad PLC 0
1,929 Anglian Water PLC 28
2,067 Anglian Water PLC, Class B* 2
5,000 Arjo Wiggins Appleton PLC 9
6,000 Associated British Foods PLC 61
6,000 BAA PLC 66
9,361 Barclays PLC 213
1,000 Barratt Developments PLC 4
4,855 Bass PLC 67
3,062 BBA Group PLC 17
1,000 Berkeley Group PLC 8
24,294 BG PLC 167
3,113 BICC Group PLC 3
5,219 Blue Circle Industries PLC 26
2,987 BOC Group PLC 43
5,587 Boots Co. PLC 90
1,015 Bowthorpe PLC 7
3,000 BPB PLC 10
11,177 British Aerospace PLC 96
6,120 British Airways PLC 41
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
9,205 British American Tobacco PLC $ 84
3,035 British Land Co. PLC 26
33,795 British Petroleum Co. PLC 527
10,000 British Sky Broadcasting Group PLC 83
12,000 British Steel PLC 19
39,250 British Telecommunications PLC 538
20,610 BTR PLC 42
3,000 Bunzl PLC 13
1,000 Burmah Castrol PLC 15
15,000 Cable & Wireless PLC 191
6,224 Cadbury Schweppes PLC 94
2,900 Caradon PLC 5
4,044 Carlton Communications PLC 33
27,000 Centrica PLC* 56
5,000 Coats Viyella PLC 2
1,000 Cobham PLC 14
5,872 Coca-Cola Beverages PLC* 12
8,114 CGU PLC 129
4,000 Compass Group PLC 42
1,000 Courtaulds Textiles PLC 3
1,000 De La Rue PLC 3
1,000 Delta PLC 2
21,594 Diageo PLC 242
3,000 Electrocomponents PLC 21
3,057 Elementis PLC 4
5,137 EMI Group PLC 31
2,020 English China Clays PLC 6
4,000 FKI PLC 10
16,653 General Electric Co. PLC 136
4,596 GKN PLC 51
22,000 Glaxo Wellcome PLC 696
5,078 Granada Group PLC 79
2,000 Great Portland Estates PLC 6
6,000 Great Universal Stores PLC 62
5,857 Guardian Royal Exchange PLC 32
15,300 Halifax PLC 218
2,040 Hammerson PLC 13
4,000 Hanson PLC 30
2,000 Hepworth PLC 5
11,235 HSBC Holdings PLC 285
5,117 HSBC Holdings PLC (75P) 139
1,000 Hyder PLC 13
2,000 IMI PLC 9
4,000 Imperial Chemical Industries PLC 37
1,000 Jarvis PLC 11
1,000 Johnson Matthey PLC 7
8,176 Kingfisher PLC 78
7,117 Ladbroke Group PLC 28
1,000 Laird Group PLC 2
3,363 Land Securities Group PLC 45
6,000 LASMO PLC 14
8,000 Legal & General Group PLC 98
1,000 Lex Service PLC 7
35,076 Lloyds TSB Group PLC 488
1,286 Lonrho PLC 6
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
United Kingdom--Continued
8,070 LucasVarity PLC $ 28
17,515 Marks & Spencer PLC 119
1,714 Marley PLC 3
2,251 MEPC PLC 15
1,000 Meyer International PLC 6
4,000 Misys PLC 28
9,050 National Grid Group PLC 72
7,302 National Power PLC 62
2,000 Next PLC 16
1,000 Ocean Group PLC 12
3,699 Pearson PLC 67
3,896 Peninsular and Oriental Steam Navigation Co. 47
6,742 Pilkington PLC 7
1,929 Provident Financial PLC 29
12,000 Prudential Corp. PLC 175
2,000 Racal Electronics PLC 10
3,000 Railtrack Group PLC 82
4,215 Rank Group PLC 15
6,832 Reed International PLC 54
16,000 Rentokil Initial PLC 103
9,400 Reuters Holdings PLC 91
2,379 Rexam PLC 8
1,437 Rexam PLC, Class B* 2
6,562 Rio Tinto PLC (Registered) 77
2,000 RMC Group PLC 26
10,133 Rolls-Royce PLC 41
10,093 Royal & Sun Alliance Insurance Group PLC 84
5,749 Royal Bank Scotland Group PLC 87
4,000 Rugby Group PLC 5
6,261 Safeway PLC 31
12,679 Sainsbury (J) PLC 106
1,500 Schroders PLC 31
4,000 Scottish & Newcastle PLC 51
3,000 Scottish Hydro-Electric 35
8,000 Scottish Power PLC 85
993 Sears PLC 4
993 Selfridges PLC 4
12,000 Siebe PLC 43
3,000 Slough Estates PLC 13
34,178 SmithKline Beecham PLC 420
2,000 Smiths Industries PLC 28
3,000 St. James Place Capital PLC 14
5,000 Stagecoach Holdings PLC 19
6,194 Tarmac PLC 12
3,000 Tate & Lyle PLC 19
3,046 Taylor Woodrow PLC 8
44,153 Tesco PLC 130
1,833 Thames Water PLC 35
2,000 Thames Water PLC, Class B* 3
3,000 TI Group PLC 17
565 Transport Development Group PLC 2
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
1,000 Transport Development Group PLC, Class B* 1
1,556 Unigate PLC 12
19,868 Unilever PLC $ 207
3,067 United Biscuits Holdings PLC 12
3,451 United Biscuits Holdings PLC, Class B* 1
3,000 United Utilities PLC 44
1,333 Vickers PLC 4
1,000 Viglen Technology PLC 0
19,190 Vodafone Group PLC 283
4,307 Williams PLC 27
4,666 Williams PLC, Class B* 2
1,000 Wilson (Connolly) Holdings PLC 2
2,000 Wimpey (George) PLC 4
4,000 Wolseley PLC 25
6,000 Zeneca Group PLC 250
-------
9,472
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $40,786) $43,462
- -------------------------------------------------------------------------------
PREFERRED STOCKS--0.7%
Australia--0.2%
12,422 News Corp. Ltd. $ 78
3,600 Star City Holdings Ltd.* 3
-------
81
-------
Austria--0.0%
12 Bau Holdings A.G.--Vorzug 0
4 Generali Holding Vienna A.G.--Vorzug 1
-------
1
-------
France--0.0%
100 Etablissements Econonmiques du Casino Guichard-Perrachon
S.A. 6
-------
Germany--0.5%
50 Axa Colonia Konzern A.G.--Non Voting 5
50 MAN A.G.--Vorzug 10
150 Metro A.G.--Vorzug 6
550 RWE A.G.--Non Voting 19
250 SAP A.G.--Vorzug 131
500 Volkswagen A.G.--Non Voting 26
-------
197
-------
Italy--0.0%
7,300 Fiat S.p.A. 13
-------
United Kingdon--0.0%
2,726 MEPC PLC, Class B 4
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $225) $ 301
- -------------------------------------------------------------------------------
CORPORATE BONDS--0.0%
United Kingdom--0.0%
Viglen Technology PLC
$2 6.938% Due 9/1/00 $ 3
Viglen Technology PLC Letters of Entitlement to Litigation
Notes
1 4.12% Due 1/1/01 0
-------
3
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $4) $ 3
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
OTHER--1.5%
Australia--0.2%
10,500 World Equity Benchmark Shares (WEBS) Index Series--
Australia $ 101
-------
Belgium--0.2%
5,500 WEBS Index Series--Belgium 106
-------
France--0.1%
2,500 WEBS Index Series--France 52
-------
Germany--0.7%
14,300 WEBS Index Series--Germany 308
-------
Japan--0.2%
7,500 WEBS Index Series--Japan 75
-------
Switzerland--0.1%
1,200 WEBS Index Series--Switzerland 20
- ------------------------------------------------------------------------
TOTAL OTHER (Cost $650) $ 662
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENT--0.6%
Societe Generale, Paris, France
$298 5.375%Due 12/1/98 $ 298
- ------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $298) $ 298
- ------------------------------------------------------------------------
TOTAL INVESTMENTS--99.5%
(Cost $41,963) $44,726
- ------------------------------------------------------------------------
Other assets, less liabilities--0.5% 226
- ------------------------------------------------------------------------
NET ASSETS--100.0% $44,952
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
At November 30, 1998 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<S> <C>
Industry/Sector
- ------------------------------
Banks 14.6%
Business Services 10.4
Capital Goods 6.5
Consumer Goods 13.3
Consumer Services 3.6
Energy/Utilities 4.8
Financial Services 10.4
Pharmaceuticals/Health 8.8
Multi-Industry 3.0
Raw Materials 6.4
Retail 4.2
Technology 4.2
Transportation 2.4
Utilities 7.4
- ------------------------------
Total 100.0%
- ------------------------------
</TABLE>
See accompanying notes to financial statements.
67
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
Shares Description Value
- ---------------------------
International Growth Portfolio
<TABLE>
<CAPTION>
<C> <S> <C>
COMMON STOCKS--94.4%
Australia--2.4%
145,000 Broken Hill Proprietary Co. Ltd. $ 1,153
55,000 News Corp. Ltd. ADR 1,540
--------
2,693
--------
Finland--0.4%
5,000 Nokia Oyj 490
--------
France--14.9%
18,000 Axa-UAP 2,333
12,000 Castorama Dubois Investisse 2,433
18,000 Elf Aquitaine S.A. 2,250
5,500 Groupe Danone S.A. 1,610
6,000 LVMH Moet-Hennessy Louis Vuitton 1,163
7,500 Societe Generale 1,185
14,000 Suez Lyonnaise des Eaux 2,772
9,000 Total S.A. 1,119
21,000 Valeo S.A. 1,803
--------
16,668
--------
Germany--10.5%
3,500 Allianz A.G. 1,264
20,000 Deutsche Bank A.G. 1,239
45,000 Hoechst A.G. 1,938
2,900 Karstadt A.G. 1,364
3,400 Muenchener Rueckversicherungse 1,568
22,000 Siemens A.G. 1,535
25,000 VEBA A.G. 1,390
18,000 Volkswagen A.G. 1,469
--------
11,767
--------
Greece--0.9%
40,000 Hellenic Telecommunication Organization S.A. 1,001
--------
India--0.6%
60,000 Mahanagar Telephone Nigam Ltd. 635
--------
Ireland--1.5%
25,000 Elan Corp. PLC ADR* 1,703
--------
Italy--6.0%
60,000 Assicurazioni Generali* 2,247
225,000 ENI S.p.A. 1,400
220,000 Telecom Italia S.p.A. 1,788
225,000 Unicredito Italiano S.p.A. 1,283
--------
6,718
--------
Japan--15.9%
440 DDI Corp. 1,432
20,000 Hirose Electric Co. Ltd. 1,342
25,000 Jafco Co. Ltd. 714
35,000 Jusco Co. Ltd. 668
180,000 Kirin Brewery Co. Ltd. 1,871
130,000 Mitsubishi Estate Co. Ltd. 1,244
135,000 Mitsubishi Heavy Industries Ltd. 506
150,000 Nikon Corp. 1,440
105,000 Pioneer Electronic Corp. 1,730
130,000 Sanwa Bank 1,179
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
135,000 Shiseido Co. Ltd. $ 1,539
150,000 Sumitomo Electric Industries 1,635
330,000 Toshiba Corp. 1,852
35,000 Uny Co. Ltd. 587
--------
17,739
--------
Netherlands--6.8%
12,000 Equant N.V.* 677
15,000 Getronics N.V. 658
23,000 ING Groep N.V. 1,321
10,000 Philips Electronics N.V. 633
21,000 Unilever N.V. 1,624
50,000 Vedior N.V. 1,023
8,500 Wolters Kluwer N.V. 1,625
--------
7,561
--------
Singapore--0.7%
100,000 Development Bank of Singapore Ltd. 759
--------
South Korea--1.2%
368 Daewoo Corp. 1
15,000 Samsung Display Devices Co. 545
15,000 Samsung Electronics 802
--------
1,348
--------
Spain--2.8%
50,000 Argentaria, Caja Postal y Banco 1,168
115,000 Iberdrola S.A. 1,910
--------
3,078
--------
Sweden--1.7%
105,000 Astra AB, A Shares 1,929
--------
Switzerland--6.7%
1,500 Novartis A.G. 2,824
130 Roche Holding A.G. (Genusss) 1,532
6,000 Swisscom A.G.* 2,026
3.800 UBS A.G. 1,147
--------
7,529
--------
Taiwan--0.7%
110,000 Acer, Inc.* 729
--------
United Kingdom--20.7%
105,000 Allied Zurich PLC* 1,508
100,000 Bass PLC 1,380
75,000 BOC Group PLC 1,090
260,000 British Sky Broadcasting Group PLC 2,150
220,000 Diageo PLC 2,466
30,000 Glaxo Wellcome PLC 1,905
215,000 Marks & Spencer PLC 1,462
110,000 Orange PLC* 1,126
110,000 Pearson PLC 1,979
110,000 PowerGen PLC 1,521
55,000 SEMA Group PLC 449
590,000 Shell Transport & Trading Co. 3,559
20,000 Smithkline Beecham PLC* 1,219
9,000 Vodafone Group PLC 1,329
--------
23,143
- ----------------------------------------------------------
TOTAL COMMON STOCKS (Cost $92,120) $105,490
- ----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
68
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------
<C> <S> <C>
PREFERRD STOCK--0.3%
Germany
700 SAP A.G. $ 365
- -------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $467) $ 365
- -------------------------------------------------------------------
SHORT-TERM INVESTMENT--3.4%
Societe Generale, Paris, France
$3,861 5.375%Due 12/1/98 $ 3,861
- -------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $3,861) $ 3,861
- -------------------------------------------------------------------
WARRANTS--0.0%
192 Muenchener Rueckversicherungs-New Shares* $ 8
- -------------------------------------------------------------------
TOTAL WARRANTS (Cost $6) $ 8
- -------------------------------------------------------------------
TOTAL INVESTMENTS--98.1%
(Cost $96,454) $109,724
- -------------------------------------------------------------------
Other assets, less liabilities--1.9% 2,073
- -------------------------------------------------------------------
NET ASSETS--100.0% $111,797
===================================================================
</TABLE>
*Non-income producing security.
At November 30, 1998 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<CAPTION>
Industry/Sector
- -----------------------------------
<S> <C>
Auto 1.3%
Basic Industry 12.9
Capital Goods 6.6
Consumer Goods 32.2
Financial Services 16.9
Pharmaceuticals/Health Care 1.5
Real Estate 1.1
Technology 18.4
Utilities 1.5
Other 7.6
- -----------------------------------
Total 100.0%
- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Small Company Index Portfolio
<C> <S> <C>
COMMON STOCK--83.7%
Advertising--0.4%
3,325 Advo, Inc.* $ 86
2,700 Catalina Marketing Corp.* 158
1,400 CKS Group, Inc.* 47
3,200 Getty Images, Inc.* 55
100 Grey Advertising, Inc. 36
3,200 Ha-Lo Industries, Inc.* 102
5,500 Sitel Corp.* 14
1,600 TMP Worldwide, Inc.* 51
--------
549
--------
Aerospace and Defense--0.6%
4,100 AAR Corp. 104
1,300 Alliant Techsystems, Inc.* 99
900 Banner Aerospace, Inc.* 8
4,100 BE Aerospace, Inc.* 97
700 Curtiss-Wright Corp. 26
1,250 Ducommun, Inc.* 21
2,000 Fairchild Corp. (The)* 32
5,000 GenCorp., Inc. 123
900 Heico Corp.* 22
3,400 Kaman Corp. 55
1,700 Kellstrom Industry, Inc.* 42
800 L-3 Communications Holdings, Inc.* 37
1,650 Nichols Research Corp.* 35
600 Primex Technologies, Inc. 24
2,900 Remec, Inc.* 40
900 Sequa Corp.* 57
--------
822
--------
Agriculture--0.1%
5,700 Agribiotech, Inc.* 74
1,600 Agribrands International, Inc.* 49
4,900 Cadiz, Inc.* 44
1,300 Tejon Ranch Co.* 26
--------
193
--------
Airlines--0.5%
8,200 Airtran Holdings, Inc.* 33
3,800 Alaska Airgroup, Inc.* 142
6,130 America West Holding Corp., Class B* 87
400 Amtran, Inc.* 9
3,200 ASA Holdings, Inc. 109
1,800 Atlantic Coast Airlines Holdings* 46
3,700 Mesa Air Group, Inc.* 30
1,750 Mesaba Holdings, Inc.* 33
2,025 Midwest Express Holdings* 56
3,000 Skywest, Inc. 81
8,400 Trans World Airlines* 43
--------
669
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
Apparel--0.6%
2,800 Authentic Fitness Corp.* $ 45
9,000 Burlington Industries, Inc. 94
900 Columbia Sportswear Co.* 20
2,700 Cone Mills Corp.* 12
1,600 Donna Karan International, Inc.* 12
1,700 Galey & Lord, Inc.* 18
900 Guess ?, Inc.* 3
3,900 Hartmarx Corp.* 23
3,150 Kellwood Co. 85
4,900 Nautica Enterprises, Inc.* 96
3,700 Nine West Group, Inc.* 46
1,800 Oshkosh B'gosh, Inc. 43
900 Oxford Industries, Inc. 26
3,400 Phillips-Van Heusen Corp. 24
2,000 Quiksilver, Inc.* 49
4,500 Russell Corp. 107
2,400 St. John Knits, Inc. 48
6,800 Stride Rite Corp. 60
800 Timberland Co.* 33
6,000 Wolverine World Wide, Inc.* 82
--------
926
--------
Auto Manufacturers--0.0%
3,400 Wabash National Corp. 64
--------
Auto Parts and Equipment--0.8%
2,400 Aftermarket Technology Corp.* 14
3,400 Arvin Industries, Inc. 143
2,000 Bandag, Inc. 71
3,200 Borg-Warner Automotive, Inc.* 160
2,300 Breed Technologies, Inc.* 16
3,100 Delco Remy International, Inc.* 34
1,200 Detroit Diesel Corp.* 25
1,600 Excel Industries, Inc. 28
2,500 Exide Corp.* 44
2,600 Hayes Lemmerz International, Inc.* 82
5,800 Miller Industries, Inc.* 28
2,400 OEA, Inc.* 31
2,500 Simpson Industries 26
1,500 Standard Motor Products, Inc. 34
2,425 Standard Products Co. 45
3,000 Superior Industries International, Inc. 78
2,525 Titan International, Inc.* 25
6,800 Tower Automotive, Inc.* 155
2,143 Wynn's International, Inc. 48
--------
1,087
--------
Banks--5.7%
1,000 Alabama National BanCorp. 26
4,250 Amcore Financial, Inc. 100
1,400 Area Bancshares Corp. 38
500 Bancfirst Corp. 20
1,000 Bancfirst Ohio Corp. 30
7,300 BancorpSouth, Inc. 140
2,400 Bancwest Corp. 104
</TABLE>
See accompanying notes to financial statements.
70
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,727 Bank of Granite Corp. $ 49
2,200 Banknorth Group, Inc. 73
808 BOK Financial Corp. 38
1,845 Brenton Banks, Inc. 33
1,000 BSB BanCorp., Inc. 29
1,860 BT Financial Corp. 52
500 Capital City Bank Group, Inc. 15
2,700 Carolina First Corp. 67
1,100 Cathay BanCorp., Inc. 42
2,285 Centennial BanCorp.* 41
1,300 Century South Banks, Inc. 38
1,583 Chemical Financial Corp. 67
2,108 Chittenden Corp. 64
3,650 Citizens Banking Corp. 118
1,000 City Holding Co. 34
4,576 CNB Bancshares, Inc. 198
1,500 Columbia Banking Systems, Inc.* 29
3,273 Commerce BanCorp., Inc. 156
1,100 Community Bank System, Inc. 32
6,900 Community First Bankshares, Inc. 147
1,430 Community Trust BanCorp. 33
1,200 Corus Bankshares, Inc. 44
3,880 Cullen/Frost Bankers, Inc. 208
1,450 CVB Financial Corp. 35
1,300 Evergreen BanCorp., Inc. 38
940 F & M BanCorp. 32
1,606 F & M BanCorp., Inc. 51
3,255 F & M National Corp. 98
2,442 F.N.B. Corp. 69
1,000 Farmers Capital Bank Corp. 35
3,750 First BanCorp. of Puerto Rico 103
1,200 First Charter Corp. 21
900 First Citizens Bancshares, Inc. 77
1,800 First Commerce Bancshares, Inc. 52
3,200 First Commonwealth Financial Corp. 78
3,834 First Financial BanCorp. 129
1,389 First Financial Bankshares, Inc. 51
952 First Financial Corp. 42
1,500 First Merchants Corp. 43
3,813 First Midwest BanCorp., Inc. 148
1,400 First Republic Bank Corp.* 36
1,574 First Source Corp. 51
3,100 First United Bancshares, Inc. 61
1,632 First Western BanCorp. 51
900 Frontier Financial Corp.* 44
2,100 GBC BanCorp. 52
1,200 Gold Banc Corp., Inc.* 20
2,170 Grand Premier Financial, Inc. 28
1,300 Greater Bay BanCorp. 45
1,200 Hamilton BanCorp., Inc.* 30
1,410 Hancock Holding Co. 63
1,068 Harleysville National Corp. 39
1,200 Horizon BanCorp., Inc. 44
4,012 Hubco, Inc. 108
4,981 Imperial BanCorp.* 77
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
1,800 Independent Bank Corp. $ 28
1,600 International Bancshares Corp. 86
1,000 Investors Financial Services Co. 56
1,700 Irwin Financial Corp. 49
1,533 Jeffbanks, Inc. 35
900 Mahoning National BanCorp. 29
2,100 MainStreet Financial Corp. 90
1,100 Merchants New York BanCorp. 39
400 Michigan Financial Corp. 14
1,170 Mid-America BanCorp. 30
900 Mississippi Valley Bancshares, Inc. 33
1,883 N B T BanCorp., Inc. 47
2,300 National BanCorp. of Alaska 71
800 National City BanCorp.* 21
1,769 National City Bancshares, Inc. 67
1,885 National Penn Bancshares, Inc. 61
4,019 Old National BanCorp. 209
1,300 Omega Financial Corp. 39
4,831 One Valley BanCorp., Inc. 159
1,600 Oriental Financial Group 49
1,200 Park National Corp. 115
900 Peoples Holding Co. (The) 29
600 Pinnacle Banc Group, Inc. 17
2,500 Premier Bancshares, Inc. 58
600 Prime Banchsares, Inc. 10
1,400 Prime BanCorp., Inc. 27
3,552 Provident Bankshares Corp. 95
600 Republic Banchsares, Inc.* 11
3,112 Republic BanCorp. 52
1,000 Republic Banking Corp. 11
6,916 Republic Security Finl Corp. 77
2,800 Riggs National Corp. of Washington D.C. 59
4,100 S & T BanCorp., Inc. 109
1,400 Sandy Springs BanCorp., Inc. 46
2,300 Santa Barbara BanCorp. 58
1,000 Shoreline Financial Corp. 26
1,375 Signal Corp. 47
2,800 Silicon Valley Bancshares* 70
800 Simmons First National Corp. 32
5,733 Sky Financial Group, Inc. 174
3,000 Southwest BanCorp. of Texas 54
1,200 Sterling BanCorp. 25
3,150 Sterling Bancshares, Inc. 50
800 Sterling Financial Corp. 33
4,993 Susquehanna Bancshares, Inc. 111
2,150 Texas Regional Bancshares 59
3,200 Triangle BanCorp., Inc. 61
2,400 Trust Co. of New Jersey 58
3,955 Trustco Bank Corp. 111
2,163 UMB Financial Corp. 96
5,700 United Bankshares, Inc. 163
1,510 United National BanCorp. 35
2,000 US BanCorp., Inc. 39
1,000 USB Holding Co., Inc. 16
</TABLE>
See accompanying notes to financial statements.
71
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Banks--Continued
6,228 UST Corp. $ 154
1,900 Vermont Financial Services Corp. 45
1,500 Washington Trust BanCorp. 32
3,050 Wesbanco, Inc. 84
2,050 West Coast BanCorp. of Oregon 44
6,200 Westamerica BanCorp. 224
2,300 Western BanCorp. 75
6,200 Westernbank Puerto Rico 82
3,275 Whitney Holding Corp. 121
--------
8,023
--------
Beverages--0.4%
5,100 Adolph Coors Co. 254
2,600 Beringer Wine Estates Holdings* 95
2,100 Boston Beer Co., Inc.* 18
2,300 Canandaigua Brands, Inc.* 114
300 Coca-Cola Bottling Co. Consolidated 17
98 Farmer Bros. Co. 19
1,200 Robert Mondavi* 44
--------
561
--------
Biotechnology--1.0%
4,200 Advanced Tissue Sciences, Inc.* 12
2,200 Affymetrix, Inc.* 55
1,900 Aviron* 41
1,500 Bio-Rad Laboratories, Inc.* 32
7,100 Bio-Technology General Corp.* 48
3,400 Cell Genesys, Inc.* 17
1,500 Entremed, Inc.* 37
3,194 Enzo Biochem, Inc.* 42
3,300 Human Genome Sciences, Inc.* 103
5,100 Icos Corp.* 111
2,600 Idec Pharmaceuticals Corp.* 87
3,300 Incyte Pharmaceuticals, Inc.* 103
2,300 Inhale Therapeutic Systems, Inc.* 74
300 Lab One, Inc. 4
5,600 Liposome Co., Inc.* 51
4,100 Millennium Pharmaceuticals, Inc.* 84
1,700 Neurogen Corp.* 29
4,356 Organogenesis, Inc.* 58
2,700 Protein Design Labs, Inc.* 59
3,300 Regeneron Pharmaceutical, Inc.* 27
3,500 Serologicals Corp.* 103
1,500 Sugen, Inc.* 21
2,500 Transkaryotic Therapies, Inc.* 56
2,300 Vical, Inc.* 38
--------
1,292
--------
Building Materials--1.1%
2,100 Advanced Lighting Technologies, Inc.* 18
600 Ameron International Corp. 22
4,100 Apogee Enterprises, Inc. 51
750 Butler MFG Co. 17
2,900 Calmat Co. 89
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,400 Centex Construction Products, Inc. $ 50
4,500 Comfort Systems USA, Inc.* 84
5,100 Dal-Tile International, Inc.* 44
1,800 Deltic Timber Corp. 36
1,950 Elcor Corp. 60
2,000 Florida Rock Industries, Inc. 59
1,800 Genlyte Group, Inc.* 34
1,400 Giant Cement Holding, Inc.* 34
1,600 Holophane Corp.* 37
5,600 Homebase, Inc.* 32
7,500 Hussmann International, Inc.* 124
2,600 Juno Lighting, Inc. 61
1,500 Lone Star Industries, Inc. 114
3,200 Modine Manufacturing Co. 117
2,600 NCI Building Systems, Inc.* 64
1,400 Nortek, Inc.* 38
600 Puerto Rican Cement Co., Inc. 22
4,100 Rayonier, Inc. 174
1,300 Republic Group, Inc. 22
600 Simpson Manufacturing Co., Inc.* 23
2,350 Thomas Industries, Inc. 41
1,900 TJ International, Inc. 45
2,200 Universal Forest Products, Inc.* 44
--------
1,556
--------
Chemicals--1.4%
9,100 Airgas, Inc.* 92
3,100 Albemarle Corp. 58
900 Bush Boake Allen, Inc.* 31
3,392 Cambrex Corp. 95
1,300 Carbide/Graphite Group* 17
2,800 Chemfirst, Inc. 53
9,100 Ethyl Corp. 53
5,400 Ferro Corp. 151
1,900 Fuller (H. B.) Co. 83
1,300 General Chemical Group, Inc. 22
3,400 Geon Co. 76
4,500 Georgia Gulf Corp. 84
6,500 Hanna (M.A.) Co. 91
3,700 Lawter International, Inc. 31
1,300 Learonal, Inc. 29
3,375 Lilly Industries, Inc. 63
2,100 Macdermid, Inc. 77
1,200 Mcwhorter Technologies, Inc.* 28
2,900 Minerals Technologies, Inc. 127
3,868 Mississippi Chemical Corp. 61
3,100 NL Industries, Inc. 41
2,200 Octel Corp.* 32
3,500 OM Group, Inc. 127
900 Penford Corp. 14
5,100 Schulman (A.), Inc. 109
2,700 Scotts Co. (The)* 98
1,900 Spartech Corp. 38
1,000 Stepan Co. 28
4,800 Terra Industries, Inc. 26
1,600 Tetra Technologies, Inc.* 20
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,100 Valhi, Inc. $ 12
5,000 Wellman, Inc. 61
--------
1,928
--------
Commercial Services--4.8%
2,200 Aaron Rents, Inc.* 34
1,200 Abacus Direct Corp.* 69
2,420 ABM Industries, Inc. 81
4,200 ABR Information Services, Inc.* 71
3,000 Access Health, Inc.* 108
900 Administaff, Inc.* 24
800 AHL Services, Inc.* 26
2,100 Alternative Resources Corp.* 20
4,000 American Oncology Resources, Inc.* 45
2,200 Ameripath, Inc.* 10
4,200 Avis Rent A Car, Inc.* 88
600 Bacou USA, Inc.* 11
347 Berlitz International, Inc.* 10
2,500 Big Flower Holdings, Inc.* 61
5,000 Billing Concepts Corp.* 64
1,900 Borg-Warner Security Corp.* 35
1,500 Boron Lepore & Associates, Inc.* 46
4,000 Budget Group, Inc.* 50
5,300 Building One Services Corp.* 90
3,500 Caribiner International, Inc.* 33
1,300 Carriage Services, Inc.* 33
1,700 CDI Corp.* 46
1,700 Central Parking Corp.* 50
6,700 Century Business Services, Inc.* 90
1,300 Chemed Corp. 44
1,900 Coinmach Laundry Corp.* 31
2,600 Computer Learning Centers* 17
6,907 Concentra Managed Care, Inc.* 82
1,900 Cort Business Service Corp.* 43
5,150 Crawford & Co. 79
1,200 Crescent Operating, Inc.* 5
700 Data Processing Resources, Inc.* 17
1,400 Data Transmission Network Corp.* 38
1,100 DBT Online, Inc.* 19
8,800 Devry, Inc.* 232
1,000 Diamond Technology Partners, Inc.* 14
3,500 Dollar Thrifty Automotive Group, Inc.* 44
700 Duff & Phelps Credit Rating, Inc. 36
1,300 Education Management, Inc.* 59
400 Edutreck International, Inc.* 3
3,100 Envoy Corp.* 124
3,000 Equity Corp. International, Inc.* 78
1,400 F.Y.I., Inc.* 44
1,600 First Consulting Group, Inc.* 38
300 Forrester Research, Inc.* 9
3,400 Franklin Covey Co.* 64
3,600 Group Maintenance American Corp.* 48
1,000 Hagler Bailly, Inc.* 18
1,043 Healthplan Services Corp. 10
1,800 Home Choice Holdings, Inc.* 29
2,100 Hooper Holmes, Inc.* 49
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
2,900 Horizon Software, Inc. $ 18
2,100 Inacom Corp.* 44
2,600 Integrated Electrical Services, Inc.* 50
6,900 Interim Services, Inc.* 143
1,800 International Telcomm Data Systems, Inc. 44
2,550 Iron Mountain, Inc.* 75
2,550 ITT Educational Services, Inc.* 84
1,100 Kendle International, Inc.* 25
1,300 Kroll-O'Gara Co.* 40
3,400 Labor Ready, Inc.* 74
1,200 Landauer, Inc. 34
1,700 Lason, Inc.* 104
1,300 Learning Tree International, Inc.* 11
700 Leasing Solutions, Inc.* 3
1,100 Maximus, Inc.* 34
1,100 Mcgrath RentCorp. 22
11,500 Medaphis Corp.* 33
3,400 Medquist, Inc.* 103
1,800 Memberworks, Inc.* 44
1,200 Meta Group, Inc.* 30
4,300 Metamor Worldwide, Inc.* 102
1,500 Metzler Group, Inc.* 62
2,500 Midas, Inc. 78
900 National Processing, Inc.* 5
1,250 NCO Group, Inc.* 46
2,550 NFO Worldwide, Inc.* 32
2,300 Norrell Corp. 37
9,690 Nova Corp.* 308
4,100 Novacare Employee Services, Inc.* 25
9,900 Olsten Corp. 74
1,600 On Assignment, Inc.* 57
5,300 Orthodontic Centers of America* 101
228 Panavision, Inc.* 4
3,600 Parexel International Corp.* 94
2,300 Paymentech, Inc.* 37
2,200 Pediatrix Medical Group, Inc.* 118
4,800 Personnel Group of America, Inc.* 79
2,445 Pharmaceutical Product Development* 70
11,500 Phycor, Inc.* 70
2,500 Phymatrix, Inc.* 7
4,100 Physician Reliance Network, Inc.* 38
1,100 Pierce Leahy Corp.* 27
1,050 Pinkertons, Inc.* 21
2,800 Prepaid Legal Services, Inc.* 73
3,300 Primark Corp.* 83
1,600 Probusiness Services, Inc.* 70
1,600 Profit Recovery Group International* 54
3,200 Protection One, Inc.* 31
600 Remedytemp, Inc.* 9
2,060 Renaissance Worldwide, Inc.* 15
3,400 Rental Services Corp.* 72
2,200 Renters Choice, Inc.* 53
1,400 Rent-Way, Inc.* 38
2,800 Rollins, Inc. 48
5,113 Romac International, Inc.* 71
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Commercial Services--Continued
4,000 Ruddick Corp. $ 78
2,100 Rural/Metro Corp.* 22
400 S M & A Corp.* 5
2,100 Service Experts, Inc.* 62
1,200 SOS Staffing Services, Inc.* 9
5,900 Sotheby's Holdings, Inc. 165
2,400 Staff Leasing, Inc.* 22
2,500 Staffmark, Inc.* 58
1,050 Strayer Education, Inc. 39
1,000 Superior Consultant Holdings, Inc.* 37
5,575 Sylvan Learning Systems, Inc.* 162
3,000 Teletech Holdings, Inc.* 27
3,000 Trico Marine Services, Inc.* 17
2,000 Trico Marine Services, Inc. 52
3,055 United Rentals, Inc.* 80
6,300 USWeb Corp.* 143
1,000 Vincam Group, Inc.* 15
1,200 Volt Information Sciences, Inc.* 28
1,500 Wackenhut Corrections Corp.* 41
1,397 Wackhenut Corp. 34
800 Westaff, Inc.* 5
--------
6,694
--------
Computers--3.6%
1,700 Anacomp, Inc.* 24
3,111 Analysts International Corp. 52
3,900 Anixter International, Inc.* 64
500 AnswerThink Consulting Group, Inc.* 10
700 Apex PC Solutions, Inc.* 18
700 ARIS Corp.* 11
1,500 Aspec Technology, Inc.* 3
4,175 Avant! Corp.* 70
3,600 Axent Technologies, Inc.* 94
2,700 BA Merchant Services, Inc.* 45
3,066 Banctec, Inc.* 40
2,200 Bell & Howell Co.* 74
3,400 Bisys Group, Inc.* 164
6,300 Checkfree Holdings Corp.* 102
1,400 Complete Business Solutions* 34
2,600 Compucom Systems, Inc.* 10
4,500 Computer Horizons Corp.* 101
275 Computer Management Sciences* 5
2,500 Computer Task Group, Inc.* 68
1,800 Cotelligent, Inc.* 33
2,300 Cylink Corp.* 19
7,300 Data General Corp.* 132
1,500 DecisionOne Holdings Corp.* 11
5,200 Diamond Multimedia Systems* 34
7,700 Electronics for Imaging, Inc.* 206
1,500 Evans & Sutherland CMP Corp.* 29
800 Factset Research Systems, Inc.* 33
1,850 Henry (Jack) & Associates 93
5,600 HMT Technology Corp.* 64
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,900 Hutchinson Technology* $ 90
1,300 Hypercom Corp.* 15
800 Icon CMT Corp.* 11
500 Intelligroup, Inc.* 8
6,200 Intergraph Corp.* 40
2,900 International Network Services* 158
700 ISS Group, Inc.* 26
7,800 Komag, Inc.* 57
1,200 Kronos, Inc.* 52
400 Manhattan Associates, Inc.* 7
2,900 Mastech Corp.* 77
9,000 Mentor Graphics Corp.* 78
5,100 Micron Electronics, Inc.* 116
2,400 Micros Systems, Inc.* 68
4,300 MMC Networks, Inc.* 56
3,700 MTI Technology Corp.* 15
2,700 MTS Systems Corp. 35
4,100 National Computer Systems, Inc. 135
2,900 Neomagic Corp.* 55
4,500 Network Appliance, Inc.* 338
1,300 Pomeroy Computer Resources* 25
1,100 QRS Corp.* 46
800 Radiant Systems, Inc.* 6
2,100 Rambus, Inc.* 186
6,600 Read-Rite Corp.* 89
500 RWD Technologies, Inc.* 10
7,500 S3, Inc.* 40
4,100 Safeguard Scientifics, Inc.* 116
2,800 Sandisk Corp.* 33
1,700 SCM Microsystems, Inc.* 101
5,600 Security Dynamics Technologies* 85
6,400 Sequent Computer Systems, Inc.* 82
3,800 Smart Modular Technologies* 79
2,000 Splash Technology Holdings* 17
900 SPR, Inc.* 16
2,500 Sykes Enterprises, Inc.* 51
700 Syntel, Inc.* 9
5,000 Systems & Computer Technology Co.* 91
6,025 Technology Solutions Co.* 56
2,400 Telxon Corp.* 65
3,800 Tyler Corp.* 25
6,500 Vanstar Corp.* 78
500 Verisign, Inc.* 20
2,900 Visual Networks, Inc.* 101
6,800 Wang Laboratories* 173
4,200 Whittman-Hart, Inc.* 93
3,400 Xircom, Inc.* 103
5,000 Xylan Corp.* 91
2,700 Zebra Technologies Corp.* 91
--------
5,058
--------
Consumer Products--0.2%
400 800-Jr Cigar, Inc.* 6
1,500 Consolidated Cigar Holdings, Inc.* 17
6,500 Dimon, Inc. 53
</TABLE>
See accompanying notes to financial statements.
74
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
1,300 General Cigar Holdings, Inc.* $ 13
5,000 Universal Corp. 176
--------
265
--------
Cosmetics and Personal Care--0.1%
1,400 Chattem, Inc.* 60
1,000 French Fragrances, Inc.* 7
2,123 Natures Sunshine Products, Inc. 33
4,800 Playtex Products, Inc.* 74
--------
174
--------
Distribution and Wholesale--0.8%
2,800 Anicom, Inc. 29
2,800 Aviall, Inc.* 34
1,000 Aviation Sales Co.* 37
7,624 Brightpoint, Inc.* 114
1,000 CDW Computer Centers, Inc.* 81
4,900 Cellstar Corp.* 32
4,600 CHS Electronics, Inc.* 68
1,600 Daisytek International Corp.* 25
2,750 Insight Enterprises, Inc.* 116
600 JLK Direct Distribution, Inc.* 7
2,300 Keystone Automotive Industries, Inc.* 44
11,800 Merisel, Inc.* 34
2,950 Microage, Inc.* 52
2,900 Owens & Minor, Inc. Holding Co. 50
1,600 Tristar Aerospace Co.* 12
1,700 U.S.A. Floral Products, Inc.* 20
10,300 Unisource Worldwide, Inc. 81
5,400 United Stationers, Inc.* 143
2,100 VWR Scientific Products Corp.* 66
2,800 Watsco, Inc. 50
--------
1,095
--------
Diversified Financial Services--1.4%
3,150 Aames Financial Corp.* 6
3,400 Advanta Corp. 35
1,100 Advest Group, Inc. 26
2,600 Affiliated Managers Group* 70
9,100 Americredit Corp.* 126
1,500 Ameritrade Holding Corp.* 37
500 Amplicon, Inc. 8
300 Capital Factors Holdings, Inc. 5
3,000 Charter Municipal Mortgage Acceptance 38
2,500 Cityscape Financial Corp. 0
1,900 Conning Corp. 33
1,400 Contifinancial Corp.* 8
3,300 Credit Acceptance Corp.* 22
1,800 Dain Rauscher Corp. 67
600 Delta Financial Corp.* 3
4,600 Doral Financial Corp. 82
1,700 DVI, Inc.* 30
5,300 E*trade Group, Inc.* 143
4,200 Eaton Vance Corp. 102
1,900 Everen Capital Corp. 47
400 Federal Agricultural Mortgage Co.* 15
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,350 Financial Federal Corp.* $ 36
1,600 First Sierra Financial, Inc.* 14
600 Firstcity Financial Corp.* 8
1,200 Franchise Mortgage Acceptance Corp.* 12
1,900 Freedom Securities Corp. 34
3,500 Friedman, Billings, Ramsey Group* 21
800 Fund American Enterprise Holdings, Inc 113
2,600 Hambrecht & Quist, Inc.* 63
2,900 Headlands Mortgage Co.* 48
1,700 Healthcare Financial Partners* 56
3,700 IMC Mortgage Co.* 2
4,364 Imperial Credit Industries* 44
500 Investment Technology Group* 26
2,000 Jefferies Group, Inc. 93
900 John Nuveen Co. 33
3,200 Long Beach Financial Corp.* 25
1,600 Medallion Financial Corp. 25
2,846 Metris Cos., Inc.* 95
4,037 Morgan Keegan, Inc. 81
6,450 Phoenix Investment Partners Ltd. 55
3,200 Pioneer Group, Inc.* 58
3,000 Resource America, Inc. 36
2,196 Resource Bancshares MTG Group 30
91 Search Financial Services 0
1,100 Southern Pacific Funding Corp. 0
1,560 Southwest Securities Group 31
600 Student Loan Corp. 27
6,500 UniCapital Corp.* 54
3,020 United Cos. Financial Corp.* 12
--------
2,035
--------
Electric--2.3%
3,150 Black Hills Corp. 78
3,000 Calpine Corp.* 72
2,500 Central Hudson Gas & Electric 101
2,000 CilCorp., Inc. 121
3,300 Cleco Corp. 113
4,800 CMP Group, Inc. 86
2,700 Commonwealth Energy System 104
3,000 Eastern Utilities Associates 74
8,100 EL Paso Electric Co.* 75
2,500 Empire District Electric Co. 55
4,650 Hawaiian Electric Industries 181
5,500 IdaCorp., Inc. 192
2,350 Madison Gas & Electric Co. 54
7,775 MDU Resources Group, Inc. 197
5,000 Minnesota Power, Inc. 209
7,500 Nevada Power Co. 178
3,078 Northwestern Corp. 73
2,000 Orange & Rockland Utilities 113
1,700 Otter Tail Power Co. 68
6,100 Public Service Co. of New Mexico 119
5,700 Rochester Gas & Electric Corp. 175
4,500 Sierra Pacific Resources 162
3,450 Southern Indiana Gas & Electric 116
1,600 TNP Enterprises, Inc. 61
</TABLE>
See accompanying notes to financial statements.
75
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Electric--Continued
4,680 Unisource Energy Corp. Holding* $ 70
2,100 United Illuminating Co. 105
8,250 Washington Water Power 151
3,500 WPS Resources Corp. 118
--------
3,221
--------
Electrical Components and Equipment--1.2%
1,075 AFC Cable Systems, Inc.* 32
2,500 Alpine Group, Inc.* 39
4,800 Ametek, Inc. 100
4,896 Artesyn Technologies, Inc.* 82
2,200 Barnes Group, Inc. 68
3,800 Belden, Inc. 64
1,800 C&D Technologies, Inc. 52
4,375 Cable Design Technologies Corp.* 81
4,900 C-Cube Microsystems, Inc.* 128
2,168 Electro Rent Corp.* 26
1,900 Encore Wire Corp.* 25
4,300 Essex International, Inc.* 139
3,400 FSI International, Inc.* 27
5,400 General Cable Corp. 103
3,100 Jabil Circuit, Inc.* 180
3,400 Kulicke & Soffa Industries* 58
2,900 Littelfuse, Inc.* 68
4,000 Royavac Corp. 93
1,600 Scotsman Industries, Inc. 33
2,175 SLI, Inc.* 48
700 Special Devices, Inc.* 23
2,800 Tecumseh Products Co. 139
2,900 Vicor Corp.* 26
--------
1,634
--------
Electronics--2.2%
1,000 Aavid Thermal Technologies* 18
2,300 Amphenol Corp.* 75
900 Analogic Corp. 32
1,500 Benchmark Electronics, Inc.* 38
3,900 BMC Industries, Inc.* 24
4,500 Checkpoint Systems, Inc.* 60
3,500 Coherent, Inc.* 44
1,400 Cohu, Inc. 32
3,200 Credence Systems Corp.* 63
1,609 CTS Corp. 57
676 Cubic Corp. 14
4,200 Cymer, Inc.* 63
3,600 DII Group, Inc.* 75
3,300 Dionex Corp.* 102
1,100 Dynatech Corp. 3
1,700 Electro Scientific Industries, Inc.* 51
5,900 Fisher Scientific International 109
5,778 Flowserve Corp. 103
4,200 Genrad, Inc.* 68
10,500 Gentex Corp.* 193
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
2,000 Hadco Corp.* $ 70
1,500 Harmon Industries, Inc. 38
2,200 Innovex, Inc. 35
12,000 Integrated Device Technology, Inc.* 71
1,300 ITI Technologies, Inc.* 35
1,400 Itron, Inc.* 9
5,600 Kemet Corp.* 79
4,000 Kent Electronics Corp.* 57
2,600 Lo-Jack Corp.* 24
5,250 Methode Electronics 72
5,600 Mettler Toledo International* 147
2,000 Micrel, Inc.* 81
7,500 Microchip Technology, Inc.* 261
1,000 Moog, Inc.* 29
2,640 OAK Industries, Inc.* 82
1,398 Park Electrochemical Corp. 27
5,232 Paxar Corp.* 55
57 Perkin-Elmer Corp. 0
1,500 Recoton Corp.* 28
1,100 Rogers Corp.* 30
1,800 Sawtek, Inc.* 39
9,800 Sensormatic Electronics Corp.* 80
2,600 Sipex Corp.* 84
1,300 Spectra-Physics Lasers, Inc.* 12
1,700 Stoneridge, Inc.* 31
3,200 Tava Technologies, Inc.* 18
2,100 Technitrol, Inc. 63
2,300 Thermedics, Inc.* 24
400 Thermo Optek Corp.* 4
400 Thermoquest Corp.* 4
3,300 Trimble Navigation Ltd.* 29
1,700 Triumph Group, Inc.* 57
1,300 Veeco Instruments, Inc.* 47
7,600 Vishay Intertechnology, Inc.* 108
2,400 Watts Industries 45
1,300 Woodward Governor Co. 33
2,500 X-Rite, Inc. 22
--------
3,154
--------
Engineering and Construction--0.4%
2,400 Dames & Moore Group 31
1,800 Dycom Industries, Inc.* 71
6,000 Foster Wheeler Corp. 103
2,775 Granite Construction, Inc. 90
3,100 Insituform Technologies, Inc.* 41
3,200 Jacobs Engineering Group, Inc.* 121
4,891 Morrison Knudsen Corp.* 47
1,000 Stone & Webster, Inc. 34
1,800 URS Corp.* 37
--------
575
--------
Entertainment--1.0%
900 AMC Entertainment, Inc.* 15
1,100 Anchor Gaming* 56
4,400 Ascent Entertainment Group* 35
6,600 Aztar Corp.* 33
</TABLE>
See accompanying notes to financial statements.
76
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
5,300 Boyd Gaming Corp.* $ 19
1,100 Carmike Cinemas, Inc.* 22
1,500 Championship Auto Racing Teams* 42
1,100 Churchill Downs, Inc. 33
1,500 Dover Downs Entertainment 17
800 GC Companies, Inc.* 32
5,900 Grand Casinos, Inc.* 56
6,100 Gtech Holdings Corp.* 153
900 Harveys Casinos Resorts 24
2,900 Hollywood Park, Inc.* 28
2,700 International Speedway Corp.* 96
900 Penske Motorsports, Inc.* 21
9,200 Premier Parks, Inc.* 250
600 Primadonna Resorts, Inc.* 5
2,500 RIO Hotel And Casino, Inc.* 39
1,500 Scientific Games Holdings, Inc.* 29
3,400 SFX Entertainment, Inc.* 170
500 Silverleaf Resorts, Inc.* 6
1,800 Speedway Motorsports, Inc.* 51
3,100 Station Casinos, Inc.* 26
1,300 Steinway Musical Instruments* 30
4,000 Sunterra Corp.* 47
500 Trendwest Resorts, Inc.* 7
3,900 Vail Resorts, Inc.* 98
900 Vistana, Inc.* 13
--------
1,453
--------
Environmental Control--0.6%
27,100 Aqua Alliance, Inc., Class A* 54
5,100 Calgon Carbon Corp. 37
900 Casella Waste Systems, Inc.* 28
7,000 Catalytica, Inc.* 126
4,400 Eastern Environmental Services* 96
2,200 Imco Recycling, Inc. 33
2,400 Ionics, Inc.* 75
3,900 Metal Management, Inc.* 12
500 Mine Safety Appliances Co. 33
17,220 Safety Kleen Corp.* 59
3,300 Superior Services, Inc.* 61
3,300 Syntroleum Corp.* 28
4,197 Tetra Tech, Inc.* 88
750 Thermo Ecotek Corp.* 8
400 Waste Industries, Inc.* 7
18,400 Wastemasters, Inc.* 10
--------
755
--------
Food--1.3%
2,600 American Italian Pasta Co.* 66
5,500 Chiquita Brands International 62
5,200 Corn Products International, Inc. 146
3,100 Dreyer's Grand Ice Cream, Inc. 42
6,300 Earthgrains Co. 202
5,600 Fleming Companies, Inc.* 56
2,600 Great Atlantic & Pacific Tea Co. 71
2,000 Hain Food Group, Inc.* 41
2,200 Imperial Holly Corp. 19
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
1,400 Ingles Markets, Inc. $ 17
2,500 International Multifoods Corp. 64
3,300 Lance, Inc. 65
2,000 Michael Foods, Inc. 50
1,850 Performance Food Group Co.* 45
499 Pilgrims Pride Corp.* 12
4,800 RalCorp. Holdings, Inc.* 84
7,000 Richfood Holdings, Inc. 130
1,100 Riviana Foods, Inc. 22
100 Seaboard Corp. 43
4,900 Smithfield Foods, Inc.* 130
3,800 Smucker (J.M.) Co. 88
600 United Natural Foods, Inc.* 15
7,500 Universal Foods Corp. 186
3,700 Vlasic Foods International* 80
1,600 Wild Oats Markets, Inc.* 46
2,300 Zapata Corp. 18
--------
1,800
--------
Forest Products and Paper--0.5%
3,500 Buckeye Technologies, Inc.* 68
3,700 Caraustar Industries, Inc. 98
2,800 Chesapeake Corp.* 97
3,700 Glatfelter (P.H.) Co. 48
4,300 Potlatch Corp. 163
1,770 Rock-Tenn Co. 29
2,100 Schweitzer-Mauduit International 38
8,491 Wausau-Mosinee Paper Corp. 143
--------
684
--------
Gas--1.7%
8,400 AGL Resources, Inc. 181
4,450 Atmos Energy Corp. 136
2,000 Bay State Gas 79
1,300 Colonial Gas Co. 45
1,500 Connecticut Energy Corp. 42
3,000 Eastern Enterprises 122
3,800 Energen Corp. 68
4,433 Indiana Energy, Inc. 100
2,600 Laclede Gas Co. 65
2,600 New Jersey Resources 101
1,450 North Carolina Natural Gas 47
3,600 Northwest Natural Gas Co. 102
1,900 NUI Corp. 46
4,600 Oneok, Inc. 160
1,500 Pennsylvania Enterprises, Inc. 37
5,200 Peoples Energy Corp. 196
4,476 Piedmont Natural Gas Co. 157
2,950 Public Service Co. of North Carolina 72
2,087 SEMCO Energy, Inc. 34
1,120 South Jersey Industries 29
2,619 Southern Union Co.* 53
4,400 Southwest Gas Corp. 105
3,600 Southwestern Energy Co. 27
4,800 UGI Corp. 117
6,400 Washington Gas Light Co. 163
</TABLE>
See accompanying notes to financial statements.
77
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Gas--Continued
5,500 Wicor, Inc. $ 120
1,550 Yankee Energy Systems, Inc. 45
--------
2,449
--------
Hand and Machine Tools--0.6%
5,875 Applied Power, Inc.* 209
4,893 Baldor Electric 98
668 Franklin Electric Co., Inc. 44
1,400 Hardinger, Inc. 27
7,200 Lincoln Electric Holdings, Inc. 169
5,700 Milacron, Inc. 115
3,100 Regal Beloit 78
1,800 SPX Corp.* 104
1,000 Starrett (L.S.) Co. 31
--------
875
--------
Health Care--3.1%
3,200 Acuson Corp.* 45
2,900 Adac Laboratories* 75
6,600 Alaris Medical, Inc.* 35
2,300 Alternative Living Services* 62
1,300 American Homepatient, Inc.* 3
2,500 American Retirement Corp.* 39
6,100 Apria Healthcare Group, Inc.* 43
2,000 Arrow International, Inc. 57
2,200 Assisted Living Concepts, Inc.* 28
4,500 Ballard Medical Products 98
1,400 Brookdale Living Communities* 24
1,600 Capital Senior Living Corp.* 20
1,400 Carematrix Corp.* 39
1,700 Centennial HealthCare Corp.* 26
800 Closure Medical Corp.* 18
2,800 Columbia Laboratories, Inc.* 11
2,250 Conmed Corp.* 61
2,200 Cooper Companies, Inc.* 47
8,550 Covance, Inc.* 214
8,600 Coventry Health Care, Inc.* 64
1,900 Curative Health Services, Inc.* 55
2,300 Cytyc Corp.* 46
1,900 Datascope Corp.* 42
1,700 Diagnostic Products Corp. 44
4,900 Express Scripts, Inc.* 270
5,200 Genesis Health Ventures* 50
3,400 Haemonetics Corp.* 77
2,700 Hanger Orthopedic Group, Inc.* 65
3,300 Henry Schein, Inc.* 117
2,000 Hologic, Inc.* 26
5,200 Idexx Laboratories, Inc.* 135
1,600 Igen International, Inc.* 43
1,200 Impath, Inc.* 46
3,500 Invacare Corp.* 84
5,700 Laboratory Corp. of America* 7
1,571 Life Technologies, Inc. 58
1,200 Lifecore Biomedical, Inc.* 10
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
330 LTC Healthcare, Inc. $ 1
4,600 Magellan Health Services* 43
10,427 Mariner Post-Acute Network* 45
2,100 Maxxim Medical, Inc.* 57
135 MEDIQ, Inc. 1
3,464 Mentor Corp. 64
7,000 MID Atlantic Medical Services* 62
1,100 Minimed, Inc.* 78
1,100 National Healthcare Corp.* 17
9,200 Novacare, Inc.* 29
1,200 Novoste Corp.* 20
4,600 Oakley, Inc.* 45
1,400 Ocular Sciences, Inc.* 32
1,800 OEC Medical, Inc.* 50
11,800 Oxford Health Plans* 131
1,000 Perclose, Inc.* 27
1,200 Province Healthcare Co.* 38
10,325 PSS World Medical, Inc.* 214
4,400 Quest Diagnostics, Inc.* 79
5,950 Renal Care Group, Inc.* 160
1,750 Res-Care, Inc.* 42
2,100 Resmed, Inc.* 72
4,055 Respironics, Inc.* 77
1,600 Sabratek Corp.* 27
3,500 Sierra Health Services* 80
3,600 Sola International, Inc.* 57
7,880 Sun Healthcare Group, Inc.* 41
2,100 Sunrise Assisted Living, Inc.* 91
2,900 Sunrise Medical, Inc.* 37
2,800 Techne Corp.* 53
600 Thermo Bioanalysis Corp.* 6
2,700 Thermo Cardiosystems, Inc.* 31
1,600 Thermolase Corp.* 8
1,350 Thermotrex Corp.* 14
800 Trex Medical Corp.* 8
1,900 United Wisconsin Services, Inc. 14
8,800 Vencor, Inc.* 40
2,000 Ventana Medical Systems* 43
2,000 Visx, Inc.* 146
700 Vital Signs, Inc. 12
1,600 Wesley Jessen Visioncare* 38
1,823 West Co., Inc. 55
1,200 Xomed Surgical Products, Inc.* 53
--------
4,422
--------
Holding Companies--Diversified--0.1%
2,320 Triarc Companies, Inc.* 37
6,000 Walter Industries, Inc.* 86
--------
123
--------
Home Builders--1.0%
1,812 American Homestar Corp.* 30
2,900 Cavalier Homes, Inc. 31
6,004 Champion Enterprises, Inc.* 134
2,600 Coachmen Industries, Inc. 59
1,100 Crossmann Cmntys, Inc.* 28
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
5,158 DR Horton, Inc. $ 97
6,700 Fairfield Communities, Inc.* 72
5,800 Kaufman & Broad Home Corp. 146
2,700 MDC Holdings, Inc. 50
1,200 Monaco Coach Corp.* 36
1,500 National RV Holdings, Inc.* 40
1,400 NVR L.P.* 55
6,850 Oakwood Homes* 102
2,820 Palm Harbor Homes, Inc.* 73
3,600 Pulte Corp. 92
2,200 Ryland Group, Inc. 58
1,100 Skyline Corp. 36
3,700 Standard-Pacific Corp. 36
983 Thor Industries, Inc. 23
3,500 Toll Brothers, Inc.* 85
1,979 U S Home Corp.* 63
2,100 Webb (DEL E.) Corp. 56
1,900 Winnebago Industries 23
--------
1,425
--------
Home Furnishings--0.4%
1,900 Bassett Furniture Industries 48
1,500 Bush Industries 25
4,800 Fedders Corp. 27
2,710 Harman International 116
5,300 Kimball International 102
7,800 La-Z-Boy, Inc. 131
400 Meadowcraft, Inc.* 4
2,400 O'Sullivan Industries Holdings* 24
900 Parkervision, Inc.* 22
2,200 Polycom, Inc.* 39
3,200 Windmere-Durable Holdings* 20
--------
558
--------
Household Products and Wares--0.6%
2,350 American Business Products, Inc. 52
3,080 Brady Corp. 79
4,300 Central Garden and Pet Co.* 69
2,700 Church & Dwight, Inc. 93
900 CSS Industries, Inc.* 27
1,100 DAY Runner, Inc.* 24
1,200 Fossil, Inc.* 33
2,400 Gibson Greetings, Inc.* 26
4,600 Harland (John H.) Co. 70
1,300 Hunt Corp. 18
5,400 Jostens, Inc. 127
1,900 New England Business Service, Inc. 61
1,600 Russ Berrie & Co., Inc. 36
1,900 Standard Register Co. 56
6,200 Wallace Computer Services, Inc. 139
--------
910
--------
Housewares--0.2%
2,400 Enesco Group, Inc. 58
2,600 Libbey, Inc. 80
7,757 Metromedia International Group * 34
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,090 Mikasa, Inc. $ 12
1,000 National Presto Industries, Inc. 41
2,050 Oneida Ltd. 37
1,900 Toro Co. 50
--------
312
--------
Insurance--3.3%
1,700 Acceptance Insurance Companies, Inc.* 33
3,600 Alfa Corp. 79
1,124 American Annuity Group, Inc. 26
2,400 American Heritage Life Investment Corp 59
1,200 American Medical Security Group 17
3,400 Amerin Corp.* 84
2,549 Amerus Life Holdings, Inc. 56
2,600 Argonaut Group, Inc. 65
3,400 ARM Financial Group, Inc. 73
1,700 Baldwin & Lyons, Inc. 36
1,900 Blanch (EW) Holdings, Inc. 76
3,200 Capital Re Corp. 63
1,200 Capitol Transamerica Corp. 21
1,200 Chartwell RE Corp. 33
2,000 Chicago Title Corp. 94
900 Citizens Corp. 30
3,300 Cmac Investment Corp. 159
2,400 CNA Surety Corp.* 35
3,800 Commerce Group, Inc. 130
2,181 Delphi Financial Group* 102
3,600 Enhance Financial Services Group 106
1,500 Executive Risk, Inc.* 81
4,600 FBL Financial Group, Inc. 113
2,783 Fidelity National Financial, Inc. 91
7,250 First American Financial 222
2,600 Foremost Corp. of America 53
1,400 Fpic Insurance Group, Inc.* 51
5,134 Frontier Insurance Group, Inc. 73
2,500 Gallagher, Arthur J. & Co. 116
1,400 Guarantee Life Companies, Inc. 26
1,700 Harleysville Group, Inc. 37
5,500 HCC Insurance Holdings, Inc. 102
1,900 Highlands Insurance Group* 24
1,800 Hilb, Rogal & Hamilton Co. 34
4,350 HSB Group, Inc. 180
500 Kansas City Life Insurance Co. 41
2,200 Landamerica Financial Group, Inc. 135
1,600 Liberty Corp. 78
1,700 Life RE Corp. 160
3,100 Life USA Holding, Inc. 40
600 Markel Corp.* 100
700 Meadowbrook Insurance Group 11
3,175 Medical Assurance, Inc.* 96
600 Midland Co. 15
2,400 MMI Companies, Inc. 39
2,200 NAC Re Corp. 105
300 National Western Life Insurance* 36
500 Nymagic, Inc. 11
2,200 Pennsylvania Manufacturers Corp. 42
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Insurance--Continued
900 Penn Treaty American Corp.* $ 25
2,900 PennCorp. Financial Group, Inc.* 3
900 Philadelphia Consolidated Holdings* 19
1,525 POE & Brown, Inc. 53
3,300 Presidential Life Corp. 59
1,751 Pxre Corp. 39
3,700 Reinsurance Group of America 242
1,900 Risk Capital Holdings, Inc.* 41
1,181 RLI Corp. 43
1,800 Scpie Holdings, Inc. 55
4,300 Selective Insurance Group 81
1,900 State Auto Financial Corp. 23
1,000 Stewart Information Services 49
6,300 TIG Holdings, Inc. 89
1,650 Trenwick Group, Inc. 52
2,000 Triad Guaranty, Inc.* 45
5,500 UICI* 109
1,050 United Fire & Casualty Co. 39
1,500 Vesta Insurance Group, Inc. 9
3,300 W.R. Berkley Corp. 111
1,400 Zenith National Insurance Corp. 34
--------
4,709
--------
Investment Companies--0.0%
700 PEC Israel Economic Corp.* 17
--------
Iron and Steel--0.9%
6,700 AK Steel Holding Corp. 129
2,700 Arch Coal, Inc. 52
13,300 Armco, Inc.* 52
19,006 Bethlehem Steel Corp.* 157
4,100 Birmingham Steel Corp. 20
2,900 Carpenter Technology 102
1,600 Citation Corp.* 22
1,700 Cleveland-Cliffs, Inc. 65
900 Gibraltar Steel Corp.* 18
7,200 Inland Steel Industries, Inc. 132
1,700 J & L Specialty Steel, Inc. 11
3,300 Lone Star Technologies* 32
14,600 LTV Corp. 80
3,100 National Steel Corp. 23
3,200 Oregon Steel Mills, Inc. 41
1,550 Reliance Steel & Aluminum 47
1,600 Roanoke Electric Steel Corp. 23
1,000 Rouge Industries, Inc. 8
600 Schnitzer Steel Industries, Inc. 11
600 Shiloh Industries, Inc.* 9
5,200 Steel Dynamics, Inc.* 71
3,100 Texas Industries, Inc. 90
2,400 WHX Corp.* 25
--------
1,220
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
Leisure Time--0.3%
500 Ambassadors International, Inc.* $ 9
1,000 American Classic Voyager* 15
2,200 American Skiing Co.* 20
3,500 Bally Total Fitness Holding* 83
1,400 Coleman Co., Inc.* 13
2,850 Family Golf Centers, Inc.* 59
1,617 K2, Inc. 18
1,800 North Face, Inc.* 23
1,500 Pegasus Systems, Inc.* 33
3,400 Polaris Industries, Inc. 119
1,200 Travel Services International, Inc.* 27
--------
419
--------
Lodging--0.3%
5,600 Choice Hotels International, Inc.* 64
10,500 Extended Stay America, Inc.* 105
3,800 Florida Panthers Holdings* 43
2,600 Homestead Village, Inc.* 17
3,359 Marcus Corp. 51
7,700 Prime Hospitality Corp.* 67
4,100 RED Roof Inns, Inc.* 70
2,500 Servico, Inc.* 16
1,300 Suburban Lodges of America* 10
--------
443
--------
Machinery--Construction and Mining--0.3%
1,100 Astec Industries, Inc.* 57
1,850 Commercial Intertech Corp. 29
3,200 Global Industries Technologies* 27
5,900 Global Industries Technologies* 97
2,500 Kuhlman Corp. 70
2,525 Manitowoc Co. 100
2,600 Terex Corp.* 73
--------
453
--------
Machinery--Diversified--1.2%
900 Advanced Energy Industries* 16
2,623 Albany International Corp. 50
1,200 Allied Products 9
3,200 Applied Industrial Technology, Inc. 45
3,500 Briggs & Stratton 177
2,450 Chart Industries, Inc. 19
5,000 Cognex Corp.* 83
1,700 Columbus Mckinnon Corp. 31
1,300 DT Industries, Inc.* 24
2,500 Esterline Technologies Corp.* 52
2,050 Gardner Denver Machinery, Inc.* 33
2,900 Gerber Scientific, Inc. 73
1,300 Gleason Corp. 25
2,145 Graco, Inc. 60
2,800 Helix Technology Corp. 34
4,325 Idex Corp. 117
6,000 Imation Corp.* 98
2,600 Integrated Process Equipment* 27
1,800 Iteq, Inc.* 4
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
1,850 Lindsay Manufacturing Co. $ 28
3,900 Magnetek, Inc.* 44
2,600 Motivepower Industries, Inc.* 79
1,000 Nacco Industries 87
2,000 Nordson Corp. 96
1,500 Omniquip International, Inc.* 20
4,000 Presstek, Inc.* 31
2,500 PRI Automation, Inc.* 60
1,148 Robbins & Myers, Inc. 23
1,100 Sauer, Inc. 10
1,700 Specialty Equipment Companies, Inc.* 40
2,000 Speedfam International, Inc.* 30
4,100 Stewart & Stevenson Services 41
1,400 Tennant Co. 48
1,200 Thermo Fibertek, Inc.* 7
5,300 Unova, Inc.* 90
--------
1,711
--------
Media--2.0%
1,100 Entertainment, Inc. 8
2,200 Ackerley Group, Inc.* 39
2,500 Adelphia Communications* 87
6,200 American Media, Inc.* 29
4,300 Banta Corp. 114
5,400 Bowne & Co., Inc. 90
1,600 CD Radio, Inc.* 61
4,600 Century Communications* 112
1,600 Consolidated Graphics, Inc.* 92
1,300 COX Radio, Inc.* 50
1,700 Emmis Communications Corp.* 59
3,000 Gaylord Entertainment Co.* 88
700 Gray Communication System* 12
5,600 Hollinger International, Inc. 72
3,600 Houghton Mifflin Co. 151
2,100 Jones Intercable, Inc.* 65
1,600 Journal Register Co.* 26
6,500 LEE Enterprises 182
4,900 Mail-Well, Inc.* 63
3,275 Mcclatchy Co. 108
3,400 Media General, Inc. 161
2,008 Merrill Corp. 34
1,100 Metro Networks, Inc.* 42
1,200 On Command Corp.* 10
2,700 Paxson Communications Corp.* 20
1,200 Pegasus Communications Corp.* 20
2,600 Petersen Cos., Inc.* 62
2,500 Playboy Enterprises* 39
1,900 Scholastic Corp.* 90
3,400 Spelling Entertainment Group* 25
7,400 TCI Satellite Entmnt Group* 8
5,800 United International Holdings, Inc.* 98
600 United Television, Inc. 66
5,400 Valassis Communications, Inc.* 232
300 Value Line, Inc. 12
3,300 Westwood One, Inc.* 87
3,800 Wiley (John) & Sons 131
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
5,600 World Color Press, Inc.* $ 167
1,400 Young Broadcasting Corp.* 50
--------
2,862
--------
Metal Fabricate and Hardware--0.6%
1,656 Castle (A.M.) & Co. 32
2,100 Chase Industries, Inc.* 25
1,966 Commercial Metals Co. 50
2,800 Intermet Corp. 38
4,800 Kaydon Corp. 170
1,800 Ladish Co., Inc.* 18
800 Lawson Products 18
1,800 Maverick Tube Corp.* 10
4,100 Metals USA, Inc.* 38
5,200 Mueller Industries, Inc.* 119
2,500 NS Group, Inc.* 14
3,600 Precision Castparts Corp. 159
2,100 Quanex Corp. 38
2,800 ROHN Industries, Inc. 8
600 Ryerson Tull, Inc.* 7
800 Shaw Group, Inc. (The)* 7
500 Special Metals Corp.* 5
2,900 Valmont Industries 47
2,100 Wolverine Tube, Inc. 47
2,900 Wyman-Gordon Co.* 45
--------
895
--------
Metals--Diversified--0.4%
5,400 Asarco, Inc. 105
2,400 Brush Wellman, Inc. 39
1,800 Century Aluminum Co. 15
1,400 Commonwealth Industries, Inc. 13
8,100 Hecla Mining Co.* 34
4,300 Kaiser Aluminum Corp.* 28
500 Maxxam, Inc.* 24
2,100 RTI International Metals, Inc.* 32
3,700 Southern Peru Limited 43
3,000 Stillwater Mining Co.* 110
3,200 Titanium Metals Corp. 32
500 Tremont Corp. 18
--------
493
--------
Mining--0.2%
3,500 Amcol International Corp. 37
33,700 Battle Mountain Gold Co.* 158
4,517 Getchell Gold Corp.* 74
--------
269
--------
Miscellaneous Manufacturer--1.5%
2,100 ACX Technologies, Inc.* 27
4,500 Aptargroup, Inc. 126
3,050 Arctic Cat, Inc. 32
12,600 Aura Systems, Inc.* 17
3,600 Blount International, Inc. 83
3,550 Clarcor, Inc. 67
1,500 CPI Corp. 32
</TABLE>
See accompanying notes to financial statements.
81
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Miscellaneous Manufacturer--Continued
2,350 Cuno, Inc.* $ 35
3,400 Dexter Corp. 109
5,600 Donaldson Co., Inc. 112
6,700 Federal Signal Corp. 164
2,100 Foamex International, Inc.* 24
2,700 Furon Co. 46
711 General Electric Co. 64
4,500 Griffon Corp.* 43
2,100 Heska Corp.* 13
2,200 Hexcel Corp.* 20
2,500 Justin Industries 32
2,300 Lydall, Inc.* 29
8,000 Mark IV Industries, Inc. 135
5,400 Mascotech, Inc. 87
2,400 Matthews International Corp. 72
2,694 Myers Industries, Inc. 61
300 NCH Corp. 17
3,900 Polymer Group, Inc.* 41
4,600 Roper Industries, Inc. 85
1,200 Samsonite Corp.* 8
2,700 Scott Technologies, Inc.* 42
2,100 Smith (A.O.) Corp. 52
1,528 SPS Technologies, Inc.* 87
1,700 Standex International Corp. 40
2,900 Sturm Ruger & Co., Inc. 37
2,700 Synetic, Inc.* 114
3,000 Tredegar Industries, Inc. 70
2,500 Westinghouse Air Brake Co.* 55
1,600 Zoltek Cos., Inc.* 17
--------
2,095
--------
Office Furnishings--0.1%
2,100 Knoll, Inc.* 57
660 Virco Manufacturing 14
--------
71
--------
Office and Business Equipment--0.0%
900 General Binding Corp. 34
--------
Oil and Gas Producers--1.5%
1,500 Atwood Oceanics, Inc.* 28
4,640 Barrett Resources Corp.* 113
800 Belco Oil & Gas Corp.* 5
4,300 Benton Oil & Gas Co.* 16
2,700 Berry Petroleum 35
3,900 Brown (Tom), Inc. 39
3,300 Cabot Oil & Gas Corp. 51
7,154 Chesapeake Energy Corp. 10
2,300 Cliffs Drilling Co. 36
2,900 Comstock Resources, Inc.* 11
5,700 Cross Timbers Oil Co. 65
3,300 Devon Energy Corp. 109
18,600 Enserch Exploration, Inc. 66
1,900 Forcenergy, Inc.* 8
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
4,900 Forest Oil Corp.* $ 42
4,100 Frontier Oil Corp.* 23
21,400 Grey Wolf, Inc.* 21
19,600 Harken Energy Corp.* 55
7,400 Helmerich & Payne 128
678 Holly Corp. 11
1,200 Houston Exploration Co.* 21
2,500 HS Resources, Inc.* 22
3,700 KCS Energy, Inc.* 15
18,400 Kelley Oil & Gas Corp.* 17
2,856 Louis Dreyfus Natural Gas* 37
7,800 Marine Drilling Co., Inc.* 68
4,776 Meridian Resource Corp.* 19
3,000 Mitchell Energy & Development 39
4,700 Newfield Exploration Co.* 92
2,900 Nuevo Energy Co.* 43
9,100 Parker Drilling Co.* 34
4,600 Patterson Energy, Inc.* 22
800 Penn Virginia Corp. 17
2,500 Plains Resources, Inc.* 44
5,500 Pogo Producing Co. 64
7,400 Pride International, Inc.* 56
5,300 Quaker State Corp. 76
2,600 Range Resources Corp. 11
800 Rutherford-Moran Oil Corp.* 2
15,000 Santa Fe Energy Resources* 115
9,200 Seagull Energy Corp.* 75
4,900 Snyder Oil Corp. 63
1,600 St. Mary Land & Exploration 30
2,000 Stone Energy Corp.* 60
2,220 Swift Energy Co.* 21
4,700 Tesoro Petroleum Corp.* 63
5,300 Titan Exploration, Inc.* 39
1,400 Transtexas Gas Corp.* 3
5,400 Vintage Petroleum, Inc. 56
2,030 Wd-40 Co. 63
--------
2,159
--------
Oil and Gas Services--0.5%
600 CAL Dive International, Inc.* 10
400 Carbo Ceramics, Inc. 8
2,100 Daniel Industries 23
1,800 Friede Goldman International, Inc.* 23
900 Gulf Island Fabrication, Inc.* 7
4,200 Hanover Compressor Co.* 95
5,900 Input/Output, Inc.* 48
1,900 IRI International Corp.* 8
2,700 KEY Energy Group* 17
1,000 Lufkin Industries, Inc. 20
9,860 Newpark Resources* 73
3,400 Oceaneering International, Inc.* 42
500 Omni Energy Services Corp.* 5
3,100 Pool Energy Services Co.* 35
2,000 RPC, Inc. 16
1,900 Seacor Smit, Inc.* 91
3,300 Seitel, Inc.* 44
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
2,600 Superior Energy Services* $ 8
6,700 Tuboscope, Inc.* 56
1,500 UTI Energy Corp.* 13
3,100 Veritas DGC, Inc.* 45
--------
687
--------
Packaging and Containers--0.6%
4,500 Ball Corp. 192
900 Bway Corp.* 15
3,900 Earthshell Corp.* 53
5,700 First Brands Corp. 213
7,500 Gaylord Container Corp. 39
2,100 Greif Brothers Corp. 68
2,700 Ivex Packaging Corp.* 53
7,600 Longview Fibre Co. 86
3,150 Shorewood Packaging Corp.* 47
1,700 Silgan Holdings, Inc.* 47
--------
813
--------
Pharmaceuticals--2.9%
1,200 Advance Paradigm, Inc.* 38
4,600 Agouron Pharmaceuticals, Inc.* 201
1,500 Algos Pharmaceuticals Corp.* 41
2,800 Alkermes, Inc.* 51
76 Alpha 1 Biomedicals, Inc. 0
2,500 Alpharma, Inc., Class A 90
3,100 Amerisource Health Corp.* 198
1,000 Andrx Corp.* 40
4,400 AxyS Pharmaceuticals, Inc.* 25
1,300 Barr Laboratories, Inc.* 55
2,333 Bindley Western Industries* 90
1,000 Biomatrix, Inc.* 49
2,080 Block Drug Co. 78
3,200 Carter-Wallace, Inc. 57
3,900 Cephalon, Inc.* 29
1,600 Chirex, Inc.* 29
3,500 COR Therapeutics, Inc.* 41
2,000 Coulter Pharmaceutical, Inc.* 57
6,800 Dura Pharmaceuticals, Inc.* 88
2,700 Fuisz Technologies Ltd.* 33
1,900 Geltex Pharmaceuticals, Inc.* 45
11,600 Gensia Sicor, Inc.* 54
4,500 Gilead Sciences, Inc.* 140
2,400 Guilford Pharmaceuticals, Inc.* 34
1,766 Herbalife International, Inc. 21
3,600 Imclone Systems* 38
3,400 Immune Response Corp.* 44
3,900 Isis Pharmaceuticals, Inc.* 44
14,400 Ivax Corp.* 137
3,400 Jones Pharma, Inc. 122
1,950 KV Pharmaceutical Co.* 42
5,458 Ligand Pharmaceuticals, Inc.* 54
2,700 Macrochem Corp.* 21
2,700 Medicis Pharmaceutical* 170
3,400 Medimmune, Inc.* 227
900 Miravant Medical Technologies* 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
7,800 Nbty, Inc.* $ 48
2,000 NCS Healthcare, Inc.* 41
4,200 Nexstar Pharmaceuticals, Inc.* 42
1,000 Omega Protein Corp.* 9
2,400 Pathogensis Corp.* 115
3,150 Patterson Dental Co.* 131
9,400 Perrigo Co.* 79
1,800 Pharmacyclics, Inc.* 31
10,000 PharMerica, Inc.* 41
1,800 Priority Healthcare Corp.* 66
3,700 Roberts Pharmaceutical Corp.* 91
2,400 Sangstat Medical Corp.* 58
600 Schein Pharmaceutical, Inc.* 8
5,600 Scios, Inc.* 42
3,900 Sepracor, Inc.* 324
4,600 Sequus Pharmaceuticals, Inc.* 91
1,400 Supergen, Inc.* 9
3,800 Theragenics Corp.* 52
2,800 Triangle Pharmaceuticals, Inc.* 31
3,200 Twinlab Corp.* 53
3,600 US Bioscience, Inc.* 27
3,700 Vertex Pharmaceuticals, Inc.* 88
3,000 Veterinary Centers of America* 55
1,400 Viropharma, Inc.* 16
4,000 Vivus, Inc.* 12
1,100 Weider Nutrition International 7
5,100 Zila Pharmaceuticals, Inc.* 38
1,700 Zonagen, Inc.* 33
--------
4,135
--------
Pipelines--0.2%
600 Aquila Gas Pipeline Corp.* 5
5,400 Equitable Resources, Inc. 159
3,200 Transmontaigne, Inc.* 48
3,100 Western Gas Resources, Inc. 29
--------
241
--------
Real Estate--0.5%
700 Avatar Holdings, Inc.* 11
1,800 Castle & Cooke, Inc.* 28
1,900 CB Richard Ellis Services, Inc.* 34
2,000 Forest City Enterprises, Class A 49
962 Getty Realty Corp. 13
2,900 Grubb & Ellis Co.* 24
1,933 Insignia Financial Group, Inc.* 26
2,400 Lasalle Partners, Inc. 68
3,800 LNR Property Corp.* 74
265 Merry Land Properties, Inc. 1
344 Reckson Services Industries, Inc. 1
5,900 Security Capital Group, Inc.* 87
4,200 Trammell Crow Co.* 101
8,000 Ventas, Inc.* 96
2,500 Wellsford Real Properties, Inc.* 23
--------
636
--------
</TABLE>
See accompanying notes to financial statements.
83
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
REITs--6.1%
470 Alexander's, Inc.* $ 37
1,600 Alexandria Real Estate Equities 49
3,400 American Health Properties 77
2,000 Amli Residential Properties 43
2,600 Anthracite Capital, Inc. 19
759 Apartment Investment & Management Co. 30
200 Archstone Communities Trust 4
2,500 Associated Estates Realty 32
3,300 Bedford Property Investors 59
5,400 Berkshire Realty Co. 51
2,500 Boykin Lodging Co. 33
3,503 Bradley Real Estate Trust 72
4,900 Brandywine Realty Trust 88
6,424 Bre Properties, Inc., Class A 155
4,700 Burnham Pacific Property, Inc. 61
2,700 Cabot Industrial Trust 57
6,533 Camden Property Trust 168
3,100 Capital Automotive 41
8,975 Capstead Mortgage Corp.* 30
3,300 CBL & Associates Properties 83
3,200 CCA Prison Realty Trust 78
2,600 Centerpoint Properties Corp. 88
2,800 Centertrust Retail Properties 33
3,100 Chateau Communities, Inc. 89
2,300 Chelsea GCA Realty, Inc. 78
3,800 Colonial Properties Trust 103
4,300 Commercial NET Lease Realty 61
6,300 Cornerstone Realty Income Trust 67
3,700 Cousins Properties, Inc. 114
5,900 Criimi MAE, Inc. 22
3,400 Crown American Realty 27
8,400 Developers Divers Realty 162
6,400 Dynex Capital, Inc. 30
2,400 Eastgroup Properties 45
2,000 Entertainment Properties Trust 37
5,300 Equity Inns, Inc. 54
2,100 Essex Property Trust, Inc. 65
5,800 Federal Realty Investment Trust 139
9,433 Felcor Lodging Trust, Inc. 225
5,500 First Industrial Realty Trust 133
4,600 First Union Real Estate 27
7,200 Franchise Finance Corp. of America 177
3,700 Gables Residential Trust 92
5,300 General Growth Propeties 201
4,600 Glenborough Realty Trust, Inc. 98
3,500 Glimcher Realty Trust 59
1,100 Golf Trust of America, Inc. 29
2,600 Great Lakes Reit, Inc. 41
4,500 Health Care Property Investors 142
4,100 Health Care Reit, Inc. 93
6,099 Healthcare Realty Trust, Inc. 140
2,300 Home Properties of NY, Inc. 57
299 Horizon Group Properties, Inc. 1
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
5,300 Hospitality Properties Trust $ 138
3,000 IMPAC Mortgage Holdings, Inc. 15
5,100 Imperial Credit Commerical Mortgage 50
4,700 Innkeepers USA Trust 52
4,600 IRT Property Co. 46
2,700 Irvine Apartment Communities 72
4,650 JDN Realty Corp. 96
1,900 JP Realty, Inc. 42
4,100 Kilroy Realty Corp. 92
3,900 Koger Equity, Inc. 62
1,700 LaSalle Hotel Properties 23
2,400 Laser Mortgage Management, Inc. 14
2,500 Lexington Corporate Properties 33
4,100 LTC Properties, Inc. 69
4,300 Macerich Co. (The) 114
3,100 Manufactured Home Communities 76
4,600 Meridian Industrial Trust 111
6,742 Meristar Hospitality Corp.* 131
2,000 MGI Properties, Inc. 56
2,800 Mid-America Apartment Communities 68
2,100 Mills Corp. 45
1,800 National Golf Properties, Inc. 52
3,400 National Health Investors 90
6,400 Nationwide Health Properties, Inc. 143
12,880 New Plan Excel Realty Trust 282
2,600 Ocwen Asset Investment Corp. 14
2,918 Omega Healthcare Investors 89
2,600 Pacific Gulf Properties, Inc. 50
1,500 PAN Pacific Retail Properties, Inc. 30
1,600 Parkway Properties, Inc. 48
1,700 Pennsylvania Real Estate Investment Trust 34
5,800 Prentiss Properties Trust 126
309 Price Enterprises, Inc. 2
500 Prime Group Realty Trust 8
6,197 Prime Retail, Inc. 65
3,500 PS Business Parks, Inc. 81
3,900 Realty Income Corp. 98
5,900 Reckson Associates Realty 136
1,800 Redwood Trust, Inc. 26
2,000 Regency Realty Corp. 47
3,300 RFS Hotel Investors, Inc. 47
4,200 Shurgard Storage Centers, Inc. 111
3,500 SL Green Realty Corp. 75
2,500 Charles E. Smith Residential Realty, Inc. 74
1,800 Sovran Self Storage, Inc. 46
2,100 Storage Trust Realty 47
4,100 Storage USA, Inc. 130
3,100 Summit Properties, Inc. 54
2,500 Sun Communities, Inc. 81
5,500 Sunstone Hotel Investors, Inc. 58
700 Tanger Factory Outlet Centers, Inc. 16
5,700 Taubman Centers, Inc. 79
3,200 Thornburg Mortgage Asset Corp. 28
2,500 Tower Reallty Trust, Inc 47
2,300 Town & Country Trust 35
</TABLE>
See accompanying notes to financial statements.
84
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
3,300 Trinet Corporate Realty Trust $ 88
15,200 United Dominion Realty Trust 164
1,400 Urban Shopping Centers, Inc. 46
2,500 Walden Residential Props, Inc. 52
5,200 Washington Reit 91
2,900 Weeks Corp. 83
3,900 Weingarten Realty Investment 177
2,500 Western Investment Real Estate Trust 29
4,400 Westfield America, Inc. 77
--------
8,557
--------
Retail--4.3%
1,168 99 Cents Only Stores* 50
5,900 Advantica Restaurant Group, Inc.* 38
2,000 American Eagle Outfitters* 120
3,400 Ames Department Stores, Inc.* 81
2,900 Ann Taylor Stores Corp.* 96
3,700 Applebees International, Inc. 76
4,112 Avado Brands, Inc.* 32
1,100 Barnett, Inc.* 14
1,000 Blair Corp. 18
6,100 BOB Evans Farms 148
1,800 Boise Cascade Corp.* 20
2,600 Brown Group, Inc. 47
700 Brylane, Inc.* 11
1,000 Buckle, Inc.* 26
6,740 Buffets, Inc.* 79
2,880 Burlington Coat Factory Warehouses* 42
7,700 Casey's General Stores, Inc.* 107
3,700 Cash America Investments, Inc.* 62
2,400 Cato Corp. 33
1,300 CDnow, Inc.* 31
2,650 CEC Entertainment, Inc.* 79
14,700 Charming Shoppes* 61
2,400 Cheesecake Factory (The)* 62
1,900 Childrens Place* 35
5,950 Claire's Stores, Inc. 101
1,500 Coldwater Creek, Inc.* 18
2,000 Cole National Corp.* 31
2,428 Consolidated Products, Inc.* 50
1,400 Copart, Inc.* 32
15,400 Corporate Express, Inc.* 90
1,300 Cost Plus, Inc.* 43
2,800 CSK Auto, Inc.* 78
1,900 Dave & Buster's, Inc.* 37
300 Delia*s, Inc.* 2
1,300 Discount Auto Parts* 32
2,800 Dress Barn, Inc.* 41
2,500 Duane Reade, Inc.* 100
3,700 Eagle Hardware & Garden* 104
1,900 Elder-Beerman Stores Corp.* 27
6,900 Fingerhut Cos., Inc. 77
2,600 Finish Line* 24
800 Finlay Enterprises* 6
5,100 Foodmaker, Inc.* 99
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
3,600 Footstar, Inc.* $ 88
1,300 Fred's, Inc. 18
1,400 Friedman's, Inc.* 14
1,100 Gadzooks, Inc.* 8
1,800 Garden Ridge Corp.* 14
3,800 Genesco, Inc.* 21
1,300 Genesis Direct, Inc.* 9
440 Genovese Drug Stores 13
2,500 Global Directmail Corp.* 49
2,700 Goody's Family Clothing, Inc.* 30
1,800 Group 1 Automotive, Inc.* 31
2,500 Guitar Center, Inc.* 57
3,500 Gymboree Corp.* 23
3,000 Hancock Fabrics, Inc. 25
4,600 Handleman Co.* 55
17,100 Hanover Direct, Inc.* 42
1,300 Haverty Furniture 25
8,800 Heilig-Meyers Co. 62
3,700 Hollywood Entertainment Corp.* 89
4,200 Host Marriott Services Corp.* 46
3,300 Hughes Supply, Inc. 92
1,400 Ihop Corp.* 56
2,500 Jo-Ann Stores, Inc.* 39
3,550 Just For Feet, Inc.* 80
700 K & G Men's Center, Inc.* 7
1,100 Kenneth Cole Productions, Inc.* 20
3,800 Landry's Seafood Restaurant* 31
2,100 Land's End, Inc.* 47
5,700 Linens 'N Things, Inc.* 175
5,700 Lone Star Steakhouse & Saloon* 43
4,500 Longs Drug Stores, Inc. 160
3,400 Luby's Cafeterias, Inc. 54
2,800 Maxim Group, Inc. (The)* 55
3,012 Men's Wearhouse, Inc.* 76
3,700 Michaels Stores, Inc.* 67
5,100 Micro Warehouse, Inc.* 140
1,300 Movado Group, Inc. 26
5,200 Musicland Stores Corp.* 88
1,700 N2K, Inc.* 28
1,100 NPC International, Inc.* 13
500 Onsale, Inc.* 31
2,000 O'Reilly Automotive, Inc.* 91
3,075 Pacific Sunwear of California* 46
2,950 Papa John's International, Inc.* 124
1,200 Party City Corp.* 20
3,050 Petco Animal Supplies, Inc.* 31
17,000 Petsmart, Inc.* 146
500 PJ America, Inc.* 10
5,400 Planet Hollywood International* 16
3,450 Rainforest Cafe, Inc.* 24
2,600 Regis Corp. 87
4,200 Ruby Tuesday, Inc.* 78
6,100 Ryan's Family STK Houses, Inc.* 69
1,950 Sbarro, Inc.* 51
3,800 Shopko Stores, Inc.* 123
</TABLE>
See accompanying notes to financial statements.
85
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Retail--Continued
1,200 Smart & Final, Inc. $ 13
2,750 Sonic Corp.* 54
21,000 Southland Corp.* 43
3,400 Spiegel, Inc.* 13
4,700 Spiegel, Inc. 31
3,900 Stage Stores, Inc.* 45
4,000 Stein Mart, Inc.* 34
6,200 Sunglass HUT International, Inc.* 37
1,000 Syms Corp.* 10
1,700 Talbots, Inc. 43
1,500 Tcby Enterprises, Inc. 12
2,250 Trans World Entertainment 52
2,300 United Auto Group, Inc.* 31
1,400 Urban Outfitters, Inc.* 20
1,700 Value City Dept Stores, Inc.* 17
1,400 West Marine, Inc.* 16
1,600 Wet Seal, Inc.* 44
1,600 Wilmar Industries, Inc.* 28
5,400 Zale Corp.* 155
--------
6,021
--------
Savings and Loans--1.9%
1,980 Albank Financial Corp. 134
2,600 Anchor BanCorp. Wisconsin, Inc. 52
900 Andover BanCorp., Inc. 29
5,700 Arcadia Financial Ltd.* 20
2,300 Bank Plus Corp.* 10
5,400 Bankatlantic BanCorp. Inc 43
1,800 Bankunited Financial Corp.* 15
3,000 Bay View Capital Corp. 63
2,000 Brookline BanCorp., Inc. 24
1,200 CFSB BanCorp., Inc. 28
8,894 Commercial Federal Corp. 204
2,254 Commonwealth BanCorp., Inc. 34
1,300 D & N Financial Corp. 30
1,700 Dime Community Bancshares 46
3,006 Downey Financial Corp. 78
2,300 First Federal Capital Corp. 38
2,000 First Financial Holdings, Inc. 38
1,357 First Indiana Corp. 26
1,600 First Liberty Financial Corp. 35
4,695 First Source BanCorp., Inc. 38
1,720 First Washington BanCorp., Inc. 36
2,900 Firstfed Financial Corp.* 51
700 Flagstar BanCorp., Inc. 17
2,106 Harbor Florida Bancshares, Inc. 23
1,200 Harris Financial, Inc. 18
1,300 Haven BanCorp., Inc. 22
11,100 Independence Community Bank 157
3,050 Interwest BanCorp., Inc. 74
1,300 Jefferson Savings BanCorp., Inc. 19
1,200 JSB Financial, Inc. 63
3,000 Local Financial Corp.* 26
4,988 MAF BanCorp., Inc. 128
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,100 Northwest BanCorp., Inc. $ 21
1,600 Ocean Financial Corp. 25
2,000 PBOC Holdings, Inc.* 22
5,200 Peoples BanCorp., Inc. 52
2,400 PFF BanCorp., Inc.* 37
2,650 Queens County BanCorp., Inc. 80
1,200 Reliance BanCorp., Inc. 35
3,900 Richmond County Financial Corp. 64
6,100 Roslyn BanCorp., Inc. 114
1,000 SIS BanCorp., Inc. 47
5,919 St. Paul BanCorp., Inc. 125
6,600 Staten Island BanCorp., Inc. 137
2,300 TR Financial Corp. 86
5,600 Webster Financial Corp. 155
1,118 WestCorp. 10
400 Wilshire Financial Services Group* 0
1,500 WSFS Financial Corp. 25
--------
2,654
--------
Semiconductors--1.9%
2,800 Actel Corp.* 47
5,400 Amkor Technologies, Inc.* 34
3,400 Applied Micro Circuits Corp.* 114
900 Artisan Components, Inc.* 10
2,200 ATMI, Inc.* 42
2,875 Burr-Brown Corp.* 68
9,700 Cirrus Logic, Inc.* 119
13,300 Cypress Semiconductor Corp.* 135
4,100 Dallas Semiconductor Corp. 155
700 Dupont Photomasks, Inc.* 26
2,900 Electroglas, Inc.* 42
3,100 Etec Systems, Inc.* 102
4,100 General Semiconductor, Inc. 42
7,600 International Rectifier Corp.* 71
1,500 Kopin Corp.* 21
5,600 Lam Research Corp.* 100
3,300 Lattice Semiconductor Corp.* 122
5,200 Level One Communications, Inc.* 161
2,400 Marshall Industries* 62
2,900 MEMC Electronics Materials* 27
5,000 Novellus Systems, Inc.* 248
5,300 OAK Technology, Inc.* 21
3,100 Photronics, Inc.* 62
3,837 Pioneer Standard Electronics 42
2,200 Plexus Corp.* 66
4,500 PMC-Sierra, Inc.* 242
1,300 Qlogic Corp.* 133
1,800 SDL, Inc.* 40
1,800 Semtech Corp.* 53
4,800 Silicon Valley Group, Inc.* 59
1,500 Siliconix, Inc.* 29
3,100 Ultratech Stepper, Inc.* 58
3,600 Unitrode Corp.* 61
6,400 Vlsi Technology, Inc.* 73
--------
2,687
--------
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Shipbuilding--0.2%
1,400 Avondale Industries, Inc.* $ 39
4,250 Halter Marine Group, Inc.* 29
5,200 Newport News Shipbuilding 146
--------
214
--------
Software--5.7%
2,200 3Dfx Interactive, Inc.* 28
6,200 Acclaim Entertainment, Inc.* 59
7,120 Acxiom Corp.* 168
600 Advantage Learning Systems, Inc.* 33
800 Advent Software, Inc.* 31
1,200 Alydaar Software Corp.* 11
6,200 American Management Systems* 183
1,340 Applied Graphics Technologies* 17
2,500 Aspect Development, Inc.* 84
3,600 Aspen Technology, Inc.* 51
3,400 Avid Technology, Inc.* 81
1,300 Avt Corp. Communication* 30
1,600 Barra, Inc.* 42
7,500 BEA Systems, Inc.* 90
2,400 Black Box Corp.* 84
4,176 Boole & Babbage, Inc.* 132
2,500 Broadvision, Inc.* 67
1,700 Business Records Holding 32
3,700 CCC Information Services Group* 41
3,800 Cerner Corp.* 100
2,100 Choicepoint, Inc.* 122
3,200 Clarify, Inc.* 58
2,600 CMG Information Services, Inc.* 202
1,300 CNET, Inc.* 69
2,100 Concentric Network Corp.* 60
1,900 Concord Communications, Inc.* 84
3,800 CSG Systems International* 238
2,300 Datastream Systems, Inc.* 23
1,700 Dataworks Corp.* 13
1,100 Deltek Systems, Inc.* 19
2,700 Dendrite International, Inc.* 52
1,400 Dialogic Corp.* 31
1,800 Digi International, Inc.* 23
1,700 Documentum, Inc.* 72
2,100 Doubleclick, Inc.* 85
2,000 Earthlink Network, Inc.* 122
1,000 Engineering Animation, Inc.* 39
3,900 Excite, Inc.* 191
1,800 Exodus Communications, Inc.* 61
1,500 Fair Issac & Co., Inc.* 60
4,300 Filenet Corp.* 37
4,400 General Magic, Inc.* 23
1,300 Genesys Telecomm Labs, Inc. 37
1,200 Great Plains Software, Inc.* 47
3,800 Gt Interactive Software Corp.* 23
1,400 H.T.E., Inc.* 13
4,375 Harbinger Corp.* 38
3,800 HNC Software* 125
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,385 Hyperion Solutions Corp.* $ 142
1,400 IDX Systems Corp.* 57
1,700 IMRglobal Corp.* 36
4,500 Indus International, Inc.* 22
3,900 Industri-Matematik International* 24
4,300 Information Resources, Inc.* 36
22,500 Informix Corp.* 122
3,600 Infoseek Corp.* 123
4,100 InfoUSA, Inc.* 23
7,500 Inprise Corp.* 42
1,550 Inspire Insurance Solutions, Inc.* 52
2,700 Integrated Systems, Inc.* 27
3,100 Inter-Tel, Inc.* 74
2,900 JDA Software Group, Inc.* 23
5,400 Legato Systems, Inc.* 258
5,650 Lycos, Inc.* 333
5,000 Macromedia, Inc.* 140
2,900 Manugistics Group, Inc.* 25
2,200 Mapics, Inc.* 43
1,500 Medical Manager Corp.* 42
2,200 Mercury Interactive Corp.* 101
900 Metro Information Services, Inc.* 23
1,500 Micromuse, Inc.* 34
4,173 Midway Games, Inc.* 42
2,300 Mindspring Enterprises, Inc.* 148
400 Mobius Management Systems, Inc.* 5
5,000 National Data Corp. 187
2,150 National Instruments Corp.* 62
600 Network Solutions, Inc.* 39
1,000 New ERA of Networks, Inc.* 74
1,400 Objective Systems Integrator* 6
3,300 Open Market, Inc.* 57
800 Pegasystems, Inc.* 5
1,100 Peregrine Systems, Inc.* 41
1,200 Pinnacle Systems, Inc.* 40
3,500 Platinum Software Corp.* 37
1,800 Preview Travel, Inc.* 34
2,500 Progress Software Corp.* 63
1,000 Project Software & Development* 30
6,300 Psinet, Inc.* 118
1,000 QAD, Inc.* 4
2,500 Quadramed Corp. 60
12,685 Rational Software Corp.* 288
1,300 RealNetworks, Inc.* 50
3,300 Remedy Corp.* 34
900 Sanchez Computer Associates* 27
1,400 Sapient Corp.* 65
1,600 SCB Computer Technology, Inc.* 13
1,500 Schawk, Inc. 21
1,900 SEI Investments Co. 175
4,000 Shiva Corp.* 23
4,400 Software AG Systems, Inc.* 85
1,900 Sportsline USA, Inc.* 33
1,400 SS&C Technologies, Inc.* 16
5,300 Structural Dynamics Research* 92
</TABLE>
See accompanying notes to financial statements.
87
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Software--Continued
11,800 Sybase, Inc.* $ 85
8,100 Symantec Corp.* 162
4,850 System Software Associates, Inc.* 33
4,000 Transaction Systems Architects, Inc.* 152
2,600 Transition Systems, Inc.* 26
2,800 Uscs International, Inc.* 90
3,800 Vantive Corp.* 32
700 Verio, Inc.* 13
2,300 Viasoft, Inc.* 17
3,600 Visio Corp.* 127
2,400 Wavephore, Inc.* 19
3,125 Wind River Systems* 146
--------
8,009
--------
Telecommunication Equipment--1.6%
2,800 Adtran, Inc.* 69
4,000 Allen Telecom, Inc.* 28
13,690 American Tower Corp.* 316
3,400 Antec Corp.* 63
7,400 Aspect Telecommunications* 140
4,100 Associated Group, Inc.* 154
5,200 Cellnet Data Systems, Inc.* 30
500 Com21, Inc.* 9
5,600 Commscope, Inc.* 85
1,250 Davox Corp.* 9
6,800 Digital Microwave Corp.* 40
5,900 DSP Communications, Inc.* 88
800 Excel Switching Corp.* 21
2,700 Geotel Communications Corp.* 74
9,100 Glenayre Technologies, Inc.* 56
7,100 Interdigital Communications Corp.* 34
1,800 Metromedia Fiber Network, Inc.* 93
1,300 Natural Microsystems Corp.* 14
3,200 Network Equipment Technologies* 36
2,200 North Pittsburgh Systems, Inc. 31
900 OmniAmerica, Inc.* 22
300 Optical Cable Corp.* 4
5,000 Pagemart Wireless, Inc.* 30
10,300 Pairgain Technologies, Inc.* 104
6,400 P-Com, Inc.* 24
5,600 Picturetel Corp.* 40
2,400 Plantronics, Inc.* 158
500 Powerwave Technologies, Inc.* 7
3,700 Premisys Communications, Inc.* 55
8,700 SkyTel Communications, Inc.* 182
1,175 Superior Telecom, Inc. 51
5,000 Tekelec* 77
1,600 Westell Technologies, Inc.* 10
3,300 World Access, Inc.* 67
--------
2,221
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
Telecommunications--1.6%
1,500 Aerial Communications, Inc.* $ 6
2,100 American Mobile Satellite Corp.* 10
3,300 APAC Telecommunications, Corp.* 21
1,700 California Microwave* 21
2,350 Cellular Communications International, 146
1,600 Cellular Communications of Puerto Rico 24
2,200 Centennial Cellular Corp.* 88
3,000 Commnet Cellular, Inc.* 31
1,166 Commonwealth Telephone Enterprise* 32
1,300 CoreComm Limited 19
1,800 Echostar Communications Corp.* 70
1,000 Electric Lightwave, Inc.* 6
5,300 General Communication* 21
6,700 ICG Communications, Inc.* 154
2,400 IDT Corp.* 46
7,500 ITC Deltacom, Inc.* 118
3,900 IXC Communications, Inc.* 107
1,900 LCC International, Inc.* 8
1,800 Mastec, Inc. 42
4,000 Metrocall, Inc.* 18
400 MGC Communications, Inc.* 2
3,400 MRV Communications, Inc.* 22
1,400 Norstan, Inc.* 21
6,033 NTL, Inc.* 336
4,500 Omnipoint Corp.* 40
1,200 Pacific Gateway Exchange, Inc.* 54
2,400 PLD Telekom, Inc.* 6
2,200 Powertel, Inc.* 30
4,900 Premiere Technologies, Inc.* 24
4,900 RCN Corp.* 83
2,100 Smartalk Teleservices, Inc.* 10
3,100 Star Telecommunications, Inc.* 42
900 Telegroup, Inc.* 2
5,900 Tel-Save, Inc.* 70
1,350 Transaction Network Services, Inc.* 32
700 US LEC Corp.* 8
5,100 US Satellite Broadcasting Co.* 39
3,800 Vanguard Cellular Systems, Inc.* 87
2,600 West Teleservices Corp.* 29
11,100 Western Wireless Corp., Class A * 201
5,800 Winstar Communications, Inc.* 162
--------
2,288
--------
Telephone--0.2%
5,200 Aliant Communications, Inc. 148
1,900 CFW Communications Co. 40
7,000 E.spire Communications, Inc.* 56
3,100 Primus Telecommunications* 39
2,600 USN Communications, Inc.* 1
--------
284
--------
Textiles--0.3%
8,900 Collins & Aikman Corp.* 47
1,000 Culp, Inc. 9
2,100 DAN River, Inc.* 17
2,750 G & K Services, Inc.* 139
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
2,797 Guilford Mills, Inc. $ 40
6,800 Interface, Inc. 85
1,100 Pillowtex Corp. 37
1,500 Quaker Fabric Corp.* 10
1,700 Springs Industries, Inc. 66
1,300 Unifirst Corp. 29
--------
479
--------
Toys, Games and Hobbies--0.1%
2,100 Action Performance Companies, Inc.* 77
2,600 Department 56* 89
800 Marvel Enterprises, Inc.* 5
600 Media Arts Group, Inc.* 9
--------
180
--------
Transportation Services--1.4%
5,050 Air Express International Corp. 112
1,200 Airnet Systems, Inc.* 18
5,800 Alexander & Baldwin, Inc. 133
3,100 American Freightways Corp.* 28
3,000 Arnold Industries, Inc. 43
1,300 Atlas Air, Inc.* 60
6,000 C.H. Robinson Worldwide, Inc. 135
1,900 Circle International Group 33
3,500 Coach USA, Inc.* 99
3,100 Consolidated Freightways Corp.* 39
1,000 Covenant Transport, Inc.* 17
1,200 Dispatch Management Services Co.* 7
1,200 Eagle USA Airfreight, Inc.* 23
3,600 Expeditors International of Washington Inc. 139
1,700 Florida East Coast Industries 58
3,400 Fritz Cos., Inc.* 33
8,800 Greyhound Lines, Inc.* 53
900 Gulfmark offshore, Inc.* 14
2,539 Heartland Express, Inc.* 43
1,600 Hvide Marine, Inc.* 10
3,200 J.B. Hunt Transport Services, Inc. 61
3,100 Kirby Corp.* 62
2,500 Kitty Hawk, Inc.* 26
900 Knight Transportation, Inc.* 17
1,600 Landstar System, Inc.* 66
1,300 MS Carriers, Inc.* 32
3,200 offshore Logistics* 40
4,000 Overseas Shipholding Group 63
2,900 Pittston Bax Group 25
2,300 Roadway Express, Inc. 34
3,650 Swift Transportation Co., Inc.* 80
900 US Xpress Enterprises, Inc.* 14
3,850 Usfreightways Corp. 103
4,212 Werner Enterprises, Inc. 69
7,500 Wisconsin Central Transport* 136
3,400 Yellow Corp.* 55
--------
1,980
--------
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- --------------------------------------------------------------------
<C> <S> <C>
Trucking and Leasing--0.2%
1,200 Amerco, Inc.* $ 28
700 Greenbrier Cos., Inc. 10
2,000 Interpool, Inc. 29
7,100 Rollins Truck Leasing Corp. 85
2,500 Varlen Corp. 66
2,300 Xtra Corp. 109
--------
327
--------
Water Supply--0.2%
1,100 Aquarion Co. 41
1,726 California Water Service Group 45
1,200 E'Town Corp. 50
3,433 Philadelphia Suburban Corp. 87
3,952 United Water Resources, Inc. 82
--------
305
- --------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $120,743) $117,909
- --------------------------------------------------------------------
PREFERRED STOCKS--0.1%
Oil & Gas Services--0.0%
700 Dril-Quip* $ 10
--------
REITs--0.1%
1,500 Price Enterprises, Inc. 20
1,800 US Restaurants Properties, Inc. 44
--------
64
- --------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $82) $ 74
- --------------------------------------------------------------------
WARRANTS--0.0%
248 Corarm Healthcare Corp., Exp. 7-11-99 $ 0
350 Milicom American Satellite Corp., Exp. 6/30/99 0
- --------------------------------------------------------------------
TOTAL WARRANTS (Cost $0) $ 0
- --------------------------------------------------------------------
OTHER INVESTMENTS--0.0%
2,000 Escrow CFS Group, Inc.* $ 0
1,400 Escrow Millicom, Inc.* 0
900 Escrow Northeast Bancorp, Inc.* 0
2,790 Escrow Statesman Group, Inc.* 0
1,420 Escrow Strawbridge & Clothier* 0
1,700 Escrow Takecare, Inc.* 0
1,000 Escrow WCI Steel, Inc.* 0
- --------------------------------------------------------------------
TOTAL OTHER INVESTMENTS (Cost $0) $ 0
- --------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
U.S. Treasury Bill #
$340,000 3.970% Due 1/7/99 $ 337
- --------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION--0.2% (Cost $337) $ 337
- --------------------------------------------------------------------
SHORT-TERM INVESTMENT--14.4%
Societe Generale, Paris
$20,249 5.375% Due 12/1/98 $ 20,249
- --------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT--14.4%
(Cost $20,249) $ 20,249
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
89
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Concluded
- ------------------------------------------------------------
<C> <S> <C>
TOTAL INVESTMENTS--
98.4%
(Cost $141,411) $138,569
- ------------------------------------------------------------
Other assets, less
liablilites--1.6% 2,256
- ------------------------------------------------------------
NET ASSETS--100.0% $140,825
============================================================
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Russell 2000 38 $7,555 Long 12/18/98 $32
- ---------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
90
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
91
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in
securities, at cost $53,632 $111,324 $ 918,468 $ 91,890 $41,963 $ 96,454 $141,411
- -----------------------------------------------------------------------------------------------------------
Investments in
securities, at value $67,732 $179,134 $1,366,695 $133,825 $44,726 $109,724 $138,569
Cash and foreign
currencies -- 1 16,300 -- 119 -- 1
Receivables:
Dividends and interest 384 170 1,736 98 66 104 90
Foreign tax reclaims -- -- -- -- 47 172 --
Fund shares sold 115 -- 476 40 -- 179 14,984
Investment securities
sold -- 94 68 962 40 3,956 --
Administrator 22 13 73 16 25 -- 29
Deferred organization
costs, net -- -- -- -- 11 5 --
Other assets -- 2 13 -- -- 1 2
- -----------------------------------------------------------------------------------------------------------
Total assets 68,253 179,414 1,385,361 134,941 45,034 114,141 153,675
- -----------------------------------------------------------------------------------------------------------
Liabilities:
Due to Custodian -- -- -- -- -- 1,204 --
Payable for:
Fund shares redeemed 22 45 7,579 249 9 18 63
Investment securities
purchased -- 190 58,574 -- 41 1,006 12,746
Accrued expenses:
Advisory fees 27 79 99 86 9 72 16
Administration fees 5 14 99 11 5 14 8
Custodian fees 2 2 16 2 6 12 8
Transfer agent fees 1 2 22 2 -- 1 1
Other liabilities 16 13 166 713 12 17 8
- -----------------------------------------------------------------------------------------------------------
Total liabilities 73 345 66,555 1,063 82 2,344 12,850
- -----------------------------------------------------------------------------------------------------------
Net assets $68,180 $179,069 $1,318,806 $133,878 $44,952 $111,797 $140,825
- -----------------------------------------------------------------------------------------------------------
Analysis of net assets:
Paid-in capital $47,851 $ 91,504 $789,141 $ 81,959 $40,101 $ 92,519 $119,053
Accumulated
undistributed
net investment income
(loss) 366 716 1,602 (110) 242 117 1,349
Accumulated net realized
gains on investments,
options, futures and
foreign currency
transactions 5,863 18,691 79,574 10,094 1,845 5,851 23,233
Net unrealized
appreciation
(depreciation) on
investments, options,
futures and foreign
currency transactions 14,100 68,158 448,489 41,935 2,763 13,270 (2,810)
Net unrealized gain on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- -- -- 1 40 --
- -----------------------------------------------------------------------------------------------------------
Net assets $68,180 $179,069 $1,318,806 $133,878 $44,952 $111,797 $140,825
- -----------------------------------------------------------------------------------------------------------
Total shares outstanding
(no par value),
unlimited shares
authorized
Class A 4,146 10,021 51,782 7,529 3,752 9,470 10,680
Class C 366 -- 4,947 533 -- -- 67
Class D 51 64 1,404 110 1 17 66
- -----------------------------------------------------------------------------------------------------------
Net asset value,
offering and redemption
price per share
Class A $ 14.95 $ 17.76 $ 22.69 $ 16.39 $ 11.98 $ 11.78 $ 13.02
Class C $ 14.91 -- $ 22.64 $ 16.34 -- -- $ 12.98
Class D $ 14.88 $ 17.53 $ 22.58 $ 16.14 $ 11.97 $ 11.60 $ 12.94
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
92
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend $ 329 $ 1,662 $ 16,896 $ 1,082 $ 865 $ 1,750 $ 1,694
Interest 1,720 165 975 67 29 363 171
- ----------------------------------------------------------------------------------------------------------
Total income 2,049 1,827 17,871 1,149 894(a) 2,113(b) 1,865
- ----------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 477 1,316 3,411 1,438 235 1,087 497
Administration fees 59 165 1,137 131 70 163 124
Custodian fees 23 28 268 29 68 122 228
Registration fees 27 24 103 23 59 5 28
Amortization of deferred
organization costs 7 1 1 10 4 14 1
Transfer agent fees 12 18 250 24 5 11 14
Shareholder servicing
fees 10 3 232 18 -- 1 3
Professional fees 7 14 60 6 5 4 9
Trustee fees and ex-
penses 3 3 30 3 2 2 3
Other 12 15 68 30 24 12 18
- ----------------------------------------------------------------------------------------------------------
Total expenses 637 1,587 5,560 1,712 472 1,421 925
Less voluntary waivers
of investment advisory
fees (179) (411) (2,274) (392) (118) (217) (248)
Less expenses reimburs-
able by Administrator (79) (83) (504) (84) (98) (50) (282)
- ----------------------------------------------------------------------------------------------------------
Net expenses 379 1,093 2,782 1,236 256 1,154 395
- ----------------------------------------------------------------------------------------------------------
Net investment income
(loss) 1,670 734 15,089 (87) 638 959 1,470
Net realized gains
(losses) on:
Investment transactions 5,868 18,516 79,906 10,129 1,850 9,914 22,988
Futures transactions -- 266 3,115 37 -- -- (143)
Foreign currency trans-
actions -- -- -- -- (32) (89) --
Net change in unrealized
appreciation
(depreciation) on
investments, options,
futures, and foreign
currency transactions 2,033 17,053 132,779 17,953 4,011 8,909 (28,927)
Net change in unrealized
gains on translation of
other assets and
liabilities denominated
in foreign currencies -- -- -- -- 4 46 --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $9,571 $36,569 $230,889 $28,032 $6,471 $19,739 $(4,612)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $88 in non-reclaimable foreign withholding taxes.
(b) Net of $159 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
93
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Balanced Diversified
Portfolio Growth Portfolio
----------------- ------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,670 $ 1,606 $ 734 $ 1,090
Net realized gains (losses) on invest-
ments, options, futures and foreign
currency transactions 5,868 2,227 18,782 18,135
Net change in unrealized appreciation
(depreciation) on investments,
options, futures and foreign currency
transactions 2,033 4,839 17,053 14,940
Net change in unrealized gains (losses)
on translations of other assets and
liabilities denominated in foreign
currencies -- -- -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 9,571 8,672 36,569 34,165
- --------------------------------------------------------------------------------
Distributions to Class A shareholders
from:
Net investment income (1,247) (1,436) (1,086) (1,369)
Net realized gains (1,990) (1,132) (18,075) (14,420)
- --------------------------------------------------------------------------------
Total distributions to Class A share-
holders (3,237) (2,568) (19,161) (15,789)
- --------------------------------------------------------------------------------
Distributions to Class C shareholders:
Net investment income (107) (151) -- --
Net realized gains (174) (152) -- --
- --------------------------------------------------------------------------------
Total distributions to Class C share-
holders (281) (303) -- --
- --------------------------------------------------------------------------------
Distributions to Class D shareholders:
Net investment income (14) (8) (4) (4)
Net realized gains (29) (6) (104) (45)
- --------------------------------------------------------------------------------
Total distributions to Class D share-
holders (43) (14) (108) (49)
- --------------------------------------------------------------------------------
Class A share transactions:
Proceeds from the sale of shares 19,629 7,638 13,164 13,555
Reinvested distributions 3,204 2,538 18,263 14,520
Cost of shares redeemed (17,773) (9,103) (29,056) (29,982)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class A share transac-
tions 5,060 1,073 2,371 (1,907)
- --------------------------------------------------------------------------------
Class C share transactions:
Proceeds from the sale of shares 1,465 1,106 -- --
Reinvested distributions 281 303 -- --
Cost of shares redeemed (1,386) (3,329) -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class C share transac-
tions 360 (1,920) -- --
- --------------------------------------------------------------------------------
Class D share transactions:
Proceeds from the sale of shares 618 140 511 215
Reinvested distributions 43 14 108 49
Cost of shares redeemed (295) (96) (300) (93)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class D share transac-
tions 366 58 319 171
- --------------------------------------------------------------------------------
Net increase (decrease) 11,796 4,998 19,990 16,591
Net assets--beginning of year 56,384 51,386 159,079 142,488
- --------------------------------------------------------------------------------
Net assets--end of year $ 68,180 $56,384 $179,069 $159,079
- --------------------------------------------------------------------------------
Accumulated undistributed net investment
income (loss) $ 366 $ 60 $ 716 $ 1,072
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
94
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Equity Index Focused Growth Equity Index International Small Company
Portfolio Portfolio Portfolio Growth Portfolio Index Portfolio
- --------------------- ------------------ ----------------- ------------------ ------------------
1998 1997 1998 1997 1998 1997 (a) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 15,089 $ 13,574 $ (87) $ 327 $ 638 $ 312 $ 959 $ 1,206 $ 1,470 $ 1,478
83,021 72,933 10,166 23,396 1,818 (3) 9,825 4,368 22,845 9,968
132,779 119,879 17,953 4,216 4,011 (1,248) 8,909 138 (28,927) 13,285
-- -- -- -- 4 (3) 46 (21) -- --
- -----------------------------------------------------------------------------------------------------
230,889 206,386 28,032 27,939 6,471 (942) 19,739 5,691 (4,612) 24,731
- -----------------------------------------------------------------------------------------------------
(12,617) (12,212) (321) (130) (678) -- (1,630) (1,022) (1,365) (1,364)
(64,765) (32,814) (20,346) (12,039) -- -- (5,679) (5,790) (8,892) (13,019)
- -----------------------------------------------------------------------------------------------------
(77,382) (45,026) (20,667) (12,169) (678) -- (7,309) (6,812) (10,257) (14,383)
- -----------------------------------------------------------------------------------------------------
(1,037) (1,052) (5) (4) -- -- -- -- -- --
(5,908) (2,679) (1,471) (811) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------
(6,945) (3,731) (1,476) (815) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------
(298) (313) (1) -- -- -- (3) (1) (5) (1)
(2,272) (399) (270) (79) -- -- (15) (4) (43) (13)
- -----------------------------------------------------------------------------------------------------
(2,570) (712) (271) (79) -- -- (18) (5) (48) (14)
- -----------------------------------------------------------------------------------------------------
512,427 340,805 20,270 21,470 22,035 36,436 9,817 11,482 99,274 46,673
68,757 41,881 19,625 11,306 649 -- 6,291 5,984 9,261 13,462
(376,883) (354,580) (37,427) (37,017) (17,779) (1,250) (23,669) (47,748) (102,546) (35,376)
- -----------------------------------------------------------------------------------------------------
204,301 28,106 2,468 (4,241) 4,905 35,186 (7,561) (30,282) 5,989 24,759
- -----------------------------------------------------------------------------------------------------
44,422 41,164 178 171 -- -- -- -- 2,017 --
6,945 3,733 1,476 814 -- -- -- -- -- --
(35,066) (28,213) (1,678) (623) -- -- -- -- (1,148) --
- -----------------------------------------------------------------------------------------------------
16,301 16,684 (24) 362 -- -- -- -- 869 --
- -----------------------------------------------------------------------------------------------------
10,633 22,852 770 491 10 -- 162 200 544 583
2,526 561 271 79 -- -- 17 4 48 14
(16,644) (5,161) (558) (133) -- -- (241) (64) (285) (238)
- -----------------------------------------------------------------------------------------------------
(3,485) 18,252 483 437 10 -- (62) 140 307 359
- -----------------------------------------------------------------------------------------------------
361,109 219,959 8,545 11,434 10,708 34,244 4,789 (31,268) (7,752) 35,452
957,697 737,738 125,333 113,899 34,244 -- 107,008 138,276 148,577 113,125
- -----------------------------------------------------------------------------------------------------
$1,318,806 $ 957,697 $133,878 $125,333 $ 44,952 $34,244 $111,797 $107,008 $140,825 $148,577
- -----------------------------------------------------------------------------------------------------
$ 1,602 $ 465 $ (110) $ 304 $ 242 $ 314 $ 117 $ 880 $ 1,349 $ 1,272
- -----------------------------------------------------------------------------------------------------
</TABLE>
95
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Balanced Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 13.59 $ 12.24 $ 11.05 $ 9.50 $ 10.22
Income (loss) from investment op-
erations:
Net investment income 0.38 0.38 0.34 0.34 0.24
Net realized and unrealized gain
(loss) 1.81 1.66 1.19 1.55 (0.72)
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.19 2.04 1.53 1.89 (0.48)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.32) (0.38) (0.34) (0.34) (0.22)
Net realized gain (0.51) (0.31) -- -- (0.02)
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (0.83) (0.69) (0.34) (0.34) (0.24)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.36 1.35 1.19 1.55 (0.72)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 14.95 $ 13.59 $ 12.24 $ 11.05 $ 9.50
- --------------------------------------------------------------------------------
Total return (c) 16.90% 17.29% 14.07% 20.22% (4.76)%
Ratio to average net assets of
(d):
Expenses, net of waivers and re-
imbursements 0.61% 0.61% 0.61% 0.61% 0.61%
Expenses, before waivers and re-
imbursements 1.04% 1.11% 1.20% 1.28% 1.50%
Net investment income, net of
waivers and reimbursements 2.83% 2.99% 3.03% 3.36% 2.56%
Net investment income, before
waivers and reimbursements 2.40% 2.49% 2.44% 2.69% 1.68%
Portfolio turnover rate 67.16% 59.06% 104.76% 93.39% 75.69%
Net assets at end of year (in
thousands) $61,969 $51,475 $45,157 $38,897 $31,462
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------ ------------------------
1998 1997 1996 (a) 1998 1997 1996 (b)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $13.56 $12.24 $11.12 $13.54 $12.23 $11.34
Income from investment opera-
tions:
Net investment income 0.37 0.36 0.29 0.40 0.34 0.22
Net realized and unrealized
gain 1.78 1.64 1.12 1.72 1.64 0.96
- --------------------------------------------------------------------------------
Total income from investment
operations 2.15 2.00 1.41 2.12 1.98 1.18
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.29) (0.37) (0.29) (0.27) (0.36) (0.29)
Net realized gain (0.51) (0.31) -- (0.51) (0.31) --
- --------------------------------------------------------------------------------
Total distributions to share-
holders (0.80) (0.68) (0.29) (0.78) (0.67) (0.29)
- --------------------------------------------------------------------------------
Net increase 1.35 1.32 1.12 1.34 1.31 0.89
- --------------------------------------------------------------------------------
Net asset value, end of year $14.91 $13.56 $12.24 $14.88 $13.54 $12.23
- --------------------------------------------------------------------------------
Total return (c) 16.61% 17.00% 12.72% 16.45% 16.82% 10.55%
Ratio to average net assets
of (d):
Expenses, net of waivers and
reimbursements 0.85% 0.85% 0.85% 1.00% 1.00% 1.00%
Expenses, before waivers and
reimbursements 1.28% 1.35% 1.44% 1.43% 1.50% 1.59%
Net investment income, net
of waivers and reimburse-
ments 2.58% 2.75% 2.80% 2.44% 2.60% 2.78%
Net investment income, be-
fore waivers and reimburse-
ments 2.15% 2.25% 2.21% 2.01% 2.10% 2.19%
Portfolio turnover rate 67.16% 59.06% 104.76% 67.16% 59.06% 104.76%
Net assets at end of year (in
thousands) $5,459 $4,587 $5,997 $ 752 $ 322 $ 232
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C shares issue date) through
November 30, 1996.
(b) For the period February 20, 1996 (Class D shares issue date) through
November 30, 1996.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
96
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Diversified Growth Portfolio
<TABLE>
<CAPTION>
Class A
------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 16.20 $ 14.36 $ 12.20 $ 9.88 $ 10.65
Income (loss) from
investment operations:
Net investment income 0.07 0.11 0.14 0.15 0.09
Net realized and unrealized
gain (loss) 3.46 3.33 2.33 2.26 (0.83)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.53 3.44 2.47 2.41 (0.74)
- --------------------------------------------------------------------------------
Distributions to sharehold-
ers from:
Net investment income (0.11) (0.14) (0.15) (0.09) (0.01)
Net realized gain (1.86) (1.46) (0.16) -- (0.02)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.97) (1.60) (0.31) (0.09) (0.03)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.56 1.84 2.16 2.32 (0.77)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 17.76 $ 16.20 $ 14.36 $ 12.20 $ 9.88
- --------------------------------------------------------------------------------
Total return (b) 25.22% 27.06% 20.83% 24.55% (6.98)%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.66% 0.67% 0.66% 0.69% 0.67%
Expenses, before waivers
and reimbursements 0.96% 1.03% 1.10% 1.12% 1.08%
Net investment income, net
of waivers and
reimbursements 0.45% 0.76% 0.98% 1.16% 0.77%
Net investment income,
before waivers and
reimbursements 0.15% 0.40% 0.54% 0.73% 0.35%
Portfolio turnover rate 37.74% 45.53% 59.99% 81.65% 78.94%
Net assets at end of year
(in thousands) $177,947 $158,383 $142,055 $146,731 $164,963
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
-----------------------------------------
1998 1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.03 $14.26 $12.16 $ 9.88 $10.41
Income (loss) from investment
operations:
Net investment income 0.03 0.09 0.11 0.11 0.01
Net realized and unrealized gain
(loss) 3.40 3.27 2.29 2.25 (0.54)
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations 3.43 3.36 2.40 2.36 (0.53)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.07) (0.13) (0.14) (0.08) --
Net realized gain (1.86) (1.46) (0.16) -- --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.93) (1.59) (0.30) (0.08) --
- -------------------------------------------------------------------------------
Net increase (decrease) 1.50 1.77 2.10 2.28 (0.53)
- -------------------------------------------------------------------------------
Net asset value, end of year $17.53 $16.03 $14.26 $12.16 $ 9.88
- -------------------------------------------------------------------------------
Total return (b) 24.73% 26.60% 20.39% 24.19% (5.14)%
Ratio to average net assets of (c):
Expenses, net of waivers and
reimbursements 1.05% 1.06% 1.05% 1.08% 1.05%
Expenses, before waivers and
reimbursements 1.35% 1.42% 1.49% 1.51% 1.46%
Net investment income, net of
waivers and reimbursements 0.06% 0.37% 0.59% 0.73% 0.94%
Net investment income (loss),
before waivers and reimbursements (0.24)% 0.01% 0.15% 0.30% 0.53%
Portfolio turnover rate 37.74% 45.53% 59.99% 81.65% 78.94%
Net assets at end of year (in thou-
sands) $1,122 $ 696 $ 433 $ 221 $ 40
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D shares issued date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
See accompanying notes to financial statements.
97
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Equity Index Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 20.09 $ 16.79 $ 13.86 $ 10.60 $ 10.78
Income (loss) from
investment operations:
Net investment income 0.28 0.30 0.31 0.30 0.27
Net realized and
unrealized gain (loss) 4.02 4.13 3.36 3.47 (0.18)
- --------------------------------------------------------------------------------
Total income from
investment operations 4.30 4.43 3.67 3.77 0.09
- --------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.26) (0.30) (0.31) (0.30) (0.27)
Net realized gain (1.44) (0.83) (0.43) (0.21) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.70) (1.13) (0.74) (0.51) (0.27)
- --------------------------------------------------------------------------------
Net increase (decrease) 2.60 3.30 2.93 3.26 (0.18)
- --------------------------------------------------------------------------------
Net asset value, end of
year $ 22.69 $ 20.09 $ 16.79 $ 13.86 $ 10.60
- --------------------------------------------------------------------------------
Total return (c) 23.39% 27.93% 27.53% 36.60% 0.87%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.21% 0.22% 0.22% 0.22% 0.23%
Expenses, before waivers
and reimbursements 0.46% 0.46% 0.50% 0.54% 0.59%
Net investment income, net
of waivers and
reimbursements 1.36% 1.66% 2.12% 2.54% 2.62%
Net investment income,
before waivers and
reimbursements 1.11% 1.42% 1.84% 2.22% 2.25%
Portfolio turnover rate 15.26% 18.96% 18.02% 15.27% 71.98%
Net assets at end of year
(in thousands) $1,175,112 $844,065 $675,804 $479,763 $281,817
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------------------ ------------------------------------------
1998 1997 1996 1995 (a) 1998 1997 1996 1995 1994 (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 20.05 $ 16.79 $ 13.86 $ 13.43 $ 20.00 $ 16.77 $13.83 $10.60 $10.96
Income (loss) from
investment operations:
Net investment income 0.24 0.26 0.28 0.05 0.21 0.26 0.27 0.25 0.02
Net realized and
unrealized gain (loss) 4.01 4.11 3.35 0.45 4.00 4.07 3.36 3.47 (0.31)
- -----------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.25 4.37 3.63 0.50 4.21 4.33 3.63 3.72 (0.29)
- -----------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.22) (0.28) (0.27) (0.07) (0.19) (0.27) (0.26) (0.28) (0.07)
Net realized gain (1.44) (0.83) (0.43) -- (1.44) (0.83) (0.43) (0.21) --
- -----------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.66) (1.11) (0.70) (0.07) (1.63) (1.10) (0.69) (0.49) (0.07)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) 2.59 3.26 2.93 0.43 2.58 3.23 2.94 3.23 (0.36)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 22.64 $ 20.05 $ 16.79 $ 13.86 $ 22.58 $ 20.00 $16.77 $13.83 $10.60
- -----------------------------------------------------------------------------------------------------------
Total return (c) 23.09% 27.64% 27.24% 3.94% 22.90% 27.45% 27.20% 36.20% (2.68)%
Ratio to average net
assets of (d):
Expenses, net of
waivers and
reimbursements 0.45% 0.46% 0.46% 0.46% 0.60% 0.61% 0.61% 0.61% 0.60%
Expenses, before
waivers and
reimbursements 0.70% 0.70% 0.74% 0.78% 0.85% 0.85% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and
reimbursements 1.12% 1.42% 1.89% 2.29% 0.97% 1.27% 1.78% 2.07% 2.67%
Net investment income,
before waivers and
reimbursements 0.87% 1.18% 1.61% 1.97% 0.71% 1.03% 1.50% 1.75% 2.31%
Portfolio turnover rate 15.26% 18.96% 18.02% 15.27% 15.26% 18.96% 18.02% 15.27% 71.98%
Net assets at end of
year (in thousands) $111,991 $82,982 $53,929 $18,390 $31,703 $30,650 $8,005 $ 810 $ 3
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 28, 1995 (Class C shares issue date) through
November 30, 1995.
(b) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
98
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Focused Growth Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 16.20 $ 14.48 $ 12.53 $ 9.79 $ 10.43
Income (loss) from
investment operations:
Net investment income
(loss) (0.01) 0.05 0.02 0.05 0.02
Net realized and
unrealized gain (loss) 3.10 3.37 2.17 2.71 (0.66)
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.09 3.42 2.19 2.76 (0.64)
- -------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.05) (0.02) (0.05) (0.02) --
Net realized gain (2.85) (1.68) (0.19) -- --
- -------------------------------------------------------------------------------
Total distributions to
shareholders (2.90) (1.70) (0.24) (0.02) --
- -------------------------------------------------------------------------------
Net increase (decrease) 0.19 1.72 1.95 2.74 (0.64)
- -------------------------------------------------------------------------------
Net asset value, end of
year $ 16.39 $ 16.20 $ 14.48 $ 12.53 $ 9.79
- -------------------------------------------------------------------------------
Total return (c) 24.03% 27.05% 17.82% 28.38% (6.15)%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.92% 0.92% 0.91% 0.91% 0.91%
Expenses, before waivers
and reimbursements 1.29% 1.34% 1.43% 1.47% 1.55%
Net investment income
(loss), net of waivers
and reimbursements (0.04)% 0.30% 0.12% 0.46% 0.24%
Net investment loss,
before waivers and
reimbursements (0.41)% (0.12)% (0.40)% (0.10)% (0.39)%
Portfolio turnover rate 79.11% 108.29% 116.78% 85.93% 74.28%
Net assets at end of year
(in thousands) $123,380 $115,802 $106,250 $86,099 $57,801
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------- --------------------------------------
1998 1997 1996 (a) 1998 1997 1996 1995 (b)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 16.16 $ 14.47 $ 13.46 $ 16.01 $ 14.37 $ 12.48 $ 9.55
Income (loss) from
investment operations:
Net investment income
(loss) (0.05) 0.01 (0.01) (0.05) 0.03 (0.03) 0.02
Net realized and
unrealized gain 3.09 3.37 1.02 3.04 3.30 2.15 2.93
- ------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 3.04 3.38 1.01 2.99 3.33 2.12 2.95
- ------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.01) (0.01) -- (0.01) (0.01) (0.04) (0.02)
Net realized gain (2.85) (1.68) -- (2.85) (1.68) (0.19) --
- ------------------------------------------------------------------------------------------------
Total distributions to
shareholders (2.86) (1.69) -- (2.86) (1.69) (0.23) (0.02)
- ------------------------------------------------------------------------------------------------
Net increase 0.18 1.69 1.01 0.13 1.64 1.89 2.93
- ------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 16.34 $ 16.16 $ 14.47 $ 16.14 $ 16.01 $ 14.37 $12.48
- ------------------------------------------------------------------------------------------------
Total return (c) 23.73% 26.75% 7.51% 23.60% 26.52% 17.42% 30.97%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 1.16% 1.16% 1.15% 1.31% 1.31% 1.30% 1.30%
Expenses, before
waivers and
reimbursements 1.53% 1.58% 1.67% 1.68% 1.73% 1.82% 1.86%
Net investment income
(loss), net of waivers
and reimbursements (0.29)% 0.06% (0.12)% (0.44)% (0.09)% (0.28)% (0.11)%
Net investment loss,
before waivers and
reimbursements (0.66)% (0.36)% (0.64)% (0.81)% (0.51)% (0.80)% (0.67)%
Portfolio turnover rate 79.11% 108.29% 116.78% 79.11% 108.29% 116.78% 85.93%
Net assets at end of
year (in thousands) $ 8,719 $ 8,325 $ 6,993 $ 1,779 $ 1,206 $ 656 $ 489
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period June 14, 1996 (Class C shares issue date) through November
30, 1996.
(b) For the period December 8, 1994 (Class D shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
99
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Equity Index Portfolio
<TABLE>
<CAPTION>
Class A Class D
----------------- -------------
1998 1997 (a) 1998 (b)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.55 $ 10.00 $ 9.88
Income from investment operations:
Net investment income 0.14 0.10 --
Net realized and unrealized gain 1.46 0.45 2.09
- -----------------------------------------------------------------------------
Total income from investment operations 1.60 0.55 2.09
- -----------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.17) -- --
Net realized gain -- -- --
- -----------------------------------------------------------------------------
Total distributions to shareholders (0.17) -- --
- -----------------------------------------------------------------------------
Net increase 1.43 0.55 2.09
- -----------------------------------------------------------------------------
Net asset value, end of year $ 11.98 $ 10.55 $11.97
- -----------------------------------------------------------------------------
Total return (c) 15.50% 5.45% 21.15 %
Ratio to average net assets of (d):
Expenses, net of waivers and reimbursements 0.55% 0.51% 0.94 %
Expenses, before waivers and reimbursements 1.00% 1.08% 1.39 %
Net investment income, net of waivers and
reimbursements 1.36% 1.75% (0.11)%
Net investment income, before waivers and
reimbursements 0.91% 1.18% (0.80)%
Portfolio turnover rate 41.53% 8.16% 41.53 %
Net assets at end of year (in thousands) $44,940 $34,244 $ 12
- -----------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) For the period October 5, 1998 (Class D shares issue date) through
November 30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
100
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Growth Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1998 1997 1996 1995 1994(a)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 10.52 $ 10.63 $ 9.88 $ 10.21 $ 10.00
Income (loss) from in-
vestment operations:
Net investment income 0.09 0.11 0.10 0.12 0.05
Net realized and
unrealized gain (loss) 1.90 0.31 0.87 (0.36) 0.16
- ---------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.99 0.42 0.97 (0.24) 0.21
- ---------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.16) (0.08) (0.22) (0.05) --
Net realized gain (0.57) (0.45) -- (0.04) --
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (0.73) (0.53) (0.22) (0.09) --
- ---------------------------------------------------------------------------------
Net increase (decrease) 1.26 (0.11) 0.75 (0.33) 0.21
- ---------------------------------------------------------------------------------
Net asset value, end of
year $ 11.78 $ 10.52 $ 10.63 $ 9.88 $ 10.21
- ---------------------------------------------------------------------------------
Total return (c) 20.44% 4.21% 9.96% (2.32)% 2.11%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 1.06% 1.06% 1.06% 1.06% 1.04%
Expenses, before waiv-
ers and reimbursements 1.31% 1.37% 1.43% 1.38% 1.47%
Net investment income,
net of waivers and re-
imbursements 0.89% 0.97% 0.73% 1.22% 0.76%
Net investment income,
before waivers and re-
imbursements 0.64% 0.66% 0.36% 0.90% 0.33%
Portfolio turnover rate 160.13% 154.62% 202.47% 215.31% 77.79%
Net assets at end of
year (in thousands) $111.594 $106,774 $138,182 $148,704 $133,212
- ---------------------------------------------------------------------------------
<CAPTION>
Class D
-------------------------------------------------------
1998 1997 1996 1995 1994(b)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 10.39 $ 10.54 $ 9.83 $ 10.21 $ 10.47
Income (loss) from in-
vestment operations:
Net investment income 0.09 0.09 0.01 0.19 --
Net realized and
unrealized gain (loss) 1.83 0.29 0.92 (0.48) (0.26)
- ---------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.92 0.38 0.93 (0.29) (0.26)
- ---------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.14) (0.08) (0.22) (0.05) --
Net realized gain (0.57) (0.45) -- (0.04) --
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (0.71) (0.53) (0.22) (0.09) --
- ---------------------------------------------------------------------------------
Net increase (decrease) 1.21 (0.15) 0.71 (0.38) (0.26)
- ---------------------------------------------------------------------------------
Net asset value, end of
year $ 11.60 $ 10.39 $ 10.54 $ 9.83 $ 10.21
- ---------------------------------------------------------------------------------
Total return (c) 19.91% 3.79% 9.59% (2.78)% (2.56)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 1.45% 1.45% 1.45% 1.45% 1.35%
Expenses, before waiv-
ers and reimbursements 1.70% 1.76% 1.82% 1.77% 1.78%
Net investment income,
net of waivers and re-
imbursements 0.59% 0.58% 0.44% 2.01% --
Net investment income
(loss), before waivers
and reimbursements 0.34% 0.27% 0.07% 1.69% (0.43)%
Portfolio turnover rate 160.13% 154.62% 202.47% 215.31% 77.79%
Net assets at end of
year (in thousands) $ 203 $ 234 $ 94 $ 20 $ --
- ---------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 16, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
101
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Small Company Index Portfolio
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 15.05 $ 13.97 $ 12.98 $ 10.86 $ 11.29
Income (loss) from investment
operations:
Net investment income 0.13 0.15 0.19 0.16 0.14
Net realized and unrealized
gain (loss) (1.13) 2.69 1.75 2.67 (0.30)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations (1.00) 2.84 1.94 2.83 (0.16)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.14) (0.17) (0.14) (0.15) (0.02)
Net realized gain (0.89) (1.59) (0.81) (0.56) (0.25)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.03) (1.76) (0.95) (0.71) (0.27)
- --------------------------------------------------------------------------------
Net increase (decrease) (2.03) 1.08 0.99 2.12 (0.43)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 13.02 $ 15.05 $ 13.97 $ 12.98 $ 10.86
- --------------------------------------------------------------------------------
Total return (c) (7.02)% 23.06% 15.96% 27.76% (1.54)%
Ratio to average net assets
of (d):
Expenses, net of waivers and
reimbursements 0.31% 0.32% 0.32% 0.32% 0.33%
Expenses, before waivers and
reimbursements 0.74% 0.68% 0.79% 0.81% 0.86%
Net investment income, net
of waivers and
reimbursements 1.19% 1.22% 1.36% 1.31% 1.27%
Net investment income,
before waivers and
reimbursements 0.76% 0.86% 0.89% 0.82% 0.74%
Portfolio turnover rate 59.21% 42.66% 46.26% 38.46% 98.43%
Net assets at end of year (in
thousands) $139,100 $147,887 $112,856 $94,899 $77,120
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------- ---------------------------------
1998 (a) 1998 1997 1996 1995 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.89 $15.01 $13.96 $12.95 $10.51
Income from investment operations:
Net investment income 0.03 0.11 0.17 0.13 0.18
Net realized and unrealized gain
(loss) (0.94) (1.19) 2.62 1.83 2.96
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations (0.91) (1.08) 2.79 1.96 3.14
- -------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income -- (0.10) (0.15) (0.14) (0.14)
Net realized gain -- (0.89) (1.59) (0.81) (0.56)
- -------------------------------------------------------------------------------
Total distributions to
shareholders -- (0.99) (1.74) (0.95) (0.70)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.91) (2.07) 1.05 1.01 2.44
- -------------------------------------------------------------------------------
Net asset value, end of year $12.98 $12.94 $15.01 $13.96 $12.95
- -------------------------------------------------------------------------------
Total return (c) (6.54)% (7.58)% 22.68% 16.20% 31.62%
Ratio to average net assets of
(d):
Expenses, net of waivers and
reimbursements 0.55% 0.70% 0.71% 0.71% 0.71%
Expenses, before waivers and
reimbursements 0.98% 1.13% 1.07% 1.18% 1.20%
Net investment income, net of
waivers and reimbursements 0.98% 0.80% 0.76% 1.02% 0.90%
Net investment income, before
waivers and reimbursements 0.55% 0.37% 0.40% 0.55% 0.41%
Portfolio turnover rate 59.21% 59.21% 42.66% 46.26% 38.46%
Net assets at end of year (in
thousands) $ 870 $ 855 $ 690 $ 269 $ 44
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period January 8, 1998 (Class C shares issue date) through
November 30, 1998.
(b) For the period December 8, 1994 (Class D shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
102
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
1. Organization
Northern Institutional Funds (the "Trust") is a Delaware business trust which
was formed on July 1, 1997, and is registered under the Investment Company Act
of 1940 (as amended) as an open-end management investment company. The Trust,
formerly known as The Benchmark Funds, changed its name effective July 15,
1998. The Trust includes seventeen portfolios, each with its own investment
objective. Prior to March 31, 1998, each portfolio was a series of The
Benchmark Funds, a Massachusetts business trust, which reorganized into the
Trust at the close of business on that date. Each portfolio, other than the
International Bond Portfolio, is classified as a diversified investment
company. Except as noted below, the Northern Trust Company ("Northern") is the
investment adviser for all actively managed portfolios and is the custodian
and transfer agent for the Trust. Effective April 1, 1998, Northern Trust
Quantitative Advisors, Inc. ("NTQA"), a wholly-owned subsidiary of Northern
Trust Corporation, became the investment adviser for the U.S. Treasury Index,
Equity Index, International Equity Index and Small Company Index Portfolios.
Goldman, Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the fixed income
and equity portfolios (the "Portfolios").
Each of the Portfolios has four separate classes: Class A, B, C and D. Each
class is distinguished by the level of administrative support and transfer
agent service provided. As of November 30, 1998, Class A, Class C and Class D
shares are outstanding for certain Portfolios.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(a) Investment Valuation
Investments held by a Portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any
securities are not traded on a valuation date, at the last quoted bid price.
Securities which are traded in the over-the-counter markets are valued at the
last quoted bid price. Exchange traded futures and options are valued at the
settlement price as established by the exchange on which they are traded.
Index futures are marked to market on a daily basis. Any securities, including
restricted securities, for which current quotations are not readily available
are valued at fair value as determined in good faith by Northern under the
supervision of the Board of Trustees ("the Board"). Short-term investments are
valued at amortized cost which Northern has determined, pursuant to Board
authorization, approximates market value.
(b) Investment Transactions and Investment Income
Investment transactions are recorded as of the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums. The interest rates reflected in the Statements of
Investments represent either the stated coupon rate, annualized yield on date
of purchase for discount notes, the current reset rate for floating rate
securities or, for interest only or principal only securities, the current
effective yield. Dividend income is recorded on the ex-dividend date.
Dividends from foreign securities are recorded on the ex-date, or as soon as
the information is available.
(c) Deferred Organization Costs
Organization-related costs are being amortized on a straight-line basis over
five years.
(d) Expenses
Expenses arising in connection with a specific Portfolio are allocated to that
Portfolio. Certain expenses arising in connection with a class of shares are
allocated to that class of shares. Expenses incurred which do not specifically
relate to an individual Portfolio are allocated among the Portfolios based on
each Portfolio's relative net assets.
(e) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
103
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
(f) Futures Contracts
Each Portfolio may invest in long or short futures contracts for hedging
purposes, to increase total return (i.e., for speculative purposes) or to
maintain liquidity. The Portfolios bear the market risk arising from changes
in the value of these financial instruments. At the time a Portfolio enters
into a futures contract it is required to make a margin deposit with the
custodian of a specified amount of liquid assets. Subsequently, as the market
price of the futures contract fluctuates, gains or losses are recorded and
payments are made, on a daily basis, between the Portfolio and the broker. The
Statements of Operations reflect gains and losses as realized for closed
futures contracts and as unrealized for open futures contracts.
At November 30, 1998, the Diversified Growth, Equity Index and Small Company
Index Portfolios had entered into long exchange traded futures contracts. The
aggregate market value of assets pledged to cover margin requirements for open
positions at November 30, 1998 was approximately $362,000, $1,691,000 and
$337,000 for the Diversified Growth, Equity Index and Small Company Index
Portfolios, respectively.
(g) Options Contracts
Each Portfolio may purchase and write (sell) put and call options on foreign
and domestic stock indices, foreign currencies, and U.S. and foreign
securities that are traded on U.S. and foreign securities exchanges and over-
the-counter markets. These transactions are for hedging (or cross-hedging)
purposes or for the purposes of earning additional income.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as Portfolio securities.
The cost of securities acquired through the exercise of call options is
increased by the premiums paid. The proceeds from securities sold through the
exercise of put options are decreased by the premiums paid.
In writing an option, the Portfolio bears the market risk of an unfavorable
change in the price of the security or currency underlying the written option.
Exercise of an option written by the Portfolio could result in the Portfolio
selling or buying a security or currency at a price different from the current
market value.
The Portfolios did not write call or put options during the year ended
November 30, 1998.
(h) Stripped Securities
Stripped securities represent the right to receive future interest payments
(interest only stripped securities) or principal payments (principal only
stripped securities). The value of variable rate interest only stripped
securities varies directly with changes in interest rates, while the value of
fixed rate interest only securities and the value of principal only stripped
securities vary inversely with changes in interest rates.
(i) Forward Foreign Currency Exchange Contracts
Certain Portfolios are authorized to enter into forward foreign currency
exchange contracts for the purchase of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. In addition, the International Bond and
International Growth Portfolios may enter into foreign currency exchange
contracts for speculative purposes. The objective of a Portfolio's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Portfolio's foreign currency denominated securities will decline in
value due to changes in foreign currency exchange rates. All forward foreign
currency contracts are "marked-to-market" daily at the applicable exchange
rates and any resulting unrealized gains or losses are recorded in the
financial statements. The Portfolio records realized gains or losses when the
forward contract is offset by entry into a closing transaction or extinguished
by delivery of the currency. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
At November 30, 1998, there were no outstanding forward foreign currency
exchange contracts.
(j) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments, interest and
dividend
104
<PAGE>
- -------------------------------------------------------------------------------
income are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on
investments.
(k) Federal Taxes
It is each Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute,
each year, substantially all of its taxable income and capital gains to its
shareholders. Therefore, no provision is made for federal taxes.
At November 30, 1998, the Portfolios had approximately the following amount
of capital loss carryforwards for U.S. federal income tax purposes:
<TABLE>
<CAPTION>
Amount Year(s) of Expiration
- ---------------------------------------------------------
(in thousands)
<S> <C> <C>
U.S. Treasury Index $323 2002 to 2005
- ---------------------------------------------------------
</TABLE>
This amount is available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
(l) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
- -------------------------------------
<S> <C>
Bond Monthly
Intermediate Bond Monthly
International Bond Quarterly
Short-Intermediate Bond Monthly
U.S. Government Securities Monthly
U.S. Treasury Index Monthly
Balanced Quarterly
Diversified Growth Annually
Equity Index Quarterly
Focused Growth Annually
International Equity Index Annually
International Growth Annually
Small Company Index Annually
- -------------------------------------
</TABLE>
Each Portfolio's net realized capital gains are distributed at least
annually. Income dividends and capital gain distributions are determined in
accordance with income tax regulations. Such amounts may differ from income
and capital gains recorded in accordance with generally accepted accounting
principles.
3. Advisory, Transfer Agency and Custodian Agreements
The Trust has an investment advisory agreement whereby each Portfolio pays
Northern or NTQA, as the case may be, a fee, computed daily and payable
monthly, based on a specified percentage of its average daily net assets. For
the current period, Northern and NTQA each voluntarily agreed to waive a
portion of the advisory fees as shown on the accompanying Statements of
Operations. The annual advisory fees and waiver rates expressed as a
percentage of average daily net assets for the year ended November 30, 1998,
are as follows:
<TABLE>
<CAPTION>
Net
Advisory Less: Advisory
Fee Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
Intermediate Bond .60 .35 .25
International Bond .90 .20 .70
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
Balanced .80 .30 .50
Diversified Growth .80 .25 .55
Equity Index .30 .20 .10
Focused Growth 1.10 .30 .80
International Equity Index .50 .25 .25
International Growth 1.00 .20 .80
Small Company Index .40 .20 .20
- ----------------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%, .10%
and .15% of the average daily net asset value of the outstanding Class A, B, C
and D shares, respectively, for the Portfolios.
4. Administration and Distribution Agreements
The Trust has an administration agreement with Goldman Sachs whereby each
Portfolio pays the administrator a fee, computed daily and payable monthly, at
an annual rate of .10% of the Portfolio's average daily net assets, except the
International Bond, International Equity Index and International Growth
Portfolios which pay the administrator a fee, computed daily and payable
monthly, at an annual rate of .15% of their respective average daily net
assets.
In addition, if in any fiscal year the sum of a Portfolio's expenses,
including the administration fee, but excluding the fees payable to Northern
for its duties as investment
105
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
adviser and Transfer agent, shareholder servicing fees and extraordinary
expenses (such as taxes, interest and indemnification expenses), exceeds on an
annualized basis .10% of a Portfolio's average daily net assets (0.25% for the
International Bond, International Growth and International Equity Index
Portfolios), Goldman Sachs will reimburse each Portfolio for the amount of the
excess pursuant to the terms of the administration agreement.
The expenses reimbursed during the year ended November 30, 1998, under such
arrangements, are shown on the accompanying Statements of Operations. No
administration fees were waived under this agreement during the year ended
November 30, 1998.
Goldman Sachs receives no compensation under the distribution agreement.
5. Shareholder Servicing Plan
The Trust has adopted a Shareholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain shareholder administrative support
services for their customers or other investors who beneficially own Class B,
C and D shares. As compensation under the Shareholder Servicing Plan, the
institution or other financial intermediary receives a fee at an annual rate
of up to .10%, .15% and .25% of the average daily net asset value of the
outstanding Class B, C and D shares, respectively.
6. Investment Transactions
Investment transactions for the year ended November 30, 1998 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from
Purchases maturities sales and
of U.S. Purchases of U.S. maturities
Government of other Government of other
Obligations securities Obligations securities
- -------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $374,882 $205,475 $344,907 $117,007
Intermediate Bond 24,234 10,004 15,220 2,456
International Bond -- 6,730 -- 6,007
Short-Intermediate Bond 111,674 61,032 152,920 31,131
U.S. Government Securities 57,557 -- 53,320 --
U.S. Treasury Index 17,445 -- 29,538 --
Balanced 16,967 21,228 13,721 22,923
Diversified Growth -- 60,615 -- 76,974
Equity Index -- 321,263 -- 170,092
Focused Growth -- 102,129 -- 119,229
International Equity Index -- 26,187 -- 18,914
International Growth -- 161,519 -- 173,754
Small Company Index -- 72,775 -- 84,983
- -------------------------------------------------------------------------
</TABLE>
As of November 30, 1998, the composition of unrealized appreciation
(depreciation) of investment securities (including the effects of foreign
currency translation and excluding futures transactions) based on the
aggregate cost of investments for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Net Income
Appreciation Tax
Appreciation Depreciation (Depreciation) Purposes
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $ 19,048 $10,217 $ 8,831 $650,582
Intermediate Bond 268 414 (146) 31,483
International Bond 1,889 743 1,146 26,708
Short-Intermediate Bond 2,353 8,374 (6,021) 187,635
U.S. Government Securities 585 510 75 53,827
U.S. Treasury Index 1,410 27 1,383 22,430
Balanced 14,668 568 14,100 53,632
Diversified Growth 68,475 1,013 67,462 111,672
Equity Index 477,382 31,820 445,562 921,133
Focused Growth 42,530 764 41,766 92,059
International Equity Index 6,431 4,195 2,236 42,490
International Growth 14,504 2,047 12,457 97,267
Small Company Index 16,241 19,261 (3,020) 141,589
- -----------------------------------------------------------------------------
</TABLE>
106
<PAGE>
- -------------------------------------------------------------------------------
7. Bank Loans
Prior to January 16, 1998, the Trust maintained a $5,000,000 revolving bank
credit line and a $15,000,000 conditional revolving credit line for liquidity
and other purposes. As of January 16, 1998, the Trust maintains a $100,000,000
revolving bank credit line and a $15,000,000 conditional revolving credit line
for liquidity and other purposes. Borrowings under this arrangement bear
interest at 1% above the federal funds rate and are secured by pledged
securities equal to or exceeding 120% of the outstanding balance.
Interest expense for the year ended November 30, 1998 was approximately
$3,000, $27,000, $18,000, $16,000 and $6,000 for the Diversified Growth,
Equity Index, Focused Growth, International Equity Index and Small Company
Index Portfolios, respectively. These amounts are included in "Other Expenses"
on the Statements of Operations.
As of November 30, 1998, the Focused Growth Portfolio had approximately
$700,000 of outstanding borrowings which is included in "Other Liabilities" on
the Statements of Assets and Liabilities. The interest rate in effect at
November 30, 1998, was 5.875%, (current NIBOR rate plus 0.375%).
8. Share Transactions
Transactions in Class A shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 10,138 1,515 5,483 6,170
Intermediate Bond 1,392 67 551 908
International Bond 108 60 140 28
Short-Intermediate Bond 6,204 738 7,697 (755)
U.S. Government Securities 632 116 518 230
U.S. Treasury Index 724 21 1,357 (612)
Balanced 1,380 239 1,260 359
Diversified Growth 812 1,322 1,887 247
Equity Index 24,202 3,689 18,131 9,760
Focused Growth 1,385 1,532 2,536 381
International Equity Index 1,984 63 1,540 507
International Growth 892 644 2,220 (684)
Small Company Index 7,425 673 7,245 853
- -----------------------------------------------------------------------
</TABLE>
Transactions in Class A shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,554 1,111 4,475 4,190
Intermediate Bond 594 9 -- 603
International Bond 56 74 363 (233)
Short-Intermediate Bond 5,953 572 4,056 2,469
U.S. Government Securities 3,473 227 6,148 (2,448)
U.S. Treasury Index 1,031 59 740 350
Balanced 609 205 717 97
Diversified Growth 939 1,144 2,201 (118)
Equity Index 18,925 2,547 19,705 1,767
Focused Growth 1,481 905 2,575 (189)
International Equity Index 3,356 -- 111 3,245
International Growth 1,116 606 4,566 (2,844)
Small Company Index 3,221 1,087 2,562 1,746
- -----------------------------------------------------------------------
</TABLE>
Transactions in Class C shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvestment increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 1,409 192 1,156 445
U.S. Government Securities 84 9 54 39
U.S. Treasury Index 8 -- 7 1
Balanced 104 21 97 28
Equity Index 2,131 373 1,696 808
Focused Growth 12 115 109 18
Small Company Index 153 -- 86 67
- ----------------------------------------------------------------------
</TABLE>
107
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
Transactions in Class C shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 2,988 104 1,045 2,047
U.S. Government Securities 67 10 97 (20)
Balanced 89 25 266 (152)
Equity Index 2,220 226 1,520 926
Focused Growth 12 65 45 32
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class D shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 118 5 58 65
Intermediate Bond 2 -- -- 2
International Bond 3 -- 2 1
Short-Intermediate Bond 22 4 29 (3)
U.S. Government Securities 51 1 8 44
U.S. Treasury Index 21 3 27 (3)
Balanced 45 3 21 27
Diversified Growth 32 8 20 20
Equity Index 513 137 778 (128)
Focused Growth 52 21 38 35
International Equity Index 1 -- -- 1
International Growth 15 1 22 (6)
Small Company Index 38 3 21 20
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class D shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 32 1 15 18
International Bond 3 -- -- 3
Short-Intermediate Bond 31 1 5 27
U.S. Government Securities 6 -- 1 5
U.S. Treasury Index 55 2 16 41
Balanced 12 1 8 5
Diversified Growth 16 4 6 14
Equity Index 1,302 34 281 1,055
Focused Growth 32 6 9 29
International Growth 19 -- 5 14
Small Company
Index 43 1 17 27
- ----------------------------------------------------------------------
</TABLE>
9. Subsequent Event
On January 1, 1999, eleven European countries converted to a common currency
referred to as the "Euro". Hereinafter, investments traded in the markets of
these countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal, and Spain) will be denominated in Euro.
Accordingly, the portfolio holdings of the International Bond, International
Equity and International Growth Portfolios denominated in these countries'
functional currency were converted.
108
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Report of Independent Auditors
To the Shareholders and Trustees of
Northern Institutional Funds
Fixed Income and Equity Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Bond, Intermediate Bond,
International Bond, Short-Intermediate Bond, U.S. Government Securities, U.S.
Treasury Index, Balanced, Diversified Growth, Equity Index, Focused Growth,
International Equity Index, International Growth and Small Company Index
Portfolios, comprising the Fixed Income and Equity Portfolios of the Northern
Institutional Funds, as of November 30, 1998, and the related statements of
operations, changes in net assets and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of the
investments owned at November 30, 1998 by physical examination of the
securities held by the custodian and by correspondence with central
depositories, unaffiliated subcustodian banks and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bond, Intermediate Bond, International Bond, Short-Intermediate Bond, U.S.
Government Securities, U.S. Treasury Index, Balanced, Diversified Growth,
Equity Index, Focused Growth, International Equity Index, International Growth
and Small Company Index Portfolios, comprising the Fixed Income and Equity
Portfolios of the Northern Institutional Funds, at November 30, 1998, the
results of their operations, the changes in their net assets and financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 15, 1999
109
<PAGE>
APPENDIX A
Description of Bond Ratings
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA: Debt rated AAA has the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is extremely
strong.
AA: Debt rated AA differs from the highest rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB and B: Debt rated BB and B is regarded as having significant speculative
characteristics. Debt rated BB is less vulnerable to non-payment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation. Debt rated B is more vulnerable to non-payment than debt
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
S&P may attach the rating "r" to highlight risks to principal or volatility of
expected returns which are not addressed in the credit rating.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
1-A
<PAGE>
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba and B: Bonds that possess one of these ratings provide questionable
protection of interest and principal. Ba indicates some speculative
elements. B indicates a general lack of characteristics of desirable
investment.
The foregoing ratings for corporate and municipal long-term debt are sometimes
presented in parenthesis preceded with a "con", indicating the bonds are rated
conditionally. Such parenthetical rating denotes the probable credit stature
upon completion of some act or the fulfillment of some condition.
The following summarizes the highest six ratings used by Duff & Phelps Credit
Rating Co. ("D&P") for corporate and municipal long-term debt:
AAA: Debt rated AAA is of the highest credit quality. The risk factors are
considered to be negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA: Debt rated AA is of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
A: Debt rated A has protection factors which are average but adequate.
However risk factors are more variable and greater in periods of economic
stress.
BBB: Debt rated BBB has below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
2-A
<PAGE>
BB and B: Debt rated BB or B is considered to be below investment grade.
Debt rated BB is deemed likely to meet obligations when due. Debt rated B
possesses the risk that obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within these major categories.
The following summarizes the highest six ratings used by Fitch IBCA, Inc.
("Fitch") for corporate and municipal bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of investment risk and
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality.
These ratings denote a low expectation of credit risk and indicate strong
capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality.
These ratings denote that there is currently a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this category.
BB: Bonds considered to be speculative. These ratings indicate that there
is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
B: Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
To provide more detailed indications of credit quality, the Fitch ratings "AA"
and lower may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major rating categories.
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Description of Municipal Note Ratings
The following summarizes the two highest ratings by S&P for short-term municipal
notes:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics are given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1: Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2: Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
The two highest rating categories of D&P for short-term debt are D-1 and D-2.
D&P employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D-1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D-1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D-2 indicates good certainty of
timely payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of Bond
Ratings" for tax-exempt notes and other short-term obligations. Fitch uses the
short-term ratings described below under "Description of Commercial Paper
Ratings" for municipal notes.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the obligor's capacity to meet
its financial commitment is strong. Those issues for which the obligor's
capacity to meet its financial commitment on the obligation is extremely strong
are denoted in A-1+. The obligor's capacity to meet its financial commitment on
commercial paper rated A-2 is satisfactory but these obligations are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
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The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers or supporting institutions rated Prime-1 are considered to have a
superior capacity for repayment of short-term debt obligations. Prime-1
repayment ability will often be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers or supporting institutions rated Prime-2 are considered to have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F1 securities possess exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest capacity for timely
payment of financial commitments and may have an added + to denote any
exceptionally strong credit feature.
F2 securities possess good credit quality. Issues assigned this rating have
a satisfactory capacity for timely payment of financial commitments, but
the margin of safety is not as great as in the case of the higher ratings.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
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APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within three business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Portfolio could use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this could include the use of futures contract sales to protect
against expected increases in interest rates and the use of futures contract
purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures contracts.
Interest rate futures contracts can also be used by a Portfolio for
non-hedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
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<PAGE>
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the -New York Futures Exchange. A Portfolio
would deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. A Portfolio may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
II. Index Futures Contracts
General. A bond index assigns relative values to the bonds included in the index
which fluctuates with changes in the market values of the bonds included.
A Portfolio may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio may do so either to hedge the value of its portfolio
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold. Conversely, a Portfolio
may purchase index futures contracts in anticipation of purchases of securities.
A long futures position may be terminated without a corresponding purchase of
securities.
In addition, a Portfolio may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Portfolio expects to narrow the range of industry
groups represented in its holdings it may, prior to making purchases of the
actual securities, establish a long futures position based on a more restricted
index, such as an index comprised of securities of a particular industry group.
A Portfolio may also sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to the
time of sale.
2-B
<PAGE>
Index futures contracts may also be used by a Portfolio for non-hedging
(speculative) purposes, to increase total return.
III. Futures Contracts on Foreign Currencies (International Bond Portfolio)
A futures contract on foreign currency creates a binding obligation on one
party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Portfolio for hedging
purposes in anticipation of fluctuations in exchange rates between the U.S.
dollars and other currencies arising from multinational transactions.
The International Bond Portfolio may also use futures contracts on foreign
currencies for non-hedging (speculative) purposes to increase total return.
IV. Margin Payments
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Portfolio upon the purchase or sale of a futures contract.
Initially, the Portfolio will be required to deposit with the broker or in a
segregated account with the Custodian or a sub-custodian an amount of liquid
assets, known as initial margin, based on the value of the contract. The nature
of initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular Portfolio
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Portfolio will be entitled to receive from the broker
a variation margin payment equal to that increase in value. Conversely, where
the Portfolio has purchased a futures contract and the price of the future
contract has declined in response to a decrease in the underlying instruments,
the position would be less valuable and the Portfolio would be required to make
a variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Portfolio's adviser may elect to close the position by
taking an opposite position, subject to the availability of a secondary market,
which will operate to terminate the Portfolio's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Portfolio, and the Portfolio
realizes a loss or gain.
V. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by the
Portfolios. In connection with the use of futures for hedging purposes, one risk
arises because of the imperfect
3-B
<PAGE>
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Portfolio would be in a better position than if it had not hedged
at all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If the price of the futures moves more than the price of the hedged instruments,
the Portfolio involved will experience either a loss or gain on the futures
which will not be completely offset by movements in the price of the instruments
which are the subject of the hedge. To compensate for the imperfect correlation
of movements in the price of instruments being hedged and movements in the price
of futures contracts, the Portfolio may buy or sell futures contracts in a
greater dollar amount than the dollar amount of instruments being hedged if the
volatility over a particular time period of the prices of such instruments has
been greater than the volatility over such time period of the futures, or if
otherwise deemed to be appropriate by the Investment Advisers. Conversely, the
Portfolios may buy or sell fewer futures contracts if the volatility over a
particular time period of the prices of the instruments being hedged is less
than the volatility over such time period of the futures contract being used, or
if otherwise deemed to be appropriate by the Investment Advisers. It is also
possible that, where a Portfolio had sold futures to hedge its portfolio against
a decline in the market, the market may advance and the value of instruments
held in the Portfolio may decline. If this occurred, the Portfolio would lose
money on the futures and also experience a decline in value in its portfolio
securities.
When futures are purchased to hedge against a possible increase in the
price of securities before a Portfolio is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Portfolio then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Portfolio will realize a loss on the futures contract that is not offset by
a reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the Investment Advisers may still
not result in a successful hedging transaction over a short time frame.
4-B
<PAGE>
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the
Portfolios intend to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Portfolios would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will generally not be sold
until the futures contract can be terminated. In such circumstances, an increase
in the price of the securities, if any, may partially or completely offset
losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Portfolios is also subject to the
Investment Advisers' ability to predict correctly movements in the direction of
the market. For example, if a particular Portfolio has hedged against the
possibility of a decline in the market adversely affecting securities held by it
and securities prices increase instead, the Portfolio will lose part or all of
the benefit to the increased value of its securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of securities
may be, but will not necessarily be, at increased prices which reflect the
rising market. The Portfolios may have to sell securities at a time when they
may be disadvantageous to do so.
Futures purchased or sold by the International Bond Portfolio (and related
options) may be traded on foreign exchanges. Participation in foreign futures
and foreign options transactions involves the execution and clearing of trades
on or subject to the rules of a foreign board of trade. Neither the National
Futures Association nor any domestic exchange regulates activities of any
foreign boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
board of trade or any applicable foreign law. This is true even if the exchange
is formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers who
trade foreign futures of foreign options contracts may not be afforded certain
of the protective measures provided by the
5-B
<PAGE>
Commodity Exchange Act, the Commodity Futures Trading Commission's ("CFTC")
regulations and the rules of the National Futures Association and any domestic
exchange, including the right to use reparations proceedings before the CFTC and
arbitration proceedings provided by the National Futures Association or any
domestic futures exchange. In particular, the investments of the International
Bond Portfolio in foreign futures or foreign options transactions may not be
provided the same protections in respect of transactions on United States
futures exchanges. In addition, the price of any foreign futures or foreign
options contract and, therefore the potential profit and loss thereon may be
affected by any variance in the foreign exchange rate between the time an order
is placed and the time it is liquidated, offset or exercised.
VI. Options on Futures Contracts
The Portfolios may purchase and write (sell) call and put options on the
futures contracts described above. A futures option gives the holder, in return
for the premium paid, the right to buy (call) from or sell (put) to the writer
of the option a futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the option is obligated to
pay the difference between the cash value of the futures contract and the
exercise price. Like the buyer or seller of a futures contract, the holder, or
writer, of an option has the right to terminate its position prior to the
scheduled expiration of the option by selling, or purchasing an option of the
same series, at which time the person entering into the closing transaction will
realize a gain or loss. A Portfolio will be required to deposit initial margin
and variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in futures contracts (for example,
the existence of a liquid secondary market). See "Risks of Transactions in
Futures Contracts" above. In addition, the purchase or sale of an option also
entails the risk that changes in the value of the underlying futures contract
will not correspond to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures contract upon which
it is based, or upon the price of any underlying instruments, an option may or
may not be less risky than ownership of the futures contract or such
instruments. In general, the market prices of options can be expected to be more
volatile than the market prices on the underlying futures contract. Compared to
the purchase or sale of futures contracts, however, the purchase of call or put
options on futures contracts may, unlike futures contracts where the risk of
loss is potentially unlimited, frequently involve less potential risk to the
Portfolio because the maximum amount at risk is the premium paid for the options
(plus transaction costs). The writing of an option on a futures contract
involves risks similar to those risks relating to the sale of futures contracts.
VII. Other Matters
Each Portfolio intends to comply with the regulations of the CFTC exempting
it from registration as a "commodity pool operator." Accounting for futures
contracts will be in accordance with generally accepted accounting principles.
6-B
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
NORTHERN INSTITUTIONAL FUNDS
4900 Sears Tower
Chicago, Illinois 60606
BALANCED PORTFOLIO
EQUITY INDEX PORTFOLIO
DIVERSIFIED GROWTH PORTFOLIO
FOCUSED GROWTH PORTFOLIO
SMALL COMPANY INDEX PORTFOLIO
INTERNATIONAL EQUITY INDEX PORTFOLIO
INTERNATIONAL GROWTH PORTFOLIO
This Statement of Additional Information dated April 1, 1999 (the
"Additional Statement") is not a prospectus. Copies of the prospectus dated
April 1, 1999 for the Balanced, Equity Index, Diversified Growth, Focused
Growth, Small Company Index, International Equity Index and International Growth
Portfolios (the "Portfolios") of Northern Institutional Funds (the "Prospectus")
may be obtained without charge by calling 1-800-637-1380 (toll-free) or by
writing to the address stated above. Capitalized terms not otherwise defined
have the same meaning as in the Prospectus.
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 are incorporated herein
by reference in the section entitled "Financial Statements." No other parts of
the annual report are incorporated herein by reference. Copies of the annual
report may be obtained upon request and without charge by calling 1-800-637-1380
(toll-free).
B-1
<PAGE>
INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION..........................................B-3
Classification and History........................................B-3
Investment Objectives, Strategies and Risks.......................B-3
Investment Restrictions..........................................B-19
ADDITIONAL TRUST INFORMATION..............................................B-22
Trustees and Officers............................................B-22
Investment Advisers, Transfer Agent and Custodian................B-27
Portfolio Transactions...........................................B-33
Portfolio Valuation..............................................B-38
Administrator and Distributor....................................B-38
Shareholder Servicing Plan.......................................B-40
Counsel and Auditors.............................................B-42
In-Kind Purchases and Redemptions................................B-42
PERFORMANCE INFORMATION...................................................B-43
TAXES ....................................................................B-53
General..........................................................B-53
Foreign Investors................................................B-54
Conclusion.......................................................B-54
DESCRIPTION OF SHARES.....................................................B-55
OTHER INFORMATION.........................................................B-60
FINANCIAL STATEMENTS......................................................B-61
APPENDIX A.................................................................1-A
APPENDIX B.................................................................1-B
----------------
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering made by the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust or its distributor. The Prospectus does not constitute
an offering by the Trust or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. An investment in a Portfolio involves investment risks, including
possible loss of principal.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Classification and History
Northern Institutional Funds (the "Trust") is an open-end, management
investment company. Each Portfolio is classified as diversified under the
Investment Company Act of 1940, as amended (the "1940 Act").
Each Portfolio is a series of the Trust, which was formed as a Delaware
business trust on July 1, 1997 under an Agreement and Declaration of Trust (the
"Trust Agreement"). The Trust, formerly known as The Benchmark Funds, changed
its name to Northern Institutional Funds on July 15, 1998. The Portfolios were
formerly series of The Benchmark Funds, a Massachusetts business trust, and were
reorganized into the Trust on March 31, 1998.
Investment Objectives, Strategies and Risks
The following supplements the investment objectives, strategies and risks
of the Portfolios as set forth in the Prospectus. The investment objective of
each Portfolio may not be changed without the vote of the majority of the
Portfolio's outstanding shares. Except as expressly noted below, however, each
Portfolio's investment policies may be changed without shareholder approval.
Warrants. The Balanced, Diversified Growth, Focused Growth, Small Company
Index, International Equity Index and International Growth Portfolios may
purchase warrants and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. The prices of warrants do not necessarily correlate with the prices of the
underlying shares. The purchase of warrants involves the risk that a Portfolio
could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's expiration. Also, the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. A Portfolio will not invest
more than 5% of its total assets, taken at market value, in warrants. Warrants
acquired by a Portfolio in shares or attached to other securities are not
subject to this restriction.
U.S. Government Obligations. Examples of the types of U.S. Government
obligations that may be acquired by the Portfolios include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Federal National Mortgage Association,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, and the Maritime Administration.
Foreign Securities. Unanticipated political, economic or social
developments may affect the value of a Portfolio's investments in emerging
market countries and the availability to a Portfolio of additional investments
in these countries. Some of these countries may have in the past
B-3
<PAGE>
failed to recognize private property rights and may have at times nationalized
or expropriated the assets of private companies. The small size and inexperience
of the securities markets in certain of such countries and the limited volume of
trading in securities in those countries may make a Portfolio's investments in
such countries illiquid and more volatile than investments in Japan or most
Western European countries, and a Portfolio may be required to establish special
custodial or other arrangements before making certain investments in those
countries. There may be little financial or accounting information available
with respect to issuers located in certain of such countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.
Investors should understand that the expense ratios of the International
Equity Index and International Growth Portfolios can be expected to be higher
than those funds investing primarily in domestic securities. The costs
attributable to investing abroad are usually higher for several reasons, such as
the higher cost of investment research, higher cost of custody of foreign
securities, higher commissions paid on comparable transactions on foreign
markets and additional costs arising from delays in settlements of transactions
involving foreign securities.
As noted in the Prospectus, the International Equity Index Portfolio
invests primarily in the equity securities included in the EAFE Index. As of
November 30, 1998, fifteen European countries (Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom) constitute approximately 73%
of the EAFE Index. Five Asian/Pacific countries (Australia, Hong Kong, Japan,
New Zealand and Singapore) account for the remaining 27%.
Countries in which the International Growth Portfolio may invest include,
but are not limited to: Argentina, Australia, Austria, Belgium, Brazil, Canada,
Chile, Colombia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong
Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia,
Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines, Poland,
Portugal, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, the United Kingdom and Venezuela.
The end of the Cold War, the reunification of Germany, the accession of new
Western European members to the European Economic and Monetary Union and the
aspirations of Eastern European states to join and other political and social
events in Europe have caused considerable economic, social and political
dislocation. In addition, events in the Japanese economy, as well as political
and social developments there have affected Japanese securities and currency
markets, and the relationship of the Japanese yen with other currencies and with
the U.S. dollar. Future political, economic and social developments in Japan and
in the Asia/Pacific regional context can be expected to produce continuing
effects on securities and currency markets.
Foreign Currency Transactions. In order to protect against a possible loss
on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Balanced, Diversified Growth, Focused Growth,
International Equity Index and International Growth Portfolios are authorized to
enter into forward foreign currency exchange contracts. These contracts involve
an obligation to purchase or sell a specified currency at a future date at a
price set at the time of the contract. Forward currency
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contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow a Portfolio to establish a rate of exchange for a future point
in time.
When entering into a contract for the purchase or sale of a security, a
Portfolio may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When the investment management team anticipates that a particular foreign
currency may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, a Portfolio may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Portfolio's securities denominated
in such foreign currency. Similarly, when the securities held by a Portfolio
create a short position in a foreign currency, the Portfolio may enter into a
forward contract to buy, for a fixed amount, an amount of foreign currency
approximating the short position. A Portfolio's net long and short foreign
currency exposure will not exceed its total asset value. With respect to any
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by that contract and the value of the securities
involved due to the changes in the values of such securities resulting from
market movements between the date the forward contract is entered into and the
date it matures. In addition, while forward contracts may offer protection from
losses resulting from declines or appreciation in the value of a particular
foreign currency, they also limit potential gains which might result from
changes in the value of such currency. A Portfolio may also incur costs in
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
In addition, the International Growth Portfolio may purchase or sell
forward foreign currency exchange contracts to seek to increase total return or
for cross-hedging purposes. The Portfolio may engage in cross-hedging by using
forward contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency if the investment management team
believes that there is a pattern of correlation between the two currencies.
Liquid assets equal to the amount of a Portfolio's assets that could be
required to consummate forward contracts will be segregated except to the extent
the contracts are otherwise "covered." The segregated assets will be valued at
market or fair value. If the market or fair value of such assets declines,
additional liquid assets will be segregated daily so that the value of the
segregated assets will equal the amount of such commitments by the Portfolio. A
forward contract to sell a foreign currency is "covered" if a Portfolio owns the
currency (or securities denominated in the currency) underlying the contract, or
holds a forward contract (or call option) permitting the Portfolio to buy the
same currency at a price that is (i) no higher than the Portfolio's price to
sell the currency or (ii) greater than the Portfolio's price to sell the
currency provided the Portfolio segregates liquid assets in the amount of the
difference. A forward contract to buy a foreign currency is "covered" if a
Portfolio holds a forward contract (or call option) permitting the Portfolio to
sell the same currency at a price that is (i) as high as or higher than the
Portfolio's price to buy the currency or (ii) lower than the Portfolio's price
to buy the currency provided the Portfolio segregates liquid assets in the
amount of the difference.
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Options. Each Portfolio may buy put options and buy call options and write
covered call and secured put options. Such options may relate to particular
securities, foreign and domestic stock indices, financial instruments, or
foreign currencies and may or may not be listed on a domestic or foreign
securities exchange or issued by the Options Clearing Corporation. A call option
for a particular security or currency gives the purchaser of the option the
right to buy, and a writer the obligation to sell, the underlying security or
currency at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security or currency. The premium
paid to the writer is in consideration for undertaking the obligation under the
option contract. A put option for a particular security or currency gives the
purchaser the right to sell the security or currency at the stated exercise
price to the expiration date of the option, regardless of the market price of
the security or currency. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
Options trading is a highly specialized activity which entails greater than
ordinary investment risk. Options on particular securities may be more volatile
than the underlying instruments, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying instruments themselves.
The Portfolios will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are segregated) upon conversion or exchange of other securities
held by it. For a call option on an index, the option is covered if a Portfolio
maintains with its custodian a portfolio of securities substantially replicating
the movement of the index, or liquid assets equal to the contract value. A call
option is also covered if a Portfolio holds a call on the same security,
currency or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written, or (ii)
greater than the exercise price of the call written provided the Portfolio
segregates liquid assets in the amount of the difference. The Portfolios will
write put options only if they are "secured" by segregated liquid assets in an
amount not less than the exercise price of the option at all times during the
option period.
A Portfolio's obligation to sell a security subject to a covered call
option written by it, or to purchase a security or currency subject to a secured
put option written by it, may be terminated prior to the expiration date of the
option by the Portfolio's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying security or currency, exercise price and expiration date) as the
option previously written. Such a purchase does not result in the ownership of
an option. A closing purchase transaction will ordinarily be effected to realize
a profit on an outstanding option, to prevent an underlying security or currency
from being called, to permit the sale of the underlying security or currency or
to permit the writing of a new option containing different terms on such
underlying security. The cost of such a liquidation purchase plus transaction
costs may be greater than the premium received upon the original option, in
which event the Portfolio will have incurred a loss in the transaction. There is
no assurance that a liquid secondary market will exist for any particular
option. An option writer, unable to effect a closing purchase transaction, will
not be able to sell the underlying security or
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currency (in the case of a covered call option) or liquidate the segregated
assets (in the case of a secured put option) until the option expires or the
optioned security or currency is delivered upon exercise with the result that
the writer in such circumstances will be subject to the risk of market decline
or appreciation in the security or currency during such period.
When a Portfolio purchases an option, the premium paid by it is recorded as
an asset of the Portfolio. When the Portfolio writes an option, an amount equal
to the net premium (the premium less the commission) received by the Portfolio
is included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by the Portfolio expires unexercised, the Portfolio realizes a loss
equal to the premium paid. If the Portfolio enters into a closing sale
transaction on an option purchased by it, the Portfolio will realize a gain if
the premium received by the Portfolio on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is less. If an option
written by the Portfolio expires on the stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option written by the Portfolio is exercised, the
proceeds of the sale will be increased by the net premium originally received
and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain options.
For example, there are significant differences between the securities, currency
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded
over-the-counter or on a national securities exchange (an "Exchange"), may be
absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an Exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities or currencies; unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading value; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that Exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that Exchange would continue to be exercisable in accordance with their terms.
Supranational Bank Obligations. The Balanced Portfolio may invest in
------------------------------
obligations of supranational banks. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the World
Bank). Obligations of supranational banks may be supported by appropriated but
unpaid commitments of their member countries and there is no assurance that
these commitments will be undertaken or met in the future.
Stripped Securities. The Balanced Portfolio may purchase stripped
-------------------
securities. The Treasury Department has facilitated transfers of ownership of
zero coupon securities by accounting
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separately for the beneficial ownership of particular interest coupon and
principal payments on Treasury securities through the Federal Reserve book-entry
record-keeping system. The Federal Reserve program as established by the
Treasury Department is known as "STRIPS" or "Separate Trading of Registered
Interest and Principal of Securities." The Portfolio may purchase securities
registered in the STRIPS program. Under the STRIPS program, the Portfolio will
be able to have its beneficial ownership of zero coupon securities recorded
directly in the book-entry record-keeping system in lieu of having to hold
certificates or other evidences of ownership of the underlying U.S. Treasury
securities.
In addition, the Balanced Portfolio may acquire U.S. Government obligations
and their unmatured interest coupons that have been separated ("stripped") by
their holder, typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of the U.S.
Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury
Securities" ("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. The underlying
U.S. Treasury bonds and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these certificates or other
evidences of ownership of U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities most likely will be deemed the
beneficial holders of the underlying U.S. Government obligations for Federal tax
purposes. The Trust is not aware of any binding legislative, judicial or
administrative authority on this issue.
The Prospectus discusses other types of stripped securities that may be
purchased by the Balanced Portfolio, including stripped mortgage-backed
securities ("SMBS"). SMBS are usually structured with two or more classes that
receive different proportions of the interest and principal distributions from a
pool of mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class receives all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying obligations
experience greater than anticipated prepayments of principal, the Portfolio may
fail to fully recoup its initial investment in these securities. The market
value of the class consisting entirely of principal payments generally is
extremely volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest are generally higher
than prevailing market yields on other mortgage-backed obligations because their
cash flow patterns are also volatile and there is a risk that the initial
investment will not be fully recouped. SMBS issued by the U.S. Government (or a
U.S. Government agency or instrumentality) may be considered liquid under
guidelines established by the Trust's Board of Trustees if they can be disposed
of promptly in the ordinary course of business at a value reasonably close to
that used in the calculation of the net asset value per share.
Asset-Backed Securities. The Balanced Portfolio may purchase asset backed
-----------------------
securities, which are securities backed by mortgages, installment contracts,
credit card receivables or other assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
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payments made by the individual borrowers on the assets that underlie the
securities, net of any fees paid to the issuer or guarantor of the securities.
The average life of asset-backed securities varies with the maturities of the
underlying instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely.
If an asset-backed security is purchased at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if an asset-backed security is purchased at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will decrease, yield to maturity. In calculating the
average weighted maturity of the fixed income portion of the Balanced Portfolio,
the maturity of asset-backed securities will be based on estimates of average
life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments.
Asset-backed securities acquired by the Balanced Portfolio may include
collateralized mortgage obligations ("CMOs") issued by private companies. CMOs
provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Issuers of CMOs
ordinarily elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be structured
in a variety of ways. The Portfolio will not purchase "residual" CMO interests,
which normally exhibit greater price volatility.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United
States, created
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pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed by the United States or by any Federal
Home Loan Banks and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by the FHLMC. The FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When the FHLMC does not guarantee timely payment of
principal, the FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Balanced
Portfolio may enter into interest rate swaps or purchase interest rate floors or
caps for hedging purposes and not for speculation. Interest rate swaps involve
the exchange by the Portfolio with another party of their respective commitments
to pay or receive interest, such as an exchange of fixed rate payments for
floating rate payments. The Portfolio will typically use interest rate swaps to
preserve a return on a particular investment or portion of its portfolio or to
shorten the effective duration of its portfolio investments. The purchase of an
interest rate floor or cap entitles the purchaser to receive payments of
interest on a notional principal amount from the seller, to the extent the
specified index falls below (floor) or exceeds (cap) a predetermined interest
rate. The Portfolio will only enter into interest rate swaps or interest rate
floor or cap transactions on a net basis; i.e., the two payment streams are
netted out, with the Portfolio receiving or paying, as the case may be, only the
net amount of the two payments.
The International Equity Index and International Growth Portfolios may
enter into currency swaps, which involve the exchange of the rights of a
Portfolio and another party to make or receive payments in specified currencies.
Currency swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency.
Inasmuch as interest rate and currency swaps are entered into for good
faith hedging purposes, the Trust, The Northern Trust Company ("Northern") and
Northern Trust Quantitative Advisors, Inc. ("NTQA" and, collectively with
Northern, the "Investment Advisers") believe that such transactions do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Portfolios' borrowing restrictions. The
net amount of the excess, if any, of a Portfolio's obligations over its
entitlements with respect to interest rate or
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currency swaps will be accrued on a daily basis and an amount of liquid assets
having an aggregate net asset value at least equal to such accrued excess will
be segregated by the Portfolio.
The Balanced Portfolio will not enter into an interest rate swap, floor or
cap transaction, and the International Equity Index and International Growth
Portfolios will not enter into currency swap transactions unless the unsecured
commercial paper, senior debt or the claims-paying ability of the other party
thereto is rated either A or A-l or better by S&P, Duff or Fitch, or A or P-1 or
better by Moody's. If there is a default by the other party to such transaction,
the Portfolios will have contractual remedies pursuant to the agreements related
to the transaction. The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid in comparison with markets for other similar
instruments which are traded in the interbank market.
Equity Swaps. Each Portfolio may enter into equity swap contracts to invest
in a market without owning or taking physical custody of securities in
circumstances in which direct investment is restricted for legal reasons or is
otherwise impracticable. Equity swaps may also be used for hedging purposes or
to seek to increase total return. The counterparty to an equity swap contract
will typically be a bank, investment banking firm or broker/dealer. Equity swap
contracts may be structured in different ways. For example, a counterparty may
agree to pay the Portfolio the amount, if any, by which the notional amount of
the equity swap contract would have increased in value had it been invested in
particular stocks (or an index of stocks), plus the dividends that would have
been received on those stocks. In these cases, the Portfolio may agree to pay to
the counterparty the amount, if any, by which that notional amount would have
decreased in value had it been invested in the stocks. Therefore, the return to
the Portfolio on any equity swap contract should be the gain or loss on the
notional amount plus dividends on the stocks less the interest paid by the
Portfolio on the notional amount. In other cases, the counterparty and the
Portfolio may each agree to pay the other the difference between the relative
investment performances that would have been achieved if the notional amount of
the equity swap contract had been invested in different stocks (or indices of
stocks).
A Portfolio will enter into equity swaps only on a net basis, which means
that the two payment streams are netted out, with the Portfolio receiving or
paying, as the case may be, only the net amount of the two payments. Payments
may be made at the conclusion of an equity swap contract or periodically during
its term. Equity swaps do not involve the delivery of securities or other
underlying assets. Accordingly, the risk of loss with respect to equity swaps is
limited to the net amount of payments that a Portfolio is contractually
obligated to make. If the other party to an equity swap defaults, a Portfolio's
risk of loss consists of the net amount of payments that such Portfolio is
contractually entitled to receive, if any. Inasmuch as these transactions are
entered into for hedging purposes or are offset by segregated cash or liquid
assets to cover the Portfolios' potential exposure, the Portfolios and the
Investment Advisers believe that such transactions do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to a Portfolio's borrowing restrictions.
The Portfolios will not enter into any swap transactions unless the
unsecured commercial paper, senior debt or claims-paying ability of the other
party is rated either A or A-1 or better by S&P, Duff or Fitch, or A or P-1 or
better by Moody's. If there is a default by the other party to
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such a transaction, a Portfolio will have contractual remedies pursuant to the
agreements related to the transaction.
The use of equity swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Advisers are incorrect in
their forecasts of market values, the investment performance of a Portfolio
would be less favorable than it would have been if this investment technique
were not used.
Futures Contracts and Related Options. Each Portfolio may invest in futures
contracts and may purchase and sell call and put options on futures contracts
for hedging purposes, for speculative purposes (to seek to increase total
return), or for liquidity management purposes. When used as a hedge, a Portfolio
may sell a futures contract in order to offset a decrease in the market value of
its portfolio securities that might otherwise result from a market decline or
currency exchange fluctuations. A Portfolio may do so either to hedge the value
of its portfolio of securities as a whole, or to protect against declines,
occurring prior to sales of securities, in the value of the securities to be
sold. Conversely, a Portfolio may purchase a futures contract as a hedge in
anticipation of purchases of securities. In addition, a Portfolio may utilize
futures contracts in anticipation of changes in the composition of its portfolio
holdings. For a detailed description of futures contracts and related options,
see Appendix B to this Additional Statement.
Real Estate Investment Trusts. The Small Company Index Portfolio may invest
in equity real estate investment trusts ("REITs") that constitute a part of the
Russell 2000 Small Stock Index. REITs pool investors' funds for investment
primarily in commercial real estate properties. Investments in REITs may subject
the Portfolio to certain risks. REITs may be affected by changes in the value of
the underlying property owned by the trust. REITs are dependent upon specialized
management skill, may not be diversified and are subject to the risks of
financing projects. REITs are also subject to heavy cash flow dependency,
defaults by borrowers, self liquidation and the possibility of failing to
qualify for the beneficial tax treatment available to REITs under the Internal
Revenue Code of 1986, as amended, and to maintain exemption from the 1940 Act.
As a shareholder in a REIT, the Portfolio would bear, along with other
shareholders, its pro rata portion of the REIT's operating expenses. These
expenses would be in addition to the advisory and other expenses the Portfolio
bears directly in connection with its own operations.
Securities Lending. Collateral for loans of portfolio securities made by a
Portfolio may consist of cash, cash equivalents, securities issued or guaranteed
by the U.S. Government or its agencies or irrevocable bank letters of credit (or
any combination thereof). The borrower of securities will be required to
maintain the market value of the collateral at not less than the market value of
the loaned securities, and such value will be monitored on a daily basis. When a
Portfolio lends its securities, it continues to receive dividends and interest
on the securities loaned and may simultaneously earn interest on the investment
of the cash collateral. Although voting rights, or rights to consent, attendant
to securities on loan pass to the borrower, such loans will be called so that
the securities may be voted by a Portfolio if a material event affecting the
investment is to occur.
Forward Commitments, When-Issued Securities and Delayed Delivery
Transactions. When a Portfolio purchases securities on a when-issued, delayed
delivery or forward commitment basis, the Portfolio will segregate liquid assets
until three days prior to the settlement date having a value
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(determined daily) at least equal to the amount of the Portfolio's purchase
commitments, or will otherwise cover its position. In the case of a forward
commitment to sell portfolio securities, the Portfolio will segregate the
portfolio securities themselves. These procedures are designed to ensure that
the Portfolio will maintain sufficient assets at all times to cover its
obligations under when-issued purchases, forward commitments and delayed
delivery transactions.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time
Deposits and Bank Notes. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party. Bank notes rank junior to deposit liabilities of banks and pari passu
with other senior, unsecured obligations of the bank. Bank notes are classified
as "other borrowings" on a bank's balance sheet, while deposit notes and
certificates of deposit are classified as deposits. Bank notes are not insured
by the Federal Deposit Insurance Corporation or any other insurer. Deposit notes
are insured by the Federal Deposit Insurance Corporation only to the extent of
$100,000 per depositor per bank.
Each Portfolio may invest a portion of its assets in the obligations of
foreign banks and foreign branches of domestic banks. Such obligations include
Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs") which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs") which are U.S.
dollar-denominated bankers' acceptances issued by a U.S. branch of a foreign
bank and held in the United States.
Commercial paper and other short-term obligations acquired by a Portfolio
will be rated A-2 or higher by S&P, P-2 or higher by Moody's, D-2 or higher by
Duff, or F-2 or higher by Fitch at the time of purchase or, if unrated,
determined to be of comparable quality by the Investment Advisers.
Insurance Funding Agreements. The Balanced Portfolio may invest in
insurance funding agreements ("IFAs"). An IFA is normally a general obligation
of the issuing insurance company and not a separate account. The purchase price
paid for an IFA becomes part of the general assets of the insurance company, and
the contract is paid from the company's general assets. Generally, IFAs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in IFAs may not exist.
B-13
<PAGE>
Zero Coupon, Pay-in-Kind and Capital Appreciation Bonds. To the extent
consistent with its investment objective, the Balanced Portfolio may invest in
zero coupon bonds, capital appreciation bonds and pay-in-kind ("PIK")
securities. Zero coupon and capital appreciation bonds are debt securities
issued or sold at a discount from their face value and which do not entitle the
holder to any periodic payment of interest prior to maturity or a specified
date. The original issue discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, the liquidity of the
security and the perceived credit quality of the issuer. These securities also
may take the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves or receipts or certificates
representing interests in such stripped debt obligations or coupons. The market
prices of zero coupon bonds, capital appreciation bonds and PIK securities
generally are more volatile than the market prices of interest bearing
securities and are likely to respond to a greater degree to changes in interest
rates than interest bearing securities having similar maturities and credit
quality.
PIK securities may be debt obligations or preferred shares that provide the
issuer with the option of paying interest or dividends on such obligations in
cash or in the form of additional securities rather than cash. Similar to zero
coupon bonds, PIK securities are designed to give an issuer flexibility in
managing cash flow. PIK securities that are debt securities can either be senior
or subordinated debt and generally trade flat (i.e., without accrued interest).
The trading price of PIK debt securities generally reflects the market value of
the underlying debt plus an amount representing accrued interest since the last
interest payment.
Zero coupon bonds, capital appreciation bonds and PIK securities involve
the additional risk that, unlike securities that periodically pay interest to
maturity, the Portfolio will realize no cash until a specified future payment
date unless a portion of such securities is sold and, if the issuer of such
securities defaults, the Portfolio may obtain no return at all on its
investment. In addition, even though such securities do not provide for the
payment of current interest in cash, the Portfolio is nonetheless required to
accrue income on such investments for each taxable year and generally is
required to distribute such accrued amounts (net of deductible expenses, if any)
to avoid being subject to tax. Because no cash is generally received at the time
of the accrual, the Portfolio may be required to liquidate other portfolio
securities to obtain sufficient cash to satisfy Federal tax distribution
requirements applicable to the Portfolio.
Variable and Floating Rate Instruments. With respect to the variable and
floating rate instruments that may be acquired by the Portfolios, the investment
management team will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments and, if the instruments
are subject to demand features, will monitor their financial status and ability
to meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument meets the Portfolios' quality requirements, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
Variable and floating rate instruments eligible for purchase by the
Portfolios include variable amount master demand notes, which permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate, and leveraged inverse floating rate debt
instruments ("inverse floaters"). The interest rate on an inverse floater resets
in the opposite direction from the market rate of interest to which the inverse
floater is indexed. An inverse floater
B-14
<PAGE>
may be considered to be leveraged to the extent that its interest rate varies by
a magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage interest in inverse floaters is
associated with greater volatility in their market values. Accordingly, the
duration of an inverse floater may exceed its stated final maturity. The
Portfolios may deem the maturity of variable and floating rate instruments to be
less than their stated maturities based on their variable and floating rate
features and/or their put features. Unrated variable and floating rate
instruments will be determined by the Investment Advisers to be of comparable
quality at the time of purchase to rated instruments which may be purchased by
the Portfolios.
Variable and floating rate instruments including inverse floaters held by a
Portfolio will be subject to the Portfolio's 15% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days absent a reliable trading market.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
with financial institutions, such as banks and broker/dealers, as are deemed
creditworthy by the Investment Advisers under guidelines approved by the Trust's
Board of Trustees. The repurchase price under the repurchase agreements will
generally equal the price paid by a Portfolio plus interest negotiated on the
basis of current short-term rates (which may be more or less than the rate on
the securities underlying the repurchase agreement). Securities subject to
repurchase agreements will be held by the Trust's custodian (or subcustodian),
in the Federal Reserve/Treasury book-entry system or by another authorized
securities depository. The seller under a repurchase agreement will be required
to maintain the value of the securities which are subject to the agreement and
held by a Portfolio in an amount that exceeds the agreed upon repurchase price
(including accrued interest). Repurchase agreements are considered to be loans
by a Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds as a
temporary measure for emergency purposes or to meet redemption requests by
selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). The Portfolios may use the proceeds of
reverse repurchase agreements to purchase other securities either maturing, or
under an agreement to resell, at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Portfolio may
decline below the repurchase price. The Portfolios will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Portfolio will segregate liquid assets in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. Reverse repurchase agreements are considered
to be borrowings by a Portfolio under the 1940 Act.
Investment Companies.
With respect to the investments of the Portfolios in the securities of
other investment companies, such investments will be limited so that, as
determined after a purchase is made, either (a) not more than 3% of the total
outstanding stock of such investment company will be owned by a Portfolio, the
Trust as a whole and their affiliated persons (as defined in the 1940 Act); or
(b) (i) not more than 5% of the value the total assets of a Portfolio will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio.
B-15
<PAGE>
Certain investment companies whose securities are purchased by the
Portfolios may not be obligated to redeem such securities in an amount exceeding
1% of the investment company's total outstanding securities during any period of
less than 30 days. Therefore, such securities that exceed this amount may be
illiquid.
If required by the 1940 Act, each Portfolio expects to vote the shares of
other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
A Portfolio may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policy and restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. A Portfolio may adhere
to more restrictive limitations with respect to its investments in securities
issued by other investment companies if required by the SEC or deemed to be in
the best interests of the Trust.
As noted in the Prospectus, the International Equity Index Portfolio may
invest in World Equity Benchmark Shares ("WEBS"), Standard & Poor's Depository
Receipts ("SPDRs") and similar securities of other investment companies, subject
to the restrictions set forth above.
WEBS are shares of an investment company that invests substantially all of
its assets in securities included in the MSCI indices for specified countries.
WEBS are listed on the American Stock Exchange (the "AMEX"), and were initially
offered to the public in 1996. The market prices of WEBS are expected to
fluctuate in accordance with both changes in the net asset values of their
underlying indices and supply and demand of WEBS on the AMEX. To date WEBS have
traded at relatively modest discounts and premiums to their net asset values.
However, WEBS have a limited operating history, and information is lacking
regarding the actual performance and trading liquidity of WEBS for extended
periods or over complete market cycles. In addition, there is no assurance that
the requirements of the AMEX necessary to maintain the listing of WEBS will
continue to be met or will remain unchanged. In the event substantial market or
other disruptions affecting WEBS should occur in the future, the liquidity and
value of the International Equity Index Portfolio's shares could also be
substantially and adversely affected, and the Portfolio's ability to provide
investment results approximating the performance of securities in the EAFE Index
could be impaired. If such disruptions were to occur, the Portfolio could be
required to reconsider the use of WEBS as part of its investment strategy.
SPDRs are interests in a unit investment trust ("UIT") that may be obtained
from the UIT or purchased in the secondary market (SPDRs are listed on the
AMEX). The UIT will issue SPDRs in aggregations known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P Index"), (b) a cash
payment equal to a pro rata portion of the dividends accrued on the UIT's
portfolio securities since the last dividend payment by the UIT, net of expenses
and liabilities, and (c) a cash payment or credit ("Balancing Amount") designed
to equalize the net asset value of the S&P Index and the net asset value of a
Portfolio Deposit.
B-16
<PAGE>
SPDRs are not individually redeemable, except upon termination of the UIT.
To redeem, the Portfolio must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the
Portfolio will receive Index Securities and cash identical to the Portfolio
Deposit required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived from and based upon the securities held by
the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is based
on a basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the International Equity Index Portfolio could result
in losses on SPDRs. Trading in SPDRs involves risks similar to those risks
involved in the writing of options on securities.
Risks Related to Lower-Rated Securities. While any investment carries some
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of these
securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per share.
There remains some uncertainty about the performance level of the market
for lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the market for lower-rated securities (resulting in a greater number of
bond defaults) and the value of lower-rated securities held in the portfolio of
investments.
The economy and interest rates can affect lower-rated securities
differently than other securities. For example, the prices of lower-rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher-rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security defaults, a Portfolio may incur additional
expenses to seek recovery. In addition, periods of economic uncertainty would
likely result in increased volatility for the market prices of lower-rated
securities as well as a Portfolio's net asset value. In general, both the prices
and yields of lower-rated securities will fluctuate.
In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
B-17
<PAGE>
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower-rated
securities held by a Portfolio, especially in a thinly traded market. Illiquid
or restricted securities held by a Portfolio may involve special registration
responsibilities, liabilities and costs, and could involve other liquidity and
valuation difficulties.
The ratings of S&P, Moody's, Duff and Fitch evaluate the safety of a
lower-rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, the Investment Advisers perform their own analysis
of the issuers whose lower-rated securities the Portfolios purchase. Because of
this, a Portfolio's performance may depend more on their own credit analysis
than is the case of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, the Investment Advisers consider
factors such as those relating to the creditworthiness of issuers, the ratings
and performance of the securities, the protections afforded the securities and
the diversity of a Portfolio's investment portfolio. The Investment Advisers
monitor the issuers of lower-rated securities held by a Portfolio for their
ability to make required principal and interest payments, as well as in an
effort to control the liquidity of the Portfolio so that it can meet redemption
requests.
Yields and Ratings. The yields on certain obligations, including the
instruments in which the Portfolios may invest, are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, Duff, Fitch and TBW represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices. For a
more complete discussion of ratings, see Appendix A to this Additional
Statement.
Subject to the limitations stated in the Prospectus, if a security held by
a Portfolio undergoes a rating revision, the Portfolio may continue to hold the
security if the Investment Advisers determine such retention is warranted.
Tracking Variance. As discussed in the Prospectus, the Equity Index, Small
Company Index and International Equity Index Portfolios are subject to the risk
of tracking variance. Tracking variance may result from share purchases and
redemptions, transaction costs, expenses and other factors. Share purchases and
redemptions may necessitate the purchase and sale of securities by a Portfolio
and the resulting transaction costs which may be substantial because of the
number and the characteristics of the securities held. In addition, transaction
costs are incurred because sales of securities received in connection with
spin-offs and other corporate reorganizations are made to conform a Portfolio's
holdings with its investment objective. Tracking variance may also occur due to
factors such as the size of a Portfolio, the maintenance of a cash reserve
pending investment or to meet expected redemptions, changes made in the
Portfolio's designated Index or the manner in which the Index is calculated or
because the indexing and investment approach of the Investment Adviser does not
produce the intended goal of the Portfolio. In the event the performance of a
Portfolio is not comparable to the
B-18
<PAGE>
performance of its designated Index, the Board of Trustees will evaluate the
reasons for the deviation and the availability of corrective measures. If
substantial deviation in a Portfolio's performance were to continue for extended
periods, it is expected that the Board of Trustees would consider recommending
to shareholders possible changes to the Portfolio's investment objective.
The Small Company Index and International Equity Index Portfolios require
the payment of an additional transaction fee on purchases of shares of the
Portfolios. The purpose of the fee is to indirectly allocate transaction costs
associated with new purchases to investors making those purchases, thus
protecting existing shareholders. These costs include: (1) brokerage costs; (2)
market impact costs--i.e., the increase in market prices which may result when
the Portfolios purchase thinly traded stocks; (3) sales charges relating to the
purchase of shares in certain unaffiliated investment companies; and, most
importantly (4) the effect of the "bid-ask" spread in the over-the-counter
market. (Securities in the over-the-counter market are bought at the "ask" or
purchase price, but are valued in the Portfolios at the last quoted bid price).
The additional transaction fees represent the Investment Adviser's estimate of
the brokerage and other transaction costs which may be incurred by the Small
Company Index and International Equity Index Portfolios in acquiring stocks of
small capitalization or foreign companies. Without the additional transaction
fee, the Portfolios would generally be selling their shares at a price less than
the cost to the Portfolios of acquiring the portfolio securities necessary to
maintain their investment characteristics, thereby resulting in reduced
investment performance for all shareholders in the Portfolios. With the
additional transaction fee, the transaction costs of acquiring additional stocks
are not borne by all existing shareholders, but are defrayed by the transaction
fees paid by those investors making additional purchases of shares.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
Portfolios is calculated by dividing the lesser of purchases or sales of
portfolio investments for the reporting period by the monthly average value of
the portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares and by requirements which
enable the Portfolios to receive favorable tax treatment.
Investment Restrictions
Each Portfolio is subject to the fundamental investment restrictions
enumerated below which may be changed with respect to a particular Portfolio
only by a vote of the holders of a majority of such Portfolio's outstanding
shares.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
B-19
<PAGE>
(3) Purchase or sell real estate, but this restriction shall not prevent a
Portfolio from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or acquiring securities of real
estate investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that each
Portfolio may, to the extent appropriate to its investment policies,
purchase securities of companies engaging in whole or in part in such
activities, enter into futures contracts and related options, and enter
into forward currency contracts in accordance with its investment objective
and policies.
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial instruments, currencies and indices of
securities (and in the case of the International Growth Portfolio, yield
curve options); futures contracts; options on futures contracts; forward
currency contracts; short sales of securities against the box; interest
rate swaps; and pair-off transactions (except in the case of the
International Growth Portfolio). (This restriction does not apply to any
type of option, futures contract, forward contract, short sale, swap or
pair-off transaction unless it involves a put, call or combination thereof
written by a Portfolio.)
(8) Make any investment inconsistent with the Portfolio's classification as
a diversified investment company under the 1940 Act.
(9) Purchase securities (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and, in the case of the
International Equity Index Portfolio, securities of other investment
companies) if such purchase would cause more than 25% in the aggregate of
the market value of the total assets of a Portfolio to be invested in the
securities of one or more issuers having their principal business
activities in the same industry. For the purposes of this restriction, as
to utility companies, the gas, electric, water and telephone businesses are
considered separate industries; personal credit finance companies and
business credit finance companies are deemed to be separate industries; and
wholly-owned finance companies are considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents.
(10) Borrow money (other than pursuant to reverse repurchase agreements),
except (a) as a temporary measure, and then only in amounts not exceeding
5% of the value of the Portfolio's total assets or (b) from banks, provided
that immediately after any such borrowing all borrowings of the Portfolio
do not exceed one-third of the Portfolio's total assets. No purchases of
securities will be made if borrowings subject to this restriction exceed 5%
of the value of the Portfolio's assets. The exceptions in (a) and (b) to
this
B-20
<PAGE>
restriction are not for investment leverage purposes but are solely for
extraordinary or emergency purposes or to facilitate management of the
Portfolios by enabling the Trust to meet redemption requests when the
liquidation of Portfolio instruments is deemed to be disadvantageous or not
possible. If due to market fluctuations or other reasons the total assets
of a Portfolio fall below 300% of its borrowings, the Trust will promptly
reduce the borrowings of such Portfolio in accordance with the 1940 Act.
(11) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may purchase securities of other investment companies to the full extent
permitted under Section 12 of the 1940 Act (or any successor provision
thereto) or under any regulation or order of the Securities and Exchange
Commission; and each Portfolio may invest all or substantially all of its
assets in a single open-end investment company or series thereof with
substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
In applying Restriction No. 9 above, a security is considered to be issued
by the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by a Portfolio, does not exceed 10% of the value of the Portfolio's total
assets.
Except to the extent otherwise provided in Investment Restriction No. 9 for
the purpose of such restriction, in determining industry classification the
Trust intends to use the industry classification titles in the Standard
Industrial Classification Manual (except that the International Growth Portfolio
and the International Equity Index Portfolio will use the Morgan Stanley Capital
International industry classification titles). Securities held in escrow or
separate accounts in connection with a Portfolio's investment practices
described in this Additional Statement and in the Prospectus are not deemed to
be mortgaged, pledged or hypothecated for purposes of the foregoing Investment
Restrictions.
In addition, as a matter of fundamental policy, the International Equity
Index and International Growth Portfolios will not issue senior securities
except as stated in the Prospectus or this Additional Statement.
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
B-21
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. Information pertaining to the
Trustees and officers of the Trust is set forth below.
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
William H. Springer 69 Chairman Director of Walgreen Co. (a retail drug store
701 Morningside Drive and business) since 1988; Director of Baker, Fentress &
Lake Forest, IL 60045 Trustee Co. (a closed-end, non-diversified management
investment company) since 1992; Trustee of Goldman Sachs
Trust since 1989.
Richard Gordon Cline 64 Trustee Chairman and Director of Hussman International Inc.
4200 Commerce Court, Suite 300 (commercial refrigeration company) since January
Lisle, IL 60532 1998; Chairman of Hawthorne Inc. (a management
advisory services and private investment company) since
January 1996; Chairman, President and CEO of NICOR Inc. (a
diversified public utility holding company) from 1985 to
1996; Chairman and Director of the Federal Reserve Bank of
Chicago from 1992 to 1995; Director of Central DuPage Health
System, Pet Incorporated, Whitman Corporation (a diversified
holding company), Kmart Corporation (a retailing company),
Ryerson Tull, Inc. (a metals distribution company) and
University of Illinois Foundation.
Edward J. Condon, Jr. 58 Trustee Chairman and CEO of The Paradigm Group, Ltd. (a
Sear Tower, Suite 9650 financial advisor) since July 1993; within the last
233 S. Wacker Drive five years he has served as: Vice Chairman and
Chicago, IL 60606 Director of Energenics L.L.C.; Director of Financial
Pacific Company; Member of the Board of Managers of The
Liberty Hampshire Company, LLC; Member of Advisory Board of
Real-Time USA, Inc.; Member of the Board of Directors of
University Eldercare, Inc.; Member of the Board of Directors
of the Girl Scouts of Chicago; and Member of the Board of Trustees
of Dominican University.
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
John W. English 66 Trustee Private Investor since 1993; Vice President and Chief Investment
50-H New England Ave. Officer of The Ford Foundation (a charitable trust) from 1981 to
P.O. Box 640 1993; Trustee of The China Fund, Inc., American Red Cross in
Summit, NJ 07902-0640 Greater New York, Mote Marine Laboratory, State Street's Select
Sector SPDR Trust, Washington Mutual's WM Funds and United Board
for Christian Higher Education in Asia. Director of
University of Iowa Foundation, Blanton-Peale Institutes of
Religion and Health, Community Foundation of Sarasota County
and Duke Management Company.
Sandra Polk Guthman 55 Trustee President and CEO of Polk Bros. Foundation (an
420 N. Wabash Avenue Illinois not-for-profit corporation) from 1993 to
Suite 204 present; Director of Business Transformation from
Chicago, IL 60611 1992-1993 and Midwestern Director of Marketing from
1988-1992 for IBM Corporation; Director of MBIA Insurance
Corporation of Illinois (bank holding company) since 1994
and Avondale Financial Corporation (a stock savings and loan
holding company) since 1995.
Frederick T. Kelsey 71 Trustee Consultant to Goldman Sachs from December 1985
3133 Laughing Gull Court through February 1988; Director of Goldman Sachs
Johns Island, SC 29455 Funds Group and Vice President of Goldman Sachs from
May 1981 until his retirement in November 1985; President
and Treasurer of the Trust and other investment companies
affiliated with Goldman Sachs through August 1985; President
from 1983 to 1985 and Trustee from 1983 to 1994 of The
Centerland Funds and its successor, The Pilot Funds; Trustee
of various management investment companies affiliated with
Zurich Kemper Investments.
</TABLE>
B-23
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
Richard P. Strubel 59 Trustee Managing Director of Tandem Partners, Inc. (a
737 N. Michigan Avenue privately held management services firm) since 1990;
Suite 1405 President and CEO of Microdot, Inc. (a privately
Chicago, IL 60611 held manufacturing firm) from January 1984 to
October 1994; Trustee of Goldman Sachs Trust from 1987 to
present; Director of Kaynar Technologies Inc. (a leading
manufacturer of aircraft fasteners) since March 1997;
Trustee of the University of Chicago; Director of Children's
Memorial Medical Center.
Gordon F. Linke 42 President Vice President of Goldman Sachs Funds Group (since
555 California Street March 1992); Corporate Finance Officer of Bank of
San Francisco, CA 94104 America (prior thereto).
James A. Fitzpatrick 39 Vice Vice President of Goldman Sachs Asset Management
4900 Sears Tower President (since April 1997); Vice President and General
Chicago, IL 60606 Manager of First Data Corporation - Investors
Services Group prior thereto.
Nancy L. Mucker 49 Vice Vice President of Goldman Sachs (since April 1985);
4900 Sears Tower President Co-Manager, Shareholder Servicing of Goldman Sachs
Chicago, IL 60606 Asset Management (since November 1989).
John Perlowski 34 Treasurer Vice President of Goldman Sachs (since July 1995);
One New York Plaza Director of Investors Bank and Trust Company (November
New York, NY 10004 1993 to July 1995); Audit Manager of Arthur Andersen,
LLP (prior thereto).
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
Michael J. Richman 38 Secretary General Counsel of the Funds Group, Goldman Sachs
85 Broad Street Asset Management (since December 1997); Associate
New York, NY 10004 General Counsel of Goldman Sachs Asset Management
(February 1994 to December 1997); Vice President of Goldman
Sachs (since June 1992); Associate General Counsel of
Goldman Sachs (since December 1998); Counsel to the Funds
Group of Goldman Sachs Asset Management (since June 1992);
Partner of Hale and Dorr, September 1991 to June 1992).
Deborah A. Farrell 27 Assistant Legal Assistant, Goldman Sachs (since January 1996);
85 Broad Street Secretary Executive Secretary, Goldman Sachs (January 1994 to
New York, NY 10004 January 1996); Legal Secretary, Cleary, Gottlieb,
Steen & Hamilton (September 1990 to January 1994).
Steven E. Hartstein 35 Assistant Associate, Goldman Sachs (since December 1998); Legal
85 Broad Street Secretary Products Analyst, Goldman Sachs (June 1993 to December
New York, NY 10004 1998).
Howard B. Surloff 33 Assistant General Counsel to the Funds Group (since February 1999);
85 Broad Street Secretary Assistant General Counsel, Goldman Sachs Asset Management
New York, NY 10004 (December 1997 to February 1999); Vice President and
Assistant General Counsel, Goldman Sachs (since November
1993 and May 1994, respectively); Counsel to the Funds
Group, Goldman Sachs Asset Management (since November 1993);
Associate of Shereff, Friedman, Hoffman & Goodman, LLP
(prior thereto).
Valerie A. Zondorak 33 Assistant Assistant General Counsel, Goldman Sachs Asset
85 Broad St. Secretary Management and the Funds Group (since December 1997);
New York, NY 10004 Vice President and Assistant General Counsel, Goldman Sachs
(since December 1997) and Vice President and Counsel to
Goldman Sachs (since March 1997); Associate of Shereff,
Friedman, Hoffman & Goodman, LLP (prior thereto).
</TABLE>
Certain of the Trustees and officers and the organizations with which they
are associated have had in the past, and may have in the future, transactions
with the Investment Advisers,
B-25
<PAGE>
Goldman Sachs and their respective affiliates. The Trust has been advised by
such Trustees and officers that all such transactions have been and are expected
to be in the ordinary course of business and the terms of such transactions,
including all loans and loan commitments by such persons, have been and are
expected to be substantially the same as the prevailing terms for comparable
transactions for other customers. Messrs. Springer, Kelsey, Strubel, Richman,
Perlowski, Fitzpatrick, Surloff and Hartstein and Mmes. Farrell, Mucker and
Zondorak hold similar positions with one or more investment companies that are
advised by Goldman Sachs. As a result of the responsibilities assumed by the
Investment Advisers under the Advisory Agreements with the Trust, by Northern
under its Transfer Agency Agreement, Custodian Agreement and Foreign Custody
Agreement with the Trust and by Goldman Sachs under its Administration Agreement
and Distribution Agreement with the Trust, the Trust itself requires no
employees.
Each officer holds comparable positions with certain other investment
companies of which Goldman Sachs, Goldman Sachs Asset Management or an affiliate
thereof is the investment adviser, administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,750 and the Chairman of the
Board earns a quarterly retainer of $10,125. Each Trustee, including the
Chairman of the Board, earns an additional fee of $2,500 for each meeting
attended, plus reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of
three members including a Chairman of the Committee. The Audit Committee members
are Messrs. Condon, Kelsey and Strubel (Chairman). Each member earns a fee of
$2,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,500.
Each Trustee will hold office for an indefinite term until the earliest of
(1) the next meeting of shareholders if any, called for the purpose of
considering the election or re-election of such Trustee and until the election
and qualification of his or her successor, if any, elected at such meeting; (2)
the date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
The Trust's officers do not receive fees from the Trust for services in
such capacities, although Goldman Sachs, of which they are also officers,
receives fees from the Trust for administrative services.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1998:
B-26
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Aggregate Benefits Accrued Compensation
Compensation as Part of Trust's from Trust
Name of Trustee from the Trust Expenses Paid to Trustees
- --------------- -------------- -------- ----------------
<S> <C> <C> <C>
William H. Springer $46,750 $0 $46,750
Richard G. Cline $34,000 $0 $34,000
Edward J. Condon, Jr. $37,000 $0 $37,000
John W. English $32,500 $0 $32,500
Sandra Polk Guthman $34,000 $0 $34,000
Frederick T. Kelsey $37,000 $0 $37,000
Richard P. Strubel $42,250 $0 $42,250
</TABLE>
Investment Advisers, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives. NTQA, also a
wholly-owned subsidiary of Northern Trust Corporation, serves as investment
adviser principally to defined benefit and defined contribution plans and
manages over 60 equity and bond commingled and common trust funds. As of
December 31, 1998, the Investment Advisers and their affiliates had
approximately $236 billion in assets under management for clients including
public and private retirement funds, endowments, foundations, trusts,
corporations, other investment companies and individuals.
Subject to the general supervision of the Board of Trustees, the Investment
Advisers make decisions with respect to, and place orders for, all purchases and
sales of portfolio securities for each Portfolio. The Advisory Agreements with
the Trust provide that in selecting brokers or dealers to place orders for
transactions (a) on common and preferred stocks, the Investment Advisers shall
use their best judgment to obtain the best overall terms available, and (b) on
bonds and other fixed income obligations, the Investment Advisers shall attempt
to obtain best net price
B-27
<PAGE>
and execution. In assessing the best overall terms available for any
transaction, the Investment Advisers are to consider all factors they deem
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 Investment Advisers may consider the brokerage and research
services provided to the Portfolios and/or other accounts over which the
Investment Advisers or an affiliate of Northern exercise investment discretion.
A broker or dealer providing brokerage and/or research services may receive a
higher commission than another broker or dealer would receive for the same
transaction. These brokerage and research services may include industry and
company analyses, portfolio services, quantitative data, market information
systems and economic and political consulting and analytical services.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed. Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Investment
Advisers will normally deal directly with dealers who make a market in the
instruments involved except in those circumstances where more favorable prices
and execution are available elsewhere. The cost of foreign and domestic
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolios will engage in this practice, however, only when the Investment
Advisers believe such practice to be in the Portfolios' interests.
On occasions when the Investment Advisers deem the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by them (including any other Portfolio, investment
company or account for which the Investment Advisers act as adviser), the
Advisory Agreements provide that the Investment Advisers, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
sold or purchased for such Portfolio with those to be sold or purchased for such
other accounts in order to obtain best overall terms available with respect to
common and preferred stock, and best net price and execution with respect to
bonds and other fixed income obligations. 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 Investment Advisers in the manner they consider
to be most equitable and consistent with their fiduciary obligations to the
Portfolio and other accounts involved. In some instances, this procedure may
adversely affect the size of the position obtainable for a Portfolio or the
amount of the securities that are able to be sold for a Portfolio.
The Advisory Agreements provide that the Investment Advisers may render
similar services to others so long as their services under such Agreements are
not impaired thereby. The Advisory Agreements also provide that the Trust will
indemnify the Investment Advisers against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
B-28
<PAGE>
omissions of material fact and actions that are in accordance with the terms of
the Agreements) or, in lieu thereof, contribute to resulting losses.
At a meeting held on September 2, 1997, shareholders of the International
Growth Portfolio approved a new advisory agreement with Northern and another
wholly-owned subsidiary of Northern Trust Corporation (The Northern Trust
Company of Connecticut, formerly, RCB Trust Company, which has principal offices
at 300 Atlantic Street, Stamford, Connecticut 06901) that would permit the
Portfolio to implement a "manager-of-managers" structure. The new advisory
agreement would be identical in all material respects to the current Advisory
Agreement for the International Growth Portfolio, except that the new agreement
would appoint both Northern and The Northern Trust Company of Connecticut as the
advisers of the Portfolio and would allow the advisers to (1) delegate their
duties to sub-advisers, (2) implement a manager-of-managers structure and (3)
enter into sub-advisory agreements in the future without further shareholder
approval. Fees payable to the sub-advisers would be payable by Northern and The
Northern Trust Company of Connecticut and not by the Portfolio, and the current
investment advisory fee rate payable by the Portfolio would not change. Although
the Securities and Exchange Commission (the "SEC") has granted an exemption
permitting the Portfolio to implement a manager-of-managers structure, the new
advisory agreement will not become effective until the Trust's Board of Trustees
acts to effectuate the structure with respect to the Portfolio. At present, it
is uncertain when, or if, the manager-of-managers structure will become
effective.
Under its Transfer Agency Agreement with the Trust, with respect to shares
held by Institutions, Northern has undertaken to perform some or all of the
following services: (1) establish and maintain an omnibus account in the name of
each Institution; (2) process purchase orders and redemption requests from an
Institution, and furnish confirmations and disburse redemption proceeds; (3) act
as the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of shares in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions shareholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to shares held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of shares in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for prospectuses and statements of additional
information, and assistance in the completion of new account applications) from
investors and respond to all requests for information regarding the Trust (such
as current price, recent performance, and yield data) and questions relating to
accounts of investors (such as possible errors in statements, and transactions);
(8) respond to and seek to resolve all complaints of investors with respect to
the Trust or their accounts; (9) furnish proxy statements and proxies, annual
and semi-annual financial statements, and dividend, distribution and tax notices
to investors; (10) furnish the Trust with all pertinent Blue Sky information;
(11) perform all required tax withholding; (12) preserve records; and (13)
furnish necessary office space, facilities and personnel. Northern may appoint
one or more sub-transfer agents in the performance of its services.
B-29
<PAGE>
As compensation for the services rendered by Northern under the Transfer
Agency Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.10% and .15% of the average daily net asset value of the Class A, C and D
Shares, respectively, of the Portfolios.
Under its Custodian Agreement (and in the case of the International Growth
Portfolio and International Equity Index Portfolio, its Foreign Custody
Agreement) with the Trust, Northern (1) holds each Portfolio's cash and
securities, (2) maintains such cash and securities in separate accounts in the
name of the Portfolio, (3) makes receipts and disbursements of funds on behalf
of the Portfolio, (4) receives, delivers and releases securities on behalf of
the Portfolio, (5) collects and receives all income, principal and other
payments in respect of the Portfolio's investments held by Northern under the
Agreement, and (6) maintains the accounting records of the Trust. Northern may
employ one or more subcustodians, provided that Northern, subject to certain
monitoring responsibilities, shall have no more responsibility or liability to
the Trust on account of any action or omission of any subcustodian so employed
than such subcustodian has to Northern and that the responsibility or liability
of the subcustodian to Northern shall conform to the resolution of the Trustees
of the Trust authorizing the appointment of the particular subcustodian (or, in
the case of foreign securities, to the terms of any agreement entered into
between Northern and such subcustodian to which such resolution relates). In
addition, the Trust's custodial arrangements provide, with respect to foreign
securities, that Northern shall not be: (i) responsible for the solvency of any
subcustodian appointed by it with reasonable care; (ii) responsible for any act,
omission, default or for the solvency of any eligible foreign securities
depository; and (iii) liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the subcustodian has otherwise
exercised reasonable care. Northern may also appoint agents to carry out such of
the provisions of the Custodian Agreement and the Foreign Custody Agreement as
Northern may from time to time direct, provided that the appointment of an agent
shall not relieve Northern of any of its responsibilities under either
Agreement. Northern has entered into agreements with financial institutions and
depositories located in foreign countries with respect to the custody of the
Portfolio's foreign securities.
As compensation for the services rendered to the Trust by Northern as
custodian with respect to each Portfolio except the International Growth
Portfolio and International Equity Index Portfolio, and the assumption by
Northern of certain related expenses, Northern is entitled to payment from the
Trust as follows: (i) $18,000 annually for each Portfolio, plus (ii) 1/100th of
1% annually of each Portfolio's average daily net assets to the extent they
exceed $100 million, plus (iii) a fixed dollar fee for each trade in portfolio
securities, plus (iv) a fixed dollar fee for each time that Northern as
Custodian receives or transmits funds via wire, plus (v) reimbursement of
expenses incurred by Northern as custodian for telephone, postage, courier fees,
office supplies and duplicating. The fees referred to in clauses (iii) and (iv)
are subject to annual upward adjustments based on increases in the Consumer
Price Index for All Urban Consumers, provided that Northern may permanently or
temporarily waive all or any portion of any upward adjustment.
As compensation for the services rendered to the Trust under the Foreign
Custody Agreement with respect to the International Growth Portfolio and
International Equity Index Portfolio, and the assumption by Northern of certain
related expenses, Northern is entitled to payment from the Trust as follows: (i)
$35,000 annually for the International Growth Portfolio and
B-30
<PAGE>
International Equity Index Portfolio, plus (ii) 9/100th of 1% annually of the
Portfolios' average daily net assets, plus (iii) reimbursement for fees incurred
by Northern as foreign custodian for telephone, postage, courier fees, office
supplies and duplicating.
Northern's fees under the Custodian Agreement and Foreign Custody Agreement
are subject to reduction based on the Portfolios' daily uninvested cash balances
(if any).
Unless sooner terminated, the Advisory Agreements, the Custodian Agreement
(or, in the case of the International Growth Portfolio and International Equity
Index Portfolio, the Foreign Custody Agreement) and the Transfer Agency
Agreement will continue in effect with respect to a particular Portfolio until
April 30, 1999 and thereafter for successive 12-month periods, provided that the
continuance is approved at least annually (1) by the vote of a majority of the
Trustees who are not parties to the agreement or "interested persons" (as such
term is defined in the 1940 Act) of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval, and (2) by the
Trustees or by the vote of a majority of the outstanding shares of such
Portfolio (as defined below under "Other Information"). Each agreement is
terminable at any time without penalty by the Trust (by specified Trustee or
shareholder action) on 60 days' written notice to Northern or NTQA and by
Northern or NTQA on 60 days' written notice to the Trust.
Prior to April 1, 1998, Northern served as investment adviser to the Equity
Index, Small Company Index and International Equity Index Portfolios on the same
terms as those described above.
For the fiscal years or periods ended November 30 as indicated, the amount
of advisory fees incurred by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 297,879 $ 270,536 $ 226,872
Equity Index Portfolio 1,136,850 830,952 603,016
Diversified Growth Portfolio 905,091 795,346 768,689
Focused Growth Portfolio 1,045,682 934,052 811,643
Small Company Index Portfolio 248,736 242,421 212,150
International Growth Portfolio 869,641 993,121 1,089,874
International Equity Index Portfolio (1) 117,326 44,662 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
For the fiscal years or periods ended November 30 as indicated, the
Investment Advisers waived advisory fees as follows:
B-31
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 178,727 $ 162,322 $ 136,185
Equity Index Portfolio 2,273,722 1,661,904 1,206,801
Diversified Growth Portfolio 411,405 361,521 349,197
Focused Growth Portfolio 392,131 350,269 304,447
Small Company Index Portfolio 248,733 242,421 212,148
International Growth Portfolio 217,410 248,280 272,159
International Equity Index Portfolio (1) 117,319 44,662 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
For the fiscal years or periods ended November 30 as indicated, the amount
of transfer agency fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 11,754 $ 10,622 $ 8,853
Equity Index Portfolio 249,731 172,360 92,186
Diversified Growth Portfolio 17,453 15,280 14,368
Focused Growth Portfolio 23,773 19,546 12,738
Small Company Index Portfolio 13,858 12,676 11,706
International Growth Portfolio 11,469 12,624 13,559
International Equity Index Portfolio (1) 4,696 1,780 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
For the fiscal years or periods ended November 30 as indicated, the amount
of custodian fees (and, in the case of the International Growth Portfolio and
International Equity Index Portfolio, the foreign custodian fees) incurred by
each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 22,993 $ 24,371 $ 21,294
Equity Index Portfolio 268,057 142,960 154,259
Diversified Growth Portfolio 28,035 27,587 26,634
Focused Growth Portfolio 28,583 23,050 21,498
Small Company Index Portfolio 227,658 66,695 67,319
International Growth Portfolio 122,373 158,611 170,117
International Equity Index Portfolio (1) 67,398 49,999 N/A
</TABLE>
- -------------------
(1) Commenced investment operations on April 1, 1997.
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of
B-32
<PAGE>
such a company as agent for and upon the order of customers. Northern and NTQA
believe that they may perform the services contemplated by their agreements with
the Trust without violation of such banking laws or regulations, which are
applicable to them. It should be noted, however, that future changes in either
Federal or state statutes and regulations relating to the permissible activities
of banks and their subsidiaries or affiliates, as well as future judicial or
administrative decisions or interpretations of current and future statutes and
regulations, could prevent Northern and NTQA from continuing to perform such
services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern or NTQA in connection with the provision of
services on behalf of the Trust, the Trust might be required to alter materially
or discontinue its arrangements with Northern or NTQA and change its method of
operations. It is not anticipated, however, that any change in the Trust's
method of operations would affect the net asset value per share of any Portfolio
or result in a financial loss to any shareholder. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates would consider the possibility of
offering to perform some or all of the services now provided by Goldman Sachs.
It is not possible, of course, to predict whether or in what form such
restrictions might be relaxed or the terms upon which Northern and its
affiliates might offer to provide services for consideration by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
Under a Service Mark License Agreement with the Trust, Northern Trust
Corporation has agreed that the name "Northern Institutional Funds" may be used
in connection with the Trust's business on a royalty-free basis. Northern Trust
Corporation has reserved to itself the right to grant the non-exclusive right to
use the name "Northern Institutional Funds" to any other person. The Agreement
provides that at such time as the Agreement is no longer in effect, the Trust
will cease using the name "Northern Institutional Funds."
Portfolio Transactions
To the extent that a Portfolio effects brokerage transactions with Goldman
Sachs or any broker/dealer affiliated directly or indirectly with the Investment
Advisers, such transactions, including the frequency thereof, the receipt of any
commissions payable in connection therewith, and the selection of the affiliated
broker/dealer effecting such transactions, will be fair and reasonable to the
shareholders of the Portfolio.
During the fiscal year ended November 30, 1998, the Balanced Portfolio
acquired and sold securities of Lehman Brothers, Inc. and Merrill Lynch & Co.,
Inc., each a regular broker/dealer. At November 30, 1998, the Balanced Portfolio
owned the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: Donaldson Lufkin &
Jenrette Securities, Inc., with an approximate aggregate market value of
$202,000; Lehman Brothers, Inc., with an approximate aggregate market value of
$837,000; Merrill Lynch & Co., Inc., with an approximate aggregate market value
of $90,000; and Salomon Brothers, Inc., with an approximate aggregate market
value of $667,000.
B-33
<PAGE>
During the fiscal year ended November 30, 1998, the Equity Index Portfolio
acquired and sold securities of Bankers Trust, Bear Stearns & Co., Lehman
Brothers, Inc., J.P. Morgan Securities, Inc., Merrill Lynch & Co., Inc. and
Morgan Stanley Group, Inc., each a regular broker/dealer. At November 30, 1998,
the Equity Index Portfolio owned the following amounts of securities of its
regular broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or their
parents: Bankers Trust, with an approximate aggregate market value of
$1,166,000; Bear Stearns & Co., with an approximate aggregate market value of
$664,000; Lehman Brothers, Inc., with an approximate aggregate market value of
$824,000; J.P. Morgan Securities, Inc., with an approximate aggregate market
value of $2,629,000; Merrill Lynch & Co., Inc., with an approximate aggregate
market value of $3,637,000; and Morgan Stanley Group, Inc., with an approximate
aggregate market value of 5,681,000.
During the fiscal year ended November 30, 1998, the Diversified Growth
Portfolio acquired and sold securities of Merrill Lynch & Co., Inc., a regular
broker/dealer. At November 30, 1998, the Diversified Growth Portfolio owned the
following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Merrill Lynch & Co., Inc., with
an approximate aggregate market value of $510,000.
During the fiscal year ended November 30, 1998, the Focused Growth
Portfolio acquired and sold securities of Merrill Lynch & Co., Inc., a regular
broker/dealer. At November 30, 1998, the Focused Growth Portfolio owned the
following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Merrill Lynch & Co., Inc., with
an approximate aggregate market value of $1,826,000.
During the fiscal year ended November 30, 1998, the Small Company Index
Portfolio acquired and sold securities of Everen Capital Corp. and Hambrecht and
Quist, each a regular broker/dealer. At November 30, 1998, the Small Company
Index Portfolio owned the following amounts of securities of its regular
broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or their parents:
Everen Capital Corp., with an approximate aggregate market value of $47,000; and
Hambrecht and Quist, with an approximate aggregate market value of $63,000.
During the fiscal year ended November 30, 1998, the International Equity
Index Portfolio acquired and sold securities of ABN-AMRO, HSBC Securities, Inc.,
Nomura Securities Co. and UBS Securities, each a regular broker/dealer. At
November 30, 1998, the International Equity Index Portfolio owned the following
amounts of securities of its regular broker/dealers, as defined in Rule 10b-1
under the 1940 Act, or their parents: ABN-AMRO, with an approximate aggregate
market value of $204,000; HSBC Securities, Inc., with an approximate aggregate
market value of $424,000; Nomura Securities Co., with an approximate aggregate
market value of $117,000; and UBS Securities, with an approximate aggregate
market value of $421,000.
During the fiscal year ended November 30, 1998, the International Growth
Portfolio did not acquire, sell or own any securities of its regular
broker/dealers or their parents.
B-34
<PAGE>
For the fiscal years ended November 30 as indicated, each Portfolio paid
brokerage commissions as follows:
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November 30, Commissions Affiliated Commissions Providing
1998 Paid Brokers(1) Paid Research(4)
---- ---- ---------- ---- -----------
<S> <C> <C> <C> <C>
Balanced
Portfolio $33,693 $ 2,794 $ 24,707,706 $25,032
(8.29%)(2) (1.91%)(3)
Equity
Index
Portfolio 148,670 0 590,431,860 125,498
Focused
Growth
Portfolio 257,630 12,648 178,606,124 208,872
(4.91%)(2) (0.12%)(3)
Diversified
Growth
Portfolio 148,788 19,748 116,674,485 122,744
(13.27%)(2) (2.23%)(3)
Small Company
Index
Portfolio 98,346 0 139,815,827 97,942
International
Growth
Portfolio 933,041 23,687 325,994,274 581,629
(2.54%)(2) (3.32%)(3)
International
Equity Index
Portfolio 72,801 0 43,852,342 61,732
</TABLE>
- ----------
(1) Goldman Sachs was the only affiliated broker utilized by the Trust during
the fiscal year.
(2) Percentage of total commissions paid.
(3) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
(4) The amounts of the transactions involving commissions paid to brokers
providing research were $18,453,666, $537,682,036, $145,818,514,
$94,871,574, $139,042,814, $198,366,763 and $36,469,237 for the Balanced,
Equity Index, Focused Growth, Diversified Growth, Small Company Index,
International Growth and International Equity Index Portfolios,
respectively.
B-35
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November 30, Commissions Affiliated Commissions Providing
1997 Paid Brokers(1) Paid Research
---- ---- ---------- ---- --------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 32,642 $ 0 $ 20,396,168 $ 25,974
Equity
Index
Portfolio 131,385 0 254,772,161 121,495
Focused
Growth
Portfolio 300,436 1,484 226,791,529 260,384
(0.49%)(2) (0.59%)(3)
Diversified
Growth
Portfolio 202,193 0 132,628,487 186,656
Small Company
Index
Portfolio 73,241 0 93,889,780 73,173
International
Growth
Portfolio 1,163,242 0 374,185,022 644,392
International
Equity Index
Portfolio 56,347 0 26,892,453 56,347
</TABLE>
- ----------
(1) Goldman Sachs was the only affiliated broker utilized by the Trust during
the fiscal year.
(2) Percentage of total commissions paid.
(3) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-36
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November 30, Commissions Affiliated Commissions Providing
1996 Paid Brokers(1) Paid Research
---- ---- ---------- ---- --------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 53,002 $ 0 $ 33,133,354 $ 34,545
Equity
Index
Portfolio 86,325 0 176,685,003 71,053
Focused
Growth
Portfolio 325,022 5,623 189,320,203 248,133
(1.73%)(2) (1.10%)(3)
Diversified
Growth
Portfolio 266,884 0 170,853,039 228,062
Small Company
Index
Portfolio 90,057 0 74,698,179 44,761
International
Growth
Portfolio 1,797,065 0 531,192,806 636,028
</TABLE>
- ----------
(1) Goldman Sachs was the only affiliated broker utilized by the Trust during
the fiscal year.
(2) Percentage of total commissions paid.
(3) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-37
<PAGE>
Portfolio Valuation
U.S. and foreign investments held by a Portfolio are valued at the last
quoted sales price on the exchange on which such securities are primarily
traded, except that securities listed on an exchange in the United Kingdom are
valued at the average of the closing bid and ask prices. If any securities
listed on a U.S. securities exchange are not traded on a valuation date, they
will be valued at the last quoted bid price. If securities listed on a foreign
securities exchange are not traded on a valuation date, they will be valued at
the most recent quoted trade price. Securities which are traded in the U.S.
over-the-counter markets are valued at the last quoted bid price. Securities
which are traded in the foreign over-the-counter markets are valued at the last
sales price, except that such securities traded in the United Kingdom are valued
at the average of the closing bid and ask prices. Shares of investment companies
held by the Portfolios will be valued at their respective net asset values. Any
securities, including restricted securities, for which current quotations are
not readily available are valued at fair value as determined in good faith by
the Investment Adviser under the supervision of the Board of Trustees.
Short-term investments are valued at amortized cost which the Investment Adviser
has determined, pursuant to Board authorization, approximates market value.
Securities may be valued on the basis of prices provided by independent pricing
services when such prices are believed to reflect the fair market value of such
securities.
Administrator and Distributor
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as
administrator and distributor for the Portfolios. Under its Administration
Agreement with the Trust, Goldman Sachs, subject to the general supervision of
the Trust's Board of Trustees, acts as the Trust's Administrator. In this
capacity, Goldman Sachs (1) provides supervision of certain aspects of the
Trust's non-investment advisory operations (the parties giving recognition to
the fact that certain of such operations are performed by Northern pursuant to
the Trust's agreements with Northern), (2) provides the Trust, to the extent not
provided pursuant to such agreements, with such personnel as are reasonably
necessary for the conduct of the Trust's affairs, (3) arranges, to the extent
not provided pursuant to such agreements, for the preparation at the Trust's
expense of its tax returns, reports to shareholders, periodic updating of the
prospectuses issued by the Trust, and reports filed with the SEC and other
regulatory authorities (including qualification under state securities or Blue
Sky laws of the Trust's shares), and (4) provides the Trust, to the extent not
provided pursuant to such agreements, with adequate office space and equipment
and certain related services in Chicago.
Subject to the limitations described below, as compensation for its
administrative services and the assumption of related expenses, Goldman Sachs is
entitled to a fee from each Portfolio, computed daily and payable monthly, at an
annual rate of .15% of the average daily net assets of each of the International
Equity Index and International Growth Portfolios, and .10% of the average daily
net assets of each other Portfolio. For the fiscal years or periods ended
November 30 as indicated, Goldman Sachs received fees under the Administration
Agreement (after fee waivers) in the amount of:
B-38
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $ 59,575 $ 54,096 $ 45,373
Equity Index Portfolio 1,136,850 830,785 603,816
Diversified Growth Portfolio 164,560 144,576 139,259
Focused Growth Portfolio 130,709 116,431 101,553
Small Company Index Portfolio 124,365 121,184 106,073
International Growth Portfolio 163,058 159,139 136,235
International Equity Index Portfolio (1) 70,396 26,233 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
Prior to May 1, 1997, Goldman Sachs voluntarily agreed to waive a portion
of its administration fee for each Portfolio resulting in an effective fee of
.10% of the average daily net assets for each Portfolio. The effect of these
waivers by Goldman Sachs was to reduce administration fees by the following
amounts for the fiscal years or periods ended November 30 as indicated:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $0 $ 32,260 $ 68,595
Equity Index Portfolio 0 52,050 176,462
Diversified Growth Portfolio 0 68,234 170,691
Focused Growth Portfolio 0 63,979 148,402
Small Company Index Portfolio 0 65,061 152,457
International Growth Portfolio 0 68,541 168,984
International Equity Index Portfolio (1) 0 1,460 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs agreed that, if its administration fees (less expense
reimbursements paid by Goldman Sachs to the Trust and less certain marketing
expenses paid by Goldman Sachs) exceed a specified amount ($1 million for the
Trust's first twelve investment portfolios plus $50,000 for each additional
portfolio) during the current fiscal year, Goldman Sachs will waive a portion of
its administration fees during the following fiscal year. This undertaking may
be terminated by Goldman Sachs at any time without the consent of the Trust or
the shareholders. There have been no waivers pursuant to this agreement during
the last three fiscal years.
Goldman Sachs has agreed for the current fiscal year to reimburse each
Portfolio for its expenses (including fees payable to Goldman Sachs as
administrator, but excluding advisory fees, transfer agency fees, servicing fees
and extraordinary expenses) which exceed on an annualized basis .25% of the
International Equity Index and International Growth Portfolios' respective
average daily net assets and .10% of each other Portfolio's average daily net
assets. Prior to May 1, 1997, this undertaking was voluntary with respect to the
Portfolios. As of May 1, 1997, this undertaking is contractual with respect to
all Portfolios. The effect of these reimbursements by
B-39
<PAGE>
Goldman Sachs for the fiscal years or periods ended November 30 as indicated
were to reduce the expenses of each Portfolio by:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio $78,916 $74,341 $65,547
Equity Index Portfolio 504,482 304,060 306,865
Diversified Growth Portfolio 82,995 89,069 98,425
Focused Growth Portfolio 83,616 79,410 80,020
Small Company Index Portfolio 282,541 128,881 134,838
International Growth Portfolio 49,890 67,398 55,347
International Equity Index Portfolio (1) 98,328 56,393 N/A
</TABLE>
- ------------------
(1) Commenced investment operations on April 1, 1997.
Unless sooner terminated, the Administration Agreement will continue in
effect with respect to a particular Portfolio until April 30, 1999, and
thereafter for successive 12-month periods, provided that the agreement is
approved annually (1) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" (as such term is defined by the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the Trustees or by the vote of a
majority of the outstanding shares of such Portfolio (as defined below under
"Other Information"). The Administration Agreement is terminable at any time
without penalty by the Trust (upon specified Trustee or shareholder action) on
60 days' written notice to Goldman Sachs and by Goldman Sachs on 60 days'
written notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman
Sachs, as agent, sells shares of each Portfolio on a continuous basis. Goldman
Sachs is not obligated to sell any certain number of shares of any Portfolio.
Goldman Sachs pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Trust (excluding preparation and typesetting
expenses) and of sales presentations, advertising and other distribution
efforts. No compensation is payable by the Trust to Goldman Sachs for such
distribution services.
The Administration Agreement and the Distribution Agreement provide that
Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
Shareholder Servicing Plan
As stated in the Portfolios' Prospectus, Servicing Agents may enter into
servicing agreements with the Trust under which they provide (or arrange to have
provided) support services to their Customers or other investors who
beneficially own such shares in consideration of the Portfolios' payment of not
more than .15% and .25% (on an annualized basis) of the average daily net asset
value of the Class C and D Shares, respectively, beneficially owned by such
Customers or investors.
B-40
<PAGE>
For the fiscal years or periods ended November 30 as indicated, the
aggregate amount of the Shareholder Service Fee incurred by each class of each
Portfolio then in existence was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio
Class C (1) $ 7,927 $ 8,026 $ 7,123
Class D (2) 1,860 710 61
Equity Index Portfolio
Class C 148,096 99,924 46,497
Class D 84,248 52,360 7,257
Diversified Growth Portfolio
Class C N/A N/A N/A
Class D 2,669 1,466 703
Focused Growth Portfolio
Class C (3) 13,754 11,222 3,028
Class D 4,375 2,037 1,224
Small Company Index Portfolio
Class C (4) 338 N/A N/A
Class D 2,173 993 252
International Growth Portfolio
Class C N/A N/A N/A
Class D 825 379 201
International Equity Index Portfolio
Class D (5) 5 N/A N/A
</TABLE>
- ---------------
(1) Class C Shares were issued on December 29, 1995.
(2) Class D Shares were issued on February 20, 1996.
(3) Class C Shares were issued on June 14, 1996.
(4) Class C Shares were issued on January 8, 1998.
(5) Class D Shares were issued on October 5, 1998.
Services provided by or arranged to be provided by Servicing Agents under
their servicing agreements may include: (1) establishing and maintaining
separate account records of Customers or other investors; (2) providing
Customers or other investors with a service that invests their assets in shares
of certain classes pursuant to specific or pre-authorized instructions, and
assistance with new account applications; (3) aggregating and processing
purchase and redemption requests for shares of certain classes from Customers or
other investors, and placing purchase and redemption orders with the Transfer
Agent; (4) issuing confirmations to Customers or other investors in accordance
with applicable law; (5) arranging for the timely transmission of funds
representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other investors; (7) providing
information periodically to Customers or other investors showing their positions
in shares; (8) responding to Customer or other investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the Servicing Agents; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to shares of certain classes beneficially owned by Customers or other investors;
(11) if required by law, forwarding shareholder communications from the Trust
(such as proxy statements and proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Customers and other investors; (12) providing such office space, facilities and
personnel
B-41
<PAGE>
as may be required to perform their services under the servicing agreements;
(13) maintaining appropriate management reporting and statistical information;
(14) paying expenses related to the preparation of educational and other
explanatory materials in connection with the development of investor services;
(15) developing and monitoring investment programs; and (16) providing such
other similar services as the Trust may reasonably request to the extent the
Servicing Agents are permitted to do so under applicable statutes, rules and
regulations.
The Trust's agreements with Servicing Agents are governed by a Plan (called
the "Shareholder Servicing Plan"), which has been adopted by the Board of
Trustees. Pursuant to the Shareholder Servicing Plan, the Board of Trustees will
review, at least quarterly, a written report of the amounts expended under the
Trust's agreements with Servicing Agents and the purposes for which the
expenditures were made. In addition, the arrangements with Servicing Agents must
be approved annually by a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, and have no direct or indirect financial interest in
such arrangements.
The Board of Trustees has approved the arrangements with Servicing Agents
based on information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their shareholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their shares in
an efficient manner.
Counsel and Auditors
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago,
Illinois 60606, have been selected as auditors of the Trust. In addition to
audit services, Ernst & Young LLP reviews the Trust's Federal and state tax
returns, and provides consultation and assistance on accounting, internal
control and related matters.
In-Kind Purchases and Redemptions
Payment for shares of a Portfolio may, in the discretion of Northern, be
made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind securities
payment, a Portfolio will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Portfolio and that the Portfolio receive satisfactory assurances that it will
have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Portfolio; and that adequate
information be provided concerning the basis and other tax matters relating to
the securities.
The additional transaction fee described in the Prospectus with respect to
the Small Company Index Portfolio and the International Equity Index Portfolio
does not apply to in-kind purchases of shares that are structured to minimize
the related brokerage, market impact costs and other transaction costs to such
Portfolios as described in the Prospectus.
B-42
<PAGE>
Although each Portfolio generally will redeem shares in cash, each
Portfolio reserves the right to pay redemptions by a distribution in kind of
securities (instead of cash) from such Portfolio. The securities distributed in
kind would be readily marketable and would be valued for this purpose using the
same method employed in calculating the Portfolio's net asset value per share.
If a shareholder receives redemption proceeds in kind, the shareholder should
expect to incur transaction costs upon the disposition of the securities
received in the redemption.
PERFORMANCE INFORMATION
The performance of a class of shares of a Portfolio may be compared to
those of other mutual funds with similar investment objectives and to bond,
stock and other relevant indices or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, the performance of a class of shares may be compared
to data prepared by Lipper Analytical Services, Inc. or other independent mutual
fund reporting services. In addition, the performance of a class may be compared
to the Lehman Brothers Government/Corporate Bond Index (or its components,
including the Treasury Bond Index), S&P 500 Index, S&P/Barra Growth Index, the
Russell 2000 Index, the EAFE Index or other unmanaged stock and bond indices,
including, but not limited to, the Merrill Lynch 1-5 Year Government Bond Index,
the Merrill Lynch 1-5 Year Corporate/Government Bond Index, the 3-month LIBOR
Index, the 91-day Treasury Bill Rate, the Composite Index, the J.P. Morgan
Non-U.S. Government Bond Index, and the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industry companies listed on
the New York Stock Exchange. Performance data as reported in national financial
publications such as Money Magazine, Morningstar, Forbes, Barron's, The Wall
Street Journal and The New York Times, or in publications of a local or regional
nature, may also be used in comparing the performance of a class of shares of a
Portfolio.
The Portfolios calculate their total returns for each class of shares
separately on an "average annual total return" basis for various periods.
Average annual total return reflects the average annual percentage change in
value of an investment in the class over the measuring period. Total returns for
each class of shares may also be calculated on an "aggregate total return" basis
for various periods. Aggregate total return reflects the total percentage change
in value over the measuring period. Both methods of calculating total return
reflect changes in the price of the shares and assume that any dividends and
capital gain distributions made by the Portfolio with respect to a class during
the period are reinvested in the shares of that class. When considering average
total return figures for periods longer than one year, it is important to note
that the annual total return of a class for any one year in the period might
have been more or less than the average for the entire period. The Portfolios
may also advertise from time to time the total return of one or more classes of
shares on a year-by-year or other basis for various specified periods by means
of quotations, charts, graphs or schedules.
Each Portfolio that advertises an "average annual total return" for a class
of shares computes such return by determining the average annual compounded rate
of return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T = (ERV/P)1/n-1
B-43
<PAGE>
Where: T = average annual total return;
ERV = ending redeemable value at the end of the applicable
period (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the period;
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in terms of
years.
Each Portfolio that advertises an "aggregate total return" for a class of
shares computes such return by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T = [(ERV/P)]-1
The Small Company Index and International Equity Index Portfolios may
advertise total return data without reflecting the .50% and 1.00% portfolio
transaction fee in accordance with the rules of the SEC. Quotations which do not
reflect the fee will, of course, be higher than quotations which do.
The calculations set forth below are made assuming that (1) all dividends
and capital gain distributions are reinvested on the reinvestment dates at the
price per share existing on the reinvestment date, (2) all recurring fees
charged to all shareholder accounts are included, and (3) the portfolio
transaction fee is taken into account for purchases of shares of the Small
Company Index Portfolio and the International Equity Index Portfolio. The ending
redeemable value (variable "ERV" in the formula) is determined by assuming
complete redemption of the hypothetical investment after deduction of all
nonrecurring charges at the end of the measuring period. Total return
calculations excluding the transaction fee are also provided for the Small
Company Index Portfolio and the International Equity Index Portfolio.
The average annual total returns and aggregate total returns shown below
for the Diversified Growth, Equity Index, Small Company Index and International
Growth Portfolios include, for periods prior to the commencement of the
Portfolios' operations, the performance of predecessor collective funds adjusted
to reflect the higher estimated fees and expenses applicable to such Portfolios'
Class A Shares at the time of their inception. Although all such predecessor
collective funds were managed by Northern for the periods stated in a manner and
pursuant to investment objectives that were equivalent in all material respects
to the management and investment objectives of the corresponding Portfolios,
such predecessor collective funds were not registered under the 1940 Act and
were not subject to certain investment restrictions imposed by the 1940 Act. If
they had been registered under the 1940 Act, performance might have been
adversely affected. The average annual total returns and aggregate total returns
shown for the Portfolios for their Class C and/or Class D Shares also include,
for the periods prior to the inception of such classes, the performance of the
Portfolios' Class A Shares. Because the fees and expenses of Class C and Class D
Shares are, respectively, 0.24% and 0.39% higher than those of Class A Shares,
B-44
<PAGE>
actual performance for periods prior to the inception of Class C and Class D
Shares would have been lower if such higher fees and expenses had been taken
into account.
Following commencement of operations of the Portfolios, Goldman Sachs
reimbursed expenses to the Portfolios and voluntarily agreed to reduce a portion
of its administration fee for each Portfolio pursuant to the undertaking
described above under "Additional Trust Information - Administrator and
Distributor" and "- Investment Advisers, Transfer Agent and Custodian," and
Northern waived a portion of its investment advisory fees with respect to the
Portfolios. The average annual total returns and aggregate total returns of each
Portfolio with respect to Class A, Class C and Class D Shares, as applicable,
are shown below with and without such fee waivers and expense reimbursements.
B-45
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified Growth(1)
Class A 25.22 17.37 16.17 -- 25.22 122.73 347.65 --
with fee waivers and
expense reimbursements
without fee waivers and 24.85 16.91 15.70 -- 24.85 118.40 329.87 --
expense reimbursements
Class D
with fee waivers and 24.73 17.02 16.00 -- 24.73 119.43 341.14 --
expense reimbursements
without fee waivers and 24.36 16.56 15.52 -- 24.36 115.15 323.23 --
expense reimbursements
Focused Growth(2)
Class A
with fee waivers and 24.03 17.47 -- 16.92 24.03 123.68 -- 133.38
expense reimbursements
without fee waivers and 23.58 24.25 -- 21.46 23.58 196.13 -- 186.93
expense reimbursements
Class C
with fee waivers and 23.73 17.34 -- 16.80 23.73 122.45 -- 132.08
expense reimbursements
without fee waivers and 23.28 16.75 -- 16.19 23.28 116.91 -- 125.60
expense reimbursements
Class D
with fee waivers and 23.60 17.12 -- 16.59 23.60 120.37 -- 129.87
expense reimbursements
without fee waivers and 23.15 16.53 -- 15.97 23.15 114.88 -- 123.31
expense reimbursements
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Index(3)
Class A
with fee waivers and 23.39 22.64 18.42 -- 23.39 177.43 442.31 --
expense reimbursements
without fee waivers and 23.09 22.29 18.04 -- 23.09 173.50 425.16 --
expense reimbursements
Class C
with fee waivers and 23.09 22.46 18.33 -- 23.09 175.40 438.20 --
expense reimbursements
without fee waivers and 22.79 22.11 17.96 -- 22.79 171.49 421.61 --
expense reimbursements
Class D
with fee waivers and 22.90 22.30 18.25 -- 22.90 173.61 434.58 --
expense reimbursements
without fee waivers and 22.59 21.96 17.89 -- 22.59 169.83 418.53 --
expense reimbursements
Small Company Index(4)
Class A
with fee waivers and -7.48 10.68 12.20 -- -7.48 66.09 216.18 --
expense reimbursements
and portfolio transaction fee
with fee waivers and -7.02 10.79 12.26 -- -7.02 66.92 217.87 --
expense reimbursements
but without portfolio
transaction fee
without fee waivers and -7.88 10.17 11.65 -- -7.88 62.30 201.01 --
expense reimbursements
but with portfolio
transaction fee
without fee waivers and -7.42 10.28 17.71 -- -7.42 63.11 202.64 --
expense reimbursements
and portfolio transaction fee
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Company Index(4)
Class C
with fee waivers and -7.79 10.60 12.17 -- -7.79 65.49 215.33 --
expense reimbursements and
portfolio transaction fee
with fee waivers and expense -7.33 10.71 12.22 -- -7.33 66.32 216.74 --
reimbursements but without
portfolio transaction fee
without fee waivers and -8.18 10.10 11.61 -- -8.18 61.78 199.94 --
expense reimbursements but
with portfolio transaction fee
without fee waivers and -7.72 10.28 11.67 -- -7.72 63.11 201.55 --
expense reimbursements and
portfolio transaction fee
Class D
with fee waivers and -8.04 10.46 12.09 -- -8.04 64.45 213.09 --
expense reimbursements and
portfolio transaction fee
with fee waivers and expense -7.58 10.57 12.15 -- -7.58 65.27 214.77 --
reimbursements but without
portfolio transaction fee
without fee waivers and -5.87 10.32 11.73 -- -5.87 63.41 203.18 --
expense reimbursements but
with portfolio transaction fee
without fee waivers and -5.40 10.43 11.78 -- -5.40 64.22 204.54 --
expense reimbursements and
portfolio transaction fee
</TABLE>
B-48
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Growth(5)
Class A
with fee waivers and 20.52 9.43 -- 6.94 20.52 56.92 -- 75.97
expense reimbursements
without fee waivers and 20.25 9.06 -- 6.58 20.25 54.29 -- 71.11
expense reimbursements
Class D
with fee waivers and 19.96 9.06 -- 6.79 19.96 54.29 -- 72.97
expense reimbursements
without fee waivers and 19.69 8.70 -- 6.37 19.69 51.76 -- 68.27
expense reimbursements
Balanced(6)
Class A
with fee waivers and 16.90 12.36 -- 11.98 16.90 79.08 -- 84.66
expense reimbursements
without fee waivers and 16.44 11.67 -- 11.26 16.44 73.65 -- 78.35
expense reimbursements
Class C
with fee waivers and 16.61 12.19 -- 11.82 16.61 77.73 -- 83.30
expense reimbursements
without fee waivers and 16.15 11.51 -- 11.13 16.15 72.41 -- 77.18
expense reimbursements
Class D
with fee waivers and 16.45 12.12 -- 11.76 16.45 77.18 -- 82.69
expense reimbursements
without fee waivers and 15.99 11.43 -- 11.06 15.99 71.80 -- 76.59
expense reimbursements
</TABLE>
B-49
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1998
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Index(7)
Class A
with fee waivers and 14.36 -- -- 11.90 14.36 -- -- 20.59
expense reimbursements
and portfolio transaction fee
with fee waivers and expense 15.50 -- -- 12.57 15.50 -- -- 21.80
reimbursements but without
portfolio transaction fee
without fee waivers and 13.87 -- -- 10.94 13.87 -- -- 18.88
expense reimbursements but with
portfolio transaction fee
without fee waivers and 15.01 -- -- 11.60 15.01 -- -- 20.07
expense reimbursements
and portfolio transaction fee
Class D
with fee waivers and 15.30 -- -- 11.85 15.30 -- -- 20.50
expense reimbursements
and portfolio transaction fee
with fee waivers and expense 15.42 -- -- 12.52 15.42 -- -- 21.71
reimbursements but without
portfolio transaction fee
without fee waivers and 13.79 -- -- 10.89 13.79 -- -- 18.79
expense reimbursements but with
portfolio transaction fee
without fee waivers and 14.93 -- -- 11.56 14.93 -- -- 19.98
expense reimbursements
and portfolio transaction fee
</TABLE>
B-50
<PAGE>
- ----------------------
1. For Class A and D Shares, performance information prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Shares, performance information from January 11, 1993 to September
14, 1994 (commencement of Class D Shares) is that of Class A Shares.
Because the fees and expenses of Class D Shares are .39% higher than those
of Class A Shares, actual performance would have been lower had such higher
fees and expenses been taken into account. The predecessor collective fund
has been managed in a manner and pursuant to investment objectives
equivalent in all material respects to the management and investment
objective of the Portfolio for the periods shown. The performance
information of the predecessor collective fund is adjusted to reflect the
higher fees and expenses applicable to Class A Shares at the time of their
inception.
2. For Class C and Class D Shares, performance from July 1, 1993 to June 14,
1996 (commencement of Class C Shares) and December 8, 1994 (commencement of
Class D Shares), respectively, is that of Class A Shares. Class A Shares
commenced operations on July 1, 1993. Because the fees and expenses of
Class C and Class D Shares are .24% and .39%, respectively, higher than
those of Class A Shares, actual performance would have been lower had such
higher expenses been taken into account.
3. For Class A, C and D Shares, performance information prior to January 11,
1993 (commencement of Portfolio) is that of a predecessor collective fund.
For Class C and D Shares, performance information from January 11, 1993 to
September 28, 1995 (commencement of Class C Shares) and September 14, 1994
(commencement of Class D Shares), respectively, is that of Class A Shares.
Because the fees and expenses of Class C and Class D Shares are .24% and
.39%, respectively, higher than those of Class A Shares, actual performance
would have been lower had such higher fees and expenses been taken into
account. The predecessor collective fund has been managed in a manner and
pursuant to investment objectives equivalent in all material respects to
the management and investment objective of the Portfolio for the periods
shown. The performance information of the predecessor collective fund is
adjusted to reflect the higher fees and expenses applicable to Class A
Shares at the time of their inception.
4. For Class A, C and D Shares, performance information prior to January 11,
1993 (commencement of Portfolio) is that of a predecessor collective fund.
For Class C and D Shares, performance information from January 11, 1993 to
January 8, 1998 (commencement of Class C Shares) and December 8, 1994
(commencement of Class D Shares), respectively, is that of Class A Shares.
Because the fees and expenses of Class C and Class D Shares are .24% and
.39%, respectively, higher than those of Class A Shares, actual performance
would have been lower had such higher fees and expenses been taken into
account. Performance information of the predecessor collective fund is
shown from August 1, 1988 (the date such collective fund was first managed
in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio) and is adjusted to reflect the higher fees and expenses
applicable to Class A Shares at the time of their inception.
5. For Class A and Class D Shares, performance information prior to March 28,
1994 (commencement of Portfolio) is that of a predecessor collective fund.
For Class D Shares, performance information from March 28, 1994 to November
16, 1994 (commencement of Class D Shares) is that of Class A Shares.
Because the fees and expenses of Class D Shares are .39% higher than those
of Class A Shares, actual performance would have been lower had such higher
fees and expenses been taken into account. Performance information of the
predecessor collective fund is shown from July 1, 1990 (the date such fund
was first managed in a manner and pursuant to investment objectives
equivalent in all material respects to the management and investment
objective of the Portfolio) and is adjusted to reflect the higher fees and
expenses applicable to Class A Shares at the time of their inception.
6. For Class C and Class D Shares, performance from July 1, 1993 to December
29, 1995 (commencement of Class C Shares) and February 20, 1996
(commencement of Class D Shares), respectively, is that of Class A Shares.
Class A Shares commenced operations on July 1, 1993. Because the fees and
expenses of Class C and Class D Shares are .24% and .39%, respectively,
higher than those of Class A Shares, actual performance would have been
lower had such higher fees and expenses been taken into account.
7. For Class D Shares, performance from April 1, 1997 to October 5, 1998
(commencement of Class D Shares) is that of Class A Shares. Class A Shares
commenced operations on April 1, 1997. Because the fees and expenses of
Class D Shares are .39% higher than those of Class A Shares, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-51
<PAGE>
The yield of a class of shares in the Balanced Portfolio is computed based
on the net income of such class during a 30-day (or one month) period (which
period will be identified in connection with the particular yield quotation).
More specifically, the Portfolio's yield for a class of shares is computed by
dividing the per share net income for the class during a 30-day (or one month)
period by the net asset value per share on the last day of the period and
annualizing the result on a semi-annual basis.
The Balanced Portfolio calculates its 30-day (or one month) standard yield
for a class of shares in accordance with the method prescribed by the SEC for
mutual funds:
Yield = 2 [(a-b/cd + 1)6-1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the
period entitled to receive dividends; and
d = net asset value per share on the last day of the
period.
For the 30-day period ended November 30, 1998, the annualized yields for
the Class A, Class C and Class D Shares of the Balanced Portfolio was 2.52%,
2.35% and 2.21%, respectively. During such period, Goldman Sachs reimbursed
expenses to the Portfolio and voluntarily agreed to reduce a portion of its
administration fees under "Additional Trust Information - Administrator and
Distributor," and Northern waived a portion of its investment advisory fees with
respect to the Portfolio. In the absence of such advisory and administration fee
reductions and expense limitations, the 30-day yield for Class A, Class C and
Class D Shares would have been 2.16%, 1.92% and 1.78%, respectively.
Because of the different servicing fees and transfer agency fees payable
with respect to Class A, C and D Shares in a Portfolio, performance quotations
for shares of Class C and D of the Portfolio will be lower than the quotations
for Class A Shares of the Portfolio, which will not bear any fees for
shareholder support services and will bear minimal transfer agency fees.
The performance of each class of shares of the Portfolios is based on
historical earnings, will fluctuate and is not intended to indicate future
performance. The investment return and principal value of an investment in a
class will fluctuate so that when redeemed, shares may be worth more or less
than their original cost. Performance information may not provide a basis for
comparison with bank deposits and other investments which provide a fixed yield
for a stated period of time. Total return data should also be considered in
light of the risks associated with a Portfolio's composition, quality, maturity,
operating expenses and market conditions. Any fees
B-52
<PAGE>
charged by Institutions directly to their Customer accounts in connection with
investments in a Portfolio will not be included in calculations of performance
information.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their shareholders that are not described in the
Portfolios' Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Portfolios or their shareholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situations.
General
Each Portfolio will elect to be taxed separately as a regulated investment
company (a "RIC"). To qualify as a RIC, each Portfolio generally must distribute
an amount equal to at least 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gain over net
long-term capital loss), if any, for each year (the "Distribution Requirement")
and satisfy certain other requirements. Each Portfolio must derive at least 90%
of its gross income from dividends, interest, certain payments with respect to
securities loans and gains from the sale or other disposition of stock or
securities or foreign currencies, or from other income derived with respect to
its business of investing in such stock, securities or currencies. Also, at the
close of each quarter of the taxable year, it is generally required that at
least 50% of the value of each Portfolio's assets must consist of cash and cash
items, U.S. Government securities, securities of other RICs and securities of
other issuers (as to which the Portfolio has not invested more than 5% of the
value of its total assets in securities of such issuer and as to which the
Portfolio does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of each Portfolio's total assets
may be invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which such Portfolio controls and which are engaged in the same or
similar trades or businesses. Each Portfolio intends to comply with these RIC
requirements.
If for any taxable year any Portfolio were not to qualify as a RIC, all of
its taxable income would be subject to tax at regular corporate rates without
any deduction for distributions to shareholders. In such event, all
distributions by the Portfolio would be taxable to shareholders as ordinary
income to the extent of the Portfolio's current and accumulated earnings and
profits, and would be eligible for the dividends-received deduction in the case
of corporate shareholders.
The Internal Revenue Code imposes a nondeductible 4% excise tax on RICs
that fail currently to distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and capital
gain net income each calendar year to avoid liability for this excise tax. Each
Portfolio also intends to make sufficient distributions or deemed distributions
each year to avoid liability for corporate
B-53
<PAGE>
income tax. If a Portfolio were to fail to make sufficient distributions, it
could be liable for corporate income tax and for excise tax.
The Trust will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross sale proceeds
paid to any shareholder (i) who has provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service for prior failure to report the
receipt of taxable interest or dividend income properly, or (iii) who has failed
to certify to the Trust, when required to do so, that he is not subject to
backup withholding or that he is an "exempt recipient."
Foreign Investors
Foreign shareholders generally will be subject to U.S. withholding tax at a
rate of 30% (or a lower treaty rate, if applicable) on distributions by a
Portfolio of net investment income, other ordinary income, and the excess, if
any, of net short-term capital gain over net long-term capital loss for the
year, regardless of the extent, if any, to which the income or gain is derived
from non-U.S. investments of the Portfolio. For this purpose, foreign
shareholders include individuals other than U.S. citizens, residents and certain
nonresident aliens, and foreign corporations, partnerships, trusts and estates.
A foreign shareholder generally will not be subject to U.S. income or
withholding tax in respect of proceeds from or gain on the redemption of shares
or in respect of capital gain dividends (i.e., dividends attributable to
long-term capital gains of a Portfolio), provided such shareholder submits a
statement, signed under penalties of perjury, attesting to such shareholder's
exempt status. Different tax consequences apply to a foreign shareholder engaged
in a U.S. trade or business or present in the U.S. for 183 days or more in a
year. Foreign shareholders should consult their tax advisers regarding the U.S.
and foreign tax consequences of investing in a Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which
are in effect on the date of this Additional Statement. Such laws and
regulations may be changed by legislative or administrative action. No attempt
is made to present a detailed explanation of the tax treatment of the Portfolio
or its shareholders, and the discussion here and in the Prospectus is not
intended as a substitute for careful tax planning. Shareholders are advised to
consult their tax advisers with specific reference to their own tax situation,
including the application of state and local taxes.
Although each Portfolio expects to qualify as a RIC and to be relieved of
all or substantially all Federal taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
B-54
<PAGE>
DESCRIPTION OF SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trustees may hereafter create series in addition to the Trust's
seventeen existing series, which represent interests in the Trust's seventeen
respective portfolios, seven of which are discussed in this Additional
Statement. The Trust Agreement also permits the Board of Trustees to classify or
reclassify any unissued shares into classes within a series. Pursuant to such
authority, the Trustees have authorized the issuance of an unlimited number of
shares of beneficial interest in three separate classes of shares in each of the
Trust's non-money market portfolios: Class A, C and D Shares.
Under the terms of the Trust Agreement, each share of each Portfolio is
without par value, represents an equal proportionate interest in the particular
Portfolio with each other share of its class in the same Portfolio and is
entitled to such dividends and distributions out of the income belonging to the
Portfolio as are declared by the Trustees. Upon any liquidation of a Portfolio,
shareholders of each class of a Portfolio are entitled to share pro rata in the
net assets belonging to that class available for distribution. Shares do not
have any preemptive or conversion rights. The right of redemption is described
under "About Your Account -- Selling Shares" in the Prospectus. In addition,
pursuant to the terms of the 1940 Act, the right of a shareholder to redeem
shares and the date of payment by a Portfolio may be suspended for more than
seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the shareholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.
In addition, shares of each Portfolio are redeemable at the unilateral option of
the Trust if the Trustees determine in their sole discretion that failure to so
redeem may have material adverse consequences to the shareholders of the
Portfolio. Shares when issued as described in the Prospectus are validly issued,
fully paid and nonassessable, except as stated below. In the interests of
economy and convenience, certificates representing shares of the Portfolios are
not issued.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying assets
of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust. Expenses with respect to the Portfolios
are normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
B-55
<PAGE>
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding shares of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees are
exempt from the separate voting requirements stated above. In addition,
shareholders of each of the classes in a particular investment portfolio have
equal voting rights except that only shares of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to shareholder servicing expenses and transfer
agency fees that are payable by that class.
The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees and,
accordingly, the holders of more than 50% of the aggregate voting power of the
Trust may elect all of the Trustees, irrespective of the vote of the other
shareholders. Meetings of shareholders of the Trust, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the shares entitled to vote at such
meeting. To the extent required by law, the Trust will assist in shareholder
communications in connection with a meeting called by shareholders. The
shareholders of the Trust will have voting rights only with respect to the
limited number of matters specified in the Trust Agreement and such other
matters as the Trustees may determine or may be required by law.
The Trust Agreement authorizes the Trustees, without shareholder approval
(except as stated in the next paragraph), to cause the Trust, or any series
thereof, to merge or consolidate with any corporation, association, trust or
other organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement also authorizes the Trustees, in connection with the
merger, consolidation, termination or other reorganization of the Trust or any
series or class, to classify the shareholders of any class into one or more
separate groups and to provide for the different treatment of shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of shareholders that are so
classified.
B-56
<PAGE>
The Trust Agreement permits the Trustees to amend the Trust Agreement
without a shareholder vote. However, shareholders of the Trust have the right to
vote on any amendment (i) that would adversely affect the voting rights of
shareholders; (ii) that is required by law to be approved by shareholders; (iii)
that would amend the voting provisions of the Trust Agreement; or (iv) that the
Trustees determine to submit to shareholders.
The Trust Agreement permits the termination of the Trust or of any series
or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust, or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders
are not personally liable for obligations of the Trust. The Delaware Act
entitles shareholders of the Trust to the same limitation of liability as is
available to shareholders of private for-profit corporations. However, no
similar statutory or other authority limiting business trust shareholder
liability exists in many other states. As a result, to the extent that the Trust
or a shareholder is subject to the jurisdiction of courts in such other states,
those courts may not apply Delaware law and may subject the shareholders to
liability. To offset this risk, the Trust Agreement (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into or executed by the Trust or its Trustees and (ii)
provides for indemnification out of the property of the applicable series of the
Trust of any shareholder held personally liable for the obligations of the Trust
solely by reason of being or having been a shareholder and not because of the
shareholder's acts or omissions or for some other reason. Thus, the risk of a
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (3) the applicable series of the Trust is unable to
meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any
person other than the Trust or a shareholder and that a Trustee will not be
liable for any act as a Trustee. However, nothing in the Trust Agreement
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Trust Agreement provides for indemnification of Trustees, officers and
agents of the Trust unless the recipient is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
B-57
<PAGE>
In addition to the requirements of Delaware law, the Trust Agreement
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis
of such claim. The Trust Agreement also provides that no person, other than the
Trustees, who is not a shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to retain
counsel or other advisers in considering the merits of the request and may
require an undertaking by the shareholders making such request to reimburse the
Trust for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the Trust
Agreement with respect to such series or class; and/or (c) may have no power or
authority with respect to any other series or class. The Trustees are not
currently considering the appointment of Series Trustees for the Trust.
As of January 5, 1999, substantially all of the Portfolios' outstanding
shares were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, Northern possessed sole or shared voting and/or
investment power for its customer accounts with respect to less than 10% of the
Trust's outstanding shares. As of the same date, the Trust's Trustees and
officers as a group owned beneficially less than 1% of the outstanding shares of
each class of each Portfolio. Northern has advised the Trust that the following
persons (whose mailing address is: c/o The Northern Trust Company, 50 South
LaSalle, Chicago, IL 60675) beneficially owned five percent or more of the
outstanding shares of the Portfolios' classes as of January 5, 1999:
B-58
<PAGE>
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
--------- ---------
<S> <C> <C>
BALANCED PORTFOLIO
Class A
Northern Trust Thrift Incentive Plan 1,625,049 35.83%
Tetra Pak Salaried Trust 834,419 18.40%
Sealed Air Corporation 562,114 12.39%
Class C
Kitch Profit Sharing Plan 55,330 100%
Class D
First National Bank of La Grange 28,241 100%
DIVERSIFIED GROWTH PORTFOLIO
Class A
Northern Trust Pension Plan 4,949,085 44.84%
EQUITY INDEX PORTFOLIO
Class A
Northern Trust Thrift Incentive Plan 8,563,920 15.39%
Meadows Fund 4,807,521 8.64%
Libby-Owens-Ford Company 3,842,565 6.90%
Class C
AMA 401K Plan 1,548,489 33.07%
Wilson Sporting Goods 1,114,577 23.81%
U.S. Silica 521,520 11.14%
Sierra Technology 433,871 9.27%
Children's Hospital San Diego 413,455 8.83%
Clark - Schwebel Retirement Partnership 333,305 7.12%
Class D
Marquette Trust Company 1,122,854 75.28%
Citizens Bank 102,684 6.88%
Midwest Trust Company 96,988 6.50%
FOCUSED GROWTH PORTFOLIO
Class C
Northern Trust Thrift Incentive Plan 4,336,190 54.90%
Doe Run Resources 767,398 9.72%
SMALL COMPANY INDEX PORTFOLIO
Class A
Masco In-House 7,859,290 44.33%
Doe Run Resources 949,832 5.36%
Class C
Amcol International Savings Plan Trust 45,810 100%
</TABLE>
B-59
<PAGE>
<TABLE>
<S> <C> <C>
INTERNATIONAL EQUITY INDEX PORTFOLIO
Class A
Northern Trust Pension Plan 1,258,392 31.27%
Nigas Savings Investment
& Thrift International Fund 869,017 21.59%
Felpro 401K Plan 785,013 19.51%
Northern Trust Thrift Incentive Plan 594,403 14.77%
Sisters of The Precious Blood Foundation 214,776 5.34%
INTERNATIONAL GROWTH PORTFOLIO
Class A
Northern Trust Pension Plan 1,134,142 11.57%
White Cap 735,131 7.50%
Doe Run Resources 724,094 7.38%
Global Industrial Technology 678,822 6.92%
Tuthill Pension 643,992 6.57%
Northwestern Medical Mission 521,376 5.32%
Class D
Fort Wayne National Corporation 15,083 95.78%
</TABLE>
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the rules and
regulations of the SEC. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern,
NTQA and Goldman Sachs, brokerage fees and commissions, fees for the
registration or qualification of Portfolio shares under Federal or state
securities laws, expenses of the organization of the Portfolio, taxes, interest,
costs of liability insurance, fidelity bonds, indemnification or contribution,
any costs, expenses or losses arising out of any liability of, or claim for
damages or other relief asserted against, the Trust for violation of any law,
legal, tax and auditing fees and expenses, servicing fees, expenses of preparing
and printing prospectuses, statements of additional information, proxy
materials, reports and notices and the printing and distributing of the same to
the Trust's shareholders and regulatory authorities, compensation and expenses
of its Trustees, expenses for industry organizations such as the Investment
Company Institute, miscellaneous expenses and extraordinary expenses incurred by
the Trust.
The term "majority of the outstanding shares" of either the Trust or a
particular Portfolio means, with respect to the approval of an investment
advisory agreement or a change in a fundamental investment policy, the vote of
the lesser of (i) 67% or more of the shares of the Trust
B-60
<PAGE>
or such Portfolio present at a meeting, if the holders of more than 50% of the
outstanding shares of the Trust or such Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding shares of the Trust or such
Portfolio.
Statements contained in the Prospectus or in this Additional Statement as
to the contents of any contract or other documents referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 (the "Annual Report")
are hereby incorporated herein by reference and attached hereto. No other parts
of the Annual Report, including without limitation, "Management's Discussion of
Portfolio Performance," are incorporated by reference herein. Copies of the
Annual Report may be obtained by writing to Goldman, Sachs & Co., Funds Group,
4900 Sears Tower, Chicago, Illinois 60606, or by calling Goldman Sachs toll-free
at 800-621-2550.
B-61
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--12.0%
Automotive--5.1%
Banc One Auto
Grantor Trust,
Series 1997-B, Class
A
$10,329 6.29% 7/20/04 $10,455
WFS Financial Owner
Trust,
Series 1997-A, Class
A-3
7,680 6.50 9/20/01 7,766
Series 1997-D, Class
A-3
16,000 6.25 3/20/02 16,140
-------
34,361
-------
Home Equity Loans--4.5%
Contimortgage Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1998-1, Class
A10I
-- 6.50 9/15/00 10,550
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
6,851 7.92 3/16/28 6,740
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class
A(/1/)
9,333 7.41 11/26/28 8,889
The Money Store
Trust, Series 1997-
1(/1/)
3,744 7.36 5/16/01 3,743
-------
29,922
-------
Other--2.4%
California
Infrastructure &
Economic
Development, Series
1997-1, Class A4
15,785 6.22 3/25/04 16,258
- -------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $84,124) $80,541
- -------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
7.9%
American Southwest
Financial Securities
Corp., Series 1996
FHA-1, Class A-1
$ 41 6.675% 11/25/38 $ 41
Delta Funding Corp.,
Interest Only
Stripped Security,
Series 1991-1, Class
A-4(/1/)
-- 18.00 1/1/06 9
Donaldson, Lufkin, &
Jenrette
Mortgage Acceptance
Corp.,
Adjustable Rate,
Interest Only
Stripped Security,
Series 1995-QE10
-- 6.814 11/25/25 445
Donaldson, Lufkin, &
Jenrette
Mortgage Acceptance
Corp.,
Series 1994-Q8,
Class 2-A1
3,505 7.25 5/25/24 3,551
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
<S> <C> <C> <C>
First Union-Lehman
Brothers-Bank of
America Commercial
Mortgage Trust,
Series 1998-C2,
Class A-2
$ 11,840 6.50% 5/15/07 $ 12,225
Lehman FHA Title
Loan Trust,
Interest Only
Stripped Security,
Series 1996-2, Class
S
-- 0.586 5/25/17 1,898
Morgan Stanley
Capital I,
Series 1998-WF1,
Class A2
20,000 6.55 12/15/07 20,502
PNC Mortgage
Securities Corp.,
Series 1996-PR1,
Class A(/1/)
7,387 5.85 4/28/27 7,673
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
6,354 7.00 10/25/27 6,354
- -------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $52,619) $ 52,698
- -------------------------------------------------------------------
CORPORATE AND FOREIGN GOVERNMENT
BONDS--17.3%
Beverages--2.5%
Coca-Cola Co.
$ 14,935 6.70% 10/15/36 $ 16,421
--------
Insurance--3.3%
Anthem
Insurance(/1/)
6,000 9.00 4/1/27 6,485
Lumberman's Mutual Casualty
Co.
7,050 9.15 7/1/26 8,300
4,830 8.30 12/1/37 5,153
1,960 8.45 12/1/97 2,007
--------
21,945
--------
Retail--2.3%
Penney (J.C.) & Co.,
Inc.
15,000 6.90 8/15/26 15,507
--------
Sanitary Services--2.4%
WMX Technologies,
Inc.(/1/)
15,300 7.10 8/01/26 16,241
--------
Sovereign--6.0%
Asian Development
Bank
20,360 6.375 10/1/28 22,126
Quebec (Province
of), Canada
Medium-Term Note
15,450 7.22 7/22/36 17,907
--------
40,033
--------
Transportation Services--0.8%
Burlington Northern
Santa Fe Corp.
5,000 6.53 7/15/37 5,121
- -------------------------------------------------------------------
TOTAL CORPORATE AND FOREIGN
GOVERNMENT BONDS (Cost
$110,560) $115,268
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------
Bond Portfolio--Continued
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--10.9%
COLLATERALIZED MORTGAGE OBLIGATIONS--
1.1%
Fannie Mae REMIC Trust--0.8%
Series 1996-M4,
Class A
$ 2,277 7.75% 3/17/17 $ 2,343
Series 1992-73,
Class G
3,111 7.50 4/25/21 3,128
--------
Fannie Mae REMIC Trust 5,471
--------
Interest Only Stripped Securi-
ties--0.3%
Series 278, Class 2
-- 1.252 8/01/25 462
Series 1997-20,
Class IO
-- 1.84 3/25/27 1,532
--------
1,994
--------
Fannie Mae REMIC Trust
Principal Only Stripped Secu-
rities--0.0%
Series 1994-9, Class
G
215 5.15 11/25/23 207
--------
MORTGAGE-BACKED SECURITIES--
9.8%
Fannie Mae--4.8%
Pool #452480
$ 32,623 6.00% 11/1/28 $ 32,195
--------
Freddie Mac--5.0%
Pool #252649
1 6.50 6/1/04 1
Pool #C18118
16,004 6.00 11/1/28 15,804
Pool #G00767
16,970 7.50 8/1/27 17,426
--------
33,231
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $75,573) $ 73,098
- -------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
40.2%
U.S. Treasury Bonds--19.7%
$ 92,600 7.125% 2/15/23 $114,983
15,000 6.00 2/15/26 16,477
--------
131,460
--------
U.S. Treasury Inflation Index
Notes--5.0%
33,555 3.625 1/15/08 33,702
--------
U.S. Treasury Notes--15.5%
34,415 6.625 7/31/01 36,120
58,795 7.50 2/15/05 67,348
--------
103,468
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $256,297) $268,630
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Shares/
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
<C> <S> <C> <C>
PREFERRED STOCKS--2.8%
Agency--2.2%
15,000 Home Ownership
Funding Corp. $ 14,614
Real Estate--0.6%
4,600 Tier One Properties,
Inc. 4,411
- --------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost
$19,600) $ 19,025
- --------------------------------------------------------
FLOATING RATE BANK NOTES--3.9%
Lloyds Bank PLC
$14,950 6.00% 12/15/98 $ 12,355
Midland Bank PLC
2,500 6.00 12/29/98 1,914
National Westminster
Bank
15,300 5.375 2/26/99 12,113
- --------------------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $28,032) $ 26,382
- --------------------------------------------------------
SHORT-TERM INVESTMENT--3.6%
Societe Generale,
Paris
$23,771 5.375% 12/1/98 $ 23,771
- --------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $23,771) $ 23,771
- --------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $650,576) $659,413
- --------------------------------------------------------
Other assets, less liabili-
ties--1.4% 9,593
- --------------------------------------------------------
NET ASSETS--100.0% $669,006
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $49,780 (7.4% of net assets), with an aggregate cost basis of
$49,357. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
Intermediate Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--12.8%
Automotive--7.0%
Chevy Chase
Automobile
Receivables Trust,
Series 1997-4, Class
A
$ 377 6.25% 6/15/04 $ 380
Olympic Automobile
Receivables Trust,
Series 1996-D, Class
A-4
500 6.05 8/15/02 504
Western Financial
Owner Trust,
Series 1997-D, Class
A-3
500 6.25 3/20/02 504
Series 1998-B, A-3
750 5.95 7/20/02 754
-------
2,142
-------
Financial--2.3%
California
Infrastructure &
Economic
Development, Series
1997-1, Class A-4
690 6.22 3/25/04 711
-------
Home Equity Loans--3.5%
Advanta Mortgage
Loan Trust, Interest
Only Stripped
Security,
Series 1998-1 Class
AI0
-- 5.00 10/25/00 403
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
208 7.92 3/16/28 205
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class
A
364 7.41 11/26/28 347
The Money Store
Trust, Series 1997-
1(/1/)
84 7.36 5/16/01 85
-------
1,040
- -------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,016) $ 3,893
- -------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
7.2%
First Union-Lehman
Brothers-Bank of
America Commercial
Mortgage Trust,
Series 1998-C1,
Class A-2
$ 500 6.56% 11/18/08 $ 516
GE Capital Mortgage
Services, Inc.,
Series 1997-5, Class
A2
500 7.50 6/25/27 509
Morgan Stanley
Capital I,
Series 1998-WF1,
Class A2
355 6.55 12/15/07 364
Mortgage Capital
Funding,
Series 1998-MC1,
Class A2
540 7.00 1/18/08 567
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
258 7.00 10/25/27 258
- -------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $2,169) $ 2,214
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--16.0%
Beverages--4.0%
Coca-Cola (The) Co.
$1,100 6.70% 10/15/36 $ 1,209
--------
Diversified Financial Servic-
es--3.3%
CIT Group Holdings,
Inc.
1,000 5.85 5/26/00 1,006
--------
Environmental Control--1.5%
WMX Technologies,
Inc.
440 7.10 8/1/26 467
--------
Insurance--2.4%
Lumberman's Mutual
Casualty Co.(/1/)
545 9.15 7/1/26 642
105 8.45 12/1/97 108
--------
750
--------
Retail--1.4%
Penney (J.C.) & Co.,
Inc.
400 7.40 4/1/37 443
--------
Transportation--3.4%
Burlington Northern
Santa Fe Corp.
1,000 6.53 7/15/37 1,024
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$4,835) $ 4,899
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--8.7%
Fannie Mae--4.4%
Pool #440700
$ 1,364 6.00% 11/01/28 $ 1,346
--------
Freddie Mac--4.3%
Pool #G00767
676 7.50 8/01/27 694
Pool #C18079
618 6.00 11/1/28 610
--------
1,304
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $2,649) $ 2,650
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
42.0%
U.S. Treasury Inflation Index--
4.4%
$ 1,350 3.625% 1/15/08 $ 1,356
--------
U.S. Treasury Notes--37.6%
1,250 5.75 8/15/03 1,307
3,350 7.50 2/15/05 3,837
6,000 6.625 7/31/01 6,297
--------
11,441
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $12,785) $ 12,797
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------------
Intermediate Bond Portfolio (Continued)
<C> <S> <C> <C>
FLOATING RATE BANK NOTES--4.0%
Lloyds Bank PLC
$ 750 6.00% 12/15/98 $ 620
National Westminster
Bank
750 5.375 11/30/49 594
- ------------------------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,359) $ 1,214
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--12.1%
Federal Home Loan
Bank
$ 2,457 5.45% 12/1/98 $ 2,457
Societe Generale,
Paris
1,213 5.375 12/1/98 1,213
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,670) $ 3,670
- -----------------------------------------------------------
TOTAL INVESTMENTS--102.8%
(Cost $31,483) $31,337
- -----------------------------------------------------------
Liabilities, less other as-
sets--(2.8)% (857)
- -----------------------------------------------------------
NET ASSETS--100.0% $30,480
===========================================================
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $1,040 (3.4% of net assets), with an aggregate cost basis of
$1,064. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local
Currency/
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
International Bond Portfolio
<C> <S> <C> <C>
DEBT OBLIGATIONS--96.7%
Australian Dollar--2.5%
Commonwealth of
Australia
980 10.00% 10/15/02 $ 731
-------
Belgian Franc--2.3%
Kingdom of Belgium
18,275 7.50 7/29/08 657
-------
British Pound Sterling--16.4%
Abbey National PLC
825 6.00 8/10/99 1,356
BAA PLC
525 7.875 2/10/07 975
Lloyds Bank PLC
800 7.375 3/11/04 1,396
Treasury of Great
Britain
400 8.00 6/7/21 979
-------
4,706
-------
Canadian Dollar--2.6%
Province of Ontario
1,050 7.25 9/27/05 752
-------
Danish Krone--6.7%
Kingdom of Denmark
10,100 8.00 3/15/06 1,926
-------
European Currency Unit--4.9%
Electricite de
France
1,214 3.75 10/28/03 1,406
-------
German Mark--15.6%
Federal Republic of
Germany
1,795 6.25 1/4/24 1,275
LKB Global Bond
1,500 6.00 5/10/99 896
Republic of Austria
1,670 8.00 1/30/02 1,114
Republic of Finland
1,920 5.50 2/9/01 1,184
-------
4,469
-------
Italian Lira--10.2%
Republic of Italy
4,000,000 8.50 4/1/04 2,917
-------
Japanese Yen--14.5%
Asian Development
Bank
90,000 5.00 2/5/03 863
European Bank for
Reconstruction and
Development
95,000 5.875 11/26/99 817
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local
Currency/
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
<C> <S> <C> <C>
International Bank
for Reconstruction
and Development
100,000 4.50% 3/20/03 $ 950
Japan Development
Bank
160,000 6.50 9/20/01 1,521
-------
4,151
-------
Netherlands Guilder--1.4%
Kingdom of the
Netherlands
700 5.75 2/15/07 411
-------
Spanish Peseta--4.7%
Kingdom of Spain
120,000 11.30 1/15/02 1,022
35,000 10.00 2/28/05 323
-------
1,345
-------
Swedish Krona--2.0%
Kingdom of Sweden
3,700 10.25 5/5/03 571
-------
United States Dollar--12.9%
U.S. Treasury Bond
2,150 7.125 2/15/23 2,670
U.S. Treasury Note
900 7.50 2/15/05 1,031
-------
3,701
- ------------------------------------------------------
TOTAL DEBT OBLIGATIONS (Cost
$26,597) $27,743
- ------------------------------------------------------
SHORT-TERM INVESTMENT--0.4%
United States Dollar
Societe Generale,
Paris, France
$ 111 5.375% 12/1/98 $ 111
- ------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $111) $ 111
- ------------------------------------------------------
TOTAL INVESTMENTS--97.1%
(Cost $26,708) $27,854
- ------------------------------------------------------
Other assets, less liabili-
ties--2.9% 846
- ------------------------------------------------------
NET ASSETS--100.0% $28,700
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
Short-Intermediate Bond Portfolio
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--31.8%
Automotive--9.8%
Chevy Chase
Automobile
Receivables Trust,
Series 1991-4, Class
A
$ 3,212 6.25% 6/15/04 $ 3,235
Olympic Automobile
Receivables Trust,
Interest Only
Stripped Security,
Series 1995-D, Class
I
-- 7.187 1/15/99 25
Olympic Automobile
Receivables Trust,
Series 1995-A, Class
A
833 7.875 7/15/01 839
Series 1996-D, Class
A-4
4,075 6.05 8/15/02 4,111
Western Financial
Automobile Loan
Trust, Series 1994-
4, Class A-1
248 7.10 1/1/00 249
WFS Financial Owner
Trust,
Series 1997-A, Class
A-3
4,454 6.50 9/20/01 4,504
Series 1997-D, Class
A-3
5,000 6.25 3/20/02 5,044
--------
18,007
--------
Home Equity Loans--5.8%
Contimortgage Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1998-1, Class
A10I
-- 6.50 9/15/00 3,709
Contimortgage Net
Interest Margin
Notes, Series 1998-
A, Class A(/1/)
2,583 7.92 3/16/28 2,541
Delta Funding Home
Equity Loan Trust,
Interest Only
Stripped Security,
Series 1997-2, Class
AIO
-- 6.50 5/25/12 1,920
Lehman FHA Title I
Loan Trust,
Interest Only
Stripped Security,
Series 1995-6, Class
S
-- 0.493 11/25/16 1,130
The Money Store
Trust, Series 1997-
1(/1/)
1,377 7.36 5/16/01 1,377
--------
10,677
--------
Financial--16.2%
Associates Corp.
5,000 5.85 1/15/01 5,045
California Infrastructure
Pacific Gas & Electric,
Series 1997-1, Class A-3
7,250 6.15 6/25/02 7,354
California Infrastructure &
Economic
Development, Series 1997-1,
Class A-4
5,925 6.22 3/25/04 6,102
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
<C> <S> <C> <C>
IMC Excess Cashflow
Securities Trust
Series 1997-A, Class A
$ 3,098 7.41% 11/26/28 $ 2,951
MBNA Master Credit
Card Trust
5,800 5.25 2/15/06 5,798
Southern Pacific
Secured Asset Corp.,
Series 1997-2, Class
AIO
95,800 1.784 7/25/00 2,545
--------
29,795
- --------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $63,214) $ 58,479
- --------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
20.5%
AAMES Mortgage
Trust,
Interest Only
Stripped Security,
Series 1997-B, Class
AIO
$ -- 5.50% 7/15/00 $ 1,472
BA Mortgage
Securities, Inc.
8,250 6.50 8/25/28 8,310
Donaldson, Lufkin &
Jenrette
Mortgage Acceptance
Corp.,
Interest Only
Stripped Security,
Series 1997-CF2,
Class CP
-- 7.43 11/15/04 5,545
Series 1994-Q8,
Class 2A1
-- 7.25 5/25/24 1,527
Financial Asset
Securitization,
Inc.,
Series 1997-NAMC,
Class FXA-3
1,619 7.35 4/25/27 1,616
GE Capital Mortgage
Services, Inc.,
Series 1994-15,
Class A-16
4,789 6.00 4/25/09 4,738
PNC Mortgage
Securities Corp.,
Series 1996-PR1,
Class A(/1/)
2,183 5.847 4/28/27 2,268
Prudential Home
Mortgage Securities
Co.,
Series 1994-1, Class
A-3
6,963 6.00 2/25/09 6,889
Residential Asset
Securitization
Trust,
Series 1997-A8,
Class A-3
2,577 7.00 10/25/27 2,577
Series 1998-A1,
Class A-6
2,970 0.00 1/1/28 2,732
- --------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $39,574) $ 37,674
- --------------------------------------------------------
CORPORATE BONDS--8.9%
Brokerage Services--3.5%
Donaldson, Lufkin &
Jenrette, Inc.
Medium Term Note
$ 6,500 5.625% 2/15/16 $ 6,402
--------
Electrical Utility--2.1%
Tenaga Nasional
Berhad
4,800 7.20 4/29/07 3,958
--------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------------------
<C> <S> <C> <C>
Telecommunications--3.3%
Worldcom, Inc.
$ 5,900 6.125% 8/15/01 $ 6,008
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$17,177) $ 16,368
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--1.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--
1.0%
Fannie Mae REMIC Trust--0.9%
Series 1996-M4,
Class A
$ 1,518 7.75% 3/17/17 $ 1,562
--------
Fannie Mae REMIC Trust
Principal Only Stripped Security--0.1%
Series 1994-9, Class
G
215 5.15 11/25/23 207
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $1,710) $ 1,769
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
34.9%
U.S. Treasury Notes--34.9%
$ 9,500 3.63% 1/15/08 $ 9,542
41,000 5.75 10/31/02 42,550
11,500 6.25 1/31/02 12,032
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $62,760) $ 64,124
- -------------------------------------------------------------------
SHORT-TERM INVESTMENT--1.7%
Societe Generale,
Paris
$ 3,200 5.375% 12/1/98 $ 3,200
- -------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,200) $ 3,200
- -------------------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(Cost $187,635) $181,614
- -------------------------------------------------------------------
Other assets, less liabili-
ties--1.2% 2,209
- -------------------------------------------------------------------
NET ASSETS--100.0% $183,823
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
(/1/)At November 30, 1998, the Portfolio owned restricted securities valued at
approximately $6,186 (3.4% of net assets), with an aggregate cost basis of
$6,183. These securities may not be publicly sold without registration under
the Securities Act of 1933. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
29
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------
U.S. Government Securities Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--62.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--
27.7%
Fannie Mae REMIC Trust--15.5%
Series 1998-M2,
Class CPI,
Interest Only
Stripped Security
$ -- 6.25% 2/17/02 $ 513
Series 1997-M1,
Class A
2,582 6.78 1/17/03 2,657
Series 1998-14,
Class F
64 9.20 12/25/17 65
Series 1993-133,
Class EZ
3,262 5.85 2/25/17 3,259
Series 1996-M4,
Class A
1,012 7.75 3/17/17 1,041
Series 1992-2000,
Class E
473 6.25 6/25/17 472
Series 1997-20,
Class IO,
Interest Only
Stripped Security
-- 6.15 3/25/27 249
--------
8,256
--------
Freddie Mac--12.2%
Series 1227, Class G
2,311 10.40 5/15/99 2,373
Series 1296, Class H
1,432 11.61 7/15/99 1,488
Series 1520, Class F
414 5.65 9/15/04 413
Series 2028, Class
PE
2,250 6.00 11/15/21 2,266
--------
6,540
--------
14,796
--------
MORTGAGE-BACKED SECURITIES--17.5%
Fannie Mae--8.8%
Pool #124945
$2,020 7.49% 12/1/98 $ 2,056
Pool #452480
2,727 6.00 11/1/28 2,691
--------
4,747
--------
Freddie Mac--8.7%
Pool #410092
214 7.57 11/1/24 218
Pool #G00767
2,282 7.50 8/1/27 2,343
Pool #C18079
2,101 6.00 11/1/28 2,074
--------
4,635
--------
$ 9,382
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------
<C> <S> <C> <C>
AGENCY OBLIGATIONS--16.8%
Fannie Mae--9.5%
$ 2,250 5.625% 3/15/01 $ 2,286
2,750 5.25 1/15/03 2,777
--------
5,063
--------
Freddie Mac--4.3%
2,250 5.75 7/15/03 2,317
--------
Tennessee Valley Authority--3.0%
1,500 6.24 7/15/45 1,576
--------
$ 8,956
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $33,097) $ 33,134
- ----------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--31.6%
U.S. Treasury Notes--26.5%
$ 9,000 6.63% 7/31/01 $ 9,446
1,250 6.25 1/31/02 1,308
3,000 7.50 2/15/05 3,436
--------
14,190
--------
U.S. Treasury Inflationary In-
dex--5.1%
2,700 3.63% 1/15/08 2,712
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $16,864) $ 16,902
- ----------------------------------------------------------
SHORT-TERM INVESTMENT--7.2%
Federal Home Loan
Bank Discount Note
$ 3,866 5.150% 12/1/98 $ 3,866
- ----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,866) $ 3,866
- ----------------------------------------------------------
TOTAL INVESTMENTS--100.8%
(Cost $53,827) $ 53,902
- ----------------------------------------------------------
Liabilities, less other as-
sets--(0.8)% (419)
- ----------------------------------------------------------
NET ASSETS--100.0% $ 53,483
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. Treasury Index Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--
98.4%
U.S. Treasury Notes--48.8%
$2,300 7.75% 1/31/00 $ 2,379
1,450 4.50 9/30/00 1,448
1,900 6.50 5/31/01 1,983
1,400 6.25 2/15/03 1,483
1,000 6.50 8/15/05 1,101
1,525 6.25 2/15/07 1,674
1,500 5.75 8/15/23 1,568
-------
11,636
-------
U.S. Treasury Bonds--49.6%
1,000 11.75 2/15/01 1,148
1,400 7.50 11/15/01 1,510
1,000 6.00 7/31/02 1,046
65 13.875 5/15/11 101
660 14.00 11/15/11 1,048
490 13.25 5/15/14 812
1,450 7.25 5/15/16 1,774
1,025 8.125 5/15/21 1,395
700 8.00 11/15/21 944
1,400 6.25 8/15/23 1,577
400 6.50 11/15/26 469
-------
11,824
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGA-
TIONS
(Cost $22,076) $23,460
- ------------------------------------------------------
SHORT-TERM INVESTMENT--1.5%
Federal Home Loan
Bank Discount Note
$ 353 5.15% 12/1/98 $ 353
- ------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $353) $ 353
- ------------------------------------------------------
TOTAL INVESTMENTS--99.9%
(Cost $22,429) $23,813
- ------------------------------------------------------
Other assets, less liabili-
ties--0.1% 10
- ------------------------------------------------------
NET ASSETS--100.0% $23,823
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in securi-
ties, at cost $650,576 $31,483 $26,708 $187,635 $53,827 $22,429
- ------------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $659,413 $31,337 $27,854 $181,614 $53,902 $23,813
Cash and foreign curren-
cies 654 -- 46 274 -- 1
Receivables:
Interest 9,391 412 805 2,099 651 254
Fund shares sold 738 5 -- 83 126 3
Investment securities
sold -- -- -- -- 8 977
Foreign tax reclaims -- -- 17 -- -- --
Administrator 60 26 6 12 17 15
Deferred organization
costs, net -- -- 5 -- -- --
Other assets 6 -- 2 1 -- --
- ------------------------------------------------------------------------------------------------
Total assets 670,262 31,780 28,735 184,083 54,704 25,063
- ------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- 1,269 -- -- 1,166 --
Payable for:
Fund shares redeemed 873 -- -- 188 24 13
Investment securities
purchased -- -- -- -- -- 1,212
Accrued expenses:
Advisory fees 135 6 17 38 11 3
Administration fees 54 2 4 15 4 2
Transfer agent fees 10 -- -- 2 1 --
Custodian fees 3 2 6 -- 2 1
Other liabilities 181 21 8 17 13 9
- ------------------------------------------------------------------------------------------------
Total liabilities 1,256 1,300 35 260 1,221 1,240
- ------------------------------------------------------------------------------------------------
Net assets $669,006 $30,480 $28,700 $183,823 $53,483 $23,823
- ------------------------------------------------------------------------------------------------
Analysis of net assets:
Paid-in capital $637,446 $30,290 $26,988 $186,617 $52,652 $22,739
Accumulated undistrib-
uted net investment in-
come 1,259 33 354 702 37 23
Accumulated net realized
gains (losses) on
investments and foreign
currency transactions 21,464 303 197 2,525 719 (323)
Net unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions 8,837 (146) 1,146 (6,021) 75 1,384
Net unrealized gain on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- 15 -- -- --
- ------------------------------------------------------------------------------------------------
Net assets $669,006 $30,480 $28,700 $183,823 $53,483 $23,823
- ------------------------------------------------------------------------------------------------
Total shares outstanding
(no par value), unlim-
ited shares authorized
Class A 28,021 1,511 1,338 9,137 2,384 1,014
Class C 2,845 -- -- -- 195 1
Class D 94 2 6 41 60 79
- ------------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per share
Class A $ 21.61 $ 20.15 $ 21.35 $ 20.03 $ 20.27 $ 21.77
Class C $ 21.60 -- -- -- $ 20.26 $ 21.81
Class D $ 21.58 $ 20.13 $ 21.26 $ 19.97 $ 20.22 $ 21.74
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $43,266 $1,453 $1,651(a) $19,862 $3,143 $1,516
- ------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 3,491 133 238 1,195 296 101
Administration fees 582 22 40 199 49 25
Transfer agent fees 112 2 3 22 9 5
Shareholder servicing
fees 91 -- -- 3 7 5
Custodian fees 76 18 55 28 22 21
Registration fees 71 40 28 40 22 21
Professional fees 32 4 7 11 7 6
Trustee fees and ex-
penses 14 1 3 5 3 3
Amortization of deferred
organization costs 2 3 16 2 5 2
Other 28 18 13 16 14 14
- ------------------------------------------------------------------------------------------------
Total expenses 4,499 241 403 1,521 434 203
Less voluntary waivers
of investment advisory
fees (2,037) (78) (53) (697) (173) (63)
Less expenses reimburs-
able by Administrator (222) (83) (95) (103) (72) (67)
- ------------------------------------------------------------------------------------------------
Net expenses 2,240 80 255 721 189 73
- ------------------------------------------------------------------------------------------------
Net investment income 41,026 1,373 1,396 19,141 2,954 1,443
Net realized gains
(losses) on:
Investment transactions 21,659 324 271 1,538 786 732
Foreign currency trans-
actions -- -- (51) -- -- --
Net change in unrealized
appreciation (deprecia-
tion) on investments,
forward foreign cur-
rency contracts and
foreign currency
transactions (6,108) (85) 1,365 (6,078) (228) 445
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- -- 17 -- -- --
- ------------------------------------------------------------------------------------------------
Net increase in net as-
sets resulting from op-
erations $56,577 $1,612 $2,998 $14,601 $3,512 $2,620
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $7 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
33
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Intermediate
Bond Bond
Portfolio Portfolio
------------------ -----------------
1998 1997 1998 1997 (a)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 41,026 $ 28,861 $ 1,373 $ 204
Net realized gains (losses) on
investments, forward foreign currency
contracts and foreign currency
transactions 21,659 3,869 324 (21)
Net change in unrealized appreciation
(depreciation) on investments, forward
foreign currency contracts and foreign
currency transactions (6,108) 4,710 (85) (61)
Net change in unrealized gains on
translations of other assets and
liabilities denominated in foreign
currencies -- -- -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 56,577 37,440 1,612 122
- ------------------------------------------------------------------------------
Distributions to Class A shareholders
from:
Net investment income (35,543) (25,700) (1,358) (185)
Net realized gain on investment
transactions (2,645) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class A
shareholders (38,188) (25,700) (1,358) (185)
- ------------------------------------------------------------------------------
Distributions to Class C shareholders
from:
Net investment income (3,794) (2,140) -- --
Net realized gain on investment
transactions (295) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class C
shareholders (4,089) (2,140) -- --
- ------------------------------------------------------------------------------
Distributions to Class D shareholders
from:
Net investment income (107) (23) (1) --
Net realized gain on investment
transactions (6) -- -- --
- ------------------------------------------------------------------------------
Total distributions to Class D
shareholders (113) (23) (1) --
- ------------------------------------------------------------------------------
Class A share transactions:
Proceeds from the sale of shares 217,204 155,583 27,967 11,875
Reinvested distributions 32,297 22,888 1,346 185
Cost of shares redeemed (117,228) (92,369) (11,125) --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from
Class A share transactions 132,273 86,102 18,188 12,060
- ------------------------------------------------------------------------------
Class C share transactions:
Proceeds from the sale of shares 30,139 60,626 -- --
Reinvested distributions 4,089 2,140 -- --
Cost of shares redeemed (24,755) (21,561) -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class C share
transactions 9,473 41,205 -- --
- ------------------------------------------------------------------------------
Class D share transactions:
Proceeds from the sale of shares 2,529 657 41 --
Reinvested distributions 113 22 1 --
Cost of shares redeemed (1,238) (306) -- --
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class D share
transactions 1,404 373 42 --
- ------------------------------------------------------------------------------
Net increase (decrease) 157,337 137,257 18,483 11,997
Net assets--beginning of year 511,669 374,412 11,997 --
- ------------------------------------------------------------------------------
Net assets--end of year $669,006 $511,669 $30,480 $11,997
- ------------------------------------------------------------------------------
Undistributed net investment income $ 1,259 $ 338 $ 33 $ 19
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short- U.S. Government
International Intermediate Securities U.S. Treasury
Bond Portfolio Bond Portfolio Portfolio Index Portfolio
- ---------------- ------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,396 $ 1,608 $ 19,141 $ 13,180 $ 2,954 $ 5,026 $ 1,443 $ 1,856
220 97 1,538 (623) 786 76 732 (56)
1,365 (2,827) (6,078) (2,110) (228) (46) 445 382
17 3 -- -- -- -- -- --
- -----------------------------------------------------------------------------
2,998 (1,119) 14,601 10,447 3,512 5,056 2,620 2,182
- -----------------------------------------------------------------------------
(1,024) (1,390) (17,379) (12,516) (2,583) (4,820) (1,370) (1,746)
(385) (520) (267) (414) -- -- -- --
- -----------------------------------------------------------------------------
(1,409) (1,910) (17,646) (12,930) (2,583) (4,820) (1,370) (1,746)
- -----------------------------------------------------------------------------
-- -- -- -- (188) (204) (1) --
-- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------
-- -- -- -- (188) (204) (1) --
- -----------------------------------------------------------------------------
(5) (3) (87) (39) (42) (17) (105) (79)
(2) (1) (1) (1) -- -- -- --
- -----------------------------------------------------------------------------
(7) (4) (88) (40) (42) (17) (105) (79)
- -----------------------------------------------------------------------------
2,261 1,168 125,815 121,515 12,721 68,991 15,301 20,990
1,217 1,525 14,872 11,648 2,336 4,525 458 1,197
(2,867) (7,465) (156,030) (82,865) (10,457) (122,819) (28,575) (14,944)
- -----------------------------------------------------------------------------
611 (4,772) (15,343) 50,298 4,600 (49,303) (12,816) 7,243
- -----------------------------------------------------------------------------
-- -- -- -- 1,687 1,328 184 --
-- -- -- -- 188 204 1 --
-- -- -- -- (1,094) (1,940) (164) --
- -----------------------------------------------------------------------------
-- -- -- -- 781 (408) 21 --
- -----------------------------------------------------------------------------
65 47 454 638 1,026 111 445 1,106
6 4 75 27 29 6 53 40
(38) (7) (578) (110) (155) (29) (570) (321)
- -----------------------------------------------------------------------------
33 44 (49) 555 900 88 (72) 825
- -----------------------------------------------------------------------------
2,226 (7,761) (18,525) 48,330 6,980 (49,608) (11,723) 8,425
26,474 34,235 202,348 154,018 46,503 96,111 35,546 27,121
- -----------------------------------------------------------------------------
$28,700 $26,474 $183,823 $202,348 $53,483 $ 46,503 $ 23,823 $ 35,546
- -----------------------------------------------------------------------------
$ 354 $ 38 $ 702 $ 56 $ 37 $ -- $ 23 $ 56
- -----------------------------------------------------------------------------
</TABLE>
35
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Bond Portfolio
<TABLE>
<CAPTION>
Class A
------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 21.08 $ 20.77 $ 20.96 $ 18.29 $ 20.70
Income (loss) from invest-
ment operations:
Net investment income 1.47 1.34 1.29 1.17 1.42
Net realized and unrealized
gain (loss) 0.62 0.29 (0.19) 2.66 (2.21)
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 2.09 1.63 1.10 3.83 (0.79)
- --------------------------------------------------------------------------------
Distributions to sharehold-
ers from:
Net investment income (1.44) (1.32) (1.26) (1.14) (1.46)
Net realized gain (0.12) -- -- -- (0.15)
Return of capital -- -- (0.03) (0.02) (0.01)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.56) (1.32) (1.29) (1.16) (1.62)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.53 0.31 (0.19) 2.67 (2.41)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.61 $ 21.08 $ 20.77 $ 20.96 $ 18.29
- --------------------------------------------------------------------------------
Total return (c) 10.31% 8.17% 5.57% 21.55% (4.04)%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.75% 0.77% 0.84% 0.84% 0.87%
Net investment income, net
of waivers and reimburse-
ments 7.07% 6.66% 6.39% 5.94% 7.31%
Net investment income, be-
fore waivers and reim-
bursements 6.68% 6.25% 5.91% 5.46% 6.80%
Portfolio turnover rate 84.80% 76.30% 101.38% 74.19% 103.09%
Net assets at end of year
(in thousands) $605,517 $460,514 $366,850 $286,301 $257,391
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------- -----------------------------------------
1998 1997 1996 1995(a) 1998 1997 1996 1995 1994 (b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 21.07 $ 20.78 $ 20.96 $20.21 $21.05 $20.76 $ 20.94 $18.29 $ 18.74
Income (loss) from in-
vestment operations:
Net investment income 1.42 1.29 1.25 0.47 1.38 1.24 1.22 1.08 0.28
Net realized and
unrealized gain (loss) 0.62 0.28 (0.18) 0.74 0.63 0.30 (0.18) 2.66 (0.45)
- --------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 2.04 1.57 1.07 1.21 2.01 1.54 1.04 3.74 (0.17)
- --------------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.39) (1.28) (1.22) (0.45) (1.36) (1.25) (1.19) (1.09) (0.28)
Net realized gain (0.12) -- -- -- (0.12) -- -- -- --
Return of capital -- -- (0.03) (0.01) -- -- (0.03) -- --
- --------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.51) (1.28) (1.25) (0.46) (1.48) (1.25) (1.22) (1.09) (0.28)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.53 0.29 (0.18) 0.75 0.53 0.29 (0.18) 2.65 (0.45)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 21.60 $ 21.07 $ 20.78 $20.96 $21.58 $21.05 $ 20.76 $20.94 $ 18.29
- --------------------------------------------------------------------------------------------------------
Total return (c) 10.04% 7.88% 5.33% 6.08% 9.89% 7.74% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.99% 1.01% 1.08% 1.08% 1.14% 1.16% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and
reimbursements 6.83% 6.39% 6.09% 5.59% 6.70% 6.27% 5.99% 5.48% 6.31%
Net investment income,
before waivers and
reimbursements 6.44% 5.98% 5.61% 5.11% 6.31% 5.86% 5.51% 5.00% 5.80%
Portfolio turnover rate 84.80% 76.30% 101.38% 74.19% 84.80% 76.30% 101.38% 74.19% 103.09%
Net assets at end of
year (in thousands) $61,450 $50,554 $ 7,342 $3,704 $2,039 $ 601 $ 220 $ 120 $ 15
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period July 3, 1995 (Class C shares issue date) through November
30, 1995.
(b) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
36
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Year Ended November 30,
Intermediate Bond Portfolio
<TABLE>
<CAPTION>
Class A Class D
------------------ --------
1998 1997 (a) 1998 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 19.89 $ 20.00 $20.46
Income (loss) from investment operations:
Net investment income 1.19 0.38 0.18
Net realized and unrealized gain (loss) 0.27 (0.15) (0.32)
- -------------------------------------------------------------------------------
Total income from investment operations 1.46 0.23 (0.14)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.20) (0.34) (0.19)
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.20) (0.34) (0.19)
- -------------------------------------------------------------------------------
Net increase (decrease) $ 0.26 $ (0.11) $(0.33)
- -------------------------------------------------------------------------------
Net asset value, end of year $ 20.15 $ 19.89 $20.13
- -------------------------------------------------------------------------------
Total return (c) 7.55% 1.17% (0.70)%
Ratio to average net assets of (d):
Expenses, net of waivers and reimbursements 0.36% 0.36% 0.75%
Expenses, before waivers and reimbursements 1.09% 2.28% 1.48%
Net investment income, net of waivers and reim-
bursements 6.19% 5.87% 5.69%
Net investment income, before waivers and reim-
bursements 5.46% 3.95% 4.96%
Portfolio turnover rate 93.40% 56.99% 93.40%
Net assets at end of year (in thousands) $30,439 $11,997 $ 41
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through
November 30, 1997.
(b) For the period October 5, 1998 (Class D share issue date) through November
30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
37
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Bond Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------
1998 1997 1996 1995 1994(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.13 $ 22.16 $ 21.74 $ 19.93 $ 20.00
Income (loss) from investment op-
erations:
Net investment income 0.98 1.02 1.54 1.26 0.79
Net realized and unrealized gain
(loss) 1.33 (1.70) 0.43 2.28 0.01
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.31 (0.68) 1.97 3.54 0.80
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (c) (0.79) (1.01) (1.55) (1.73) (0.87)
Net realized gain (0.30) (0.34) -- -- --
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (1.09) (1.35) (1.55) (1.73) (0.87)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.22 (2.03) 0.42 1.81 (0.07)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.35 $ 20.13 $ 22.16 $ 21.74 $ 19.93
- --------------------------------------------------------------------------------
Total return (d) 11.85% (3.02)% 9.47% 18.20% 4.03%
Ratio to average net assets of
(e):
Expenses, net of waivers and re-
imbursements 0.96% 0.96% 0.96% 0.96% 0.96%
Expenses, before waivers and re-
imbursements 1.52% 1.52% 1.58% 1.47% 1.49%
Net investment income, net of
waivers and reimbursements 5.27% 5.61% 5.91% 5.92% 5.93%
Net investment income, before
waivers and reimbursements 4.71% 5.05% 5.29% 5.41% 5.40%
Portfolio turnover rate 23.76% 29.29% 33.89% 54.46% 88.65%
Net assets at end of year (in
thousands) $28,568 $26,383 $34,183 $32,673 $26,947
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------
1998 1997 1996 1995(b)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $20.06 $22.14 $21.74 $22.17
Income (loss) from investment operations:
Net investment income 0.93 0.97 1.37 0.02
Net realized and unrealized gain (loss) 1.29 (1.72) 0.51 (0.08)
- ------------------------------------------------------------------------------
Total income (loss) from investment opera-
tions 2.22 (0.75) 1.88 (0.06)
- ------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (c) (0.72) (0.99) (1.48) (0.37)
Net realized gain (0.30) (0.34) -- --
- ------------------------------------------------------------------------------
Total distributions to shareholders (1.02) (1.33) (1.48) (0.37)
- ------------------------------------------------------------------------------
Net increase (decrease) 1.20 (2.08) 0.40 (0.43)
- ------------------------------------------------------------------------------
Net asset value, end of year $21.26 $20.06 $22.14 $21.74
- ------------------------------------------------------------------------------
Total return (d) 11.43% (3.38)% 9.04% (0.30)%
Ratio to average net assets of (e):
Expenses, net of waivers and reimbursements 1.35% 1.35% 1.35% 1.35%
Expenses, before waivers and reimbursements 1.91% 1.91% 1.97% 1.86%
Net investment income, net of waivers and
reimbursements 4.90% 5.36% 5.67% 3.26%
Net investment income, before waivers and
reimbursements 4.34% 4.80% 5.05% 2.75%
Portfolio turnover rate 23.76% 29.29% 33.89% 54.46%
Net assets at end of year (in thousands) $ 132 $ 91 $ 52 $ 9
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 20, 1995 (Class D shares issue date) through
November 30, 1995.
(c) Distributions to shareholders from net investment income include amounts
relating to foreign currency transactions which are treated as ordinary
income for Federal income tax purposes.
(d) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
38
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Short-Intermediate Bond Portfolio
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.36 $ 20.70 $ 20.73 $ 19.53 $ 20.33
Income (loss) from investment
operations:
Net investment income 1.84 1.46 1.14 1.02 0.97
Net realized and unrealized
gain (loss) (0.36) (0.29) (0.01) 1.19 (0.80)
- --------------------------------------------------------------------------------
Total income from investment
operations 1.48 1.17 1.13 2.21 0.17
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (1.78) (1.46) (1.16) (1.01) (0.97)
Net realized gain (0.03) (0.05) -- -- --
- --------------------------------------------------------------------------------
Total distributions to share-
holders (1.81) (1.51) (1.16) (1.01) (0.97)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.33) (0.34) (0.03) 1.20 (0.80)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 20.03 $ 20.36 $ 20.70 $ 20.73 $ 19.53
- --------------------------------------------------------------------------------
Total return (b) 7.50% 5.95% 5.68% 11.58% 0.84%
Ratio to average net assets of
(c):
Expenses, net of waivers and
reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers and
reimbursements 0.76% 0.81% 0.88% 0.91% 0.95%
Net investment income, net of
waivers and reimbursements 9.61% 7.68% 5.83% 5.14% 4.84%
Net investment income, before
waivers and reimbursements 9.21% 7.23% 5.31% 4.59% 4.25%
Portfolio turnover rate 89.97% 48.49% 47.68% 54.68% 48.67%
Net assets at end of year (in
thousands) $182,999 $201,457 $153,675 $158,678 $96,209
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------
1998 1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.31 $20.66 $20.71 $19.53 $19.82
Income (loss) from investment opera-
tions:
Net investment income 1.78 1.43 1.07 0.94 0.23
Net realized and unrealized gain
(loss) (0.40) (0.34) (0.02) 1.18 (0.29)
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.38 1.09 1.05 2.12 (0.06)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1.69) (1.39) (1.10) (0.94) (0.23)
Net realized gain (0.03) (0.05) -- -- --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.72) (1.44) (1.10) (0.94) (0.23)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.34) (0.35) (0.05) 1.18 (0.29)
- -------------------------------------------------------------------------------
Net asset value, end of year $19.97 $20.31 $20.66 $20.71 $19.53
- -------------------------------------------------------------------------------
Total return (b) 7.08% 5.54% 5.22% 11.09% (0.30)%
Ratio to average net assets of (c):
Expenses, net of waivers and reim-
bursements 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waivers and reim-
bursements 1.15% 1.20% 1.27% 1.30% 1.34%
Net investment income, net of waivers
and reimbursements 9.31% 7.48% 4.96% 4.85% 4.42%
Net investment income, before waivers
and reimbursements 8.91% 7.03% 4.44% 4.30% 3.83%
Portfolio turnover rate 89.97% 48.49% 47.68% 54.68% 48.67%
Net assets at end of year (in thou-
sands) $ 824 $ 891 $ 343 $ 13 $ 1
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
See accompanying notes to financial statements.
39
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
U.S. Government Securities Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 19.99 $ 20.07 $ 20.08 $ 19.05 $ 20.07
Income (loss) from invest-
ment operations:
Net investment income 1.17 1.21 1.02 1.05 0.91
Net realized and
unrealized gain (loss) 0.26 (0.07) (0.01) 1.02 (1.02)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.43 1.14 1.01 2.07 (0.11)
- --------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.15) (1.22) (1.02) (1.04) (0.91)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.15) (1.22) (1.02) (1.04) (0.91)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.28 (0.08) (0.01) 1.03 (1.02)
- --------------------------------------------------------------------------------
Net asset value, end of
year $ 20.27 $ 19.99 $ 20.07 $ 20.08 $ 19.05
- --------------------------------------------------------------------------------
Total return (c) 7.36% 5.93% 5.15% 11.18% (0.57)%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.86% 0.85% 0.94% 1.09% 1.12%
Net investment income,
net of waivers and reim-
bursements 6.01% 5.86% 5.22% 5.43% 4.62%
Net investment income,
before waivers and reim-
bursements 5.51% 5.37% 4.64% 4.70% 3.86%
Portfolio turnover rate 115.55% 95.73% 119.75% 141.14% 45.55%
Net assets at end of year
(in thousands) $48,317 $43,073 $92,351 $56,329 $25,293
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------- ----------------------------------------
1998 1997 1996 (a) 1998 1997 1996 1995 1994 (b)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $19.98 $20.06 $ 20.13 $ 19.94 $20.03 $20.04 $19.05 $19.43
Income (loss) from in-
vestment operations:
Net investment income 1.12 1.14 0.91 1.08 1.16 0.96 0.96 0.22
Net realized and
unrealized gain (loss) 0.26 (0.04) (0.12) 0.28 (0.10) (0.03) 1.00 (0.38)
- ----------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.38 1.10 0.79 1.36 1.06 0.93 1.96 (0.16)
- ----------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.10) (1.18) (0.86) (1.08) (1.15) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) 0.28 (0.08) (0.07) 0.28 (0.09) (0.01) 0.99 (0.38)
- ----------------------------------------------------------------------------------------------
Net asset value, end of
year $20.26 $19.98 $ 20.06 $ 20.22 $19.94 $20.03 $20.04 $19.05
- ----------------------------------------------------------------------------------------------
Total return (c) 7.10% 5.67% 4.05% 6.96% 5.52% 4.77% 10.66% (0.90)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 1.10% 1.09% 1.18% 1.25% 1.24% 1.33% 1.48% 1.51%
Net investment income,
net of waivers and re-
imbursements 5.77% 5.63% 4.97% 5.55% 5.50% 4.83% 5.08% 4.65%
Net investment income,
before waivers and re-
imbursements 5.27% 5.14% 4.39% 5.05% 5.01% 4.25% 4.35% 3.89%
Portfolio turnover rate 115.55% 95.73% 119.75% 115.55% 95.73% 119.75% 141.14% 45.55%
Net assets at end of
year (in thousands) $3,942 $3,118 $ 3,535 $ 1,224 $ 312 $ 225 $ 67 $ 13
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C shares issue date) through
November 30, 1996.
(b) For the period September 15, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
40
<PAGE>
Northern Institutional Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
U.S. Treasury Index Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 20.81 $ 20.60 $ 20.78 $ 18.77 $ 21.05
Income (loss) from investment op-
erations:
Net investment income 1.23 1.26 1.19 1.11 1.15
Net realized and unrealized gain
(loss) 0.97 0.20 (0.18) 2.01 (1.93)
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.20 1.46 1.01 3.12 (0.78)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (1.24) (1.25) (1.19) (1.11) (1.14)
Net realized gain -- -- -- -- (0.36)
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (1.24) (1.25) (1.19) (1.11) (1.50)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.96 0.21 (0.18) 2.01 (2.28)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 21.77 $ 20.81 $ 20.60 $ 20.78 $ 18.77
- --------------------------------------------------------------------------------
Total return (c) 10.92% 7.44% 5.10% 16.95% (3.80)%
Ratio to average net assets of
(d):
Expenses, net of waivers and re-
imbursements 0.26% 0.26% 0.26% 0.26% 0.26%
Expenses, before waivers and re-
imbursements 0.77% 0.82% 1.04% 0.89% 0.79%
Net investment income, net of
waivers and reimbursements 5.73% 6.36% 5.93% 5.09% 5.60%
Net investment income, before
waivers and reimbursements 5.22% 5.80% 5.15% 4.46% 5.07%
Portfolio turnover rate 69.84% 72.61% 42.49% 80.36% 52.80%
Net assets at end of year (in
thousands) $22,085 $33,839 $26,273 $17,674 $37,305
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------- -----------------------------------------
1998 (a) 1998 1997 1996 1995 1994 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 22.28 $ 20.77 $20.57 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 0.21 1.13 1.20 1.17 1.00 0.09
Net realized and
unrealized gain (loss) (0.52) 1.00 0.18 (0.24) 2.03 (0.03)
- -------------------------------------------------------------------------------
Total income from invest-
ment operations (0.31) 2.13 1.38 0.93 3.03 0.06
- -------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
- -------------------------------------------------------------------------------
Total distributions to
shareholders (0.16) (1.16) (1.18) (1.11) (1.05) (0.09)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.47) 0.97 0.20 (0.18) 1.98 (0.03)
- -------------------------------------------------------------------------------
Net asset value, end of
year $ 21.81 $ 21.74 $20.77 $20.57 $20.75 $18.77
- -------------------------------------------------------------------------------
Total return (c) (1.39)% 10.50% 7.03% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.50% 0.65% 0.65% 0.65% 0.65% 0.65%
Expenses, before waivers
and reimbursements 1.01% 1.16% 1.21% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and
reimbursements 5.22% 5.35% 6.07% 5.57% 5.41% 6.05%
Net investment income,
before waivers and
reimbursements 4.71% 4.84% 5.51% 4.79% 4.78% 5.52%
Portfolio turnover rate 69.84% 69.84% 72.61% 42.49% 80.36% 52.80%
Net assets at end of year
(in thousands) $ 17 $ 1,721 $1,707 $ 848 $ 286 $ --
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period October 7, 1998 (Class C shares issue date) through
November 30, 1998.
(b) For the period November 16, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the year. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
41
<PAGE>
The Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Balanced Portfolio
<C> <S> <C>
COMMON STOCKS--54.6%
Advertising--0.6%
11,000 Snyder Communications, Inc. $ 391
-------
Banking--1.1%
5,000 Banc One Corp. 257
3,500 First Union Corp. 213
2,400 State Street Corp. 165
4,000 Wells Fargo Co. 145
-------
780
-------
Beverages--2.1%
2,000 Anheuser-Busch Companies, Inc. 121
5,000 Coca-Cola (The) Co. 350
14,400 PepsiCo, Inc. 557
8,200 Starbucks Corp.* 378
-------
1,406
-------
Chemicals--0.3%
3,700 Du Pont (E.I.) de Nemours & Co. 217
-------
Commercial Services--0.9%
12,000 Paychex, Inc. 597
-------
Communications--0.5%
5,500 AT&T Corp. 342
-------
Computers--3.5%
8,925 Cisco Systems, Inc.* 673
11,600 Computer Sciences Corp.* 663
4,500 Dell Computer Corp.* 274
2,000 EMC Corp.* 145
3,800 International Business Machines Corp. 627
-------
2,382
-------
Cosmetics and Personal Care--1.5%
7,000 Gillette Co. 322
7,800 Procter & Gamble Co. 683
-------
1,005
-------
Diversified Financial Services--4.5%
2,100 American Express Co. 210
14,900 Fannie Mae 1,084
12,500 Freddie Mac 756
6,000 MBNA Corp. 136
1,200 Merrill Lynch & Co. 90
5,000 Price (T. Rowe) Associates 179
11,000 Schwab (Charles) Corp. 620
-------
3,075
-------
Electric--0.5%
4,000 Cinergy Corp. 138
3,500 Duke Energy Corp. 219
-------
357
-------
Electrical Components and Equipment--0.7%
7,500 Emerson Electric Co. 488
-------
Electronics--0.7%
7,000 Solectron Corp.* 463
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Food--0.3%
3,000 Albertson's Inc. $ 171
-------
Health Care--3.2%
6,000 Becton, Dickinson & Co. 255
1,000 Guidant Corp. 86
28,725 Health Management Associates, Inc., Class A* 623
6,200 Johnson & Johnson Co. 504
10,400 Medtronic, Inc. 703
-------
2,171
-------
Housewares--0.6%
10,000 Newell Co. 443
-------
Insurance--2.3%
3,200 Allstate Corp. 130
10,650 American International Group, Inc. 1,001
4,900 MBIA, Inc. 317
2,000 Nationwide Financial Services 96
-------
1,544
-------
Leisure Time--0.7%
13,000 Carnival Corp., Class A 449
-------
Media--1.0%
4,900 Disney (Walt) Co. 158
8,300 Fox Entertainment Group, Inc.* 196
30,200 Time Warner, Inc. 338
-------
692
-------
Miscellaneous Manufacturing--2.1%
12,400 General Electric Co. 1,121
5,000 Tyco International Ltd. 329
-------
1,450
-------
Office and Business Equipment--1.3%
14,000 Pitney Bowes, Inc. 784
1,200 Xerox Corp. 129
-------
913
-------
Oil and Gas Producers--3.9%
6,000 Chevron Corp. 502
14,000 Conoco, Inc.* 332
11,400 Exxon Corp. 856
3,700 Mobil Corp. 319
13,800 Royal Dutch Petroleum Co. 649
-------
2,658
-------
Oil and Gas Services--0.6%
9,600 Schlumberger Ltd. ADR 429
-------
Pharmaceuticals--5.9%
2,800 Bristol-Myers Squibb Co. 343
9,000 Cardinal Health, Inc. 618
6,000 Elan Corp. PLC ADR* 409
3,700 Eli Lilly & Co. 332
4,900 Merck & Co., Inc. 759
4,900 Pfizer, Inc. 547
1,700 Schering-Plough Corp. 181
10,800 Warner-Lambert Co. 815
-------
4,004
-------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
Retail--6.7%
6,300 Dayton Hudson Corp. $ 284
2,500 Gap, Inc. 184
19,300 Home Depot (The), Inc. 960
4,100 Kohls Corp.* 202
21,050 Staples, Inc.* 735
19,000 Walgreen Co. 1,020
15,500 Wal-Mart Stores, Inc. 1,167
-------
4,552
-------
Semiconductors--1.4%
5,900 Intel Corp. 635
2,500 Motorola, Inc. 155
1,800 Texas Instruments, Inc. 137
-------
927
-------
Software--1.9%
9,500 Microsoft Corp.* 1,159
4,000 Oracle Corp.* 137
-------
1,296
-------
Telecommunication Equipment--1.5%
6,000 Lucent Technologies, Inc. 516
1,000 Nokia OYJ 98
8,000 Tellabs, Inc.* 433
-------
1,047
-------
Telephone--2.4%
10,200 Ameritech Corp. 552
5,400 Bell Atlantic Corp. 300
2,000 Bellsouth Corp. 175
5,000 MCI WORLDCOM, Inc.* 295
7,000 SBC Communications, Inc. 336
-------
1,658
-------
Textiles--0.5%
6,400 Cintas Corp. 352
-------
Tobacco--1.4%
12,700 Phillip Morris Co., Inc. 710
6,000 UST, Inc. 209
-------
919
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $23,107) $37,178
- -------------------------------------------------------------------------------
PREFERRED STOCK--1.4%
Agency--1.4%
1,000 Home Ownership Funding Corp. $ 974
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $1,000) $ 974
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.4%
Automotive--2.7%
Chevy Chase Auto Receivables Trust, Series 1997-4, Class A
$ 686 6.25%Due 6/15/04 $ 691
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
Olympic Automobile Receivable Trust, Series 1996-D, Class
A-4
$ 600 6.05%Due 8/15/02 $ 605
Western Financial Grantor Trust, Series 1994-4, Class A-1
25 7.10Due 1/11/00 25
Series 1995-5, Class A-1
182 5.875Due 3/1/02 183
Western Financial Owner Trust, Series 1997-A, Class A-3
307 6.50Due 9/20/01 311
-------
1,815
-------
Credit Card--1.5%
Circuit City Credit Card Master Trust, Series 1994-2,
Class A
1,000 8.00Due 11/15/03 1,026
-------
Home Equity Loans--0.2%
The Money Store Trust, Series 1997-1
161 7.36Due 5/16/01 161
- ------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (Cost $2,988) $ 3,002
- ------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--2.4%
Donaldson, Lufkin & Jenrette
Mortgage Acceptance Corp.,
Series 1994-Q8, Class 2-A1
$ 199 7.25%Due 5/25/24 $ 202
Financial Asset Securitization, Inc.,
Series 1997-NAMC, Class FXA-3
240 7.35Due 4/25/27 239
First Union-Lehman Brothers-Bank of America Commercial
Mortgage Trust, Series 1998-C2, Class A2
510 6.56Due 5/15/07 527
Mortgage Capital Funding, Inc. Commercial Mortgage Backed
Security, Series 1998-MC1, Class A2
605 7.00Due 1/18/08 636
- ------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $1,562) $1,604
- ------------------------------------------------------------------------------
CORPORATE AND FOREIGN GOVERNMENT BONDS--8.7%
Financial--3.6%
Lehman Brothers Holdings, Inc.
Medium Term Note
$ 305 6.90%Due 1/29/01 $ 310
Lumbermens Mutual Casualty Co.
460 9.15Due 7/1/26 542
90 8.45Due 12/1/97 92
Ford Motor Credit Co.
800 6.00Due 1/14/03 812
Salomon, Inc. Medium Term Note
650 6.65Due 7/15/01 667
-------
2,423
-------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
The Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------
Balanced Portfolio--Continued
<C> <S> <C>
Industrial--1.2%
Penney (J.C.), Inc.
$ 830 6.90%Due 8/15/26, putable 08/15/03 $ 858
-------
Sanitary Services--1.7%
WMX Technologies, Inc.
285 8.25Due 11/15/99 292
800 7.10Due 8/1/26, putable 08/01/03 849
-------
1,141
-------
Sovereign--1.0%
Quebec Province, Canada Medium Term Note
600 7.22Due 7/22/36, putable 7/22/06 and 7/22/16 695
-------
Utility--1.2%
Tenaga Nasional Berhad
1,000 7.20Due 4/29/07, putable 4/29/02 825
- -------------------------------------------------------------------
TOTAL CORPORATE AND FOREIGN GOVERNMENT BONDS (Cost
$5,943) $ 5,942
- -------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--4.3%
Fannie Mae REMIC Trust--2.5%
Series 1991-37, Class G
$ 27 8.15%Due 8/25/05 $ 27
Series 1996-M4, Class A
190 7.75Due 3/17/17 195
Series 92-200, Class E
236 6.25Due 6/25/17 236
Pool #440700
1,313 6.00Due 11/1/28 1,296
-------
1,754
-------
Freddie Mac REMIC Trust--1.8%
Pool #G00767
620 7.50Due 8/1/27 636
Pool #C18079
571 6.00Due 11/1/28 564
-------
1,200
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $2,938) $ 2,954
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--13.1%
U.S. Treasury Notes--13.1%
$ 700 5.625%Due 10/31/99 $ 706
500 7.75Due 1/31/00 517
1,925 7.75Due 2/15/01 2,050
1,470 6.625Due 7/31/01 1,542
2,475 7.50Due 2/15/05 2,835
1,300 3.625Due 1/15/08 1,306
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $8,849) $ 8,956
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ----------------------------------------------
<C> <S> <C>
FLOATING RATE BANK NOTES--1.9%
Lloyds Bank PLC
$ 800 6.00%Due 12/15/98 $ 661
National Westminster Bank
800 5.375Due 11/30/98 633
- ----------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,417) $ 1,294
- ----------------------------------------------
SHORT-TERM INVESTMENT--8.5%
Societe Generale, Paris
$5,828 5.375%Due 12/1/98 $ 5,828
- ----------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$5,828) $ 5,828
- ----------------------------------------------
TOTAL INVESTMENTS--99.3%
(Cost $53,632) $67,732
- ----------------------------------------------
Other assets, less liabilities--0.7% 448
- ----------------------------------------------
NET ASSETS--100.0% $68,180
- ----------------------------------------------
- ----------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
44
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Diversified Growth Portfolio
<C> <S> <C>
COMMON STOCKS--94.6%
Advertising--1.4%
14,000 Interpublic Group of Cos., Inc. $ 963
44,100 Snyder Communications, Inc. 1,567
-------
2,530
-------
Banking--2.4%
23,000 Banc One Corp. 1,180
6,000 Fifth Third Bancorp 398
17,500 First Union Corp. 1,063
9,200 State Street Corp. 631
26,000 Wells Fargo & Co. 936
-------
4,208
-------
Beverages--3.5%
14,000 Anheuser-Busch Cos., Inc. 849
28,000 Coca-Cola (The) Co. 1,962
40,800 PepsiCo, Inc. 1,578
42,000 Starbucks Corp.* 1,936
-------
6,325
-------
Chemicals--0.6%
18,000 du Pont (E.I.) de Nemours & Co. 1,058
-------
Commercial Services--2.0%
33,400 Cintus Corp. 1,837
35,000 Paycheck, Inc. 1,741
-------
3,578
-------
Computers--5.9%
41,175 Cisco Systems, Inc.* 3,104
44,800 Computer Sciences Corp.* 2,559
21,600 Dell Computer Corp.* 1,314
10,500 EMC Corp. 761
17,500 International Business Machines Corp. 2,888
-------
10,626
-------
Consumer Products--2.5%
64,000 Philip Morris Cos., Inc. 3,580
28,000 UST, Inc. 973
-------
4,553
-------
Cosmetics and Personal Care--2.2%
26,000 Gillette Co. 1,194
31,500 Procter & Gamble Co. 2,759
-------
3,953
-------
Diversified Financial Services--7.3%
12,600 American Express Co. 1,261
65,700 Fannie Mae 4,779
56,000 Freddie Mac 3,388
23,000 MBNA Corp. 522
6,800 Merrill Lynch & Co. 510
18,000 Price (T. Rowe) Associates, Inc. 644
34,000 Schwab (Charles) Corp. 1,917
-------
13,021
-------
Electric--1.0%
22,000 Cinergy Corp. 760
17,000 Duke Energy Corp. 1,064
-------
1,824
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Electrical Components and Equipment--0.9%
25,000 Emerson Electric Co. $ 1,625
-------
Electronics--0.8%
22,000 Solectron Corp.* 1,456
-------
Health Care--4.6%
34,000 Becton Dickinson & Co. 1,445
5,500 Guidant Corp. 472
87,800 Health Management Associates, Inc., Class A* 1,904
30,000 Johnson & Johnson Co. 2,438
28,000 Medtronic, Inc. 1,895
-------
8,154
-------
Housewares--0.9%
36,700 Newell Co. 1,624
-------
Insurance--4.2%
20,000 Allstate Corp. 815
48,775 American International Group, Inc. 4,584
26,800 MBIA, Inc. 1,735
8,000 Nationwide Financial Services, Class A 385
-------
7,519
-------
Leisure Time--1.0%
53,800 Carnival Corp., Class A 1,856
-------
Media--2.2%
38,000 Disney (The Walt) Co. 1,223
50,200 Fox Entertainment Group, Inc.* 1,186
15,000 Time Warner, Inc. 1,586
-------
3,995
-------
Miscellaneous Manufacturing--3.9%
61,500 General Electric Co. 5,566
21,800 Tyco International Ltd. 1,435
-------
7,001
-------
Office and Business Equipment--0.4%
6,500 Xerox Corp. 699
-------
Oil and Gas Producers--10.5%
32,000 Chevron Corp. 2,676
72,000 Conoco, Inc.* 1,706
60,800 Exxon Corp. 4,564
54,700 Mobil Corp. 4,714
63,800 Royal Dutch Petroleum Co. ADR 2,999
48,800 Schlumberger Ltd. ADR 2,181
-------
18,840
-------
Pharmaceuticals--10.0%
19,000 Bristol-Myers Squibb Co. 2,329
27,000 Cardinal Health, Inc. 1,853
31,000 Elan Corp. PLC* 2,112
24,000 Lilly (Eli) & Co. 2,153
24,400 Merck & Co., Inc. 3,779
27,000 Pfizer, Inc. 3,014
11,800 Schering-Plough Corp. 1,255
18,000 Warner-Lambert Co. 1,359
-------
17,854
-------
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
Diversified Growth Portfolio--Continued
<C> <S> <C>
Retail--9.9%
14,000 Albertson's, Inc. $ 799
34,000 Dayton-Hudson Corp. 1,530
14,000 Gap (The), Inc. 1,030
72,100 Home Depot (The), Inc. 3,587
36,000 Kohl's Corp.* 1,771
53,775 Staples, Inc.* 1,879
48,000 Walgreen Co. 2,577
62,700 Wal-Mart Stores, Inc. 4,722
--------
17,895
--------
Semiconductors--2.7%
32,800 Intel Corp. 3,530
11,000 Motorola, Inc. 682
7,500 Texas Instruments, Inc. 573
--------
4,785
--------
Software--3.6%
47,000 Microsoft Corp.* 5,734
19,000 Oracle Corp.* 651
--------
6,385
--------
Telecommunication Equipment--2.6%
30,000 Lucent Technologies, Inc. 2,582
4,000 Nokia OYJ 392
30,000 Tellabs, Inc.* 1,622
--------
4,596
--------
Telephone--7.6%
48,000 Ameritech Corp. 2,598
32,700 AT&T Corp. 2,037
28,600 Bell Atlantic Corp. 1,591
34,000 BellSouth Corp. 2,967
33,000 MCI WORLDCOM, Inc.* 1,947
50,000 SBC Communications, Inc. 2,397
--------
13,537
- -----------------------------------------------------------
TOTAL COMMON STOCKS (Cost
$101,757) $169,497
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
OTHER INVESTMENT--0.9%
$14,000 Standard and Poor's 500 Depository Receipt Unit Trust,
Series I 1,626
- -----------------------------------------------------------------------------
TOTAL OTHER INVESTMENT
(Cost $1,557) $ 1,626
- -----------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
$365 U.S. Treasury Bill #
4.57% Due 1/28/99 $ 362
- -----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION (Cost $361) $ 362
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENT--4.3%
$7,649 Societe Generale, Paris, France
5.375% Due 12/1/98 $ 7,649
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $7,649) $ 7,649
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $111,324) $179,134
- -----------------------------------------------------------------------------
Liabilities, less other assets--0.0% (65)
- -----------------------------------------------------------------------------
NET ASSETS--100.0% $179,069
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS:
Number
of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P
500 24 $ 6,975 Long 12/18/98 $ 348
- --------------------------------------------------------
</TABLE>
*Non-income producing security.
#Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
Equity Index Portfolio
<C> <S> <C>
COMMON STOCKS--98.9%
Advertising--0.2%
18,900 Interpublic Group Cos., Inc. $ 1,299
23,600 Omnicom Group, Inc. 1,261
--------
2,560
--------
Aerospace and Defense--1.5%
78,100 AlliedSignal, Inc. 3,436
140,600 Boeing (The) Co. 5,712
17,600 General Dynamics Corp. 1,022
10,300 Goodrich (B.F.) Co. 391
27,254 Lockheed Martin Corp.* 2,828
9,600 Northrop Grumman Corp. 780
47,100 Raytheon Co., Class B 2,608
31,700 United Technologies Corp. 3,398
--------
20,175
--------
Airlines--0.3%
25,400 AMR Corp.* 1,675
21,100 Delta Air Lines, Inc. 1,133
46,675 Southwest Airlines Co. 1,004
13,100 U.S. Airways Group, Inc.* 681
--------
4,493
--------
Apparel--0.2%
10,000 Fruit of the Loom, Inc., Class A* 147
9,200 Liz Clairborne, Inc. 312
40,000 Nike, Inc. Class B 1,600
7,900 Reebok International Ltd.* 126
5,000 Russell Corp. 119
16,900 VF Corp. 829
--------
3,133
--------
Auto Manufacturers--1.2%
168,600 Ford Motor Co. 9,315
91,000 General Motors Corp. 6,370
9,320 Navistar International Corp.* 241
10,920 PACCAR, Inc. 497
--------
16,423
--------
Auto Parts and Equipment--0.3%
10,800 Cooper Tire & Rubber Co. 211
22,984 Dana Corp. 896
24,875 Genuine Parts Co. 819
21,800 Goodyear Tire & Rubber (The) Co. 1,237
17,000 TRW, Inc. 936
--------
4,099
--------
Banks--6.9%
104,000 Bank of New York Co., Inc. 3,562
162,942 Bank One Corp. 8,361
241,786 BankAmerica Corp. 15,761
40,900 BankBoston Corp. 1,702
13,400 Bankers Trust Corp. 1,166
39,800 BB&T Corp. 1,470
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
119,192 Chase Manhattan Corp. $ 7,561
21,600 Comerica, Inc. 1,393
37,275 Fifth Third Bancorp 2,474
134,856 First Union Corp. 8,192
79,002 Fleet Financial Group, Inc. 3,293
29,450 Huntington Bancshares, Inc. 872
61,200 KeyCorp 1,878
36,300 Mellon Bank Corp. 2,285
21,100 Mercantile Bancorp, Inc. 930
24,600 Morgan (J.P.) & Co., Inc. 2,629
45,900 National City Corp. 3,087
42,000 PNC Bank Corp. 2,166
29,800 Regions Financial Corp. 1,155
15,000 Republic New York Corp. 701
22,500 State Street Corp. 1,544
24,200 Summit Bancorp 1,012
29,100 SunTrust Banks, Inc. 2,032
36,600 Synovus Financial Corp. 807
103,417 U.S. Bancorp 3,807
17,700 Union Planters Corp. 843
28,800 Wachovia Corp. 2,515
225,060 Wells Fargo & Co.* 8,102
--------
91,300
--------
Beverages--3.0%
67,100 Anheuser-Busch Cos., Inc. 4,068
9,600 Brown-Forman Corp., Class B 698
343,100 Coca-Cola (The) Co. 24,038
56,300 Coca-Cola Enterprises 2,129
5,100 Coors (Adolph) Co., Class B 254
204,900 PepsiCo, Inc. 7,927
--------
39,114
--------
Biotechnology--0.6%
35,300 Amgen, Inc. 2,656
83,600 Monsanto Co. 3,788
33,600 Pioneer Hi-Bred International, Inc. 1,006
--------
7,450
--------
Building Materials--0.2%
5,600 Armstrong World Industries, Inc. 373
47,300 Masco Corp. 1,366
7,500 Owens Corning Corp. 280
--------
2,019
--------
Chemicals--1.5%
32,200 Air Products & Chemicals, Inc. 1,228
31,200 Dow Chemical Co. 3,038
157,500 Du Pont (E.I.) de Nemours & Co. 9,253
11,075 Eastman Chemical Co. 642
20,087 Engelhard Corp. 388
8,200 Great Lakes Chemical Corp. 327
13,200 Hercules, Inc. 434
18,100 Morton International Inc. 533
9,200 Nalco Chemical Co. 308
22,000 Praxair, Inc. 840
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
24,800 Rohm & Haas Co. $ 866
24,100 Sherwin-Williams Co. 684
14,000 Sigma-Aldrich Corp. 450
18,800 Union Carbide Corp. 841
10,600 W.R. Grace & Company* 175
--------
20,007
--------
Commercial Services--0.6%
14,000 H & R Block, Inc. 629
119,411 Cendant Corp.* 2,269
11,200 Deluxe Corp. 389
23,800 Dun & Bradstreet (The) Corp. 718
18,000 Ecolab, Inc. 557
20,600 Equifax, Inc. 855
22,700 Paychex, Inc. 1,129
35,800 Service Corp. International 1,338
--------
7,884
--------
Computers--6.6%
49,900 3Com Corp.* 1,931
18,700 Apple Computer, Inc.* 597
30,000 Ascend Communications, Inc.* 1,686
22,900 Cabletron Systems, Inc.* 321
10,100 Ceridian Corp.* 657
216,375 Cisco Systems, Inc.* 16,309
232,557 Compaq Computer Corp. 7,558
22,000 Computer Sciences Corp.* 1,257
6,900 Data General Corp.* 125
176,100 Dell Computer Corp.* 10,709
68,500 Electronic Data Systems Corp. 2,671
69,500 EMC Corp.* 5,039
21,700 Gateway 2000, Inc.* 1,218
144,600 Hewlett-Packard Co. 9,074
129,800 International Business Machines Corp. 21,417
33,800 Seagate Technology, Inc.* 997
26,300 Silicon Graphics, Inc.* 322
52,700 Sun Microsystems, Inc.* 3,903
35,400 Unisys Corp.* 1,009
--------
86,800
--------
Cosmetics and Personal Care--2.5%
7,700 Alberto-Culver Co., Class B 197
36,600 Avon Products, Inc. 1,487
41,100 Colgate-Palmolive Co. 3,519
156,200 Gillette Co. 7,175
14,900 International Flavors & Fragrances, Inc. 624
76,184 Kimberly-Clark Corp. 4,009
186,600 Procter & Gamble Co. 16,351
--------
33,362
--------
Diversified Financial Services--5.0%
63,500 American Express Co. 6,354
48,207 Associates First Capital Corp., Class A 3,754
15,800 Bear Stearns Cos., Inc. 664
9,200 Capital One Financial Corp. 1,012
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
318,087 Citigroup, Inc.* $ 15,964
15,500 Countrywide Credit Industries, Inc. 767
144,300 Fannie Mae 10,498
35,200 Franklin Resources, Inc. 1,505
94,400 Freddie Mac 5,711
68,499 Household International, Inc. 2,680
16,500 Lehman Brothers Holdings, Inc. 824
104,630 MBNA Corp. 2,374
48,500 Merrill Lynch & Co., Inc. 3,637
81,449 Morgan Stanley, Dean Witter & Co. 5,681
13,200 Providian Financial Corp. 1,212
37,150 Schwab (Charles) Corp. 2,094
23,300 SLM Holding Corp. 1,025
--------
65,756
--------
Electric--2.5%
24,500 AES Corp.* 1,121
19,100 Ameren Corp. 787
26,600 American Electric Power Co. 1,234
20,700 Baltimore Gas & Electric Co. 635
21,100 Carolina Power & Light Co. 979
29,600 Central & South West Corp. 814
22,010 Cinergy Corp. 761
32,500 Consolidated Edison Co. of New York, Inc. 1,651
27,300 Dominion Resources, Inc. 1,261
20,200 DTE Energy Co. 881
50,243 Duke Energy Corp. 3,143
49,200 Edison International 1,353
34,300 Entergy Corp. 1,005
33,000 FirstEnergy Corporation 1,021
25,200 FPL Group, Inc. 1,544
17,800 GPU, Inc. 780
41,218 Houston Industries, Inc. 1,304
15,500 New Century Energies, Inc. 745
26,100 Niagara Mohawk Power Corp.* 401
21,100 Northern States Power Co. 574
41,400 PacifiCorp 776
31,000 Peco Energy Co. 1,244
53,200 PG&E Corp. 1,646
21,000 PP&L Resources, Inc. 574
32,300 Public Service Enterprise Group, Inc. 1,260
97,100 Southern Co. 2,864
38,912 Texas Utilities Co. 1,734
30,200 Unicom Corp. 1,138
--------
33,230
--------
Electrical Components and Equipment--0.3%
61,300 Emerson Electric Co. 3,985
--------
Electronics--0.4%
30,456 AMP, Inc. 1,473
6,400 EG&G, Inc. 179
17,600 Honeywell, Inc. 1,407
11,800 Johnson Controls, Inc. 683
6,100 Millipore Corp. 172
15,425 Parker Hannifin Corp. 536
6,800 Perkin-Elmer Corp. 634
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
6,600 Tektronix, Inc. $ 177
7,900 Thomas & Betts Corp. 342
--------
5,603
--------
Engineering and Construction--0.0%
11,000 Fluor Corp. 471
5,700 Foster Wheeler Corp. 98
--------
569
--------
Entertainment--0.0%
14,100 Harrah's Entertainment, Inc.* 219
25,000 Mirage Resorts, Inc.* 372
--------
591
--------
Environmental Control--0.3%
24,200 Browning-Ferris Industries, Inc. 714
79,585 Waste Management, Inc. 3,412
--------
4,126
--------
Food--2.8%
34,200 Albertson's, Inc. 1,952
38,200 American Stores Co. 1,282
83,370 Archer-Daniels-Midland Co. 1,532
40,000 Bestfoods 2,325
62,500 Campbell Soup Co. 3,570
67,900 ConAgra, Inc. 2,135
21,500 General Mills, Inc. 1,623
5,300 Great Atlantic & Pacific Tea Co., Inc. 145
50,400 Heinz (H.J.) Co. 2,939
19,900 Hershey Foods Corp. 1,338
56,600 Kellogg Co. 2,073
35,700 Kroger Co.* 1,894
19,900 Quaker Oats Co. 1,166
43,400 Ralston-Ralston Purina Group 1,511
67,700 Safeway, Inc.* 3,575
65,000 Sara Lee Corp. 3,794
16,800 Supervalu, Inc. 434
47,000 Sysco Corp. 1,266
20,700 Winn-Dixie Stores, Inc. 834
16,200 Wrigley (W.M.) Jr. Co. 1,428
--------
36,816
--------
Forest Products and Paper--0.7%
7,800 Boise Cascade Corp. 247
13,300 Champion International Corp. 553
30,700 Fort James Corp. 1,201
13,000 Georgia-Pacific Corp. 738
42,735 International Paper Co. 1,856
15,300 Louisiana-Pacific Corp. 260
14,400 Mead Corp. 437
4,000 Potlatch Corp. 151
396 Smurfit-Stone Container Corp. 6
7,700 Temple-Inland, Inc. 413
9,600 Union Camp Corp. 621
14,050 Westvaco Corp. 395
27,700 Weyerhaeuser Co. 1,388
15,500 Willamette Industries, Inc. 542
--------
8,808
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Gas--0.1%
3,100 Eastern Enterprises $ 126
6,600 NICOR, Inc. 278
4,400 ONEOK, Inc. 153
4,900 Peoples Energy Corp. 185
33,493 Sempra Energy* 839
--------
1,581
--------
Hand and Machine Tools--0.2%
12,900 Black & Decker Corp. 699
13,600 Grainger (W.W.), Inc. 575
5,500 Milacron, Inc. 111
8,200 Snap-On, Inc. 279
12,400 Stanley Works (The) 379
--------
2,043
--------
Health Care--2.7%
9,100 Allergan, Inc. 554
7,800 Bard (C.R.), Inc. 357
7,800 Bausch & Lomb, Inc. 433
39,700 Baxter International, Inc. 2,523
34,400 Becton, Dickinson & Co. 1,462
15,600 Biomet, Inc. 597
27,200 Boston Scientific Corp.* 1,346
89,795 Columbia/HCA Healthcare Corp. 2,211
21,000 Guidant Corp. 1,802
58,800 HEALTHSOUTH Corp.* 790
23,200 Humana, Inc.* 460
187,100 Johnson & Johnson 15,202
10,200 Mallinckrodt, Inc. 330
15,050 Manor Care, Inc.* 478
65,300 Medtronic, Inc. 4,420
11,700 St. Jude Medical, Inc.* 340
42,900 Tenet Healthcare Corp.* 1,268
27,200 United Healthcare Corp. 1,227
--------
35,800
--------
Holding Companies--Diversified--0.1%
48,200 Seagram (The) Co. Ltd. 1,654
--------
Home Builders--0.1%
8,300 Centex Corp. 296
4,800 Fleetwood Enterprises Inc. 162
5,500 Kaufman & Broad Home Corp. 139
6,000 Pulte Corp. 153
--------
750
--------
Home Furnishings--0.1%
12,700 Maytag Corp. 687
10,600 Whirlpool Corp. 594
--------
1,281
--------
Household Products and Wares--0.9%
9,800 American Greetings Corp., Class A 415
16,300 Avery-Dennison Corp. 781
14,500 Clorox Co. 1,610
24,000 Fortune Brands, Inc. 818
5,100 Jostens, Inc. 120
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
12,300 Moore Corp. Ltd. $ 135
20,900 Rubbermaid, Inc. 691
8,000 Tupperware Corp. 140
89,100 Unilever N.V., New York Shares 6,889
--------
11,599
--------
Housewares--0.1%
22,600 Newell Co. 1,000
--------
Insurance--3.9%
20,057 Aetna, Inc. 1,551
115,330 Allstate Corp. 4,700
35,170 American General Corp. 2,477
146,068 American International Group, Inc. 13,730
23,500 AON Corp. 1,354
23,000 Chubb (The) Corp. 1,611
29,500 CIGNA Corp. 2,295
23,300 Cincinnati Financial Corp. 910
43,463 Conseco, Inc. 1,440
10,500 General Re Corp. 2,452
32,500 Hartford Financial Services Group, Inc. 1,794
14,737 Jefferson-Pilot Corp. 1,006
14,000 Lincoln National Corp. 1,172
16,000 Loews Corp. 1,600
35,550 Marsh & McLennan Cos., Inc. 2,069
13,800 MBIA, Inc. 894
15,800 MGIC Investment Corp. 694
10,100 Progressive Corp. 1,499
18,800 Provident Companies, Inc. 723
19,600 SAFECO Corp. 842
32,844 St. Paul Cos., Inc. 1,158
28,800 SunAmerica, Inc. 2,282
19,500 Torchmark Corp. 741
8,700 Transamerica Corp. 924
19,200 UNUM Corp. 1,034
--------
50,952
--------
Iron and Steel--0.1%
27,427 Allegheny Teledyne, Inc. 564
500 Armco, Inc. 2
18,000 Bethlehem Steel Corp.* 149
12,300 Nucor Corp. 517
12,300 USX-U.S. Steel Group, Inc. 301
--------
1,533
--------
Leisure Time--0.0%
13,800 Brunswick Corp. 304
--------
Lodging--0.1%
36,300 Hilton Hotels Corp. 790
34,800 Marriott International, Inc. 1,022
--------
1,812
--------
Machinery--Construction and Mining--0.2%
10,400 Case Corp. 252
50,800 Caterpillar, Inc. 2,511
6,600 Harnischfeger Industries, Inc. 66
--------
2,829
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
Machinery--Diversified--0.3%
3,400 Briggs & Stratton Corp. $ 171
5,400 Cummins Engine Co., Inc. 200
34,100 Deere & Co. 1,191
31,000 Dover Corp. 1,104
22,950 Ingersoll-Rand Co. 1,074
8,200 McDermott International, Inc. 220
1,100 NACCO Industries, Inc., Class A 96
23,100 Thermo Electron Corp.* 390
--------
4,446
--------
Media--3.3%
99,600 CBS Corp.* 2,969
34,600 Clear Channel Communications, Inc.* 1,618
51,400 Comcast Corp., Class A 2,499
285,100 Disney (The Walt) Co. 9,177
19,400 Donnelley (R.R.) & Sons Co. 823
13,000 Dow Jones & Co., Inc. 622
39,600 Gannett Co., Inc. 2,557
10,200 King World Productions, Inc.* 278
11,000 Knight-Ridder, Inc. 566
13,800 McGraw-Hill Cos., Inc. 1,235
84,800 MediaOne Group, Inc.* 3,434
7,300 Meredith Corp. 283
26,400 New York Times Co., Class A 820
72,800 Tele-Communications, Inc., Class A 3,076
83,400 Time Warner, Inc. 8,820
12,100 Times Mirror Co., Class A 709
17,000 Tribune Co. 1,090
49,800 Viacom, Inc., Class B* 3,315
--------
43,891
--------
Metal Fabricate and Hardware--0.0%
8,700 Timken (The) Co. 167
13,475 Worthington Industries, Inc. 164
--------
331
--------
Metals--Diversified--0.4%
31,700 Alcan Aluminium Ltd. 844
26,000 Aluminum Co. of America 1,927
5,500 ASARCO, Inc. 107
25,000 Freeport-McMoRan Copper & Gold, Inc., Class B 327
23,100 Inco Ltd. 267
8,200 Phelps Dodge Corp. 465
34,800 Placer Dome, Inc. 507
10,000 Reynolds Metals Co. 549
--------
4,993
--------
Mining--0.2%
51,900 Barrick Gold Corp. 1,038
32,000 Battle Mountain Gold Co. 150
13,050 Cyprus Amax Minerals Co. 148
29,400 Homestake Mining Co. 316
23,297 Newmont Mining Corp. 463
--------
2,115
--------
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
Miscellaneous Manufacturing--5.1%
3,900 Aeroquip-Vickers, Inc. $ 142
16,200 Cooper Industries, Inc. 796
32,300 Corning, Inc. 1,296
9,600 Crane Co. 310
18,600 Danaher Corp. 849
44,900 Eastman Kodak Co. 3,258
9,900 Eaton Corp. 676
4,800 FMC Corp.* 279
452,700 General Electric Co. 40,969
34,800 Illinois Tool Works, Inc. 2,212
16,500 ITT Industries, Inc. 594
56,200 Minnesota Mining & Manufacturing Co. 4,514
5,800 National Service Industries, Inc. 224
17,266 Pall Corp. 401
6,100 Polaroid Corp. 130
24,600 PPG Industries, Inc. 1,505
11,700 Raychem Corp. 399
23,600 Tenneco, Inc. 841
22,800 Textron, Inc. 1,771
89,644 Tyco International Ltd. 5,900
--------
67,066
--------
Office and Business Equipment--0.6%
11,100 Harris Corp. 421
38,200 Pitney Bowes, Inc. 2,139
45,700 Xerox Corp. 4,913
--------
7,473
--------
Oil and Gas Producers--6.2%
12,700 Amerada Hess Corp. 705
132,800 Amoco Corp. 7,827
16,700 Anadarko Petroleum Corp. 471
13,700 Apache Corp. 315
10,600 Ashland, Inc. 515
44,700 Atlantic Richfield Co. 2,973
24,652 Burlington Resources, Inc. 878
91,100 Chevron Corp. 7,618
29,600 Coastal Corp. 1,032
339,300 Exxon Corp. 25,469
7,000 Helmerich & Payne, Inc. 121
6,600 Kerr-McGee Corp. 261
108,800 Mobil Corp. 9,377
49,100 Occidental Petroleum Corp. 994
14,800 Oryx Energy Co.* 204
6,600 Pennzoil Co. 245
36,000 Phillips Petroleum Co. 1,512
11,900 Rowan Cos., Inc.* 117
298,400 Royal Dutch Petroleum Co. 14,025
13,000 Sunoco, Inc. 440
74,600 Texaco, Inc. 4,294
34,976 Union Pacific Resources Group, Inc. 391
33,600 Unocal Corp. 1,138
42,800 USX-Marathon Group, Inc. 1,214
--------
82,136
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
Oil and Gas Services--0.5%
44,240 Baker Hughes, Inc. $ 810
61,100 Halliburton Co. 1,795
75,700 Schlumberger Ltd. 3,383
--------
5,988
--------
Packaging and Containers--0.2%
4,200 Ball Corp. 180
7,400 Bemis Co. 280
17,300 Crown Cork & Seal Co., Inc. 584
21,600 Owens-Illinois, Inc.* 694
11,606 Sealed Air Corp.* 512
--------
2,250
--------
Pharmaceuticals--9.3%
214,300 Abbott Laboratories 10,286
12,000 ALZA Corp.* 627
183,100 American Home Products Corp. 9,750
138,400 Bristol-Myers Squibb Co. 16,963
27,850 Cardinal Health, Inc. 1,911
153,196 Lilly (Eli) & Co. 13,740
165,700 Merck & Co., Inc. 25,663
181,800 Pfizer, Inc. 20,293
70,720 Pharmacia & Upjohn, Inc. 3,682
102,100 Schering-Plough Corp. 10,861
114,200 Warner-Lambert Co. 8,622
--------
122,398
--------
Pipelines--0.5%
11,600 Columbia Energy Group 658
13,300 Consolidated Natural Gas Co. 722
45,800 Enron Corp. 2,407
15,300 Sonat, Inc. 454
59,100 Williams (The) Cos., Inc. 1,703
--------
5,944
--------
Retail--6.1%
21,300 Autozone, Inc.* 642
13,900 Circuit City Stores, Inc. 503
15,200 Consolidated Stores Corp.* 327
30,103 Costco Cos., Inc.* 1,889
54,200 CVS Corp. 2,676
19,400 Darden Restaurants, Inc. 307
61,100 Dayton-Hudson Corp. 2,750
15,400 Dillards, Inc., Class A 529
25,700 Dollar General 612
29,300 Federated Department Stores, Inc.* 1,221
21,400 Fred Meyer, Inc.* 1,089
54,700 Gap (The), Inc. 4,024
9,900 Harcourt General, Inc. 512
204,500 Home Depot (The), Inc. 10,174
18,900 IKON Office Solutions, Inc. 184
68,500 KMart Corp.* 1,045
22,000 Kohl's Corp.* 1,082
31,700 Limited (The), Inc. 917
5,400 Longs Drug Stores, Inc. 192
48,900 Lowe's Cos., Inc. 2,066
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
Equity Index Portfolio--Continued
<C> <S> <C>
32,100 MAY Department Stores Co. $ 1,936
95,300 McDonald's Corp. 6,677
20,700 Nordstrom, Inc. 771
35,200 Penney (J.C.) Co., Inc. 1,936
8,900 Pep Boys-Manny, Moe & Jack 126
36,000 Rite Aid Corp. 1,670
54,600 Sears, Roebuck & Co. 2,590
40,000 Staples, Inc.* 1,398
14,000 Tandy Corp. 631
44,100 TJX Cos., Inc. 1,130
36,400 Toys "R" Us, Inc.* 719
21,230 Tricon Global Restaurants* 967
18,800 Venator Group, Inc* 148
69,200 Walgreen Co. 3,715
311,100 Wal-Mart Stores, Inc. 23,430
17,700 Wendy's International, Inc. 354
--------
80,939
--------
Savings and Loans--0.3%
8,000 Golden West Financial Corp. 758
82,461 Washington Mutual, Inc. 3,195
--------
3,953
--------
Semiconductors--3.1%
20,000 Advanced Micro Devices, Inc.* 554
51,000 Applied Materials, Inc.* 1,976
233,800 Intel Corp. 25,163
12,100 KLA-Tencor Corp.* 412
19,600 LSI Logic Corp.* 304
29,600 Micron Technology, Inc.* 1,223
83,200 Motorola, Inc. 5,158
22,900 National Semiconductor Corp.* 329
26,600 Rockwell International Corp. 1,302
54,300 Texas Instruments, Inc. 4,147
--------
40,568
--------
Software--4.7%
9,400 Adobe Systems, Inc. 421
6,500 Autodesk, Inc. 236
41,900 Automatic Data Processing, Inc. 3,226
28,700 BMC Software, Inc.* 1,465
78,125 Computer Associates International, Inc. 3,457
62,200 First Data Corp. 1,660
60,000 HBO & Co. 1,496
23,100 IMS Health, Inc. 1,533
342,900 Microsoft Corp.* 41,834
49,200 Novell, Inc.* 815
135,400 Oracle Corp.* 4,637
37,900 Parametric Technology Corp.* 644
32,100 Peoplesoft, Inc.* 660
3,700 Shared Medical Systems Corp. 194
--------
62,278
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<S> <C> <C>
Telecommunication Equipment--1.7%
12,030 Andrew Corp.* $ 192
21,000 General Instrument Corp.* 591
182,928 Lucent Technologies, Inc. 15,743
90,760 Northern Telecom Ltd. 4,237
10,400 Scientific-Atlanta, Inc. 202
27,000 Tellabs, Inc.* 1,460
--------
22,425
--------
Telecommunications--0.6%
79,800 AirTouch Communications, Inc.* 4,564
23,900 Frontier Corp. 720
39,800 Nextel Communications, Inc., Class A 856
57,450 Sprint Corp. (PCS Group)* 919
--------
7,059
--------
Telephone--7.2%
38,100 Alltel Corp. 2,019
153,400 Ameritech Corp. 8,303
251,300 AT&T Corp. 15,659
216,160 Bell Atlantic Corp. 12,024
136,900 Bellsouth Corporation 11,945
134,100 GTE Corp. 8,314
247,170 MCI WORLDCOM, Inc.* 14,583
272,312 SBC Communications, Inc. 13,054
59,800 Sprint Corp. (FON Group) 4,350
69,832 U.S. West, Inc. 4,347
--------
94,598
--------
Textiles--0.0%
2,600 Springs Industries, Inc. 101
--------
Tobacco--1.6%
338,400 Philip Morris Companies, Inc. 18,929
45,200 RJR Nabisco Holdings Corp. 1,302
25,800 UST, Inc. 897
--------
21,128
--------
Toys, Games and Hobbies--0.2%
18,275 Hasbro, Inc. 641
40,745 Mattel, Inc. 1,408
--------
2,049
--------
Transportation--0.6%
65,795 Burlington Northern Santa Fe Corp. 2,237
30,400 CSX Corp. 1,267
20,560 FDX Corp.* 1,334
45,900 Laidlaw, Inc. 456
52,700 Norfolk Southern Corp. 1,601
34,400 Union Pacific Corp. 1,673
--------
8,568
--------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------------
<C> <S> <C>
Trucking and Leasing--0.0%
10,200 Ryder System, Inc. $ 291
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $856,202) $1,304,429
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.1%
U.S. Treasury Bill #
$ 1,710 4.37% Due 01/07/99 $ 1,691
- ----------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $1,691) $ 1,691
- ----------------------------------------------------------------
SHORT-TERM INVESTMENT--4.6%
Societe Generale, Paris
$60,575 5.375%, 12/01/98 $ 60,575
- ----------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $60,575) $ 60,575
- ----------------------------------------------------------------
TOTAL INVESTMENTS--103.6%
(Cost $918,468) $1,366,695
- ----------------------------------------------------------------
Liabilities, less other assets--
(3.6)% (47,889)
- ----------------------------------------------------------------
NET ASSETS--100.0% $1,318,806
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 47 $13,397 Long December, 1998 $262
- --------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
53
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
Focused Growth Portfolio
<C> <S> <C>
COMMON STOCKS--99.8%
Advertising--1.0%
40,400 Snyder Communications, Inc. $ 1,437
--------
Airlines--0.4%
25,000 Southwest Airlines Co. 538
--------
Banks--2.3%
29,200 State Street Corp. 2,004
31,650 Wells Fargo Co. 1,139
--------
3,143
--------
Beverages--3.2%
9,750 Anheuser-Busch Cos., Inc. 591
24,350 Coca-Cola (The) Co. 1,706
19,100 PepsiCo, Inc. 739
26,800 Starbucks Corp.* 1,236
--------
4,272
--------
Biotechnology--0.6%
12,200 Genentech, Inc.* 855
--------
Commercial Services--3.5%
10,000 Ceridian Corp. 650
29,200 Cintas Corp. 1,606
14,600 H & R Block, Inc. 656
35,000 Paychex, Inc. 1,741
--------
4,653
--------
Computers--5.7%
35,050 Cisco Systems, Inc.* 2,642
29,200 Computer Sciences Corp.* 1,668
12,200 Dell Computer Corp.* 742
9,750 EMC Corp. 707
8,750 International Business Machines Corp. 1,444
10,000 Synopsys, Inc.* 474
--------
7,677
--------
Consumer Products--2.3%
36,900 Philip Morris Cos., Inc. 2,065
29,200 UST, Inc. 1,015
--------
3,080
--------
Cosmetics and Personal Care--1.1%
17,550 Procter & Gamble Co. 1,538
--------
Diversified Financial Services--8.8%
9,750 Capital One Financial Corp. 1,072
36,250 Fannie Mae 2,637
34,750 Freddie Mac 2,102
80,350 MBNA Corp. 1,823
24,350 Merrill Lynch & Co. 1,826
40,000 Schwab (Charles) Corp. 2,255
--------
11,715
--------
Electrical Components and Equipment--0.5%
20,000 Molex, Inc. 721
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
Electronics--1.3%
10,000 Honeywell, Inc. $ 799
14,600 Solectron Corp.* 966
--------
1,765
--------
Health Care--5.8%
30,200 Becton, Dickinson & Co. 1,284
18,100 Guidant Corp. 1,553
97,400 Health Management Associates, Inc., Class A 2,112
9,750 Johnson & Johnson 792
30,200 Medtronic, Inc. 2,044
--------
7,785
--------
Housewares--1.3%
38,950 Newell Co. 1,724
--------
Insurance--4.3%
29,200 American International Group, Inc. 2,745
22,700 MBIA, Inc. 1,470
10,250 Progressive Corp. 1,521
--------
5,736
--------
Leisure Time--1.0%
38,950 Carnival Corp., Class A 1,344
--------
Media--3.8%
12,200 Clear Channel Communications, Inc.* 570
20,000 Disney (The Walt) Co. 644
53,200 Fox Entertainment Group, Inc.* 1,257
29,200 MediaOne Group, Inc.* 1,183
13,150 Time Warner, Inc. 1,391
--------
5,045
--------
Miscellaneous Manufacturing--4.4%
48,700 General Electric Co. 4,407
22,400 Tyco International Ltd. 1,474
--------
5,881
--------
Office and Business Equipment--1.3%
11,700 Pitney Bowes, Inc. 655
9,750 Xerox Corp. 1,048
--------
1,703
--------
Oil and Gas Producers--4.7%
43,850 Conoco, Inc.* 1,039
36,550 Exxon Corp. 2,744
29,200 Mobil Corp. 2,517
--------
6,300
--------
Oil and Gas Services--0.4%
12,800 Schlumberger Ltd. 572
--------
Pharmaceuticals--11.6%
29,250 Cardinal Health, Inc. 2,007
34,350 Elan Corp. PLC ADR* 2,340
24,350 Lilly (Eli) & Co. 2,184
16,550 Merck & Co., Inc. 2,563
24,350 Omnicare, Inc. 697
14,100 Pfizer, Inc. 1,574
22,900 Schering-Plough Corp. 2,436
21,900 Warner-Lambert Co. 1,653
--------
15,454
--------
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------
Focused Growth Portfolio -- Continued
<C> <S> <C>
Pipelines--1.2%
31,650 Enron Corp. $ 1,664
--------
Retail--11.7%
16,550 Albertson's, Inc. 944
24,350 Dayton-Hudson Corp. 1,096
65,000 Home Depot (The), Inc. 3,234
43,850 Kohl's Corp.* 2,157
75,000 Staples, Inc.* 2,620
29,200 Walgreen Co. 1,568
53,550 Wal-Mart Stores, Inc. 4,033
--------
15,652
--------
Semiconductors--2.4%
14,600 Intel Corp. 1,571
12,650 Linear Technology Corp. 886
12,500 Motorola, Inc. 775
--------
3,232
--------
Software--6.6%
9,700 America Online, Inc.* 849
19,500 BMC Software* 996
14,600 Fiserv, Inc.* 645
33,100 Microsoft Corp.* 4,038
34,100 Oracle Corp.* 1,168
29,200 Sterling Commerce, Inc.* 1,059
--------
8,755
--------
Telecommunication Equipment--2.4%
19,500 Lucent Technologies, Inc. 1,678
25,000 Newbridge Networks Corp.* 731
13,400 Tellabs, Inc.* 724
--------
3,133
--------
Telecommunications--1.7%
19,500 Qwest Communications International* 780
9,750 Vodafone Group PLC ADR 1,440
--------
2,220
--------
Telephone--4.5%
34,100 Ameritech Corp. 1,846
23,400 Bellsouth Corp. 2,042
35,000 MCI WORLDCOM, Inc.* 2,065
--------
5,953
- ----------------------------------------------------------
TOTAL COMMON STOCKS (Cost $91,612) $133,547
- ----------------------------------------------------------
SHORT-TERM INVESTMENT--0.2%
Societe Generale, Paris, France
$278 5.375%Due 12/1/98 $ 278
- ----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $278) $ 278
- ----------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $91,890) $133,825
- ----------------------------------------------------------
Other assets, less liabilities--0.0% 53
- ----------------------------------------------------------
NET ASSETS--100.0% $133,878
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
55
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
International Equity Index Portfolio
<C> <S> <C>
COMMON STOCKS--96.7%
Australia--2.2%
600 Aberfoyle Ltd. $ 1
4,400 Amcor Ltd. 19
1,800 Ashton Mining Ltd. 1
2,282 Australian Gas Light Co. Ltd. 17
5,100 Australian National Industries Ltd. 3
7,999 Boral Ltd. 12
1,600 Brambles Industries Ltd. 39
14,420 Broken Hill Proprietary Co. Ltd. 115
3,500 Burns Philp & Co. Ltd. 0
5,872 Coca-Cola Amatil Ltd. 20
8,052 Coles Myer Ltd. 42
6,400 Crown Ltd.* 2
7,200 CSR Ltd. 17
2,600 David Jones Ltd. 3
1,300 Delta Gold NL 2
2,001 Email Ltd. 3
1,022 Faulding (F.H.) & Co. Ltd. 5
11,900 Foster's Brewing Group Ltd. 31
3,209 Futuris Corp. Ltd. 4
9,134 General Property Trust Units 18
4,416 Gio Australia Holdings Ltd. 14
8,917 Goodman Fielder Ltd. 10
1,911 Great Central Mines Ltd. 1
2,800 Hardie (James) Industries Ltd. 5
408 Homestake Mining Co. 5
1,700 Leighton Holdings Ltd. 7
1,750 Lend Lease Corp. Ltd. 43
11,497 M.I.M. Holdings Ltd. 6
1,200 Metal Manufactures Ltd. 2
9,900 National Australia Bank 148
1,600 Newcrest Mining Ltd. 2
13,646 News Corp. Ltd. 96
11,570 Normandy Mining Ltd. 11
5,230 North Ltd. 10
1,885 Orica Ltd. 10
7,100 Pacific Dunlop Ltd. 13
6,200 Pioneer International Ltd. 13
2,698 QBE Insurance Group Ltd. 12
4,315 QCT Resources Ltd. 3
1,400 Resolute Ltd. 1
1,400 RGC Ltd. 3
2,300 Rio Tinto Ltd. 30
800 Rothmans Holdings Ltd. 5
4,200 Santos Ltd. 12
2,800 Schroders Property Fund 5
1,300 Smith (Howard) Ltd. 8
724 Sons of Gwalia Ltd. 2
4,326 Southcorp Holdings Ltd. 14
2,599 Stockland Trust Group 6
89 Stockland Trust Group (New)* 0
2,100 TABCORP Holdings Ltd. 14
8,916 Westfield Trust 21
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------
<C> <S> <C>
13,169 Westpac Banking Corp. Ltd. $ 88
7,855 WMC Ltd. 25
260 Zimbabwe Platinum Mines Ltd. 0
-------
999
-------
Austria--0.3%
19 Austria Mikro Systeme International A.G. 1
168 Austrian Airlines Osterreichische LuftverkehrsA.G.* 5
639 Bank Austria A.G. 33
63 Bank Austria A.G. (Partial Certificates) 3
30 Bau Holdings A.G. 1
70 Bohler-Uddeholm A.G. 3
12 BWT A.G. 3
135 Flughafen Wien A.G. 6
45 Generali Holding Vienna A.G. 10
26 Lenzing 2
78 Mayr-Melnhof Karton A.G. 4
58 Oesterreichische Brau-Beteiligungs A.G. 3
200 Oesterreichische Elektrizitaetswirtschafts A.G. 31
175 OMV A.G. 17
90 Radex-Heraklith Industriebeteiligungs A.G. 2
72 Steyr-Daimler-Puch A.G. 2
33 Universale-Bau A.G. 1
97 VA Technologies A.G. 8
56 Wienerberger Baustoffindustrie A.G. 11
-------
146
-------
Belgium--1.6%
100 Barco Industries 27
18 Bekaert N.V. 10
220 Cimenteries CBR Cementbedrisven 19
100 Compagnie Maritime Belge S.A. 5
435 Delhaize-Le Lion 36
400 Electrabel S.A. 155
300 Fortis A.G. 95
100 Generale de Banque S.A. 37
100 Gevaert N.V. Warrants* 1
50 Glaverbel S.A. 6
200 Groupe Bruxelles Lambert S.A. 38
970 KBC Bancassurance Holding 70
160 Petrofina S.A. 65
118 Royale Belge 19
625 Solvay S.A. 44
625 Tractebel 105
150 Union Miniere Group 7
-------
739
-------
Denmark--0.9%
12 Aarhus Oliefabrik A/S, Class A 1
12 Aarhus Oliefabrik A/S, Class B, Limited Voting 1
20 Aktieselskabet Korn-OG Foderstof KompagnietA/S 0
64 Bang & Olufsen Holdings A/S, Class B 4
231 Carlsberg A/S, Class A 13
178 Carlsberg A/S, Class B 10
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
7 Dampskibsselskabet af 1912 A/S, Class B $ 48
5 Dampskibsselskabet Svendborg A/S, Class B 47
385 Danisco A/S 20
300 Den Danske Bank 40
85 Det Ostasiatiske Kompagni A/S* 0
280 FLS Industries A/S, Class B 6
206 GN Store Nord A/S 7
156 International Service System A/S, Class B 10
6 Lauritzen (J.) Holding A/S 0
29 NKT Holdings A/S 2
471 Novo-Nordisk A/S, Class B 54
45 Radiometer A/S, Class B 2
257 SAS Danmark A/S 3
164 Superfos A/S 2
799 Tele Danmark A/S 90
342 Unidanmark A/S, Class A 28
-------
388
-------
Finland--1.2%
200 Amer Group Ltd. 2
300 Cultor Oy 3
100 Instrumentarium Group, Class A 4
100 Instrumentarium Group, Class A Rights* 1
900 Kemira Oy 6
700 Kesko 9
5,700 Merita Ltd., Class A 33
100 Metra Oy, Class A 2
300 Metra Oy, Class B 5
3,100 Nokia AB, Class A 304
900 Nokia AB, Class K 88
1,000 Outokumpu Oy, Class A 10
100 Pohjola Insurance Group, Class A 5
100 Pohjola Insurance Group, Class B 5
400 Sampo Insurance Co. Ltd., Class A 14
200 Stockman AB, Class A 5
200 Stockman AB, Class B 4
1,800 Upm-Kymmene Corp. 47
-------
547
-------
France--9.5%
200 Accor S.A. 44
1,080 Air Liquide 184
1,170 Alcatel Alsthom 155
27 Assurances Generales de France S.A. Warrants* 0
2,100 AXA-UAP 272
1,321 Banque Nationale de Paris 101
10 Bongrain S.A. 4
150 Bouygues 28
190 Canal Plus 44
400 Cap Gemini S.A. 59
235 Carrefour S.A. 167
50 Chargeurs S.A. 3
100 Club Mediterranee* 8
50 Coflexip Stena Offshore 4
557 Compagnie de Saint Gobain 83
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
100 Compagnie Francaise d'Etudes et de Construction Technip $ 8
50 Compagnie Generale de Geophysique S.A.* 3
75 Compagnie Parisienne de Reescompte 4
455 Danone 133
600 Dassault Systemes S.A. 24
1,700 Elf Aquitaine S.A. 213
165 Eridania Beghin-Say S.A. 31
60 Essilor International S.A. 23
450 Etablissements Economiques du Casino Guichard-Perrachon S.A. 43
4,925 France Telecom S.A. 343
4,925 France Telecom S.A. Rights* 0
100 Groupe GTM 11
100 Imetal S.A. 9
410 L'OREAL 256
1,300 Lafarage S.A. 122
750 Lagardere S.C.A. 31
170 Legrand S.A. 46
540 LVMH Moet Hennessy Louis Vuitton 105
848 Michelin, Class B 37
100 Natexis 6
100 Nord-Est S.A. 3
1,000 Paribas 89
50 Pathe 11
300 Pechiney S.A. 10
350 Pernod-Ricard 23
725 Pinault Printemps-Redoute S.A. 124
150 Primagaz Cie 14
120 Promodes 79
300 PSA Peugeot Citroen 48
2,300 Rhone-Poulenc, Class A 115
30 Sagem S.A. 21
650 Sanofi S.A. 116
950 Schneider S.A. 59
50 SEB S.A. 5
300 SEITA 17
200 Sidel S.A. 15
125 Simco S.A. 11
100 Skis Rossignol S.A. 1
350 Societe BIC S.A. 22
25 Societe Eurafrance S.A. 16
50 Societe Francaise d'Investissements Immobiliers et de Gestion 3
640 Societe Generale, Class A 101
210 Sodexho Alliance S.A. 41
150 Sommer-Allibert 4
942 Suez Lyonnaise des Eaux 187
1,500 Total S.A., Class B 186
900 Thomson CSF 34
50 Union du Credit-Bail Immobilier 7
50 Union du Immobiliere de France 5
1,600 Usinor Sacilor 18
454 Valeo S.A. 39
970 Vivendi 220
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
France--Continued
300 Vivendi Warrants* $ 1
20 Zodiac S.A. 5
-------
4,254
-------
Germany--9.6%
300 Adidas-Salomon A.G. 33
250 AGIV A.G. 6
1,510 Allianz A.G. 545
50 AMB Aachener & Muenchener Beteilgungs-A.G. (Bearer) 6
250 AMB Aachener & Muenchener Beteilgungs-A.G. (Registered) 39
150 Axa Colonia Konzern A.G. 18
3,900 BASF A.G. 148
4,550 Bayer A.G. 187
2,587 Bayerische HypoVereinsbank A.G. 225
500 Beiersdorf A.G. 33
250 Bilfinger & Berger Bau A.G. 6
50 Brau Und Brunnen A.G. 4
700 Continental A.G. 17
3,568 DaimlerChrysler A.G. 336
550 Degussa A.G. 27
3,300 Deutsche Bank A.G. 204
2,350 Deutsche Lufthansa A.G. (Registered) 52
13,650 Deutsche Telekom A.G. 384
400 Deutz A.G.* 4
200 Douglas Holdings A.G. 13
3,200 Dresdner Bank A.G. 144
400 FAG Kugelfischer Georg Schaefer A.G. 4
320 Heidelbergerzement A.G. 24
450 Hochtief A.G. 17
70 Karstadt A.G. 33
70 Linde A.G. 40
50 Man A.G. 14
2,400 Mannesmann A.G. 260
1,050 Merck KGaA 43
1,360 Metro A.G. 85
1,510 Metro A.G. Rights* 3
500 Muenchener Ruckversicherungs-Gesellschaft A.G. 231
120 Preussag A.G. 44
100 Rheinmetall A.G. 2
2,350 RWE A.G. 125
400 SAP A.G. 182
400 Schering A.G. 50
150 SGL Carbon A.G. 9
3,550 Siemens A.G. 248
210 Thyssen A.G. 38
3,100 VEBA A.G. 172
150 Viag A.G. 93
1,950 Volkswagen A.G. 159
-------
4,307
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
Hong Kong--2.3%
10,000 Applied International Holdings* $ 0
9,200 Bank of East Asia Ltd.* 17
23,000 Cathay Pacific Airways 22
15,000 Cheung Kong Holdings Ltd. 108
16,000 China Light & Power Co. Ltd. 84
12,000 Chinese Estates Holdings 2
2,400 Chinese Estates Holdings Warrants* 0
2,000 Dickson Concepts International Ltd 2
5,000 Elec & Eltek International Holdings Ltd. 1
6,000 Giordano International Ltd. 1
9,000 Hang Lung Development Co. 11
12,600 Hang Seng Bank Ltd. 111
7,500 Hong Kong & Shanghai Hotels Ltd. 6
1,200 Hong Kong Aircraft Engineering Co. Ltd. 2
28,720 Hong Kong China Gas Co. Ltd. 38
1,260 Hong Kong China Gas Co. Ltd. Warrants* 0
78,400 Hong Kong Telecommunications Ltd. 150
28,000 Hopewell Holdings Ltd. 4
25,000 Hutchinson Whampoa Ltd. 179
7,083 Hysan Development Co. Ltd. 10
700 Hysan Development Co. Ltd. Warrants* 0
6,800 Johnson Electric Holdings Ltd. 15
3,000 Kumagai Gum Ltd. 1
600 Kumagai Gum Ltd. Warrants* 0
4,000 Miramar Hotel & Investment Ltd. 4
12,879 New World Development Co. Ltd. 31
12,000 Oriental Press Group 1
2,000 Playmates Toys Holdings 0
26,400 Regal Hotels International 4
13,000 Shangri-La Asia Ltd. 12
12,000 Shun Tak Holdings Ltd. 2
20,741 Sino Land Co. 11
12,000 South China Morning Post Holdings Ltd. 7
2,000 Stelux Holdings 0
16,000 Sun Hung Kai Properties Ltd. 115
10,000 Swire Pacific Ltd. 45
5,000 Tai Cheung Holdings Ltd. 1
12,000 Tan Chong International Ltd.* 1
3,000 Television Broadcasts Ltd. 8
2,000 Varitronix International Ltd. 4
15,000 Wharf Holdings Ltd. 24
750 Wharf Holdings Ltd. Warrants* 0
1,500 Wing Lung Bank 5
------
1,039
------
Ireland--0.5%
5,837 Allied Irish Banks PLC 90
272 Clondalkin Group PLC Units 2
293 Crean (James) PLC Units 0
2,626 CRH PLC 40
540 DCC PLC 5
1,912 Fyffes PLC 4
1,245 Greencore Group PLC 6
1,696 Independent Newspapers PLC 6
168 Irish Continental Group PLC 2
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
2,175 Irish Life PLC $ 19
611 Irish Permanent PLC 8
564 Jurys Hotel Group PLC 4
1,118 Kerry Group PLC, Class A 16
1,300 Ryanair Holdings PLC* 7
7,532 Smurfit (Jefferson) Group PLC 15
1,489 Tullow Oil PLC* 1
4,995 Waterford Wedgewood PLC Units 5
-------
230
-------
Italy--5.0%
7,000 Assicurazioni Generali* 262
12,000 Banca Commerciale Italiana 82
11,000 Banca Intesa S.p.A. 62
5,000 Banca Intesa-RNC S.p.A. 15
2,000 Banco Popolare di Milano 18
10,000 Benetton Group S.p.A. 18
2,000 Bulgari S.p.A. 11
1,000 Burgo (Cartiere) S.p.A. 6
2,000 Cementir S.p.A. 2
4,000 Edison S.p.A. 40
52,000 ENI S.p.A. 324
1,000 Falck Acciaierie & Ferriere Lombarde 8
24,400 Fiat S.p.A. 75
5,300 Fiat-RNC S.p.A. 10
4,000 Impregilo S.p.A. 3
26,000 Istituto Nationale Assicurazioni 69
1,000 Italcementi S.p.A. 10
1,000 Italcementi-RNC S.p.A. 5
5,000 Italgas S.p.A. 25
1,000 La Rinascente S.p.A. 10
4,200 Magneti Marelli 7
8,000 Mediaset S.p.A. 57
4,000 Mediobanca S.p.A. 49
1,000 Mondadori (Arnoldo) Editore S.p.A. 13
33,000 Montedison S.p.A. 40
6,000 Montedison-RNC S.p.A. 5
18,240 Olivetti Group* 48
10,000 Parmalat Finanziaria S.p.A. 19
13,000 Pirelli S.p.A. 41
1,000 Pirelli-RNC S.p.A. 2
1,000 Reno de Medici S.p.A. 3
3,000 Riunione Adriatic di Sicurta S.p.A. 40
1,000 Riunione Adriatica di Sicurta-RNC S.p.A. 10
9,180 San Paolo-IMI S.p.A. 151
1,000 Sirti S.p.A. 6
5,000 Snia BPD S.p.A. 7
1,000 Snia BPD-RNC S.p.A. 1
1,000 Societa Assicuratrice Industriale S.p.A. 11
43,000 Telecom Italia Mobile S.p.A. 283
10,000 Telecom Italia Mobile-RNC S.p.A. 42
24,111 Telecom Italia S.p.A. 196
5,488 Telecom Italia-RNC S.p.A. 34
19,000 Unicredito Italiano S.p.A. 108
26,000 Unione Immobiliare S.p.A. 13
-------
2,241
-------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Japan--20.6%
2,000 77 Bank $ 19
900 Acom Co. Ltd. 55
600 Advantest Corp. 40
4,000 Ajinomoto Co. 36
1,000 Alps Electric Co. Ltd. 16
2,000 Amada Co. Ltd. 10
1,000 Amano Corp. 9
3,000 Aoki Corp.* 2
100 Aoyama Trading 3
400 Arabian Oil Co. 5
14,000 Asahi Bank Ltd. 54
3,000 Asahi Breweries Ltd. 43
9,000 Asahi Chemical Industry Co. Ltd. 37
7,000 Asahi Glass Co. Ltd. 41
4,000 Ashikaga Bank Ltd. 7
300 Autobacs Seven Co. Ltd. 9
27,000 Bank of Tokyo-Mitsubishi Ltd. 294
8,000 Bank of Yokohama Ltd. 17
5,000 Bridgestone Corp. 117
2,000 Brother Industries Ltd. 6
5,000 Canon, Inc. 111
2,000 Casio Computer Co. Ltd. 15
5,000 Chiba Bank Ltd. 19
1,000 Chiyoda Corp. 2
1,000 Chugai Pharmaceutical Co. Ltd. 9
2,000 Citizen Watch Co. Ltd. 13
4,000 Cosmo Oil Co. Ltd. 6
1,000 Credit Saison Co. Ltd. 23
500 CSK Corp. 12
5,000 Dai Nippon Ink & Chemicals, Inc. 13
5,000 Dai Nippon Printing Co. Ltd. 73
1,000 Dai Nippon Screen MFG Co. Ltd. 3
3,000 Daicel Chemical Industry Ltd. 7
3,000 Daido Steel Co. Ltd. 5
5,000 Daiei, Inc. 13
1,000 Daifuku Co. Ltd. 5
2,000 Daiichi Pharmaceutical 31
2,000 Daikin Industries Ltd. 18
1,000 Daikyo, Inc. 1
2,000 Daimaru, Inc. 5
1,100 Daito Trust Construction Co. 9
3,000 Daiwa House Industry Co. Ltd. 32
1,000 Daiwa Kosho Lease Co. Ltd. 4
9,000 Daiwa Securities Co. Ltd. 32
3,000 Denki Kagaku Kogyo Kabushiki Kaisha 5
5,000 Denso Corp. 97
24 East Japan Railway Co. 140
2,000 Ebara Corp. 17
2,000 Eisai Co. Ltd. 31
1,000 Ezaki Glico Co. Ltd. 5
1,400 Fanuc 44
18,000 Fuji Bank Ltd. 71
3,000 Fuji Photo Film Co. 112
2,000 Fujikura Ltd. 11
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Japan--Continued
3,000 Fujita Corp. $ 2
1,000 Fujita Kanko, Inc. 10
11,000 Fujitsu Ltd. 127
4,000 Furukawa Electric Co. Ltd. 14
1,000 Gakken Co. Ltd. 1
3,000 Gunma Bank 22
2,000 Gunze Ltd. 4
6,000 Hankyu Corp. 24
1,000 Hankyu Department Stores, Inc. 7
3,000 Haseko 2
2,000 Hazama Corp. 1
2,000 Higo Bank 8
200 Hirose Electric 13
20,000 Hitachi Ltd. 121
7,000 Hitachi Zosen Corp. 11
5,000 Hokuriku Bank 9
6,000 Honda Motor Co. Ltd. 216
1,000 House Foods Corp. 15
1,000 Hoya Corp. 42
2,000 Inax 11
16,000 Industrial Bank of Japan 87
1,000 Isetan 10
2,000 Ishihara Sangyo Kaisha 3
3,000 Ito-Yokado Co. 184
10,000 Itochu Corp. 19
2,000 Itoham Foods 10
2,000 Iwataini International Corp. 4
1,000 JACCS Co., Ltd. 4
11,000 Japan Airlines 28
8,000 Japan Energy Corp. 8
1,000 Japan Metals & Chemicals* 2
3,000 Japan Steel Works 4
1,000 JGC Corp. 3
6,000 Joyo Bank 22
2,000 JUSCO Co. 38
6,000 Kajima Corp. 16
1,000 Kaken Pharmaceutical Co. 3
2,000 Kamigumi Co. Ltd. 9
1,000 Kandenko Co. Ltd. 7
4,000 Kanebo Ltd.* 4
2,000 Kaneka Corp. 14
6,000 Kansai Electric Power Co., Inc. 121
2,000 Kansai Paint 5
4,000 Kao Corp. 76
8,000 Kawasaki Heavy Industries Ltd. 20
4,000 Kawasaki Kisen Kaisha Ltd. 6
21,000 Kawasaki Steel Corp. 32
3,000 Keihin Electric Expesss Railway Co. Ltd. 9
1,000 Kikkoman Corp. 6
2,000 Kinden Corp. 27
10,000 Kinki Nippon Railway 50
6,000 Kirin Brewery Co. Ltd. 62
1,000 Kokuyo Co. Ltd. 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
6,000 Komatsu Ltd. $ 31
300 Konami Co. Ltd. 8
2,000 Konica Corp. 9
1,000 Koyo Seiko Co. 6
9,000 Kubota Corp. 21
5,000 Kumagai Gumi Co. Ltd. 4
2,000 Kurabo Industries 2
2,000 Kurary Co. Ltd. 21
1,000 Kureha Chemical Industry 3
1,000 Kurita Water Industries Ltd. 14
1,100 Kyocera Corp. 52
3,000 Kyowa Hakko Kogyo 15
2,000 Lion Corp. 8
1,000 Maeda Road Construction Co. Ltd. 6
1,000 Makino Milling Machine Co. Ltd. 6
1,000 Makita Corp. 11
10,000 Marubeni Corp. 18
2,000 Maruha Corp. 2
2,000 Marui Co. Ltd. 36
13,000 Matsushita Electric Industrial Co. Ltd. 209
2,000 Meiji Milk Products Co. Ltd. 6
3,000 Meiji Seika 11
2,000 Minebea Co. Ltd. 22
1,000 Misawa Homes Co. Ltd. 3
14,000 Mitsubishi Chemical Corp. 26
10,000 Mitsuibishi Corp. 64
14,000 Mitsubishi Electric Corp. 36
8,000 Mitsubishi Estate Co. Ltd. 77
3,000 Mitsubishi Gas Chemical Co. 8
21,000 Mitsubishi Heavy Industries Ltd. 79
1,000 Mitsubishi Logistics Corp. 11
8,000 Mitsubishi Materials Corp. 14
3,000 Mitsubishi Oil Co. Ltd. 5
2,000 Mitsubishi Paper Mills 4
4,000 Mitsubishi Rayon Co. 11
8,000 Mitsubishi Trust & Banking Corp. 58
10,000 Mitsui & Co. 57
6,000 Mitsui Engineering & Shipbuilding Co. Ltd.* 6
5,000 Mitsui Fudosan Co. Ltd. 38
5,000 Mitsui Marine & Fire Insurance Co. Ltd. 25
3,000 Mitsui Mining & Smelting 14
8,000 Mitsui O.S.K. Lines Ltd. 13
1,000 Mitsui Soko Co. Ltd. 4
8,000 Mitsui Trust & Banking Co. Ltd. 11
3,000 Mitsukoshi Ltd. 8
1,000 Mori Seiki Co. Ltd. 11
1,000 Murata Manufacturing Co. Ltd. 39
2,000 Mycal Corp. 13
1,000 Nagase & Co. Ltd. 3
5,000 Nagoya Railroad Co. Ltd. 17
400 Namco Ltd. 8
3,000 Nankai Electric Railway 13
10,000 NEC Corp. 85
2,000 NGK Insulators Ltd. 22
1,000 NGK Spark Plug Co. 9
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
3,000 Nichido Fire & Marine Insurance $ 15
2,000 Nichirei Corp. 5
2,000 Niigata Engineering Co. Ltd.* 2
2,000 Nikon Corp. 19
1,000 Nippon Beet Sugar Manufacturing Co. Ltd. 2
1,000 Nippon Comsys Corp. 13
7,000 Nippon Express Co. Ltd. 36
4,000 Nippon Fire & Marine Insurance 14
4,000 Nippon Light Metal Co. 4
1,000 Nippon Meat Packers, Inc. 14
8,000 Nippon Oil Co. Ltd. 26
6,000 Nippon Paper Industries Co. 26
1,000 Nippon Sharyo Ltd. 3
3,000 Nippon Sheet Glass Co. Ltd. 7
2,000 Nippon Shinpan Co. 4
1,000 Nippon Shokubai K.K. Co. 6
42,000 Nippon Steel Corp. 77
2,000 Nippon Suisan Kaisha Ltd.* 2
73 Nippon Telegraph & Telephone Corp. 546
8,000 Nippon Yusen Kabushiki Kaisha 24
2,000 Nishimatsu Construction 11
15,000 Nissan Motor Co. Ltd. 46
2,000 Nisshinbo Industries, Inc. 7
1,000 Nissin Food Products 20
1,000 Nitto Denko Corp. 15
25,000 NKK Corp. 18
1,000 NOF Corp. 2
12,000 Nomura Securities Co. Ltd. 117
1,000 Noritake Co. Ltd. 5
4,000 NSK Ltd. 16
3,000 NTN Corp. 9
5,000 Obayashi Corp. 23
5,000 Odakyu Electric Railway 16
6,000 Oji Paper Co. Ltd. 27
1,000 Okamoto Industries Inc. 2
1,000 Okuma Corp. 5
2,000 Okumura Corp. 7
2,000 Olympus Optical Co. Ltd. 22
2,000 Omron Corp. 24
1,000 Onward Kasiyama Co. Ltd. 12
2,000 Orient Corp. 5
400 Orix Corp. 29
15,000 Osaka Gas Co. Ltd. 44
300 Oyo Corp. 4
2,000 Penta-Ocean Construction 4
1,000 Pioneer Electronic Corp. 16
1,000 Q.P. Corp. 7
2,000 Renown, Inc.* 1
1,000 Rohm Co. Ltd. 85
24,000 Sakura Bank Ltd. 61
1,000 Sanden Corp. 6
2,000 Sankyo Aluminium Industry Co. 2
3,000 Sankyo Co. Ltd. 68
2,000 Sanwa Shutter Corp. 9
12,000 Sanyo Electric Co. 34
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
2,000 Sapporo Breweries Ltd. $ 9
2,000 Sato Kogyo 2
1,000 Secom Co. Ltd. 74
700 Sega Enterprises 17
1,000 Seino Transportation Co. Ltd. 6
1,000 Seiyu Ltd. 3
3,000 Sekisui Chemical Co. Ltd. 18
4,000 Sekisui House Ltd. 39
7,000 Sharp Corp. 62
300 Shimachu Co., Ltd. 6
1,000 Shimano Inc. 26
5,000 Shimizu Corp. 16
2,000 Shin-Etsu Chemical Co. Ltd. 45
2,000 Shionogi & Co. 14
3,000 Shiseido Co. Ltd. 34
5,000 Shizuoka Bank 54
7,000 Showa Denko K.K. 6
1,000 Skylark Co. Ltd. 12
400 SMC Corp. 30
2,000 Snow Brand Milk Products 8
2,500 Sony Corp. 183
19,000 Sumitomo Bank Ltd. 212
10,000 Sumitomo Chemicals Co. 35
7,000 Sumitomo Corp. 38
4,000 Sumitomo Electric Industries 44
1,000 Sumitomo Forestry Co. Ltd. 7
4,000 Sumitomo Heavy Industries Ltd. 8
4,000 Sumitomo Marine & Fire Insurance 24
21,000 Sumitomo Metal Industries 25
4,000 Sumitomo Metal Mining Co. 14
3,000 Sumitomo Osaka Cement Co. Ltd. 6
6,400 Taiheiyo Cement Corp. 15
6,000 Taisei Corp. 11
2,000 Taisho Pharmaceutical Co. 50
1,000 Taiyo Yuden Co. Ltd. 11
1,000 Takara Shuzo 5
1,000 Takara Standard Co. Ltd. 7
2,000 Takashimaya Co. Ltd. 17
5,000 Takeda Chemical Industries 169
6,000 Teijin Ltd. 22
2,000 Teikoku Oil Co. Ltd. 6
1,000 Toa Corp. 2
6,000 Tobu Railway Co. 17
1,000 Toei Co. Ltd. 3
100 Toho Co. 12
3,100 Tohoku Electric Power 50
12,000 Tokai Bank 61
9,000 Tokio Marine & Fire Insurance Co. 102
1,000 Tokyo Broadcasting System Inc. 10
1,000 Tokyo Dome Corp. 5
8,300 Tokyo Electric Power Co. 190
1,000 Tokyo Electron Ltd. 37
18,000 Tokyo Gas Co. Ltd. 42
1,200 Tokyo Steel Manufacturing 5
1,000 Tokyo Style Co. Ltd. 11
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Japan--Continued
2,000 Tokyo Tatemono Co. Ltd. $ 4
2,000 Tokyotokeiba 3
7,000 Tokyu Corp. 18
4,000 Toppan Printing Co. Ltd. 48
9,000 Toray Industries, Inc. 43
4,000 Tosoh Corp. 6
1,000 Tostem Corp. 17
2,000 Toto Ltd. 15
1,000 Toyo Engineering Corp. 1
1,000 Toyo Seikan Kaisha 17
5,000 Toyobo Ltd. 6
2,000 Toyoda Automatic Loom Works 34
22,000 Toyota Motor Corp. 558
200 Trans Cosmos Inc. 5
1,000 Tsubakimoto Chain 2
6,000 Ube Industries Ltd. 8
500 Uni-Charm Corp. 21
3,000 Unitika Ltd.* 2
1,000 Uny Co. Ltd. 17
1,000 Wacoal Corp. 11
1,000 Yamaguchi Bank 9
1,000 Yamaha Corp. 11
5,000 Yamaichi Securities Co. Ltd. 0
2,000 Yamanouchi Pharmaceutical Co. Ltd. 59
3,000 Yamato Transport Co. Ltd. 37
1,000 Yamazaki Baking Co. Ltd. 12
8,000 Yasuda Trust & Banking 8
2,000 Yokogawa Electric 10
-------
9,237
-------
Malaysia--0.4%
2,200 AMMB Holdings Berhad 2
8,000 Amsteel Corp. Berhad 1
2,000 Antah Holdings Berhad 0
2,000 Aokam Perdana Berhad* 0
6,000 Berjaya Group Berhad 1
4,000 Berjaya Land Berhad 1
5,000 Commerce Asset Holdings Berhad 2
2,000 Edaran Otomobil Nasional Berhad 2
4,000 Ekran Berhad* 1
6,000 Golden Hope Plantations Berhad 3
1,000 Golden Plus Holdings Berhad 0
2,000 Guinness Anchor Berhad 1
4,000 Highlands & Lowlands Berhad 2
2,000 Hong Leong Industries Berhad 1
4,000 Hong Leong Properties Berhad 1
2,000 Hume Industries Berhad 1
4,000 Idris Hydraulic Berhad* 1
3,000 IGB Corp. Berhad 1
5,000 IOI Corp. Berhad 2
2,000 Jaya Tiasa Holdings Berhad 2
2,000 Johan Holdings Berhad 0
3,000 Kedah Cement Holdings Berhad 1
1,000 Kelanamas Industries Berhad* 0
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
3,000 Kemayan Corp. Berhad $ 0
1,000 Kian Joo Can Factory Berhad 1
5,000 Kuala Lumpur Kepong Berhad 5
3,000 Land and General Berhad 1
3,000 Landmarks Berhad 0
3,000 Leader Universal Holdings Berhad 1
9,000 Magnum Corp. Berhad 3
13,200 Malayan Banking Berhad 15
3,000 Malayan Cement Berhad 1
12,000 Malayan United Industries Berhad 2
1,500 Malayawata Steel Berhad 0
24,000 Malaysia International Shipping Berhad 20
5,000 Malaysia Mining Corp. Berhad 2
5,000 Malaysian Airline System Berhad 2
2,000 Malaysian Mosaics Berhad 1
1,000 Malaysian Oxygen Berhad 1
2,000 Malaysian Pacific Industries 2
5,666 Malaysian Resources Corp. Berhad 2
5,000 MBF Capital Berhad 1
5,000 Metroplex Berhad 1
6,000 Mulpha International Berhad 1
5,000 Multi-Purpose Holdings 1
3,000 Mycom Berhad 0
2,000 Nestle Berhad 5
2,000 New Straits Times Press Berhad 1
2,600 Oriental Holdings Berhad 2
1,000 Palmco Holdings Berhad 0
5,000 Pan-Malaysia Cement Works Berhad 1
3,000 Perlis Plantations Berhad 2
4,000 Perusahaan Otomolbil Nasional Berhad 4
2,000 Petaling Garden Berhad 1
2,000 Pilecon Engineering Berhad 0
4,000 Promet Berhad* 0
3,600 Public Bank Berhad 1
25,600 Public Bank Berhad (Foreign Market) 8
2,000 R.J. Reynolds Berhad 1
3,000 Rashid Hussain Berhad 2
7,000 Resorts World Berhad 5
12,000 RHB Capital Berhad 4
1,800 Rothmans of Pall Mall Berhad 7
2,000 Selangor Properties Berhad 1
2,000 Shell Refining Co. Berhad 2
280 Silverstone Berhad* 0
14,000 Sime Darby Berhad 9
3,000 Sungei Way Holdings Berhad 1
5,000 Ta Enterprise Berhad 1
4,000 Tan Chong Motor Holdings Berhad 1
5,000 Technology Resources Industries Berhad 2
17,500 Telekom Malaysia Berhad 24
18,000 Tenaga Nasional Berhad 17
5,000 Time Engineering Berhad 1
2,000 UMW Holdings Berhad 1
5,000 United Engineers (Malaysia) Ltd. 3
8,000 YTL Corp. Berhad 6
-------
202
-------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
Netherlands--5.1%
9,888 ABN AMRO Holdings N.V. $ 204
1,856 Akzo Nobel 76
233 ASR Verzekeringsgroep N.V. 19
540 Buhrmann N.V. 9
4,334 Elsevier N.V. 57
558 Getronics N.V. 25
2,037 Heineken N.V. 104
215 Hollandsche Beton Groep N.V. 3
78 IHC Caland N.V. 3
6,121 ING Groep N.V. 351
479 KLM N.V. 13
1,681 Koninklijke Ahold N.V. 58
241 Koninklijke Hoogovens N.V. 8
3,422 Koninklijke KPN N.V. 148
148 Koninklijke Nedlloyd N.V. 2
209 Koninklijke Pakhoed N.V. 5
530 Oce-Van Der Grinten N.V. 19
2,371 Philips Electronics N.V. 150
12,440 Royal Dutch Petroleum Co. 598
199 Stork N.V. 5
1,422 TNT Post Group N.V. 36
4,162 Unilever N.V. 326
449 Wolters Kluwer N.V. 86
-------
2,305
-------
New Zealand--0.2%
17,500 Brierley Investments Ltd. 4
11,200 Carter Holt Harvey Ltd. 11
800 Fisher & Paykel Industries Ltd. 2
2,218 Fletcher Challenge Building 3
2,292 Fletcher Challenge Energy 5
5,317 Fletcher Challenge Forests 2
4,200 Fletcher Challenge Paper 3
3,600 Lion Nathan Ltd. 9
11,400 Telecom Corp. of New Zealand Ltd. 49
-------
88
-------
Norway--0.4%
400 Aker RGI ASA 5
140 Aker RGI ASA, Class B 1
300 ASK ASA* 2
300 Bergesen d.y. ASA, Class A 4
100 Bergesen d.y. ASA, Class B 1
3,600 Christiania Bank Og Kreditkasse 13
4,200 Den norske Bank ASA 16
200 Dyno Industrier ASA 3
300 Elkem ASA 3
500 Hafslund ASA, Class A 3
200 Hafslund ASA, Class B 1
100 Helicopter Services Group ASA 1
200 Kvaerner ASA 3
100 Kvaerner ASA, Class B 1
200 Leif Hoegh & Co. ASA 3
600 Merkantildata ASA 7
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
1,600 NCL Holdings ASA* $ 3
1,500 Norsk Hydro ASA 56
200 Norske Skogindustrier ASA, Class A 6
100 Norske Skogindustrier ASA, Class B 2
1,000 Orkla ASA, Class A 17
300 Orkla ASA, Class B 4
600 Petroleum Geo-Services ASA* 9
300 SAS Norge ASA, Class B 3
400 Schibsted ASA 5
200 Smedvig, Class A 1
100 Smedvig, Class B 1
1,800 Storebrand ASA* 13
300 Tomra System ASA 9
100 Unitor ASA 1
-------
197
-------
Portugal--0.6%
1,200 Banco Comercial Portugues S.A. (Registered) 37
600 Banco Espirito Santo e Comercial de Lisboa S.A. (Registered) 19
400 Banco Totta & Acores S.A. (Registered) 10
500 BPI-SGPS S.A. (Registered) 16
500 Brisa-Auto Estradas de Portugal S.A. 27
500 Cimpor-Cimentos de Portugal SGPS S.A. 16
100 Colep-Companhia Portuguesa de Embalagens* 1
100 Companhia de Seguros Tranquilidade (Registered) 3
100 Corticeira Amorim S.A. 1
2,300 EDP-Electricidade de Portugal S.A. 51
100 EFACEC-Empresa Fabril de MaquinasElectricas S.A. 1
100 Engil-SGPS 1
100 INAPA Investimentos Participacoes e Gestao S.A. 1
100 INAPA Investimentos Participacoes e Gestao S.A. Rights* 0
400 Jeronimo Martins SGPS S.A. 20
700 Portucel Industral-Empresa Produtora deCelulose S.A. 5
1,200 Portugal Telecom S.A. (Registered) 52
100 Sociedade de Construcoes Soares da Costa S.A. 0
100 Sociedade de Construcoes Soares da Costa S.A. Bonus Rights* 0
100 Somague-SGPS S.A. 1
200 Sonae Investmentos-SGPS S.A. 10
100 UNICER-Uniao Cervejeira S.A. 2
-------
274
-------
Singapore--0.9%
1,000 Chuan Hup Holdings Ltd. 0
3,000 City Developments Ltd. 14
2,000 Comfort Group Ltd. 1
1,000 Cycle & Carriage Ltd. 3
3,000 DBS Land Ltd. 4
10,900 Development Bank of Singapore Ltd.* 83
1,000 First Capital Corp. Ltd. 1
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
Singapore--Continued
1,000 Fraser & Neave Ltd. $ 3
2,000 Goldtron Ltd. 0
2,000 Hai Sun Hup Group Ltd. 1
1,000 Haw Par Brothers International Ltd. 1
1,000 Hotel Properties Ltd. 1
1,000 Inchcape Marketing Services Ltd.* 1
1,000 Inchape Motors Ltd. 1
6,000 IPC Corp. 0
2,250 Keppel Corp. Ltd. 6
2,400 Lum Chang Holdings Ltd. 1
1,000 NatSteel Ltd. 1
3,000 Neptune Orient Lines Ltd. 1
16,600 Overseas Chinese Banking Corp. Ltd. (Foreign) 102
1,000 Overseas Union Enterprise Ltd. 2
1,000 Parkways Holdings Ltd. 2
1,000 Sembawang Marine and Logistics 1
5,494 Sembcorp Industries Ltd.* 7
10,000 Singapore Airlines Ltd. 70
1,893 Singapore Press Holdings Ltd. 20
17,000 Singapore Telecommunications Ltd. 28
1,000 Straits Trading Co. Ltd. 1
4,000 United Industrial Corp. Ltd. 2
8,000 United Overseas Bank Ltd. (Foreign) 46
2,000 United Overseas Land Ltd. 1
-------
405
-------
Spain--3.3%
375 Acerinox S.A. 9
3,050 Argentaria, Caja Postal y Banco Hipotecario de Espana S.A. 71
1,550 Autopistas Concesionaria ESP 24
12,656 Banco Bilbao Vizcaya S.A. 200
6,840 Banco Central Hispanoamericano 79
8,384 Banco Santander S.A. 172
75 Corporacion Financiera Alba 10
393 Corporacion Mapfre 11
372 Dragados & Construcciones S.A. 12
400 Ebro Agricolas Compania de Alimentacion S.A.* 9
200 El Aguila S.A.* 2
150 Empresa Nacional de Celulosas S.A. 2
6,100 Empresa Nacional de Electricidad S.A. 160
900 Ercros S.A.* 1
375 Fomenta de Construcciones S.A. 22
925 Gas Natural SDG S.A., Class E 78
5,601 Iberdrola S.A. 93
250 Inmobiliaria Urbis S.A.* 4
300 Metrovacesa S.A. 8
125 Portland Valderrivas S.A. 5
400 Prosegur CIA de Seguridad S.A. (Registered) 5
1,875 Repsol S.A. 107
453 Sarrio S.A. 2
275 Sociedade General de Aguas de Barcelona S.A. 16
1,175 Tabacalera S.A., Class A 29
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------
<C> <S> <C>
6,279 Telefonica de Espana $ 296
1,884 Union Electrica Fenosa S.A. 28
350 Uralita S.A. 4
825 Vallehermoso S.A. 10
150 Viscofan Industria Navarra de Envolturas Celulosicas S.A. 5
350 Zardoya Otis S.A. 11
-------
1,485
-------
Sweden--3.0%
4,400 ABB AB, Class A 48
1,800 ABB AB, Class B 19
900 AGA AB, Class A 11
700 AGA AB, Class B 8
250 Asticus AB* 2
8,766 Astra AB, Class A 161
2,000 Astra AB, Class B 36
800 Atlas Copco AB, Class A 18
400 Atlas Copco AB, Class B 9
400 Diligentia AB 3
700 Drott AB, Class B* 5
2,440 Electrolux AB, Class B 37
100 Esselte AB, Class A 1
100 Esselte AB, Class B 2
2,300 ForeningsSparbanken AB 65
192 Granges AB 3
1,400 Hennes & Mauritz AB, Class B 104
700 Netcom Systems AB, Class B* 27
500 Om Gruppen AB 7
1,200 Sandvik AB, Class A 22
500 Sandvik AB, Class B 9
2,000 Securitas AB, Class B 30
3,405 Skandia Forsakrings AB 48
3,900 Skandinaviska Enskilda Banken, Class A 44
700 Skanska AB, Class B 20
300 SKF AB, Class A 4
411 SKF AB, Class B 5
1,700 Stora Kopparbergs Bergslags Aktiebolag,
Class A 21
400 Stora Kopparbergs Bergslags Aktiebolag,
Class B 5
1,300 Svenska Cellulosa AB, Class B 29
1,400 Svenska Handelsbanken, Class A 57
100 Svenska Handelsbanken, Class B 4
500 Svenskt Stal AB, Class A 4
200 Svenskt Stal AB, Class B 2
2,800 Swedish Match AB 9
12,800 Telefonaktiebolaget LM Ericsson, Class B 357
800 Trelleborg AB, Class B 7
900 Volvo AB, Class A 20
2,000 Volvo AB, Class B 47
500 Wm-Data AB, Class B 21
-------
1,331
-------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
Switzerland--8.0%
55 ABB A.G. (Bearer)* $ 69
25 ABB A.G. (Registered) 6
110 Adecco S.A. 48
40 Alusuisse-Lonza Holdings A.G. (Registered) 50
1,745 Credit Suisse Group (Registered) 301
15 Fischer (Georg) A.G. (Registered) 5
30 Holderbank Financiere Glarus A.G., (Bearer) 35
50 Holderbank Financiere Glarus A.G. (Registered) 12
2 Kuoni Reisen A.G., Category B (Registered) 8
265 Nestle S.A. (Registered) 552
50 Novartis A.G. (Bearer) 93
360 Novartis A.G. (Registered) 678
10 Roche Holdings A.G. (Bearer) 180
47 Roche Holdings A.G. (Genusss) 554
100 Sairgroup (Registered) 22
10 Schindler Holding A.G. (Registered) 17
100 Schweizerische Reuckversicherungs-Gesellschaft (Registered) 254
15 SGS Societe Generale de Surveillance Holdings S.A (Bearer) 12
10 SGS Societe Generale de Surveillance Holdings S.A
(Registered) 2
20 Sulzer (Registered) 11
20 Swatch Group A.G. (Bearer) 11
100 Swatch Group A.G. (Registered) 13
1,394 Union Bank of Switzerland (Registered) 421
25 Valora Holding A.G. 7
300 Zurich Allied A.G. 215
-------
3,576
-------
United Kingdom--21.1%
9,000 Abbey National PLC 182
9,205 Allied Zurich PLC* 132
1,031 AMEC PLC 3
439 Amstrad PLC 0
1,929 Anglian Water PLC 28
2,067 Anglian Water PLC, Class B* 2
5,000 Arjo Wiggins Appleton PLC 9
6,000 Associated British Foods PLC 61
6,000 BAA PLC 66
9,361 Barclays PLC 213
1,000 Barratt Developments PLC 4
4,855 Bass PLC 67
3,062 BBA Group PLC 17
1,000 Berkeley Group PLC 8
24,294 BG PLC 167
3,113 BICC Group PLC 3
5,219 Blue Circle Industries PLC 26
2,987 BOC Group PLC 43
5,587 Boots Co. PLC 90
1,015 Bowthorpe PLC 7
3,000 BPB PLC 10
11,177 British Aerospace PLC 96
6,120 British Airways PLC 41
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
9,205 British American Tobacco PLC $ 84
3,035 British Land Co. PLC 26
33,795 British Petroleum Co. PLC 527
10,000 British Sky Broadcasting Group PLC 83
12,000 British Steel PLC 19
39,250 British Telecommunications PLC 538
20,610 BTR PLC 42
3,000 Bunzl PLC 13
1,000 Burmah Castrol PLC 15
15,000 Cable & Wireless PLC 191
6,224 Cadbury Schweppes PLC 94
2,900 Caradon PLC 5
4,044 Carlton Communications PLC 33
27,000 Centrica PLC* 56
5,000 Coats Viyella PLC 2
1,000 Cobham PLC 14
5,872 Coca-Cola Beverages PLC* 12
8,114 CGU PLC 129
4,000 Compass Group PLC 42
1,000 Courtaulds Textiles PLC 3
1,000 De La Rue PLC 3
1,000 Delta PLC 2
21,594 Diageo PLC 242
3,000 Electrocomponents PLC 21
3,057 Elementis PLC 4
5,137 EMI Group PLC 31
2,020 English China Clays PLC 6
4,000 FKI PLC 10
16,653 General Electric Co. PLC 136
4,596 GKN PLC 51
22,000 Glaxo Wellcome PLC 696
5,078 Granada Group PLC 79
2,000 Great Portland Estates PLC 6
6,000 Great Universal Stores PLC 62
5,857 Guardian Royal Exchange PLC 32
15,300 Halifax PLC 218
2,040 Hammerson PLC 13
4,000 Hanson PLC 30
2,000 Hepworth PLC 5
11,235 HSBC Holdings PLC 285
5,117 HSBC Holdings PLC (75P) 139
1,000 Hyder PLC 13
2,000 IMI PLC 9
4,000 Imperial Chemical Industries PLC 37
1,000 Jarvis PLC 11
1,000 Johnson Matthey PLC 7
8,176 Kingfisher PLC 78
7,117 Ladbroke Group PLC 28
1,000 Laird Group PLC 2
3,363 Land Securities Group PLC 45
6,000 LASMO PLC 14
8,000 Legal & General Group PLC 98
1,000 Lex Service PLC 7
35,076 Lloyds TSB Group PLC 488
1,286 Lonrho PLC 6
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
International Equity Index Portfolio--Continued
<C> <S> <C>
United Kingdom--Continued
8,070 LucasVarity PLC $ 28
17,515 Marks & Spencer PLC 119
1,714 Marley PLC 3
2,251 MEPC PLC 15
1,000 Meyer International PLC 6
4,000 Misys PLC 28
9,050 National Grid Group PLC 72
7,302 National Power PLC 62
2,000 Next PLC 16
1,000 Ocean Group PLC 12
3,699 Pearson PLC 67
3,896 Peninsular and Oriental Steam Navigation Co. 47
6,742 Pilkington PLC 7
1,929 Provident Financial PLC 29
12,000 Prudential Corp. PLC 175
2,000 Racal Electronics PLC 10
3,000 Railtrack Group PLC 82
4,215 Rank Group PLC 15
6,832 Reed International PLC 54
16,000 Rentokil Initial PLC 103
9,400 Reuters Holdings PLC 91
2,379 Rexam PLC 8
1,437 Rexam PLC, Class B* 2
6,562 Rio Tinto PLC (Registered) 77
2,000 RMC Group PLC 26
10,133 Rolls-Royce PLC 41
10,093 Royal & Sun Alliance Insurance Group PLC 84
5,749 Royal Bank Scotland Group PLC 87
4,000 Rugby Group PLC 5
6,261 Safeway PLC 31
12,679 Sainsbury (J) PLC 106
1,500 Schroders PLC 31
4,000 Scottish & Newcastle PLC 51
3,000 Scottish Hydro-Electric 35
8,000 Scottish Power PLC 85
993 Sears PLC 4
993 Selfridges PLC 4
12,000 Siebe PLC 43
3,000 Slough Estates PLC 13
34,178 SmithKline Beecham PLC 420
2,000 Smiths Industries PLC 28
3,000 St. James Place Capital PLC 14
5,000 Stagecoach Holdings PLC 19
6,194 Tarmac PLC 12
3,000 Tate & Lyle PLC 19
3,046 Taylor Woodrow PLC 8
44,153 Tesco PLC 130
1,833 Thames Water PLC 35
2,000 Thames Water PLC, Class B* 3
3,000 TI Group PLC 17
565 Transport Development Group PLC 2
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
1,000 Transport Development Group PLC, Class B* 1
1,556 Unigate PLC 12
19,868 Unilever PLC $ 207
3,067 United Biscuits Holdings PLC 12
3,451 United Biscuits Holdings PLC, Class B* 1
3,000 United Utilities PLC 44
1,333 Vickers PLC 4
1,000 Viglen Technology PLC 0
19,190 Vodafone Group PLC 283
4,307 Williams PLC 27
4,666 Williams PLC, Class B* 2
1,000 Wilson (Connolly) Holdings PLC 2
2,000 Wimpey (George) PLC 4
4,000 Wolseley PLC 25
6,000 Zeneca Group PLC 250
-------
9,472
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $40,786) $43,462
- -------------------------------------------------------------------------------
PREFERRED STOCKS--0.7%
Australia--0.2%
12,422 News Corp. Ltd. $ 78
3,600 Star City Holdings Ltd.* 3
-------
81
-------
Austria--0.0%
12 Bau Holdings A.G.--Vorzug 0
4 Generali Holding Vienna A.G.--Vorzug 1
-------
1
-------
France--0.0%
100 Etablissements Econonmiques du Casino Guichard-Perrachon
S.A. 6
-------
Germany--0.5%
50 Axa Colonia Konzern A.G.--Non Voting 5
50 MAN A.G.--Vorzug 10
150 Metro A.G.--Vorzug 6
550 RWE A.G.--Non Voting 19
250 SAP A.G.--Vorzug 131
500 Volkswagen A.G.--Non Voting 26
-------
197
-------
Italy--0.0%
7,300 Fiat S.p.A. 13
-------
United Kingdon--0.0%
2,726 MEPC PLC, Class B 4
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $225) $ 301
- -------------------------------------------------------------------------------
CORPORATE BONDS--0.0%
United Kingdom--0.0%
Viglen Technology PLC
$2 6.938% Due 9/1/00 $ 3
Viglen Technology PLC Letters of Entitlement to Litigation
Notes
1 4.12% Due 1/1/01 0
-------
3
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $4) $ 3
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
OTHER--1.5%
Australia--0.2%
10,500 World Equity Benchmark Shares (WEBS) Index Series--
Australia $ 101
-------
Belgium--0.2%
5,500 WEBS Index Series--Belgium 106
-------
France--0.1%
2,500 WEBS Index Series--France 52
-------
Germany--0.7%
14,300 WEBS Index Series--Germany 308
-------
Japan--0.2%
7,500 WEBS Index Series--Japan 75
-------
Switzerland--0.1%
1,200 WEBS Index Series--Switzerland 20
- ------------------------------------------------------------------------
TOTAL OTHER (Cost $650) $ 662
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENT--0.6%
Societe Generale, Paris, France
$298 5.375%Due 12/1/98 $ 298
- ------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $298) $ 298
- ------------------------------------------------------------------------
TOTAL INVESTMENTS--99.5%
(Cost $41,963) $44,726
- ------------------------------------------------------------------------
Other assets, less liabilities--0.5% 226
- ------------------------------------------------------------------------
NET ASSETS--100.0% $44,952
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
At November 30, 1998 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<S> <C>
Industry/Sector
- ------------------------------
Banks 14.6%
Business Services 10.4
Capital Goods 6.5
Consumer Goods 13.3
Consumer Services 3.6
Energy/Utilities 4.8
Financial Services 10.4
Pharmaceuticals/Health 8.8
Multi-Industry 3.0
Raw Materials 6.4
Retail 4.2
Technology 4.2
Transportation 2.4
Utilities 7.4
- ------------------------------
Total 100.0%
- ------------------------------
</TABLE>
See accompanying notes to financial statements.
67
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
Shares Description Value
- ---------------------------
International Growth Portfolio
<TABLE>
<CAPTION>
<C> <S> <C>
COMMON STOCKS--94.4%
Australia--2.4%
145,000 Broken Hill Proprietary Co. Ltd. $ 1,153
55,000 News Corp. Ltd. ADR 1,540
--------
2,693
--------
Finland--0.4%
5,000 Nokia Oyj 490
--------
France--14.9%
18,000 Axa-UAP 2,333
12,000 Castorama Dubois Investisse 2,433
18,000 Elf Aquitaine S.A. 2,250
5,500 Groupe Danone S.A. 1,610
6,000 LVMH Moet-Hennessy Louis Vuitton 1,163
7,500 Societe Generale 1,185
14,000 Suez Lyonnaise des Eaux 2,772
9,000 Total S.A. 1,119
21,000 Valeo S.A. 1,803
--------
16,668
--------
Germany--10.5%
3,500 Allianz A.G. 1,264
20,000 Deutsche Bank A.G. 1,239
45,000 Hoechst A.G. 1,938
2,900 Karstadt A.G. 1,364
3,400 Muenchener Rueckversicherungse 1,568
22,000 Siemens A.G. 1,535
25,000 VEBA A.G. 1,390
18,000 Volkswagen A.G. 1,469
--------
11,767
--------
Greece--0.9%
40,000 Hellenic Telecommunication Organization S.A. 1,001
--------
India--0.6%
60,000 Mahanagar Telephone Nigam Ltd. 635
--------
Ireland--1.5%
25,000 Elan Corp. PLC ADR* 1,703
--------
Italy--6.0%
60,000 Assicurazioni Generali* 2,247
225,000 ENI S.p.A. 1,400
220,000 Telecom Italia S.p.A. 1,788
225,000 Unicredito Italiano S.p.A. 1,283
--------
6,718
--------
Japan--15.9%
440 DDI Corp. 1,432
20,000 Hirose Electric Co. Ltd. 1,342
25,000 Jafco Co. Ltd. 714
35,000 Jusco Co. Ltd. 668
180,000 Kirin Brewery Co. Ltd. 1,871
130,000 Mitsubishi Estate Co. Ltd. 1,244
135,000 Mitsubishi Heavy Industries Ltd. 506
150,000 Nikon Corp. 1,440
105,000 Pioneer Electronic Corp. 1,730
130,000 Sanwa Bank 1,179
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
135,000 Shiseido Co. Ltd. $ 1,539
150,000 Sumitomo Electric Industries 1,635
330,000 Toshiba Corp. 1,852
35,000 Uny Co. Ltd. 587
--------
17,739
--------
Netherlands--6.8%
12,000 Equant N.V.* 677
15,000 Getronics N.V. 658
23,000 ING Groep N.V. 1,321
10,000 Philips Electronics N.V. 633
21,000 Unilever N.V. 1,624
50,000 Vedior N.V. 1,023
8,500 Wolters Kluwer N.V. 1,625
--------
7,561
--------
Singapore--0.7%
100,000 Development Bank of Singapore Ltd. 759
--------
South Korea--1.2%
368 Daewoo Corp. 1
15,000 Samsung Display Devices Co. 545
15,000 Samsung Electronics 802
--------
1,348
--------
Spain--2.8%
50,000 Argentaria, Caja Postal y Banco 1,168
115,000 Iberdrola S.A. 1,910
--------
3,078
--------
Sweden--1.7%
105,000 Astra AB, A Shares 1,929
--------
Switzerland--6.7%
1,500 Novartis A.G. 2,824
130 Roche Holding A.G. (Genusss) 1,532
6,000 Swisscom A.G.* 2,026
3.800 UBS A.G. 1,147
--------
7,529
--------
Taiwan--0.7%
110,000 Acer, Inc.* 729
--------
United Kingdom--20.7%
105,000 Allied Zurich PLC* 1,508
100,000 Bass PLC 1,380
75,000 BOC Group PLC 1,090
260,000 British Sky Broadcasting Group PLC 2,150
220,000 Diageo PLC 2,466
30,000 Glaxo Wellcome PLC 1,905
215,000 Marks & Spencer PLC 1,462
110,000 Orange PLC* 1,126
110,000 Pearson PLC 1,979
110,000 PowerGen PLC 1,521
55,000 SEMA Group PLC 449
590,000 Shell Transport & Trading Co. 3,559
20,000 Smithkline Beecham PLC* 1,219
9,000 Vodafone Group PLC 1,329
--------
23,143
- ----------------------------------------------------------
TOTAL COMMON STOCKS (Cost $92,120) $105,490
- ----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
68
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------------
<C> <S> <C>
PREFERRD STOCK--0.3%
Germany
700 SAP A.G. $ 365
- -------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $467) $ 365
- -------------------------------------------------------------------
SHORT-TERM INVESTMENT--3.4%
Societe Generale, Paris, France
$3,861 5.375%Due 12/1/98 $ 3,861
- -------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $3,861) $ 3,861
- -------------------------------------------------------------------
WARRANTS--0.0%
192 Muenchener Rueckversicherungs-New Shares* $ 8
- -------------------------------------------------------------------
TOTAL WARRANTS (Cost $6) $ 8
- -------------------------------------------------------------------
TOTAL INVESTMENTS--98.1%
(Cost $96,454) $109,724
- -------------------------------------------------------------------
Other assets, less liabilities--1.9% 2,073
- -------------------------------------------------------------------
NET ASSETS--100.0% $111,797
===================================================================
</TABLE>
*Non-income producing security.
At November 30, 1998 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<CAPTION>
Industry/Sector
- -----------------------------------
<S> <C>
Auto 1.3%
Basic Industry 12.9
Capital Goods 6.6
Consumer Goods 32.2
Financial Services 16.9
Pharmaceuticals/Health Care 1.5
Real Estate 1.1
Technology 18.4
Utilities 1.5
Other 7.6
- -----------------------------------
Total 100.0%
- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
Small Company Index Portfolio
<C> <S> <C>
COMMON STOCK--83.7%
Advertising--0.4%
3,325 Advo, Inc.* $ 86
2,700 Catalina Marketing Corp.* 158
1,400 CKS Group, Inc.* 47
3,200 Getty Images, Inc.* 55
100 Grey Advertising, Inc. 36
3,200 Ha-Lo Industries, Inc.* 102
5,500 Sitel Corp.* 14
1,600 TMP Worldwide, Inc.* 51
--------
549
--------
Aerospace and Defense--0.6%
4,100 AAR Corp. 104
1,300 Alliant Techsystems, Inc.* 99
900 Banner Aerospace, Inc.* 8
4,100 BE Aerospace, Inc.* 97
700 Curtiss-Wright Corp. 26
1,250 Ducommun, Inc.* 21
2,000 Fairchild Corp. (The)* 32
5,000 GenCorp., Inc. 123
900 Heico Corp.* 22
3,400 Kaman Corp. 55
1,700 Kellstrom Industry, Inc.* 42
800 L-3 Communications Holdings, Inc.* 37
1,650 Nichols Research Corp.* 35
600 Primex Technologies, Inc. 24
2,900 Remec, Inc.* 40
900 Sequa Corp.* 57
--------
822
--------
Agriculture--0.1%
5,700 Agribiotech, Inc.* 74
1,600 Agribrands International, Inc.* 49
4,900 Cadiz, Inc.* 44
1,300 Tejon Ranch Co.* 26
--------
193
--------
Airlines--0.5%
8,200 Airtran Holdings, Inc.* 33
3,800 Alaska Airgroup, Inc.* 142
6,130 America West Holding Corp., Class B* 87
400 Amtran, Inc.* 9
3,200 ASA Holdings, Inc. 109
1,800 Atlantic Coast Airlines Holdings* 46
3,700 Mesa Air Group, Inc.* 30
1,750 Mesaba Holdings, Inc.* 33
2,025 Midwest Express Holdings* 56
3,000 Skywest, Inc. 81
8,400 Trans World Airlines* 43
--------
669
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
Apparel--0.6%
2,800 Authentic Fitness Corp.* $ 45
9,000 Burlington Industries, Inc. 94
900 Columbia Sportswear Co.* 20
2,700 Cone Mills Corp.* 12
1,600 Donna Karan International, Inc.* 12
1,700 Galey & Lord, Inc.* 18
900 Guess ?, Inc.* 3
3,900 Hartmarx Corp.* 23
3,150 Kellwood Co. 85
4,900 Nautica Enterprises, Inc.* 96
3,700 Nine West Group, Inc.* 46
1,800 Oshkosh B'gosh, Inc. 43
900 Oxford Industries, Inc. 26
3,400 Phillips-Van Heusen Corp. 24
2,000 Quiksilver, Inc.* 49
4,500 Russell Corp. 107
2,400 St. John Knits, Inc. 48
6,800 Stride Rite Corp. 60
800 Timberland Co.* 33
6,000 Wolverine World Wide, Inc.* 82
--------
926
--------
Auto Manufacturers--0.0%
3,400 Wabash National Corp. 64
--------
Auto Parts and Equipment--0.8%
2,400 Aftermarket Technology Corp.* 14
3,400 Arvin Industries, Inc. 143
2,000 Bandag, Inc. 71
3,200 Borg-Warner Automotive, Inc.* 160
2,300 Breed Technologies, Inc.* 16
3,100 Delco Remy International, Inc.* 34
1,200 Detroit Diesel Corp.* 25
1,600 Excel Industries, Inc. 28
2,500 Exide Corp.* 44
2,600 Hayes Lemmerz International, Inc.* 82
5,800 Miller Industries, Inc.* 28
2,400 OEA, Inc.* 31
2,500 Simpson Industries 26
1,500 Standard Motor Products, Inc. 34
2,425 Standard Products Co. 45
3,000 Superior Industries International, Inc. 78
2,525 Titan International, Inc.* 25
6,800 Tower Automotive, Inc.* 155
2,143 Wynn's International, Inc. 48
--------
1,087
--------
Banks--5.7%
1,000 Alabama National BanCorp. 26
4,250 Amcore Financial, Inc. 100
1,400 Area Bancshares Corp. 38
500 Bancfirst Corp. 20
1,000 Bancfirst Ohio Corp. 30
7,300 BancorpSouth, Inc. 140
2,400 Bancwest Corp. 104
</TABLE>
See accompanying notes to financial statements.
70
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,727 Bank of Granite Corp. $ 49
2,200 Banknorth Group, Inc. 73
808 BOK Financial Corp. 38
1,845 Brenton Banks, Inc. 33
1,000 BSB BanCorp., Inc. 29
1,860 BT Financial Corp. 52
500 Capital City Bank Group, Inc. 15
2,700 Carolina First Corp. 67
1,100 Cathay BanCorp., Inc. 42
2,285 Centennial BanCorp.* 41
1,300 Century South Banks, Inc. 38
1,583 Chemical Financial Corp. 67
2,108 Chittenden Corp. 64
3,650 Citizens Banking Corp. 118
1,000 City Holding Co. 34
4,576 CNB Bancshares, Inc. 198
1,500 Columbia Banking Systems, Inc.* 29
3,273 Commerce BanCorp., Inc. 156
1,100 Community Bank System, Inc. 32
6,900 Community First Bankshares, Inc. 147
1,430 Community Trust BanCorp. 33
1,200 Corus Bankshares, Inc. 44
3,880 Cullen/Frost Bankers, Inc. 208
1,450 CVB Financial Corp. 35
1,300 Evergreen BanCorp., Inc. 38
940 F & M BanCorp. 32
1,606 F & M BanCorp., Inc. 51
3,255 F & M National Corp. 98
2,442 F.N.B. Corp. 69
1,000 Farmers Capital Bank Corp. 35
3,750 First BanCorp. of Puerto Rico 103
1,200 First Charter Corp. 21
900 First Citizens Bancshares, Inc. 77
1,800 First Commerce Bancshares, Inc. 52
3,200 First Commonwealth Financial Corp. 78
3,834 First Financial BanCorp. 129
1,389 First Financial Bankshares, Inc. 51
952 First Financial Corp. 42
1,500 First Merchants Corp. 43
3,813 First Midwest BanCorp., Inc. 148
1,400 First Republic Bank Corp.* 36
1,574 First Source Corp. 51
3,100 First United Bancshares, Inc. 61
1,632 First Western BanCorp. 51
900 Frontier Financial Corp.* 44
2,100 GBC BanCorp. 52
1,200 Gold Banc Corp., Inc.* 20
2,170 Grand Premier Financial, Inc. 28
1,300 Greater Bay BanCorp. 45
1,200 Hamilton BanCorp., Inc.* 30
1,410 Hancock Holding Co. 63
1,068 Harleysville National Corp. 39
1,200 Horizon BanCorp., Inc. 44
4,012 Hubco, Inc. 108
4,981 Imperial BanCorp.* 77
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
1,800 Independent Bank Corp. $ 28
1,600 International Bancshares Corp. 86
1,000 Investors Financial Services Co. 56
1,700 Irwin Financial Corp. 49
1,533 Jeffbanks, Inc. 35
900 Mahoning National BanCorp. 29
2,100 MainStreet Financial Corp. 90
1,100 Merchants New York BanCorp. 39
400 Michigan Financial Corp. 14
1,170 Mid-America BanCorp. 30
900 Mississippi Valley Bancshares, Inc. 33
1,883 N B T BanCorp., Inc. 47
2,300 National BanCorp. of Alaska 71
800 National City BanCorp.* 21
1,769 National City Bancshares, Inc. 67
1,885 National Penn Bancshares, Inc. 61
4,019 Old National BanCorp. 209
1,300 Omega Financial Corp. 39
4,831 One Valley BanCorp., Inc. 159
1,600 Oriental Financial Group 49
1,200 Park National Corp. 115
900 Peoples Holding Co. (The) 29
600 Pinnacle Banc Group, Inc. 17
2,500 Premier Bancshares, Inc. 58
600 Prime Banchsares, Inc. 10
1,400 Prime BanCorp., Inc. 27
3,552 Provident Bankshares Corp. 95
600 Republic Banchsares, Inc.* 11
3,112 Republic BanCorp. 52
1,000 Republic Banking Corp. 11
6,916 Republic Security Finl Corp. 77
2,800 Riggs National Corp. of Washington D.C. 59
4,100 S & T BanCorp., Inc. 109
1,400 Sandy Springs BanCorp., Inc. 46
2,300 Santa Barbara BanCorp. 58
1,000 Shoreline Financial Corp. 26
1,375 Signal Corp. 47
2,800 Silicon Valley Bancshares* 70
800 Simmons First National Corp. 32
5,733 Sky Financial Group, Inc. 174
3,000 Southwest BanCorp. of Texas 54
1,200 Sterling BanCorp. 25
3,150 Sterling Bancshares, Inc. 50
800 Sterling Financial Corp. 33
4,993 Susquehanna Bancshares, Inc. 111
2,150 Texas Regional Bancshares 59
3,200 Triangle BanCorp., Inc. 61
2,400 Trust Co. of New Jersey 58
3,955 Trustco Bank Corp. 111
2,163 UMB Financial Corp. 96
5,700 United Bankshares, Inc. 163
1,510 United National BanCorp. 35
2,000 US BanCorp., Inc. 39
1,000 USB Holding Co., Inc. 16
</TABLE>
See accompanying notes to financial statements.
71
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Banks--Continued
6,228 UST Corp. $ 154
1,900 Vermont Financial Services Corp. 45
1,500 Washington Trust BanCorp. 32
3,050 Wesbanco, Inc. 84
2,050 West Coast BanCorp. of Oregon 44
6,200 Westamerica BanCorp. 224
2,300 Western BanCorp. 75
6,200 Westernbank Puerto Rico 82
3,275 Whitney Holding Corp. 121
--------
8,023
--------
Beverages--0.4%
5,100 Adolph Coors Co. 254
2,600 Beringer Wine Estates Holdings* 95
2,100 Boston Beer Co., Inc.* 18
2,300 Canandaigua Brands, Inc.* 114
300 Coca-Cola Bottling Co. Consolidated 17
98 Farmer Bros. Co. 19
1,200 Robert Mondavi* 44
--------
561
--------
Biotechnology--1.0%
4,200 Advanced Tissue Sciences, Inc.* 12
2,200 Affymetrix, Inc.* 55
1,900 Aviron* 41
1,500 Bio-Rad Laboratories, Inc.* 32
7,100 Bio-Technology General Corp.* 48
3,400 Cell Genesys, Inc.* 17
1,500 Entremed, Inc.* 37
3,194 Enzo Biochem, Inc.* 42
3,300 Human Genome Sciences, Inc.* 103
5,100 Icos Corp.* 111
2,600 Idec Pharmaceuticals Corp.* 87
3,300 Incyte Pharmaceuticals, Inc.* 103
2,300 Inhale Therapeutic Systems, Inc.* 74
300 Lab One, Inc. 4
5,600 Liposome Co., Inc.* 51
4,100 Millennium Pharmaceuticals, Inc.* 84
1,700 Neurogen Corp.* 29
4,356 Organogenesis, Inc.* 58
2,700 Protein Design Labs, Inc.* 59
3,300 Regeneron Pharmaceutical, Inc.* 27
3,500 Serologicals Corp.* 103
1,500 Sugen, Inc.* 21
2,500 Transkaryotic Therapies, Inc.* 56
2,300 Vical, Inc.* 38
--------
1,292
--------
Building Materials--1.1%
2,100 Advanced Lighting Technologies, Inc.* 18
600 Ameron International Corp. 22
4,100 Apogee Enterprises, Inc. 51
750 Butler MFG Co. 17
2,900 Calmat Co. 89
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,400 Centex Construction Products, Inc. $ 50
4,500 Comfort Systems USA, Inc.* 84
5,100 Dal-Tile International, Inc.* 44
1,800 Deltic Timber Corp. 36
1,950 Elcor Corp. 60
2,000 Florida Rock Industries, Inc. 59
1,800 Genlyte Group, Inc.* 34
1,400 Giant Cement Holding, Inc.* 34
1,600 Holophane Corp.* 37
5,600 Homebase, Inc.* 32
7,500 Hussmann International, Inc.* 124
2,600 Juno Lighting, Inc. 61
1,500 Lone Star Industries, Inc. 114
3,200 Modine Manufacturing Co. 117
2,600 NCI Building Systems, Inc.* 64
1,400 Nortek, Inc.* 38
600 Puerto Rican Cement Co., Inc. 22
4,100 Rayonier, Inc. 174
1,300 Republic Group, Inc. 22
600 Simpson Manufacturing Co., Inc.* 23
2,350 Thomas Industries, Inc. 41
1,900 TJ International, Inc. 45
2,200 Universal Forest Products, Inc.* 44
--------
1,556
--------
Chemicals--1.4%
9,100 Airgas, Inc.* 92
3,100 Albemarle Corp. 58
900 Bush Boake Allen, Inc.* 31
3,392 Cambrex Corp. 95
1,300 Carbide/Graphite Group* 17
2,800 Chemfirst, Inc. 53
9,100 Ethyl Corp. 53
5,400 Ferro Corp. 151
1,900 Fuller (H. B.) Co. 83
1,300 General Chemical Group, Inc. 22
3,400 Geon Co. 76
4,500 Georgia Gulf Corp. 84
6,500 Hanna (M.A.) Co. 91
3,700 Lawter International, Inc. 31
1,300 Learonal, Inc. 29
3,375 Lilly Industries, Inc. 63
2,100 Macdermid, Inc. 77
1,200 Mcwhorter Technologies, Inc.* 28
2,900 Minerals Technologies, Inc. 127
3,868 Mississippi Chemical Corp. 61
3,100 NL Industries, Inc. 41
2,200 Octel Corp.* 32
3,500 OM Group, Inc. 127
900 Penford Corp. 14
5,100 Schulman (A.), Inc. 109
2,700 Scotts Co. (The)* 98
1,900 Spartech Corp. 38
1,000 Stepan Co. 28
4,800 Terra Industries, Inc. 26
1,600 Tetra Technologies, Inc.* 20
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,100 Valhi, Inc. $ 12
5,000 Wellman, Inc. 61
--------
1,928
--------
Commercial Services--4.8%
2,200 Aaron Rents, Inc.* 34
1,200 Abacus Direct Corp.* 69
2,420 ABM Industries, Inc. 81
4,200 ABR Information Services, Inc.* 71
3,000 Access Health, Inc.* 108
900 Administaff, Inc.* 24
800 AHL Services, Inc.* 26
2,100 Alternative Resources Corp.* 20
4,000 American Oncology Resources, Inc.* 45
2,200 Ameripath, Inc.* 10
4,200 Avis Rent A Car, Inc.* 88
600 Bacou USA, Inc.* 11
347 Berlitz International, Inc.* 10
2,500 Big Flower Holdings, Inc.* 61
5,000 Billing Concepts Corp.* 64
1,900 Borg-Warner Security Corp.* 35
1,500 Boron Lepore & Associates, Inc.* 46
4,000 Budget Group, Inc.* 50
5,300 Building One Services Corp.* 90
3,500 Caribiner International, Inc.* 33
1,300 Carriage Services, Inc.* 33
1,700 CDI Corp.* 46
1,700 Central Parking Corp.* 50
6,700 Century Business Services, Inc.* 90
1,300 Chemed Corp. 44
1,900 Coinmach Laundry Corp.* 31
2,600 Computer Learning Centers* 17
6,907 Concentra Managed Care, Inc.* 82
1,900 Cort Business Service Corp.* 43
5,150 Crawford & Co. 79
1,200 Crescent Operating, Inc.* 5
700 Data Processing Resources, Inc.* 17
1,400 Data Transmission Network Corp.* 38
1,100 DBT Online, Inc.* 19
8,800 Devry, Inc.* 232
1,000 Diamond Technology Partners, Inc.* 14
3,500 Dollar Thrifty Automotive Group, Inc.* 44
700 Duff & Phelps Credit Rating, Inc. 36
1,300 Education Management, Inc.* 59
400 Edutreck International, Inc.* 3
3,100 Envoy Corp.* 124
3,000 Equity Corp. International, Inc.* 78
1,400 F.Y.I., Inc.* 44
1,600 First Consulting Group, Inc.* 38
300 Forrester Research, Inc.* 9
3,400 Franklin Covey Co.* 64
3,600 Group Maintenance American Corp.* 48
1,000 Hagler Bailly, Inc.* 18
1,043 Healthplan Services Corp. 10
1,800 Home Choice Holdings, Inc.* 29
2,100 Hooper Holmes, Inc.* 49
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
2,900 Horizon Software, Inc. $ 18
2,100 Inacom Corp.* 44
2,600 Integrated Electrical Services, Inc.* 50
6,900 Interim Services, Inc.* 143
1,800 International Telcomm Data Systems, Inc. 44
2,550 Iron Mountain, Inc.* 75
2,550 ITT Educational Services, Inc.* 84
1,100 Kendle International, Inc.* 25
1,300 Kroll-O'Gara Co.* 40
3,400 Labor Ready, Inc.* 74
1,200 Landauer, Inc. 34
1,700 Lason, Inc.* 104
1,300 Learning Tree International, Inc.* 11
700 Leasing Solutions, Inc.* 3
1,100 Maximus, Inc.* 34
1,100 Mcgrath RentCorp. 22
11,500 Medaphis Corp.* 33
3,400 Medquist, Inc.* 103
1,800 Memberworks, Inc.* 44
1,200 Meta Group, Inc.* 30
4,300 Metamor Worldwide, Inc.* 102
1,500 Metzler Group, Inc.* 62
2,500 Midas, Inc. 78
900 National Processing, Inc.* 5
1,250 NCO Group, Inc.* 46
2,550 NFO Worldwide, Inc.* 32
2,300 Norrell Corp. 37
9,690 Nova Corp.* 308
4,100 Novacare Employee Services, Inc.* 25
9,900 Olsten Corp. 74
1,600 On Assignment, Inc.* 57
5,300 Orthodontic Centers of America* 101
228 Panavision, Inc.* 4
3,600 Parexel International Corp.* 94
2,300 Paymentech, Inc.* 37
2,200 Pediatrix Medical Group, Inc.* 118
4,800 Personnel Group of America, Inc.* 79
2,445 Pharmaceutical Product Development* 70
11,500 Phycor, Inc.* 70
2,500 Phymatrix, Inc.* 7
4,100 Physician Reliance Network, Inc.* 38
1,100 Pierce Leahy Corp.* 27
1,050 Pinkertons, Inc.* 21
2,800 Prepaid Legal Services, Inc.* 73
3,300 Primark Corp.* 83
1,600 Probusiness Services, Inc.* 70
1,600 Profit Recovery Group International* 54
3,200 Protection One, Inc.* 31
600 Remedytemp, Inc.* 9
2,060 Renaissance Worldwide, Inc.* 15
3,400 Rental Services Corp.* 72
2,200 Renters Choice, Inc.* 53
1,400 Rent-Way, Inc.* 38
2,800 Rollins, Inc. 48
5,113 Romac International, Inc.* 71
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Commercial Services--Continued
4,000 Ruddick Corp. $ 78
2,100 Rural/Metro Corp.* 22
400 S M & A Corp.* 5
2,100 Service Experts, Inc.* 62
1,200 SOS Staffing Services, Inc.* 9
5,900 Sotheby's Holdings, Inc. 165
2,400 Staff Leasing, Inc.* 22
2,500 Staffmark, Inc.* 58
1,050 Strayer Education, Inc. 39
1,000 Superior Consultant Holdings, Inc.* 37
5,575 Sylvan Learning Systems, Inc.* 162
3,000 Teletech Holdings, Inc.* 27
3,000 Trico Marine Services, Inc.* 17
2,000 Trico Marine Services, Inc. 52
3,055 United Rentals, Inc.* 80
6,300 USWeb Corp.* 143
1,000 Vincam Group, Inc.* 15
1,200 Volt Information Sciences, Inc.* 28
1,500 Wackenhut Corrections Corp.* 41
1,397 Wackhenut Corp. 34
800 Westaff, Inc.* 5
--------
6,694
--------
Computers--3.6%
1,700 Anacomp, Inc.* 24
3,111 Analysts International Corp. 52
3,900 Anixter International, Inc.* 64
500 AnswerThink Consulting Group, Inc.* 10
700 Apex PC Solutions, Inc.* 18
700 ARIS Corp.* 11
1,500 Aspec Technology, Inc.* 3
4,175 Avant! Corp.* 70
3,600 Axent Technologies, Inc.* 94
2,700 BA Merchant Services, Inc.* 45
3,066 Banctec, Inc.* 40
2,200 Bell & Howell Co.* 74
3,400 Bisys Group, Inc.* 164
6,300 Checkfree Holdings Corp.* 102
1,400 Complete Business Solutions* 34
2,600 Compucom Systems, Inc.* 10
4,500 Computer Horizons Corp.* 101
275 Computer Management Sciences* 5
2,500 Computer Task Group, Inc.* 68
1,800 Cotelligent, Inc.* 33
2,300 Cylink Corp.* 19
7,300 Data General Corp.* 132
1,500 DecisionOne Holdings Corp.* 11
5,200 Diamond Multimedia Systems* 34
7,700 Electronics for Imaging, Inc.* 206
1,500 Evans & Sutherland CMP Corp.* 29
800 Factset Research Systems, Inc.* 33
1,850 Henry (Jack) & Associates 93
5,600 HMT Technology Corp.* 64
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,900 Hutchinson Technology* $ 90
1,300 Hypercom Corp.* 15
800 Icon CMT Corp.* 11
500 Intelligroup, Inc.* 8
6,200 Intergraph Corp.* 40
2,900 International Network Services* 158
700 ISS Group, Inc.* 26
7,800 Komag, Inc.* 57
1,200 Kronos, Inc.* 52
400 Manhattan Associates, Inc.* 7
2,900 Mastech Corp.* 77
9,000 Mentor Graphics Corp.* 78
5,100 Micron Electronics, Inc.* 116
2,400 Micros Systems, Inc.* 68
4,300 MMC Networks, Inc.* 56
3,700 MTI Technology Corp.* 15
2,700 MTS Systems Corp. 35
4,100 National Computer Systems, Inc. 135
2,900 Neomagic Corp.* 55
4,500 Network Appliance, Inc.* 338
1,300 Pomeroy Computer Resources* 25
1,100 QRS Corp.* 46
800 Radiant Systems, Inc.* 6
2,100 Rambus, Inc.* 186
6,600 Read-Rite Corp.* 89
500 RWD Technologies, Inc.* 10
7,500 S3, Inc.* 40
4,100 Safeguard Scientifics, Inc.* 116
2,800 Sandisk Corp.* 33
1,700 SCM Microsystems, Inc.* 101
5,600 Security Dynamics Technologies* 85
6,400 Sequent Computer Systems, Inc.* 82
3,800 Smart Modular Technologies* 79
2,000 Splash Technology Holdings* 17
900 SPR, Inc.* 16
2,500 Sykes Enterprises, Inc.* 51
700 Syntel, Inc.* 9
5,000 Systems & Computer Technology Co.* 91
6,025 Technology Solutions Co.* 56
2,400 Telxon Corp.* 65
3,800 Tyler Corp.* 25
6,500 Vanstar Corp.* 78
500 Verisign, Inc.* 20
2,900 Visual Networks, Inc.* 101
6,800 Wang Laboratories* 173
4,200 Whittman-Hart, Inc.* 93
3,400 Xircom, Inc.* 103
5,000 Xylan Corp.* 91
2,700 Zebra Technologies Corp.* 91
--------
5,058
--------
Consumer Products--0.2%
400 800-Jr Cigar, Inc.* 6
1,500 Consolidated Cigar Holdings, Inc.* 17
6,500 Dimon, Inc. 53
</TABLE>
See accompanying notes to financial statements.
74
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
1,300 General Cigar Holdings, Inc.* $ 13
5,000 Universal Corp. 176
--------
265
--------
Cosmetics and Personal Care--0.1%
1,400 Chattem, Inc.* 60
1,000 French Fragrances, Inc.* 7
2,123 Natures Sunshine Products, Inc. 33
4,800 Playtex Products, Inc.* 74
--------
174
--------
Distribution and Wholesale--0.8%
2,800 Anicom, Inc. 29
2,800 Aviall, Inc.* 34
1,000 Aviation Sales Co.* 37
7,624 Brightpoint, Inc.* 114
1,000 CDW Computer Centers, Inc.* 81
4,900 Cellstar Corp.* 32
4,600 CHS Electronics, Inc.* 68
1,600 Daisytek International Corp.* 25
2,750 Insight Enterprises, Inc.* 116
600 JLK Direct Distribution, Inc.* 7
2,300 Keystone Automotive Industries, Inc.* 44
11,800 Merisel, Inc.* 34
2,950 Microage, Inc.* 52
2,900 Owens & Minor, Inc. Holding Co. 50
1,600 Tristar Aerospace Co.* 12
1,700 U.S.A. Floral Products, Inc.* 20
10,300 Unisource Worldwide, Inc. 81
5,400 United Stationers, Inc.* 143
2,100 VWR Scientific Products Corp.* 66
2,800 Watsco, Inc. 50
--------
1,095
--------
Diversified Financial Services--1.4%
3,150 Aames Financial Corp.* 6
3,400 Advanta Corp. 35
1,100 Advest Group, Inc. 26
2,600 Affiliated Managers Group* 70
9,100 Americredit Corp.* 126
1,500 Ameritrade Holding Corp.* 37
500 Amplicon, Inc. 8
300 Capital Factors Holdings, Inc. 5
3,000 Charter Municipal Mortgage Acceptance 38
2,500 Cityscape Financial Corp. 0
1,900 Conning Corp. 33
1,400 Contifinancial Corp.* 8
3,300 Credit Acceptance Corp.* 22
1,800 Dain Rauscher Corp. 67
600 Delta Financial Corp.* 3
4,600 Doral Financial Corp. 82
1,700 DVI, Inc.* 30
5,300 E*trade Group, Inc.* 143
4,200 Eaton Vance Corp. 102
1,900 Everen Capital Corp. 47
400 Federal Agricultural Mortgage Co.* 15
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,350 Financial Federal Corp.* $ 36
1,600 First Sierra Financial, Inc.* 14
600 Firstcity Financial Corp.* 8
1,200 Franchise Mortgage Acceptance Corp.* 12
1,900 Freedom Securities Corp. 34
3,500 Friedman, Billings, Ramsey Group* 21
800 Fund American Enterprise Holdings, Inc 113
2,600 Hambrecht & Quist, Inc.* 63
2,900 Headlands Mortgage Co.* 48
1,700 Healthcare Financial Partners* 56
3,700 IMC Mortgage Co.* 2
4,364 Imperial Credit Industries* 44
500 Investment Technology Group* 26
2,000 Jefferies Group, Inc. 93
900 John Nuveen Co. 33
3,200 Long Beach Financial Corp.* 25
1,600 Medallion Financial Corp. 25
2,846 Metris Cos., Inc.* 95
4,037 Morgan Keegan, Inc. 81
6,450 Phoenix Investment Partners Ltd. 55
3,200 Pioneer Group, Inc.* 58
3,000 Resource America, Inc. 36
2,196 Resource Bancshares MTG Group 30
91 Search Financial Services 0
1,100 Southern Pacific Funding Corp. 0
1,560 Southwest Securities Group 31
600 Student Loan Corp. 27
6,500 UniCapital Corp.* 54
3,020 United Cos. Financial Corp.* 12
--------
2,035
--------
Electric--2.3%
3,150 Black Hills Corp. 78
3,000 Calpine Corp.* 72
2,500 Central Hudson Gas & Electric 101
2,000 CilCorp., Inc. 121
3,300 Cleco Corp. 113
4,800 CMP Group, Inc. 86
2,700 Commonwealth Energy System 104
3,000 Eastern Utilities Associates 74
8,100 EL Paso Electric Co.* 75
2,500 Empire District Electric Co. 55
4,650 Hawaiian Electric Industries 181
5,500 IdaCorp., Inc. 192
2,350 Madison Gas & Electric Co. 54
7,775 MDU Resources Group, Inc. 197
5,000 Minnesota Power, Inc. 209
7,500 Nevada Power Co. 178
3,078 Northwestern Corp. 73
2,000 Orange & Rockland Utilities 113
1,700 Otter Tail Power Co. 68
6,100 Public Service Co. of New Mexico 119
5,700 Rochester Gas & Electric Corp. 175
4,500 Sierra Pacific Resources 162
3,450 Southern Indiana Gas & Electric 116
1,600 TNP Enterprises, Inc. 61
</TABLE>
See accompanying notes to financial statements.
75
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Electric--Continued
4,680 Unisource Energy Corp. Holding* $ 70
2,100 United Illuminating Co. 105
8,250 Washington Water Power 151
3,500 WPS Resources Corp. 118
--------
3,221
--------
Electrical Components and Equipment--1.2%
1,075 AFC Cable Systems, Inc.* 32
2,500 Alpine Group, Inc.* 39
4,800 Ametek, Inc. 100
4,896 Artesyn Technologies, Inc.* 82
2,200 Barnes Group, Inc. 68
3,800 Belden, Inc. 64
1,800 C&D Technologies, Inc. 52
4,375 Cable Design Technologies Corp.* 81
4,900 C-Cube Microsystems, Inc.* 128
2,168 Electro Rent Corp.* 26
1,900 Encore Wire Corp.* 25
4,300 Essex International, Inc.* 139
3,400 FSI International, Inc.* 27
5,400 General Cable Corp. 103
3,100 Jabil Circuit, Inc.* 180
3,400 Kulicke & Soffa Industries* 58
2,900 Littelfuse, Inc.* 68
4,000 Royavac Corp. 93
1,600 Scotsman Industries, Inc. 33
2,175 SLI, Inc.* 48
700 Special Devices, Inc.* 23
2,800 Tecumseh Products Co. 139
2,900 Vicor Corp.* 26
--------
1,634
--------
Electronics--2.2%
1,000 Aavid Thermal Technologies* 18
2,300 Amphenol Corp.* 75
900 Analogic Corp. 32
1,500 Benchmark Electronics, Inc.* 38
3,900 BMC Industries, Inc.* 24
4,500 Checkpoint Systems, Inc.* 60
3,500 Coherent, Inc.* 44
1,400 Cohu, Inc. 32
3,200 Credence Systems Corp.* 63
1,609 CTS Corp. 57
676 Cubic Corp. 14
4,200 Cymer, Inc.* 63
3,600 DII Group, Inc.* 75
3,300 Dionex Corp.* 102
1,100 Dynatech Corp. 3
1,700 Electro Scientific Industries, Inc.* 51
5,900 Fisher Scientific International 109
5,778 Flowserve Corp. 103
4,200 Genrad, Inc.* 68
10,500 Gentex Corp.* 193
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
2,000 Hadco Corp.* $ 70
1,500 Harmon Industries, Inc. 38
2,200 Innovex, Inc. 35
12,000 Integrated Device Technology, Inc.* 71
1,300 ITI Technologies, Inc.* 35
1,400 Itron, Inc.* 9
5,600 Kemet Corp.* 79
4,000 Kent Electronics Corp.* 57
2,600 Lo-Jack Corp.* 24
5,250 Methode Electronics 72
5,600 Mettler Toledo International* 147
2,000 Micrel, Inc.* 81
7,500 Microchip Technology, Inc.* 261
1,000 Moog, Inc.* 29
2,640 OAK Industries, Inc.* 82
1,398 Park Electrochemical Corp. 27
5,232 Paxar Corp.* 55
57 Perkin-Elmer Corp. 0
1,500 Recoton Corp.* 28
1,100 Rogers Corp.* 30
1,800 Sawtek, Inc.* 39
9,800 Sensormatic Electronics Corp.* 80
2,600 Sipex Corp.* 84
1,300 Spectra-Physics Lasers, Inc.* 12
1,700 Stoneridge, Inc.* 31
3,200 Tava Technologies, Inc.* 18
2,100 Technitrol, Inc. 63
2,300 Thermedics, Inc.* 24
400 Thermo Optek Corp.* 4
400 Thermoquest Corp.* 4
3,300 Trimble Navigation Ltd.* 29
1,700 Triumph Group, Inc.* 57
1,300 Veeco Instruments, Inc.* 47
7,600 Vishay Intertechnology, Inc.* 108
2,400 Watts Industries 45
1,300 Woodward Governor Co. 33
2,500 X-Rite, Inc. 22
--------
3,154
--------
Engineering and Construction--0.4%
2,400 Dames & Moore Group 31
1,800 Dycom Industries, Inc.* 71
6,000 Foster Wheeler Corp. 103
2,775 Granite Construction, Inc. 90
3,100 Insituform Technologies, Inc.* 41
3,200 Jacobs Engineering Group, Inc.* 121
4,891 Morrison Knudsen Corp.* 47
1,000 Stone & Webster, Inc. 34
1,800 URS Corp.* 37
--------
575
--------
Entertainment--1.0%
900 AMC Entertainment, Inc.* 15
1,100 Anchor Gaming* 56
4,400 Ascent Entertainment Group* 35
6,600 Aztar Corp.* 33
</TABLE>
See accompanying notes to financial statements.
76
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
5,300 Boyd Gaming Corp.* $ 19
1,100 Carmike Cinemas, Inc.* 22
1,500 Championship Auto Racing Teams* 42
1,100 Churchill Downs, Inc. 33
1,500 Dover Downs Entertainment 17
800 GC Companies, Inc.* 32
5,900 Grand Casinos, Inc.* 56
6,100 Gtech Holdings Corp.* 153
900 Harveys Casinos Resorts 24
2,900 Hollywood Park, Inc.* 28
2,700 International Speedway Corp.* 96
900 Penske Motorsports, Inc.* 21
9,200 Premier Parks, Inc.* 250
600 Primadonna Resorts, Inc.* 5
2,500 RIO Hotel And Casino, Inc.* 39
1,500 Scientific Games Holdings, Inc.* 29
3,400 SFX Entertainment, Inc.* 170
500 Silverleaf Resorts, Inc.* 6
1,800 Speedway Motorsports, Inc.* 51
3,100 Station Casinos, Inc.* 26
1,300 Steinway Musical Instruments* 30
4,000 Sunterra Corp.* 47
500 Trendwest Resorts, Inc.* 7
3,900 Vail Resorts, Inc.* 98
900 Vistana, Inc.* 13
--------
1,453
--------
Environmental Control--0.6%
27,100 Aqua Alliance, Inc., Class A* 54
5,100 Calgon Carbon Corp. 37
900 Casella Waste Systems, Inc.* 28
7,000 Catalytica, Inc.* 126
4,400 Eastern Environmental Services* 96
2,200 Imco Recycling, Inc. 33
2,400 Ionics, Inc.* 75
3,900 Metal Management, Inc.* 12
500 Mine Safety Appliances Co. 33
17,220 Safety Kleen Corp.* 59
3,300 Superior Services, Inc.* 61
3,300 Syntroleum Corp.* 28
4,197 Tetra Tech, Inc.* 88
750 Thermo Ecotek Corp.* 8
400 Waste Industries, Inc.* 7
18,400 Wastemasters, Inc.* 10
--------
755
--------
Food--1.3%
2,600 American Italian Pasta Co.* 66
5,500 Chiquita Brands International 62
5,200 Corn Products International, Inc. 146
3,100 Dreyer's Grand Ice Cream, Inc. 42
6,300 Earthgrains Co. 202
5,600 Fleming Companies, Inc.* 56
2,600 Great Atlantic & Pacific Tea Co. 71
2,000 Hain Food Group, Inc.* 41
2,200 Imperial Holly Corp. 19
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
1,400 Ingles Markets, Inc. $ 17
2,500 International Multifoods Corp. 64
3,300 Lance, Inc. 65
2,000 Michael Foods, Inc. 50
1,850 Performance Food Group Co.* 45
499 Pilgrims Pride Corp.* 12
4,800 RalCorp. Holdings, Inc.* 84
7,000 Richfood Holdings, Inc. 130
1,100 Riviana Foods, Inc. 22
100 Seaboard Corp. 43
4,900 Smithfield Foods, Inc.* 130
3,800 Smucker (J.M.) Co. 88
600 United Natural Foods, Inc.* 15
7,500 Universal Foods Corp. 186
3,700 Vlasic Foods International* 80
1,600 Wild Oats Markets, Inc.* 46
2,300 Zapata Corp. 18
--------
1,800
--------
Forest Products and Paper--0.5%
3,500 Buckeye Technologies, Inc.* 68
3,700 Caraustar Industries, Inc. 98
2,800 Chesapeake Corp.* 97
3,700 Glatfelter (P.H.) Co. 48
4,300 Potlatch Corp. 163
1,770 Rock-Tenn Co. 29
2,100 Schweitzer-Mauduit International 38
8,491 Wausau-Mosinee Paper Corp. 143
--------
684
--------
Gas--1.7%
8,400 AGL Resources, Inc. 181
4,450 Atmos Energy Corp. 136
2,000 Bay State Gas 79
1,300 Colonial Gas Co. 45
1,500 Connecticut Energy Corp. 42
3,000 Eastern Enterprises 122
3,800 Energen Corp. 68
4,433 Indiana Energy, Inc. 100
2,600 Laclede Gas Co. 65
2,600 New Jersey Resources 101
1,450 North Carolina Natural Gas 47
3,600 Northwest Natural Gas Co. 102
1,900 NUI Corp. 46
4,600 Oneok, Inc. 160
1,500 Pennsylvania Enterprises, Inc. 37
5,200 Peoples Energy Corp. 196
4,476 Piedmont Natural Gas Co. 157
2,950 Public Service Co. of North Carolina 72
2,087 SEMCO Energy, Inc. 34
1,120 South Jersey Industries 29
2,619 Southern Union Co.* 53
4,400 Southwest Gas Corp. 105
3,600 Southwestern Energy Co. 27
4,800 UGI Corp. 117
6,400 Washington Gas Light Co. 163
</TABLE>
See accompanying notes to financial statements.
77
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Gas--Continued
5,500 Wicor, Inc. $ 120
1,550 Yankee Energy Systems, Inc. 45
--------
2,449
--------
Hand and Machine Tools--0.6%
5,875 Applied Power, Inc.* 209
4,893 Baldor Electric 98
668 Franklin Electric Co., Inc. 44
1,400 Hardinger, Inc. 27
7,200 Lincoln Electric Holdings, Inc. 169
5,700 Milacron, Inc. 115
3,100 Regal Beloit 78
1,800 SPX Corp.* 104
1,000 Starrett (L.S.) Co. 31
--------
875
--------
Health Care--3.1%
3,200 Acuson Corp.* 45
2,900 Adac Laboratories* 75
6,600 Alaris Medical, Inc.* 35
2,300 Alternative Living Services* 62
1,300 American Homepatient, Inc.* 3
2,500 American Retirement Corp.* 39
6,100 Apria Healthcare Group, Inc.* 43
2,000 Arrow International, Inc. 57
2,200 Assisted Living Concepts, Inc.* 28
4,500 Ballard Medical Products 98
1,400 Brookdale Living Communities* 24
1,600 Capital Senior Living Corp.* 20
1,400 Carematrix Corp.* 39
1,700 Centennial HealthCare Corp.* 26
800 Closure Medical Corp.* 18
2,800 Columbia Laboratories, Inc.* 11
2,250 Conmed Corp.* 61
2,200 Cooper Companies, Inc.* 47
8,550 Covance, Inc.* 214
8,600 Coventry Health Care, Inc.* 64
1,900 Curative Health Services, Inc.* 55
2,300 Cytyc Corp.* 46
1,900 Datascope Corp.* 42
1,700 Diagnostic Products Corp. 44
4,900 Express Scripts, Inc.* 270
5,200 Genesis Health Ventures* 50
3,400 Haemonetics Corp.* 77
2,700 Hanger Orthopedic Group, Inc.* 65
3,300 Henry Schein, Inc.* 117
2,000 Hologic, Inc.* 26
5,200 Idexx Laboratories, Inc.* 135
1,600 Igen International, Inc.* 43
1,200 Impath, Inc.* 46
3,500 Invacare Corp.* 84
5,700 Laboratory Corp. of America* 7
1,571 Life Technologies, Inc. 58
1,200 Lifecore Biomedical, Inc.* 10
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
330 LTC Healthcare, Inc. $ 1
4,600 Magellan Health Services* 43
10,427 Mariner Post-Acute Network* 45
2,100 Maxxim Medical, Inc.* 57
135 MEDIQ, Inc. 1
3,464 Mentor Corp. 64
7,000 MID Atlantic Medical Services* 62
1,100 Minimed, Inc.* 78
1,100 National Healthcare Corp.* 17
9,200 Novacare, Inc.* 29
1,200 Novoste Corp.* 20
4,600 Oakley, Inc.* 45
1,400 Ocular Sciences, Inc.* 32
1,800 OEC Medical, Inc.* 50
11,800 Oxford Health Plans* 131
1,000 Perclose, Inc.* 27
1,200 Province Healthcare Co.* 38
10,325 PSS World Medical, Inc.* 214
4,400 Quest Diagnostics, Inc.* 79
5,950 Renal Care Group, Inc.* 160
1,750 Res-Care, Inc.* 42
2,100 Resmed, Inc.* 72
4,055 Respironics, Inc.* 77
1,600 Sabratek Corp.* 27
3,500 Sierra Health Services* 80
3,600 Sola International, Inc.* 57
7,880 Sun Healthcare Group, Inc.* 41
2,100 Sunrise Assisted Living, Inc.* 91
2,900 Sunrise Medical, Inc.* 37
2,800 Techne Corp.* 53
600 Thermo Bioanalysis Corp.* 6
2,700 Thermo Cardiosystems, Inc.* 31
1,600 Thermolase Corp.* 8
1,350 Thermotrex Corp.* 14
800 Trex Medical Corp.* 8
1,900 United Wisconsin Services, Inc. 14
8,800 Vencor, Inc.* 40
2,000 Ventana Medical Systems* 43
2,000 Visx, Inc.* 146
700 Vital Signs, Inc. 12
1,600 Wesley Jessen Visioncare* 38
1,823 West Co., Inc. 55
1,200 Xomed Surgical Products, Inc.* 53
--------
4,422
--------
Holding Companies--Diversified--0.1%
2,320 Triarc Companies, Inc.* 37
6,000 Walter Industries, Inc.* 86
--------
123
--------
Home Builders--1.0%
1,812 American Homestar Corp.* 30
2,900 Cavalier Homes, Inc. 31
6,004 Champion Enterprises, Inc.* 134
2,600 Coachmen Industries, Inc. 59
1,100 Crossmann Cmntys, Inc.* 28
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
5,158 DR Horton, Inc. $ 97
6,700 Fairfield Communities, Inc.* 72
5,800 Kaufman & Broad Home Corp. 146
2,700 MDC Holdings, Inc. 50
1,200 Monaco Coach Corp.* 36
1,500 National RV Holdings, Inc.* 40
1,400 NVR L.P.* 55
6,850 Oakwood Homes* 102
2,820 Palm Harbor Homes, Inc.* 73
3,600 Pulte Corp. 92
2,200 Ryland Group, Inc. 58
1,100 Skyline Corp. 36
3,700 Standard-Pacific Corp. 36
983 Thor Industries, Inc. 23
3,500 Toll Brothers, Inc.* 85
1,979 U S Home Corp.* 63
2,100 Webb (DEL E.) Corp. 56
1,900 Winnebago Industries 23
--------
1,425
--------
Home Furnishings--0.4%
1,900 Bassett Furniture Industries 48
1,500 Bush Industries 25
4,800 Fedders Corp. 27
2,710 Harman International 116
5,300 Kimball International 102
7,800 La-Z-Boy, Inc. 131
400 Meadowcraft, Inc.* 4
2,400 O'Sullivan Industries Holdings* 24
900 Parkervision, Inc.* 22
2,200 Polycom, Inc.* 39
3,200 Windmere-Durable Holdings* 20
--------
558
--------
Household Products and Wares--0.6%
2,350 American Business Products, Inc. 52
3,080 Brady Corp. 79
4,300 Central Garden and Pet Co.* 69
2,700 Church & Dwight, Inc. 93
900 CSS Industries, Inc.* 27
1,100 DAY Runner, Inc.* 24
1,200 Fossil, Inc.* 33
2,400 Gibson Greetings, Inc.* 26
4,600 Harland (John H.) Co. 70
1,300 Hunt Corp. 18
5,400 Jostens, Inc. 127
1,900 New England Business Service, Inc. 61
1,600 Russ Berrie & Co., Inc. 36
1,900 Standard Register Co. 56
6,200 Wallace Computer Services, Inc. 139
--------
910
--------
Housewares--0.2%
2,400 Enesco Group, Inc. 58
2,600 Libbey, Inc. 80
7,757 Metromedia International Group * 34
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,090 Mikasa, Inc. $ 12
1,000 National Presto Industries, Inc. 41
2,050 Oneida Ltd. 37
1,900 Toro Co. 50
--------
312
--------
Insurance--3.3%
1,700 Acceptance Insurance Companies, Inc.* 33
3,600 Alfa Corp. 79
1,124 American Annuity Group, Inc. 26
2,400 American Heritage Life Investment Corp 59
1,200 American Medical Security Group 17
3,400 Amerin Corp.* 84
2,549 Amerus Life Holdings, Inc. 56
2,600 Argonaut Group, Inc. 65
3,400 ARM Financial Group, Inc. 73
1,700 Baldwin & Lyons, Inc. 36
1,900 Blanch (EW) Holdings, Inc. 76
3,200 Capital Re Corp. 63
1,200 Capitol Transamerica Corp. 21
1,200 Chartwell RE Corp. 33
2,000 Chicago Title Corp. 94
900 Citizens Corp. 30
3,300 Cmac Investment Corp. 159
2,400 CNA Surety Corp.* 35
3,800 Commerce Group, Inc. 130
2,181 Delphi Financial Group* 102
3,600 Enhance Financial Services Group 106
1,500 Executive Risk, Inc.* 81
4,600 FBL Financial Group, Inc. 113
2,783 Fidelity National Financial, Inc. 91
7,250 First American Financial 222
2,600 Foremost Corp. of America 53
1,400 Fpic Insurance Group, Inc.* 51
5,134 Frontier Insurance Group, Inc. 73
2,500 Gallagher, Arthur J. & Co. 116
1,400 Guarantee Life Companies, Inc. 26
1,700 Harleysville Group, Inc. 37
5,500 HCC Insurance Holdings, Inc. 102
1,900 Highlands Insurance Group* 24
1,800 Hilb, Rogal & Hamilton Co. 34
4,350 HSB Group, Inc. 180
500 Kansas City Life Insurance Co. 41
2,200 Landamerica Financial Group, Inc. 135
1,600 Liberty Corp. 78
1,700 Life RE Corp. 160
3,100 Life USA Holding, Inc. 40
600 Markel Corp.* 100
700 Meadowbrook Insurance Group 11
3,175 Medical Assurance, Inc.* 96
600 Midland Co. 15
2,400 MMI Companies, Inc. 39
2,200 NAC Re Corp. 105
300 National Western Life Insurance* 36
500 Nymagic, Inc. 11
2,200 Pennsylvania Manufacturers Corp. 42
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Insurance--Continued
900 Penn Treaty American Corp.* $ 25
2,900 PennCorp. Financial Group, Inc.* 3
900 Philadelphia Consolidated Holdings* 19
1,525 POE & Brown, Inc. 53
3,300 Presidential Life Corp. 59
1,751 Pxre Corp. 39
3,700 Reinsurance Group of America 242
1,900 Risk Capital Holdings, Inc.* 41
1,181 RLI Corp. 43
1,800 Scpie Holdings, Inc. 55
4,300 Selective Insurance Group 81
1,900 State Auto Financial Corp. 23
1,000 Stewart Information Services 49
6,300 TIG Holdings, Inc. 89
1,650 Trenwick Group, Inc. 52
2,000 Triad Guaranty, Inc.* 45
5,500 UICI* 109
1,050 United Fire & Casualty Co. 39
1,500 Vesta Insurance Group, Inc. 9
3,300 W.R. Berkley Corp. 111
1,400 Zenith National Insurance Corp. 34
--------
4,709
--------
Investment Companies--0.0%
700 PEC Israel Economic Corp.* 17
--------
Iron and Steel--0.9%
6,700 AK Steel Holding Corp. 129
2,700 Arch Coal, Inc. 52
13,300 Armco, Inc.* 52
19,006 Bethlehem Steel Corp.* 157
4,100 Birmingham Steel Corp. 20
2,900 Carpenter Technology 102
1,600 Citation Corp.* 22
1,700 Cleveland-Cliffs, Inc. 65
900 Gibraltar Steel Corp.* 18
7,200 Inland Steel Industries, Inc. 132
1,700 J & L Specialty Steel, Inc. 11
3,300 Lone Star Technologies* 32
14,600 LTV Corp. 80
3,100 National Steel Corp. 23
3,200 Oregon Steel Mills, Inc. 41
1,550 Reliance Steel & Aluminum 47
1,600 Roanoke Electric Steel Corp. 23
1,000 Rouge Industries, Inc. 8
600 Schnitzer Steel Industries, Inc. 11
600 Shiloh Industries, Inc.* 9
5,200 Steel Dynamics, Inc.* 71
3,100 Texas Industries, Inc. 90
2,400 WHX Corp.* 25
--------
1,220
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
Leisure Time--0.3%
500 Ambassadors International, Inc.* $ 9
1,000 American Classic Voyager* 15
2,200 American Skiing Co.* 20
3,500 Bally Total Fitness Holding* 83
1,400 Coleman Co., Inc.* 13
2,850 Family Golf Centers, Inc.* 59
1,617 K2, Inc. 18
1,800 North Face, Inc.* 23
1,500 Pegasus Systems, Inc.* 33
3,400 Polaris Industries, Inc. 119
1,200 Travel Services International, Inc.* 27
--------
419
--------
Lodging--0.3%
5,600 Choice Hotels International, Inc.* 64
10,500 Extended Stay America, Inc.* 105
3,800 Florida Panthers Holdings* 43
2,600 Homestead Village, Inc.* 17
3,359 Marcus Corp. 51
7,700 Prime Hospitality Corp.* 67
4,100 RED Roof Inns, Inc.* 70
2,500 Servico, Inc.* 16
1,300 Suburban Lodges of America* 10
--------
443
--------
Machinery--Construction and Mining--0.3%
1,100 Astec Industries, Inc.* 57
1,850 Commercial Intertech Corp. 29
3,200 Global Industries Technologies* 27
5,900 Global Industries Technologies* 97
2,500 Kuhlman Corp. 70
2,525 Manitowoc Co. 100
2,600 Terex Corp.* 73
--------
453
--------
Machinery--Diversified--1.2%
900 Advanced Energy Industries* 16
2,623 Albany International Corp. 50
1,200 Allied Products 9
3,200 Applied Industrial Technology, Inc. 45
3,500 Briggs & Stratton 177
2,450 Chart Industries, Inc. 19
5,000 Cognex Corp.* 83
1,700 Columbus Mckinnon Corp. 31
1,300 DT Industries, Inc.* 24
2,500 Esterline Technologies Corp.* 52
2,050 Gardner Denver Machinery, Inc.* 33
2,900 Gerber Scientific, Inc. 73
1,300 Gleason Corp. 25
2,145 Graco, Inc. 60
2,800 Helix Technology Corp. 34
4,325 Idex Corp. 117
6,000 Imation Corp.* 98
2,600 Integrated Process Equipment* 27
1,800 Iteq, Inc.* 4
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
1,850 Lindsay Manufacturing Co. $ 28
3,900 Magnetek, Inc.* 44
2,600 Motivepower Industries, Inc.* 79
1,000 Nacco Industries 87
2,000 Nordson Corp. 96
1,500 Omniquip International, Inc.* 20
4,000 Presstek, Inc.* 31
2,500 PRI Automation, Inc.* 60
1,148 Robbins & Myers, Inc. 23
1,100 Sauer, Inc. 10
1,700 Specialty Equipment Companies, Inc.* 40
2,000 Speedfam International, Inc.* 30
4,100 Stewart & Stevenson Services 41
1,400 Tennant Co. 48
1,200 Thermo Fibertek, Inc.* 7
5,300 Unova, Inc.* 90
--------
1,711
--------
Media--2.0%
1,100 Entertainment, Inc. 8
2,200 Ackerley Group, Inc.* 39
2,500 Adelphia Communications* 87
6,200 American Media, Inc.* 29
4,300 Banta Corp. 114
5,400 Bowne & Co., Inc. 90
1,600 CD Radio, Inc.* 61
4,600 Century Communications* 112
1,600 Consolidated Graphics, Inc.* 92
1,300 COX Radio, Inc.* 50
1,700 Emmis Communications Corp.* 59
3,000 Gaylord Entertainment Co.* 88
700 Gray Communication System* 12
5,600 Hollinger International, Inc. 72
3,600 Houghton Mifflin Co. 151
2,100 Jones Intercable, Inc.* 65
1,600 Journal Register Co.* 26
6,500 LEE Enterprises 182
4,900 Mail-Well, Inc.* 63
3,275 Mcclatchy Co. 108
3,400 Media General, Inc. 161
2,008 Merrill Corp. 34
1,100 Metro Networks, Inc.* 42
1,200 On Command Corp.* 10
2,700 Paxson Communications Corp.* 20
1,200 Pegasus Communications Corp.* 20
2,600 Petersen Cos., Inc.* 62
2,500 Playboy Enterprises* 39
1,900 Scholastic Corp.* 90
3,400 Spelling Entertainment Group* 25
7,400 TCI Satellite Entmnt Group* 8
5,800 United International Holdings, Inc.* 98
600 United Television, Inc. 66
5,400 Valassis Communications, Inc.* 232
300 Value Line, Inc. 12
3,300 Westwood One, Inc.* 87
3,800 Wiley (John) & Sons 131
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
5,600 World Color Press, Inc.* $ 167
1,400 Young Broadcasting Corp.* 50
--------
2,862
--------
Metal Fabricate and Hardware--0.6%
1,656 Castle (A.M.) & Co. 32
2,100 Chase Industries, Inc.* 25
1,966 Commercial Metals Co. 50
2,800 Intermet Corp. 38
4,800 Kaydon Corp. 170
1,800 Ladish Co., Inc.* 18
800 Lawson Products 18
1,800 Maverick Tube Corp.* 10
4,100 Metals USA, Inc.* 38
5,200 Mueller Industries, Inc.* 119
2,500 NS Group, Inc.* 14
3,600 Precision Castparts Corp. 159
2,100 Quanex Corp. 38
2,800 ROHN Industries, Inc. 8
600 Ryerson Tull, Inc.* 7
800 Shaw Group, Inc. (The)* 7
500 Special Metals Corp.* 5
2,900 Valmont Industries 47
2,100 Wolverine Tube, Inc. 47
2,900 Wyman-Gordon Co.* 45
--------
895
--------
Metals--Diversified--0.4%
5,400 Asarco, Inc. 105
2,400 Brush Wellman, Inc. 39
1,800 Century Aluminum Co. 15
1,400 Commonwealth Industries, Inc. 13
8,100 Hecla Mining Co.* 34
4,300 Kaiser Aluminum Corp.* 28
500 Maxxam, Inc.* 24
2,100 RTI International Metals, Inc.* 32
3,700 Southern Peru Limited 43
3,000 Stillwater Mining Co.* 110
3,200 Titanium Metals Corp. 32
500 Tremont Corp. 18
--------
493
--------
Mining--0.2%
3,500 Amcol International Corp. 37
33,700 Battle Mountain Gold Co.* 158
4,517 Getchell Gold Corp.* 74
--------
269
--------
Miscellaneous Manufacturer--1.5%
2,100 ACX Technologies, Inc.* 27
4,500 Aptargroup, Inc. 126
3,050 Arctic Cat, Inc. 32
12,600 Aura Systems, Inc.* 17
3,600 Blount International, Inc. 83
3,550 Clarcor, Inc. 67
1,500 CPI Corp. 32
</TABLE>
See accompanying notes to financial statements.
81
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Miscellaneous Manufacturer--Continued
2,350 Cuno, Inc.* $ 35
3,400 Dexter Corp. 109
5,600 Donaldson Co., Inc. 112
6,700 Federal Signal Corp. 164
2,100 Foamex International, Inc.* 24
2,700 Furon Co. 46
711 General Electric Co. 64
4,500 Griffon Corp.* 43
2,100 Heska Corp.* 13
2,200 Hexcel Corp.* 20
2,500 Justin Industries 32
2,300 Lydall, Inc.* 29
8,000 Mark IV Industries, Inc. 135
5,400 Mascotech, Inc. 87
2,400 Matthews International Corp. 72
2,694 Myers Industries, Inc. 61
300 NCH Corp. 17
3,900 Polymer Group, Inc.* 41
4,600 Roper Industries, Inc. 85
1,200 Samsonite Corp.* 8
2,700 Scott Technologies, Inc.* 42
2,100 Smith (A.O.) Corp. 52
1,528 SPS Technologies, Inc.* 87
1,700 Standex International Corp. 40
2,900 Sturm Ruger & Co., Inc. 37
2,700 Synetic, Inc.* 114
3,000 Tredegar Industries, Inc. 70
2,500 Westinghouse Air Brake Co.* 55
1,600 Zoltek Cos., Inc.* 17
--------
2,095
--------
Office Furnishings--0.1%
2,100 Knoll, Inc.* 57
660 Virco Manufacturing 14
--------
71
--------
Office and Business Equipment--0.0%
900 General Binding Corp. 34
--------
Oil and Gas Producers--1.5%
1,500 Atwood Oceanics, Inc.* 28
4,640 Barrett Resources Corp.* 113
800 Belco Oil & Gas Corp.* 5
4,300 Benton Oil & Gas Co.* 16
2,700 Berry Petroleum 35
3,900 Brown (Tom), Inc. 39
3,300 Cabot Oil & Gas Corp. 51
7,154 Chesapeake Energy Corp. 10
2,300 Cliffs Drilling Co. 36
2,900 Comstock Resources, Inc.* 11
5,700 Cross Timbers Oil Co. 65
3,300 Devon Energy Corp. 109
18,600 Enserch Exploration, Inc. 66
1,900 Forcenergy, Inc.* 8
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
4,900 Forest Oil Corp.* $ 42
4,100 Frontier Oil Corp.* 23
21,400 Grey Wolf, Inc.* 21
19,600 Harken Energy Corp.* 55
7,400 Helmerich & Payne 128
678 Holly Corp. 11
1,200 Houston Exploration Co.* 21
2,500 HS Resources, Inc.* 22
3,700 KCS Energy, Inc.* 15
18,400 Kelley Oil & Gas Corp.* 17
2,856 Louis Dreyfus Natural Gas* 37
7,800 Marine Drilling Co., Inc.* 68
4,776 Meridian Resource Corp.* 19
3,000 Mitchell Energy & Development 39
4,700 Newfield Exploration Co.* 92
2,900 Nuevo Energy Co.* 43
9,100 Parker Drilling Co.* 34
4,600 Patterson Energy, Inc.* 22
800 Penn Virginia Corp. 17
2,500 Plains Resources, Inc.* 44
5,500 Pogo Producing Co. 64
7,400 Pride International, Inc.* 56
5,300 Quaker State Corp. 76
2,600 Range Resources Corp. 11
800 Rutherford-Moran Oil Corp.* 2
15,000 Santa Fe Energy Resources* 115
9,200 Seagull Energy Corp.* 75
4,900 Snyder Oil Corp. 63
1,600 St. Mary Land & Exploration 30
2,000 Stone Energy Corp.* 60
2,220 Swift Energy Co.* 21
4,700 Tesoro Petroleum Corp.* 63
5,300 Titan Exploration, Inc.* 39
1,400 Transtexas Gas Corp.* 3
5,400 Vintage Petroleum, Inc. 56
2,030 Wd-40 Co. 63
--------
2,159
--------
Oil and Gas Services--0.5%
600 CAL Dive International, Inc.* 10
400 Carbo Ceramics, Inc. 8
2,100 Daniel Industries 23
1,800 Friede Goldman International, Inc.* 23
900 Gulf Island Fabrication, Inc.* 7
4,200 Hanover Compressor Co.* 95
5,900 Input/Output, Inc.* 48
1,900 IRI International Corp.* 8
2,700 KEY Energy Group* 17
1,000 Lufkin Industries, Inc. 20
9,860 Newpark Resources* 73
3,400 Oceaneering International, Inc.* 42
500 Omni Energy Services Corp.* 5
3,100 Pool Energy Services Co.* 35
2,000 RPC, Inc. 16
1,900 Seacor Smit, Inc.* 91
3,300 Seitel, Inc.* 44
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
2,600 Superior Energy Services* $ 8
6,700 Tuboscope, Inc.* 56
1,500 UTI Energy Corp.* 13
3,100 Veritas DGC, Inc.* 45
--------
687
--------
Packaging and Containers--0.6%
4,500 Ball Corp. 192
900 Bway Corp.* 15
3,900 Earthshell Corp.* 53
5,700 First Brands Corp. 213
7,500 Gaylord Container Corp. 39
2,100 Greif Brothers Corp. 68
2,700 Ivex Packaging Corp.* 53
7,600 Longview Fibre Co. 86
3,150 Shorewood Packaging Corp.* 47
1,700 Silgan Holdings, Inc.* 47
--------
813
--------
Pharmaceuticals--2.9%
1,200 Advance Paradigm, Inc.* 38
4,600 Agouron Pharmaceuticals, Inc.* 201
1,500 Algos Pharmaceuticals Corp.* 41
2,800 Alkermes, Inc.* 51
76 Alpha 1 Biomedicals, Inc. 0
2,500 Alpharma, Inc., Class A 90
3,100 Amerisource Health Corp.* 198
1,000 Andrx Corp.* 40
4,400 AxyS Pharmaceuticals, Inc.* 25
1,300 Barr Laboratories, Inc.* 55
2,333 Bindley Western Industries* 90
1,000 Biomatrix, Inc.* 49
2,080 Block Drug Co. 78
3,200 Carter-Wallace, Inc. 57
3,900 Cephalon, Inc.* 29
1,600 Chirex, Inc.* 29
3,500 COR Therapeutics, Inc.* 41
2,000 Coulter Pharmaceutical, Inc.* 57
6,800 Dura Pharmaceuticals, Inc.* 88
2,700 Fuisz Technologies Ltd.* 33
1,900 Geltex Pharmaceuticals, Inc.* 45
11,600 Gensia Sicor, Inc.* 54
4,500 Gilead Sciences, Inc.* 140
2,400 Guilford Pharmaceuticals, Inc.* 34
1,766 Herbalife International, Inc. 21
3,600 Imclone Systems* 38
3,400 Immune Response Corp.* 44
3,900 Isis Pharmaceuticals, Inc.* 44
14,400 Ivax Corp.* 137
3,400 Jones Pharma, Inc. 122
1,950 KV Pharmaceutical Co.* 42
5,458 Ligand Pharmaceuticals, Inc.* 54
2,700 Macrochem Corp.* 21
2,700 Medicis Pharmaceutical* 170
3,400 Medimmune, Inc.* 227
900 Miravant Medical Technologies* 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
7,800 Nbty, Inc.* $ 48
2,000 NCS Healthcare, Inc.* 41
4,200 Nexstar Pharmaceuticals, Inc.* 42
1,000 Omega Protein Corp.* 9
2,400 Pathogensis Corp.* 115
3,150 Patterson Dental Co.* 131
9,400 Perrigo Co.* 79
1,800 Pharmacyclics, Inc.* 31
10,000 PharMerica, Inc.* 41
1,800 Priority Healthcare Corp.* 66
3,700 Roberts Pharmaceutical Corp.* 91
2,400 Sangstat Medical Corp.* 58
600 Schein Pharmaceutical, Inc.* 8
5,600 Scios, Inc.* 42
3,900 Sepracor, Inc.* 324
4,600 Sequus Pharmaceuticals, Inc.* 91
1,400 Supergen, Inc.* 9
3,800 Theragenics Corp.* 52
2,800 Triangle Pharmaceuticals, Inc.* 31
3,200 Twinlab Corp.* 53
3,600 US Bioscience, Inc.* 27
3,700 Vertex Pharmaceuticals, Inc.* 88
3,000 Veterinary Centers of America* 55
1,400 Viropharma, Inc.* 16
4,000 Vivus, Inc.* 12
1,100 Weider Nutrition International 7
5,100 Zila Pharmaceuticals, Inc.* 38
1,700 Zonagen, Inc.* 33
--------
4,135
--------
Pipelines--0.2%
600 Aquila Gas Pipeline Corp.* 5
5,400 Equitable Resources, Inc. 159
3,200 Transmontaigne, Inc.* 48
3,100 Western Gas Resources, Inc. 29
--------
241
--------
Real Estate--0.5%
700 Avatar Holdings, Inc.* 11
1,800 Castle & Cooke, Inc.* 28
1,900 CB Richard Ellis Services, Inc.* 34
2,000 Forest City Enterprises, Class A 49
962 Getty Realty Corp. 13
2,900 Grubb & Ellis Co.* 24
1,933 Insignia Financial Group, Inc.* 26
2,400 Lasalle Partners, Inc. 68
3,800 LNR Property Corp.* 74
265 Merry Land Properties, Inc. 1
344 Reckson Services Industries, Inc. 1
5,900 Security Capital Group, Inc.* 87
4,200 Trammell Crow Co.* 101
8,000 Ventas, Inc.* 96
2,500 Wellsford Real Properties, Inc.* 23
--------
636
--------
</TABLE>
See accompanying notes to financial statements.
83
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
REITs--6.1%
470 Alexander's, Inc.* $ 37
1,600 Alexandria Real Estate Equities 49
3,400 American Health Properties 77
2,000 Amli Residential Properties 43
2,600 Anthracite Capital, Inc. 19
759 Apartment Investment & Management Co. 30
200 Archstone Communities Trust 4
2,500 Associated Estates Realty 32
3,300 Bedford Property Investors 59
5,400 Berkshire Realty Co. 51
2,500 Boykin Lodging Co. 33
3,503 Bradley Real Estate Trust 72
4,900 Brandywine Realty Trust 88
6,424 Bre Properties, Inc., Class A 155
4,700 Burnham Pacific Property, Inc. 61
2,700 Cabot Industrial Trust 57
6,533 Camden Property Trust 168
3,100 Capital Automotive 41
8,975 Capstead Mortgage Corp.* 30
3,300 CBL & Associates Properties 83
3,200 CCA Prison Realty Trust 78
2,600 Centerpoint Properties Corp. 88
2,800 Centertrust Retail Properties 33
3,100 Chateau Communities, Inc. 89
2,300 Chelsea GCA Realty, Inc. 78
3,800 Colonial Properties Trust 103
4,300 Commercial NET Lease Realty 61
6,300 Cornerstone Realty Income Trust 67
3,700 Cousins Properties, Inc. 114
5,900 Criimi MAE, Inc. 22
3,400 Crown American Realty 27
8,400 Developers Divers Realty 162
6,400 Dynex Capital, Inc. 30
2,400 Eastgroup Properties 45
2,000 Entertainment Properties Trust 37
5,300 Equity Inns, Inc. 54
2,100 Essex Property Trust, Inc. 65
5,800 Federal Realty Investment Trust 139
9,433 Felcor Lodging Trust, Inc. 225
5,500 First Industrial Realty Trust 133
4,600 First Union Real Estate 27
7,200 Franchise Finance Corp. of America 177
3,700 Gables Residential Trust 92
5,300 General Growth Propeties 201
4,600 Glenborough Realty Trust, Inc. 98
3,500 Glimcher Realty Trust 59
1,100 Golf Trust of America, Inc. 29
2,600 Great Lakes Reit, Inc. 41
4,500 Health Care Property Investors 142
4,100 Health Care Reit, Inc. 93
6,099 Healthcare Realty Trust, Inc. 140
2,300 Home Properties of NY, Inc. 57
299 Horizon Group Properties, Inc. 1
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
5,300 Hospitality Properties Trust $ 138
3,000 IMPAC Mortgage Holdings, Inc. 15
5,100 Imperial Credit Commerical Mortgage 50
4,700 Innkeepers USA Trust 52
4,600 IRT Property Co. 46
2,700 Irvine Apartment Communities 72
4,650 JDN Realty Corp. 96
1,900 JP Realty, Inc. 42
4,100 Kilroy Realty Corp. 92
3,900 Koger Equity, Inc. 62
1,700 LaSalle Hotel Properties 23
2,400 Laser Mortgage Management, Inc. 14
2,500 Lexington Corporate Properties 33
4,100 LTC Properties, Inc. 69
4,300 Macerich Co. (The) 114
3,100 Manufactured Home Communities 76
4,600 Meridian Industrial Trust 111
6,742 Meristar Hospitality Corp.* 131
2,000 MGI Properties, Inc. 56
2,800 Mid-America Apartment Communities 68
2,100 Mills Corp. 45
1,800 National Golf Properties, Inc. 52
3,400 National Health Investors 90
6,400 Nationwide Health Properties, Inc. 143
12,880 New Plan Excel Realty Trust 282
2,600 Ocwen Asset Investment Corp. 14
2,918 Omega Healthcare Investors 89
2,600 Pacific Gulf Properties, Inc. 50
1,500 PAN Pacific Retail Properties, Inc. 30
1,600 Parkway Properties, Inc. 48
1,700 Pennsylvania Real Estate Investment Trust 34
5,800 Prentiss Properties Trust 126
309 Price Enterprises, Inc. 2
500 Prime Group Realty Trust 8
6,197 Prime Retail, Inc. 65
3,500 PS Business Parks, Inc. 81
3,900 Realty Income Corp. 98
5,900 Reckson Associates Realty 136
1,800 Redwood Trust, Inc. 26
2,000 Regency Realty Corp. 47
3,300 RFS Hotel Investors, Inc. 47
4,200 Shurgard Storage Centers, Inc. 111
3,500 SL Green Realty Corp. 75
2,500 Charles E. Smith Residential Realty, Inc. 74
1,800 Sovran Self Storage, Inc. 46
2,100 Storage Trust Realty 47
4,100 Storage USA, Inc. 130
3,100 Summit Properties, Inc. 54
2,500 Sun Communities, Inc. 81
5,500 Sunstone Hotel Investors, Inc. 58
700 Tanger Factory Outlet Centers, Inc. 16
5,700 Taubman Centers, Inc. 79
3,200 Thornburg Mortgage Asset Corp. 28
2,500 Tower Reallty Trust, Inc 47
2,300 Town & Country Trust 35
</TABLE>
See accompanying notes to financial statements.
84
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
3,300 Trinet Corporate Realty Trust $ 88
15,200 United Dominion Realty Trust 164
1,400 Urban Shopping Centers, Inc. 46
2,500 Walden Residential Props, Inc. 52
5,200 Washington Reit 91
2,900 Weeks Corp. 83
3,900 Weingarten Realty Investment 177
2,500 Western Investment Real Estate Trust 29
4,400 Westfield America, Inc. 77
--------
8,557
--------
Retail--4.3%
1,168 99 Cents Only Stores* 50
5,900 Advantica Restaurant Group, Inc.* 38
2,000 American Eagle Outfitters* 120
3,400 Ames Department Stores, Inc.* 81
2,900 Ann Taylor Stores Corp.* 96
3,700 Applebees International, Inc. 76
4,112 Avado Brands, Inc.* 32
1,100 Barnett, Inc.* 14
1,000 Blair Corp. 18
6,100 BOB Evans Farms 148
1,800 Boise Cascade Corp.* 20
2,600 Brown Group, Inc. 47
700 Brylane, Inc.* 11
1,000 Buckle, Inc.* 26
6,740 Buffets, Inc.* 79
2,880 Burlington Coat Factory Warehouses* 42
7,700 Casey's General Stores, Inc.* 107
3,700 Cash America Investments, Inc.* 62
2,400 Cato Corp. 33
1,300 CDnow, Inc.* 31
2,650 CEC Entertainment, Inc.* 79
14,700 Charming Shoppes* 61
2,400 Cheesecake Factory (The)* 62
1,900 Childrens Place* 35
5,950 Claire's Stores, Inc. 101
1,500 Coldwater Creek, Inc.* 18
2,000 Cole National Corp.* 31
2,428 Consolidated Products, Inc.* 50
1,400 Copart, Inc.* 32
15,400 Corporate Express, Inc.* 90
1,300 Cost Plus, Inc.* 43
2,800 CSK Auto, Inc.* 78
1,900 Dave & Buster's, Inc.* 37
300 Delia*s, Inc.* 2
1,300 Discount Auto Parts* 32
2,800 Dress Barn, Inc.* 41
2,500 Duane Reade, Inc.* 100
3,700 Eagle Hardware & Garden* 104
1,900 Elder-Beerman Stores Corp.* 27
6,900 Fingerhut Cos., Inc. 77
2,600 Finish Line* 24
800 Finlay Enterprises* 6
5,100 Foodmaker, Inc.* 99
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
3,600 Footstar, Inc.* $ 88
1,300 Fred's, Inc. 18
1,400 Friedman's, Inc.* 14
1,100 Gadzooks, Inc.* 8
1,800 Garden Ridge Corp.* 14
3,800 Genesco, Inc.* 21
1,300 Genesis Direct, Inc.* 9
440 Genovese Drug Stores 13
2,500 Global Directmail Corp.* 49
2,700 Goody's Family Clothing, Inc.* 30
1,800 Group 1 Automotive, Inc.* 31
2,500 Guitar Center, Inc.* 57
3,500 Gymboree Corp.* 23
3,000 Hancock Fabrics, Inc. 25
4,600 Handleman Co.* 55
17,100 Hanover Direct, Inc.* 42
1,300 Haverty Furniture 25
8,800 Heilig-Meyers Co. 62
3,700 Hollywood Entertainment Corp.* 89
4,200 Host Marriott Services Corp.* 46
3,300 Hughes Supply, Inc. 92
1,400 Ihop Corp.* 56
2,500 Jo-Ann Stores, Inc.* 39
3,550 Just For Feet, Inc.* 80
700 K & G Men's Center, Inc.* 7
1,100 Kenneth Cole Productions, Inc.* 20
3,800 Landry's Seafood Restaurant* 31
2,100 Land's End, Inc.* 47
5,700 Linens 'N Things, Inc.* 175
5,700 Lone Star Steakhouse & Saloon* 43
4,500 Longs Drug Stores, Inc. 160
3,400 Luby's Cafeterias, Inc. 54
2,800 Maxim Group, Inc. (The)* 55
3,012 Men's Wearhouse, Inc.* 76
3,700 Michaels Stores, Inc.* 67
5,100 Micro Warehouse, Inc.* 140
1,300 Movado Group, Inc. 26
5,200 Musicland Stores Corp.* 88
1,700 N2K, Inc.* 28
1,100 NPC International, Inc.* 13
500 Onsale, Inc.* 31
2,000 O'Reilly Automotive, Inc.* 91
3,075 Pacific Sunwear of California* 46
2,950 Papa John's International, Inc.* 124
1,200 Party City Corp.* 20
3,050 Petco Animal Supplies, Inc.* 31
17,000 Petsmart, Inc.* 146
500 PJ America, Inc.* 10
5,400 Planet Hollywood International* 16
3,450 Rainforest Cafe, Inc.* 24
2,600 Regis Corp. 87
4,200 Ruby Tuesday, Inc.* 78
6,100 Ryan's Family STK Houses, Inc.* 69
1,950 Sbarro, Inc.* 51
3,800 Shopko Stores, Inc.* 123
</TABLE>
See accompanying notes to financial statements.
85
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Retail--Continued
1,200 Smart & Final, Inc. $ 13
2,750 Sonic Corp.* 54
21,000 Southland Corp.* 43
3,400 Spiegel, Inc.* 13
4,700 Spiegel, Inc. 31
3,900 Stage Stores, Inc.* 45
4,000 Stein Mart, Inc.* 34
6,200 Sunglass HUT International, Inc.* 37
1,000 Syms Corp.* 10
1,700 Talbots, Inc. 43
1,500 Tcby Enterprises, Inc. 12
2,250 Trans World Entertainment 52
2,300 United Auto Group, Inc.* 31
1,400 Urban Outfitters, Inc.* 20
1,700 Value City Dept Stores, Inc.* 17
1,400 West Marine, Inc.* 16
1,600 Wet Seal, Inc.* 44
1,600 Wilmar Industries, Inc.* 28
5,400 Zale Corp.* 155
--------
6,021
--------
Savings and Loans--1.9%
1,980 Albank Financial Corp. 134
2,600 Anchor BanCorp. Wisconsin, Inc. 52
900 Andover BanCorp., Inc. 29
5,700 Arcadia Financial Ltd.* 20
2,300 Bank Plus Corp.* 10
5,400 Bankatlantic BanCorp. Inc 43
1,800 Bankunited Financial Corp.* 15
3,000 Bay View Capital Corp. 63
2,000 Brookline BanCorp., Inc. 24
1,200 CFSB BanCorp., Inc. 28
8,894 Commercial Federal Corp. 204
2,254 Commonwealth BanCorp., Inc. 34
1,300 D & N Financial Corp. 30
1,700 Dime Community Bancshares 46
3,006 Downey Financial Corp. 78
2,300 First Federal Capital Corp. 38
2,000 First Financial Holdings, Inc. 38
1,357 First Indiana Corp. 26
1,600 First Liberty Financial Corp. 35
4,695 First Source BanCorp., Inc. 38
1,720 First Washington BanCorp., Inc. 36
2,900 Firstfed Financial Corp.* 51
700 Flagstar BanCorp., Inc. 17
2,106 Harbor Florida Bancshares, Inc. 23
1,200 Harris Financial, Inc. 18
1,300 Haven BanCorp., Inc. 22
11,100 Independence Community Bank 157
3,050 Interwest BanCorp., Inc. 74
1,300 Jefferson Savings BanCorp., Inc. 19
1,200 JSB Financial, Inc. 63
3,000 Local Financial Corp.* 26
4,988 MAF BanCorp., Inc. 128
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,100 Northwest BanCorp., Inc. $ 21
1,600 Ocean Financial Corp. 25
2,000 PBOC Holdings, Inc.* 22
5,200 Peoples BanCorp., Inc. 52
2,400 PFF BanCorp., Inc.* 37
2,650 Queens County BanCorp., Inc. 80
1,200 Reliance BanCorp., Inc. 35
3,900 Richmond County Financial Corp. 64
6,100 Roslyn BanCorp., Inc. 114
1,000 SIS BanCorp., Inc. 47
5,919 St. Paul BanCorp., Inc. 125
6,600 Staten Island BanCorp., Inc. 137
2,300 TR Financial Corp. 86
5,600 Webster Financial Corp. 155
1,118 WestCorp. 10
400 Wilshire Financial Services Group* 0
1,500 WSFS Financial Corp. 25
--------
2,654
--------
Semiconductors--1.9%
2,800 Actel Corp.* 47
5,400 Amkor Technologies, Inc.* 34
3,400 Applied Micro Circuits Corp.* 114
900 Artisan Components, Inc.* 10
2,200 ATMI, Inc.* 42
2,875 Burr-Brown Corp.* 68
9,700 Cirrus Logic, Inc.* 119
13,300 Cypress Semiconductor Corp.* 135
4,100 Dallas Semiconductor Corp. 155
700 Dupont Photomasks, Inc.* 26
2,900 Electroglas, Inc.* 42
3,100 Etec Systems, Inc.* 102
4,100 General Semiconductor, Inc. 42
7,600 International Rectifier Corp.* 71
1,500 Kopin Corp.* 21
5,600 Lam Research Corp.* 100
3,300 Lattice Semiconductor Corp.* 122
5,200 Level One Communications, Inc.* 161
2,400 Marshall Industries* 62
2,900 MEMC Electronics Materials* 27
5,000 Novellus Systems, Inc.* 248
5,300 OAK Technology, Inc.* 21
3,100 Photronics, Inc.* 62
3,837 Pioneer Standard Electronics 42
2,200 Plexus Corp.* 66
4,500 PMC-Sierra, Inc.* 242
1,300 Qlogic Corp.* 133
1,800 SDL, Inc.* 40
1,800 Semtech Corp.* 53
4,800 Silicon Valley Group, Inc.* 59
1,500 Siliconix, Inc.* 29
3,100 Ultratech Stepper, Inc.* 58
3,600 Unitrode Corp.* 61
6,400 Vlsi Technology, Inc.* 73
--------
2,687
--------
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
Shipbuilding--0.2%
1,400 Avondale Industries, Inc.* $ 39
4,250 Halter Marine Group, Inc.* 29
5,200 Newport News Shipbuilding 146
--------
214
--------
Software--5.7%
2,200 3Dfx Interactive, Inc.* 28
6,200 Acclaim Entertainment, Inc.* 59
7,120 Acxiom Corp.* 168
600 Advantage Learning Systems, Inc.* 33
800 Advent Software, Inc.* 31
1,200 Alydaar Software Corp.* 11
6,200 American Management Systems* 183
1,340 Applied Graphics Technologies* 17
2,500 Aspect Development, Inc.* 84
3,600 Aspen Technology, Inc.* 51
3,400 Avid Technology, Inc.* 81
1,300 Avt Corp. Communication* 30
1,600 Barra, Inc.* 42
7,500 BEA Systems, Inc.* 90
2,400 Black Box Corp.* 84
4,176 Boole & Babbage, Inc.* 132
2,500 Broadvision, Inc.* 67
1,700 Business Records Holding 32
3,700 CCC Information Services Group* 41
3,800 Cerner Corp.* 100
2,100 Choicepoint, Inc.* 122
3,200 Clarify, Inc.* 58
2,600 CMG Information Services, Inc.* 202
1,300 CNET, Inc.* 69
2,100 Concentric Network Corp.* 60
1,900 Concord Communications, Inc.* 84
3,800 CSG Systems International* 238
2,300 Datastream Systems, Inc.* 23
1,700 Dataworks Corp.* 13
1,100 Deltek Systems, Inc.* 19
2,700 Dendrite International, Inc.* 52
1,400 Dialogic Corp.* 31
1,800 Digi International, Inc.* 23
1,700 Documentum, Inc.* 72
2,100 Doubleclick, Inc.* 85
2,000 Earthlink Network, Inc.* 122
1,000 Engineering Animation, Inc.* 39
3,900 Excite, Inc.* 191
1,800 Exodus Communications, Inc.* 61
1,500 Fair Issac & Co., Inc.* 60
4,300 Filenet Corp.* 37
4,400 General Magic, Inc.* 23
1,300 Genesys Telecomm Labs, Inc. 37
1,200 Great Plains Software, Inc.* 47
3,800 Gt Interactive Software Corp.* 23
1,400 H.T.E., Inc.* 13
4,375 Harbinger Corp.* 38
3,800 HNC Software* 125
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,385 Hyperion Solutions Corp.* $ 142
1,400 IDX Systems Corp.* 57
1,700 IMRglobal Corp.* 36
4,500 Indus International, Inc.* 22
3,900 Industri-Matematik International* 24
4,300 Information Resources, Inc.* 36
22,500 Informix Corp.* 122
3,600 Infoseek Corp.* 123
4,100 InfoUSA, Inc.* 23
7,500 Inprise Corp.* 42
1,550 Inspire Insurance Solutions, Inc.* 52
2,700 Integrated Systems, Inc.* 27
3,100 Inter-Tel, Inc.* 74
2,900 JDA Software Group, Inc.* 23
5,400 Legato Systems, Inc.* 258
5,650 Lycos, Inc.* 333
5,000 Macromedia, Inc.* 140
2,900 Manugistics Group, Inc.* 25
2,200 Mapics, Inc.* 43
1,500 Medical Manager Corp.* 42
2,200 Mercury Interactive Corp.* 101
900 Metro Information Services, Inc.* 23
1,500 Micromuse, Inc.* 34
4,173 Midway Games, Inc.* 42
2,300 Mindspring Enterprises, Inc.* 148
400 Mobius Management Systems, Inc.* 5
5,000 National Data Corp. 187
2,150 National Instruments Corp.* 62
600 Network Solutions, Inc.* 39
1,000 New ERA of Networks, Inc.* 74
1,400 Objective Systems Integrator* 6
3,300 Open Market, Inc.* 57
800 Pegasystems, Inc.* 5
1,100 Peregrine Systems, Inc.* 41
1,200 Pinnacle Systems, Inc.* 40
3,500 Platinum Software Corp.* 37
1,800 Preview Travel, Inc.* 34
2,500 Progress Software Corp.* 63
1,000 Project Software & Development* 30
6,300 Psinet, Inc.* 118
1,000 QAD, Inc.* 4
2,500 Quadramed Corp. 60
12,685 Rational Software Corp.* 288
1,300 RealNetworks, Inc.* 50
3,300 Remedy Corp.* 34
900 Sanchez Computer Associates* 27
1,400 Sapient Corp.* 65
1,600 SCB Computer Technology, Inc.* 13
1,500 Schawk, Inc. 21
1,900 SEI Investments Co. 175
4,000 Shiva Corp.* 23
4,400 Software AG Systems, Inc.* 85
1,900 Sportsline USA, Inc.* 33
1,400 SS&C Technologies, Inc.* 16
5,300 Structural Dynamics Research* 92
</TABLE>
See accompanying notes to financial statements.
87
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Continued
<C> <S> <C>
Software--Continued
11,800 Sybase, Inc.* $ 85
8,100 Symantec Corp.* 162
4,850 System Software Associates, Inc.* 33
4,000 Transaction Systems Architects, Inc.* 152
2,600 Transition Systems, Inc.* 26
2,800 Uscs International, Inc.* 90
3,800 Vantive Corp.* 32
700 Verio, Inc.* 13
2,300 Viasoft, Inc.* 17
3,600 Visio Corp.* 127
2,400 Wavephore, Inc.* 19
3,125 Wind River Systems* 146
--------
8,009
--------
Telecommunication Equipment--1.6%
2,800 Adtran, Inc.* 69
4,000 Allen Telecom, Inc.* 28
13,690 American Tower Corp.* 316
3,400 Antec Corp.* 63
7,400 Aspect Telecommunications* 140
4,100 Associated Group, Inc.* 154
5,200 Cellnet Data Systems, Inc.* 30
500 Com21, Inc.* 9
5,600 Commscope, Inc.* 85
1,250 Davox Corp.* 9
6,800 Digital Microwave Corp.* 40
5,900 DSP Communications, Inc.* 88
800 Excel Switching Corp.* 21
2,700 Geotel Communications Corp.* 74
9,100 Glenayre Technologies, Inc.* 56
7,100 Interdigital Communications Corp.* 34
1,800 Metromedia Fiber Network, Inc.* 93
1,300 Natural Microsystems Corp.* 14
3,200 Network Equipment Technologies* 36
2,200 North Pittsburgh Systems, Inc. 31
900 OmniAmerica, Inc.* 22
300 Optical Cable Corp.* 4
5,000 Pagemart Wireless, Inc.* 30
10,300 Pairgain Technologies, Inc.* 104
6,400 P-Com, Inc.* 24
5,600 Picturetel Corp.* 40
2,400 Plantronics, Inc.* 158
500 Powerwave Technologies, Inc.* 7
3,700 Premisys Communications, Inc.* 55
8,700 SkyTel Communications, Inc.* 182
1,175 Superior Telecom, Inc. 51
5,000 Tekelec* 77
1,600 Westell Technologies, Inc.* 10
3,300 World Access, Inc.* 67
--------
2,221
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
Telecommunications--1.6%
1,500 Aerial Communications, Inc.* $ 6
2,100 American Mobile Satellite Corp.* 10
3,300 APAC Telecommunications, Corp.* 21
1,700 California Microwave* 21
2,350 Cellular Communications International, 146
1,600 Cellular Communications of Puerto Rico 24
2,200 Centennial Cellular Corp.* 88
3,000 Commnet Cellular, Inc.* 31
1,166 Commonwealth Telephone Enterprise* 32
1,300 CoreComm Limited 19
1,800 Echostar Communications Corp.* 70
1,000 Electric Lightwave, Inc.* 6
5,300 General Communication* 21
6,700 ICG Communications, Inc.* 154
2,400 IDT Corp.* 46
7,500 ITC Deltacom, Inc.* 118
3,900 IXC Communications, Inc.* 107
1,900 LCC International, Inc.* 8
1,800 Mastec, Inc. 42
4,000 Metrocall, Inc.* 18
400 MGC Communications, Inc.* 2
3,400 MRV Communications, Inc.* 22
1,400 Norstan, Inc.* 21
6,033 NTL, Inc.* 336
4,500 Omnipoint Corp.* 40
1,200 Pacific Gateway Exchange, Inc.* 54
2,400 PLD Telekom, Inc.* 6
2,200 Powertel, Inc.* 30
4,900 Premiere Technologies, Inc.* 24
4,900 RCN Corp.* 83
2,100 Smartalk Teleservices, Inc.* 10
3,100 Star Telecommunications, Inc.* 42
900 Telegroup, Inc.* 2
5,900 Tel-Save, Inc.* 70
1,350 Transaction Network Services, Inc.* 32
700 US LEC Corp.* 8
5,100 US Satellite Broadcasting Co.* 39
3,800 Vanguard Cellular Systems, Inc.* 87
2,600 West Teleservices Corp.* 29
11,100 Western Wireless Corp., Class A * 201
5,800 Winstar Communications, Inc.* 162
--------
2,288
--------
Telephone--0.2%
5,200 Aliant Communications, Inc. 148
1,900 CFW Communications Co. 40
7,000 E.spire Communications, Inc.* 56
3,100 Primus Telecommunications* 39
2,600 USN Communications, Inc.* 1
--------
284
--------
Textiles--0.3%
8,900 Collins & Aikman Corp.* 47
1,000 Culp, Inc. 9
2,100 DAN River, Inc.* 17
2,750 G & K Services, Inc.* 139
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
2,797 Guilford Mills, Inc. $ 40
6,800 Interface, Inc. 85
1,100 Pillowtex Corp. 37
1,500 Quaker Fabric Corp.* 10
1,700 Springs Industries, Inc. 66
1,300 Unifirst Corp. 29
--------
479
--------
Toys, Games and Hobbies--0.1%
2,100 Action Performance Companies, Inc.* 77
2,600 Department 56* 89
800 Marvel Enterprises, Inc.* 5
600 Media Arts Group, Inc.* 9
--------
180
--------
Transportation Services--1.4%
5,050 Air Express International Corp. 112
1,200 Airnet Systems, Inc.* 18
5,800 Alexander & Baldwin, Inc. 133
3,100 American Freightways Corp.* 28
3,000 Arnold Industries, Inc. 43
1,300 Atlas Air, Inc.* 60
6,000 C.H. Robinson Worldwide, Inc. 135
1,900 Circle International Group 33
3,500 Coach USA, Inc.* 99
3,100 Consolidated Freightways Corp.* 39
1,000 Covenant Transport, Inc.* 17
1,200 Dispatch Management Services Co.* 7
1,200 Eagle USA Airfreight, Inc.* 23
3,600 Expeditors International of Washington Inc. 139
1,700 Florida East Coast Industries 58
3,400 Fritz Cos., Inc.* 33
8,800 Greyhound Lines, Inc.* 53
900 Gulfmark offshore, Inc.* 14
2,539 Heartland Express, Inc.* 43
1,600 Hvide Marine, Inc.* 10
3,200 J.B. Hunt Transport Services, Inc. 61
3,100 Kirby Corp.* 62
2,500 Kitty Hawk, Inc.* 26
900 Knight Transportation, Inc.* 17
1,600 Landstar System, Inc.* 66
1,300 MS Carriers, Inc.* 32
3,200 offshore Logistics* 40
4,000 Overseas Shipholding Group 63
2,900 Pittston Bax Group 25
2,300 Roadway Express, Inc. 34
3,650 Swift Transportation Co., Inc.* 80
900 US Xpress Enterprises, Inc.* 14
3,850 Usfreightways Corp. 103
4,212 Werner Enterprises, Inc. 69
7,500 Wisconsin Central Transport* 136
3,400 Yellow Corp.* 55
--------
1,980
--------
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- --------------------------------------------------------------------
<C> <S> <C>
Trucking and Leasing--0.2%
1,200 Amerco, Inc.* $ 28
700 Greenbrier Cos., Inc. 10
2,000 Interpool, Inc. 29
7,100 Rollins Truck Leasing Corp. 85
2,500 Varlen Corp. 66
2,300 Xtra Corp. 109
--------
327
--------
Water Supply--0.2%
1,100 Aquarion Co. 41
1,726 California Water Service Group 45
1,200 E'Town Corp. 50
3,433 Philadelphia Suburban Corp. 87
3,952 United Water Resources, Inc. 82
--------
305
- --------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $120,743) $117,909
- --------------------------------------------------------------------
PREFERRED STOCKS--0.1%
Oil & Gas Services--0.0%
700 Dril-Quip* $ 10
--------
REITs--0.1%
1,500 Price Enterprises, Inc. 20
1,800 US Restaurants Properties, Inc. 44
--------
64
- --------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $82) $ 74
- --------------------------------------------------------------------
WARRANTS--0.0%
248 Corarm Healthcare Corp., Exp. 7-11-99 $ 0
350 Milicom American Satellite Corp., Exp. 6/30/99 0
- --------------------------------------------------------------------
TOTAL WARRANTS (Cost $0) $ 0
- --------------------------------------------------------------------
OTHER INVESTMENTS--0.0%
2,000 Escrow CFS Group, Inc.* $ 0
1,400 Escrow Millicom, Inc.* 0
900 Escrow Northeast Bancorp, Inc.* 0
2,790 Escrow Statesman Group, Inc.* 0
1,420 Escrow Strawbridge & Clothier* 0
1,700 Escrow Takecare, Inc.* 0
1,000 Escrow WCI Steel, Inc.* 0
- --------------------------------------------------------------------
TOTAL OTHER INVESTMENTS (Cost $0) $ 0
- --------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
U.S. Treasury Bill #
$340,000 3.970% Due 1/7/99 $ 337
- --------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION--0.2% (Cost $337) $ 337
- --------------------------------------------------------------------
SHORT-TERM INVESTMENT--14.4%
Societe Generale, Paris
$20,249 5.375% Due 12/1/98 $ 20,249
- --------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT--14.4%
(Cost $20,249) $ 20,249
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
89
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
Small Company Index Portfolio--Concluded
- ------------------------------------------------------------
<C> <S> <C>
TOTAL INVESTMENTS--
98.4%
(Cost $141,411) $138,569
- ------------------------------------------------------------
Other assets, less
liablilites--1.6% 2,256
- ------------------------------------------------------------
NET ASSETS--100.0% $140,825
============================================================
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Russell 2000 38 $7,555 Long 12/18/98 $32
- ---------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
90
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
91
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in
securities, at cost $53,632 $111,324 $ 918,468 $ 91,890 $41,963 $ 96,454 $141,411
- -----------------------------------------------------------------------------------------------------------
Investments in
securities, at value $67,732 $179,134 $1,366,695 $133,825 $44,726 $109,724 $138,569
Cash and foreign
currencies -- 1 16,300 -- 119 -- 1
Receivables:
Dividends and interest 384 170 1,736 98 66 104 90
Foreign tax reclaims -- -- -- -- 47 172 --
Fund shares sold 115 -- 476 40 -- 179 14,984
Investment securities
sold -- 94 68 962 40 3,956 --
Administrator 22 13 73 16 25 -- 29
Deferred organization
costs, net -- -- -- -- 11 5 --
Other assets -- 2 13 -- -- 1 2
- -----------------------------------------------------------------------------------------------------------
Total assets 68,253 179,414 1,385,361 134,941 45,034 114,141 153,675
- -----------------------------------------------------------------------------------------------------------
Liabilities:
Due to Custodian -- -- -- -- -- 1,204 --
Payable for:
Fund shares redeemed 22 45 7,579 249 9 18 63
Investment securities
purchased -- 190 58,574 -- 41 1,006 12,746
Accrued expenses:
Advisory fees 27 79 99 86 9 72 16
Administration fees 5 14 99 11 5 14 8
Custodian fees 2 2 16 2 6 12 8
Transfer agent fees 1 2 22 2 -- 1 1
Other liabilities 16 13 166 713 12 17 8
- -----------------------------------------------------------------------------------------------------------
Total liabilities 73 345 66,555 1,063 82 2,344 12,850
- -----------------------------------------------------------------------------------------------------------
Net assets $68,180 $179,069 $1,318,806 $133,878 $44,952 $111,797 $140,825
- -----------------------------------------------------------------------------------------------------------
Analysis of net assets:
Paid-in capital $47,851 $ 91,504 $789,141 $ 81,959 $40,101 $ 92,519 $119,053
Accumulated
undistributed
net investment income
(loss) 366 716 1,602 (110) 242 117 1,349
Accumulated net realized
gains on investments,
options, futures and
foreign currency
transactions 5,863 18,691 79,574 10,094 1,845 5,851 23,233
Net unrealized
appreciation
(depreciation) on
investments, options,
futures and foreign
currency transactions 14,100 68,158 448,489 41,935 2,763 13,270 (2,810)
Net unrealized gain on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- -- -- 1 40 --
- -----------------------------------------------------------------------------------------------------------
Net assets $68,180 $179,069 $1,318,806 $133,878 $44,952 $111,797 $140,825
- -----------------------------------------------------------------------------------------------------------
Total shares outstanding
(no par value),
unlimited shares
authorized
Class A 4,146 10,021 51,782 7,529 3,752 9,470 10,680
Class C 366 -- 4,947 533 -- -- 67
Class D 51 64 1,404 110 1 17 66
- -----------------------------------------------------------------------------------------------------------
Net asset value,
offering and redemption
price per share
Class A $ 14.95 $ 17.76 $ 22.69 $ 16.39 $ 11.98 $ 11.78 $ 13.02
Class C $ 14.91 -- $ 22.64 $ 16.34 -- -- $ 12.98
Class D $ 14.88 $ 17.53 $ 22.58 $ 16.14 $ 11.97 $ 11.60 $ 12.94
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
92
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend $ 329 $ 1,662 $ 16,896 $ 1,082 $ 865 $ 1,750 $ 1,694
Interest 1,720 165 975 67 29 363 171
- ----------------------------------------------------------------------------------------------------------
Total income 2,049 1,827 17,871 1,149 894(a) 2,113(b) 1,865
- ----------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 477 1,316 3,411 1,438 235 1,087 497
Administration fees 59 165 1,137 131 70 163 124
Custodian fees 23 28 268 29 68 122 228
Registration fees 27 24 103 23 59 5 28
Amortization of deferred
organization costs 7 1 1 10 4 14 1
Transfer agent fees 12 18 250 24 5 11 14
Shareholder servicing
fees 10 3 232 18 -- 1 3
Professional fees 7 14 60 6 5 4 9
Trustee fees and ex-
penses 3 3 30 3 2 2 3
Other 12 15 68 30 24 12 18
- ----------------------------------------------------------------------------------------------------------
Total expenses 637 1,587 5,560 1,712 472 1,421 925
Less voluntary waivers
of investment advisory
fees (179) (411) (2,274) (392) (118) (217) (248)
Less expenses reimburs-
able by Administrator (79) (83) (504) (84) (98) (50) (282)
- ----------------------------------------------------------------------------------------------------------
Net expenses 379 1,093 2,782 1,236 256 1,154 395
- ----------------------------------------------------------------------------------------------------------
Net investment income
(loss) 1,670 734 15,089 (87) 638 959 1,470
Net realized gains
(losses) on:
Investment transactions 5,868 18,516 79,906 10,129 1,850 9,914 22,988
Futures transactions -- 266 3,115 37 -- -- (143)
Foreign currency trans-
actions -- -- -- -- (32) (89) --
Net change in unrealized
appreciation
(depreciation) on
investments, options,
futures, and foreign
currency transactions 2,033 17,053 132,779 17,953 4,011 8,909 (28,927)
Net change in unrealized
gains on translation of
other assets and
liabilities denominated
in foreign currencies -- -- -- -- 4 46 --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $9,571 $36,569 $230,889 $28,032 $6,471 $19,739 $(4,612)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $88 in non-reclaimable foreign withholding taxes.
(b) Net of $159 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
93
<PAGE>
Northern Institutional Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Balanced Diversified
Portfolio Growth Portfolio
----------------- ------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,670 $ 1,606 $ 734 $ 1,090
Net realized gains (losses) on invest-
ments, options, futures and foreign
currency transactions 5,868 2,227 18,782 18,135
Net change in unrealized appreciation
(depreciation) on investments,
options, futures and foreign currency
transactions 2,033 4,839 17,053 14,940
Net change in unrealized gains (losses)
on translations of other assets and
liabilities denominated in foreign
currencies -- -- -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 9,571 8,672 36,569 34,165
- --------------------------------------------------------------------------------
Distributions to Class A shareholders
from:
Net investment income (1,247) (1,436) (1,086) (1,369)
Net realized gains (1,990) (1,132) (18,075) (14,420)
- --------------------------------------------------------------------------------
Total distributions to Class A share-
holders (3,237) (2,568) (19,161) (15,789)
- --------------------------------------------------------------------------------
Distributions to Class C shareholders:
Net investment income (107) (151) -- --
Net realized gains (174) (152) -- --
- --------------------------------------------------------------------------------
Total distributions to Class C share-
holders (281) (303) -- --
- --------------------------------------------------------------------------------
Distributions to Class D shareholders:
Net investment income (14) (8) (4) (4)
Net realized gains (29) (6) (104) (45)
- --------------------------------------------------------------------------------
Total distributions to Class D share-
holders (43) (14) (108) (49)
- --------------------------------------------------------------------------------
Class A share transactions:
Proceeds from the sale of shares 19,629 7,638 13,164 13,555
Reinvested distributions 3,204 2,538 18,263 14,520
Cost of shares redeemed (17,773) (9,103) (29,056) (29,982)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class A share transac-
tions 5,060 1,073 2,371 (1,907)
- --------------------------------------------------------------------------------
Class C share transactions:
Proceeds from the sale of shares 1,465 1,106 -- --
Reinvested distributions 281 303 -- --
Cost of shares redeemed (1,386) (3,329) -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class C share transac-
tions 360 (1,920) -- --
- --------------------------------------------------------------------------------
Class D share transactions:
Proceeds from the sale of shares 618 140 511 215
Reinvested distributions 43 14 108 49
Cost of shares redeemed (295) (96) (300) (93)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class D share transac-
tions 366 58 319 171
- --------------------------------------------------------------------------------
Net increase (decrease) 11,796 4,998 19,990 16,591
Net assets--beginning of year 56,384 51,386 159,079 142,488
- --------------------------------------------------------------------------------
Net assets--end of year $ 68,180 $56,384 $179,069 $159,079
- --------------------------------------------------------------------------------
Accumulated undistributed net investment
income (loss) $ 366 $ 60 $ 716 $ 1,072
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
94
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Equity Index Focused Growth Equity Index International Small Company
Portfolio Portfolio Portfolio Growth Portfolio Index Portfolio
- --------------------- ------------------ ----------------- ------------------ ------------------
1998 1997 1998 1997 1998 1997 (a) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 15,089 $ 13,574 $ (87) $ 327 $ 638 $ 312 $ 959 $ 1,206 $ 1,470 $ 1,478
83,021 72,933 10,166 23,396 1,818 (3) 9,825 4,368 22,845 9,968
132,779 119,879 17,953 4,216 4,011 (1,248) 8,909 138 (28,927) 13,285
-- -- -- -- 4 (3) 46 (21) -- --
- -----------------------------------------------------------------------------------------------------
230,889 206,386 28,032 27,939 6,471 (942) 19,739 5,691 (4,612) 24,731
- -----------------------------------------------------------------------------------------------------
(12,617) (12,212) (321) (130) (678) -- (1,630) (1,022) (1,365) (1,364)
(64,765) (32,814) (20,346) (12,039) -- -- (5,679) (5,790) (8,892) (13,019)
- -----------------------------------------------------------------------------------------------------
(77,382) (45,026) (20,667) (12,169) (678) -- (7,309) (6,812) (10,257) (14,383)
- -----------------------------------------------------------------------------------------------------
(1,037) (1,052) (5) (4) -- -- -- -- -- --
(5,908) (2,679) (1,471) (811) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------
(6,945) (3,731) (1,476) (815) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------
(298) (313) (1) -- -- -- (3) (1) (5) (1)
(2,272) (399) (270) (79) -- -- (15) (4) (43) (13)
- -----------------------------------------------------------------------------------------------------
(2,570) (712) (271) (79) -- -- (18) (5) (48) (14)
- -----------------------------------------------------------------------------------------------------
512,427 340,805 20,270 21,470 22,035 36,436 9,817 11,482 99,274 46,673
68,757 41,881 19,625 11,306 649 -- 6,291 5,984 9,261 13,462
(376,883) (354,580) (37,427) (37,017) (17,779) (1,250) (23,669) (47,748) (102,546) (35,376)
- -----------------------------------------------------------------------------------------------------
204,301 28,106 2,468 (4,241) 4,905 35,186 (7,561) (30,282) 5,989 24,759
- -----------------------------------------------------------------------------------------------------
44,422 41,164 178 171 -- -- -- -- 2,017 --
6,945 3,733 1,476 814 -- -- -- -- -- --
(35,066) (28,213) (1,678) (623) -- -- -- -- (1,148) --
- -----------------------------------------------------------------------------------------------------
16,301 16,684 (24) 362 -- -- -- -- 869 --
- -----------------------------------------------------------------------------------------------------
10,633 22,852 770 491 10 -- 162 200 544 583
2,526 561 271 79 -- -- 17 4 48 14
(16,644) (5,161) (558) (133) -- -- (241) (64) (285) (238)
- -----------------------------------------------------------------------------------------------------
(3,485) 18,252 483 437 10 -- (62) 140 307 359
- -----------------------------------------------------------------------------------------------------
361,109 219,959 8,545 11,434 10,708 34,244 4,789 (31,268) (7,752) 35,452
957,697 737,738 125,333 113,899 34,244 -- 107,008 138,276 148,577 113,125
- -----------------------------------------------------------------------------------------------------
$1,318,806 $ 957,697 $133,878 $125,333 $ 44,952 $34,244 $111,797 $107,008 $140,825 $148,577
- -----------------------------------------------------------------------------------------------------
$ 1,602 $ 465 $ (110) $ 304 $ 242 $ 314 $ 117 $ 880 $ 1,349 $ 1,272
- -----------------------------------------------------------------------------------------------------
</TABLE>
95
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Balanced Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 13.59 $ 12.24 $ 11.05 $ 9.50 $ 10.22
Income (loss) from investment op-
erations:
Net investment income 0.38 0.38 0.34 0.34 0.24
Net realized and unrealized gain
(loss) 1.81 1.66 1.19 1.55 (0.72)
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.19 2.04 1.53 1.89 (0.48)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.32) (0.38) (0.34) (0.34) (0.22)
Net realized gain (0.51) (0.31) -- -- (0.02)
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (0.83) (0.69) (0.34) (0.34) (0.24)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.36 1.35 1.19 1.55 (0.72)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 14.95 $ 13.59 $ 12.24 $ 11.05 $ 9.50
- --------------------------------------------------------------------------------
Total return (c) 16.90% 17.29% 14.07% 20.22% (4.76)%
Ratio to average net assets of
(d):
Expenses, net of waivers and re-
imbursements 0.61% 0.61% 0.61% 0.61% 0.61%
Expenses, before waivers and re-
imbursements 1.04% 1.11% 1.20% 1.28% 1.50%
Net investment income, net of
waivers and reimbursements 2.83% 2.99% 3.03% 3.36% 2.56%
Net investment income, before
waivers and reimbursements 2.40% 2.49% 2.44% 2.69% 1.68%
Portfolio turnover rate 67.16% 59.06% 104.76% 93.39% 75.69%
Net assets at end of year (in
thousands) $61,969 $51,475 $45,157 $38,897 $31,462
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------ ------------------------
1998 1997 1996 (a) 1998 1997 1996 (b)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $13.56 $12.24 $11.12 $13.54 $12.23 $11.34
Income from investment opera-
tions:
Net investment income 0.37 0.36 0.29 0.40 0.34 0.22
Net realized and unrealized
gain 1.78 1.64 1.12 1.72 1.64 0.96
- --------------------------------------------------------------------------------
Total income from investment
operations 2.15 2.00 1.41 2.12 1.98 1.18
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.29) (0.37) (0.29) (0.27) (0.36) (0.29)
Net realized gain (0.51) (0.31) -- (0.51) (0.31) --
- --------------------------------------------------------------------------------
Total distributions to share-
holders (0.80) (0.68) (0.29) (0.78) (0.67) (0.29)
- --------------------------------------------------------------------------------
Net increase 1.35 1.32 1.12 1.34 1.31 0.89
- --------------------------------------------------------------------------------
Net asset value, end of year $14.91 $13.56 $12.24 $14.88 $13.54 $12.23
- --------------------------------------------------------------------------------
Total return (c) 16.61% 17.00% 12.72% 16.45% 16.82% 10.55%
Ratio to average net assets
of (d):
Expenses, net of waivers and
reimbursements 0.85% 0.85% 0.85% 1.00% 1.00% 1.00%
Expenses, before waivers and
reimbursements 1.28% 1.35% 1.44% 1.43% 1.50% 1.59%
Net investment income, net
of waivers and reimburse-
ments 2.58% 2.75% 2.80% 2.44% 2.60% 2.78%
Net investment income, be-
fore waivers and reimburse-
ments 2.15% 2.25% 2.21% 2.01% 2.10% 2.19%
Portfolio turnover rate 67.16% 59.06% 104.76% 67.16% 59.06% 104.76%
Net assets at end of year (in
thousands) $5,459 $4,587 $5,997 $ 752 $ 322 $ 232
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C shares issue date) through
November 30, 1996.
(b) For the period February 20, 1996 (Class D shares issue date) through
November 30, 1996.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
96
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Diversified Growth Portfolio
<TABLE>
<CAPTION>
Class A
------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 16.20 $ 14.36 $ 12.20 $ 9.88 $ 10.65
Income (loss) from
investment operations:
Net investment income 0.07 0.11 0.14 0.15 0.09
Net realized and unrealized
gain (loss) 3.46 3.33 2.33 2.26 (0.83)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.53 3.44 2.47 2.41 (0.74)
- --------------------------------------------------------------------------------
Distributions to sharehold-
ers from:
Net investment income (0.11) (0.14) (0.15) (0.09) (0.01)
Net realized gain (1.86) (1.46) (0.16) -- (0.02)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.97) (1.60) (0.31) (0.09) (0.03)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.56 1.84 2.16 2.32 (0.77)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 17.76 $ 16.20 $ 14.36 $ 12.20 $ 9.88
- --------------------------------------------------------------------------------
Total return (b) 25.22% 27.06% 20.83% 24.55% (6.98)%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.66% 0.67% 0.66% 0.69% 0.67%
Expenses, before waivers
and reimbursements 0.96% 1.03% 1.10% 1.12% 1.08%
Net investment income, net
of waivers and
reimbursements 0.45% 0.76% 0.98% 1.16% 0.77%
Net investment income,
before waivers and
reimbursements 0.15% 0.40% 0.54% 0.73% 0.35%
Portfolio turnover rate 37.74% 45.53% 59.99% 81.65% 78.94%
Net assets at end of year
(in thousands) $177,947 $158,383 $142,055 $146,731 $164,963
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
-----------------------------------------
1998 1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.03 $14.26 $12.16 $ 9.88 $10.41
Income (loss) from investment
operations:
Net investment income 0.03 0.09 0.11 0.11 0.01
Net realized and unrealized gain
(loss) 3.40 3.27 2.29 2.25 (0.54)
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations 3.43 3.36 2.40 2.36 (0.53)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.07) (0.13) (0.14) (0.08) --
Net realized gain (1.86) (1.46) (0.16) -- --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.93) (1.59) (0.30) (0.08) --
- -------------------------------------------------------------------------------
Net increase (decrease) 1.50 1.77 2.10 2.28 (0.53)
- -------------------------------------------------------------------------------
Net asset value, end of year $17.53 $16.03 $14.26 $12.16 $ 9.88
- -------------------------------------------------------------------------------
Total return (b) 24.73% 26.60% 20.39% 24.19% (5.14)%
Ratio to average net assets of (c):
Expenses, net of waivers and
reimbursements 1.05% 1.06% 1.05% 1.08% 1.05%
Expenses, before waivers and
reimbursements 1.35% 1.42% 1.49% 1.51% 1.46%
Net investment income, net of
waivers and reimbursements 0.06% 0.37% 0.59% 0.73% 0.94%
Net investment income (loss),
before waivers and reimbursements (0.24)% 0.01% 0.15% 0.30% 0.53%
Portfolio turnover rate 37.74% 45.53% 59.99% 81.65% 78.94%
Net assets at end of year (in thou-
sands) $1,122 $ 696 $ 433 $ 221 $ 40
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D shares issued date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
See accompanying notes to financial statements.
97
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Equity Index Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 20.09 $ 16.79 $ 13.86 $ 10.60 $ 10.78
Income (loss) from
investment operations:
Net investment income 0.28 0.30 0.31 0.30 0.27
Net realized and
unrealized gain (loss) 4.02 4.13 3.36 3.47 (0.18)
- --------------------------------------------------------------------------------
Total income from
investment operations 4.30 4.43 3.67 3.77 0.09
- --------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.26) (0.30) (0.31) (0.30) (0.27)
Net realized gain (1.44) (0.83) (0.43) (0.21) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.70) (1.13) (0.74) (0.51) (0.27)
- --------------------------------------------------------------------------------
Net increase (decrease) 2.60 3.30 2.93 3.26 (0.18)
- --------------------------------------------------------------------------------
Net asset value, end of
year $ 22.69 $ 20.09 $ 16.79 $ 13.86 $ 10.60
- --------------------------------------------------------------------------------
Total return (c) 23.39% 27.93% 27.53% 36.60% 0.87%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.21% 0.22% 0.22% 0.22% 0.23%
Expenses, before waivers
and reimbursements 0.46% 0.46% 0.50% 0.54% 0.59%
Net investment income, net
of waivers and
reimbursements 1.36% 1.66% 2.12% 2.54% 2.62%
Net investment income,
before waivers and
reimbursements 1.11% 1.42% 1.84% 2.22% 2.25%
Portfolio turnover rate 15.26% 18.96% 18.02% 15.27% 71.98%
Net assets at end of year
(in thousands) $1,175,112 $844,065 $675,804 $479,763 $281,817
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------------------ ------------------------------------------
1998 1997 1996 1995 (a) 1998 1997 1996 1995 1994 (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 20.05 $ 16.79 $ 13.86 $ 13.43 $ 20.00 $ 16.77 $13.83 $10.60 $10.96
Income (loss) from
investment operations:
Net investment income 0.24 0.26 0.28 0.05 0.21 0.26 0.27 0.25 0.02
Net realized and
unrealized gain (loss) 4.01 4.11 3.35 0.45 4.00 4.07 3.36 3.47 (0.31)
- -----------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.25 4.37 3.63 0.50 4.21 4.33 3.63 3.72 (0.29)
- -----------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.22) (0.28) (0.27) (0.07) (0.19) (0.27) (0.26) (0.28) (0.07)
Net realized gain (1.44) (0.83) (0.43) -- (1.44) (0.83) (0.43) (0.21) --
- -----------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.66) (1.11) (0.70) (0.07) (1.63) (1.10) (0.69) (0.49) (0.07)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) 2.59 3.26 2.93 0.43 2.58 3.23 2.94 3.23 (0.36)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 22.64 $ 20.05 $ 16.79 $ 13.86 $ 22.58 $ 20.00 $16.77 $13.83 $10.60
- -----------------------------------------------------------------------------------------------------------
Total return (c) 23.09% 27.64% 27.24% 3.94% 22.90% 27.45% 27.20% 36.20% (2.68)%
Ratio to average net
assets of (d):
Expenses, net of
waivers and
reimbursements 0.45% 0.46% 0.46% 0.46% 0.60% 0.61% 0.61% 0.61% 0.60%
Expenses, before
waivers and
reimbursements 0.70% 0.70% 0.74% 0.78% 0.85% 0.85% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and
reimbursements 1.12% 1.42% 1.89% 2.29% 0.97% 1.27% 1.78% 2.07% 2.67%
Net investment income,
before waivers and
reimbursements 0.87% 1.18% 1.61% 1.97% 0.71% 1.03% 1.50% 1.75% 2.31%
Portfolio turnover rate 15.26% 18.96% 18.02% 15.27% 15.26% 18.96% 18.02% 15.27% 71.98%
Net assets at end of
year (in thousands) $111,991 $82,982 $53,929 $18,390 $31,703 $30,650 $8,005 $ 810 $ 3
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 28, 1995 (Class C shares issue date) through
November 30, 1995.
(b) For the period September 14, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
98
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Focused Growth Portfolio
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 16.20 $ 14.48 $ 12.53 $ 9.79 $ 10.43
Income (loss) from
investment operations:
Net investment income
(loss) (0.01) 0.05 0.02 0.05 0.02
Net realized and
unrealized gain (loss) 3.10 3.37 2.17 2.71 (0.66)
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.09 3.42 2.19 2.76 (0.64)
- -------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.05) (0.02) (0.05) (0.02) --
Net realized gain (2.85) (1.68) (0.19) -- --
- -------------------------------------------------------------------------------
Total distributions to
shareholders (2.90) (1.70) (0.24) (0.02) --
- -------------------------------------------------------------------------------
Net increase (decrease) 0.19 1.72 1.95 2.74 (0.64)
- -------------------------------------------------------------------------------
Net asset value, end of
year $ 16.39 $ 16.20 $ 14.48 $ 12.53 $ 9.79
- -------------------------------------------------------------------------------
Total return (c) 24.03% 27.05% 17.82% 28.38% (6.15)%
Ratio to average net as-
sets of (d):
Expenses, net of waivers
and reimbursements 0.92% 0.92% 0.91% 0.91% 0.91%
Expenses, before waivers
and reimbursements 1.29% 1.34% 1.43% 1.47% 1.55%
Net investment income
(loss), net of waivers
and reimbursements (0.04)% 0.30% 0.12% 0.46% 0.24%
Net investment loss,
before waivers and
reimbursements (0.41)% (0.12)% (0.40)% (0.10)% (0.39)%
Portfolio turnover rate 79.11% 108.29% 116.78% 85.93% 74.28%
Net assets at end of year
(in thousands) $123,380 $115,802 $106,250 $86,099 $57,801
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------- --------------------------------------
1998 1997 1996 (a) 1998 1997 1996 1995 (b)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 16.16 $ 14.47 $ 13.46 $ 16.01 $ 14.37 $ 12.48 $ 9.55
Income (loss) from
investment operations:
Net investment income
(loss) (0.05) 0.01 (0.01) (0.05) 0.03 (0.03) 0.02
Net realized and
unrealized gain 3.09 3.37 1.02 3.04 3.30 2.15 2.93
- ------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 3.04 3.38 1.01 2.99 3.33 2.12 2.95
- ------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.01) (0.01) -- (0.01) (0.01) (0.04) (0.02)
Net realized gain (2.85) (1.68) -- (2.85) (1.68) (0.19) --
- ------------------------------------------------------------------------------------------------
Total distributions to
shareholders (2.86) (1.69) -- (2.86) (1.69) (0.23) (0.02)
- ------------------------------------------------------------------------------------------------
Net increase 0.18 1.69 1.01 0.13 1.64 1.89 2.93
- ------------------------------------------------------------------------------------------------
Net asset value, end of
year $ 16.34 $ 16.16 $ 14.47 $ 16.14 $ 16.01 $ 14.37 $12.48
- ------------------------------------------------------------------------------------------------
Total return (c) 23.73% 26.75% 7.51% 23.60% 26.52% 17.42% 30.97%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 1.16% 1.16% 1.15% 1.31% 1.31% 1.30% 1.30%
Expenses, before
waivers and
reimbursements 1.53% 1.58% 1.67% 1.68% 1.73% 1.82% 1.86%
Net investment income
(loss), net of waivers
and reimbursements (0.29)% 0.06% (0.12)% (0.44)% (0.09)% (0.28)% (0.11)%
Net investment loss,
before waivers and
reimbursements (0.66)% (0.36)% (0.64)% (0.81)% (0.51)% (0.80)% (0.67)%
Portfolio turnover rate 79.11% 108.29% 116.78% 79.11% 108.29% 116.78% 85.93%
Net assets at end of
year (in thousands) $ 8,719 $ 8,325 $ 6,993 $ 1,779 $ 1,206 $ 656 $ 489
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period June 14, 1996 (Class C shares issue date) through November
30, 1996.
(b) For the period December 8, 1994 (Class D shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
99
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Equity Index Portfolio
<TABLE>
<CAPTION>
Class A Class D
----------------- -------------
1998 1997 (a) 1998 (b)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.55 $ 10.00 $ 9.88
Income from investment operations:
Net investment income 0.14 0.10 --
Net realized and unrealized gain 1.46 0.45 2.09
- -----------------------------------------------------------------------------
Total income from investment operations 1.60 0.55 2.09
- -----------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.17) -- --
Net realized gain -- -- --
- -----------------------------------------------------------------------------
Total distributions to shareholders (0.17) -- --
- -----------------------------------------------------------------------------
Net increase 1.43 0.55 2.09
- -----------------------------------------------------------------------------
Net asset value, end of year $ 11.98 $ 10.55 $11.97
- -----------------------------------------------------------------------------
Total return (c) 15.50% 5.45% 21.15 %
Ratio to average net assets of (d):
Expenses, net of waivers and reimbursements 0.55% 0.51% 0.94 %
Expenses, before waivers and reimbursements 1.00% 1.08% 1.39 %
Net investment income, net of waivers and
reimbursements 1.36% 1.75% (0.11)%
Net investment income, before waivers and
reimbursements 0.91% 1.18% (0.80)%
Portfolio turnover rate 41.53% 8.16% 41.53 %
Net assets at end of year (in thousands) $44,940 $34,244 $ 12
- -----------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) For the period October 5, 1998 (Class D shares issue date) through
November 30, 1998.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
100
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
International Growth Portfolio
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1998 1997 1996 1995 1994(a)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 10.52 $ 10.63 $ 9.88 $ 10.21 $ 10.00
Income (loss) from in-
vestment operations:
Net investment income 0.09 0.11 0.10 0.12 0.05
Net realized and
unrealized gain (loss) 1.90 0.31 0.87 (0.36) 0.16
- ---------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.99 0.42 0.97 (0.24) 0.21
- ---------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.16) (0.08) (0.22) (0.05) --
Net realized gain (0.57) (0.45) -- (0.04) --
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (0.73) (0.53) (0.22) (0.09) --
- ---------------------------------------------------------------------------------
Net increase (decrease) 1.26 (0.11) 0.75 (0.33) 0.21
- ---------------------------------------------------------------------------------
Net asset value, end of
year $ 11.78 $ 10.52 $ 10.63 $ 9.88 $ 10.21
- ---------------------------------------------------------------------------------
Total return (c) 20.44% 4.21% 9.96% (2.32)% 2.11%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 1.06% 1.06% 1.06% 1.06% 1.04%
Expenses, before waiv-
ers and reimbursements 1.31% 1.37% 1.43% 1.38% 1.47%
Net investment income,
net of waivers and re-
imbursements 0.89% 0.97% 0.73% 1.22% 0.76%
Net investment income,
before waivers and re-
imbursements 0.64% 0.66% 0.36% 0.90% 0.33%
Portfolio turnover rate 160.13% 154.62% 202.47% 215.31% 77.79%
Net assets at end of
year (in thousands) $111.594 $106,774 $138,182 $148,704 $133,212
- ---------------------------------------------------------------------------------
<CAPTION>
Class D
-------------------------------------------------------
1998 1997 1996 1995 1994(b)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $ 10.39 $ 10.54 $ 9.83 $ 10.21 $ 10.47
Income (loss) from in-
vestment operations:
Net investment income 0.09 0.09 0.01 0.19 --
Net realized and
unrealized gain (loss) 1.83 0.29 0.92 (0.48) (0.26)
- ---------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.92 0.38 0.93 (0.29) (0.26)
- ---------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.14) (0.08) (0.22) (0.05) --
Net realized gain (0.57) (0.45) -- (0.04) --
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (0.71) (0.53) (0.22) (0.09) --
- ---------------------------------------------------------------------------------
Net increase (decrease) 1.21 (0.15) 0.71 (0.38) (0.26)
- ---------------------------------------------------------------------------------
Net asset value, end of
year $ 11.60 $ 10.39 $ 10.54 $ 9.83 $ 10.21
- ---------------------------------------------------------------------------------
Total return (c) 19.91% 3.79% 9.59% (2.78)% (2.56)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 1.45% 1.45% 1.45% 1.45% 1.35%
Expenses, before waiv-
ers and reimbursements 1.70% 1.76% 1.82% 1.77% 1.78%
Net investment income,
net of waivers and re-
imbursements 0.59% 0.58% 0.44% 2.01% --
Net investment income
(loss), before waivers
and reimbursements 0.34% 0.27% 0.07% 1.69% (0.43)%
Portfolio turnover rate 160.13% 154.62% 202.47% 215.31% 77.79%
Net assets at end of
year (in thousands) $ 203 $ 234 $ 94 $ 20 $ --
- ---------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 16, 1994 (Class D shares issue date) through
November 30, 1994.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
101
<PAGE>
Northern Institutional Funds
Equity Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Small Company Index Portfolio
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 15.05 $ 13.97 $ 12.98 $ 10.86 $ 11.29
Income (loss) from investment
operations:
Net investment income 0.13 0.15 0.19 0.16 0.14
Net realized and unrealized
gain (loss) (1.13) 2.69 1.75 2.67 (0.30)
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations (1.00) 2.84 1.94 2.83 (0.16)
- --------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.14) (0.17) (0.14) (0.15) (0.02)
Net realized gain (0.89) (1.59) (0.81) (0.56) (0.25)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.03) (1.76) (0.95) (0.71) (0.27)
- --------------------------------------------------------------------------------
Net increase (decrease) (2.03) 1.08 0.99 2.12 (0.43)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 13.02 $ 15.05 $ 13.97 $ 12.98 $ 10.86
- --------------------------------------------------------------------------------
Total return (c) (7.02)% 23.06% 15.96% 27.76% (1.54)%
Ratio to average net assets
of (d):
Expenses, net of waivers and
reimbursements 0.31% 0.32% 0.32% 0.32% 0.33%
Expenses, before waivers and
reimbursements 0.74% 0.68% 0.79% 0.81% 0.86%
Net investment income, net
of waivers and
reimbursements 1.19% 1.22% 1.36% 1.31% 1.27%
Net investment income,
before waivers and
reimbursements 0.76% 0.86% 0.89% 0.82% 0.74%
Portfolio turnover rate 59.21% 42.66% 46.26% 38.46% 98.43%
Net assets at end of year (in
thousands) $139,100 $147,887 $112,856 $94,899 $77,120
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------- ---------------------------------
1998 (a) 1998 1997 1996 1995 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.89 $15.01 $13.96 $12.95 $10.51
Income from investment operations:
Net investment income 0.03 0.11 0.17 0.13 0.18
Net realized and unrealized gain
(loss) (0.94) (1.19) 2.62 1.83 2.96
- -------------------------------------------------------------------------------
Total income (loss) from
investment operations (0.91) (1.08) 2.79 1.96 3.14
- -------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income -- (0.10) (0.15) (0.14) (0.14)
Net realized gain -- (0.89) (1.59) (0.81) (0.56)
- -------------------------------------------------------------------------------
Total distributions to
shareholders -- (0.99) (1.74) (0.95) (0.70)
- -------------------------------------------------------------------------------
Net increase (decrease) (0.91) (2.07) 1.05 1.01 2.44
- -------------------------------------------------------------------------------
Net asset value, end of year $12.98 $12.94 $15.01 $13.96 $12.95
- -------------------------------------------------------------------------------
Total return (c) (6.54)% (7.58)% 22.68% 16.20% 31.62%
Ratio to average net assets of
(d):
Expenses, net of waivers and
reimbursements 0.55% 0.70% 0.71% 0.71% 0.71%
Expenses, before waivers and
reimbursements 0.98% 1.13% 1.07% 1.18% 1.20%
Net investment income, net of
waivers and reimbursements 0.98% 0.80% 0.76% 1.02% 0.90%
Net investment income, before
waivers and reimbursements 0.55% 0.37% 0.40% 0.55% 0.41%
Portfolio turnover rate 59.21% 59.21% 42.66% 46.26% 38.46%
Net assets at end of year (in
thousands) $ 870 $ 855 $ 690 $ 269 $ 44
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period January 8, 1998 (Class C shares issue date) through
November 30, 1998.
(b) For the period December 8, 1994 (Class D shares issue date) through
November 30, 1995.
(c) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
102
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
1. Organization
Northern Institutional Funds (the "Trust") is a Delaware business trust which
was formed on July 1, 1997, and is registered under the Investment Company Act
of 1940 (as amended) as an open-end management investment company. The Trust,
formerly known as The Benchmark Funds, changed its name effective July 15,
1998. The Trust includes seventeen portfolios, each with its own investment
objective. Prior to March 31, 1998, each portfolio was a series of The
Benchmark Funds, a Massachusetts business trust, which reorganized into the
Trust at the close of business on that date. Each portfolio, other than the
International Bond Portfolio, is classified as a diversified investment
company. Except as noted below, the Northern Trust Company ("Northern") is the
investment adviser for all actively managed portfolios and is the custodian
and transfer agent for the Trust. Effective April 1, 1998, Northern Trust
Quantitative Advisors, Inc. ("NTQA"), a wholly-owned subsidiary of Northern
Trust Corporation, became the investment adviser for the U.S. Treasury Index,
Equity Index, International Equity Index and Small Company Index Portfolios.
Goldman, Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the fixed income
and equity portfolios (the "Portfolios").
Each of the Portfolios has four separate classes: Class A, B, C and D. Each
class is distinguished by the level of administrative support and transfer
agent service provided. As of November 30, 1998, Class A, Class C and Class D
shares are outstanding for certain Portfolios.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(a) Investment Valuation
Investments held by a Portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any
securities are not traded on a valuation date, at the last quoted bid price.
Securities which are traded in the over-the-counter markets are valued at the
last quoted bid price. Exchange traded futures and options are valued at the
settlement price as established by the exchange on which they are traded.
Index futures are marked to market on a daily basis. Any securities, including
restricted securities, for which current quotations are not readily available
are valued at fair value as determined in good faith by Northern under the
supervision of the Board of Trustees ("the Board"). Short-term investments are
valued at amortized cost which Northern has determined, pursuant to Board
authorization, approximates market value.
(b) Investment Transactions and Investment Income
Investment transactions are recorded as of the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums. The interest rates reflected in the Statements of
Investments represent either the stated coupon rate, annualized yield on date
of purchase for discount notes, the current reset rate for floating rate
securities or, for interest only or principal only securities, the current
effective yield. Dividend income is recorded on the ex-dividend date.
Dividends from foreign securities are recorded on the ex-date, or as soon as
the information is available.
(c) Deferred Organization Costs
Organization-related costs are being amortized on a straight-line basis over
five years.
(d) Expenses
Expenses arising in connection with a specific Portfolio are allocated to that
Portfolio. Certain expenses arising in connection with a class of shares are
allocated to that class of shares. Expenses incurred which do not specifically
relate to an individual Portfolio are allocated among the Portfolios based on
each Portfolio's relative net assets.
(e) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
103
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
(f) Futures Contracts
Each Portfolio may invest in long or short futures contracts for hedging
purposes, to increase total return (i.e., for speculative purposes) or to
maintain liquidity. The Portfolios bear the market risk arising from changes
in the value of these financial instruments. At the time a Portfolio enters
into a futures contract it is required to make a margin deposit with the
custodian of a specified amount of liquid assets. Subsequently, as the market
price of the futures contract fluctuates, gains or losses are recorded and
payments are made, on a daily basis, between the Portfolio and the broker. The
Statements of Operations reflect gains and losses as realized for closed
futures contracts and as unrealized for open futures contracts.
At November 30, 1998, the Diversified Growth, Equity Index and Small Company
Index Portfolios had entered into long exchange traded futures contracts. The
aggregate market value of assets pledged to cover margin requirements for open
positions at November 30, 1998 was approximately $362,000, $1,691,000 and
$337,000 for the Diversified Growth, Equity Index and Small Company Index
Portfolios, respectively.
(g) Options Contracts
Each Portfolio may purchase and write (sell) put and call options on foreign
and domestic stock indices, foreign currencies, and U.S. and foreign
securities that are traded on U.S. and foreign securities exchanges and over-
the-counter markets. These transactions are for hedging (or cross-hedging)
purposes or for the purposes of earning additional income.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as Portfolio securities.
The cost of securities acquired through the exercise of call options is
increased by the premiums paid. The proceeds from securities sold through the
exercise of put options are decreased by the premiums paid.
In writing an option, the Portfolio bears the market risk of an unfavorable
change in the price of the security or currency underlying the written option.
Exercise of an option written by the Portfolio could result in the Portfolio
selling or buying a security or currency at a price different from the current
market value.
The Portfolios did not write call or put options during the year ended
November 30, 1998.
(h) Stripped Securities
Stripped securities represent the right to receive future interest payments
(interest only stripped securities) or principal payments (principal only
stripped securities). The value of variable rate interest only stripped
securities varies directly with changes in interest rates, while the value of
fixed rate interest only securities and the value of principal only stripped
securities vary inversely with changes in interest rates.
(i) Forward Foreign Currency Exchange Contracts
Certain Portfolios are authorized to enter into forward foreign currency
exchange contracts for the purchase of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. In addition, the International Bond and
International Growth Portfolios may enter into foreign currency exchange
contracts for speculative purposes. The objective of a Portfolio's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Portfolio's foreign currency denominated securities will decline in
value due to changes in foreign currency exchange rates. All forward foreign
currency contracts are "marked-to-market" daily at the applicable exchange
rates and any resulting unrealized gains or losses are recorded in the
financial statements. The Portfolio records realized gains or losses when the
forward contract is offset by entry into a closing transaction or extinguished
by delivery of the currency. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
At November 30, 1998, there were no outstanding forward foreign currency
exchange contracts.
(j) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments, interest and
dividend
104
<PAGE>
- -------------------------------------------------------------------------------
income are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on
investments.
(k) Federal Taxes
It is each Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute,
each year, substantially all of its taxable income and capital gains to its
shareholders. Therefore, no provision is made for federal taxes.
At November 30, 1998, the Portfolios had approximately the following amount
of capital loss carryforwards for U.S. federal income tax purposes:
<TABLE>
<CAPTION>
Amount Year(s) of Expiration
- ---------------------------------------------------------
(in thousands)
<S> <C> <C>
U.S. Treasury Index $323 2002 to 2005
- ---------------------------------------------------------
</TABLE>
This amount is available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
(l) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
- -------------------------------------
<S> <C>
Bond Monthly
Intermediate Bond Monthly
International Bond Quarterly
Short-Intermediate Bond Monthly
U.S. Government Securities Monthly
U.S. Treasury Index Monthly
Balanced Quarterly
Diversified Growth Annually
Equity Index Quarterly
Focused Growth Annually
International Equity Index Annually
International Growth Annually
Small Company Index Annually
- -------------------------------------
</TABLE>
Each Portfolio's net realized capital gains are distributed at least
annually. Income dividends and capital gain distributions are determined in
accordance with income tax regulations. Such amounts may differ from income
and capital gains recorded in accordance with generally accepted accounting
principles.
3. Advisory, Transfer Agency and Custodian Agreements
The Trust has an investment advisory agreement whereby each Portfolio pays
Northern or NTQA, as the case may be, a fee, computed daily and payable
monthly, based on a specified percentage of its average daily net assets. For
the current period, Northern and NTQA each voluntarily agreed to waive a
portion of the advisory fees as shown on the accompanying Statements of
Operations. The annual advisory fees and waiver rates expressed as a
percentage of average daily net assets for the year ended November 30, 1998,
are as follows:
<TABLE>
<CAPTION>
Net
Advisory Less: Advisory
Fee Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
Intermediate Bond .60 .35 .25
International Bond .90 .20 .70
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
Balanced .80 .30 .50
Diversified Growth .80 .25 .55
Equity Index .30 .20 .10
Focused Growth 1.10 .30 .80
International Equity Index .50 .25 .25
International Growth 1.00 .20 .80
Small Company Index .40 .20 .20
- ----------------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%, .10%
and .15% of the average daily net asset value of the outstanding Class A, B, C
and D shares, respectively, for the Portfolios.
4. Administration and Distribution Agreements
The Trust has an administration agreement with Goldman Sachs whereby each
Portfolio pays the administrator a fee, computed daily and payable monthly, at
an annual rate of .10% of the Portfolio's average daily net assets, except the
International Bond, International Equity Index and International Growth
Portfolios which pay the administrator a fee, computed daily and payable
monthly, at an annual rate of .15% of their respective average daily net
assets.
In addition, if in any fiscal year the sum of a Portfolio's expenses,
including the administration fee, but excluding the fees payable to Northern
for its duties as investment
105
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
adviser and Transfer agent, shareholder servicing fees and extraordinary
expenses (such as taxes, interest and indemnification expenses), exceeds on an
annualized basis .10% of a Portfolio's average daily net assets (0.25% for the
International Bond, International Growth and International Equity Index
Portfolios), Goldman Sachs will reimburse each Portfolio for the amount of the
excess pursuant to the terms of the administration agreement.
The expenses reimbursed during the year ended November 30, 1998, under such
arrangements, are shown on the accompanying Statements of Operations. No
administration fees were waived under this agreement during the year ended
November 30, 1998.
Goldman Sachs receives no compensation under the distribution agreement.
5. Shareholder Servicing Plan
The Trust has adopted a Shareholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain shareholder administrative support
services for their customers or other investors who beneficially own Class B,
C and D shares. As compensation under the Shareholder Servicing Plan, the
institution or other financial intermediary receives a fee at an annual rate
of up to .10%, .15% and .25% of the average daily net asset value of the
outstanding Class B, C and D shares, respectively.
6. Investment Transactions
Investment transactions for the year ended November 30, 1998 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from
Purchases maturities sales and
of U.S. Purchases of U.S. maturities
Government of other Government of other
Obligations securities Obligations securities
- -------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $374,882 $205,475 $344,907 $117,007
Intermediate Bond 24,234 10,004 15,220 2,456
International Bond -- 6,730 -- 6,007
Short-Intermediate Bond 111,674 61,032 152,920 31,131
U.S. Government Securities 57,557 -- 53,320 --
U.S. Treasury Index 17,445 -- 29,538 --
Balanced 16,967 21,228 13,721 22,923
Diversified Growth -- 60,615 -- 76,974
Equity Index -- 321,263 -- 170,092
Focused Growth -- 102,129 -- 119,229
International Equity Index -- 26,187 -- 18,914
International Growth -- 161,519 -- 173,754
Small Company Index -- 72,775 -- 84,983
- -------------------------------------------------------------------------
</TABLE>
As of November 30, 1998, the composition of unrealized appreciation
(depreciation) of investment securities (including the effects of foreign
currency translation and excluding futures transactions) based on the
aggregate cost of investments for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Net Income
Appreciation Tax
Appreciation Depreciation (Depreciation) Purposes
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $ 19,048 $10,217 $ 8,831 $650,582
Intermediate Bond 268 414 (146) 31,483
International Bond 1,889 743 1,146 26,708
Short-Intermediate Bond 2,353 8,374 (6,021) 187,635
U.S. Government Securities 585 510 75 53,827
U.S. Treasury Index 1,410 27 1,383 22,430
Balanced 14,668 568 14,100 53,632
Diversified Growth 68,475 1,013 67,462 111,672
Equity Index 477,382 31,820 445,562 921,133
Focused Growth 42,530 764 41,766 92,059
International Equity Index 6,431 4,195 2,236 42,490
International Growth 14,504 2,047 12,457 97,267
Small Company Index 16,241 19,261 (3,020) 141,589
- -----------------------------------------------------------------------------
</TABLE>
106
<PAGE>
- -------------------------------------------------------------------------------
7. Bank Loans
Prior to January 16, 1998, the Trust maintained a $5,000,000 revolving bank
credit line and a $15,000,000 conditional revolving credit line for liquidity
and other purposes. As of January 16, 1998, the Trust maintains a $100,000,000
revolving bank credit line and a $15,000,000 conditional revolving credit line
for liquidity and other purposes. Borrowings under this arrangement bear
interest at 1% above the federal funds rate and are secured by pledged
securities equal to or exceeding 120% of the outstanding balance.
Interest expense for the year ended November 30, 1998 was approximately
$3,000, $27,000, $18,000, $16,000 and $6,000 for the Diversified Growth,
Equity Index, Focused Growth, International Equity Index and Small Company
Index Portfolios, respectively. These amounts are included in "Other Expenses"
on the Statements of Operations.
As of November 30, 1998, the Focused Growth Portfolio had approximately
$700,000 of outstanding borrowings which is included in "Other Liabilities" on
the Statements of Assets and Liabilities. The interest rate in effect at
November 30, 1998, was 5.875%, (current NIBOR rate plus 0.375%).
8. Share Transactions
Transactions in Class A shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 10,138 1,515 5,483 6,170
Intermediate Bond 1,392 67 551 908
International Bond 108 60 140 28
Short-Intermediate Bond 6,204 738 7,697 (755)
U.S. Government Securities 632 116 518 230
U.S. Treasury Index 724 21 1,357 (612)
Balanced 1,380 239 1,260 359
Diversified Growth 812 1,322 1,887 247
Equity Index 24,202 3,689 18,131 9,760
Focused Growth 1,385 1,532 2,536 381
International Equity Index 1,984 63 1,540 507
International Growth 892 644 2,220 (684)
Small Company Index 7,425 673 7,245 853
- -----------------------------------------------------------------------
</TABLE>
Transactions in Class A shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,554 1,111 4,475 4,190
Intermediate Bond 594 9 -- 603
International Bond 56 74 363 (233)
Short-Intermediate Bond 5,953 572 4,056 2,469
U.S. Government Securities 3,473 227 6,148 (2,448)
U.S. Treasury Index 1,031 59 740 350
Balanced 609 205 717 97
Diversified Growth 939 1,144 2,201 (118)
Equity Index 18,925 2,547 19,705 1,767
Focused Growth 1,481 905 2,575 (189)
International Equity Index 3,356 -- 111 3,245
International Growth 1,116 606 4,566 (2,844)
Small Company Index 3,221 1,087 2,562 1,746
- -----------------------------------------------------------------------
</TABLE>
Transactions in Class C shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvestment increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 1,409 192 1,156 445
U.S. Government Securities 84 9 54 39
U.S. Treasury Index 8 -- 7 1
Balanced 104 21 97 28
Equity Index 2,131 373 1,696 808
Focused Growth 12 115 109 18
Small Company Index 153 -- 86 67
- ----------------------------------------------------------------------
</TABLE>
107
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
Transactions in Class C shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 2,988 104 1,045 2,047
U.S. Government Securities 67 10 97 (20)
Balanced 89 25 266 (152)
Equity Index 2,220 226 1,520 926
Focused Growth 12 65 45 32
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class D shares for the year ended November 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 118 5 58 65
Intermediate Bond 2 -- -- 2
International Bond 3 -- 2 1
Short-Intermediate Bond 22 4 29 (3)
U.S. Government Securities 51 1 8 44
U.S. Treasury Index 21 3 27 (3)
Balanced 45 3 21 27
Diversified Growth 32 8 20 20
Equity Index 513 137 778 (128)
Focused Growth 52 21 38 35
International Equity Index 1 -- -- 1
International Growth 15 1 22 (6)
Small Company Index 38 3 21 20
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class D shares for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 32 1 15 18
International Bond 3 -- -- 3
Short-Intermediate Bond 31 1 5 27
U.S. Government Securities 6 -- 1 5
U.S. Treasury Index 55 2 16 41
Balanced 12 1 8 5
Diversified Growth 16 4 6 14
Equity Index 1,302 34 281 1,055
Focused Growth 32 6 9 29
International Growth 19 -- 5 14
Small Company
Index 43 1 17 27
- ----------------------------------------------------------------------
</TABLE>
9. Subsequent Event
On January 1, 1999, eleven European countries converted to a common currency
referred to as the "Euro". Hereinafter, investments traded in the markets of
these countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal, and Spain) will be denominated in Euro.
Accordingly, the portfolio holdings of the International Bond, International
Equity and International Growth Portfolios denominated in these countries'
functional currency were converted.
108
<PAGE>
Northern Institutional Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
Report of Independent Auditors
To the Shareholders and Trustees of
Northern Institutional Funds
Fixed Income and Equity Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Bond, Intermediate Bond,
International Bond, Short-Intermediate Bond, U.S. Government Securities, U.S.
Treasury Index, Balanced, Diversified Growth, Equity Index, Focused Growth,
International Equity Index, International Growth and Small Company Index
Portfolios, comprising the Fixed Income and Equity Portfolios of the Northern
Institutional Funds, as of November 30, 1998, and the related statements of
operations, changes in net assets and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of the
investments owned at November 30, 1998 by physical examination of the
securities held by the custodian and by correspondence with central
depositories, unaffiliated subcustodian banks and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bond, Intermediate Bond, International Bond, Short-Intermediate Bond, U.S.
Government Securities, U.S. Treasury Index, Balanced, Diversified Growth,
Equity Index, Focused Growth, International Equity Index, International Growth
and Small Company Index Portfolios, comprising the Fixed Income and Equity
Portfolios of the Northern Institutional Funds, at November 30, 1998, the
results of their operations, the changes in their net assets and financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 15, 1999
109
<PAGE>
APPENDIX A
Description of Bond Ratings
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA: Debt rated AAA has the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is extremely
strong.
AA: Debt rated AA differs from the highest rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB and B: Debt rated BB and B is regarded as having significant speculative
characteristics. Debt rated BB is less vulnerable to non-payment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation. Debt rated B is more vulnerable to non-payment than debt
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
S&P may attach the rating "r" to highlight risks to principal or volatility of
expected returns which are not addressed in the credit rating.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
1-A
<PAGE>
Aa: Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba and B: Bonds that possess one of these ratings provide questionable
protection of interest and principal. Ba indicates some speculative
elements. B indicates a general lack of characteristics of desirable
investment.
The foregoing ratings for corporate and municipal long-term debt are sometimes
presented in parenthesis preceded with a "con", indicating the bonds are rated
conditionally. Such parenthetical rating denotes the probable credit stature
upon completion of some act or the fulfillment of some condition.
The following summarizes the highest six ratings used by Duff & Phelps Credit
Rating Co. ("D&P") for corporate and municipal long-term debt:
AAA: Debt rated AAA is of the highest credit quality. The risk factors are
considered to be negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA: Debt rated AA is of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
A: Debt rated A has protection factors which are average but adequate.
However risk factors are more variable and greater in periods of economic
stress.
BBB: Debt rated BBB has below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
2-A
<PAGE>
BB and B: Debt rated BB or B is considered to be below investment grade.
Debt rated BB is deemed likely to meet obligations when due. Debt rated B
possesses the risk that obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within these major categories.
The following summarizes the highest six ratings used by Fitch IBCA, Inc.
("Fitch") for corporate and municipal bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of investment risk and
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality.
These ratings denote a low expectation of credit risk and indicate strong
capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality.
These ratings denote that there is currently a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this category.
BB: Bonds considered to be speculative. These ratings indicate that there
is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
B: Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
To provide more detailed indications of credit quality, the Fitch ratings "AA"
and lower may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major rating categories.
3-A
<PAGE>
Description of Municipal Note Ratings
The following summarizes the two highest ratings by S&P for short-term municipal
notes:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics are given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1: Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2: Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
The two highest rating categories of D&P for short-term debt are D-1 and D-2.
D&P employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D-1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D-1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D-2 indicates good certainty of
timely payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of Bond
Ratings" for tax-exempt notes and other short-term obligations. Fitch uses the
short-term ratings described below under "Description of Commercial Paper
Ratings" for municipal notes.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the obligor's capacity to meet
its financial commitment is strong. Those issues for which the obligor's
capacity to meet its financial commitment on the obligation is extremely strong
are denoted in A-1+. The obligor's capacity to meet its financial commitment on
commercial paper rated A-2 is satisfactory but these obligations are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
4-A
<PAGE>
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers or supporting institutions rated Prime-1 are considered to have a
superior capacity for repayment of short-term debt obligations. Prime-1
repayment ability will often be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers or supporting institutions rated Prime-2 are considered to have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F1 securities possess exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest capacity for timely
payment of financial commitments and may have an added + to denote any
exceptionally strong credit feature.
F2 securities possess good credit quality. Issues assigned this rating have
a satisfactory capacity for timely payment of financial commitments, but
the margin of safety is not as great as in the case of the higher ratings.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
5-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within three business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Portfolio could use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this could include the use of futures contract sales to protect
against expected increases in interest rates and the use of futures contract
purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures contracts.
Interest rate futures contracts can also be used by a Portfolio for
non-hedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
1-B
<PAGE>
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Portfolio would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. A Portfolio may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
II. Index Futures Contracts
General. A stock or bond index assigns relative values to the securities
included in the index and the index fluctuates with changes in the market values
of the securities included.
A Portfolio may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio may do so either to hedge the value of its portfolio
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold. Conversely, a Portfolio
may purchase index futures contracts in anticipation of purchases of securities.
A long futures position may be terminated without a corresponding purchase of
securities.
In addition, a Portfolio may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Portfolio expects to narrow the range of industry
groups represented in its holdings it may, prior to making purchases of the
actual securities, establish a long futures position based on a more restricted
index, such as an index comprised of securities of a particular industry group.
A Portfolio may also sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to the
time of sale.
2-B
<PAGE>
Index futures contracts may also be used by a Portfolio for non-hedging
(speculative) purposes to increase total return.
III. Futures Contracts on Foreign Currencies (International Equity Index and
International Growth Portfolios)
A futures contract on foreign currency creates a binding obligation on one
party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Portfolio for hedging
purposes in anticipation of fluctuations in exchange rates between the U.S.
dollars and other currencies arising from multinational transactions.
The International Equity Index and International Growth Portfolios may also
use futures contracts on foreign currencies for non-hedging (speculative)
purposes to increase total return.
IV. Margin Payments
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Portfolio upon the purchase or sale of a futures contract.
Initially, the Portfolio will be required to deposit with the broker or in a
segregated account with the Custodian or a sub-custodian an amount of liquid
assets, known as initial margin, based on the value of the contract. The nature
of initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular Portfolio
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Portfolio will be entitled to receive from the broker
a variation margin payment equal to that increase in value. Conversely, where
the Portfolio has purchased a futures contract and the price of the future
contract has declined in response to a decrease in the underlying instruments,
the position would be less valuable and the Portfolio would be required to make
a variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Portfolio's adviser may elect to close the position by
taking an opposite position, subject to the availability of a secondary market,
which will operate to terminate the Portfolio's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Portfolio, and the Portfolio
realizes a loss or gain.
V. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by the
Portfolios. In connection with the use of futures for hedging purposes, one risk
arises because of the imperfect
3-B
<PAGE>
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Portfolio would be in a better position than if it had not hedged
at all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If the price of the futures moves more than the price of the hedged instruments,
the Portfolio involved will experience either a loss or gain on the futures
which will not be completely offset by movements in the price of the instruments
which are the subject of the hedge. To compensate for the imperfect correlation
of movements in the price of instruments being hedged and movements in the price
of futures contracts, the Portfolio may buy or sell futures contracts in a
greater dollar amount than the dollar amount of instruments being hedged if the
volatility over a particular time period of the prices of such instruments has
been greater than the volatility over such time period of the futures, or if
otherwise deemed to be appropriate by the Investment Advisers. Conversely, the
Portfolios may buy or sell fewer futures contracts if the volatility over a
particular time period of the prices of the instruments being hedged is less
than the volatility over such time period of the futures contract being used, or
if otherwise deemed to be appropriate by the Investment Advisers. It is also
possible that, where a Portfolio had sold futures to hedge its portfolio against
a decline in the market, the market may advance and the value of instruments
held in the Portfolio may decline. If this occurred, the Portfolio would lose
money on the futures and also experience a decline in value in its portfolio
securities.
When futures are purchased to hedge against a possible increase in the
price of securities before a Portfolio is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Portfolio then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Portfolio will realize a loss on the futures contract that is not offset by
a reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the Investment Advisers may still
not result in a successful hedging transaction over a short time frame.
4-B
<PAGE>
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the
Portfolios intend to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Portfolios would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will generally not be sold
until the futures contract can be terminated. In such circumstances, an increase
in the price of the securities, if any, may partially or completely offset
losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Portfolios is also subject to the
Investment Advisers' ability to predict correctly movements in the direction of
the market. For example, if a particular Portfolio has hedged against the
possibility of a decline in the market adversely affecting securities held by it
and securities prices increase instead, the Portfolio will lose part or all of
the benefit to the increased value of its securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of securities
may be, but will not necessarily be, at increased prices which reflect the
rising market. The Portfolios may have to sell securities at a time when they
may be disadvantageous to do so.
Futures purchased or sold by the International Growth and International
Equity Portfolios (and related options) may be traded on foreign exchanges.
Participation in foreign futures and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade. Neither the National Futures Association nor any domestic exchange
regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, or has the power to compel enforcement of
the rules of a foreign board of trade or any applicable foreign law. This is
true even if the exchange is formally linked to a domestic market so that a
position taken on the market may be liquidated by a transaction on another
market. Moreover, such laws or regulations will vary depending on the foreign
country in which the foreign futures or foreign options transaction occurs. For
these reasons, customers who trade foreign futures of foreign options contracts
may not be afforded certain of the protective measures provided
5-B
<PAGE>
by the Commodity Exchange Act, the Commodity Futures Trading Commission's
("CFTC") regulations and the rules of the National Futures Association and any
domestic exchange, including the right to use reparations proceedings before the
CFTC and arbitration proceedings provided by the National Futures Association or
any domestic futures exchange. In particular, the investments of the
International Growth Portfolio and International Equity Index Portfolio in
foreign futures or foreign options transactions may not be provided the same
protections in respect of transactions on United States futures exchanges. In
addition, the price of any foreign futures or foreign options contract and,
therefore the potential profit and loss thereon may be affected by any variance
in the foreign exchange rate between the time an order is placed and the time it
is liquidated, offset or exercised.
VI. Options on Futures Contracts
The Portfolios may purchase and write (sell) call and put options on the
futures contracts described above. A futures option gives the holder, in return
for the premium paid, the right to buy (call) from or sell (put) to the writer
of the option a futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the option is obligated to
pay the difference between the cash value of the futures contract and the
exercise price. Like the buyer or seller of a futures contract, the holder, or
writer, of an option has the right to terminate its position prior to the
scheduled expiration of the option by selling, or purchasing an option of the
same series, at which time the person entering into the closing transaction will
realize a gain or loss. A Portfolio will be required to deposit initial margin
and variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in futures contracts (for example,
the existence of a liquid secondary market). See "Risks of Transactions in
Futures Contracts" above. In addition, the purchase or sale of an option also
entails the risk that changes in the value of the underlying futures contract
will not correspond to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures contract upon which
it is based, or upon the price of any underlying instruments, an option may or
may not be less risky than ownership of the futures contract or such
instruments. In general, the market prices of options can be expected to be more
volatile than the market prices on the underlying futures contract. Compared to
the purchase or sale of futures contracts, however, the purchase of call or put
options on futures contracts may, unlike futures contracts where the risk of
loss is potentially unlimited, frequently involve less potential risk to the
Portfolio because the maximum amount at risk is the premium paid for the options
(plus transaction costs). The writing of an option on a futures contract
involves risks similar to those risks relating to the sale of futures contracts.
VII. Other Matters
Each Portfolio intends to comply with the regulations of the CFTC exempting
it from registration as a "commodity pool operator." Accounting for futures
contracts will be in accordance with generally accepted accounting principles.
6-B
<PAGE>
================================================================================
Northern Institutional Funds
MONEY MARKET PORTFOLIOS
SHARES
APRIL 1, 1999
================================================================================
<PAGE>
Northern Institutional Funds
- --------------------------------------------------------------------------------
MONEY o GOVERNMENT SELECT PORTFOLIO
MARKET ------------------------------------------------------------
PORTFOLIOS o GOVERNMENT PORTFOLIO
SHARES ------------------------------------------------------------
o DIVERSIFIED ASSETS PORTFOLIO
------------------------------------------------------------
o TAX-EXEMPT PORTFOLIO
------------------------------------------------------------
Prospectus dated April 1, 1999
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
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<TABLE>
<CAPTION>
Contents
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RISK/RETURN Portfolios
SUMMARY ...........................................................................
GOVERNMENT SELECT PORTFOLIO 5
Information about the ...........................................................................
objectives, principal strategies GOVERNMENT PORTFOLIO 6
and risk characteristics ...........................................................................
of each Portfolio DIVERSIFIED ASSETS PORTFOLIO 7
...........................................................................
TAX-EXEMPT PORTFOLIO 8
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Principal Investment Risks 9
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Portfolio Performance
...........................................................................
GOVERNMENT SELECT PORTFOLIO 12
...........................................................................
GOVERNMENT PORTFOLIO 13
...........................................................................
DIVERSIFIED ASSETS PORTFOLIO 14
...........................................................................
TAX-EXEMPT PORTFOLIO 15
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Portfolio Fees and Expenses 16
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MANAGEMENT Investment Adviser 19
OF THE --------------------------------------------------------------------------------
PORTFOLIOS Advisory Fees 20
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Details that apply to the Portfolio Management 21
Portfolios as a group --------------------------------------------------------------------------------
Other Portfolio Services 21
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ABOUT YOUR Purchasing and Selling Shares
ACCOUNT ...........................................................................
Investors 22
How to open, maintain ...........................................................................
and close an account Share Classes 22
...........................................................................
Opening an Account 22
...........................................................................
Selling Shares 23
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Account Policies and Other Information
...........................................................................
Automatic Investment Arrangements 24
...........................................................................
Purchase and Redemption Minimums 24
...........................................................................
Calculating Share Price 24
...........................................................................
Timing of Purchase Requests 24
...........................................................................
</TABLE>
<PAGE>
<TABLE>
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<S> <C> <C>
Tax Identification Number 25
...........................................................................
In-Kind Purchases and Redemptions 25
...........................................................................
Miscellaneous Purchase Information 25
...........................................................................
Timing of Redemption and Exchange Requests 25
...........................................................................
Miscellaneous Redemption Information 26
...........................................................................
Exchange Privileges 26
...........................................................................
Telephone Transactions 26
...........................................................................
Advance Notification of Large Transactions 27
...........................................................................
Making Changes to Your Account Information 27
...........................................................................
Business Day 27
...........................................................................
Early Closings 27
...........................................................................
Authorized Intermediaries 27
...........................................................................
Information About Institutions 27
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Distributions and Taxes
...........................................................................
Distributions 28
...........................................................................
Taxes 28
...........................................................................
Other Tax Information 29
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Year 2000 Issues 30
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APPENDICES Appendix A
...........................................................................
Additional Information on Portfolio Risks, Securities and Techniques 31
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Appendix B
...........................................................................
Portfolio Financial Highlights 38
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FOR MORE Annual/Semiannual Reports 44
INFORMATION --------------------------------------------------------------------------------
Statement of Additional Information 44
</TABLE>
<PAGE>
Northern Institutional Funds (the "Trust") offers four money market portfolios
(each a "Portfolio") to institutional investors. Each Portfolio is authorized to
offer three classes of shares: Shares, Service Shares and Premier Shares.
Service Shares and Premier Shares are described in separate prospectuses.
The descriptions on the following pages may help you choose the Portfolio that
best fits your investment needs. Keep in mind, however, that no Portfolio can
guarantee it will meet its investment objective and no Portfolio should be
relied upon as a complete investment program. The Trust's six fixed income, one
balanced and six equity portfolios are described in a separate prospectus.
The Portfolios seek to maintain a stable net asset value of $1.00 per share.
Consistent with this policy, each of the Portfolios:
o Limits its dollar-weighted average portfolio maturity to 90 days or less;
o Buys securities with remaining maturities of 397 days or less (except for
certain variable and floating rate instruments and securities
collateralizing repurchase agreements); and
o Invests only in U.S. dollar-denominated securities that represent minimal
credit risks.
In addition, each Portfolio limits its investments to "Eligible Securities" as
defined by the Securities and Exchange Commission ("SEC"). Eligible Securities
include, generally, securities that either (a) have short-term debt ratings at
the time of purchase in the two highest rating categories or (b) are issued or
guaranteed by, or otherwise allow a Portfolio to demand payment from, an issuer
with those ratings. Securities that are unrated (including securities of issuers
that have long-term but not short-term ratings) may be deemed to be Eligible
Securities if determined to be of comparable quality by The Northern Trust
Company under the direction of the Board of Trustees. Securities that are in the
highest short-term rating category (and comparable unrated securities) are
called "First Tier Securities." Under normal circumstances, the Government
Select, Government and Diversified Assets Portfolios intend to limit purchases
of securities to First Tier Securities. Securities in which the Portfolios may
invest may not earn as high a level of income as long-term or lower quality
securities, which generally have greater market risk and more fluctuation in
market value.
In addition to the instruments described in the table above and on the pages
below, each Portfolio may use various investment techniques in seeking its
investment objective. You can learn more about these techniques and related
risks by reading Appendix A to this Prospectus and the Statement of Additional
Information.
4
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT SELECT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks its objective by investing exclusively in securities issued
or guaranteed as to principal and interest by the U.S. government, its agencies
or instrumentalities. Under normal market conditions, the Portfolio will seek to
acquire only those U.S. government securities the interest upon which is
generally exempt from state income taxation. These securities include
obligations issued by the U.S. Treasury and certain U.S. government agencies and
instrumentalities, such as the Federal Home Loan Bank and the Federal Farm
Credit Banks Funding Corp.
When appropriate securities which are exempt from state taxes are unavailable,
the Portfolio may also invest in non-exempt U.S. government securities and cash
equivalents including money market funds and time deposits with a maturity of
three months or less, and hold uninvested cash.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
5
<PAGE>
GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Government Portfolio seeks its objective by investing exclusively in
marketable securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
backed by such securities. The Portfolio may also hold custodial receipts
representing interests in U.S. government securities.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
6
<PAGE>
RISK/RETURN SUMMARY
DIVERSIFIED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Diversified Assets Portfolio seeks its objective by investing in a broad
range of government, bank and commercial obligations that are available in the
money markets, including:
o U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
o U.S. dollar-denominated obligations of foreign commercial banks where such
banks have total assets in excess of $5 billion;
o High quality commercial paper and other obligations issued or guaranteed by
U.S. and foreign corporations and other issuers;
o Corporate bonds, notes, paper and other instruments that are of high
quality;
o Asset-backed securities;
o Securities issued or guaranteed as to principal and interest by the U.S.
government or by its agencies or instrumentalities and custodial receipts
with respect thereto;
o U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities;
o Repurchase agreements relating to the above instruments; and
o Municipal securities issued or guaranteed by state or local governmental
bodies.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
7
<PAGE>
TAX-EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide its shareholders, to the extent consistent with
the preservation of capital and prescribed portfolio standards, with a high
level of income exempt from Federal income tax by investing primarily in
municipal instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks to achieve its objective by investing primarily in
high-quality short-term instruments, the interest on which is exempt from
Federal income tax ("municipal instruments"). These may include:
o Fixed and variable rate notes and similar debt instruments;
o Tax-exempt commercial paper;
o Rated and unrated municipal bonds, notes, paper or other instruments; and
o Municipal bonds and notes which are guaranteed as to principal and interest
or backed by the U.S. government or its agencies or instrumentalities.
Under normal market conditions, at least 80% of the Portfolio's annual gross
income will be derived from municipal instruments. Interest earned by the
Portfolio on "private activity bonds" (if any) that is treated as an item of tax
preference under the Federal alternative minimum tax ("AMT obligations") will
not be deemed to have been derived from municipal instruments for the purposes
of determining whether the Portfolio meets this policy.
During extraordinary circumstances, however, the Portfolio may take a temporary
defensive posture and hold uninvested cash or invest in AMT obligations and
taxable short-term securities without limitation.
Taxable investments will consist exclusively of those instruments that may be
purchased by the Diversified Assets Portfolio including U.S. dollar-denominated
obligations of U.S. banks, foreign commercial banks and securities issued or
guaranteed by foreign governments; high quality commercial paper and other
obligations; high quality corporate bonds and notes; asset-backed securities;
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and custodial receipts with respect thereto; and repurchase
agreements relating to the above instruments.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
8
<PAGE>
RISK/RETURN SUMMARY
Principal Investment Risks
All investments carry some degree of risk which will affect the value of a
Portfolio's investments, investment performance, yield and the price of its
shares.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
The following summarizes the principal risks that may affect the Portfolios.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO ALL
PORTFOLIOS
Money market risk is the risk that a Portfolio will not be able to maintain a
net asset value per share of $1.00 at all times.
Interest rate risk is the risk that during periods of rising interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be lower
than prevailing market rates; in periods of falling interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be
higher.
Counterparty risk is the risk that an issuer of a security, or a bank or other
financial institution that has entered into a repurchase agreement, may default
on its payment obligations.
Credit enhancement risk is the risk that changes in credit quality of a bank or
other financial institution could cause a Portfolio's investments in securities
backed by letters of credit or other credit enhancements issued by such bank or
institution to decline in value.
Management risk is the risk that a strategy used by the investment management
team may fail to produce the intended results.
Liquidity risk is the risk that a Portfolio will not be able to pay redemption
proceeds on the same Business Day that shares are redeemed, because of unusual
market conditions, an unusually high volume of redemption requests or other
reasons.
Year 2000 risk is the risk that a Portfolio's operations or value will be
adversely affected by the "Year 2000 Problem." (For more information, please see
"Year 2000 Issues" on page 30.)
9
<PAGE>
Principal Investment Risks continued
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE GOVERN-
MENT SELECT
AND GOVERNMENT
PORTFOLIOS
Government securities risk is the risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE DIVERSIFIED
ASSETS AND
TAX-EXEMPT
PORTFOLIOS
Prepayment risk is the risk that asset-backed securities may be more rapidly
repaid than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying obligations. During
periods of declining interest rates, prepayment of obligations underlying
asset-backed securities can be expected to accelerate. Accordingly, a
Portfolio's ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at comparable
yields is subject to generally prevailing interest rates at that time.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES TO THE
DIVERSIFIED
ASSETS PORTFOLIO
Foreign securities risk is the risk that a foreign security, even if it is a
U.S. dollar-denominated foreign security, could lose value as a result of
political, financial and economic events in foreign countries, less stringent
foreign securities regulations and accounting and disclosure standards, or other
factors.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO THE
TAX-EXEMPT
PORTFOLIO
Concentration risk is the risk that the Portfolio may be more sensitive to an
adverse economic, business or political development if it invests more than 25%
of its assets in the municipal instruments of issuers in the same state, in
municipal instruments the interest upon which is paid solely from revenues of
similar projects, or in industrial development bonds.
Tax risk is the risk that future legislative or administrative changes or court
decisions may materially affect the ability of the Portfolio to pay tax-exempt
dividends.
More information about the risks of investing in the Portfolios is provided in
Appendix A to this Prospectus. You should carefully consider the risks discussed
in this section and Appendix A before investing in a Portfolio.
10
<PAGE>
RISK/RETURN SUMMARY
Portfolio Performance
The bar charts and tables below provide an indication of the risks of investing
in a Portfolio by showing changes in the performance of a Portfolio's Shares
from year to year. The bar charts and tables assume reinvestment of dividends
and distributions. A Portfolio's past performance is not necessarily an
indication of how the Portfolio will perform in the future. Performance reflects
certain expense limitations (as set forth in the Footnotes to the "Portfolio
Fees and Expenses" table on page 17) that were in effect during the periods
presented. If expense limitations were not in place, a Portfolio's performance
would have been reduced.
11
<PAGE>
Portfolio Performance continued
GOVERNMENT SELECT PORTFOLIO
Calendar Year Total Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1991 5.95%
1992 3.68%
1993 3.04%
1994 4.09%
1995 5.82%
1996 5.29%
1997 5.44%
1998 5.40%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2 `95
+1.47%
Q2 `93
+0.74%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year (11/7/90)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Select Portfolio 5.40% 5.21% 4.86%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.86%. You
may call 1-800-637-1380 to obtain the current 7-day yield.
12
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT PORTFOLIO
Calendar Year Total Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 7.09%
1989 9.00%
1990 8.13%
1991 6.10%
1992 3.84%
1993 2.94%
1994 3.93%
1995 5.65%
1996 5.17%
1997 5.34%
1998 5.30%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2 `89
+2.32%
Q4 `93
+0.72%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (10/29/85)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Portfolio 5.30% 5.08% 5.53% 5.83%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.81%. You
may call 1-800-637-1380 to obtain the current 7-day yield.
13
<PAGE>
Portfolio Performance continued
DIVERSIFIED ASSETS PORTFOLIO
Calendar Year Total Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 7.53%
1989 9.35%
1990 8.27%
1991 6.14%
1992 3.71%
1993 3.02%
1994 4.05%
1995 5.79%
1996 5.28%
1997 5.45%
1998 5.40%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q4 `89
+2.12%
Q2 `93
+0.74%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (7/27/82)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Assets Portfolio 5.40% 5.19% 5.63% 6.12%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 5.00%. You
may call 1-800-637-1380 to obtain the current 7-day yield.
14
<PAGE>
RISK/RETURN SUMMARY
TAX-EXEMPT PORTFOLIO
Calendar Year Total Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 5.09%
1989 6.23%
1990 5.86%
1991 4.54%
1992 2.91%
1993 2.27%
1994 2.61%
1995 3.73%
1996 3.33%
1997 3.45%
1998 3.29%
</TABLE>
Best and Worst
Quarterly Performance: Best Quarter Return
Q2 `89
+1.64%
Q1 `94
+0.52%
Worst Quarter Return
Average Annual Total Return
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (8/12/83)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio 3.29% 3.28% 3.81% 4.08%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 3.37%. You
may call 1-800-637-1380 to obtain the current 7-day yield.
15
<PAGE>
Portfolio Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Portfolios. Please note that it does not reflect any charges which
may be imposed by The Northern Trust Company, its affiliates, correspondent
banks and other institutions on their Customers (as defined on page 22). (For
more information, please see "Account Policies and Other Information" on page
24.)
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
-----------------------------------------------------------------------
Sales Charge
Sales Charge (Load)
(Load) Imposed on
Imposed on Deferred Sales Reinvested Redemption Exchange
Portfolio Purchases Charge (Load) Distributions Fees Fees
======================================================================================================
<S> <C> <C> <C> <C> <C>
GOVERNMENT SELECT None None None None None
- ------------------------------------------------------------------------------------------------------
GOVERNMENT None None None None None
- ------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS None None None None None
- ------------------------------------------------------------------------------------------------------
TAX-EXEMPT None None None None None
- ------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
RISK/RETURN SUMMARY
<TABLE>
<CAPTION>
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)
---------------------------------------------------------------
Total
Annual
Other Portfolio
Management Distribution Operating Operating
Portfolio Fees(1) (12b-1) Fees Expenses(2) Expenses(3)
======================================================================================================
<S> <C> <C> <C> <C>
GOVERNMENT SELECT 0.25% None 0.14% 0.39%
- ------------------------------------------------------------------------------------------------------
GOVERNMENT 0.25% None 0.15% 0.40%
- ------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS 0.25% None 0.13% 0.38%
- ------------------------------------------------------------------------------------------------------
TAX-EXEMPT 0.25% None 0.14% 0.39%
- ------------------------------------------------------------------------------------------------------
</TABLE>
FOOTNOTES
(1) For the fiscal year ended November 30, 1998, The Northern Trust Company
voluntarily waived a portion of its management fees for the Government
Select Portfolio. As a result of the fee waiver, actual management fees
paid by the Government Select Portfolio were 0.10% of the Portfolio's
average daily net assets. Fee waivers may be terminated at any time at the
option of The Northern Trust Company.
(2) "Other Operating Expenses" include administration fees and all other
ordinary operating expenses of the Portfolios not listed above. For the
fiscal year ended November 30, 1998, Goldman, Sachs & Co. ("Goldman Sachs")
was entitled to an administration fee from each Portfolio at an annual rate
of 0.10% of each Portfolio's average daily net assets. During the period
prior to April 1, 1998, Goldman Sachs reimbursed expenses (including fees
payable to Goldman Sachs as administrator, but excluding management fees
and certain extraordinary expenses) which exceeded on an annualized basis
0.10% of each Portfolio's average daily net assets. Beginning April 1,
1998, Goldman Sachs reimbursed expenses (including fees payable to Goldman
Sachs as administrator, but excluding management fees, transfer agency
fees, payments under the Service Plan for Service Shares and Premier Shares
and extraordinary expenses) which exceeded on an annualized basis 0.10% of
each Portfolio's average daily net assets. As a result of the expense
reimbursement, actual "Other Operating Expenses" paid by the Government,
Government Select, Diversified Assets and Tax-Exempt Portfolios were 0.10%
of each Portfolio's average daily net assets.
(3) As a result of the fee waivers and expense reimbursements, actual total
annual operating expenses paid by the Portfolios' outstanding Shares during
the fiscal year ended November 30, 1998 were as set forth below. Fee
waivers (and voluntary expense reimbursements, if applicable) may be
terminated at any time at the option of Northern or Goldman Sachs. If this
occurs, "Other Operating Expenses" may increase without shareholder
approval.
<TABLE>
<CAPTION>
Total
Annual
Operating
Portfolio Expenses
=====================================================
<S> <C>
GOVERNMENT SELECT 0.20%
-----------------------------------------------------
GOVERNMENT 0.35%
-----------------------------------------------------
DIVERSIFIED ASSETS 0.35%
-----------------------------------------------------
TAX-EXEMPT 0.35%
-----------------------------------------------------
</TABLE>
17
<PAGE>
Portfolio Fees and Expenses continued
- --------------------------------------------------------------------------------
EXAMPLE
The following Example is intended to help you compare the cost of investing in
Shares of a Portfolio (without fee waivers and expense reimbursements) with the
cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated (with reinvestment of all dividends and distributions) and then redeem
all of your Shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that a Portfolio's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years 5 Years 10 Years
================================================================================
<S> <C> <C> <C> <C>
GOVERNMENT SELECT
Shares $40 $125 $219 $493
- --------------------------------------------------------------------------------
GOVERNMENT
Shares $41 $128 $224 $505
- --------------------------------------------------------------------------------
DIVERSIFIED ASSETS
Shares $39 $122 $213 $480
- --------------------------------------------------------------------------------
TAX-EXEMPT
Shares $40 $125 $219 $493
- --------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
The Northern Trust Company ("Northern" or the "Investment Adviser"), an Illinois
state-chartered bank and member of the Federal Reserve System, serves as
investment adviser for the Portfolios. The Investment Adviser is located at 50
South LaSalle Street, Chicago, Illinois 60675 and is a wholly owned subsidiary
of Northern Trust Corporation, a bank holding company. As of December 31, 1998,
Northern Trust Corporation and its subsidiaries had approximately $27.9 billion
in assets, $18.2 billion in deposits and employed over 8,150 persons.
Northern and its affiliates administrated in various capacities (including as
master trustee, investment manager or custodian) approximately $1.26 trillion of
assets as of December 31, 1998, including approximately $236 billion of assets
for which Northern and its affiliates had investment management responsibility.
Under its Advisory Agreement with the Trust, the Investment Adviser, subject to
the general supervision of the Trust's Board of Trustees, is responsible for
making investment decisions for the Portfolios and for placing purchase and sale
orders for portfolio securities.
19
<PAGE>
Advisory Fees
As compensation for its advisory services and its assumption of related
expenses, the Investment Adviser is entitled to an advisory fee from the
Portfolios, computed daily and payable monthly, at annual rates set forth in the
table below (expressed as a percentage of each Portfolio's respective average
daily net assets). The table also reflects the advisory fees (after voluntary
fee waivers) paid by the Portfolios as a percentage of net assets for the fiscal
year ended November 30, 1998.
<TABLE>
<CAPTION>
Advisory Fee Paid
Contractual for Fiscal Year
Portfolio Rate Ended 11/30/98
================================================================================
<S> <C> <C>
GOVERNMENT SELECT 0.25% 0.10%
- --------------------------------------------------------------------------------
GOVERNMENT 0.25% 0.25%
- --------------------------------------------------------------------------------
DIVERSIFIED ASSETS 0.25% 0.25%
- --------------------------------------------------------------------------------
TAX-EXEMPT 0.25% 0.25%
- --------------------------------------------------------------------------------
</TABLE>
The difference, if any, between the contractual advisory fees and the actual
advisory fees paid by the Portfolios reflects that the Investment Adviser did
not charge the full amount of the advisory fees to which it would have been
entitled. The Investment Adviser may discontinue or modify its voluntary
limitations in the future at its discretion.
20
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Portfolio Management
- --------------------------------------------------------------------------------
The Investment Adviser employs a team approach to the investment management of
the Portfolios, relying upon investment professionals under the leadership of
James M. Snyder, Chief Investment Officer and Executive Vice President of
Northern. Mr. Snyder oversees the management of all fixed income, equity and
money market assets managed by the Investment Adviser. Mr. Snyder joined
Northern Trust in 1980.
Other Portfolio Services
- --------------------------------------------------------------------------------
Northern also serves as transfer agent ("Transfer Agent") and custodian for each
Portfolio. As Transfer Agent, Northern performs various administrative servicing
functions, and any shareholder inquiries should be directed to it. Goldman Sachs
serves as the Portfolios' administrator and distributor. The fees that Northern
and Goldman Sachs receive for their services in these capacities are described
on pages 16 and 17 under "Portfolio Fees and Expenses." Goldman Sachs does not
receive any compensation from the Trust for its distribution services. Pursuant
to an SEC order, the Portfolios may engage in portfolio securities transactions
with Goldman Sachs in the ordinary course of business.
It is expected that on or after May 1, 1999, First Data Distributors, Inc., will
replace Goldman Sachs as the Portfolios' distributor. It is also expected that
Northern and First Data Investors Services Group, Inc. (an affiliate of First
Data Distributors, Inc.) will replace Goldman Sachs to serve as the Portfolios'
co-administrators on or after such date, at substantially the same cost to the
Portfolios.
21
<PAGE>
Purchasing and Selling Shares
- --------------------------------------------------------------------------------
INVESTORS
Institutional investors, which are acting on their own behalf or on behalf of
their customers, clients, employees, participants and others ("Customers"), may
invest in the Portfolios through their institutional accounts at Northern or an
affiliate. They may also establish accounts directly with the Trust. There is no
sales charge imposed on investments. Institutional investors ("Institutions")
include:
o Northern and its affiliates;
o Defined contribution plans having at least $30 million in assets or annual
contributions of at least $5 million; and
o Other institutions and organizations.
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SHARE
CLASSES
Each Portfolio offers three classes of shares: Shares, Service Shares and
Premier Shares. Service Shares and Premier Shares are described in separate
prospectuses.
Shares of each class bear their pro rata portion of all operating expenses paid
by a Portfolio, except amounts payable under the Service Plan that has been
adopted for the Portfolios' Service Shares and Premier Shares and transfer
agency fees. Because of these class-specific expenses, the performance of the
Shares of a Portfolio described in this Prospectus is expected to be higher than
the performance of both the Service Shares and Premier Shares of the same
Portfolio, and the performance of a Portfolio's Service Shares is expected to be
higher than the performance of the same Portfolio's Premier Shares.
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OPENING AN
ACCOUNT
You can purchase Shares of the Portfolios through your institutional account at
Northern (or an affiliate) or you may open an account directly with the Trust.
Through an Institutional Account. If you are opening an institutional account at
Northern, a Northern representative can assist you with all phases of your
investment. The Trust does not require a minimum initial investment for
Institutions that invest through their accounts at Northern. To purchase Shares
through your account, contact your Northern representative for further
information.
Directly from the Trust. An Institution may open a shareholder account and
purchase Shares directly from the Trust with an aggregate minimum initial
investment of at least $5 million in one or more Portfolios. There is no minimum
for subsequent investments.
- --------------------------------------------------------------------------------
By Mail.
Read this Prospectus carefully.
Complete and sign the new account application.
Include a certified corporate resolution (or other acceptable evidence of
authority).
Enclose a check or Federal Reserve draft payable to the specific Portfolio. If
investing in more than one Portfolio, please include a separate check for each.
Mail your check, corporate resolution and completed application to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
All checks must be payable in U.S. dollars and drawn on a bank located in the
United States. Cash and third party checks are not acceptable.
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ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
By Telephone.
Read this Prospectus carefully.
Call the Transfer Agent at 1-800-637-1380.
To open a new account please provide:
o The name of the Portfolio in which you'd like to invest
o The number of Shares or dollar amount to be invested
o The method of payment
To add to an existing account, please provide:
o The Institution's name
o Your Account Number
- --------------------------------------------------------------------------------
By Wire or Automated Clearing House Transfer ("ACH Transfer").
To open a new account:
Call the Transfer Agent at 1-800-637-1380 for instructions.
For more information about the purchase of Shares, call the Transfer Agent at
1-800-637-1380.
To add to an existing account:
Have your bank wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account No.)
(Reference Shareholder's Name)
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SELLING
SHARES
Through an Institutional Account. Institutions may sell (redeem) Shares through
their institutional account by contacting their Northern account representative.
Directly through the Trust. Institutions that purchase Shares directly from the
Trust may redeem their Shares through the Transfer Agent in one of the following
ways:
- --------------------------------------------------------------------------------
By Mail.
Send a written request to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
The letter of instruction must include:
o The signature of a duly authorized person
o Your account number
o The name of the Portfolio
o The number of Shares or the dollar amount to be redeemed
- --------------------------------------------------------------------------------
By Telephone.
o Call the Transfer Agent at 1-800-637-1380 for instructions.
o During periods of unusual economic or market activity, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow the procedures outlined above under "Selling Shares By Mail."
- --------------------------------------------------------------------------------
By Wire.
o Call the Transfer Agent at 1-800-637-1380 for instructions.
o You must have given authorization for expedited wire redemption.
o The minimum amount that may be redeemed by this method is $10,000.
23
<PAGE>
Account Policies and Other Information
- --------------------------------------------------------------------------------
Automatic Investment Arrangements. Institutions may purchase Shares through
their institutional accounts at Northern either by directing automatic
investment of cash balances in excess of certain agreed upon amounts or by
directing investments from time to time on a non-automatic basis. Northern will
place a purchase order generated under an automatic investment direction either
on the Business Day that funds are available in the account or on the next
Business Day, depending upon the terms of the automatic investment arrangement.
Similarly, Northern will place a redemption order generated under an automatic
investment direction either on the Business Day Northern calculates the
redemption amount needed to bring the account balance up to the agreed upon
amount or on the next Business Day, depending upon the terms of the automatic
investment arrangement. If a redemption order is placed on the next Business
Day, Northern will normally provide funds by provisionally crediting the
Institution's account on the day the calculation is made. Institutions should
contact Northern for more information about their automatic investment
arrangements.
Purchase and Redemption Minimums. There is no purchase minimum for Institutions
purchasing Shares through their institutional account at Northern. For
Institutions opening an account directly with the Trust, there is a minimum
initial investment of $5 million in one or more Portfolios. There is no minimum
for subsequent investments. A $10,000 minimum applies for redemptions by wire.
The Trust reserves the right to waive purchase and redemption minimums and to
determine the manner in which a minimum is satisfied.
Calculating Share Price. The Trust issues Shares and redeems Shares at net asset
value ("NAV"). The NAV for each share class of a Portfolio is calculated by
dividing the value of net assets attributed to that class by the number of
outstanding shares of the class. The NAV for each Portfolio and class is
calculated as of 3:00 p.m., Chicago time, each Business Day. The NAV used in
determining the price of your Shares is the one calculated after your purchase,
exchange or redemption order is received or accepted as described below.
Each Portfolio seeks to maintain an NAV of $1.00 per share by valuing the
obligations held by it at amortized cost in accordance with SEC regulations.
Amortized cost will normally approximate market value.
Timing of Purchase Requests. Requests accepted by the Transfer Agent or other
authorized intermediary by 1:00 p.m., Chicago time, on any Business Day will be
executed the same day, provided that either:
o The Transfer Agent receives the purchase price in Federal or other
immediately available funds prior to 1:00 p.m., Chicago time, the same
Business Day;
o The order is accepted by an authorized intermediary and payment is to be
made by the close of the same Business Day in Federal or other immediately
available funds according to procedures authorized by the Trust; or
o Payment in Federal or other immediately available funds is received by the
close of the same Business Day in an institutional account maintained with
Northern or an affiliate.
Orders received by the Transfer Agent or other authorized intermediary on a
non-Business Day or after 1:00 p.m., Chicago time, on a Business Day will be
executed on the next Business Day, provided that payment is made as noted above.
We consider requests to be in "good order" when all required documents are
properly completed, signed and received, including a certified corporate
resolution or other acceptable evidence of authority. If an Institution pays for
Shares by check, Federal funds generally will become available within two
Business Days after a purchase order is received.
24
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
If payment is not received as described above from an authorized intermediary on
the same Business Day of acceptance of an order by the authorized intermediary,
the authorized intermediary may be liable for fees and losses and the
transaction may be cancelled.
In certain circumstances, the Trust may advance the time by which purchase
orders must be received. See "Early Closings" on page 27.
Tax Identification Number. Federal regulations require you to provide to the
Transfer Agent a taxpayer identification number when you open an account.
Purchase orders without such a number or an indication that a number has been
applied for will not be accepted. If you have applied for a number, you must
provide it to the Transfer Agent within 60 days of the date of the order.
In-Kind Purchases and Redemptions. The Trust reserves the right to accept
payment for Shares in the form of securities that are permissible investments
for a Portfolio. The Trust also reserves the right to pay redemptions by a
distribution "in-kind" of securities (instead of cash) from a Portfolio. See the
Statement of Additional Information for further information about the terms of
these purchases and redemptions.
Miscellaneous Purchase Information.
o Institutions are responsible for transmitting purchase orders to the
Transfer Agent and delivering required funds on a timely basis.
o Institutions are responsible for all losses and expenses of a Portfolio in
the event of any failure to make payment according to the procedures
outlined in this Prospectus. Northern may redeem shares from any account it
maintains to protect the Portfolios and Northern against loss. In addition,
a $20 charge will be imposed if a check does not clear.
o Shares of a Portfolio are entitled to the dividends declared by the
Portfolio beginning on the Business Day the purchase order is executed,
provided payment in Federal or other immediately available funds is
received by the Transfer Agent by the time designated above.
o The Trust reserves the right to reject any purchase order. The Trust also
reserves the right to change or discontinue any of its purchase procedures.
Timing of Redemption and Exchange Requests. Redemption and exchange requests
will be effected at the NAV next determined after your exchange or redemption
order is received in good order. Good order means that the request includes the
following: the account number and Portfolio name; the amount of the transaction
(as specified in dollars or shares); and the signature of a duly authorized
person (except for telephone and wire redemptions). See "Account Policies and
Other Information -- Making Changes to Your Account Information."
If either the Transfer Agent or Northern (with respect to your institutional
account) receives a redemption order by 1:00 p.m., Chicago time, on a Business
Day, redemption proceeds will normally be paid in Federal funds or other
immediately available funds wired or sent by check to you or, if you so choose,
to your institutional account with Northern, on the same Business Day.
Redemption orders received after 1:00 p.m., Chicago time, will be effected the
next Business Day. Proceeds for redemption orders received on a non-Business Day
will normally be sent on the next Business Day after receipt in good order.
In certain circumstances, the Trust may advance the time by which redemption and
exchange orders must be received. See "Early Closings" on page 27.
25
<PAGE>
Account Policies and Other Information continued
- --------------------------------------------------------------------------------
Miscellaneous Redemption Information. All redemption proceeds will be sent by
check unless the Transfer Agent is directed otherwise. Redemption proceeds may
also be wired. A redemption request may not be processed if a shareholder has
failed to submit a completed and properly executed new account application,
including a corporate resolution or other acceptable evidence of authority.
o The Trust reserves the right to defer crediting, sending or wiring
redemption proceeds for up to 7 days after receiving the redemption order
if, in its judgment, an earlier payment could adversely affect a Portfolio.
o If you are redeeming recently purchased Shares, your redemption request may
not be honored until your check or electronic transaction has cleared. This
may delay your transaction for up to 15 days.
o Institutions are responsible for transmitting redemption orders to the
Transfer Agent and crediting their Customers' accounts with redemption
proceeds on a timely basis.
o Redemption requests by mail must be signed by a person authorized by
acceptable documentation on file with the Transfer Agent.
o Dividends on Shares are earned through and including the day prior to the
day on which they are redeemed.
o The Trust reserves the right to redeem Shares held by any shareholder who
provides incorrect or incomplete account information or when such
involuntary redemptions are necessary to avoid adverse consequences to the
Trust and its shareholders.
o The Trust may require any information reasonably necessary to ensure that a
redemption request has been duly authorized.
o The Trust reserves the right to change or discontinue any of its redemption
procedures.
Exchange Privileges. Institutions and their Customers (to the extent permitted
by their account agreements) may exchange Shares of a Portfolio for shares of
another Portfolio. The registration of both accounts involved must be identical.
A $1,000 minimum investment applies. An exchange is a redemption of shares you
own and the purchase of shares you are acquiring. It is considered a taxable
event and may result in a gain or loss.
The Trust reserves the right to change or discontinue the exchange privilege at
any time upon 60 days' written notice to shareholders and to reject any exchange
request. Exchanges are only available in states where an exchange can legally be
made. Before making an exchange you should read the prospectus for the shares
you are acquiring.
Telephone Transactions. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, the Transfer Agent has adopted
procedures in an effort to establish reasonable safeguards against fraudulent
telephone transactions. If reasonable measures are taken to verify that
telephone instructions are genuine, the Trust and its service providers will not
be responsible for any loss resulting from fraudulent or unauthorized
instructions received over the telephone. In these circumstances, shareholders
will bear the risk of loss. During periods of unusual market activity, you may
have trouble placing a request by telephone. In this event, consider sending
your request in writing.
The proceeds of redemption orders received by telephone will be sent by check,
wire or transfer according to proper instructions. All checks will be made
payable to the shareholder of record and mailed only to the shareholder's
address of record.
The Trust reserves the right to refuse a telephone redemption.
26
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
Advance Notification of Large Transactions. The Trust requests that an
Institution give advance notice to the Transfer Agent by 11:00 a.m., Chicago
time, if it intends to place a purchase or redemption order of $5 million or
more on a Business Day.
Making Changes to Your Account Information. You may make changes to wiring
instructions, address of record, or other account information only in writing.
These instructions must be accompanied by a certified corporate resolution,
signature guarantee from an institution participating in the Stock Transfer
Agency Medallion Program ("STAMP"), or other acceptable evidence of authority.
In accordance with SEC regulations, the Trust and Transfer Agent may charge a
shareholder reasonable costs in locating a shareholder's current address.
Business Day. A "Business Day" is each Monday through Friday when Northern or
the New York Stock Exchange is open for business. A "Business Day" does not
include a holiday observed by Northern and the Exchange. In 1999 these holidays
are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
Early Closings. The Portfolios reserve the right to cease, or to advance the
time for, accepting purchase, redemption or exchange orders for same Business
Day credit when Northern or the Exchange closes early as a result of unusual
weather or other conditions. They also reserve this right when The Bond Market
Association recommends that securities markets close or close early.
Authorized Intermediaries. The Trust may authorize certain financial
intermediaries (including banks, trust companies, brokers and investment
advisers), which provide recordkeeping, reporting and processing services, to
accept purchase, redemption and exchange orders from their Customers on behalf
of the Trust. They may also designate other intermediaries to accept such
orders, if approved by the Trust. Authorized intermediaries are responsible for
transmitting orders and delivering funds on a timely basis. A Portfolio will be
deemed to have received an order when the order is accepted by the authorized
intermediary on a Business Day, and the order will be priced at the Portfolio's
per share NAV next determined.
Information About Institutions. Customers purchasing Shares through an
Institution should read their account agreements carefully. An Institution's
requirements may differ from those listed in this Prospectus. An Institution may
impose account charges, such as asset allocation fees, account maintenance fees,
and other charges that will reduce the net return on an investment in a
Portfolio. If a Customer has agreed with a particular Institution to maintain a
minimum balance with the Institution and the balance falls below this minimum,
the Customer may be required to redeem all or a part of his investment in a
Portfolio.
Northern may provide compensation to certain dealers and other financial
intermediaries who provide services to their Customers who invest in the Trust
or whose Customers purchase significant amounts of Shares of a Portfolio. The
amount of such compensation may be made on a one-time and/or periodic basis, and
may represent all or a portion of the annual fees earned by Northern as
Investment Adviser (after adjustments). This compensation will be paid by
Northern or its affiliates and will not represent an additional expense to the
Trust or its shareholders.
State securities laws regarding the registration of dealers may differ from
Federal law. As a result, Institutions investing in the Portfolios on behalf of
their Customers may be required to register as dealers.
27
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net income are declared daily and paid monthly by each Portfolio
to its shareholders. Net income includes the interest accrued on a Portfolio's
assets less estimated expenses. Each Portfolio's net realized short-term capital
gains, if any, are distributed at least annually. The Portfolios do not expect
to realize net long-term capital gains.
Dividends are paid as soon as practicable following the end of each month,
except in the case of a total redemption of Shares in an account that is not
subject to a standing order for the purchase of additional Shares. In that
event, dividends will be paid promptly along with the redemption proceeds.
All distributions are paid by each Portfolio in cash or are automatically
reinvested (without any sales charge) in additional Shares of the same
Portfolio. You may make arrangements to credit these distributions to your
account with Northern, its affiliates or its correspondent banks.
There are no fees or sales charges on reinvestments.
- --------------------------------------------------------------------------------
TAXES
Each Portfolio intends to qualify as a regulated investment company for Federal
tax purposes, and to distribute substantially all of its net income to
shareholders each year. Except for exempt-interest dividends paid by the
Tax-Exempt Portfolio, dividends and other distributions will be taxable as
ordinary income, unless you have a tax-advantaged account. This is true whether
dividends and distributions are received in cash or reinvested in Portfolio
Shares.
There are certain tax requirements that the Portfolios must follow in order to
avoid Federal taxation. In their efforts to adhere to these requirements, the
Portfolios may have to limit their investment activity in some types of
instruments.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Exempt-interest dividends must, however, be
reported on your Federal income tax return. Shareholders who are recipients of
Social Security Act or Railroad Retirement Act benefits should note that
exempt-interest dividends will be taken into account in determining the
taxability of their benefit payments.
In certain instances, dividends paid by the Tax-Exempt Portfolio, while exempt
from regular Federal income tax, may be subject to the alternative minimum tax.
In addition, the Portfolio may invest a portion of its assets in securities that
generate income that is not exempt from Federal tax. Any dividends paid by the
Tax-Exempt Portfolio that are derived from taxable interest or from capital
gains will be subject to Federal income tax.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable. It will apply these percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages for
any particular day.
28
<PAGE>
ABOUT YOUR ACCOUNT
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OTHER TAX
INFORMATION
Dividends and distributions from each Portfolio will generally be reportable by
you in the tax year in which they are paid with one exception. Dividends and
distributions declared by a Portfolio in October, November or December and paid
in January are taxed as though they were paid by December 31.
Every year, the Trust will send you information detailing the amount of ordinary
income and capital gains distributed to your account for the previous year.
Your investment in the Portfolios could have additional tax consequences. You
should consult your tax professional for information regarding all the tax
consequences applicable to your investments in the Portfolios. More information
is provided in the Statement of Additional Information. This short summary is
not intended as a substitute for careful tax planning.
In particular, although the Government Select Portfolio intends to invest
primarily in U.S. government securities the interest on which is generally
exempt from state income taxation, you should consult your own tax professional
to determine whether this is true in your own situation. Similarly, dividends
paid by the Portfolios (including the Tax-Exempt Portfolio) may be taxable under
state or local law as dividend income even though all or a portion of such
dividends may be derived from interest on obligations which, if realized
directly, would be exempt from such income taxes.
29
<PAGE>
Year 2000 Issues
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000" issues.
Many computer systems use two digits rather than four to identify the year.
Unless adapted, these systems may not be able to correctly distinguish the Year
2000 from the Year 1900. As the Year 2000 approaches, many systems may be unable
to accurately process certain date-based information, which could cause a
variety of operational problems for businesses. This could have a negative
effect on the companies in which the Portfolios invest, thus decreasing the
Portfolios' investment returns.
Northern Trust has implemented steps to prepare its critical computer systems
and processes for Year 2000 processing. It has established a dedicated Year 2000
Project Team whose members have significant systems development and maintenance
experience. Northern Trust's Year 2000 project includes a comprehensive testing
plan of its critical systems. Northern Trust has advised the Trust that it has
substantially completed work on its critical systems and that testing with
outside parties will be conducted during 1999.
Northern Trust also has a program to monitor and assess the efforts of other
parties, such as other service providers to the Portfolios. However, it cannot
control the success of those other parties' efforts. Contingency plans are being
established to provide Northern Trust with alternatives in case these entities
experience significant Year 2000 difficulties that impact Northern Trust.
Furthermore, even if the actions taken by Northern Trust are successful, the
normal operations of the Portfolios may, in any event, be disrupted
significantly by the failure of communications and public utility companies,
governmental entities, financial processors or others to perform their services
as a result of Year 2000 problems.
30
<PAGE>
APPENDICES
Appendix A
ADDITIONAL INFORMATION ON PORTFOLIO
RISKS, SECURITIES AND TECHNIQUES
This Appendix takes a closer look at some of the types of securities in which
the Portfolios may invest and their related risks. It also explores the various
investment techniques that the investment management team may, but is not
required to, use. The Portfolios may invest in other securities and are subject
to further restrictions and risks which are described in the Statement of
Additional Information.
- --------------------------------------------------------------------------------
Asset-Backed Securities. Asset-backed securities are sponsored by entities such
as government agencies, banks, financial companies and commercial or industrial
companies. Asset-backed securities represent participations in, or are secured
by and payable from, pools of assets such as mortgages, motor vehicle
installment sale contracts, installment loan contracts, leases of various types
of real and personal property, receivables from revolving credit (credit card)
agreements and other financial assets. Such asset pools are securitized through
the use of privately formed trusts or special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pooled insurance policy
issued by a financial institution, or other credit enhancements.
Investment strategy. The Diversified Assets Portfolio and Tax-Exempt
Portfolio may purchase various types of asset-backed securities. The
Government Portfolio may only purchase mortgage-backed securities that are
guaranteed by the U.S. government, its agencies or instrumentalities.
Special risks. Securities that are backed by credit card, automobile and
similar types of receivables generally do not have the benefit of a
security interest in collateral that is comparable in quality to mortgage
assets. In the event of default, a Portfolio will have recourse only to the
collateral, not to the sponsor, except to the extent that the security is
guaranteed. In the event of default, a Portfolio may suffer a loss if it
cannot sell collateral quickly and receive the amount it is owed.
Borrowings and Reverse Repurchase Agreements. The Portfolios may borrow money
from banks and the Government Select, Government and Diversified Assets
Portfolios may enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of money
market securities held by a Portfolio subject to the Portfolio's agreement to
repurchase them at a mutually agreed upon date and price (including interest).
Investment strategy. Each Portfolio may borrow in amounts not exceeding
one-third of its total assets. Each of the Government Select, Government
and Diversified Assets
31
<PAGE>
Appendix A continued
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Portfolios may enter into reverse repurchase agreements in amounts not
exceeding one-third of its total assets. These transactions may be entered
into as a temporary measure for emergency purposes or to meet redemption
requests. Reverse repurchase agreements may also be entered into when the
investment management team expects that the interest income to be earned
from the investment of the transaction proceeds will be greater than the
related interest expense.
Special risks. Borrowings and reverse repurchase agreements involve
leveraging. If the securities held by the Portfolios decline in value while
these transactions are outstanding, the net asset value of the Portfolios'
outstanding shares will decline in value by proportionately more than the
decline in value of the securities. In addition, reverse repurchase
agreements involve the risks that the interest income earned by a Portfolio
(from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by
a Portfolio will decline below the price the Portfolio is obligated to pay
to repurchase the securities, and that the securities may not be returned
to the Portfolio.
Custodial Receipts for Treasury Securities. Custodial receipts are
participations in trusts that hold U.S. Treasury securities and are sold under
names such as TIGRs and CATS. Like other stripped obligations, they entitle the
holder to future interest or principal payments on the U.S. Treasury securities.
Investment strategy. The Government, Diversified Assets and Tax-Exempt
Portfolios may purchase custodial receipts. Investments by the Government
Portfolio in custodial receipts will not exceed 35% of the value of its
total assets.
Special risks. Like other stripped obligations, custodial receipts may be
subject to greater price volatility than ordinary debt obligations because
of the way in which their principal and interest are returned to investors.
Derivatives. Each Portfolio may purchase certain "derivative" instruments. A
derivative is a financial instrument whose value is derived from -- or based
upon -- the performance of underlying assets, interest or currency exchange
rates, or indices. Derivatives include structured debt obligations such as
collateralized mortgage obligations and other types of asset-backed securities,
"stripped" securities and various floating rate instruments.
Investment strategy. A Portfolio will invest in derivatives only if the
potential risks and rewards are consistent with the Portfolio's objective,
strategies and overall risk profile.
Special risks. Engaging in derivative transactions involves special risks,
including (a) market risk that the Portfolio's derivatives position will
lose value; (b) credit risk that the counterparty to the transaction will
default; (c) leveraging risk that the value of the derivative instrument
will decline more than the value of the assets on which it is based; (d)
illiquidity risk that a Portfolio will be unable to sell its position
because of lack of market depth or disruption; (e) pricing risk that the
value of a derivative instrument will be difficult to determine; and (f)
operations risk that loss will occur as a result of inadequate systems or
human error. Many types of derivatives have been recently developed and
have not been tested over complete market cycles. For these reasons, a
Portfolio may suffer a loss whether or not the analysis of the investment
management team is accurate.
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APPENDICES
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Diversification. Diversifying its holdings can help a Portfolio reduce the risks
of investing. In accordance with current SEC regulations, each Portfolio will
not invest more than 5% of the value of its total assets at the time of purchase
in the securities of any single issuer. However, a Portfolio may invest up to
25% of the value of its total assets in the securities of a single issuer for up
to three Business Days. These limitations do not apply to cash, certain
repurchase agreements, U.S. government securities or securities of other
investment companies. In addition, securities subject to certain unconditional
guarantees and securities that are not "First Tier Securities" as defined by the
SEC are subject to different diversification requirements as described in the
Statement of Additional Information.
Downgraded Securities. After its purchase, a portfolio security may be assigned
a lower rating or cease to be rated. If this occurs, a Portfolio may continue to
hold the issue if the Investment Adviser believes it is in the best interest of
the Portfolio and its shareholders.
Foreign Securities. The Diversified Assets Portfolio may invest in the
obligations of foreign governments, or any of their political subdivisions,
agencies or instrumentalities, foreign commercial banks and foreign branches of
U.S. banks. It may also invest in U.S. dollar-denominated commercial paper and
other obligations of foreign issuers. Foreign government obligations may include
debt obligations of supranational entities, including international
organizations (such as the European Coal and Steel Community and the
International Bank for Reconstruction and Development (also known as the World
Bank)) and international banking institutions and related government agencies.
Investment strategy. Investments by the Diversified Assets Portfolio in
foreign issuer obligations will not exceed 50% of the Portfolio's total
assets measured at the time of purchase.
Special risks. Foreign securities involve special risks and costs. Foreign
securities, and in particular foreign debt securities, are sensitive to
changes in interest rates. In addition, investment in the securities of
foreign governments involves the risk that foreign governments may default
on their obligations or may otherwise not respect the integrity of their
debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with less complete financial
information about the issuers, less market liquidity, more market
volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend
income, possible seizure or nationalization of foreign holdings or the
adoption of other governmental restrictions might adversely affect an
investment in foreign securities. Additionally, foreign banks and foreign
branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements.
Illiquid or Restricted Securities. Illiquid securities include repurchase
agreements and time deposits with notice/termination dates of more than seven
days, certain variable amount master demand notes that cannot be called within
seven days, certain insurance funding agreements (see below), and other
securities that are traded in the U.S. but are subject to trading restrictions
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").
33
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Investment strategy. Each Portfolio may invest up to 10% of its net assets
in securities that are illiquid. A domestically traded security which is
not registered under the 1933 Act will not be considered illiquid if the
Investment Adviser determines that an adequate trading market exists for
that security. If otherwise consistent with their investment objectives and
policies, the Portfolios may purchase commercial paper issued pursuant to
Section 4(2) of the 1933 Act and securities that are not registered under
the 1933 Act but can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. These securities will not be
considered illiquid so long as Northern determines, under guidelines
approved by the Trust's Board of Trustees, that an adequate trading market
exists.
Special risks. Because illiquid and restricted securities may be difficult
to sell at an acceptable price, they may be subject to greater volatility
and may result in a loss to a Portfolio. The practice of investing in
commercial paper available to qualified institutional buyers could increase
the level of illiquidity during any period that qualified institutional
buyers become uninterested in purchasing these securities.
Insurance Funding Agreements. An insurance funding agreement ("IFA") is an
agreement that requires a Portfolio to make cash contributions to a deposit fund
of an insurance company's general account. The insurance company then credits
interest to the Portfolio for a set time period.
Investment Strategy. The Diversified Assets Portfolio may invest in IFAs
issued by insurance companies that meet quality and credit standards
established by the Investment Adviser.
Special risks. IFAs are not insured by a government agency -- they are
backed only by the insurance company that issues them. As a result, they
are subject to default risk. In addition, an active secondary market in
IFAs does not currently exist. This means that it may be difficult to sell
an IFA at an appropriate price.
Investment Companies. In connection with the management of their daily cash
positions, the Portfolios may invest in shares of other money market funds which
invest in short-term, high quality debt securities and securities issued by
other investment companies consistent with their investment objectives and
policies.
Investment strategy. Investments by a Portfolio in other money market funds
will be subject to the limitations of the Investment Company Act of 1940.
Although the Portfolios do not expect to do so in the foreseeable future,
each Portfolio is authorized to invest substantially all of its assets in
an open-end investment company that has the same investment objective,
policies and fundamental restrictions as the Portfolio.
Special risks. As a shareholder of another investment company, a Portfolio
would be subject to the same risks as any other investor in that company.
It would also bear a proportionate share of any fees or expenses paid by
that company. These expenses would be in addition to the advisory fees and
other expenses the Portfolio bears directly in connection with its own
operations.
34
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Municipal and Related Instruments. Municipal instruments include debt
obligations issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies, authorities and
instrumentalities.
Municipal instruments include both "general" and "revenue" bonds and may be
issued to obtain funds for various public purposes. General obligations are
secured by the issuer's pledge of its full faith, credit and taxing power.
Revenue obligations are payable only from the revenues derived from a particular
facility or class of facilities. In some cases, revenue bonds are also payable
from the proceeds of a special excise or other specific revenue source such as
lease payments from the user of a facility being financed.
Municipal instruments also include "moral obligation" bonds, which are supported
by a moral commitment but not a legal obligation of a state or municipality, as
well as custodial receipts and certificates of participation that represent
interests in a pool of municipal instruments held by a trustee.
During extraordinary circumstances, the Tax-Exempt Portfolio may invest in AMT
obligations such as certain bonds issued to obtain funds to provide certain
water, sewage and solid waste facilities, qualified residential rental projects,
certain local electric, gas and other heating or cooling facilities, qualified
hazardous waste facilities, and government-owned airports, docks and wharves and
mass commuting facilities; certain qualified mortgage, student loan and
redevelopment bonds; and certain bonds issued as part of "small issues" for
industrial facilities.
Investment strategy. In connection with its investments in municipal
instruments, the Tax-Exempt Portfolio may invest more than 25% of its total
assets in (a) municipal instruments the interest upon which is paid solely
from revenues of similar projects, and (b) industrial development
obligations. The Tax-Exempt Portfolio may also invest more than 25% of the
value of its total assets in municipal instruments whose issuers are in the
same state. However, the Portfolio does not intend to invest more than 25%
of the value of its total assets in industrial development bonds or similar
obligations where the non-governmental entities supplying the revenues to
be paid are in the same industry.
The Diversified Assets Portfolio may invest up to 5% of its net assets in
municipal instruments or other securities issued by state and local
governmental bodies. Generally, this will occur when the yield of municipal
instruments, on a pre-tax basis, is comparable to that of other permitted
short-term taxable investments. Dividends paid by the Diversified Assets
Portfolio on such investments will be taxable to shareholders.
Special risks. Municipal instruments purchased by the Tax-Exempt Portfolio
may be backed by letters of credit or other forms of credit enhancement
issued by foreign (as well as domestic) banks and other financial
institutions. If the credit quality of these banks and financial
institutions declines, the Portfolio could suffer a loss to the extent that
the Portfolio is relying upon this credit support. Certain risks relating
to foreign banks and financial institutions are described on page 33 under
"Foreign Securities."
35
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Portfolio subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price.
Investment strategy. Each Portfolio may enter into repurchase agreements
with financial institutions such as banks and broker-dealers that are
deemed to be credit-worthy by the Investment Adviser. Although the
securities subject to a repurchase agreement may have maturities exceeding
one year, settlement of the agreement will never occur more than one year
after a Portfolio acquires the securities.
Special risks. In the event of a default, a Portfolio will suffer a loss to
the extent that the proceeds from the sale of the underlying securities and
other collateral are less than the repurchase price and the Portfolio's
costs associated with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy, a Portfolio could suffer losses if a
court determines that the Portfolio's interest in the collateral is not
enforceable.
Securities Lending. In order to generate additional income, the Portfolios may
lend securities on a short-term basis to banks, brokers and dealers or other
qualified institutions. In exchange, the Portfolios will receive collateral
equal to at least 100% of the value of the securities loaned.
Investment strategy. Securities lending may represent no more than
one-third the value of a Portfolio's total assets (including the loan
collateral). Any cash collateral received by a Portfolio in connection with
these loans may be invested in U.S. government securities and other liquid
high-grade debt obligations.
Special risks. The main risk when lending portfolio securities is that the
borrower might become insolvent or refuse to honor its obligation to return
the securities. In this event, a Portfolio could experience delays in
recovering its securities and may possibly incur a capital loss. In
addition, a Portfolio may incur a loss in reinvesting the cash collateral
it receives.
Stripped Obligations. These securities are issued by the U.S. government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include stripped mortgage-backed securities, which are derivative
multi-class mortgage securities.
Investment strategy. Each of the Portfolios may purchase stripped
securities.
Special risks. Stripped securities are very sensitive to interest rate
changes and to the rate of principal prepayments. A rapid or unexpected
increase in mortgage prepayments could severely depress the price of
certain stripped mortgage-backed securities and adversely affect a
Portfolio's total returns.
United States Government Obligations. These include U.S. Treasury obligations,
such as bills, notes and bonds, which generally differ only in terms of their
interest rates, maturities and time of issuance. These also include obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities. Securities guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities are deemed to include (a)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or an agency or
instrumentality thereof, and (b) participations in loans made to foreign
governments or their agencies that are so guaranteed.
36
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Investment strategy. To the extent consistent with its investment
objective, each Portfolio may invest in a variety of U.S. Treasury
obligations and obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities.
Special risks. Not all U.S. government obligations carry the same
guarantees. Some, such as those of the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the
United States Treasury. Other obligations, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from
the United States Treasury; and others, such as those issued by the Federal
National Mortgage Association ("FNMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations.
Still others are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial
support to its agencies or instrumentalities if it is not obligated to do
so by law. There is no assurance that these commitments will be undertaken
or complied with in the future. In addition, the secondary market for
certain participations in loans made to foreign governments or their
agencies may be limited.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate.
Investment strategy. Each Portfolio may invest in rated and unrated
variable and floating rate instruments to the extent consistent with its
investment objective. Unrated instruments may be purchased by a Portfolio
if they are determined by the Investment Adviser to be of comparable
quality to rated instruments eligible for purchase by the Portfolio. The
Portfolios may invest in variable amount master demand notes.
Special risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate and
credit risk. Because there is no active secondary market for certain
variable and floating rate instruments, they may be more difficult to sell
if the issuer defaults on its payment obligations or during periods when
the Portfolios are not entitled to exercise their demand rights. As a
result, the Portfolios could suffer a loss with respect to these
instruments.
When-Issued Securities, Delayed Delivery Transactions and Forward Commitments. A
purchase of "when-issued" securities refers to a transaction made conditionally
because the securities, although authorized, have not yet been issued. A delayed
delivery or forward commitment transaction involves a contract to purchase or
sell securities for a fixed price at a future date beyond the customary
settlement period.
Investment strategy. Each Portfolio may purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis. Although the
Portfolios would generally purchase securities in these transactions with
the intention of acquiring the securities, the Portfolios may dispose of
such securities prior to settlement if the investment management team deems
it appropriate to do so.
Special risks. Purchasing securities on a when-issued, delayed delivery or
forward commitment basis involves the risk that the securities may decrease
in value by the time they are actually issued or delivered. Conversely,
selling securities in these transactions involves the risk that the value
of the securities may increase before the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
37
<PAGE>
Appendix B
The financial highlights tables are intended to help you understand a
Portfolio's financial performance for the past five years. Certain information
reflects financial results for a single Portfolio Share. The total returns in
the tables represent the rate that an investor would have earned or lost on an
investment in a Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by Ernst & Young LLP, whose
report is included in the Portfolios' annual report along with the Portfolios'
financial statements. The annual report is available upon request and without
charge.
38
<PAGE>
APPENDICES
Financial Highlights
GOVERNMENT SELECT PORTFOLIO
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------
For the Years Ended November 30, 1998 1997 1996 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
....................................................................................................................................
Income from investment operations:
Net investment income 0.05 0.05 0.05 0.06 0.04
....................................................................................................................................
Net gains or losses on securities (both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total income from investment operations 0.05 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.05) (0.05) (0.05) (0.06) (0.04)
....................................................................................................................................
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total distributions to shareholders (0.05) (0.05) (0.05) (0.06) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return (a) 5.38% 5.41% 5.31% 5.82%(b) 3.84%
....................................................................................................................................
Ratio to average net assets of (c):
Expenses, before waivers and reimbursements 0.39% 0.39% 0.40% 0.41% 0.43%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20%
....................................................................................................................................
Net investment income, before waivers and reimbursements 5.12% 5.11% 4.99% 5.46% 3.60%
....................................................................................................................................
Net investment income, net of waivers and reimbursements 5.31% 5.30% 5.19% 5.67% 3.83%
....................................................................................................................................
Net assets at end of year (in thousands) $1,694,869 $1,239,393 $836,349 $685,142 $493,718
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(b) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per share
received from Northern Trust Corporation.
(c) Annualized for periods less than one year.
39
<PAGE>
Appendix B continued
Financial Highlights
GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------
For the Years Ended November 30, 1998 1997 1996 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
....................................................................................................................................
Income from investment operations:
Net investment income 0.04 0.05 0.05 0.06 0.04
....................................................................................................................................
Net gains or losses on securities (both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total income from investment operations 0.04 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.04) (0.05) (0.05) (0.06) (0.04)
....................................................................................................................................
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total distributions to shareholders (0.04) (0.05) (0.05) (0.06) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return (a) 5.28% 5.31% 5.20% 5.64%(b) 3.78%
....................................................................................................................................
Ratio to average net assets of:
Expenses, before waivers and reimbursements 0.40% 0.37% 0.38% 0.40% 0.41%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.35% 0.35% 0.35% 0.35% 0.34%
....................................................................................................................................
Net investment income, before waivers and reimbursements 5.17% 5.16% 5.05% 5.44% 3.53%
....................................................................................................................................
Net investment income, net of waivers and reimbursements 5.22% 5.18% 5.08% 5.49% 3.60%
....................................................................................................................................
Net assets at end of year (in thousands) $1,652,870 $1,051,401 $1,268,515 $850,664 $787,816
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(b) Total return for the year ended November 30, 1995 would have been 5.53%
absent the effect of a capital contribution equivalent to $.0011 per share
received from Northern Trust Corporation.
40
<PAGE>
APPENDICES
Financial Highlights
DIVERSIFIED ASSETS PORTFOLIO
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------
For the Years Ended November 30, 1998 1997 1996 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
....................................................................................................................................
Income from investment operations:
Net investment income 0.05 0.05 0.05 0.06 0.04
....................................................................................................................................
Net gains or losses on securities (both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total income from investment operations 0.05 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.05) (0.05) (0.05) (0.06) (0.04)
....................................................................................................................................
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total distributions to shareholders (0.05) (0.05) (0.05) (0.06) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return (a) 5.36% 5.42% 5.30% 5.78%(b) 3.92%
....................................................................................................................................
Ratio to average net assets of:
Expenses, before waivers and reimbursements 0.38% 0.36% 0.34% 0.34% 0.35%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.35% 0.35% 0.34% 0.34% 0.35%
....................................................................................................................................
Net investment income, before waivers and reimbursements 5.28% 5.29% 5.18% 5.63% 3.74%
....................................................................................................................................
Net investment income, net of waivers and reimbursements 5.31% 5.30% 5.18% 5.63% 3.74%
....................................................................................................................................
Net assets at end of year (in thousands) $4,794,830 $3,941,586 $3,179,529 $2,610,347 $2,891,880
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per share
received from Northern Trust Corporation.
41
<PAGE>
Appendix B continued
Financial Highlights
TAX-EXEMPT PORTFOLIO
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------
For the Years Ended November 30, 1998 1997 1996 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
....................................................................................................................................
Income from investment operations:
Net investment income 0.03 0.03 0.03 0.04 0.02
....................................................................................................................................
Net gains or losses on securities (both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total income from investment operations 0.03 0.03 0.03 0.04 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.03) (0.03) (0.03) (0.04) (0.02)
....................................................................................................................................
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
....................................................................................................................................
Total distributions to shareholders (0.03) (0.03) (0.03) (0.04) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return (a) 3.31% 3.44% 3.37% 3.71% 2.62%
....................................................................................................................................
Ratio to average net assets of:
Expenses, before waivers and reimbursements 0.39% 0.39% 0.40% 0.41% 0.36%
....................................................................................................................................
Expenses, net of waivers and reimbursements 0.35% 0.35% 0.35% 0.35% 0.35%
....................................................................................................................................
Net investment income, before waivers and reimbursements 3.23% 3.34% 3.27% 3.57% 2.39%
....................................................................................................................................
Net investment income, net of waivers and reimbursements 3.27% 3.38% 3.32% 3.63% 2.40%
....................................................................................................................................
Net assets at end of year (in thousands) $748,151 $585,159 $638,507 $803,730 $853,103
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
42
<PAGE>
This page intentionally left blank.
43
<PAGE>
For More Information
- --------------------------------------------------------------------------------
ANNUAL/
SEMIANNUAL
REPORT
Additional information about the Portfolios' investments is available in the
Portfolios' annual and semiannual reports to shareholders.
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL
INFORMATION
Additional information about the Portfolios and their policies is also available
in the Portfolios' Statement of Additional Information ("SAI"). The SAI is
incorporated by reference into this Prospectus (is legally considered part of
this Prospectus).
The Portfolios' annual and semiannual reports and the SAI are available free
upon request by calling 1-800-637-1380.
To obtain other information and for shareholder inquiries:
By telephone -- Call 1-800-637-1380
By mail -- Northern Institutional Funds
P.O. Box 75943
Chicago, IL 60675
On the Internet -- Text-only versions of the Portfolios' documents are available
on the SEC's website at http://www.sec.gov.
You may review and obtain copies of Trust documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Trust documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Northern
Institutional Funds
SHARES PROSPECTUS
811-3605
44
<PAGE>
================================================================================
INVESTMENT ADVISERS
The Northern Trust Company
Northern Trust Quantitative Advisors, Inc.
50 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT
AND CUSTODIAN
The Northern Trust Company
================================================================================
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
SHARES
NORTHERN INSTITUTIONAL FUNDS
4900 Sears Tower
Chicago, Illinois 60606
GOVERNMENT SELECT PORTFOLIO
GOVERNMENT PORTFOLIO
DIVERSIFIED ASSETS PORTFOLIO
TAX-EXEMPT PORTFOLIO
This Statement of Additional Information dated April 1, 1999 (the
"Additional Statement") is not a prospectus. Copies of the prospectus dated
April 1, 1999 for the Shares of the Government Select, Government, Diversified
Assets and Tax-Exempt Portfolios (the "Portfolios") of Northern Institutional
Funds (the "Prospectus") may be obtained without charge by calling
1-800-637-1380 (toll-free) or by writing to the address stated above. Each
Portfolio also offers two additional share classes, Service Shares and Premier
Shares, which are described in a separate statement of additional information.
Capitalized terms not otherwise defined have the same meaning as in the
Prospectus.
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 are incorporated herein
by reference in the section entitled "Financial Statements." No other parts of
the annual report are incorporated herein by reference. Copies of the annual
report may be obtained upon request and without charge by calling 1-800-637-1380
(toll-free).
B-1
<PAGE>
INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION....................................... B-3
Classification and History..................................... B-3
Investment Objectives, Strategies and Risks.................... B-3
Investment Restrictions........................................ B-12
ADDITIONAL TRUST INFORMATION............................................ B-16
Trustees and Officers.......................................... B-16
Investment Adviser, Transfer Agent and Custodian............... B-21
Portfolio Transactions......................................... B-26
Administrator and Distributor.................................. B-26
Counsel and Auditors........................................... B-28
In-Kind Purchases and Redemptions.............................. B-29
Third-Party Fees and Requirements.............................. B-29
PERFORMANCE INFORMATION................................................. B-29
AMORTIZED COST VALUATION................................................ B-32
DESCRIPTION OF SHARES................................................... B-33
ADDITIONAL INFORMATION CONCERNING TAXES................................. B-38
General ...................................................... B-38
Special Tax Considerations Pertaining to the
Tax-Exempt Portfolio.................................. B-39
Foreign Investors.............................................. B-39
Conclusion..................................................... B-40
OTHER INFORMATION ...................................................... B-40
FINANCIAL STATEMENTS.................................................... B-41
APPENDIX A ...................................................... A-1
----------------
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering of Shares made by the Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Trust or its distributor. The Prospectus does not
constitute an offering by the Trust or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Classification and History
Northern Institutional Funds (the "Trust") is an open-end, management
investment company. Each Portfolio is classified as diversified under the
Investment Company Act of 1940, as amended (the "1940 Act").
Each Portfolio is a series of the Trust, which was formed as a Delaware
business trust on July 1, 1997 under an Agreement and Declaration of Trust (the
"Trust Agreement"). The Trust, formerly known as The Benchmark Funds, changed
its name to Northern Institutional Funds on July 15, 1998. The Portfolios were
formerly series of The Benchmark Funds, a Massachusetts business trust, and were
reorganized into the Trust on March 31, 1998.
Investment Objectives, Strategies and Risks
The following supplements the investment objectives, strategies and risks
of the Portfolios as set forth in the Prospectus. The investment objective of
each Portfolio may not be changed without the vote of the majority of the
Portfolio's outstanding shares. Except as expressly noted below, however, each
Portfolio's investment policies may be changed without shareholder approval.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit and Time
Deposits
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party.
As stated in the Prospectus, the Diversified Assets Portfolio may invest a
portion of its assets in the obligations of foreign banks and foreign branches
of domestic banks. Such obligations include Eurodollar Certificates of Deposit
("ECDs") which are U.S. dollar-denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States;
Eurodollar Time Deposits ("ETDs") which are U.S. dollar-denominated deposits in
a foreign branch of a U.S. bank or a foreign bank; Canadian Time Deposits
("CTDs") which are essentially the same as ETDs except they are issued by
Canadian offices of major Canadian banks; Schedule Bs, which are obligations
issued by Canadian branches of foreign or domestic banks; Yankee Certificates of
Deposit ("Yankee CDs") which are U.S. dollar-denominated certificates of deposit
issued by a U.S. branch of a foreign bank and
B-3
<PAGE>
held in the United States; and Yankee Bankers' Acceptances ("Yankee BAs") which
are U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
The Diversified Assets Portfolio may also invest in high quality commercial
paper and other obligations issued or guaranteed by U.S. and foreign
corporations and other issuers rated (at the time of purchase) A-2 or higher by
Standard & Poor's Ratings Group ("S&P"), Prime-2 or higher by Moody's Investors
Service, Inc. ("Moody's"), Duff 2 or higher by Duff & Phelps Credit Rating Co.
("D&P"), F-2 or higher by Fitch IBCA, Inc. ("Fitch") or TBW-2 or higher by
Thomson BankWatch, Inc. ("TBW"). The Diversified Assets Portfolio may also
invest in rated and unrated corporate bonds, notes, paper and other instruments
that are of comparable quality to the commercial paper permitted to be purchased
by the Portfolio.
Asset-Backed Securities
The Diversified Assets Portfolio may purchase asset-backed securities,
which are securities backed by mortgages, installment contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as a
result of mortgage prepayments.
If an asset-backed security is purchased at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if an asset-backed security is purchased at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will decrease, yield to maturity.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments.
For this and other reasons, an asset-backed security's stated maturity may
be shortened, and the security's total return may be difficult to predict
precisely. Such difficulties are not, however, expected to have a significant
effect on the Portfolio since the remaining maturity of any asset-backed
security acquired, as calculated under applicable SEC regulations, will be 397
days or less.
Asset-backed securities acquired by the Diversified Assets Portfolio may
include collateralized mortgage obligations ("CMOs") issued by private
companies. CMOs provide the holder with a specified interest in the cash flow of
a pool of underlying mortgages or other mortgage-backed securities. Issuers of
CMOs ordinarily elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date.
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The relative payment rights of the various CMO classes may be structured in a
variety of ways. The Portfolio will not purchase "residual" CMO interests, which
normally exhibit greater price volatility.
U.S. Government Obligations
Examples of the types of U.S. Government obligations that may be acquired
by the Portfolios include U.S. Treasury Bills, Treasury Notes and Treasury Bonds
and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks,
Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Federal National Mortgage Association, Government National
Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, and the Maritime Administration.
Custodial Receipts for Treasury Securities
The Portfolios (other than the Government Select Portfolio) may acquire
U.S. Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the underwriters
of these certificates or other evidences of ownership of U.S. Treasury
securities have stated that, in their opinion, purchasers of the stripped
securities most likely will be deemed the beneficial holders of the underlying
U.S. Government obligations for Federal tax purposes. The Trust is not aware of
any binding legislative, judicial or administrative authority on this issue.
U.S. Treasury STRIPS
The Treasury Department has facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a Portfolio will be able to have its beneficial ownership of
zero coupon securities recorded directly in the book-entry record-keeping system
in lieu of having to hold certificates or other evidences of ownership of the
underlying U.S. Treasury securities. All Portfolios,
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including the Government Select Portfolio, may acquire securities registered
under the STRIPS program.
Bank and Deposit Notes
The Diversified Assets Portfolio may purchase bank and deposit notes. Bank
notes rank junior to deposit liabilities of banks and pari passu with other
senior, unsecured obligations of the bank. Bank notes are classified as "other
borrowings" on a bank's balance sheet, while deposit notes and certificates of
deposit are classified as deposits. Bank notes are not insured by the Federal
Deposit Insurance Corporation or any other insurer. Deposit notes are insured by
the Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.
Variable and Floating Rate Instruments
With respect to the variable and floating rate instruments that may be
acquired by the Portfolios as described in the Prospectus, Northern will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instruments are subject to demand
features, will monitor their financial status and ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
of "high quality," the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. The Portfolios will invest in variable and
floating rate instruments only when Northern deems the investment to involve
minimal credit risk. Unrated variable and floating rate instruments will be
determined by Northern to be of comparable quality at the time of the purchase
to rated instruments that may be purchased by the Portfolios. In determining
weighted average portfolio maturity, an instrument may, subject to SEC
regulations, be deemed to have a maturity shorter than its nominal maturity
based on the period remaining until the next interest rate adjustment or the
time the Portfolio involved can recover payment of principal as specified in the
instrument. Variable and floating rate instruments held by a Portfolio will be
subject to the Portfolio's 10% limitation on illiquid investments when the
Portfolio may not demand payment of the principal amount within seven days
absent a reliable trading market.
Investment Companies
With respect to the investments of the Portfolios in the securities of
other investment companies, such investments will be limited so that, as
determined after a purchase is made, either (a) not more than 3% of the total
outstanding stock of such investment company will be owned by a Portfolio, the
Trust as a whole and their affiliated persons (as defined in the 1940 Act); or
(b)(i) not more than 5% of the value of the total assets of a Portfolio will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio.
Unaffiliated money market funds whose securities are purchased by the
Portfolios may not be obligated to redeem such securities in an amount exceeding
1% of their total outstanding
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securities during any period of less than 30 days. Therefore, such securities
that exceed this amount may be illiquid.
If required by the 1940 Act, each Portfolio expects to vote the shares of
other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
A Portfolio may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policies and restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. A Portfolio may adhere
to more restrictive limitations with respect to its investments in securities
issued by other investment companies if required by the SEC or deemed to be in
the best interests of the Trust.
Repurchase Agreements
Each Portfolio may enter into repurchase agreements with financial
institutions, such as banks and broker-dealers, as are deemed creditworthy by
Northern under guidelines approved by the Trust's Board of Trustees. The
repurchase price under the repurchase agreements will generally equal the price
paid by a Portfolio plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the Trust's custodian (or subcustodian), in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. The seller
under a repurchase agreement will be required to maintain the value of the
securities which are subject to the agreement and held by a Portfolio in an
amount that exceeds the agreed upon repurchase price (including accrued
interest). Repurchase agreements are considered to be loans by a Portfolio under
the 1940 Act.
Reverse Repurchase Agreements
Each Portfolio (except the Tax-Exempt Portfolio) may borrow funds as a
temporary measure for emergency purposes or to meet redemption requests by
selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). The Portfolios may use the proceeds of
reverse repurchase agreements to purchase other securities either maturing, or
under an agreement to resell, at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Portfolio may
decline below the repurchase price. The Portfolios will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Portfolio will segregate liquid assets in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. Reverse repurchase agreements are considered
to be borrowings by a Portfolio under the 1940 Act.
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Securities Lending
Collateral for loans of portfolio securities made by a Portfolio may
consist of cash, securities issued or guaranteed by the U.S. Government or its
agencies or irrevocable bank letters of credit (or any combination thereof). The
borrower of securities will be required to maintain the market value of the
collateral at not less than the market value of the loaned securities, and such
value will be monitored on a daily basis. When a Portfolio lends its securities,
it continues to receive interest on the securities loaned and may simultaneously
earn interest on the investment of the cash collateral which will be invested in
readily marketable, high-quality, short-term obligations. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans will be called so that the securities may be voted by a
Portfolio if a material event affecting the investment is to occur.
Forward Commitments and When-Issued Securities
Each Portfolio may purchase securities on a when-issued basis or purchase
or sell securities on a forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the Portfolio to purchase or
sell securities at a future date. The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are normally negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities. If
deemed advisable as a matter of investment strategy, however, a Portfolio may
dispose of or negotiate a commitment after entering into it. A Portfolio also
may sell securities it has committed to purchase before those securities are
delivered to the Portfolio on the settlement date. The Portfolio may realize a
capital gain or loss in connection with these transactions. For purposes of
determining a Portfolio's average dollar-weighted maturity, the maturity of
when-issued or forward commitment securities will be calculated from the
commitment date.
When a Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio will segregate liquid assets having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the Portfolio will segregate the portfolio securities themselves. These
procedures are designed to ensure that the Portfolio will maintain sufficient
assets at all times to cover its obligations under when-issued purchases and
forward commitments.
Insurance Funding Agreements
The Diversified Assets Portfolio may invest in insurance funding agreements
("IFAs"). An IFA is normally a general obligation of the issuing insurance
company and not a separate account. The purchase price paid for an IFA becomes
part of the general assets of the insurance company, and the contract is paid
from the company's general assets. Generally, IFAs are not
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assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in IFAs may not exist.
Yields and Ratings
The yields on certain obligations, including the money market instruments
in which the Portfolios invest (such as commercial paper and bank obligations),
are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, financial
condition of the issuer, size of the offering, maturity of the obligation and
ratings of the issue. The ratings of S&P, Moody's, D&P, Fitch and TBW represent
their respective opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
Municipal Instruments
Municipal instruments are high quality, short-term instruments, the
interest on which is, in the opinion of bond counsel to the issuers, exempt from
Federal income tax. Opinions relating to the validity of municipal instruments
and to the exemption of interest thereon from regular Federal income tax are
rendered by bond counsel to the respective issuing authorities at the time of
issuance. Neither the Trust nor Northern will review the proceedings relating to
the issuance of municipal instruments or the bases for such opinions.
Municipal instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Tax-Exempt Portfolio may purchase short-term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Municipal instruments include industrial development bonds. Industrial
development bonds are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. Consequently, the credit quality of an
industrial revenue bond is usually directly related to the credit standing of
the private user of the facility involved.
The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of a
moral obligation bond is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal bonds with a series of maturity dates are called Serial Bonds.
The Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds")
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where the Portfolio obtains at the time of purchase the right to put the bond
back to the issuer or a third party at par at least every thirteen months. Put
Bonds with conditional puts (that is, puts which cannot be exercised if the
issuer defaults on its payment obligations) will present risks that are
different than those of other municipal instruments because of the possibility
that the Portfolio might hold a long-term Put Bond on which a default occurs
following its acquisition by the Portfolio.
Municipal instruments purchased by the Tax-Exempt Portfolio may be backed
by letters of credit or other forms of credit enhancement issued by foreign (as
well as domestic) banks and other financial institutions. The credit quality of
these banks and financial institutions could, therefore, cause loss to a
Portfolio that invests in municipal instruments. Letters of credit and other
obligations of foreign financial institutions may involve certain risks in
addition to those of domestic obligations.
Although the Tax-Exempt Portfolio does not expect to do so during normal
market conditions, it may invest more than 25% of the value of its total assets
in municipal instruments whose issuers are in the same state. When a substantial
percentage of the Tax-Exempt Portfolio's assets is invested in instruments which
are used to finance facilities involving a particular industry, whose issuers
are in the same state or which are otherwise related, there is a possibility
that an economic, business or political development affecting one such
instrument would likewise affect the other related instruments.
The Tax-Exempt Portfolio may invest in fixed and variable rate notes and
similar debt instruments rated MIG-2, VMIG-2 or Prime-2 or higher by Moody's,
SP-2 or A-2 or higher by S&P, AA or higher by D&P or F-2 or higher by Fitch and
tax-exempt commercial paper and similar debt instruments rated Prime-2 or higher
by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2 or higher by
Fitch. The Tax-Exempt Portfolio may also invest in rated and unrated municipal
bonds, notes, paper or other instruments that are of comparable quality to the
tax-exempt commercial paper permitted to be purchased by the Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations are
held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of floating
or variable rate obligation that represents interests in a pool of municipal
obligations held by a bank.
An issuer's obligations under its municipal instruments are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal
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of its municipal instruments may be materially adversely affected by litigation
or other conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal instruments. For example, under the Tax Reform Act of 1986
interest on certain private activity bonds must be included in an investor's
Federal alternative minimum taxable income, and corporate investors must include
all tax-exempt interest in their Federal alternative minimum taxable income. The
Trust cannot predict what legislation, if any, may be proposed in the future in
Congress as regards the Federal income tax status of interest on municipal
instruments. Future proposals could materially adversely affect the availability
of municipal instruments for investment by the Tax-Exempt Portfolio and the
liquidity and value of the Portfolio. In such an event the Board of Trustees
would reevaluate the Portfolio's investment objective and policies and consider
changes in its structure or possible dissolution.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding shares of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from municipal
instruments except under extraordinary circumstances. During extraordinary
circumstances, the Portfolio may adopt a temporary defensive posture by holding
uninvested cash or invest in AMT obligations and taxable short-term securities.
Taxable investments will consist exclusively of instruments that may be
purchased by the Diversified Assets Portfolio. The risks associated with these
investments are described in the Prospectus.
Interest earned by the Tax-Exempt Portfolio on private activity bonds (if
any) that is treated as a specific tax preference item under the Federal
alternative minimum tax will not be deemed to have been derived from municipal
instruments for purposes of determining whether that Portfolio meets its
fundamental policy that at least 80% of its annual gross income be derived from
municipal instruments.
Standby Commitments
The Tax-Exempt Portfolio may enter into standby commitments with respect to
municipal instruments held by it. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option a specified municipal instrument at its
amortized cost value to the Portfolio plus accrued interest, if any. Standby
commitments may be exercisable by the Portfolio at any time before the maturity
of the underlying municipal instruments and may be sold, transferred or assigned
only with the instruments involved.
The Tax-Exempt Portfolio expects that standby commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a standby commitment either
separately in cash or by paying a higher price for municipal instruments which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding standby commitments held by the Portfolio will not exceed
1/2 of 1% of
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the value of the Portfolio's total assets calculated immediately after each
standby commitment is acquired.
The Portfolio intends to enter into standby commitments only with dealers,
banks and broker-dealers which, in Northern's opinion, present minimal credit
risks. The Portfolio will acquire standby commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a standby commitment will not affect the
valuation or assumed maturity of the underlying municipal instrument. The actual
standby commitment will be valued at zero in determining net asset value.
Accordingly, where the Portfolio pays directly or indirectly for a standby
commitment, its cost will be reflected as an unrealized loss for the period
during which the commitment is held by the Portfolio and will be reflected in
realized gain or loss when the commitment is exercised or expires.
Illiquid or Restricted Securities
The Portfolios may purchase commercial paper issued pursuant to Section
4(2) of the 1933 Act and securities that are not registered under the 1933 Act
but can be sold to "qualified institutional buyers" in accordance with Rule 144A
under the 1933 Act. These securities will not be considered illiquid so long as
Northern determines, under guidelines approved by the Trust's Board of Trustees,
that an adequate trading market exists. This practice could increase the level
of illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
Investment Restrictions
Each Portfolio is subject to the fundamental investment restrictions
enumerated below which may be changed with respect to a particular Portfolio
only by a vote of the holders of a majority of such Portfolio's outstanding
shares.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements for the Diversified Assets, Government and
Government Select Portfolios) except to secure permitted borrowings.
(3) Purchase or sell real estate or securities issued by real estate
investment trusts, but this restriction shall not prevent a Portfolio from
investing directly or indirectly in portfolio instruments secured by real
estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs.
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(5) Invest in companies for the purpose of exercising control or
management.
(6) Act as underwriter of securities (except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies), purchase
securities on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance
of transactions), make short sales of securities or maintain a short
position, or write puts, calls or combinations thereof.
(7) Make any investment inconsistent with the Portfolio's classification as
a diversified investment company under the 1940 Act.
(8) Purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation with respect to, and each Portfolio reserves freedom of action,
when otherwise consistent with its investment policies, to concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper)
issued or guaranteed by U.S. banks and U.S. branches of foreign banks and
repurchase agreements and securities loans collateralized by such U.S.
Government obligations or such bank obligations. For the purposes of this
restriction, state and municipal governments and their agencies and
authorities are not deemed to be industries; as to utility companies, the
gas, electric, water and telephone businesses are considered separate
industries; personal credit finance companies and business credit finance
companies are deemed to be separate industries; and wholly-owned finance
companies are considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents.
(9) Borrow money (other than pursuant to reverse repurchase agreements for
the Portfolios described above), except (a) as a temporary measure, and
then only in amounts not exceeding 5% of the value of the Portfolio's total
assets or (b) from banks, provided that immediately after any such
borrowing all borrowings of the Portfolio do not exceed one-third of the
Portfolio's total assets. No purchases of securities will be made if
borrowings subject to this restriction exceed 5% of the value of the
Portfolio's assets. The exceptions in (a) and (b) to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purposes or to facilitate management of the Trust's Portfolios by
enabling the Trust to meet redemption requests when the liquidation of
portfolio instruments is deemed to be disadvantageous or not possible. If
due to market fluctuations or other reasons the total assets of a Portfolio
fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may (a) purchase securities of other investment
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companies to the full extent permitted under Section 12 of the 1940 Act (or
any successor provision thereto) or under any regulation or order of the
Securities and Exchange Commission; and (b) invest all or substantially all
of its assets in a single open-end investment company or series thereof
with substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
The freedom of action reserved in Restriction No. 8 with respect to U.S.
branches of foreign banks is subject to the requirement that they are subject to
the same regulation as domestic branches of U.S. banks. Obligations of U.S.
branches of foreign banks may include certificates of deposit, bank and deposit
notes, bankers' acceptances and fixed time deposits. These obligations may be
general obligations of the parent bank or may be limited to the issuing branch.
Such obligations will meet the criteria for "Eligible Securities" as described
in the Prospectus.
In addition, as matters of fundamental policy, the Government Select
Portfolio, Government Portfolio and Diversified Assets Portfolio may not enter
into reverse repurchase agreements exceeding in the aggregate one-third of the
applicable Portfolio's total assets; and the Tax-Exempt Portfolio may not
acquire direct ownership of industrial development bonds if, as a result of such
acquisition, more than 5% of the value of its total assets would be invested in
industrial development bonds where payment of principal and interest is the
responsibility of companies (including their predecessors) with less than three
years of operating history and such bonds are not guaranteed as to principal and
interest by companies (including their predecessors) with three years or more of
operating history.
Except to the extent otherwise provided in Investment Restriction No. 8,
for the purpose of such restriction in determining industry classification the
Trust intends to use the industry classification titles in the Standard
Industrial Classification Manual. In applying Restriction No. 8 above, a
security is considered to be issued by the entity, or entities, whose assets and
revenues back the security. A guarantee of a security is not deemed to be a
security issued by the guarantor when the value of all securities issued and
guaranteed by the guarantor, and owned by a Portfolio, does not exceed 10% of
the value of the Portfolio's total assets.
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
The Portfolios intend, as a non-fundamental policy, to diversify their
investments in accordance with current SEC regulations. Investments in the
securities of any single issuer (excluding cash, cash items, certain repurchase
agreements, U.S. Government securities and securities of other investment
companies) will be limited to not more than 5% of the value of a Portfolio's
total assets at the time of purchase, except that 25% of the value of the total
assets of each Portfolio may be invested in the securities of any one issuer for
a period of up to three Business Days. A security that has an unconditional
guarantee meeting special SEC requirements (a "Guarantee") does not need to
satisfy the foregoing issuer diversification
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requirements that would otherwise apply, but the Guarantee is instead subject to
the following diversification requirements: immediately after the acquisition of
the security, a Portfolio may not have invested more than 10% of its total
assets in securities issued by or subject to Guarantees from the same person,
except that a Portfolio may, subject to certain conditions, invest up to 25% of
its total assets in securities issued or subject to Guarantees of the same
person. This percentage is 100% if the Guarantee is issued by the U.S.
Government or an agency thereof. In addition, the Tax-Exempt Portfolio will
limit its investments in certain conduit securities that are not rated in the
highest short-term rating category as determined by two nationally recognized
statistical rating organizations (each an "NRSRO") (or one NRSRO if the security
is rated by only one NRSRO) or, if unrated, are not of comparable quality to
First Tier Securities ("Second Tier Securities"), to 5% of its total assets,
with investments in any one such issuer being limited to no more than 1% of the
Portfolio's total assets or $1 million, whichever is greater, measured at the
time of purchase. Conduit securities subject to this limitation are municipal
instruments that are not subject to a Guarantee and involve an arrangement
whereunder a person, other than a municipal issuer, provides for or secures
repayment of the security and are not: (i) fully and unconditionally guaranteed
by a municipal issuer; or (ii) payable from the general revenues of the
municipal issuer or other municipal issuers; or (iii) related to a project owned
and operated by a municipal issuer; or (iv) related to a facility leased to and
under the control of an industrial or commercial enterprise that is part of a
public project which, as a whole, is owned and under the control of a municipal
issuer. The Diversified Assets Portfolio will limit its investments in all
Second Tier Securities (that are not subject to a Guarantee) in accordance with
the foregoing percentage limitations.
In addition to the foregoing, each Portfolio is subject to additional
diversification requirements imposed by SEC regulations on the acquisition of
securities subject to other types of demand features.
B-15
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers
The business and affairs of the Trust and each Portfolio are managed
under the direction of the Trust's Board of Trustees. Information pertaining to
the Trustees and officers of the Trust is set forth below.
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
William H. Springer 69 Chairman Director of Walgreen Co. (a retail drug
701 Morningside Drive and store business) since April 1988;
Lake Forest, IL 60045 Trustee Director of Baker, Fentress & Co. (a
closed-end, non-diversified management
investment company) from April 1992 to
present; Trustee of Goldman Sachs Trust
from 1989 to present.
Richard Gordon Cline 64 Trustee Chairman and Director of Hussman
4200 Commerce Court, Suite 300 International Inc. (commercial
Lisle, IL 60532 refrigeration company) since January
1998; Chairman of Hawthorne Inc. (a
management advisory services and private
investment company) since January 1996;
Chairman, President and CEO of NICOR
Inc. (a diversified public utility
holding company) from 1985 to 1996;
Chairman and Director of the Federal
Reserve Bank of Chicago from 1992 to
1995; Director of Central DuPage Health
System, Pet Incorporated, Whitman
Corporation (a diversified holding
company), Kmart Corporation (a retailing
company), Ryerson Tull, Inc. (a metals
distribution company) and University of
Illinois Foundation.
Edward J. Condon, Jr. 58 Trustee Chairman and CEO of The Paradigm
Sear Tower, Suite 9650 Group, Ltd. (a financial advisor)
233 S. Wacker Drive since July 1993; within the last
Chicago, IL 60606 five years he has served as Vice
Chairman and Director of Energenics
L.L.C; Director of Financial
Pacific Company; Member of the
Board of Managers of The Liberty
Hampshire Company, LLC; Member of
Advisory Board
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
of Real-Time U.S.A., Inc; Member of
the Board of Directors of
University Elder Care, Inc; Member
of the Board of Directors of the
Girl Scouts of Chicago; Member of
the Board of Trustees of Dominican
University.
John W. English 66 Trustee Private Investor since 1993; Vice
50-H New England Ave. President and Chief Investment
P.O. Box 640 Officer of The Ford Foundation (a
Summit, NJ 07902-0640 charitable trust) from 1981 until
1993; Trustee of The China Fund,
Inc., American Red Cross in Greater
New York, Mote Marine Laboratory,
State Street's Select Sector SPDR
Trust, Washington Mutual's WM Funds
and United Board for Christian
Higher Education in Asia. Director
of University of Iowa Foundation,
Blanton-Peale Institutes of
Religion and Health, Community
Foundation of Sarasota County, and
Duke Management Company.
Sandra Polk Guthman 55 Trustee President and CEO of Polk Bros.
420 N. Wabash Avenue Foundation (an Illinois
Suite 204 not-for-profit corporation) from
Chicago, IL 60611 1993 to present; Director of
Business Transformation from
1992-1993 and Midwestern Director
of Marketing from 1988-1992 for IBM
Corporation; Director of MBIA
Insurance Corporation of Illinois
(bank holding company) since 1994
and Avondale Financial Corporation
(a stock savings and loan holding
company) since 1995.
Frederick T. Kelsey 71 Trustee Consultant to Goldman Sachs from
3133 Laughing Gull Court December 1985 through February
Johns Island, SC 29455 1988; Director of Goldman Sachs
Funds Group and Vice President of
Goldman Sachs from May 1981 until
his retirement in November 1985;
President and Treasurer of the
Trust and other investment
companies affiliated with Goldman
Sachs through August 1985;
President from 1983 to 1985 and
Trustee from 1983 to 1994 of The
Centerland Funds and its successor,
The Pilot Funds; Trustee of various
</TABLE>
B-17
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
management investment companies
affiliated with Zurich Kemper
Investments.
Richard P. Strubel 59 Trustee Managing Director of Tandem
737 N. Michigan Avenue Partners, Inc. (a privately held
Suite 1405 management services firm) since
Chicago, IL 60611 1990; President and CEO of
Microdot, Inc. (a privately held
manufacturing firm) from January
1984 to October 1994; Trustee of
Goldman Sachs Trust from 1987 to
present; Director of Kaynar
Technologies Inc. (a leading
manufacturer of aircraft fasteners)
since March 1997; Trustee of the
University of Chicago; Director of
Children's Memorial Medical Center.
Gordon F. Linke 42 Vice Vice President of Goldman Sachs
555 California Street President Funds Group (since March 1992);
San Francisco, CA 94104 Corporate Finance Officer of Bank
of America (prior thereto).
James A. Fitzpatrick 39 Vice Vice President of Goldman Sachs
4900 Sears Tower President Asset Management (since April
Chicago, IL 60606 1997); Vice President and General
Manager of First Data Corporation -
Investors Services Group prior
thereto.
Nancy L. Mucker 49 Vice Vice President of Goldman Sachs
4900 Sears Tower President (since April 1985); Co-Manager,
Chicago, IL 60606 Shareholder Servicing of Goldman
Sachs Asset Management (since
November 1989).
John Perlowski 34 Treasurer Vice President of Goldman Sachs
One New York Plaza (since July 1995); Director of
New York, NY 10004 Investors Bank and Trust Company
(November 1993 to July 1995); Audit
Manager of Arthur Andersen, LLP
(prior thereto).
Michael J. Richman 38 Secretary General Counsel of the Funds Group,
85 Broad Street Goldman Sachs Asset Management
New York, NY 10004 (since December 1997); Associate
General Counsel of Goldman Sachs
Asset Management (February 1994 to
December 1997); Vice President of
Goldman Sachs (since 1992) and
</TABLE>
B-18
<PAGE>
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
Associate General Counsel of
Goldman Sachs (since December
1998); Counsel to the Funds Group
of Goldman Sachs Asset Management
(since June 1992); Partner of Hale
and Dorr, September 1991 to June
1992).
Deborah A. Farrell 27 Assistant Legal Assistant, Goldman Sachs
85 Broad Street Secretary (since January 1996); Executive
New York, NY 10004 Secretary, Goldman Sachs (January
1994 - January 1996); Cleary,
Gottlieb, Steen & Hamilton
(September 1990 - January 1994).
Steven E. Hartstein 35 Assistant Associate, Goldman Sachs (December
85 Broad Street Secretary 1998 - present); Legal Products
New York, NY 10004 Analyst, Goldman Sachs (June 1993 -
December 1998).
Howard B. Surloff 33 Assistant General Counsel to the Funds Group
85 Broad Street Secretary (since February 1999); Assistant
New York, NY 10004 General Counsel, Goldman Sachs
Asset Management (December 1997 to
February 1999); Vice President and
Assistant General Counsel, Goldman
Sachs (since November 1993 and May
1994, respectively); Counsel to the
Funds Group, Goldman Sachs Asset
Management (since November 1993);
Associate of Shereff, Friedman,
Hoffman & Goodman, LLP (prior
thereto).
Valerie A. Zondorak 33 Assistant Assistant General Counsel, Goldman
85 Broad Street Secretary Sachs Asset Management and the
New York, NY 10004 Funds Group (since December 1997);
Vice President and Assistant
General Counsel, Goldman Sachs
(since December 1997) and Vice
President and Counsel to Goldman
Sachs (since March 1997); Associate
of Shereff, Friedman, Hoffman &
Goodman, LLP (prior thereto).
</TABLE>
None of the Trustees is an "interested person" under the 1940 Act. Certain
of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such Trustees and officers that all such transactions have been and
are
B-19
<PAGE>
expected to be in the ordinary course of business and the terms of such
transactions, including all loans and loan commitments by such persons, have
been and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers. Messrs. Springer, Kelsey, Strubel,
Richman, Perlowski, Fitzpatrick, Surloff and Hartstein and Mmes. Farrell, Mucker
and Zondorak hold similar positions with one or more investment companies that
are advised by Goldman Sachs. As a result of the responsibilities assumed by
Northern under its Advisory Agreement, Transfer Agency Agreement, Custodian
Agreement and Foreign Custody Agreement with the Trust and by Goldman Sachs
under its Administration Agreement and Distribution Agreement with the Trust,
the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment
companies of which Goldman Sachs, Goldman Sachs Asset Management or an affiliate
thereof is the investment adviser, administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,750 and the Chairman of the
Board earns a quarterly retainer of $10,125. Each Trustee, including the
Chairman of the Board, earns an additional fee of $2,500 for each meeting
attended, plus reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of
three members including a Chairman of the Committee. The Audit Committee members
are Messrs. Condon, Kelsey and Strubel (Chairman). Each member earns a fee of
$2,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,500.
Each Trustee will hold office for an indefinite term until the earliest of
(1) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Trustee and until the election
and qualification of his or her successor, if any, elected at such meeting; (2)
the date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
The Trust's officers do not receive fees from the Trust for services in
such capacities, although Goldman Sachs, of which they are also officers,
receives fees from the Trust for administrative services.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1998:
B-20
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Benefits
Aggregate Accrued as Part of Total Compensation
Compensation from Trust's from Trust Paid to
Name of Trustee Trust Expenses Trustees
- --------------- ----- -------- --------
<S> <C> <C> <C>
William H. Springer $46,750 $0 $46,750
Richard G. Cline $34,000 $0 $34,000
Edward J. Condon, Jr. $37,000 $0 $37,000
John W. English $32,500 $0 $32,500
Sandra Polk Guthman $34,000 $0 $34,000
Frederick T. Kelsey $37,000 $0 $37,000
Richard P. Strubel $42,250 $0 $42,250
</TABLE>
Investment Adviser, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. As of December 31, 1998, Northern and its
affiliates had over $236 billion in assets under management for clients
including public and private retirement funds, endowments, foundations, trusts,
corporations, and individuals. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of Federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives.
Northern employs a team approach to the investment management of the
Portfolios, relying upon investment professionals under the leadership of James
M. Snyder, Chief Investment Officer and Executive Vice President of Northern.
B-21
<PAGE>
Under its Advisory Agreement with the Trust, Northern, subject to the
general supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for each Portfolio and placing purchase and sale orders for
the portfolio transactions of the Portfolios. In connection with portfolio
transactions for the Portfolios, which are generally done at a net price without
a broker's commission, Northern's Advisory Agreement provides that Northern
shall attempt to obtain the best net price and execution.
Northern's investment advisory duties for the Trust are carried out through
its Trust Department. On occasions when Northern deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by it (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Investment Advisory
Agreement provides that Northern, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased for such
Portfolio with those to be sold or purchased for such other accounts in order to
obtain best net price and execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by Northern in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Portfolio and other accounts
involved. In some instances, this procedure may adversely affect the size of the
position obtainable for a Portfolio or the amount of the securities that are
able to be sold for a Portfolio. To the extent that the execution and price
available from more than one broker or dealer are believed to be comparable, the
Investment Advisory Agreement permits Northern, at its discretion but subject to
applicable law, to select the executing broker or dealer on the basis of
Northern's opinion of the reliability and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services
to others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, Northern has undertaken
to (1) answer customer inquiries regarding the current yield of, and certain
other matters (e.g. account status information) pertaining to, the Trust, (2)
process purchase and redemption transactions, including transactions generated
by any service provided outside of the Agreement by Northern, its affiliates or
correspondent banks whereby customer account cash balances are automatically
invested in shares of the Portfolios, and the disbursement of the proceeds of
redemptions, (3) establish and maintain separate omnibus accounts with respect
to shareholders investing through Northern or any of its affiliates and
correspondent banks and act as transfer agent and perform sub-accounting
services with respect to each such account, (4) provide periodic statements
showing account balances, (5) mail reports and proxy materials to shareholders,
(6) provide information in connection with the preparation by the Trust of
various regulatory reports and prepare reports to the Trustees and management,
(7) answer inquiries (including requests for prospectuses and statements of
additional information, and assistance in the completion of new account
applications) from investors and respond to all requests for information
regarding the Trust (such as current price, recent performance, and yield data)
and questions relating to
B-22
<PAGE>
accounts of investors (such as possible errors in statements, and transactions),
(8) respond to and seek to resolve all complaints of investors with respect to
the Trust or their accounts, (9) furnish proxy statements and proxies, annual
and semi-annual financial statements, and dividend, distribution and tax notices
to investors, (10) furnish the Trust all pertinent Blue Sky information, (11)
perform all required tax withholding, (12) preserve records, and (13) furnish
necessary office space, facilities and personnel. Northern may appoint one or
more sub-transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer
Agency Agreement with respect to the Shares described in this Additional
Statement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate equal to
$18 for each subaccount relating to such Shares of the Portfolios. This fee
which is borne solely by the Shares described in this Additional Statement and
not by the Portfolios' other share classes, is subject to annual upward
adjustments based on increases in the Consumer Price Index for All Urban
Consumers, provided that Northern may permanently or temporarily waive all or
any portion of any upward adjustment. Different transfer agency fees are payable
with respect to the Portfolios' different share classes. Northern's affiliates
and correspondent banks may receive compensation for performing the services
described in the preceding paragraph that Northern would otherwise receive.
Conflict-of-interest restrictions under state and Federal law (including the
Employee Retirement Income Security Act of 1974) may apply to the receipt by
such affiliates or correspondent banks of such compensation in connection with
the investment of fiduciary funds in Shares of the Portfolios.
Under its Custodian Agreement with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's securities
held by Northern under the Custodian Agreement, and (6) maintains the accounting
records of the Trust. Northern may employ one or more subcustodians, provided
that Northern, subject to certain monitoring responsibilities, shall have no
more responsibility or liability to the Trust on account of any action or
omission of any subcustodian so employed than such subcustodian has to Northern
and that the responsibility or liability of the subcustodian to Northern shall
conform to the resolution of the Trustees of the Trust authorizing the
appointment of the particular subcustodian. Northern may also appoint agents to
carry out such of the provisions of the Custodian Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under the Agreement.
As compensation for the services rendered to the Trust by Northern as
custodian, and the assumption by Northern of certain related expenses, Northern
is entitled to payment from the Trust as follows: (i) $18,000 annually for each
Portfolio, plus (ii) 1/100th of 1% annually of each Portfolio's average daily
net assets to the extent they exceed $100 million, plus (iii) a fixed dollar fee
for each trade in portfolio securities, plus (iv) a fixed dollar fee for each
time that Northern as custodian receives or transmits funds via wire, plus (v)
reimbursement of expenses incurred by Northern as custodian for telephone,
postage, courier fees, office supplies and duplicating. The fees referred to in
clauses (iii) and (iv) are subject to annual upward adjustments based on
B-23
<PAGE>
increases in the Consumer Price Index for All Urban Consumers, provided that
Northern may permanently or temporarily waive all or any portion of any upward
adjustment. Northern's fees under the Custodian Agreement are subject to
reduction based on the Portfolios' daily uninvested cash balances (if any).
Unless sooner terminated, each of the Advisory Agreement, Transfer Agency
Agreement and Custodian Agreement between Northern and the Trust will continue
in effect with respect to a particular Portfolio until April 30, 1999, and
thereafter for successive 12-month periods, provided that the continuance is
approved at least annually (1) by the vote of a majority of the Trustees who are
not parties to the agreement or "interested persons" (as such term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval and (2) by the Trustees or by the vote of a
majority of the outstanding shares of such Portfolio (as defined below under
"Other Information"). Each agreement is terminable at any time without penalty
by the Trust (by specified Trustee or shareholder action) on 60 days' written
notice to Northern and by Northern on 60 days' written notice to the Trust.
For the fiscal years ended November 30 as indicated, the amount of advisory
fees incurred by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Government Select Portfolio $ 1,460,037 $ 1,018,270 $ 772,113
Government Portfolio 3,337,292 3,243,435 2,617,746
Diversified Assets Portfolio 10,271,332 8,945,126 7,832,358
Tax-Exempt Portfolio 1,712,721 1,731,407 1,885,156
</TABLE>
In addition, for the fiscal years ended November 30, 1998, 1997 and 1996,
Northern waived advisory fees with respect to the Government Select Portfolio in
the amounts of $2,193,181, $1,527,701 and $1,157,788, respectively.
For the fiscal years ended November 30 as indicated, the amount of transfer
agency fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Government Select Portfolio $ 28,041 $ 30,361 $ 22,274
Government Portfolio 51,087 35,042 31,048
Diversified Assets Portfolio 182,267 127,270 64,579
Tax-Exempt Portfolio 28,191 22,028 14,883
</TABLE>
For the fiscal years ended November 30 as indicated, the amount of
custodian fees incurred by each Portfolio was as follows:
B-24
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Government Select Portfolio $181,920 $ 97,683 $ 96,787
Government Portfolio 179,186 140,110 131,957
Diversified Assets Portfolio 425,371 412,075 360,387
Tax-Exempt Portfolio 86,026 100,513 105,936
</TABLE>
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern believes that it may perform the services
contemplated by its agreements with the Trust without violation of such banking
laws or regulations, which are applicable to it. It should be noted, however,
that future changes in either Federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates, as
well as future judicial or administrative decisions or interpretations of
current and future statutes and regulations, could prevent Northern from
continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Northern and change its method of operations.
It is not anticipated, however, that any change in the Trust's method of
operations would affect the net asset value per share of any Portfolio or result
in a financial loss to any shareholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates would consider the possibility of
offering to perform some or all of the services now provided by Goldman Sachs.
It is not possible, of course, to predict whether or in what form such
restrictions might be relaxed or the terms upon which Northern and its
affiliates might offer to provide services for consideration by the Trustees.
Northern is active as an underwriter of municipal instruments. Under the
1940 Act, the Portfolios are precluded, subject to certain exceptions, from
purchasing in the primary market those municipal instruments with respect to
which Northern is serving as a principal underwriter. In the opinion of
Northern, this limitation will not significantly affect the ability of the
Portfolios to pursue their respective investment objectives.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of money market instruments. Its activities in this regard could have some
effect on the market for those instruments which the Portfolios acquire, hold or
sell.
B-25
<PAGE>
Under a Service Mark License Agreement with the Trust, Northern Trust
Corporation has agreed that the name "Northern Institutional Funds" may be used
in connection with the Trust's business on a royalty-free basis. Northern Trust
Corporation has reserved to itself the right to grant the non-exclusive right to
use the name "Northern Institutional Funds" to any other person. The Agreement
provides that at such time as the Agreement is no longer in effect, the Trust
will cease using the name "Northern Institutional Funds."
Portfolio Transactions
For the fiscal years ended November 30, 1998, 1997 and 1996, all portfolio
transactions for the Portfolios were executed on a principal basis and,
therefore, no brokerage commissions were paid by the Portfolios. Purchases by
the Portfolios from underwriters of portfolio securities, however, normally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include the spread between the dealer's cost for a given
security and the resale price of the security.
During the fiscal year ended November 30, 1998, the Government Portfolio
acquired and sold securities of ABN-AMRO, Bear Stearns & Co., J.P. Morgan
Securities, Inc., UBS Securities, SBC Warburg, Inc. and Warburg Dillon Read,
each a regular broker/dealer. At November 30, 1998, the Government Portfolio
owned the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: ABN-AMRO, with an
approximate aggregate market value of $200,000,000; Bear Stearns & Co., with an
approximate aggregate market value of $350,000,000; J.P. Morgan Securities,
Inc., with an approximate aggregate market value of $200,000,000; and Warburg
Dillon Read, with an approximate aggregate market value of $50,000,000.
During the fiscal year ended November 30, 1998, the Diversified Assets
Portfolio acquired and sold securities of HSBC Securities, Inc., J.P. Morgan
Securities, Inc., Lehman Brothers, Inc., Morgan Stanley Group, Inc., Salomon
Brothers, Inc., UBS Securities and Warburg Dillon Read, each a regular
broker/dealer. At November 30, 1998, the Diversified Assets Portfolio owned the
following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Bankers Trust & Co., with an
approximate aggregate market value of $56,246,000; J.P. Morgan Securities, Inc.,
with an approximate aggregate market value of $78,001,000; Morgan Stanley Group,
Inc., with an approximate aggregate market value of $24,832,000; and Warburg
Dillon Read, with an approximate aggregate market value of $50,000,000.
During the fiscal year ended November 30, 1998, neither the Government
Select Portfolio nor the Tax-Exempt Portfolio acquired, sold or owned any
securities of their regular broker/dealers or their parents.
Administrator and Distributor
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as
administrator and distributor for the Portfolios. Under its Administration
Agreement with the Trust, Goldman Sachs, subject to the general supervision of
the Trust's Board of Trustees, acts as the Trust's
B-26
<PAGE>
Administrator. In this capacity, Goldman Sachs (1) provides supervision of all
aspects of the Trust's non-investment advisory operations (the parties giving
due recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to shareholders,
periodic updating of the prospectuses issued by the Trust, and reports filed
with the SEC and other regulatory authorities (including qualification under
state securities or Blue Sky laws of the Trust's shares), and (4) provides the
Trust, to the extent not provided pursuant to such agreements, with adequate
office space and equipment and certain related services in Chicago.
Subject to the limitations described below, as compensation for its
administrative services and the assumption of related expenses, Goldman Sachs is
entitled to a fee from each Portfolio, computed daily and payable monthly, at an
annual rate of .10% of the average daily net assets of each Portfolio. For the
fiscal years ended November 30 as indicated, Goldman Sachs received fees under
the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Government Select Portfolio $1,460,037 $1,048,482 $ 897,049
Government Portfolio 1,334,907 1,208,401 1,036,172
Diversified Assets Portfolio 4,108,503 3,082,370 2,079,083
Tax-Exempt Portfolio 685,084 749,232 885,446
</TABLE>
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs agreed that, if its administration fees (less expense
reimbursements paid by Goldman Sachs to the Trust and less certain marketing
expenses paid by Goldman Sachs) exceed a specified amount ($1 million for the
Trust's first twelve investment portfolios plus $50,000 for each additional
portfolio) during the current fiscal year, Goldman Sachs will waive a portion of
its administration fees during the following fiscal year. This undertaking may
be terminated by Goldman Sachs at any time without the consent of the Trust or
the shareholders. There have been no waivers pursuant to this agreement during
the last three fiscal years.
Prior to April 1, 1998, Goldman Sachs voluntarily agreed to reimburse each
Portfolio for its expenses (including fees payable to Goldman Sachs as
administrator, but excluding the fees payable to Northern for its duties as
investment adviser and extraordinary expenses) which exceeded on an annualized
basis .10% of each Portfolio's average daily net assets.
For the fiscal years ended November 30 as indicated, the effect of these
reimbursements by Goldman Sachs was to reduce other expenses by the following
amounts:
B-27
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Government Select Portfolio $ 544,124 $ 360,250 $ 364,826
Government Portfolio 606,764 262,895 305,696
Diversified Assets Portfolio 1,328,789 477,791 0
Tax-Exempt Portfolio 279,774 305,530 382,218
</TABLE>
Effective April 1, 1998, (upon the offering of the Service and Premier
Shares), Goldman Sachs agreed to reimburse expenses of each Portfolio (including
fees payable to Goldman Sachs as administrator, but excluding the fees payable
to Northern for its duties as adviser and transfer agent, payments under the
service plan for Service and Premier Shares and certain extraordinary expenses)
which exceed on an annualized basis .10% of each Portfolio's average daily net
assets. Unless sooner terminated, the Administration Agreement will continue in
effect with respect to a particular Portfolio until April 30, 1999, and
thereafter for successive 12-month periods, provided that the agreement is
approved annually (1) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" (as such term is defined by the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the Trustees or by the vote of a
majority of the outstanding shares of such Portfolio (as defined below under
"Other Information"). The Administration Agreement is terminable at any time
without penalty by the Trust (upon specified Trustee or shareholder action) on
60 days' written notice to Goldman Sachs and by Goldman Sachs on 60 days'
written notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman
Sachs, as agent, sells shares of each Portfolio on a continuous basis. Goldman
Sachs is not obligated to sell any certain number of shares of any Portfolio.
Goldman Sachs pays the cost of printing and distributing prospectuses to persons
who are not shareholders of Trust shares (excluding preparation and typesetting
expenses) and of sales presentations, mailings, advertising and other
distribution efforts. No compensation is payable by the Trust to Goldman Sachs
for such distribution services.
The Administration Agreement and the Distribution Agreement provide that
Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
Counsel and Auditors
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago,
Illinois 60606, have been selected as auditors of the Trust. In addition to
audit services, Ernst & Young
B-28
<PAGE>
LLP reviews the Trust's Federal and state tax returns, and provides consultation
and assistance on accounting, internal control and related matters.
In-Kind Purchases and Redemptions
Payment for shares of a Portfolio may, in the discretion of Northern, be
made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind securities
payment, a Portfolio will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Portfolio and that the Portfolio receive satisfactory assurances that it will
have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Portfolio; and that adequate
information be provided concerning the basis and other tax matters relating to
the securities.
Although each Portfolio generally will redeem shares in cash, each
Portfolio reserves the right to pay redemptions by a distribution in kind of
securities (instead of cash) from such Portfolio. The securities distributed in
kind would be readily marketable and would be valued for this purpose using the
same method employed in calculating the Portfolio's net asset value per share.
If a shareholder receives redemption proceeds in kind, the shareholder should
expect to incur transaction costs upon the disposition of the securities
received in the redemption.
Third-Party Fees and Requirements
Shares are sold and redeemed without any purchase or redemption charge
imposed by the Trust, although Northern and other institutions may charge their
customers for services provided in connection with their investments.
The exercise of voting rights and the delivery to Customers of shareholder
communications from the Trust will be governed by the Customers' account
agreements with the Institutions. Customers should read the Prospectus in
connection with any relevant agreement describing the services provided by an
Institution and any related requirements and charges, or contact the Institution
at which the Customer maintains its account for further information.
PERFORMANCE INFORMATION
The performance of a class of shares of a Portfolio may be compared to
those of other money market funds with similar investment objectives and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of a class of shares may be compared to data
prepared by IBC Financial Data, Inc. or other independent mutual fund reporting
services. Performance data as reported in national financial publications such
as Money Magazine, Morningstar, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the performance of a class of shares of a Portfolio.
B-29
<PAGE>
From time to time, the Portfolios may advertise their "yields" and
"effective yields" and the Government Select Portfolio and Tax-Exempt Portfolio
may advertise their "tax-equivalent yields" and "tax-equivalent effective
yields." Yield, effective yield, tax-equivalent yield and tax-equivalent
effective yield are computed separately for each class of shares. Each class of
shares has different fees and expenses, and consequently, may have different
yields for the same period. These yield figures will fluctuate, are based on
historical earnings and are not intended to indicate future performance. "Yield"
refers to the net investment income generated by an investment in the Portfolio
over a seven-day period identified in the advertisement. This net investment
income is then "annualized." That is, the amount of net investment income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment.
In arriving at such quotations as to "yield," the Trust first determines
the net change, exclusive of capital changes, during the seven-day period in the
value of a hypothetical pre-existing account having a balance of one Share at
the beginning of the period, then divides such net change by the value of the
account at the beginning of the period to obtain the base period return, and
then multiplies the base period return by 365/7.
"Effective yield" is calculated similarly but, when annualized, the net
investment income earned by an investment in the Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The "effective
yield" with respect to the Shares of a Portfolio is computed by adding 1 to the
base period return (calculated as above), raising the sum to a power equal to
365 divided by 7, and subtracting 1 from the result.
The "tax-equivalent yield" demonstrates the level of taxable yield
necessary to produce an after-tax yield equivalent to a Portfolio's tax-free
yield. It is calculated by taking that portion of the seven-day "yield" which is
tax-exempt and adjusting it to reflect the tax savings associated with a stated
tax rate. The "tax-equivalent current yield" will always be higher than the
Portfolio's yield.
"Tax-equivalent yield" is computed by dividing the tax-exempt portion of
the yield by 1 minus a stated income tax rate, and then adding the quotient to
the taxable portion of the yield, if any. There may be more than one
tax-equivalent current yield, if more than one stated income tax rate is used.
The "tax-equivalent effective yield" demonstrates the level of taxable
yield necessary to produce an after-tax yield equivalent to a Portfolio's
tax-free effective yield. It is calculated by taking that portion of the
seven-day "effective yield" which is tax-exempt and adjusting it to reflect the
tax savings associated with a stated tax rate. The "tax-equivalent effective
yield" will always be higher than the Portfolio's effective yield.
"Tax-equivalent effective yield" is computed by dividing the tax-exempt
portion of the effective yield by 1 minus a stated income tax-rate, and then
adding the quotient to the taxable portion of the effective yield, if any. There
may be more than one tax-equivalent effective yield, if more than one stated
income tax rate is used.
B-30
<PAGE>
Quotations of yield, effective yield, tax-equivalent current yield and
tax-equivalent effective yield provided by the Trust are carried to at least the
nearest hundredth of one percent. Any fees imposed by Northern, its affiliates
or correspondent banks on their customers in connection with investments in
Shares of the Portfolios are not reflected in the calculation of yields for the
Portfolios.
The annualized yield of each Portfolio with respect to Shares for the
seven-day period ended November 30, 1998 was as follows (1):
<TABLE>
<CAPTION>
Effective Tax-Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio 4.90% 5.01% N/A N/A
Government Portfolio 4.79% 4.90% N/A N/A
Diversified Assets
Portfolio 4.98% 5.11% N/A N/A
Tax-Exempt Portfolio 3.07% 3.12% 5.03% 5.11%
</TABLE>
The information set forth in the foregoing table reflects certain fee
reductions and expense limitations. See "Additional Trust Information -
Administrator and Distributor" and "-- Investment Adviser, Transfer Agent and
Custodian." In the absence of such fee reductions and expense limitations, the
annualized yield of each Portfolio with respect to Shares for the same seven-day
period would have been as follows (2):
<TABLE>
<CAPTION>
Effective Tax-Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio 4.71% 4.81% N/A N/A
Government Portfolio 4.74% 4.85% N/A N/A
Diversified Assets
Portfolio 4.95% 5.08% N/A N/A
Tax-Exempt Portfolio 3.05% 3.10% 5.00% 5.08%
</TABLE>
- ----------
(1) An income tax rate of 39% is used in the calculation of tax-equivalent
current yield and tax-equivalent effective yield.
(2) An income tax rate of 39% is used in the calculation of tax-equivalent
current yield and tax-equivalent effective yield.
B-31
<PAGE>
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Each Portfolio's yields fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. The
annualization of one week's income is not necessarily indicative of future
actual yields. Actual yields will depend on such variables as portfolio quality,
average portfolio maturity, the type of portfolio instruments acquired, changes
in money market interest rates, portfolio expenses and other factors. Yields are
one basis investors may use to analyze a Portfolio as compared to other money
market funds and other investment vehicles. However, yields of other money
market funds and other investment vehicles may not be comparable because of the
foregoing variables, and differences in the methods used in valuing their
portfolio instruments, computing net asset value and determining yield.
Each Portfolio may also quote from time to time its total return in
accordance with SEC regulations.
The yields and total returns of the Portfolios' Service Shares and Premier
Shares are calculated separately from the calculations of the yield and total
return of the Shares described in this Additional Statement.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset
value of $1.00 per share and, in this connection, values its instruments on the
basis of amortized cost pursuant to Rule 2a-7 under the 1940 Act. This method
values a security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price a Portfolio would receive if the Portfolio sold the instrument. During
such periods the yield to investors in the Portfolio may differ somewhat from
that obtained in a similar entity which uses available indications as to market
value to value its portfolio instruments. For example, if the use of amortized
cost resulted in a lower (higher) aggregate Portfolio value on a particular day,
a prospective investor in the Portfolio would be able to obtain a somewhat
higher (lower) yield and ownership interest than would result from investment in
such similar entity and existing investors would receive less (more) investment
income and ownership interest. However, the Trust expects that the procedures
and limitations referred to in the following paragraphs of this section will
tend to minimize the differences referred to above.
Under Rule 2a-7, the Trust's Board of Trustees, in supervising the Trust's
operations and delegating special responsibilities involving portfolio
management to Northern, has established procedures that are intended, taking
into account current market conditions and the Portfolios' investment
objectives, to stabilize the net asset value of each Portfolio, as computed for
the purposes of purchases and redemptions, at $1.00 per share. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per share and the net asset value
per share based upon available indications of market
B-32
<PAGE>
value. Available indications of market value used by the Trust consist of actual
market quotations or appropriate substitutes which reflect current market
conditions and include (a) quotations or estimates of market value for
individual portfolio instruments and/or (b) values for individual portfolio
instruments derived from market quotations relating to varying maturities of a
class of money market instruments. In the event the Market Value Difference of a
given Portfolio exceeds certain limits or Northern believes that the Market
Value Difference may result in material dilution or other unfair results to
investors or existing shareholders, the Trust will take action in accordance
with the 1940 Act and the Trustees will take such steps as they consider
appropriate (e.g., selling portfolio instruments to shorten average portfolio
maturity or to realize capital gains or losses, reducing or suspending
shareholder income accruals, redeeming shares in kind or utilizing a net asset
value per share based upon available indications of market value which under
such circumstances would vary from $1.00) to eliminate or reduce to the extent
reasonably practicable any material dilution or other unfair results to
investors or existing shareholders which might arise from Market Value
Differences. In particular, if losses were sustained by a Portfolio, the number
of outstanding shares might be reduced in order to maintain a net asset value
per share of $1.00. Such reduction would be effected by having each shareholder
proportionately contribute to the Portfolio's capital the necessary shares to
restore such net asset value per share. Each shareholder will be deemed to have
agreed to such contribution in these circumstances by investing in the
Portfolio.
Rule 2a-7 requires that each Portfolio limit its investments to instruments
which Northern determines (pursuant to guidelines established by the Board of
Trustees) to present minimal credit risks and which are "Eligible Securities" as
defined by the SEC and described in the Prospectus. The Rule also requires that
each Portfolio maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its policy of maintaining a stable net asset value
per share and precludes the purchase of any instrument deemed under the Rule to
have a remaining maturity of more than 397 calendar days. Should the disposition
of a portfolio security result in a dollar-weighted average portfolio maturity
of more than 90 days, the Rule requires a Portfolio to invest its available cash
in such a manner as to reduce such maturity to the prescribed limit as soon as
reasonably practicable.
DESCRIPTION OF SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trustees may hereafter create series in addition to the Trust's
seventeen existing series, which represent interests in the Trust's seventeen
respective portfolios. The Trust Agreement also permits the Board of Trustees to
classify or reclassify any unissued shares into classes within a series.
Pursuant to such authority, the Trustees have authorized the issuance of an
unlimited number of shares of beneficial interest in three separate classes of
shares in each of the Portfolios: Shares, Service Shares and Premier Shares.
This Additional Statement (and the related Prospectus) relates only to the
Shares of the four Portfolios discussed herein. For information on the other
share classes in the Portfolios and on the Trust's other investment portfolios,
call the toll-free number on page 1.
B-33
<PAGE>
Under the terms of the Trust Agreement, each share of each Portfolio is
without par value, represents an equal proportionate interest in the particular
Portfolio with each other share of its class in the same Portfolio and is
entitled to such dividends and distributions out of the income belonging to the
Portfolio as are declared by the Trustees. Upon any liquidation of a Portfolio,
shareholders of each class of a Portfolio are entitled to share pro rata in the
net assets belonging to that class available for distribution. Shares do not
have any preemptive or conversion rights. The right of redemption is described
under "About Your Account - Selling Shares and Account Policies and Other
Information" in the Prospectus and under "Amortized Cost Valuation" in this
Additional Statement. In addition, pursuant to the terms of the 1940 Act, the
right of a shareholder to redeem shares and the date of payment by a Portfolio
may be suspended for more than seven days (a) for any period during which the
New York Stock Exchange is closed, other than the customary weekends or
holidays, or trading in the markets the Portfolio normally utilizes is closed or
is restricted as determined by the SEC, (b) during any emergency, as determined
by the SEC, as a result of which it is not reasonably practicable for the
Portfolio to dispose of instruments owned by it or fairly to determine the value
of its net assets, or (c) for such other period as the SEC may by order permit
for the protection of the shareholders of the Portfolio. The Trust may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions. In addition, shares of each
Portfolio are redeemable at the unilateral option of the Trust if the Trustees
determine in their sole discretion that failure to so redeem may have material
adverse consequences to the shareholders of the Portfolio. Shares when issued as
described in the Prospectus are validly issued, fully paid and nonassessable,
except as stated below. In the interests of economy and convenience,
certificates representing Shares of the Portfolios are not issued.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying assets
of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust. Expenses with respect to the Portfolios
are normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Portfolio affected by the matter. A Portfolio is affected by a matter
unless it is clear that the interests of each Portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
Portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a Portfolio only if approved by a majority of the outstanding
shares of such Portfolio. However, the Rule also provides that the ratification
of the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees are exempt from the separate
voting requirements stated above. In addition, shareholders of each of the
classes in a particular investment portfolio have equal voting rights except
that only shares of a particular class of an investment portfolio will be
entitled to vote on
B-34
<PAGE>
matters submitted to a vote of shareholders (if any) relating to shareholder
servicing expenses and transfer agency fees that are payable by that class.
The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees and,
accordingly, the holders of more than 50% of the aggregate voting power of the
Trust may elect all of the Trustees irrespective of the vote of the other
shareholders. Meetings of shareholders of the Trust, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the shares entitled to vote at such
meeting. The shareholders of the Trust will have voting rights only with respect
to the limited number of matters specified in the Trust Agreement and such other
matters as the Trustees may determine or may be required by law. The Trust does
not presently intend to hold annual meetings of shareholders except as required
by the 1940 Act or other applicable law. The Trustees will promptly call a
meeting of shareholders to vote upon the removal of any Trustee when so
requested in writing by the record holders of 10% or more of the outstanding
shares. To the extent required by law, the Trust will assist in shareholder
communications in connection with such a meeting.
The Trust Agreement authorizes the Trustees, without shareholder approval
(except as stated in the next paragraph), to cause the Trust, or any series
thereof, to merge or consolidate with any corporation, association, trust or
other organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement also authorizes the Trustees, in connection with the
merger, consolidation, termination or other reorganization of the Trust or any
series or class, to classify the shareholders of any class into one or more
separate groups and to provide for the different treatment of shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of shareholders that are so
classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement
without a shareholder vote. However, shareholders of the Trust have the right to
vote on any amendment: (i) that would adversely affect the voting rights of
shareholders; (ii) that is required by law to be approved by shareholders; (iii)
that would amend the voting provisions of the Trust Agreement; or (iv) that the
Trustees determine to submit to shareholders.
B-35
<PAGE>
The Trust Agreement permits the termination of the Trust or of any series
or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders
are not personally liable for obligations of the Trust. The Delaware Act
entitles shareholders of the Trust to the same limitation of liability as is
available to shareholders of private for-profit corporations. However, no
similar statutory or other authority limiting business trust shareholder
liability exists in many other states. As a result, to the extent that the Trust
or a shareholder is subject to the jurisdiction of courts in such other states,
those courts may not apply Delaware law and may subject the shareholders to
liability. To offset this risk, the Trust Agreement (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into or executed by the Trust or its Trustees and (ii)
provides for indemnification out of the property of the applicable series of the
Trust of any shareholder held personally liable for the obligations of the Trust
solely by reason of being or having been a shareholder and not because of the
shareholder's acts or omissions or for some other reason. Thus, the risk of a
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (3) the applicable series of the Trust is unable to
meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any
person other than the Trust or a shareholder and that a Trustee will not be
liable for any act as a Trustee. However, nothing in the Trust Agreement
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Trust Agreement provides for indemnification of Trustees, officers and
agents of the Trust unless the recipient is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agreement
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of
B-36
<PAGE>
the series or class to which such action relates, must join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim. The Trust Agreement also provides that no
person, other than the Trustees, who is not a shareholder of a particular series
or class shall be entitled to bring any derivative action, suit or other
proceeding on behalf of or with respect to such series or class. The Trustees
will be entitled to retain counsel or other advisers in considering the merits
of the request and may require an undertaking by the shareholders making such
request to reimburse the Trust for the expense of any such advisers in the event
that the Trustees determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the Trust
Agreement with respect to such series or class; and/or (c) may have no power or
authority with respect to any other series or class. The Trustees are not
currently considering the appointment of Series Trustees for the Trust.
As of January 5, 1999, substantially all of the Portfolios' outstanding
shares were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, Northern possessed sole or shared voting and/or
investment power for its customer accounts with respect to less than 10% of the
Trust's outstanding shares. As of the same date, the Trust's Trustees and
officers as a group owned beneficially less than 1% of the outstanding shares of
each class of each Portfolio.
Northern has advised the Trust that the following persons (whose mailing
address is: c/o The Northern Trust Company, 50 South LaSalle, Chicago, IL 60675)
beneficially owned five percent or more of the outstanding shares of the
Portfolios' classes as of January 5, 1999:
<TABLE>
<CAPTION>
Number of Percentage of
Shares Shares
------ ------
<S> <C> <C>
TAX-EXEMPT PORTFOLIO:
Shares
Tisch 401K Plan 50,904,790 6.62%
EGAP & Company 39,850,021 5.18%
GOVERNMENT SELECT PORTFOLIO:
Shares
Arcadia Trust 89,540,557 5.19%
</TABLE>
Northern has advised the Trust that no persons beneficially owned five
percent or more of the outstanding Service Shares or Premier Shares of the
Portfolios as of January 5, 1999.
B-37
<PAGE>
ADDITIONAL INFORMATION CONCERNING TAXES
General
Each Portfolio will elect to be taxed separately as a regulated investment
company (a "RIC"). To qualify as a RIC, each Portfolio generally must distribute
an amount equal to at least the sum of 90% of its investment company taxable
income and 90% of its net tax-exempt interest income (if any) (net investment
income and the excess of net short-term capital gain over net long-term capital
loss), if any, for each year (the "Distribution Requirement") and satisfy
certain other requirements.
Each Portfolio must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from the
sale or other disposition of stock or securities or foreign currencies, or from
other income derived with respect to its business of investing in such stock,
securities or currencies. Also , at the close of each quarter of the taxable
year, it is generally required that at least 50% of the value of each
Portfolio's assets must consist of cash and cash items, U.S. Government
securities, securities of other RICs and securities of other issuers (as to
which the Portfolio has not invested more than 5% of the value of its total
assets in securities of such issuer and as to which the Portfolio does not hold
more than 10% of the outstanding voting securities of such issuer), and no more
than 25% of the value of each Portfolio's total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other RICs), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses. Each
Portfolio intends to comply with these RIC requirements.
If for any taxable year any Portfolio were not to qualify as a RIC, all of
its taxable income would be subject to tax at regular corporate rates without
any deduction for distributions to shareholders. In such event, all
distributions by the Portfolio would be taxable to shareholders as ordinary
income to the extent of the Portfolio's current and accumulated earnings and
profits, and would be eligible for the dividends-received deduction in the case
of corporate shareholders.
The Internal Revenue Code imposes a nondeductible 4% excise tax on RICs
that fail currently to distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and capital
gain net income each calendar year to avoid liability for this excise tax. Each
Portfolio also intends to make sufficient distributions or deemed distributions
each year to avoid liability for corporate income tax. If a Portfolio were to
fail to make sufficient distributions, it could be liable for corporate income
tax and for excise tax.
The Trust will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends and gross sale proceeds paid to any
shareholder (i) who has provided either an incorrect tax identification number
or no number at all, (ii) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of taxable interest or
dividend income properly, or (iii) who has failed to certify to the Trust, when
required to do so, that he or she is not subject to backup withholding or that
he or she is an "exempt recipient."
B-38
<PAGE>
Special Tax Considerations Pertaining to the Tax-Exempt Portfolio
As described above and in the Prospectus, the Tax-Exempt Portfolio is
designed to provide investors with current tax-exempt interest income. Investors
in the Portfolio should note that taxpayers are required to report the receipt
of tax-exempt interest and "exempt-interest dividends" on their Federal income
tax returns and that in two circumstances such amounts, while exempt from
regular Federal income tax, are taxable to persons subject to alternative
minimum taxes. First, tax-exempt interest and "exempt-interest dividends"
derived from certain private activity bonds issued after August 7, 1986
generally will constitute an item of tax preference for corporate and
noncorporate taxpayers in determining alternative minimum tax liability. Second,
all tax-exempt interest and "exempt-interest dividends" must be taken into
account by corporate taxpayers in determining certain adjustments for
alternative minimum tax purposes.
The Portfolio is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Shares of the
Portfolio would not be suitable for tax-exempt institutions or for retirement
plans qualified under Section 401 of the Code, H.R.10 plans and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, would not gain any additional benefit from the Portfolio's
dividends being tax-exempt. In addition, the Portfolio may not be an appropriate
investment for persons or entities that are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
which regularly uses a part of such facilities in its trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, or which occupies more than 5% of the usable area of such
facilities or for which such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, partnerships and its partners
and an S corporation and its shareholders.
In order for the Tax-Exempt Portfolio to pay Federal exempt-interest
dividends for any taxable year, at the close of each taxable quarter at least
50% of the aggregate value of the Portfolio must consist of tax-exempt
obligations. The Tax-Exempt Portfolio intends to comply with this requirement.
Income from the Tax-Exempt Portfolio may not be tax-exempt in its entirety
and may be subject to taxes in certain jurisdictions.
Interest on indebtedness incurred by a shareholder to purchase or carry
Tax-Exempt Portfolio shares will generally not be deductible for Federal income
tax purposes.
Foreign Investors
Foreign shareholders generally will be subject to U.S. withholding tax at a
rate of 30% (or a lower treaty rate, if applicable) on distributions by a
Portfolio of net investment income, other
B-39
<PAGE>
ordinary income, and the excess, if any, of net short-term capital gain over net
long-term capital loss for the year, regardless of the extent, if any, to which
the income or gain is derived from non-U.S. investments of the Portfolio. For
this purpose, foreign shareholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. Different tax consequences may apply to a
foreign shareholder engaged in a U.S. trade or business or present in the U.S.
for 183 days or more in a year. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of investing in a
Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which
are in effect on the date of this Additional Statement. Such laws and
regulations may be changed by legislative or administrative action. No attempt
is made to present a detailed explanation of the tax treatment of the Portfolio
or its shareholders, and the discussion here and in the Prospectus is not
intended as a substitute for careful tax planning. Shareholders are advised to
consult their tax advisers with specific reference to their own tax situation,
including the application of state and local taxes.
Although each Portfolio expects to qualify as a RIC and to be relieved of
all or substantially all Federal taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the rules and
regulations of the SEC. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern
and Goldman Sachs, brokerage fees and commissions, fees for the registration or
qualification of Portfolio shares under Federal or state securities laws,
expenses of the organization of the Portfolio, taxes, interest, costs of
liability insurance, fidelity bonds, indemnification or contribution, any costs,
expenses or losses arising out of any liability of or claim for damages or other
relief asserted against the Trust for violation of any law, legal, tax and
auditing fees and expenses, expenses of preparing and printing prospectuses,
statements of additional information, proxy materials, reports and notices and
the printing and distributing of the same to the Trust's shareholders and
regulatory authorities, compensation and expenses of its Trustees, expenses for
industry organizations such as the Investment Company Institute, miscellaneous
expenses and extraordinary expenses incurred by the Trust.
B-40
<PAGE>
The term "majority of the outstanding shares" of either the Trust or a
particular Portfolio means, with respect to the approval of an investment
advisory agreement or a change in a fundamental investment restriction, the vote
of the lesser of (i) 67% or more of the shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as
to the contents of any contract or other documents referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 (the "Annual Report")
are hereby incorporated herein by reference and attached hereto. No other parts
of the Annual Report, including without limitation, "Management's Discussion of
Portfolio Performance," are incorporated by reference herein. Copies of the
Annual Report may be obtained by writing to Northern Institutional Funds, 4900
Sears Tower, Chicago, Illinois 60606, or by calling 1-800-637-1380 (toll-free).
B-41
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------
Diversified Assets Portfolio
<C> <C> <S> <C>
AGENCY DISCOUNT NOTE--0.5%
Administration of
Environment and
Housing Programs
Federal Home Loan
Mortgage Corp.
$25,000 4.95% 12/10/98 $ 24,969
- ------------------------------------------------------
TOTAL AGENCY DISCOUNT NOTE $ 24,969
- ------------------------------------------------------
BANK NOTES--2.0%
Domestic Depository Institutions--0.3%
Bank One Milwaukee
$17,000 5.55% 1/29/99 $ 16,999
----------
Foreign Depository Institutions--0.1%
Abbey National PLC
2,500 5.70 6/11/99 2,508
----------
Holding and Other Investment Compa-
nies--1.6%
JP Morgan and Co.,
Inc.
78,000 5.75 3/10/99 78,001
- ------------------------------------------------------
TOTAL BANK NOTES $ 97,508
- ------------------------------------------------------
CERTIFICATES OF DEPOSIT--6.5%
Domestic Depository Institutions--2.6%
Bankers Trust Co.
$16,250 6.01% 12/10/98 $ 16,251
25,000 5.58 1/22/99 24,998
15,000 5.71 7/1/99 14,997
Crestar Bank
20,000 5.59 2/2/99 19,999
Union Bank of
California
47,000 5.65 12/8/98 47,000
----------
123,245
----------
Foreign Depository Institutions--3.9%
Banque Nationale
De Paris, New York
20,000 5.52 2/18/99 19,992
20,000 5.71 3/30/99 19,993
25,000 5.75 4/23/99 24,995
Barclays Bank, New
York
5,000 5.56 2/25/99 4,999
Canadian Imperial
Bank of Commerce,
New York
25,000 5.74 4/28/99 24,989
Societe Generale,
New York
40,000 5.70 1/7/99 40,001
15,000 5.71 3/5/99 14,999
2,000 5.75 4/19/99 2,000
15,000 5.765 4/19/99 14,998
UBS Bank
19,500 5.75 5/7/99 19,551
----------
186,517
- ------------------------------------------------------
TOTAL CERTIFICATES OF DE-
POSIT $ 309,762
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
COMMERCIAL PAPER--42.1%
Asset-Backed Securities--18.1%
Altair Funding
Corp.
$10,000 5.40% 1/21/99 $ 9,923
Beta Finance Corp.
16,000 5.10 3/10/99 15,776
6,000 5.10 3/24/99 5,904
Centauri Funding
50,000 5.32 3/8/99 49,283
20,000 5.10 3/25/99 19,677
Concord Minutemen
Capital Co.
36,000 5.40 1/22/99 35,719
Cooperative
Association of
Tractor Dealers,
Series A
2,400 5.23 3/17/99 2,363
Corporate
Receivables Corp.
25,000 5.31 12/7/98 24,978
1,250 5.35 12/9/98 1,248
CPI Funding
20,227 5.07 2/25/99 19,982
29,000 4.93 4/26/99 28,420
Dakota
Certificates
Program
25,000 5.46 12/3/98 24,992
25,000 5.46 12/4/98 24,989
Grayhawk Funding
60,000 5.15 12/18/98 59,854
7,500 5.05 3/16/99 7,389
12,500 5.105 3/16/99 12,314
International
Securitization
Corp.
23,000 5.02 4/26/99 22,532
Kitty Hawk Funding
Corp.
34,000 5.46 2/16/99 33,603
KZH Crescent II
Corp.
3,102 5.55 12/4/98 3,100
KZH Cypress Tree I
Corp.
10,000 5.55 12/4/98 9,995
KZH Holding Corp.
III
2,560 5.55 12/21/98 2,552
MPF, Ltd.
53,000 5.53 2/12/99 52,406
Pooled Account
Receivables Corp.
32,263 5.35 2/12/99 31,913
R.O.S.E., Inc.
44,319 5.25 12/2/98 44,312
SALTS(III) Cayman
Islands Corp.
15,000 5.719 12/18/98 15,000
75,000 5.85 1/25/99 75,000
Sheffield
Receivables Corp.
25,000 5.11 2/12/99 24,741
23,000 5.26 2/26/99 22,708
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
Diversified Assets Portfolio--Continued
Asset-Backed Securities--Continued
<C> <C> <S> <C>
Silver Tower US
Funding
$ 3,600 5.49% 12/10/98 $ 3,595
5,000 5.50 12/22/98 4,984
9,275 5.05 3/18/99 9,136
14,500 5.02 5/18/99 14,160
Thames Asset
Global
Securitization
25,000 5.32 1/8/99 24,860
6,997 5.45 1/14/99 6,950
10,000 5.45 1/15/99 9,932
11,000 5.40 1/26/99 10,908
10,000 5.15 2/16/99 9,890
21,451 5.40 2/16/99 21,203
Trident Capital
Finance, Inc.
25,000 5.50 12/8/98 24,973
14,000 5.472 12/11/98 13,979
12,500 5.30 12/15/98 12,474
Twin Towers, Inc.
22,000 5.40 2/1/99 21,795
--------
869,512
--------
Banking--0.8%
Bankers Trust New
York Corp.
39,500 5.48 1/22/99 39,188
--------
Communications--1.6%
Cincinnati Bell,
Inc.
5,000 5.50 12/1/98 5,000
35,000 5.05 12/4/98 34,985
GTE Corp.
5,000 5.25 12/4/98 4,998
10,000 5.25 12/7/98 9,991
15,000 5.20 12/14/98 14,972
5,000 5.40 1/26/99 4,958
--------
74,904
--------
Computers and Office Machines--2.7%
BTR Dunlop
Finance, Inc.
25,000 5.50 12/7/98 24,977
54,000 5.45 2/18/99 53,354
24,500 5.34 2/23/99 24,195
12,500 5.34 2/25/99 12,340
15,000 5.25 3/8/99 14,788
--------
129,654
--------
Diversified Financial Services--2.7%
Chrysler Financial
Corp.
31,000 5.25 12/7/98 30,973
Ford Motor Credit
Corp.
59,000 5.45 12/1/98 59,000
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------
<C> <C> <S> <C>
General Motors Ac-
ceptance Corp.
$20,000 5.50% 12/2/98 $ 19,997
10,000 5.50 12/3/98 9,997
10,000 5.50 12/9/98 9,988
---------
129,955
---------
Electrical Services--1.2%
Centerior Fuel
Corp. (LOC
Barclays Bank)
35,029 5.20 12/14/98 34,963
CSW Credit, Inc.
10,000 5.25 12/4/98 9,996
15,000 5.37 12/17/98 14,964
---------
59,923
---------
Electronic and Other Electric Compo-
nents--1.7%
General Electric
Capital Corp.
60,000 5.50 12/24/98 59,789
25,000 5.48 2/26/99 24,669
---------
84,458
---------
Food and Kindred Products--2.8%
Cargill Global
Funding, Inc.
34,000 5.45 12/1/98 34,000
Coca Cola
Enterprises, Inc.
50,000 5.50 12/8/98 49,947
9,000 5.51 12/10/98 8,988
Diageo PLC
10,000 5.47 12/4/98 9,995
8,000 5.472 12/11/98 7,988
24,000 5.33 12/11/98 23,964
---------
134,882
---------
Foreign Depository Institutions--5.2%
Abbey National
PLC, North America
30,000 5.35 12/8/98 29,969
90,000 5.458 12/22/98 89,713
Credit Communal de
Belgique
30,000 5.47 12/18/98 29,923
Generale Bank,
Inc.
50,000 5.49 12/1/98 50,000
Societe Generale
North America,
Inc.
30,000 5.475 12/21/98 29,909
Spintab
AB/Swedmortgage
4,000 5.55 12/28/98 3,983
Svenska
Handelsbanken,
Inc.
15,000 5.47 12/17/98 14,964
---------
248,461
---------
Industrial Instruments--0.7%
Johnson Controls,
Inc.
15,000 5.30 2/23/99 14,815
Xerox Credit Corp.
17,500 5.32 3/5/99 17,257
---------
32,072
---------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------
<C> <C> <S> <C>
Insurance--0.9%
Aetna Service Co.
$12,000 5.28% 1/22/99 $ 11,907
18,000 5.20 2/19/99 17,790
Torchmark, Inc.
15,000 5.30 1/19/99 14,892
-----------
44,589
-----------
Municipalities--0.2%
Texas Municipal
Power Agency,
Series 1997
9,300 5.37 12/10/98 9,300
-----------
Nondepository Business Credit Institu-
tions--2.6%
FBA Properties,
Inc. (Nations
Bank, Georgia LOC)
5,575 5.45 12/30/98 5,551
Finova Capital
Corp.
5,000 5.35 12/15/98 4,990
50,000 5.40 1/14/99 49,670
27,500 5.40 1/19/99 27,298
5,000 5.28 2/17/99 4,943
18,000 5.30 2/19/99 17,788
15,000 5.18 3/12/99 14,782
-----------
125,022
-----------
Nondepository Personal Credit Institu-
tions--0.3%
Cendant Residen-
tial Mortgage
Trust
12,500 5.43 12/11/98 12,481
-----------
Petroleum Refining and Related Indus-
tries--0.3%
Koch Industries,
Inc.
12,500 5.43 12/4/98 12,494
-----------
Toys, Games and Hobbies--0.3%
Mattel, Inc.
15,340 5.43 12/4/98 15,333
- ------------------------------------------
TOTAL COMMERCIAL PAPER $ 2,022,228
- ------------------------------------------
CORPORATE NOTES--14.0%
Asset Backed Securities--
4.6%
Beta Finance
60,000 5.64 2/4/99 60,000
Liberty Light FRN
25,000 5.374 10/8/99 24,978
Restructured Asset
Certificates with
Enhanced Returns,
Series 1998-MM-B-
11
33,000 5.69 12/28/98 33,000
Salts(II) Cayman
Islands Corp., P-
Floats
20,000 5.738 12/18/98 20,000
Syndicated Loan
Funding Trust,
Series 1998-7
50,000 5.777 12/15/99 50,000
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
Triangle Funding,
Ltd., 1998-1A 1
PP, FRN
$30,000 5.353% 10/15/99 $ 30,000
----------
217,978
----------
Broker--0.5%
Morgan Stanley
Trust Certificates
1996-2
24,832 5.105 12/23/98 24,832
----------
Electronic and Other Elec-
trical Components--0.7%
Heller Financial,
Inc. FRN
35,000 5.64 11/15/99 35,065
----------
Insurance Carriers--2.0%
Transamerica
Financial Corp.
FRN
25,000 5.45 10/22/99 25,000
United Health Care
Corp.
70,000 5.65 12/1/99 70,000
----------
95,000
----------
Municipal Investments--1.0%
Crozer Keystone
Health System,
VRDN
7,600 5.69 12/2/98 7,600
Metal Forming &
Coining Corp.
Project (National
City Bank--LOC)
9,870 5.03 12/7/98 9,870
Public Service
Electric and Gas
Co.
1st and Refunding
Mortgage Bond
Series YY
30,000 5.85 5/1/99 30,000
----------
47,470
----------
Nondepository Personal
Credit Institutions--3.1%
Associates Corp.
P-Floats, FRN
50,000 5.465 4/5/09 50,000
Beneficial Corp.
FRN
5,000 5.57 9/23/99 5,000
CIT Group Holdings
57,500 5.08 8/30/99 57,461
Countrywide Home
Loan FRN
25,000 5.275 8/4/99 24,992
Household Finance
Co. FRN
13,000 5.444 1/14/99 13,000
----------
150,453
----------
Railroad Transportation--
0.8%
Communaute Urbaine
de Lille
Custodial Tax
Receipts STN 98-8
37,260 5.40 4/1/99 37,260
----------
Transportation Equipment--
1.3%
Chrysler Financial
Corp.
5,000 6.28 6/22/99 5,030
GE Engine
Receivables 1995-1
Trust FRN
10,394 5.264 12/7/98 10,394
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
Diversified Assets Portfolio--Continued
<C> <C> <S> <C>
Transportation Equipment--Con-
tinued
GE Engine
Receivables 1996-1
Trust, FRN
$ 34,732 5.264% 12/7/98 $ 34,732
General Motors
Acceptance Corp.,
FRN
12,500 4.965 6/11/99 12,495
----------
62,651
- -----------------------------------------------------------
TOTAL CORPORATE NOTES $ 670,709
- -----------------------------------------------------------
EURODOLLAR TIME DEPOSITS--
10.1%
Banco Central
Hispanoamericano,
Grand Cayman Islands
$ 50,000 5.00% 12/1/98 $ 50,000
Compagnie Financiere
de CIC, Grand Cayman
Islands
35,000 5.50 12/1/98 35,000
Deutsche Bank, Grand
Cayman Islands
160,000 5.44 12/1/98 160,000
Halifax Building
Society, Halifax
160,000 5.50 12/1/98 160,000
KBC BANK, Grand
Cayman Islands
38,807 5.25 12/1/98 38,807
Monte Dei Paschi di
Siena, Grand Cayman
Islands
40,000 5.44 12/1/98 40,000
- -----------------------------------------------------------
TOTAL EURODOLLAR TIME DEPOSITS $ 483,807
- -----------------------------------------------------------
GUARANTEED INVESTMENT
CONTRACTS--4.6%
General American
Life Insurance Co.,
FRN
$ 75,000 5.24% 12/7/98 $ 75,000
25,000 5.24 12/30/98 25,000
Integrity Life
Insurance Co., FRN
30,000 5.89 12/7/98 30,000
Transamerica Life
Insurance and
Annuity Co., FRN
30,000 5.344 12/1/98 30,000
25,000 5.327 12/12/98 25,000
35,000 5.334 12/30/98 35,000
- -----------------------------------------------------------
TOTAL GUARANTEED INVESTMENT
CONTRACTS $ 220,000
- -----------------------------------------------------------
MUNICIPAL INVESTMENTS--7.7%
City of Minneapolis-
St. Paul (Minnesota)
Metro Airport GO
Bond
$ 28,930 5.70% 12/1/98 $ 28,930
City of Seattle
(Washington) Ltd. GO
Bond Series C
46,525 4.75 12/7/98 46,525
County of Kern
(California) Pension
Obligation
18,000 5.339 12/1/98 18,000
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- --------------------------------------
<C> <C> <S> <C>
County of Los
Angeles
(California)
Pension
Obligation
$ 40,000 5.07% 12/7/98 $ 40,000
County of
Sonoma
(California)
Pension
Obligation
22,800 5.239 12/1/98 22,800
Health
Insurance Plan
of Greater New
York VRDN,
Series 1990 B-1
17,500 5.09 7/1/16 17,500
State of New
Jersey Economic
Development
Authority
25,000 5.636 10/1/21 25,000
State of
Virginia
Housing
Development
Authority
171,105 4.75 12/7/98 171,105
- --------------------------------------
TOTAL MUNICIPAL
INVESTMENTS $ 369,860
- --------------------------------------
U.S. GOVERNMENT
OBLIGATIONS--1.0%
U.S. Treasury Bills
$ 15,000 4.39% 4/1/99 $ 14,779
10,000 4.17 4/8/99 9,852
25,000 4.365 4/29/99 24,548
- --------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS $ 49,179
- --------------------------------------
REPURCHASE AGREEMENTS--
1.0%
Joint Repurchase
Agreement--1.0%
Warburg Dillon
Read LLC, Dated
6/25/98 (U.S.
Government
Securities
Colld.) Accrued
Interest $116
$ 50,000 5.25% 12/1/98 $ 50,000
- --------------------------------------
TOTAL REPURCHASE
AGREEMENTS $ 50,000
- --------------------------------------
TOTAL INVESTMENTS--89.5% $4,298,022
- --------------------------------------
Other assets, less
liabilities--10.5% 503,868
- --------------------------------------
NET ASSETS--100.0% $4,801,890
- --------------------------------------
- --------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------
Government Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--51.6%
Fannie Mae Discount Notes--18.0%
$ 26,175 5.368% 12/29/98 $ 26,066
78,000 5.07 2/25/99 77,055
78,000 4.98 3/26/99 76,759
65,000 4.91 4/20/99 63,759
55,000 4.88 4/29/99 53,889
--------
297,528
--------
Fannie Mae Medium Term Notes--4.5%
46,000 5.38 2/9/99 45,989
28,000 5.49 8/3/99 27,979
--------
73,968
--------
Fannie Mae Medium Term Note FRN--3.9%
65,000 5.025 12/1/98 64,966
--------
FHLB Discount Note--3.3%
54,214 5.15 12/1/98 54,214
--------
FHLB Medium Term Notes--8.1%
20,800 5.52 3/23/99 20,795
13,000 5.50 3/26/99 12,996
39,000 5.527 6/10/99 38,969
42,000 5.54 7/13/99 41,987
19,000 5.536 7/15/99 18,991
--------
133,738
--------
Freddie Mac Discount Note--12.3%
19,000 5.071 2/26/99 18,767
78,000 5.06 2/26/99 77,046
80,000 4.90 3/12/99 78,900
29,200 4.91 4/9/99 28,686
--------
203,399
--------
SLM Holding Corp. Medium Term Notes--1.5%
26,000 5.40 2/10/99 25,995
- ----------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $853,808
- ----------------------------------------------------------------------
REPURCHASE AGREEMENTS--48.4%
Repurchase Agreements--45.4%
ABN-Amro Securities, Inc., Dated 11/30/98,
Repurchase Price $200,030
(U.S. Government Securities Colld.)
$200,000 5.45% 12/1/98 $200,000
Bear Stearns Security Corp, Dated 11/30/98,
Repurchase Price $350,054
(U.S. Government Securities Colld.)
350,000 5.52 12/1/98 350,000
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Maturity
Principal Amount Rate Date Amortized Cost
- -------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C> <C>
J.P. Morgan Securities, Inc., Dated 11/30/98,
Repurchase Price $200,028
(U.S. Government Securities Colld.)
$200,000 5.35% 12/1/98 $ 200,000
----------
750,000
----------
Joint Repurchase Agreement--3.0%
Warburg Dillon Reed LLC, Dated 6/25/98,
(U.S. Government Securities Colld.) Accrued
Interest $128
$ 50,000 5.25% 12/1/98 $ 50,000
- -------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 800,000
- -------------------------------------------------------------------
TOTAL INVESTMENTS--100.0% $1,653,808
- -------------------------------------------------------------------
Liabilities, less other assets--0.0% (938)
- -------------------------------------------------------------------
NET ASSETS--100.0% $1,652,870
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------
Government Select Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--100.0%
Federal Farm Credit Bank--0.7%
$ 12,000 5.70% 12/1/98 $ 12,000
----------
FHLB--9.0%
21,000 5.435 2/2/99 20,994
22,750 5.52 3/23/99 22,745
14,000 5.50 3/26/99 13,996
13,000 5.61 4/8/99 12,996
25,000 5.63 5/5/99 24,988
42,000 5.527 6/10/99 41,965
15,000 5.536 7/15/99 14,993
----------
152,677
----------
FHLB Discount Notes--89.0%
430,435 5.151 12/1/98 430,435
11,905 4.777 12/4/98 11,900
162,000 4.94 1/29/99 160,704
147,000 4.941 1/29/99 145,824
81,200 4.951 1/29/99 80,549
36,865 4.982 1/29/99 36,568
208,200 5.099 2/12/99 206,074
218,000 4.961 2/17/99 215,686
51,000 5.043 2/17/99 50,450
52,000 5.006 2/24/99 51,393
123,000 4.94 5/12/99 120,332
----------
1,509,915
----------
SLM Holding Corp.--1.3%
22,000 5.74 12/17/98 21,999
- -----------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $1,696,591
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Maturity Amortized
Shares Rate Date Cost
- ----------------------------------------
<C> <S> <C> <C>
OTHER INVESTMENT--0.0%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Dreyfus Treasury Prime Cash
Management,
Class A
1 -- -- $ 1
- ----------------------------------------
TOTAL OTHER INVEST-
MENT $ 1
- ----------------------------------------
TOTAL INVESTMENTS--
100.0% $1,696,592
- ----------------------------------------
Liabilities, less
other assets--0.0% (1,615)
- ----------------------------------------
NET ASSETS--100.0% $1,694,977
- ----------------------------------------
- ----------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio
MUNICIPAL INVESTMENTS--94.2%
Alabama--1.7%
Greenville City IDR VRDN,
Series 1992, Allied-Signal,
Inc. Project (Allied-Signal,
Inc. Gtd.)
<S> <C> <C> <C>
$ 1,350 3.30% 12/2/98 $ 1,350
Jefferson County Sewer Revenue
VRDN, Series A (FGIC Insured)
5,050 3.45 12/1/98 5,050
McIntosh IDB Environmental
Improvement Revenue VRDN,
Series D (CIBA Specialty
Chemical Corp. Gtd.)
4,300 3.25 12/1/98 4,300
Mobile PCR Revenue VRDN, Series
1994A, Alabama Power Co.
Project (Alabama Power Co.
Gtd.)
2,200 3.30 12/1/98 2,200
--------
12,900
--------
Alaska--1.0%
Alaska Housing Finance Corp.
VRDN, Series 1994 PT-37,
Merrill P-Floats (Banque
National Paris LOC)
7,170 3.43 12/3/98 7,170
--------
California--3.0%
California State GO VRDN,
Series 1997H, Bank of America
(U.S. Government Securities
Colld.)
200 3.23 12/7/98 200
California Statewide Community
Development Authority
TRAN VRDN, Series 1998, LB
FR/RI-A23 Trust Receipts
(California Statewide
Community Development
Authority Insured)
5,000 3.30 12/8/98 5,000
Irvine Ranch Consolidated Water
District VRDN,
Series 1993 B, Districts 2,
102, 103, & 206
(Toronto Dominion Bank LOC)
9,550 3.20 12/1/98 9,550
San Marcos Public Facilities
Authority Revenue VRDN, Series
1989 B BTP-188, Civic Center
Project
(U.S. Government Securities
Colld.)
7,961 3.60 3/25/99 7,961
--------
22,711
--------
Florida--3.7%
Broward County HFA Revenue
VRDN, Sanctuary Park
Apartments Multifamily Project
(PNC LOC)
4,600 3.45 12/4/98 4,600
Florida State Board of
Education Capital Outlay GO
VRDN, Series 1998-9, ABN-Amro
MuniTops (FSA Insured)
3,500 3.43 12/3/98 3,500
Florida State Board of
Education GO, Series 1989A,
Eagle Trust 96C0915 (U.S.
Government Securities Colld.)
5,205 3.80 12/1/98 5,205
Florida State Board of
Education Public Education
Capital VRDN, Series 1991-B
BTP-223 (U.S. Government
Securities Colld.)
4,000 3.65 12/3/98 4,000
Florida State Board of
Education VRDN, Series 1993E,
Eagle Trust 940901
5,500 3.28 12/3/98 5,500
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Orange County HFA VRDN,
Citicorp Eagle Trust,
Series 1987-A (GNMA Securities
Colld.)
<S> <C> <C> <C>
$ 4,660 3.23% 12/2/98 $ 4,660
--------
27,465
--------
Georgia--8.0%
DeKalb County Development
Authority PCR VRDN, Series
1987, General Motors Corp.
Project (General Motors Corp.
Gtd.)
4,200 3.25 12/2/98 4,200
Fulton County Development
Authority IDR,
Citicorp Eagle Trust 981001
11,000 3.10 8/2/99 11,000
Fulton County Development
Authority IDR VRDN, General
Motors Corp. Project (General
Motors Corp. Gtd.)
2,100 3.25 2/2/98 2,100
Georgia State GO TOB, Series
1993 F BTP-82A
9,900 3.35 3/4/99 9,900
Georgia State GO VRDN, Series
1994 D BTP-100
6,035 3.35 3/4/99 6,035
Georgia State Unlimited GO
VRDN, P-Floats PA-246
10,200 3.30 12/3/98 10,200
Georgia State Unlimited GO
VRDN, P-Floats PA-248
7,340 3.30 12/3/98 7,340
Metro Atlanta Rapid Transit
Authority Sales Tax Revenue
VRDN, Series A-MTC#16, BOCM
Muni Trust Certified (MBIA
Insured)
8,000 3.30 12/7/98 8,000
Municipal Gas Authority Gas Revenue VRDN, Series B
(Wachovia Bank NA LOC)
1,300 3.05 12/7/98 1,300
--------
60,075
--------
Hawaii--2.1%
Hawaii State GO VRDN, Series 5
(FGIC Insured)
12,620 3.63 12/3/98 12,620
Hawaii Department of Budget &
Finance Special Purpose IDR,
Kaiser Permanente Project
(Kaiser Permanente Gtd.)
3,000 3.80 3/1/99 3,000
--------
15,620
--------
Idaho--0.5%
Idaho Health Facilities
Authority Hospital Revenue
VRDN, Series 1995, St. Luke's
Medical Center Project
(Credit Suisse First Boston
LOC)
3,700 3.30 12/1/98 3,700
--------
Illinois--11.4%
Chicago Board of Education
VRDN, BTP-239
(AMBAC Insured)
9,320 3.60 12/2/98 9,320
Chicago GO Refunding GO VRDN,
Series 1998 M,
Bank of America Partnership
(FGIC Insured)
5,000 3.70 8/4/99 5,000
Chicago GO VRDN, Series 1997-
SSP-7, Building Acquisition
Certificates (FSA Insured)
8,300 3.35 12/2/98 8,300
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio--Continued
Chicago O'Hare Airport Revenue
VRDN, Series 1983-D, AMR,
Inc. Project (Royal Bank of
Canada LOC)
<S> <C> <C> <C>
$ 1,100 3.30% 12/1/98 $ 1,100
DuPage Water Commission
Water/Sewer VRDN
8,400 3.26 12/3/98 8,400
Illinois Development Finance
Authority PCR VRDN,
Series 1994, UNO-VEN Co.
Project (First Chicago NBD
Bank LOC)
2,200 3.15 12/1/98 2,200
Illinois Education Facility
Authority VRDN, Series 1985,
University of Chicago
4,900 3.23 12/3/98 4,900
Illinois Health Facilities
Authority VRDN, Series 1990,
Gottlieb Health Resources,
Inc. (Harris Trust and
Savings Bank LOC)
2,000 3.15 12/2/98 2,000
Illinois Health Facilities
Authority VRDN, Series E,
Franciscan Eldercare (LaSalle
National Bank LOC)
2,500 3.20 12/2/98 2,500
Illinois Sales TRB, Series K
(U.S. Government Securities
Colld.)
1,000 7.00 6/15/99 1,035
Illinois State GO VRDN, Series 1998 PCR-10,
Citibank TOB (FSA Insured)
5,000 3.28 12/7/98 5,000
Illinois State GO VRDN, Series
38
12,885 3.63 12/3/98 12,885
Illinois State GO VRDN, Series
39
12,075 3.63 12/3/98 12,075
Metropolitan Pier & Exposition
Authority Dedicated Sales
TRB, BTP-230 A (U.S.
Government Securities Colld.)
6,000 3.60 12/7/98 6,000
Naperville City IDR VRDN,
General Motors Corp. Project
(General Motors Corp. Gtd.)
1,480 3.25 12/2/98 1,480
Peoria IDR VRDN, Series 1997, Peoria Production Shop
Project (Bank One LOC)
2,905 3.30 12/3/98 2,905
--------
85,100
--------
Indiana--3.6%
Gary Environmental Improvement
PCR, U.S. Steel Corp. Project
(Bank of New York LOC)
3,000 3.35 1/22/99 3,000
Indiana Bond Bank Operating
Municipal Notes,
Series 1998 A-2, Advanced
Funding Program
7,425 4.00 1/20/99 7,429
Indiana Development Finance
Authority IDR VRDN,
Series 1997, Bayer Corp.
Project (Bayer Corp. Gtd.)
1,300 3.35 12/1/98 1,300
Indiana Development Finance
Authority VRDN,
Series 1997, Culver
Educational Foundation
Project (Chase Manhattan Bank
LOC)
2,000 3.15 12/2/98 2,000
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Indiana State Toll Road
Commission VRDN, Series PA-
253 (U.S. Government
Securities Colld.)
<S> <C> <C> <C>
$ 3,900 3.30% 12/3/98 $ 3,900
Indiana Transportation
Authority Highway Revenue
VRDN, Series 1998A, Citicorp
Eagle Trust 981402
7,750 3.10 8/2/99 7,750
Jasper County PCR CP, Series
1988D,
Northern Indiana Public
Service Project
(Northern Indiana Public
Service Gtd.)
2,000 3.30 1/22/99 2,000
--------
27,379
--------
Iowa--2.2%
Council Bluffs City PCR
Revenue VRDN, Series 1995,
Iowa-Illinois Gas and
Electric Project
(MidAmerican Energy Co. Gtd.)
6,600 3.25 12/2/98 6,600
Iowa Finance Authority SFM
Revenue VRDN,
Series 1997A
6,085 3.43 12/1/98 6,085
Iowa Student Loan Liquidity
Student Loan Revenue
3,500 3.10 12/1/98 3,500
--------
16,185
--------
Kansas--1.2%
LaCygne City Environmental Revenue Refunding VRDN,
Series 1994, Kansas City Power & Light Project
(Kansas City Power & Light Gtd.)
2,882 3.30 12/2/98 2,882
Lawrence City GO Temporary Notes, Series 1998-1
6,355 3.79 6/1/99 6,355
--------
9,237
--------
Kentucky--1.4%
Danville City Lease Revenue
CP, Municipal Pooled
Lease Program (PNC Bank LOC)
3,000 3.25 1/12/99 3,000
Mayfield City Lease Revenue
VRDN, Series 1996, Kentucky
League of Cities Pooled
Project
(PNC Bank LOC)
7,200 3.25 12/2/98 7,200
--------
10,200
--------
Louisiana--1.5%
Greater Baton Rouge Port
Commission PCR Bonds,
Series 1983-A, Dow Chemical
Co. Project
(Dow Chemical Co. Gtd.)
5,035 3.95 12/15/98 5,035
Huntington City IDR PCR VRDN,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
1,900 3.30 12/2/98 1,900
Louisiana Public Facilities
Authority PCR VRDN,
Series 1992, Allied-Signal,
Inc. Project
(Allied-Signal, Inc. Gtd.)
4,515 3.30 12/2/98 4,515
--------
11,450
--------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
MAINE--1.0%
Maine State GO Municipal
General Purpose Bond
<S> <C> <C> <C>
$ 4,215 4.50% 6/15/99 $ 4,232
Maine State GO Municipal
Highway Bond
3,000 4.50 6/15/99 3,012
--------
7,244
--------
MARYLAND--0.9%
Maryland State Community
Development Administration SFM
Revenue, Series 1993 PT-12,
Merrill P-Floats (Maryland
Community Development
Authority Gtd.)
6,399 3.43 12/1/98 6,399
Maryland State Economic
Development Authority Pooled
Revenue VRDN, Series 1995
(NationsBank LOC)
100 3.20 12/3/98 100
--------
6,499
--------
MASSACHUSETTS--1.7%
Gloucester County Renewal BAN
5,098 4.00 8/5/99 5,109
Massachusetts Bay
Transportation Authority GO
Notes,
Series 1998 A
8,000 4.25 2/26/99 8,012
--------
13,121
--------
MINNESOTA--1.4%
East Grand Forks Independent
School District 595 GO,
Minnesota School District
Credit Enhancement Program
2,000 3.90 6/30/99 2,003
Minnesota HFA SFM VRDN, Series
1998-F
8,500 3.65 8/9/99 8,500
--------
10,503
--------
MISSOURI--0.6%
Missouri Development Finance
Board Infrastructure Revenue
VRDN, Series 1997B, Science
City at Union Station
(Canadian Imperial Bank of
Commerce LOC)
1,300 3.55 12/1/98 1,300
St. Louis County IDA Hospital
VRDN, Series 1996-B,
Friendship Village West County
Project (LaSalle National Bank
LOC)
3,270 3.20 12/30/98 3,270
--------
4,570
--------
MONTANA--0.1%
Forsyth City, Rosebud County
PCR VRDN, Series 1988,
Pacificorp Project (Rabobank
Group LOC)
1,000 3.75 12/1/98 1,000
--------
NEVADA--2.2%
Clark County School District GO
VRDN (FSA Insured)
10,000 3.33 12/3/98 10,000
Nevada State Municipal Bond
Bank GO VRDN, Series 1997
SGB31 (FGIC Insured)
6,650 3.33 12/3/98 6,650
--------
16,650
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
NEW YORK--2.3%
New York City GO VRDN,
Subordinated Series 1993 E-3
(Morgan Guaranty Trust Co.
LOC)
<S> <C> <C> <C>
$ 300 3.20% 12/1/98 $ 300
New York City Municipal Water
Finance Authority VRDN (MBIA
Insured)
3,800 3.28 12/2/98 3,800
New York State Environmental
Facility Corp. PCR Bond, Eagle
Trust (FSA Insured)
10,000 3.40 4/1/99 10,000
New York State Environmental
Facility Corp. Water PCR Bond
(FSA Insured)
2,000 3.23 12/3/98 2,000
Pooled Puttable VRDN P-Floats,
Bankers Trust, Series PPT2
1,215 3.53 12/3/98 1,215
--------
17,315
--------
NORTH CAROLINA--1.2%
Buncombe County PCR IDR VRDN,
Series 1996,
Cooper Industries, Inc.
Project (Cooper Industries,
Inc Gtd.)
3,200 3.30 12/2/98 3,200
Persons County Industrial
Facilities and PCR VRDN,
Series 1992A, Carolina Power &
Light Project (Carolina Power
& Light Gtd.)
5,500 3.25 12/1/98 5,500
--------
8,700
--------
OHIO--4.2%
Greystone Revenue Senior VRDN,
Series Trust 1998-1, (Credit
Suisse First Boston)
14,500 3.58 12/3/98 14,500
Ohio Air Quality Facilities
Revenue Bond,
Series 1988A, Ohio Edison Co.
Project
(Toronto Dominion Bank LOC)
4,000 3.65 2/1/99 4,000
Ohio State Higher Education
Capital Facilities VRDN,
Series 1994 A, BTP-69 (AMBAC
Insured)
8,545 3.65 12/3/98 8,545
Ohio State Turnpike Commission
VRDN, Series A
(FGIC Insured)
2,000 3.63 12/3/98 2,000
Red Roof Inns Mortgage Bond
Trust VRDN
(National City Bank LOC)
2,714 3.33 12/15/98 2,714
--------
31,759
--------
OREGON--0.7%
Portland City Water/Sewer
System VRDN, Series A
(FGIC Insured)
5,365 3.30 12/4/98 5,365
--------
PENNSYLVANIA--5.0%
Allegheny County Environment
Improvement
IDA Revenue CP, Series 1987
USX Corp.
Project (Commerzbank LOC)
4,000 3.35 1/22/99 4,000
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
Allegheny County Hospital
Development Authority Revenue
VRDN, Series A, Presbyterian
Health Center
(MBIA Insured)
<S> <C> <C> <C>
2,900 3.30% 12/3/98 $ 2,900
Allegheny County Hospital
Development Authority
Revenue VRDN, Series B-1,
Presbyterian
University Hospital (NBD Bank
LOC)
$ 4,900 3.30 12/4/98 4,900
Pennsylvania Turnpike
Commission Revenue VRDN,
Series 1998-Q
4,100 3.35 12/1/98 4,100
Philadelphia Hospital and
Higher Education Facilities
Authority VRDN, Series A,
Children's Hospital Project
6,450 3.30 12/1/98 6,450
Philadelphia School District
TRAN, Series 1998/99 A
(First Union National Bank
LOC)
7,000 4.25 6/30/99 7,024
Philadelphia TRAN, Series
1998/99 A
6,000 4.25 6/30/99 6,021
Warren County Hospital
Authority VRDN, Series 1994 B,
Warren General Hospital
Project (PNC Bank LOC)
1,650 3.30 12/3/98 1,650
-------
37,045
-------
SOUTH CAROLINA--2.5%
Lexington County Pollution
Control Finance Authority
IDR VRDN, Series 1992A,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
1,880 3.30 12/2/98 1,880
Lexington County Revenue IDR
VRDN, Series 1992,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
800 3.30 12/2/98 800
Piedmont Municipal Power Agency
Revenue VRDN
(MBIA Insured)
5,000 3.70 12/1/98 5,000
Public Service Authority Santee
Cooper VRDN,
Series 1998A BTP-318
10,670 3.35 12/3/98 10,670
-------
18,350
-------
SOUTH DAKOTA--1.2%
South Dakota HDA Homeownership
Mortgage Housing VRDN, Series
1996 PT-73-A, Merrill P-Floats
8,945 3.30 12/3/98 8,945
-------
TENNESSEE--1.2%
Shelby County GO VRDN, Series B
BTP-216
4,000 3.17 6/8/99 4,000
Series B BTP-263
5,000 3.60 12/3/98 5,000
-------
9,000
-------
TEXAS--10.7%
Austin City School District
Building and Refunding VRDN,
Series ML/SG-68 (PSF of Texas
Gtd.)
4,900 3.30 12/3/98 4,900
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
Bastrop City Independent School
District GO VRDN,
Series 1997 SGB 37 (PSF of
Texas Gtd.)
<S> <C> <C> <C>
$ 6,870 3.63% 12/7/98 $ 6,870
Denton City Independent School
District GO Bond, Series B
(PSF of Texas Gtd.)
6,000 3.65 8/15/99 6,000
Grand Prairie Housing Finance
Corp. VRDN, Series 1985,
Lincoln Windcliff Project
(General Electric Corp. Gtd.)
900 3.20 12/2/98 900
Harris County GO VRDN, Series
19, Toll Road Unlimited
Subordinate Lien CR138
11,880 3.23 12/3/98 11,880
Harris County Tax Revenue
Receipts, SAK-21
7,910 3.40 12/2/98 7,910
Harris County Health Facility
Development Corp. VRDN, Series
1994, Methodist Hospital
2,300 3.35 12/1/98 2,300
Harris County Toll Road
Unlimited Tax Revenue VRDN,
Series 1994 A, Citicorp Eagle
Trust 954302
6,420 3.28 12/3/98 6,420
Hurst Euless Bedford
Independent School District
GO VRDN, PT-1050 (PSF of Texas
Gtd.)
4,000 3.30 12/3/98 4,000
Pearland Independent School
District GO VRDN,
ML/SG Trust Receipts SG-106
(PSF of Texas Gtd.)
4,000 3.30 12/3/98 4,000
San Antonio Independent School
District GO VRDN,
ROCS Series 30 (PSF of Texas
Gtd.)
3,000 3.63 12/3/98 3,000
Texas State TRAN, Series A59
10,000 3.45 12/2/98 10,000
Texas State Water Financing
Assistance Refunding GO VRDN,
Series 1998A BTP-309
5,385 3.60 12/3/98 5,385
Trinity River IDA IDR VRDN,
Automatic Data Processing,
Inc. Project (Automatic Data
Processing, Inc. Gtd.)
6,200 3.70 12/1/98 6,200
--------
79,765
--------
UTAH--0.7%
Utah State GO VRDN
5,000 3.65% 3/18/99 5,000
--------
VIRGINIA--4.7%
Norfolk GO VRDN, Eagle Trust
No. 944601
10,100 3.28 12/3/98 10,100
Roanoke IDA Hospital Revenue
VRDN, Series 1997A, Carilion
Health System Obligated Group
5,000 3.35 12/1/98 5,000
Roanoke IDA VRDN, Series A,
Roanoke Memorial Hospital
7,700 3.35 12/1/98 7,700
Town of Louisa IDA PCR CP,
Series 1984, Virginia Electric
& Power Co. Project (Virginia
Electric Power Co. Gtd.)
3,400 3.60 12/16/98 3,400
4,200 3.10 2/17/99 4,200
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,700 3.25 1/12/99 4,700
------
35,100
------
Town of Louisa PCR CP, Series
1987 (Virginia Electric &
Power Co. Gtd.)
Washington--6.2%
Kent City Economic Development
Corp. IDR VRDN, Associated
Grocers Project (Bank of
America LOC)
3,500 4.02 12/2/98 3,500
Port of Seattle Passenger
Facility Charge VRDN
(MBIA Insured)
10,000 3.45 12/2/98 10,000
Washington State GO VRDN,
Smith-Barney Soc Gen Trust,
Series 1993 B SGB-13
11,950 3.33 12/3/98 11,950
Washington State Public Power
Supply System Revenue Bond,
Series A,
4,000 5.30 7/1/99 4,043
1,000 7.20 7/1/99 1,022
Washington State Public Power
Supply System VRDN, Citicorp
Eagle Trust 944701
10,000 3.33 12/3/98 10,000
Washington State Refunding GO
VRDN,
Series R-92-A, BTP-101
6,000 3.30 12/3/98 6,000
------
46,515
------
Wisconsin--4.1%
Kenosha Unified School District
TRAN, Series 1998-99
4,700 3.38 9/28/99 4,700
Pleasant Prairie PCR VRDN,
Series 1995 B, Wisconsin
Electric Power Co. Project
(Wisconsin Electric Power Co.
Gtd.)
1,830 3.20 12/3/98 1,830
Racine Unified School District
TRAN, Series 1998/99
5,000 4.00 7/7/99 5,012
Wisconsin State GO VRDN, Series
16
19,000 3.63 12/3/98 19,000
------
30,542
------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------------------------------------
Principal
Amount/ Maturity Amortized
Shares Rate Date Cost/Value
- -------------------------------------------------------------------------------------------------
Wyoming--0.3%
Green River City PCR VRDN,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
<S> <C> <C> <C>
$ 2,225 3.30% 12/2/98 $ 2,225
- -------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $704,405
- -------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--2.3%
AIM Tax Free Money Market Fund
7,485 -- -- $ 7,485
Dreyfus Tax Exempt Cash Management Fund
400 -- -- 400
Federated Tax-Free Trust Money
Market Fund #15
8,540 -- -- 8,540
Federated Tax-Free Trust Money
Market Fund #73
820 -- -- 820
Provident Municipal Fund
137 -- -- 137
- -------------------------------------------------------------------------------------------------
TOTAL OTHER INVESTMENTS $ 17,382
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--96.5% $721,787
- -------------------------------------------------------------------------------------------------
Other assets, less liabilities--3.5% 26,364
- -------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $748,151
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost $4,248,022 $853,808 $1,696,592 $721,787
Repurchase agreements, at cost 50,000 800,000 -- --
Cash -- -- 1 --
Receivables:
Interest 29,537 4,711 3,295 7,234
Fund shares sold 855,792 58,639 9,868 34,158
Investment securities sold -- -- -- 9,300
Administrator 87 199 159 54
Other assets 3 82 41 6
- -------------------------------------------------------------------------------
TOTAL ASSETS 5,183,441 1,717,439 1,709,956 772,539
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund shares redeemed 362,967 57,382 7,388 18,820
Distributions to shareholders 17,157 6,429 7,083 1,792
Investment Securities Purchased -- -- -- 3,500
Accrued expenses:
Advisory fees 848 331 143 147
Administration fees 339 132 143 59
Custodian fees 34 11 14 6
Transfer agent fees 23 8 6 4
Other liabilities 183 276 202 60
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 381,551 64,569 14,979 24,388
- -------------------------------------------------------------------------------
NET ASSETS $4,801,890 $1,652,870 $1,694,977 $748,151
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $4,802,827 $1,652,855 $1,694,973 $748,096
Accumulated net realized gains
(losses) on investment transac-
tions (937) 15 4 55
- -------------------------------------------------------------------------------
NET ASSETS $4,801,890 $1,652,870 $1,694,977 $748,151
- -------------------------------------------------------------------------------
Total shares outstanding (no par
value), unlimited shares autho-
rized
Shares 4,795,767 1,652,855 1,694,866 748,096
Service Shares 7,060 -- -- --
Premier Shares -- -- 108 --
- -------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share
Shares $ 1.00 $ 1.00 $ 1.00 $ 1.00
Service Shares $ 1.00 -- -- --
Premier Shares -- -- $ 1.00 --
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $232,461 $74,343 $80,546 $24,823
- -------------------------------------------------------------------------------
Expenses:
Investment advisory fees 10,271 3,337 3,653 1,713
Administration fees 4,109 1,335 1,460 685
Custodian fees 425 179 182 86
Professional fees 244 80 73 38
Transfer agent fees 182 51 28 28
Registration fees 277 211 190 76
Trustee fees and expenses 117 40 33 18
Other 152 63 51 44
- -------------------------------------------------------------------------------
Total expenses 15,777 5,296 5,670 2,688
Less voluntary waivers of invest-
ment advisory fees -- -- (2,193) --
Less expenses reimbursable by Ad-
ministrator (1,328) (607) (544) (280)
- -------------------------------------------------------------------------------
Net expenses 14,449 4,689 2,933 2,408
- -------------------------------------------------------------------------------
Net investment income 218,012 69,654 77,613 22,415
Net realized gains on investment
transactions 430 108 2 61
- -------------------------------------------------------------------------------
Net increase in net assets re-
sulting from operations $218,442 $69,762 $77,615 $22,476
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Assets Government Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
-------------------------- -------------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets from:
Operations:
Net investment
income $ 218,012 $ 189,676 $ 69,654 $ 67,160 $ 77,613 $ 53,967 $ 22,415 $ 23,443
Net realized
gains on
investment
transactions 430 207 108 212 2 78 61 27
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations 218,442 189,883 69,762 67,372 77,615 54,045 22,476 23,470
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders-
Shares:
Net investment
income (217,888) (189,676) (69,654) (67,160) (77,613) (53,976) (22,415) (23,443)
Realized Gains -- -- -- -- -- -- (174) --
- --------------------------------------------------------------------------------------------------------------------------
Total
distributions (217,888) (189,676) (69,654) (67,160) (77,613) (53,976) (22,589) (23,443)
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders-
Service:
Net investment
income (124) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total
distributions (124) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Shareholder
transactions (at
$1.00 per share)-
Share:
Proceeds from
the sale of
shares 53,687,791 49,976,344 16,723,046 16,517,258 8,794,437 6,143,005 5,796,229 5,626,217
Reinvested
distributions 9,197 2,169 748 580 5,934 4,952 210 172
Cost of shares
redeemed (52,844,174) (49,216,663) (16,122,433) (16,735,164) (8,344,898) (5,744,991) (5,633,334) (5,679,764)
- --------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
shareholder
transactions-
Shares 852,814 761,850 601,361 (217,326) 455,473 402,966 163,105 (53,375)
- --------------------------------------------------------------------------------------------------------------------------
Shareholder share
transactions (at
$1.00 per share)-
Service:
Proceeds from
the sale of
shares 21,636 -- -- -- -- -- -- --
Cost of shares
redeemed (14,576) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
shareholder
transactions-
Service 7,060 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Shareholder share
transactions (at
$1.00 per share)-
Premier:
Proceeds from
the sale of
shares -- -- -- -- 110 -- -- --
Cost of shares
redeemed -- -- -- -- (1) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
shareholder
transactions-
Premier -- -- -- -- 109 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 860,304 762,057 601,469 (217,114) 455,584 403,044 162,992 (53,348)
Net assets--
beginning of
year 3,941,586 3,179,529 1,051,401 1,268,515 1,239,393 836,349 585,159 638,507
- --------------------------------------------------------------------------------------------------------------------------
Net assets--end
of year $ 4,801,890 $ 3,941,586 $ 1,652,870 $ 1,051,401 $1,694,977 $1,239,393 $ 748,151 $ 585,159
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Diversified Assets Portfolio
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
from:
Net investment
income (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.36% 5.42% 5.30% 5.78%(b) 3.92% 3.00% 3.80% 6.19% 8.01%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.35% 0.35% 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35%
Expenses, before
waivers and re-
imbursements 0.38% 0.36% 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36%
Net investment
income, net of
waivers and
reimbursements 5.31% 5.30% 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01%
Net investment
income, before
waivers and
reimbursements 5.28% 5.29% 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00%
Net assets at end
of year (in thou-
sands) $4,794,830 $3,941,586 $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of year $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
from:
Net investment
income (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 8.98%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.37%
Expenses, before
waivers and re-
imbursements 0.37%
Net investment
income, net of
waivers and
reimbursements 8.98%
Net investment
income, before
waivers and
reimbursements 8.98%
Net assets at end
of year (in thou-
sands) $1,871,713
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Service
-------
1998(c)
- ----------------------------------------------
<S> <C>
Net asset value, beginning of year $1.00
Income from investment operations:
Net investment income 0.02
- ----------------------------------------------
Total income from investment oper-
ations 0.02
- ----------------------------------------------
Distributions to shareholders
from:
Net investment income (0.02)
- ----------------------------------------------
Total distributions to sharehold-
ers (0.02)
- ----------------------------------------------
Net asset value, end of year $1.00
- ----------------------------------------------
Total return (a) 1.76%
Ratio to average net assets of:
(d)
Expenses, net of waivers and re-
imbursements 0.69%
Expenses, before waivers and re-
imbursements 0.72%
Net investment income, net of
waivers and reimbursements 4.94%
Net investment income, before
waivers and reimbursements 4.91%
Net assets at end of year (in
thousands) $ 7,060
- ----------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per
share received from Northern Trust Corporation.
(c) For the period July 1, 1998 (Service shares issue date) through November
30, 1998.
(d) Annualized for periods less than one year.
See accompanying notes to financial statements.
18
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Government Portfolio
<TABLE>
<CAPTION>
Shares
------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.04 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.04 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment
income (0.04) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- --------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.04) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.28% 5.31% 5.20% 5.64%(b) 3.78% 2.91% 3.91% 6.18% 7.89%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37%
Expenses, before
waivers and reim-
bursements 0.40% 0.37% 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46%
Net investment
income, net of
waivers and
reimbursements 5.22% 5.18% 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88%
Net investment
income, before
waivers and
reimbursements 5.17% 5.16% 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79%
Net assets at end
of year (in thou-
sands) $1,652,870 $1,051,401 $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of year $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.09
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.09
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment
income (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 8.63%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.50%
Expenses, before
waivers and reim-
bursements 0.50%
Net investment
income, net of
waivers and
reimbursements 8.63%
Net investment
income, before
waivers and
reimbursements 8.63%
Net assets at end
of year (in thou-
sands) $423,517
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
year.
(b) Total return for the year ended November 30, 1995 would have been 5.53%
absent the effect of a capital contribution equivalent to $.0011 per
share received from Northern Trust Corporation.
See accompanying notes to financial statements.
19
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Government Select Portfolio
<TABLE>
<CAPTION>
Shares
----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990(a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Total return (b) 5.38% 5.41% 5.31% 5.82%(c) 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before waiv-
ers and reimbursements 0.39% 0.39% 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and
reimbursements 5.31% 5.30% 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and
reimbursements 5.12% 5.11% 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $1,694,869 $1,239,393 $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Premier
----------
1998(e)
- ---------------------------------------
<S> <C>
Net asset value, begin-
ning of year $1.00
Income from investment
operations:
Net investment income 0.00
- ---------------------------------------
Total income from in-
vestment operations 0.00
- ---------------------------------------
Distributions to share-
holders from:
Net investment income (0.00)
- ---------------------------------------
Total distributions to
shareholders (0.00)
- ---------------------------------------
Net asset value, end of
year $1.00
- ---------------------------------------
Total return (b) 0.10%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.80%
Expenses, before waiv-
ers and reimbursements 0.99%
Net investment income,
net of waivers and
reimbursements 4.71%
Net investment income,
before waivers and
reimbursements 4.52%
Net assets at end of
year (in thousands) $108
- ---------------------------------------
</TABLE>
(a) For the period November 7, 1990 (commencement of operations) through
November 30, 1990.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per share
received from Northern Trust Corporation.
(d) Annualized for periods less than one year.
(e) For the period November 23, 1998 (Premier share issue date) through
November 30, 1998. Per share amounts from net investment income and
distributions from net investment income are less than $0.01 per share.
See accompanying notes to financial statements.
20
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
Shares
-----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from invest-
ment operations:
Net investment in-
come 0.03 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.03 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment in-
come (0.03) (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders (0.03) (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total return (a) 3.31% 3.44% 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.35% 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49%
Expenses, before
waivers and reim-
bursements 0.39% 0.39% 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49%
Net investment in-
come, net of waiv-
ers and
reimbursements 3.27% 3.38% 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03%
Net investment in-
come, before waiv-
ers and
reimbursements 3.23% 3.34% 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03%
Net assets at end
of year (in thou-
sands) $748,151 $585,159 $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the end of the year.
See accompanying notes to financial statements.
21
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
1. Organization
Northern Institutional Funds (the "Trust") is a Delaware business trust which
was formed on July 1, 1997, and is registered under the Investment Company Act
of 1940 (as amended) as an open-end management investment company. The Trust,
formerly known as The Benchmark Funds, changed its name effective July 15,
1998. The Trust includes seventeen portfolios, each with its own investment
objective. Prior to March 31, 1998, each portfolio was a series of The
Benchmark Funds, a Massachusetts business trust, which reorganized into the
Trust at the close of business on that date. The Northern Trust Company
("Northern") is the investment adviser for all of the Trust's money market
portfolios and is the custodian and transfer agent for the Trust. Goldman,
Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the money market
portfolios.
The Trust includes four diversified money market portfolios: Diversified
Assets Portfolio, Government Portfolio, Government Select Portfolio and Tax-
Exempt Portfolio (the "Portfolios"). Each of these Portfolios has three
classes of shares: Shares, Services Shares and Premier Shares. Each class is
distinguished by the level of administrative, liaison and transfer agent
service provided. As of November 30, 1998, Shares, Service Shares and Premier
Shares are outstanding for certain Portfolios.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(a) Investment Valuation
Investments are valued at amortized cost, which approximates market value.
Under the amortized cost method, investments purchased at a discount or
premium are valued by amortizing the difference between the original purchase
price and maturity value of the issue over the period to maturity.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
Each Portfolio may enter into joint repurchase agreements with non-affiliated
counterparties through a master repurchase agreement with Northern. Northern
administers and manages these repurchase agreements in accordance with and as
part of its duties under its investment advisory agreements with the
Portfolios and does not collect any additional fees from the Portfolios. The
Diversified Assets and Government Portfolios had entered into such joint
repurchase agreements as of November 30, 1998, as reflected in the
accompanying Statements of Investments.
(c) Interest Income
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(d) Federal Taxes
It is each Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and tax-exempt income to its
shareholders. Therefore, no provision is made for federal taxes.
At November 30, 1998, the Portfolios had approximately the following amount
of capital loss carryforwards for U.S. federal income tax purposes:
<TABLE>
<CAPTION>
Amount Year of Expiration
- -----------------------------------------------------
(in thousands)
<S> <C> <C>
Diversified Assets $939 2002
- -----------------------------------------------------
</TABLE>
This amount is available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
(e) Expenses
Expenses arising in connection with a specific Portfolio are allocated to that
Portfolio. Certain expenses arising in connection with a class of shares are
allocated to that class of shares.
Expenses incurred which do not specifically relate to an individual Portfolio
are allocated among the Portfolios based on each Portfolio's relative average
net assets for the year.
22
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
(f) Distributions
Each Portfolio's net investment income is declared daily as a dividend to
shareholders of record as of 3:00 p.m., Chicago time. Net realized short-term
capital gains, if any,
in excess of net capital loss carryforwards, are declared and distributed at
least annually.
Distributions of net investment income with respect to a calendar month
(including with respect to shares redeemed at any time during the month) are
made as soon as practicable following the end of the month. Distributions are
made by each Portfolio to Northern in cash or automatically reinvested in
additional shares of the Portfolio. Northern has undertaken to credit or
arrange for the crediting of such distributions to each shareholder's account
with Northern, its affiliates or its correspondents.
3. Advisory, Transfer Agency, Custodian and Other Agreements
As compensation for the services rendered as investment adviser, including the
assumption by Northern of the expenses related thereto, Northern is entitled
to a fee, computed daily and payable monthly, at an annual rate of .25% of
each Portfolio's average daily net assets.
Until further notice, Northern has voluntarily agreed to waive .15% of its
advisory fee for the Government Select Portfolio, reducing such fee to .10%
per annum. The effect of this waiver by Northern for the year ended November
30, 1998 was to reduce advisory fees as shown on the accompanying Statements
of Operations.
As compensation for the services rendered as custodian and transfer agent,
including the assumption by Northern of the expenses related thereto, Northern
receives compensation based on a pre-determined schedule of charges approved
by the Board.
4. Administration and Distribution Agreements
The Trust has an administration agreement with Goldman Sachs whereby each
Portfolio pays the administrator a fee, computed daily and payable monthly, at
an annual rate of .10% of each Portfolio's average daily net assets.
In addition during the fiscal year prior to April 1, 1998, if the sum of a
Portfolio's expenses, including the administration fee, but excluding the fees
payable to Northern pursuant to duties as advisor, and certain extraordinary
expenses (such as taxes, interest and indemnification expenses), exceeded on
an annualized basis .10% of a Portfolio's average daily net assets, Goldman
Sachs reimbursed each Portfolio for the amount of the excess pursuant to the
terms of the administration agreement. On April 1, 1998, upon the offering of
the Portfolios' Premier Shares and Service Shares, Goldman Sachs reimbursed,
each Portfolio's expense (including fees payable to Goldman Sachs as
administrator, but excluding the fees payable to Northern for its duties as
adviser and transfer agent, payments under the service plan for the
Portfolios' Premier Shares and Service Shares and certain extraordinary
expenses) which exceeded on an annualized basis .10% of the Portfolio's
average daily net assets.
No administration fees were waived under this agreement during the year ended
November 30, 1998. Furthermore, Goldman Sachs voluntarily agreed to reimburse
each Portfolio for certain expenses in the event that such expenses, as
defined, exceed on an annualized basis .10% of its average daily net assets.
Expenses reimbursed during the year ended November 30, 1998 are shown on the
accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
5. Service Plan
The Trust has adopted a Service Plan pursuant to which the Trust may enter
into agreements with Northern, its affiliates or other institutions
("Servicing Agents") under which they will render certain administrative
support services and in some cases personal and account maintenance services
for their customers or investors who beneficially own Service and Premier
Shares. As compensation under the Service Plan, the institution or other
financial intermediary receives a fee at an annual rate of up to .25% and .50%
of the average daily net asset value of the outstanding Service and Premier
Shares, respectively. Furthermore, the Service Plan also provides for the
payment of fees to Northern, Goldman Sachs or other institutions for
consulting services, technology and systems support services to the Service
and Premier Shares customers at an annual rate of up to .08% of the average
daily net asset value of such shares serviced.
6. Bank Loans
Prior to January 16, 1998, the Trust maintained a $5,000,000 revolving bank
credit line and a $15,000,000 conditional revolving credit line for liquidity
and other purposes. As of January 16, 1998, the Trust maintains a $100,000,000
revolving bank credit line and a $15,000,000 conditional revolving credit line
for liquidity and other purposes. Borrowings under this arrangement bear
interest at 1% above the federal funds rate and are secured by pledged
securities equal to or exceeding 120% of the outstanding balance.
There were no borrowings under this agreement during the year ended November
30, 1998.
23
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Report of Independent Auditors
To the Shareholders and Trustees of
Northern Institutional Funds
Money Market Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Diversified Assets,
Government, Government Select and Tax-Exempt Portfolios, comprising the Money
Market Portfolios of the Northern Institutional Funds, as of November 30,
1998, and the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period then ended and
financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of the
investments owned at November 30, 1998 by physical examination of the
securities held by the custodian and by correspondence with central
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Diversified Assets, Government, Government Select and Tax-Exempt Portfolios,
comprising the Money Market Portfolios of the Northern Institutional Funds, at
November 30, 1998, the results of their operations for the year then ended and
the changes in their net assets for each of the two years in the period then
ended and financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 15, 1999
24
<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's ("S&P") commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. The following summarizes the rating categories used by
Standard and Poor's for commercial paper that is a permissible investment for
the Portfolios:
"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper that is a permissible investment
for the Portfolios:
"Prime-1" - Issuers (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: leading market
positions in well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
The following summarizes the rating categories used by Duff & Phelps for
commercial paper that is a permissible investment for the Portfolios:
A-1
<PAGE>
"D-1+" - Debt possesses the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
Duff & Phelps employs three designations, "D-1+," "D-1" and "D-1-," within
the highest rating category.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations that are permissible investments
for the Portfolios:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation indicates a
satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal and interest of debt instruments with original maturities
of one year or less. The following summarizes the ratings used by Thomson
BankWatch for short-term obligations that are permissible investments for the
Portfolios:
"TBW-1" - This designation represents Thomson BankWatch's highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's second-highest
category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."
A-2
<PAGE>
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt that are permissible investments for the
Portfolios:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
PLUS (+) OR MINUS (-) - The "AA" rating classification may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt that are permissible investments for the Portfolios:
"Aaa" - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the "Aaa" securities.
Con. (---) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
A-3
<PAGE>
Note: Moody's applies numerical modifiers 1, 2, and 3 in the rating
classification "Aa". The modifier 1 indicates that the obligation ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of its generic
rating category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt that are permissible investments for
the Portfolios:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
To provide more detailed indications of credit quality, the "AA" and "A"
ratings may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate and
municipal bonds that are permissible investments for the Portfolio:
"AAA" - Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of credit risk and are
assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
To provide more detailed indications of credit quality, the Fitch IBCA
rating "AA" may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within the major rating category.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings for those
investments which are permissible investments for the Portfolios:
"AAA" - This designation indicates that the ability to repay principal and
interest on a timely basis is extremely high.
A-4
<PAGE>
"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.
PLUS (+) OR MINUS (-) - The ratings "AAA" and "AA" may include a plus or
minus sign designation which indicates where within the respective category the
issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes that are permissible investments for the Portfolios:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity to
pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes that are permissible investments for the Portfolios:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins of
protection that are ample although not so large as in the preceding group.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes that are permissible investments
for the Portfolios.
A-5
<PAGE>
================================================================================
Northern Institutional Funds
MONEY MARKET PORTFOLIOS
SERVICE SHARES
APRIL 1, 1999
================================================================================
<PAGE>
Northern Institutional Funds
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIOS SERVICE SHARES
. GOVERNMENT SELECT PORTFOLIO
-------------------------------------------------------------------------
. GOVERNMENT PORTFOLIO
-------------------------------------------------------------------------
. DIVERSIFIED ASSETS PORTFOLIO
-------------------------------------------------------------------------
. TAX-EXEMPT PORTFOLIO
-------------------------------------------------------------------------
Prospectus dated April 1, 1999
An investment in a Portfolio is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although each of the Portfolios seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Portfolios.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
1
<PAGE>
Contents
<TABLE>
- -------------------------------------------------------------------------------------
<S> <C> <C>
RISK/RETURN Portfolios
SUMMARY ...............................................
Information about the Government Select Portfolio 5
objectives, principal strategies ...............................................
and risk characteristics Government Portfolio 6
of each Portfolio ...............................................
Diversified Assets Portfolio 7
...............................................
Tax-Exempt Portfolio 8
-------------------------------------------------
Principal Investment Risks 9
-------------------------------------------------
Portfolio Performance 11
...............................................
Government Select Portfolio 12
...............................................
Government Portfolio 13
...............................................
Diversified Assets Portfolio 14
...............................................
Tax-Exempt Portfolio 15
-------------------------------------------------
Portfolio Fees and Expenses 16
- -------------------------------------------------------------------------------------
MANAGEMENT Investment Adviser 19
OF THE -------------------------------------------------
PORTFOLIOS Advisory Fees 20
Details that apply to the -------------------------------------------------
Portfolios as a group Portfolio Management 21
-------------------------------------------------
Other Portfolio Services 21
- -------------------------------------------------------------------------------------
ABOUT YOUR Purchasing and Selling Service Shares
ACCOUNT ...............................................
Investors 22
How to open, maintain ...............................................
and close an account Share Classes 22
...............................................
Opening an Account 22
...............................................
Selling Service Shares 23
-------------------------------------------------
Account Policies and Other Information
...............................................
Automatic Investment Arrangements 24
...............................................
Purchase and Redemption Minimums 24
...............................................
Calculating Share Price 24
...............................................
Timing of Purchase Requests 24
...............................................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Tax Identification Number ............................................. 25
In-Kind Purchases and Redemptions ..................................... 25
Miscellaneous Purchase Information .................................... 25
Timing of Redemption and Exchange Requests ............................ 26
Miscellaneous Redemption Information .................................. 26
Exchange Privileges ................................................... 27
Telephone Transactions ................................................ 27
Advance Notification of Large Transactions ............................ 27
Making Changes to Your Account Information ............................ 28
Business Day .......................................................... 28
Early Closings ........................................................ 28
Authorized Intermediaries ............................................. 28
Servicing Agents ...................................................... 28
------------------------------------------------------------------------------
Distributions and Taxes
..........................................................................
Distributions ......................................................... 30
Taxes ................................................................. 30
Other Tax Information ................................................. 31
-----------------------------------------------------------------------------
Year 2000 Issues 32
APPENDICES Appendix A
...........................................................................
Additional Information on Portfolio Risks, Securities and Techniques 33
------------------------------------------------------------------------------
Appendix B
...........................................................................
Portfolio Financial Highlights ..........................................41
------------------------------------------------------------------------------
FOR MORE
INFORMATION
Annual/Semiannual Reports 44
- --------------------------------------------------------------------------------
Statement of Additional Information 44
3
<PAGE>
Northern Institutional Funds (the "Trust") offers four money market portfolios
(each a "Portfolio") to institutional investors. Each Portfolio is authorized to
offer three classes of shares: Service Shares, Shares and Premier Shares. Shares
and Premier Shares are described in separate prospectuses.
The descriptions on the following pages may help you choose the Portfolio that
best fits your investment needs. Keep in mind, however, that no Portfolio can
guarantee it will meet its investment objective and no Portfolio should be
relied upon as a complete investment program. The Trust's six fixed income, one
balanced and six equity portfolios are described in a separate prospectus.
The Portfolios seek to maintain a stable net asset value of $1.00 per share.
Consistent with this policy, each of the Portfolios:
. Limits its dollar-weighted average portfolio maturity to 90 days or less;
. Buys securities with remaining maturities of 397 days or less (except for
certain variable and floating rate instruments and securities
collateralizing repurchase agreements); and
. Invests only in U.S. dollar-denominated securities that represent minimal
credit risks.
In addition, each Portfolio limits its investments to "Eligible Securities" as
defined by the Securities and Exchange Commission ("SEC"). Eligible Securities
include, generally, securities that either (a) have short-term debt ratings at
the time of purchase in the two highest rating categories or (b) are issued or
guaranteed by, or otherwise allow a Portfolio to demand payment from, an issuer
with those ratings. Securities that are unrated (including securities of issuers
that have long-term but not short-term ratings) may be deemed to be Eligible
Securities if determined to be of comparable quality by The Northern Trust
Company under the direction of the Board of Trustees. Securities that are in the
highest short-term rating category (and comparable unrated securities) are
called "First Tier Securities." Under normal circumstances, the Government
Select, Government and Diversified Assets Portfolios intend to limit purchases
of securities to First Tier Securities. Securities in which the Portfolios may
invest may not earn as high a level of income as long-term or lower quality
securities, which generally have greater market risk and more fluctuation in
market value.
In addition to the instruments described in the table above and on the pages
below, each Portfolio may use various investment techniques in seeking its
investment objective. You can learn more about these techniques and related
risks by reading Appendix A to this Prospectus and the Statement of Additional
Information.
4
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT SELECT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
- --------------------------------------------------------------------------------
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks its objective by investing exclusively in securities issued
or guaranteed as to principal and interest by the U.S. government, its agencies
or instrumentalities. Under normal market conditions, the Portfolio will seek to
acquire only those U.S. government securities the interest upon which is
generally exempt from state income taxation. These securities include
obligations issued by the U.S. Treasury and certain U.S. government agencies and
instrumentalities, such as the Federal Home Loan Bank and the Federal Farm
Credit Banks Funding Corp.
When appropriate securities which are exempt from state taxes are unavailable,
the Portfolio may also invest in non-exempt U.S. government securities and cash
equivalents including money market funds and time deposits with a maturity of
three months or less, and hold uninvested cash.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
5
<PAGE>
GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Government Portfolio seeks its objective by investing exclusively in
marketable securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
backed by such securities. The Portfolio may also hold custodial receipts
representing interests in U.S. government securities.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
6
<PAGE>
DIVERSIFIED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Diversified Assets Portfolio seeks its objective by investing in a broad
range of government, bank and commercial obligations that are available in the
money markets, including:
. U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
. U.S. dollar-denominated obligations of foreign commercial banks where such
banks have total assets in excess of $5 billion;
. High quality commercial paper and other obligations issued or guaranteed
by U.S. and foreign corporations and other issuers;
. Corporate bonds, notes, paper and other instruments that are of high
quality;
. Asset-backed securities;
. Securities issued or guaranteed as to principal and interest by the U.S.
government or by its agencies or instrumentalities and custodial receipts
with respect thereto;
. U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities;
. Repurchase agreements relating to the above instruments; and
. Municipal securities issued or guaranteed by state or local governmental
bodies.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
7
<PAGE>
TAX-EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide its shareholders, to the extent consistent with
the preservation of capital and prescribed portfolio standards, with a high
level of income exempt from Federal income tax by investing primarily in
municipal instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks to achieve its objective by investing primarily in
high-quality short-term instruments, the interest on which is exempt from
Federal income tax ("municipal instruments"). These may include:
. Fixed and variable rate notes and similar debt instruments;
. Tax-exempt commercial paper;
. Rated and unrated municipal bonds, notes, paper or other instruments; and
. Municipal bonds and notes which are guaranteed as to principal and
interest or backed by the U.S. government or its agencies or
instrumentalities.
Under normal market conditions, at least 80% of the Portfolio's annual gross
income will be derived from municipal instruments. Interest earned by the
Portfolio on "private activity bonds" (if any) that is treated as an item of tax
preference under the Federal alternative minimum tax ("AMT obligations") will
not be deemed to have been derived from municipal instruments for the purposes
of determining whether the Portfolio meets this policy.
During extraordinary circumstances, however, the Portfolio may take a temporary
defensive posture and hold uninvested cash or invest in AMT obligations and
taxable short-term securities without limitation.
Taxable investments will consist exclusively of those instruments that may be
purchased by the Diversified Assets Portfolio including U.S. dollar-denominated
obligations of U.S. banks, foreign commercial banks and securities issued or
guaranteed by foreign governments; high quality commercial paper and other
obligations; high quality corporate bonds and notes; asset-backed securities;
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and custodial receipts with respect thereto; and repurchase
agreements relating to the above instruments.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
8
<PAGE>
RISK/RETURN SUMMARY
Principal Investment Risks
All investments carry some degree of risk which will affect the value of a
Portfolio's investments, investment performance, yield and the price of
its shares.
An investment in a Portfolio is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although each of the Portfolios seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Portfolios.
The following summarizes the principal risks that may affect the
Portfolios.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO ALL
PORTFOLIOS
Money market risk is the risk that a Portfolio will not be able to maintain a
net asset value per share of $1.00 at all times.
Interest rate risk is the risk that during periods of rising interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be lower
than prevailing market rates; in periods of falling interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be
higher.
Counterparty risk is the risk that an issuer of a security, or a bank or other
financial institution that has entered into a repurchase agreement, may default
on its payment obligations.
Credit enhancement risk is the risk that changes in credit quality of a bank or
other financial institution could cause a Portfolio's investments in securities
backed by letters of credit or other credit enhancements issued by such bank or
institution to decline in value.
Management risk is the risk that a strategy used by the investment management
team may fail to produce the intended results.
Liquidity risk is the risk that a Portfolio will not be able to pay redemption
proceeds on the same Business Day that shares are redeemed, because of unusual
market conditions, an unusually high volume of redemption requests or other
reasons.
Year 2000 risk is the risk that a Portfolio's operations or value will be
adversely affected by the "Year 2000 Problem." (For more information, please see
"Year 2000 Issues" on page 32.)
9
<PAGE>
Principal Investment Risks continued
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE GOVERN-
MENT SELECT
AND GOVERNMENT
PORTFOLIOS
Government securities risk is the risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE DIVERSIFIED
ASSETS AND
TAX-EXEMPT
PORTFOLIOS
Prepayment risk is the risk that asset-backed securities may be more rapidly
repaid than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying obligations. During
periods of declining interest rates, prepayment of obligations underlying asset-
backed securities can be expected to accelerate.
Accordingly, a Portfolio's ability to maintain positions in such securities will
be affected by reductions in the principal amount of such securities resulting
from prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to generally prevailing interest rates at that
time.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES TO THE
DIVERSIFIED
ASSETS PORTFOLIO
Foreign securities risk is the risk that a foreign security, even if it is a
U.S. dollar-denominated foreign security, could lose value as a result of
political, financial and economic events in foreign countries, less stringent
foreign securities regulations and accounting and disclosure standards, or other
factors.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO THE
TAX-EXEMPT
PORTFOLIO
Concentration risk is the risk that the Portfolio may be more sensitive to an
adverse economic, business or political development if it invests more than 25%
of its assets in the municipal instruments of issuers in the same state, in
municipal instruments the interest upon which is paid solely from revenues of
similar projects, or in industrial development bonds.
Tax risk is the risk that future legislative or administrative changes or court
decisions may materially affect the ability of the Portfolio to pay tax-exempt
dividends.
More information about the risks of investing in the Portfolios is provided in
Appendix A to this Prospectus. You should carefully consider the risks discussed
in this section and Appendix A before investing in a Portfolio.
10
<PAGE>
RISK/RETURN SUMMARY
Portfolio Performance
Service Shares of the Portfolios have less than one calendar year's
performance. For this reason, the performance information shown below is
for another class of shares (Shares) that is not offered in this
Prospectus because both Service Shares and Shares will be invested in the
same portfolio of securities. In reviewing this performance information,
however, you should be aware that Service Shares have a 0.33% (annualized)
Service Fee and a 0.02% (annualized) Transfer Agency Fee, while Shares
have neither of these fees. If the expenses of the Service Shares were
reflected, performance would be substantially lower.
The bar charts and tables below provide an indication of the risks of
investing in a Portfolio by showing changes in the performance of a
Portfolio's Shares from year to year. The bar charts and tables assume
reinvestmentof dividends and distributions. A Portfolio's past performance
is not necessarily an indication of how the Portfolio will per- form in
the future. Performance reflects certain expense limitations (as set forth
in the Footnotes to the "Portfolio Fees and Expenses" table on page 17)
that were in effect during the periodspresented. If expense limitations
were not in place, a Portfolio's performance would have been reduced.
11
<PAGE>
Portfolio Performance continued
GOVERNMENT SELECT PORTFOLIO
Calendar Year Total Return (Shares)
1991 5.95%
1992 3.68%
1993 3.04%
1994 4.09%
1995 5.82%
1996 5.29%
1997 5.44%
1998 5.40%
Best and Worst Quarterly Performance (Shares):
---------------------
Best Quarter Return
---------------------
Q2 '95
+1.47%
---------------
Q2 '93
+0.74%
----------------------
Worst Quarter Return
----------------------
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
Since
Inception
1-Year 5-Year (11/7/90)
--------------------------------------------------------------------------
Government Select Portfolio 5.40% 5.21% 4.86%
--------------------------------------------------------------------------
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.86%.
12
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT PORTFOLIO
Calendar Year Total Return (Shares)
1988 7.09%
1989 9.00%
1990 8.13%
1991 6.10%
1992 3.84%
1993 2.94%
1994 3.93%
1995 5.65%
1996 5.17%
1997 5.34%
1998 5.30%
Best and Worst
Quarterly Performance (Shares):
---------------------
Best Quarter Return
---------------------
Q2 '89
+2.32%
---------------
Q4 '93
+0.72%
----------------------
Worst Quarter Return
----------------------
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
Since
Inception
1-Year 5-Year 10-Year (10/28/85)
--------------------------------------------------------------------------
Government Select Portfolio 5.30% 5.08% 5.53% 5.83%
--------------------------------------------------------------------------
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.81%.
13
<PAGE>
Portfolio Performance continued
DIVERSIFIED ASSETS PORTFOLIO
Calendar Year Total Return (Shares)
1988 7.53%
1989 9.35%
1990 8.27%
1991 6.14%
1992 3.71%
1993 3.02%
1994 4.05%
1995 5.79%
1996 5.26%
1997 5.45%
1998 5.40%
Best and Worst
Quarterly Performance (Shares):
----------------------
Best Quarter Return
----------------------
Q4 '89
+2.12%
------------------------
Q1 '93
+0.74%
------------------------
Worst Quarter Return
------------------------
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
Since
Inception
1-Year 5-Year 10-Year (7/27/82)
- --------------------------------------------------------------------------------
Diversified Assets Portfolio 5.40% 5.19% 5.63% 6.12%
- --------------------------------------------------------------------------------
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 5.00%. You
may call 1-800-637-1380 to obtain the current 7-day yield for Service Shares of
the Portfolio.
14
<PAGE>
RISK/RETURN SUMMARY
TAX-EXEMPT PORTFOLIO
Calendar Year Total Return (Shares)
1988 5.09%
1989 6.23%
1990 5.86%
1991 4.54%
1992 2.91%
1993 2.27%
1994 2.61%
1995 3.73%
1996 3.33%
1997 3.45%
1988 3.29%
Best and Worst
Quarterly Performance (Shares):
- --------------------
Best Quarter Return
- --------------------
Q2' 89
+ 1.64%
--------------------
Q1' 94
+ 0.52%
--------------------
Worst Quarter Return
--------------------
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
Since
Inception
1-Year 5-Year 10-Year (8/12/83)
- --------------------------------------------------------------------------------
Tax-Exempt Portfolio 3.29% 3.28% 3.81% 4.08%
- --------------------------------------------------------------------------------
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 3.37%.
15
<PAGE>
Portfolio Fees and Expenses
This table describes the fees and expenses that you may pay
if you buy and hold Service Shares of the Portfolios. Please
note that it does not reflect any charges which may be
imposed by The Northern Trust Company, its affiliates,
correspondent banks and other institutions on their Customers
(as defined on page 22). (For more information, please see
"Account Policies and Other Information" on page 24.)
Shareholder Fees (fees paid directly from your investment)
----------------------------------------------------------
<TABLE>
<CAPTION>
Sales Charge
Sales Charge (Load)
(Load) Imposed on
Imposed on Deferred Sales Reinvested Redemption Exchange
Portfolio Purchases Charge (Load) Distributions Fees Fees
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
GOVERNMENT SELECT None None None None None
- --------------------------------------------------------------------------------------------
GOVERNMENT None None None None None
- --------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS None None None None None
- --------------------------------------------------------------------------------------------
TAX-EXEMPT None None None None None
- --------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
RISK/RETURN SUMMARY
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)(1)
-----------------------------------------------------
<TABLE>
<CAPTION>
Other Operating Expenses Total Annual
------------------------------------------ Total Other Portfolio
Management Distribution Servicing Transfer Other Operating Operating
Portfolio Fees(2) (12b-1)Fees Agent Fees Agency Fees Expenses(3) Expenses Expenses(4)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SELECT 0.25% None 0.25% 0.01% 0.22% 0.48% 0.73%
- -------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT 0.25% None 0.25% 0.01% 0.23% 0.49% 0.74%
- -------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS 0.25% None 0.25% 0.01% 0.21% 0.47% 0.72%
- -------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT 0.25% None 0.25% 0.01% 0.22% 0.48% 0.73%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOOTNOTES
(1) The Portfolios annual operating expenses are based on actual fees and
estimated expenses for the current fiscal year.
(2) As of the date of this Prospectus, The Northern Trust Company is
voluntarily waiving a portion of its management fees for the Government
Select Portfolio. As a result of the fee waiver, actual management fees
paid by the Government Select Portfolio are currently 0.10% of the
Portfolio's average daily net assets. Fee waivers may be terminated at any
time at the option of The Northern Trust Company.
(3) "Other Expenses" include (1) administration fees and all other ordinary
operating expenses of the Portfolios not listed above and (2) the payment
of a fee to Northern, Goldman Sachs & Co. ("Goldman Sachs") or other
institutions under a Service Plan equal to 0.08% of the average daily net
asset value of the Service Shares for systems support and related services.
Goldman Sachs is entitled to an administration fee from each Portfolio at
an annual rate of 0.10% of each Portfolio's average daily net assets.
Goldman Sachs has agreed to reimburse expenses (including fees payable to
Goldman Sachs as administrator, but excluding management fees, transfer
agency fees, payments under the Service Plan for Service Shares and Premier
Shares and extraordinary expenses) which exceeded on an annualized basis
0.10% of each Portfolio's average daily net assets. As a result of the
expense reimbursement, estimated "Other Expenses" are currently 0.18% of
each Portfolio's average daily net assets.
(4) As a result of the fee waivers and expense reimbursements, estimated actual
total annual operating expenses for the Portfolios are as set forth below.
Fee waivers (and voluntary expense reimbursements, if applicable) may be
terminated at any time at the option of Northern or Goldman Sachs. If this
occurs, "Other Operating Expenses" may increase without shareholder
approval.
Total
Annual
Operating
Portfolio Expenses
- ----------------------------------
GOVERNMENT SELECT 0.54%
- ----------------------------------
GOVERNMENT 0.69%
- ----------------------------------
DIVERSIFIED ASSETS 0.69%
- ----------------------------------
TAX-EXEMPT 0.69%
- ----------------------------------
17
<PAGE>
Portfolio Fees and Expenses continued
EXAMPLE
The following Example is intended to help you compare the cost of investing in
Service Shares of a Portfolio (without fee waivers and expense reimbursements)
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated (with reinvestment of all dividends and distributions) and then redeem
all of your Service Shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that a Portfolio's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
Portfolio 1 Year 3 Years
- ---------------------------------------------
GOVERNMENT SELECT
Service Shares $75 $233
- ---------------------------------------------
GOVERNMENT
Service Shares $76 $237
- ---------------------------------------------
DIVERSIFIED ASSETS
Service Shares $74 $230
- ---------------------------------------------
TAX-EXEMPT
Service Shares $75 $233
- ---------------------------------------------
18
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
The Northern Trust Company ("Northern" or the "Investment Adviser"), an Illinois
state-chartered bank and member of the Federal Reserve System, serves as
investment adviser for the Portfolios. The Investment Adviser is located at 50
South LaSalle Street, Chicago, Illinois 60675 and is a wholly owned subsidiary
of Northern Trust Corporation, a bank holding company. As of December 31, 1998,
Northern Trust Corporation and its subsidiaries had approximately $27.9 billion
in assets, $18.2 billion in deposits and employed over 8,150 persons.
Northern and its affiliates administrated in various capacities (including as
master trustee, investment manager or custodian) approximately $1.26 trillion of
assets as of December 31, 1998, including approximately $236 billion of assets
for which Northern and its affiliates had investment management responsibility.
Under its Advisory Agreement with the Trust, the Investment Adviser, subject to
the general supervision of the Trust's Board of Trustees, is responsible for
making investment decisions for the Portfolios and for placing purchase and sale
orders for portfolio securities.
19
<PAGE>
Advisory Fees
As compensation for its advisory services and its assumption of related
expenses, the Investment Adviser is entitled to an advisory fee from the
Portfolios, computed daily and payable monthly, at annual rates set forth in the
table below (expressed as a percentage of each Portfolio's respective average
daily net assets). The table also reflects the advisory fees (after voluntary
fee waivers) paid by the Portfolios as a percentage of net assets for the fiscal
year ended November 30, 1998.
Advisory Fee Paid
Contractual for Fiscal Year
Portfolio Rate Ended 11/30/98
- ---------------------------------------------------------
GOVERNMENT SELECT 0.25% 0.10%
- ---------------------------------------------------------
GOVERNMENT 0.25% 0.25%
- ---------------------------------------------------------
DIVERSIFIED ASSETS 0.25% 0.25%
- ---------------------------------------------------------
TAX-EXEMPT 0.25% 0.25%
- ---------------------------------------------------------
The difference, if any, between the contractual advisory fees and the actual
advisory fees paid by the Portfolios reflects that the Investment Adviser did
not charge the full amount of the advisory fees to which it would have been
entitled. The Investment Adviser may discontinue or modify its voluntary
limitations in the future at its discretion.
20
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
Portfolio Management
The Investment Adviser employs a team approach to the investment management of
the Portfolios, relying upon investment professionals under the leadership of
James M. Snyder, Chief Investment Officer and Executive Vice President of
Northern. Mr. Snyder oversees the management of all fixed income, equity and
money market assets managed by the Investment Adviser. Mr. Snyder joined
Northern Trust in 1980.
Other Portfolio Services
Northern also serves as transfer agent ("Transfer Agent") and custodian for each
Portfolio. As Transfer Agent, Northern performs various administrative servicing
functions, and any shareholder inquiries should be directed to it. Goldman Sachs
serves as the Portfolios' administrator and distributor. In addition, Northern
and its affiliates, banks, trust companies and other institutions and
organizations may enter into agreements for the provision of administrative
support services for Service Share investors. Northern, Goldman Sachs and other
institutions may provide consulting, technology and systems support services and
receive fees relating to cash management or sweep account services under a
Service Plan described under "Account Policies and Other Information - Servicing
Agents" on page 28. Goldman Sachs does not receive any compensation from the
Trust for its distribution services. Pursuant to an SEC order, the Portfolios
may engage in portfolio securities transactions with Goldman Sachs in the
ordinary course of business.
It is expected that on or after May 1, 1999, First Data Distributors, Inc. will
replace Goldman Sachs as the Portfolios' distributor. It is also expected that
Northern and First Data Investor Services Group, Inc. (an affiliate of First
Data Distributors, Inc.) will replace Goldman Sachs to serve as the Portfolios'
co-administrators on or after such date, at substantially the same cost to the
Portfolios.
21
<PAGE>
Purchasing and Selling Service Shares
INVESTORS
Institutional investors, which are acting on behalf of their customers, clients,
employees, participants and others ("Customers") and have agreed to provide (or
arrange for the provision of) administrative support services to Customers under
a servicing agreement with the Trust ("Servicing Agreement"), may invest in
Service Shares of the Portfolios through their institutional accounts at
Northern or an affiliate. They may also establish accounts directly with the
Trust. There is no sales charge imposed on investments. Institutional investors
("Institutions") include:
. Northern and its affiliates;
. Defined contribution plans having at least $30 million in assets or annual
contributions of at least $5 million; and
. Other institutions and organizations.
SHARE CLASSES
Each Portfolio offers three classes of shares: Service Shares, Shares and
Premier Shares. Shares and Premier Shares are described in separate
prospectuses.
Shares of each class bear their pro rata portion of all operating expenses paid
by a Portfolio, except amounts payable under the Service Plan that has been
adopted for the Portfolios' Service Shares and Premier Shares and transfer
agency fees. Because of these class-specific expenses, the performance of the
Service Shares of a Portfolio described in this Prospectus is expected to be
lower than the performance of the Shares of the same Portfolio and higher than
the performance of the same Portfolio's Premier Shares.
OPENING AN ACCOUNT
You can purchase Service Shares of the Portfolios through your institutional
account at Northern(or an affiliate) or you may open an account directly with
the Trust.
Through an Institutional Account.
If you are opening an institutional account at Northern, a Northern
representative can assist you with all phases of your investment. The Trust does
not require a minimum initial investment for Institutions that invest through
their accounts at Northern. To purchase Service Shares through your account,
contact your Northern representative for further information.
Directly from the Trust.
An Institution may open a shareholder account and purchase Service Shares
directly from the Trust with an aggregate minimum initial investment of at least
$5 million in one or more Portfolios. There is no minimum for subsequent
investments.
By Mail.
Read this Prospectus carefully.
Complete and sign the new account application.
Include a certified corporate resolution (or other acceptable evidence of
authority).
Enclose a check or Federal Reserve draft payable to the specific Portfolio. If
investing in more than one Portfolio, please include a separate check for each.
Mail your check, corporate resolution and completed application to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
All checks must be payable in U.S. dollars and drawn on a bank located in the
United States. Cash and third party checks are not acceptable.
22
<PAGE>
ABOUT YOUR ACCOUNT
By Telephone.
Read this Prospectus carefully.
Call the Transfer Agent at 1-800-637-1380.
To open a new account please provide:
. The name of the Portfolio in which you'd like to invest
. The number of Service Shares or dollar amount to be invested
. The method of payment
To add to an existing account, please provide:
. The Institution's name
. Your Account Number
By Wire or Automated Clearing House Transfer ("ACH Transfer").
To open a new account:
Call the Transfer Agent at 1-800-637-1380 for instructions.
For more information about the purchase of Service Shares, call the Transfer
Agent at 1-800-637-1380.
To add to an existing account:
Have your bank wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account No.)
(Reference Shareholder's Name)
SELLING SERVICE SHARES
Through an Institutional Account.
Institutions may sell (redeem) Service Shares through their institutional
account by contacting their Northern account representative.
Directly through the Trust.
Institutions that purchase Service Shares directly from the Trust may redeem
their Service Shares through the Transfer Agent in one of the following ways:
By Mail.
Send a written request to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
The letter of instruction must include:
. The signature of a duly authorized person
. Your account number
. The name of the Portfolio
. The number of Service Shares or the dollar amount to be redeemed
By Telephone.
. Call the Transfer Agent at 1-800-637-1380 for instructions.
. During periods of unusual economic or market activity, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow the procedures outlined above under "Selling Service Shares
By Mail."
By Wire.
. Call the Transfer Agent at 1-800-637-1380 for instructions.
. You must first have authorization for expedited wire redemption.
. The minimum amount that may be redeemed by this method is $10,000.
23
<PAGE>
Account Policies and Other Information
Automatic Investment Arrangements. Institutions may purchase Service Shares
through their institutional accounts at Northern either by directing automatic
investment of cash balances in excess of certain agreed upon amounts or by
directing investments from time to time on a non-automatic basis. Northern will
place a purchase order generated under an automatic investment direction either
on the Business Day that funds are available in the account or on the next
Business Day, depending upon the terms of the automatic investment arrangement.
Similarly, Northern will place a redemption order generated under an automatic
investment direction either on the Business Day Northern calculates the
redemption amount needed to bring the account balance up to the agreed upon
amount or on the next Business Day, depending upon the terms of the automatic
investment arrangement. If a redemption order is placed on the next Business
Day, Northern will normally provide funds by provisionally crediting the
Institution's account on the day the calculation is made. Institutions should
contact Northern for more information about their automatic investment
arrangements.
Purchase and Redemption Minimums. There is no purchase minimum for Institutions
purchasing Service Shares through their institutional account at Northern. For
Institutions opening an account directly with the Trust, there is a minimum
initial investment of $5 million in one or more Portfolios. There is no minimum
for subsequent investments. A $10,000 minimum applies for redemptions by wire.
The Trust reserves the right to waive purchase and redemption minimums and to
determine the manner in which a minimum is satisfied.
Calculating Share Price. The Trust issues Service Shares and redeems Service
Shares at net asset value ("NAV"). The NAV for each share class of a Portfolio
is calculated by dividing the value of net assets attributed to that class by
the number of outstanding shares of the class. The NAV for each Portfolio and
class is calculated as of 3:00 p.m., Chicago time, each Business Day. The NAV
used in determining the price of your Service Shares is the one calculated after
your purchase, exchange or redemption order is received or accepted as described
below.
Each Portfolio seeks to maintain an NAV of $1.00 per share by valuing the
obligations held by it at amortized cost in accordance with SEC regulations.
Amortized cost will normally approximate market value.
Timing of Purchase Requests. Requests accepted by the Transfer Agent or other
authorized intermediary by 1:00 p.m., Chicago time, on any Business Day will be
executed the same day, provided that either:
. The Transfer Agent receives the purchase price in Federal or other immediately
available funds prior to 1:00 p.m., Chicago time, the same Business Day;
. The order is accepted by an authorized intermediary and payment is to be made
by the close of the same Business Day in Federal or other immediately
available funds according to procedures authorized by the Trust; or
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ABOUT YOUR ACCOUNT
. Payment in Federal or other immediately available funds is received by the
close of the same Business Day in an institutional account maintained with
Northern or an affiliate.
Orders received by the Transfer Agent or other authorized intermediary on a
non-Business Day or after 1:00 p.m., Chicago time, on a Business Day will be
executed on the next Business Day, provided that payment is made as noted above.
We consider requests to be in "good order" when all required documents are
properly completed, signed and received, including a certified corporate
resolution or other acceptable evidence of authority. If an Institution pays for
Service Shares by check, Federal funds generally will become available within
two Business Days after a purchase order is received.
If payment is not received as described above from an authorized intermediary on
the same Business Day of acceptance of an order by the authorized intermediary,
the authorized intermediary may be liable for fees and losses and the
transaction may be cancelled.
In certain circumstances, the Trust may advance the time by which purchase
orders must be received. See "Early Closings" on page 28.
Tax Identification Number. Federal regulations require you to provide to the
Transfer Agent a taxpayer identification number when you open an account.
Purchase orders without such a number or an indication that a number has been
applied for will not be accepted. If you have applied for a number, you must
provide it to the Transfer Agent within 60 days of the date of the order.
In-Kind Purchases and Redemptions. The Trust reserves the right to accept
payment for Service Shares in the form of securities that are permissible
investments for a Portfolio. The Trust also reserves the right to pay
redemptions by a distribution "in-kind" of securities (instead of cash) from a
Portfolio. See the Statement of Additional Information for further information
about the terms of these purchases and redemptions.
Miscellaneous Purchase Information.
. Institutions are responsible for transmitting purchase orders to the Transfer
Agent and delivering required funds on a timely basis.
. Institutions are responsible for all losses and expenses of a Portfolio in the
event of any failure to make payment according to the procedures outlined in
this Prospectus. Northern may redeem shares from any account it maintains to
protect the Portfolios and Northern against loss. In addition, a $20 charge
will be imposed if a check does not clear.
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Account Policies and Other Information continued
. Service Shares of a Portfolio are entitled to the dividends declared by the
Portfolio beginning on the Business Day the purchase order is executed,
provided payment in Federal or other immediately available funds is received
by the Transfer Agent by the time designated above.
. The Trust reserves the right to reject any purchase order. The Trust also
reserves the right to change or discontinue any of its purchase procedures.
Timing of Redemption and Exchange Requests. Redemption and exchange requests
will be effected at the NAV next determined after your exchange or redemption
order is received in good order. Good order means that the request includes the
following: the account number and Portfolio name; the amount of the transaction
(as specified in dollars or shares); and the signature of a duly authorized
person (except for telephone and wire redemptions). See "Account Policies and
Other Information -- Making Changes to Your Account Information."
If either the Transfer Agent or Northern (with respect to your institutional
account) receives a redemption order by 1:00 p.m., Chicago time, on a Business
Day, redemption proceeds will normally be paid in Federal funds or other
immediately available funds wired or sent by check to you or, if you so choose,
to your institutional account with Northern, on the same Business Day.
Redemption orders received after 1:00 p.m., Chicago time, will be effected the
next Business Day. Proceeds for redemption orders received on a non-Business Day
will normally be sent on the next Business Day after receipt in good order.
In certain circumstances, the Trust may advance the time by which redemption and
exchange orders must be received. See "Early Closings" on page 28.
Miscellaneous Redemption Information. All redemption proceeds will be sent by
check unless the Transfer Agent is directed otherwise. Redemption proceeds may
also be wired. A redemption request may not be processed if a shareholder has
failed to submit a completed and properly executed new account application,
including a corporate resolution or other acceptable evidence of authority.
. The Trust reserves the right to defer crediting, sending or wiring redemption
proceeds for up to 7 days after receiving the redemption order if, in its
judgment, an earlier payment could adversely affect a Portfolio.
. If you are redeeming recently purchased Service Shares, your redemption
request may not be honored until your check or electronic transaction has
cleared. This may delay your transaction for up to 15 days.
. Institutions are responsible for transmitting redemption orders to the
Transfer Agent and crediting their Customers' accounts with redemption
proceeds on a timely basis.
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ABOUT YOUR ACCOUNT
. Redemption requests by mail must be signed by a person authorized by
acceptable documentation on file with the Transfer Agent.
. Dividends on Service Shares are earned through and including the day prior to
the day on which they are redeemed.
. The Trust reserves the right to redeem Service Shares held by any shareholder
who provides incorrect or incomplete account information or when such
involuntary redemptions are necessary to avoid adverse consequences to the
Trust and its shareholders.
. The Trust may require any information reasonably necessary to ensure that a
redemption request has been duly authorized.
. The Trust reserves the right to change or discontinue any of its redemption
procedures.
Exchange Privileges. Institutions and their Customers (to the extent permitted
by their account agreements) may exchange Service Shares of a Portfolio for
Service Shares of another Portfolio. The registration of both accounts involved
must be identical. A $1,000 minimum investment applies. An exchange is a
redemption of shares you own and the purchase of shares you are acquiring. It is
considered a taxable event and may result in a gain or loss.
The Trust reserves the right to change or discontinue the exchange privilege at
any time upon 60 days written notice to shareholders and to reject any exchange
request. Exchanges are only available in states where an exchange can legally be
made. Before making an exchange you should read the prospectus for the shares
you are acquiring.
Telephone Transactions. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, the Transfer Agent has adopted
procedures in an effort to establish reasonable safeguards against fraudulent
telephone transactions. If reasonable measures are taken to verify that
telephone instructions are genuine, the Trust and its service providers will not
be responsible for any loss resulting from fraudulent or unauthorized
instructions received over the telephone. In these circumstances, shareholders
will bear the risk of loss. During periods of unusual market activity, you may
have trouble placing a request by telephone. In this event, consider sending
your request in writing.
The proceeds of redemption orders received by telephone will be sent by check,
wire or transfer according to proper instructions. All checks will be made
payable to the shareholder of record and mailed only to the shareholder's
address of record.
The Trust reserves the right to refuse a telephone redemption.
Advance Notification of Large Transactions. The Trust requests that an
Institution give advance notice to the Transfer Agent by 11:00 a.m., Chicago
time, if it intends to place a purchase or redemption order of $5 million or
more on a Business Day.
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Account Policies and Other Information continued
Making Changes to Your Account Information. You may make changes to wiring
instructions, address of record, or other account information only in writing.
These instructions must be accompanied by a certified corporate resolution,
signature guarantee from an institution participating in the Stock Transfer
Agency Medallion Program ("STAMP"), or other acceptable evidence of authority.
In accordance with SEC regulations, the Trust and Transfer Agent may charge a
shareholder reasonable costs in locating a shareholder's current address.
Business Day. A "Business Day" is each Monday through Friday when Northern or
the New York Stock Exchange is open for business. A "Business Day" does not
include a holiday observed by Northern and the Exchange. In 1999 these holidays
are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
Early Closings. The Portfolios reserve the right to cease, or to advance the
time for, accepting purchase, redemption or exchange orders for same Business
Day credit when Northern or the Exchange closes early as a result of unusual
weather or other conditions. They also reserve this right when The Bond Market
Association recommends that securities markets close or close early.
Authorized Intermediaries. The Trust may authorize certain financial
intermediaries (including banks, trust companies, brokers and investment
advisers), which provide record-keeping, reporting and processing services, to
accept purchase, redemption and exchange orders from their Customers on behalf
of the Trust. They may also designate other intermediaries to accept such
orders, if approved by the Trust. Authorized intermediaries are responsible for
transmitting orders and delivering funds on a timely basis. A Portfolio will be
deemed to have received an order when the order is accepted by the authorized
intermediary on a Business Day, and the order will be priced at the Portfolio's
per share NAV next determined.
Servicing Agents. Institutions perform (or arrange to have performed) various
administrative support services for Customers who are the beneficial owners of
Service Shares through Servicing Agreements with the Trust ("Servicing Agents").
These Servicing Agreements are permitted under the Trust's Service Plan
("Service Plan"). These services may include:
. establishing and maintaining individual accounts and records;
. processing purchase, redemption and exchange orders;
. placing net purchase and redemption orders with Northern acting as the Trust's
Transfer Agent; and
. providing cash management or sweep accounts and similar programs and services.
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ABOUT YOUR ACCOUNT
Servicing Agents will receive fees from the Portfolios for these services at an
annual rate of up to 0.25% of the average daily net asset value of the Service
Shares beneficially owned by their Customers. The Service Plan also provides for
the payment of fees to Northern, Goldman Sachs or other Institutions at an
annual rate of up to 0.08% of the average daily net asset value of Service
Shares serviced by Institutions for ongoing consulting, technology and systems
support services relating to cash management or sweep account services. All fees
payable under the Service Plan are borne solely by Service Shares and not by the
Portfolios' other share classes.
Northern may provide additional compensation to certain dealers and other
financial intermediaries who provide services to their Customers who invest in
the Trust or whose Customers purchase significant amounts of Service Shares of a
Portfolio. The amount of such compensation may be made on a one-time and/or
periodic basis, and may represent all or a portion of the annual fees earned by
Northern as Investment Adviser (after adjustments). This compensation will be
paid by Northern or its affiliates and will not represent an additional expense
to the Trust or its shareholders.
You should read your account agreement with your Institution carefully. Your
Institution's requirements may differ from those listed in this Prospectus. An
Institution may impose account charges, such as asset allocation fees, account
maintenance fees, and other charges that will reduce the net return on an
investment in a Portfolio. If you have agreed to maintain a minimum balance with
your Institution and the balance falls below this minimum, you may be required
to redeem all or a part of your investment in a Portfolio.
Conflict of interest restrictions may apply to the receipt of compensation from
the Trust by an Institution in connection with the investment of fiduciary funds
in Service Shares of a Portfolio. Banks and other institutions regulated by the
Office of Comptroller of the Currency, Board of Governors of the Federal Reserve
System and state banking commissions, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before entering
into Servicing Agreements.
State securities laws regarding the registration of dealers may differ from
Federal law. As a result, Institutions investing in the Portfolios on behalf of
their Customers may be required to register as dealers.
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Distributions and Taxes
DISTRIBUTIONS
Dividends from net income are declared daily and paid monthly by each Portfolio
to its shareholders. Net income includes the interest accrued on a Portfolio's
assets less estimated expenses. Each Portfolio's net realized short-term capital
gains, if any, are distributed at least annually. The Portfolios do not expect
to realize net long-term capital gains.
Dividends are paid as soon as practicable following the end of each month,
except in the case of a total redemption of Service Shares in an account that is
not subject to a standing order for the purchase of additional Service Shares.
In that event, dividends will be paid promptly along with the redemption
proceeds.
All distributions are paid by each Portfolio in cash or are automatically
reinvested (without any sales charge) in additional Service Shares of the same
Portfolio. You may make arrangements to credit these distributions to your
account with Northern, its affiliates or its correspondent banks.
There are no fees or sales charges on reinvestments.
TAXES
Each Portfolio intends to qualify as a regulated investment company for Federal
tax purposes, and to distribute substantially all of its net income to
shareholders each year. Except for exempt-interest dividends paid by the
Tax-Exempt Portfolio, dividends and other distributions will be taxable as
ordinary income, unless you have a tax-advantaged account. This is true whether
dividends and distributions are received in cash or reinvested in Portfolio
Service Shares.
There are certain tax requirements that the Portfolios must follow in order to
avoid Federal taxation. In their efforts to adhere to these requirements, the
Portfolios may have to limit their investment activity in some types of
instruments.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Exempt-interest dividends must, however, be
reported on your Federal income tax return. Shareholders who are recipients of
Social Security Act or Railroad Retirement Act benefits should note that
exempt-interest dividends will be taken into account in determining the
taxability of their benefit payments.
In certain instances, dividends paid by the Tax-Exempt Portfolio, while exempt
from regular Federal income tax, may be subject to the alternative minimum tax.
In addition, the Portfolio may invest a portion of its assets in securities that
generate income that is not exempt from Federal tax. Any dividends paid by the
Tax-Exempt Portfolio that are derived from taxable interest or from capital
gains will be subject to Federal income tax.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable. It will apply these percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages for
any particular day.
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ABOUT YOUR ACCOUNT
OTHER TAX INFORMATION
Dividends and distributions from each Portfolio will generally be reportable by
you in the tax year in which they are paid with one exception. Dividends and
distributions declared by a Portfolio in October, November or December and paid
in January are taxed as though they were paid by December 31.
Every year, the Trust will send you information detailing the amount of ordinary
income and capital gains distributed to your account for the previous year.
Your investment in the Portfolios could have additional tax consequences. You
should consult your tax professional for information regarding all the tax
consequences applicable to your investments in the Portfolios. More information
is provided in the Statement of Additional Information. This short summary is
not intended as a substitute for careful tax planning.
In particular, although the Government Select Portfolio intends to invest
primarily in U.S. government securities the interest on which is generally
exempt from state income taxation, you should consult your own tax professional
to determine whether this is true in your own situation. Similarly, dividends
paid by the Portfolios (including the Tax-Exempt Portfolio) may be taxable under
state or local law as dividend income even though all or a portion of such
dividends may be derived from interest on obligations which, if realized
directly, would be exempt from such income taxes.
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Year 2000 Issues
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000" issues.
Many computer systems use two digits rather than four to identify the year.
Unless adapted, these systems may not be able to correctly distinguish the Year
2000 from the Year 1900. As the Year 2000 approaches, many systems may be unable
to accurately process certain date-based information, which could cause a
variety of operational problems for businesses. This could have a negative
effect on the companies in which the Portfolios invest, thus decreasing the
Portfolios' investment returns.
Northern Trust has implemented steps to prepare its critical computer systems
and processes for Year 2000 processing. It has established a dedicated Year 2000
Project Team whose members have significant systems development and maintenance
experience. Northern Trust's Year 2000 project includes a comprehensive testing
plan of its critical systems. Northern Trust has advised the Trust that it has
substantially completed work on its critical systems and that testing with
outside parties will be conducted during 1999.
Northern Trust also has a program to monitor and assess the efforts of other
parties, such as other service providers to the Portfolios. However, it cannot
control the success of those other parties' efforts. Contingency plans are being
established to provide Northern Trust with alternatives in case these entities
experience significant Year 2000 difficulties that impact Northern Trust.
Furthermore, even if the actions taken by Northern Trust are successful, the
normal operations of the Portfolios may, in any event, be disrupted
significantly by the failure of communications and public utility companies,
governmental entities, financial processors or others to perform their services
as a result of Year 2000 problems.
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APPENDICES
Appendix A ADDITIONAL INFORMATION ON PORTFOLIO
RISKS, SECURITIES AND TECHNIQUES
This Appendix takes a closer look at some of the types of securities
in which the Portfolios may invest and their related risks. It also
explores the various investment techniques that the investment
management team may, but is not required to, use. The Portfolios may
invest in other securities and are subject to further restrictions
and risks which are described in the Statement of Additional
Information.
Asset-Backed Securities. Asset-backed securities are sponsored by entities such
as government agencies, banks, financial companies and commercial or industrial
companies. Asset-backed securities represent participations in, or are secured
by and payable from, pools of assets such as mortgages, motor vehicle
installment sale contracts, installment loan contracts, leases of various types
of real and personal property, receivables from revolving credit (credit card)
agreements and other financial assets. Such asset pools are securitized through
the use of privately-formed trusts or special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pooled insurance policy
issued by a financial institution, or other credit enhancements.
Investment strategy. The Diversified Assets Portfolio and Tax-Exempt Portfolio
may purchase various types of asset-backed securities. The Government Portfolio
may only purchase mortgage-backed securities that are guaranteed by the U.S.
government, its agencies or instrumentalities.
Special risks. Securities that are backed by credit card, automobile and similar
types of receivables generally do not have the benefit of a security interest in
collateral that is comparable in quality to mortgage assets. In the event of
default, a Portfolio will have recourse only to the collateral, not to the
sponsor, except to the extent that the security is guaranteed. In the event of
default, a Portfolio may suffer a loss if it cannot sell collateral quickly and
receive the amount it is owed.
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Appendix A continued
Borrowings and Reverse Repurchase Agreements. The Portfolios may borrow money
from banks and the Government Select, Government and Diversified Assets
Portfolios may enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of money
market securities held by a Portfolio subject to the Portfolio's agreement to
repurchase them at a mutually agreed upon date and price (including interest).
Investment strategy. Each Portfolio may borrow in amounts not exceeding
one-third of its total assets. Each of the Government Select, Government and
Diversified Assets Portfolios may enter into reverse repurchase agreements in
amounts not exceeding one-third of its total assets. These transactions may
be entered into as a temporary measure for emergency purposes or to meet
redemption requests. Reverse repurchase agreements may also be entered into
when the investment management team expects that the interest income to be
earned from the investment of the transaction proceeds will be greater than
the related interest expense.
Special risks. Borrowings and reverse repurchase agreements involve
leveraging. If the securities held by the Portfolios decline in value while
these transactions are outstanding, the net asset value of the Portfolios'
outstanding shares will decline in value by proportionately more than the
decline in value of the securities. In addition, reverse repurchase
agreements involve the risks that the interest income earned by a Portfolio
(from the investment of the proceeds) will be less than the interest expense
of the transaction, that the market value of the securities sold by a
Portfolio will decline below the price the Portfolio is obligated to pay to
repurchase the securities, and that the securities may not be returned to the
Portfolio.
Custodial Receipts for Treasury Securities. Custodial receipts are
participations in trusts that hold U.S. Treasury securities and are sold under
names such as TIGRs and CATS. Like other stripped obligations, they entitle the
holder to future interest or principal payments on the U.S. Treasury securities.
Investment strategy. The Government, Diversified Assets and Tax-Exempt
Portfolios may purchase custodial receipts. Investments by the Government
Portfolio in custodial receipts will not exceed 35% of the value of its total
assets.
Special risks. Like other stripped obligations, custodial receipts may be
subject to greater price volatility than ordinary debt obligations because of
the way in which their principal and interest are returned to investors.
Derivatives. Each Portfolio may purchase certain "derivative" instruments. A
derivative is a financial instrument whose value is derived from -- or based
upon -- the performance of underlying assets, interest or currency exchange
rates, or indices. Derivatives include structured debt obligations such as
collateralized mortgage obligations and other types of asset-backed securities,
"stripped" securities and various floating rate instruments.
Investment strategy. A Portfolio will invest in derivatives only if the
potential risks and rewards are consistent with the Portfolio's objective,
strategies and overall risk profile.
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APPENDICES
Special risks. Engaging in derivative transactions involves special risks,
including (a) market risk that the Portfolio's derivatives position will lose
value; (b) credit risk that the counterparty to the transaction will default;
(c) leveraging risk that the value of the derivative instrument will decline
more than the value of the assets on which it is based; (d) illiquidity risk
that a Portfolio will be unable to sell its position because of lack of
market depth or disruption; (e) pricing risk that the value of a derivative
instrument will be difficult to determine; and (f) operations risk that loss
will occur as a result of inadequate systems or human error. Many types of
derivatives have been recently developed and have not been tested over
complete market cycles. For these reasons, a Portfolio may suffer a loss
whether or not the analysis of the investment management team is accurate.
Diversification. Diversifying its holdings can help a Portfolio reduce the risks
of investing. In accordance with current SEC regulations, each Portfolio will
not invest more than 5% of the value of its total assets at the time of purchase
in the securities of any single issuer. However, a Portfolio may invest up to
25% of the value of its total assets in the securities of a single issuer for up
to three Business Days. These limitations do not apply to cash, certain
repurchase agreements, U.S. government securities or securities of other
investment companies. In addition, securities subject to certain unconditional
guarantees and securities that are not "First Tier Securities" as defined by the
SEC are subject to different diversification requirements as described in the
Statement of Additional Information.
Downgraded Securities. After its purchase, a portfolio security may be assigned
a lower rating or cease to be rated. If this occurs, a Portfolio may continue to
hold the issue if the Investment Adviser believes it is in the best interest of
the Portfolio and its shareholders.
Foreign Securities. The Diversified Assets Portfolio may invest in the
obligations of foreign governments, or any of their political subdivisions,
agencies or instrumentalities, foreign commercial banks and foreign branches of
U.S. banks. It may also invest in U.S. dollar-denominated commercial paper and
other obligations of foreign issuers. Foreign government obligations may include
debt obligations of supranational entities, including international
organizations (such as the European Coal and Steel Community and the
International Bank for Reconstruction and Development (also known as the World
Bank)) and international banking institutions and related government agencies.
Investment strategy. Investments by the Diversified Assets Portfolio in
foreign issuer obligations will not exceed 50% of the Portfolio's total
assets measured at the time of purchase.
Special risks. Foreign securities involve special risks and costs. Foreign
securities, and in particular foreign debt securities, are sensitive to
changes in interest rates. In addition, investment in the securities of
foreign governments involves the risk that foreign governments may default on
their obligations or may otherwise not respect the integrity of their debt.
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Appendix A continued
Investment in foreign securities may involve higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as
the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with less complete financial
information about the issuers, less market liquidity, more market volatility
and political instability. Future political and economic developments, the
possible imposition of withholding taxes on dividend income, possible seizure
or nationalization of foreign holdings or the adoption of other governmental
restrictions might adversely affect an investment in foreign securities.
Additionally, foreign banks and foreign branches of domestic banks may be
subject to less stringent reserve requirements, and to different accounting,
auditing and recordkeeping requirements.
Illiquid or Restricted Securities. Illiquid securities include repurchase
agreements and time deposits with notice/termination dates of more than seven
days, certain variable amount master demand notes that cannot be called within
seven days, certain insurance funding agreements (see below), and other
securities that are traded in the U.S. but are subject to trading restrictions
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").
Investment strategy. Each Portfolio may invest up to 10% of its net assets in
securities that are illiquid. A domestically traded security which is not
registered under the 1933 Act will not be considered illiquid if the
Investment Adviser determines that an adequate trading market exists for that
security. If otherwise consistent with their investment objectives and
policies, the Portfolios may purchase commercial paper issued pursuant to
Section 4(2) of the 1933 Act and securities that are not registered under the
1933 Act but can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act. These securities will not be considered
illiquid so long as Northern determines, under guidelines approved by the
Trust's Board of Trustees, that an adequate trading market exists.
Special risks. Because illiquid and restricted securities may be difficult to
sell at an acceptable price, they may be subject to greater volatility and
may result in a loss to a Portfolio. The practice of investing in commercial
paper available to qualified institutional buyers could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
Insurance Funding Agreements. An insurance funding agreement ("IFA") is an
agreement that requires a Portfolio to make cash contributions to a deposit fund
of an insurance company's general account. The insurance company then credits
interest to the Portfolio for a set time period.
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APPENDICES
Investment Strategy. The Diversified Assets Portfolio may invest in IFAs
issued by insurance companies that meet quality and credit standards
established by the Investment Adviser.
Special risks. IFAs are not insured by a government agency -- they are backed
only by the insurance company that issues them. As a result, they are subject
to default risk. In addition, an active secondary market in IFAs does not
currently exist. This means that it may be difficult to sell an IFA at an
appropriate price.
Investment Companies. In connection with the management of their daily cash
positions, the Portfolios may invest in shares of other money market funds which
invest in short-term, high quality debt securities and securities issued by
other investment companies consistent with their investment objectives and
policies.
Investment strategy. Investments by a Portfolio in other money market funds
will be subject to the limitations of the Investment Company Act of 1940.
Although the Portfolios do not expect to do so in the foreseeable future,
each Portfolio is authorized to invest substantially all of its assets in an
open-end investment company that has the same investment objective, policies
and fundamental restrictions as the Portfolio.
Special risks. As a shareholder of another investment company, a Portfolio
would be subject to the same risks as any other investor in that company. It
would also bear a proportionate share of any fees or expenses paid by that
company. These expenses would be in addition to the advisory fees and other
expenses the Portfolio bears directly in connection with its own operations.
Municipal and Related Instruments. Municipal instruments include debt
obligations issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies, authorities and
instrumentalities.
Municipal instruments include both "general" and "revenue" bonds and may be
issued to obtain funds for various public purposes. General obligations are
secured by the issuer's pledge of its full faith, credit and taxing power.
Revenue obligations are payable only from the revenues derived from a particular
facility or class of facilities. In some cases, revenue bonds are also payable
from the proceeds of a special excise or other specific revenue source such as
lease payments from the user of a facility being financed.
Municipal instruments also include "moral obligation" bonds, which are supported
by a moral commitment but not a legal obligation of a state or municipality, as
well as custodial receipts and certificates of participation that represent
interests in a pool of municipal instruments held by a trustee.
37
<PAGE>
Appendix A continued
During extraordinary circumstances, the Tax-Exempt Portfolio may invest in AMT
obligations such as certain bonds issued to obtain funds to provide certain
water, sewage and solid waste facilities, qualified residential rental projects,
certain local electric, gas and other heating or cooling facilities, qualified
hazardous waste facilities, and government-owned airports, docks and wharves
and mass commuting facilities; certain qualified mortgage, student loan and
redevelopment bonds; and certain bonds issued as part of "small issues" for
industrial facilities.
Investment strategy. In connection with its investments in municipal
instruments, the Tax-Exempt Portfolio may invest more than 25% of its total
assets in (a) municipal instruments the interest upon which is paid solely
from revenues of similar projects, and (b) industrial development
obligations. The Tax-Exempt Portfolio may also invest more than 25% of the
value of its total assets in municipal instruments whose issuers are in the
same state. However, the Portfolio does not intend to invest more than 25% of
the value of its total assets in industrial development bonds or similar
obligations where the non-governmental entities supplying the revenues to be
paid are in the same industry.
The Diversified Assets Portfolio may invest up to 5% of its net assets in
municipal instruments or other securities issued by state and local
governmental bodies. Generally, this will occur when the yield of municipal
instruments, on a pre-tax basis, is comparable to that of other permitted
short-term taxable investments.Dividends paid by the Diversified Assets
Portfolio on such investments will be taxable to shareholders.
Special risks. Municipal instruments purchased by the Tax-Exempt Portfolio
may be backed by letters of credit or other forms of credit enhancement
issued by foreign (as well as domestic) banks and other financial
institutions. If the credit quality of these banks and financial institutions
declines, the Portfolio could suffer a loss to the extent that the Portfolio
is relying upon this credit support. Certain risks relating to foreign banks
and financial institutions are described on page 35 under "Foreign
Securities."
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Portfolio subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price.
Investment strategy. Each Portfolio may enter into repurchase agreements with
financial institutions such as banks and broker-dealers that are deemed to be
credit-worthy by the Investment Adviser. Although the securities subject to
a repurchase agreement may have maturities exceeding one year, settlement of
the agreement will never occur more than one year after a Portfolio acquires
the securities.
Special risks. In the event of a default, a Portfolio will suffer a loss to
the extent that the proceeds from the sale of the underlying securities and
other collateral are less than the repurchase price and the Portfolio's costs
associated with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy, a Portfolio could suffer losses if a
court determines that the Portfolio's interest in the collateral is not
enforceable.
38
<PAGE>
APPENDICES
Securities Lending. In order to generate additional income, the Portfolios may
lend securities on a short-term basis to banks, brokers and dealers or other
qualified institutions. In exchange, the Portfolios will receive collateral
equal to at least 100% of the value of the securities loaned.
Investment strategy. Securities lending may represent no more than one-third
the value of a Portfolio's total assets (including the loan collateral). Any
cash collateral received by a Portfolio in connection with these loans may be
invested in U.S. government securities and other liquid high-grade debt
obligations.
Special risks. The main risk when lending portfolio securities is that the
borrower might become insolvent or refuse to honor its obligation to return
the securities. In this event, a Portfolio could experience delays in
recovering its securities and may possibly incur a capital loss. In addition,
a Portfolio may incur a loss in reinvesting the cash collateral it receives.
Stripped Obligations. These securities are issued by the U.S. government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include stripped mortgage-backed securities, which are derivative
multi-class mortgage securities.
Investment strategy. Each of the
Portfolios may purchase stripped securities.
Special risks. Stripped securities are very sensitive to interest rate
changes and to the rate of principal prepayments. A rapid or unexpected
increase in mortgage prepayments could severely depress the price of certain
stripped mortgage-backed securities and adversely affect a Portfolios' total
returns.
United States Government Obligations. These include U.S. Treasury obligations,
such as bills, notes and bonds, which generally differ only in terms of their
interest rates, maturities and time of issuance. These also include obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities. Securities guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities are deemed to include (a)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or an agency or
instrumentality thereof, and (b) participations in loans made to foreign
governments or their agencies that are so guaranteed.
Investment strategy. To the extent consistent with its investment objective,
each Portfolio may invest in a variety of U.S. Treasury obligations and
obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities.
39
<PAGE>
Appendix A continued
Special risks. Not all U.S. government obligations carry the same guarantees.
Some, such as those of the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States Treasury.
Other obligations, such as those of the Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the United States
Treasury; and others, such as those issued by the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the
U.S. government to purchase the agency's obligations. Still others are
supported only by the credit of the instrumentality. No assurance can be
given that the U.S. government would provide financial support to its
agencies or instrumentalities if it is not obligated to do so by law. There
is no assurance that these commitments will be undertaken or complied with in
the future. In addition, the secondary market for certain participations in
loans made to foreign governments or their agencies may be limited.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate.
Investment strategy. Each Portfolio may invest in rated and unrated variable
and floating rate instruments to the extent consistent with its investment
objective. Unrated instruments may be purchased by a Portfolio if they are
determined by the Investment Adviser to be of comparable quality to rated
instruments eligible for purchase by the Portfolio. The Portfolios may invest
in variable amount master demand notes.
Special risks. Variable and floating rate instruments are subject to the same
risks as fixed income investments, particularly interest rate and credit
risk. Because there is no active secondary market for certain variable and
floating rate instruments, they may be more difficult to sell if the issuer
defaults on its payment obligations or during periods when the Portfolios are
not entitled to exercise their demand rights. As a result, the Portfolios
could suffer a loss with respect to these instruments.
When-Issued Securities, Delayed Delivery Transactions and Forward Commitments. A
purchase of "when-issued" securities refers to a transaction made conditionally
because the securities, although authorized, have not yet been issued. A delayed
delivery or forward commitment transaction involves a contract to purchase or
sell securities for a fixed price at a future date beyond the customary
settlement period.
Investment strategy. Each Portfolio may purchase or sell securities on a
when- issued, delayed delivery or forward commitment basis. Although the
Portfolios would generally purchase securities in these transactions with the
intention of acquiring the securities, the Portfolios may dispose of such
securities prior to settlement if the investment management team deems it
appropriate to do so.
Special risks. Purchasing securities on a when-issued, delayed delivery or
forward commitment basis involves the risk that the securities may decrease
in value by the time they are actually issued or delivered. Conversely,
selling securities in these transactions involves the risk that the value of
the securities may increase before the time they are actually issued or
delivered. These transactions also involve the risk that the seller may fail
to deliver the security or cash on the settlement date.
40
<PAGE>
APPENDICES
Appendix B
The financial highlights tables are intended to help you understand the
financial performance of the Diversified Assets Portfolio's Service Shares for
the period July 1, 1998 (Service Shares issuance date) to November 30, 1998.
Certain information reflects financial results for a single Service Share. The
total returns in the tables represent the rate that an investor would have
earned or lost on an investment in Service Shares of the Diversified Assets
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP, whose report is included in
the Portfolios' annual report along with the Portfolios' financial statements.
The annual report is available upon request and without charge. As of November
30, 1998, Service Shares of the other Portfolios had not been issued to the
public.
41
<PAGE>
Appendix B continued
Financial Highlights
DIVERSIFIED ASSETS PORTFOLIO
<TABLE>
<CAPTION>
Service
Shares
.........
<S> <C>
For the Period Ended November 30, 1998(c)
- ---------------------------------------------------------------------------------
Net asset value, beginning of year $1.00
................................................................................
Income from investment operations:
Net investment income 0.02
................................................................................
Net gains or losses on securities (both realized and unrealized) 0.00
................................................................................
Total income from investment operations 0.02
- ---------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.02)
................................................................................
Distributions (from capital gains) 0.00
................................................................................
Total distributions to shareholders (0.02)
- ---------------------------------------------------------------------------------
Net asset value, end of year $1.00
Total return (a) 1.76%
................................................................................
Ratio to average net assets of (b):
Expenses, before waivers and reimbursements 0.72%
................................................................................
Expenses, net of waivers and reimbursements 0.69%
................................................................................
Net investment income, before waivers and reimbursements 4.91%
................................................................................
Net investment income, net of waivers and reimbursements 4.94%
................................................................................
Net assets at end of year (in thousands) $7,060
- ---------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized.
(b) Ratios are annualized.
(c) For the period July 1, 1998 (Service Shares issue date) through November 30,
1998.
42
<PAGE>
This page intentionally left blank.
43
<PAGE>
For More Information
ANNUAL/
SEMIANNUAL
REPORT
Additional information about the Portfolios' investments is available in the
Portfolios' annual and semiannual reports to shareholders.
STATEMENT OF
ADDITIONAL
INFORMATION
Additional information about the Portfolios and their policies is also available
in the Portfolios' Statement of Additional Information ("SAI"). The SAI is
incorporated by reference into this Prospectus (is legally considered part
of this Prospectus).
The Portfolios' annual and semiannual reports and the SAI are available free
upon request by calling 1-800-637-1380.
To obtain other information and for
shareholder inquiries:
By telephone -- Call 1-800-637-1380
By mail -- Northern Institutional Funds
P.O. Box 75943
Chicago, IL 60675
On the Internet -- Text-only versions of the Portfolios' documents are available
on the SEC's website at http://www.sec.gov
You may review and obtain copies of Trust documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Trust documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Northern
Institutional Funds
SERVICE SHARES PROSPECTUS
811-3605
44
<PAGE>
================================================================================
INVESTMENT ADVISERS
The Northern Trust Company
Northern Trust Quantitative Advisers, Inc.
50 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT AND CUSTODIAN
The Northern Trust Company
================================================================================
<PAGE>
================================================================================
Northern Institutional Funds
MONEY MARKET PORTFOLIOS
PREMIER SHARES
APRIL 1, 1999
================================================================================
<PAGE>
Northern Institutional Funds
- --------------------------------------------------------------------------------
MONEY MARKET o GOVERNMENT SELECT PORTFOLIO
PORTFOLIOS ----------------------------------------------------------
PREMIER SHARES o GOVERNMENT PORTFOLIO
----------------------------------------------------------
o DIVERSIFIED ASSETS PORTFOLIO
----------------------------------------------------------
o TAX-EXEMPT PORTFOLIO
----------------------------------------------------------
Prospectus dated April 1, 1999
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
<TABLE>
<CAPTION>
Contents
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
RISK/RETURN Portfolios
SUMMARY ....................................................
GOVERNMENT SELECT PORTFOLIO 5
Information about the ....................................................
objectives, principal strategies GOVERNMENT PORTFOLIO 6
and risk characteristics ....................................................
of each Portfolio DIVERSIFIED ASSETS PORTFOLIO 7
....................................................
TAX-EXEMPT PORTFOLIO 8
--------------------------------------------------------
Principal Investment Risks 9
--------------------------------------------------------
Portfolio Performance 11
....................................................
GOVERNMENT SELECT PORTFOLIO 12
....................................................
GOVERNMENT PORTFOLIO 13
....................................................
DIVERSIFIED ASSETS PORTFOLIO 14
....................................................
TAX-EXEMPT PORTFOLIO 15
--------------------------------------------------------
Portfolio Fees and Expenses 16
- -----------------------------------------------------------------------------------------------------
MANAGEMENT Investment Adviser 19
OF THE --------------------------------------------------------
PORTFOLIOS Advisory Fees 20
--------------------------------------------------------
Details that apply to the Portfolio Management 21
Portfolios as a group --------------------------------------------------------
Other Portfolio Services 21
- -----------------------------------------------------------------------------------------------------
ABOUT YOUR Purchasing and Selling Premier Shares
ACCOUNT ....................................................
Investors 22
How to open, maintain ....................................................
and close an account Share Classes 22
....................................................
Opening an Account 22
....................................................
Selling Premier Shares 23
--------------------------------------------------------
Account Policies and Other Information
....................................................
Automatic Investment Arrangements 24
....................................................
Purchase and Redemption Minimums 24
....................................................
Calculating Share Price 24
....................................................
Timing of Purchase Requests 24
....................................................
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax Identification Number 25
...................................................
In-Kind Purchases and Redemptions 25
...................................................
Miscellaneous Purchase Information 25
...................................................
Timing of Redemption and Exchange Requests 26
...................................................
Miscellaneous Redemption Information 26
...................................................
Exchange Privileges 27
...................................................
Telephone Transactions 27
...................................................
Advance Notification of Large Transactions 27
...................................................
Making Changes to Your Account Information 28
...................................................
Business Day 28
...................................................
Early Closings 28
...................................................
Authorized Intermediaries 28
...................................................
Servicing Agents 28
--------------------------------------------------------
Distributions and Taxes
...................................................
Distributions 30
...................................................
Taxes 30
...................................................
Other Tax Information 31
--------------------------------------------------------
Year 2000 Issues 32
- -----------------------------------------------------------------------------------------------------
APPENDICES Appendix A
...................................................
Additional Information on Portfolio Risks,
Securities and Techniques 33
--------------------------------------------------------
Appendix B
...................................................
Portfolio Financial Highlights 41
- -----------------------------------------------------------------------------------------------------
FOR MORE INFORMATION Annual/Semiannual Reports 44
--------------------------------------------------------
Statement of Additional Information 44
</TABLE>
<PAGE>
Northern Institutional Funds (the "Trust") offers four money market portfolios
(each a "Portfolio") to institutional investors. Each Portfolio is authorized to
offer three classes of shares: Premier Shares, Service Shares and Shares.
Service Shares and Shares are described in separate prospectuses.
The descriptions on the following pages may help you choose the Portfolio that
best fits your investment needs. Keep in mind, however, that no Portfolio can
guarantee it will meet its investment objective and no Portfolio should be
relied upon as a complete investment program. The Trust's six fixed income, one
balanced and six equity portfolios are described in a separate prospectus.
The Portfolios seek to maintain a stable net asset value of $1.00 per share.
Consistent with this policy, each of the Portfolios:
o Limits its dollar-weighted average portfolio maturity to 90 days or less;
o Buys securities with remaining maturities of 397 days or less (except for
certain variable and floating rate instruments and securities
collateralizing repurchase agreements); and
o Invests only in U.S. dollar-denominated securities that represent minimal
credit risks.
In addition, each Portfolio limits its investments to "Eligible Securities" as
defined by the Securities and Exchange Commission ("SEC"). Eligible Securities
include, generally, securities that either (a) have short-term debt ratings at
the time of purchase in the two highest rating categories or (b) are issued or
guaranteed by, or otherwise allow a Portfolio to demand payment from, an issuer
with those ratings. Securities that are unrated (including securities of issuers
that have long-term but not short-term ratings) may be deemed to be Eligible
Securities if determined to be of comparable quality by The Northern Trust
Company under the direction of the Board of Trustees. Securities that are in the
highest short-term rating category (and comparable unrated securities) are
called "First Tier Securities." Under normal circumstances, the Government
Select, Government and Diversified Assets Portfolios intend to limit purchases
of securities to First Tier Securities. Securities in which the Portfolios may
invest may not earn as high a level of income as long-term or lower quality
securities, which generally have greater market risk and more fluctuation in
market value.
In addition to the instruments described in the table above and on the pages
below, each Portfolio may use various investment techniques in seeking its
investment objective. You can learn more about these techniques and related
risks by reading Appendix A to this Prospectus and the Statement of Additional
Information.
4
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT SELECT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks its objective by investing exclusively in securities issued
or guaranteed as to principal and interest by the U.S. government, its agencies
or instrumentalities. Under normal market conditions, the Portfolio will seek to
acquire only those U.S. government securities the interest upon which is
generally exempt from state income taxation. These securities include
obligations issued by the U.S. Treasury and certain U.S. government agencies and
instrumentalities, such as the Federal Home Loan Bank and the Federal Farm
Credit Banks Funding Corp.
When appropriate securities which are exempt from state taxes are unavailable,
the Portfolio may also invest in non-exempt U.S. government securities and cash
equivalents including money market funds and time deposits with a maturity of
three months or less, and hold uninvested cash.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
5
<PAGE>
GOVERNMENT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Government Portfolio seeks its objective by investing exclusively in
marketable securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
backed by such securities. The Portfolio may also hold custodial receipts
representing interests in U.S. government securities.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
6
<PAGE>
RISK/RETURN SUMMARY
DIVERSIFIED ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity by investing exclusively in
high quality money market instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Diversified Assets Portfolio seeks its objective by investing in a broad
range of government, bank and commercial obligations that are available in the
money markets, including:
o U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
o U.S. dollar-denominated obligations of foreign commercial banks where such
banks have total assets in excess of $5 billion;
o High quality commercial paper and other obligations issued or guaranteed by
U.S. and foreign corporations and other issuers;
o Corporate bonds, notes, paper and other instruments that are of high
quality;
o Asset-backed securities;
o Securities issued or guaranteed as to principal and interest by the U.S.
government or by its agencies or instrumentalities and custodial receipts
with respect thereto;
o U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities;
o Repurchase agreements relating to the above instruments; and
o Municipal securities issued or guaranteed by state or local governmental
bodies.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
7
<PAGE>
TAX-EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The Portfolio seeks to provide its shareholders, to the extent consistent with
the preservation of capital and prescribed portfolio standards, with a high
level of income exempt from Federal income tax by investing primarily in
municipal instruments.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES
The Portfolio seeks to achieve its objective by investing primarily in
high-quality short-term instruments, the interest on which is exempt from
Federal income tax ("municipal instruments"). These may include:
o Fixed and variable rate notes and similar debt instruments;
o Tax-exempt commercial paper;
o Rated and unrated municipal bonds, notes, paper or other instruments; and
o Municipal bonds and notes which are guaranteed as to principal and interest
or backed by the U.S. government or its agencies or instrumentalities.
Under normal market conditions, at least 80% of the Portfolio's annual gross
income will be derived from municipal instruments. Interest earned by the
Portfolio on "private activity bonds" (if any) that is treated as an item of tax
preference under the Federal alternative minimum tax ("AMT obligations") will
not be deemed to have been derived from municipal instruments for the purposes
of determining whether the Portfolio meets this policy.
During extraordinary circumstances, however, the Portfolio may take a temporary
defensive posture and hold uninvested cash or invest in AMT obligations and
taxable short-term securities without limitation.
Taxable investments will consist exclusively of those instruments that may be
purchased by the Diversified Assets Portfolio including U.S. dollar-denominated
obligations of U.S. banks, foreign commercial banks and securities issued or
guaranteed by foreign governments; high quality commercial paper and other
obligations; high quality corporate bonds and notes; asset-backed securities;
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and custodial receipts with respect thereto; and repurchase
agreements relating to the above instruments.
More information on the Portfolio's investment strategies and techniques is
provided in Appendix A to this Prospectus.
8
<PAGE>
RISK/RETURN SUMMARY
PRINCIPAL INVESTMENT RISKS
All investments carry some degree of risk which will affect the value of a
Portfolio's investments, investment performance, yield and the price of its
shares.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
The following summarizes the principal risks that may affect the Portfolios.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO ALL
PORTFOLIOS
Money market risk is the risk that a Portfolio will not be able to maintain a
net asset value per share of $1.00 at all times.
Interest rate risk is the risk that during periods of rising interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be lower
than prevailing market rates; in periods of falling interest rates, a
Portfolio's yield (and the market value of its securities) will tend to be
higher.
Counterparty risk is the risk that an issuer of a security, or a bank or other
financial institution that has entered into a repurchase agreement, may default
on its payment obligations.
Credit enhancement risk is the risk that changes in credit quality of a bank or
other financial institution could cause a Portfolio's investments in securities
backed by letters of credit or other credit enhancements issued by such bank or
institution to decline in value.
Management risk is the risk that a strategy used by the investment management
team may fail to produce the intended results.
Liquidity risk is the risk that a Portfolio will not be able to pay redemption
proceeds on the same Business Day that shares are redeemed, because of unusual
market conditions, an unusually high volume of redemption requests or other
reasons.
Year 2000 risk is the risk that a Portfolio's operations or value will be
adversely affected by the "Year 2000 Problem." (For more information, please see
"Year 2000 Issues" on page 32.)
9
<PAGE>
Principal Investment Risks continued
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE GOVERNMENT
SELECT AND GOVERNMENT
PORTFOLIOS
Government securities risk is the risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES PRIMARILY
TO THE DIVERSIFIED
ASSETS AND
TAX-EXEMPT
PORTFOLIOS
Prepayment risk is the risk that asset-backed securities may be more rapidly
repaid than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying obligations. During
periods of declining interest rates, prepayment of obligations underlying
asset-backed securities can be expected to accelerate. Accordingly, a
Portfolio's ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at comparable
yields is subject to generally prevailing interest rates at that time.
- --------------------------------------------------------------------------------
RISK THAT
APPLIES TO THE
DIVERSIFIED
ASSETS PORTFOLIO
Foreign securities risk is the risk that a foreign security, even if it is a
U.S. dollar-denominated foreign security, could lose value as a result of
political, financial and economic events in foreign countries, less stringent
foreign securities regulations and accounting and disclosure standards, or other
factors.
- --------------------------------------------------------------------------------
RISKS THAT
APPLY TO THE
TAX-EXEMPT
PORTFOLIO
Concentration risk is the risk that the Portfolio may be more sensitive to an
adverse economic, business or political development if it invests more than 25%
of its assets in the municipal instruments of issuers in the same state, in
municipal instruments the interest upon which is paid solely from revenues of
similar projects, or in industrial development bonds.
Tax risk is the risk that future legislative or administrative changes or court
decisions may materially affect the ability of the Portfolio to pay tax-exempt
dividends.
More information about the risks of investing in the Portfolios is provided in
Appendix A to this Prospectus. You should carefully consider the risks discussed
in this section and Appendix A before investing in a Portfolio.
10
<PAGE>
RISK/RETURN SUMMARY
PORTFOLIO PERFORMANCE
Premier Shares of the Portfolios have less than one calendar year's performance.
For this reason, the performance information shown below is for another class of
shares (Shares) that is not offered in this Prospectus because both Premier
Shares and Shares will be invested in the same portfolio of securities. In
reviewing this performance information, however, you should be aware that
Premier Shares have a 0.58% (annualized) Service Fee and a 0.02% (annualized)
Transfer Agency Fee, while Shares have neither of these fees. If the expenses of
the Premier Shares were reflected, performance would be substantially lower.
The bar charts and tables below provide an indication of the risks of investing
in a Portfolio by showing changes in the performance of a Portfolio's Shares
from year to year. The bar charts and tables assume reinvestment of dividends
and distributions. A Portfolio's past performance is not necessarily an
indication of how the Portfolio will perform in the future. Performance reflects
certain expense limitations (as set forth in the Footnotes to the "Portfolio
Fees and Expenses" table on page 17) that were in effect during the periods
presented. If expense limitations were not in place, a Portfolio's performance
would have been reduced.
11
<PAGE>
Portfolio Performance continued
GOVERNMENT SELECT PORTFOLIO
Calendar Year Total Return (Shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1991 5.95%
1992 3.68%
1993 3.04%
1994 4.09%
1995 5.82%
1996 5.29%
1997 5.44%
1998 5.40%
</TABLE>
Best and Worst
Quarterly Performance (Shares): Best Quarter Return
Q2 `95
+1.47%
Q2 `93
+0.74%
Worst Quarter Return
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year (11/7/90)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Select Portfolio 5.40% 5.21% 4.86%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.86%. You
may call 1-800-637-1380 to obtain the current 7-day yield for Premier Shares of
the Portfolio.
12
<PAGE>
RISK/RETURN SUMMARY
GOVERNMENT PORTFOLIO
Calendar Year Total Return (Shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 7.09%
1989 9.00%
1990 8.13%
1991 6.10%
1992 3.84%
1993 2.94%
1994 3.93%
1995 5.65%
1996 5.17%
1997 5.34%
1998 5.30%
</TABLE>
Best and Worst
Quarterly Performance (Shares): Best Quarter Return
Q2 `89
+2.32%
Q4 `93
+0.72%
Worst Quarter Return
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (10/29/85)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Portfolio 5.30% 5.08% 5.53% 5.83%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 4.81%.
13
<PAGE>
Portfolio Performance continued
DIVERSIFIED ASSETS PORTFOLIO
Calendar Year Total Return (Shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 7.53%
1989 9.35%
1990 8.27%
1991 6.14%
1992 3.71%
1993 3.02%
1994 4.05%
1995 5.79%
1996 5.28%
1997 5.45%
1998 5.40%
</TABLE>
Best and Worst
Quarterly Performance (Shares): Best Quarter Return
Q4 `89
+2.12%
Q2 `93
+0.74%
Worst Quarter Return
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (7/27/82)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Assets Portfolio 5.40% 5.19% 5.63% 6.12%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 5.00%.
14
<PAGE>
RISK/RETURN SUMMARY
TAX-EXEMPT PORTFOLIO
Calendar Year Total Return (Shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
1988 5.09%
1989 6.23%
1990 5.86%
1991 4.54%
1992 2.91%
1993 2.27%
1994 2.61%
1995 3.73%
1996 3.33%
1997 3.45%
1998 3.29%
</TABLE>
Best and Worst
Quarterly Performance (Shares): Best Quarter Return
Q2 `89
+1.64%
Q1 `94
+0.52%
Worst Quarter Return
Average Annual Total Return (Shares)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (8/12/83)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio 3.29% 3.28% 3.81% 4.08%
- --------------------------------------------------------------------------------
</TABLE>
The 7-day yield for Shares of the Portfolio as of December 31, 1998: 3.37%.
15
<PAGE>
Portfolio Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Premier Shares of the Portfolios. Please note that it does not reflect any
charges which may be imposed by The Northern Trust Company, its affiliates,
correspondent banks and other institutions on their Customers (as defined on
page 22). (For more information, please see "Account Policies and Other
Information" on page 24.)
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
---------------------------------------------------------------------------
Sales Charge
Sales Charge (Load)
(Load) Imposed on
Imposed on Deferred Sales Reinvested Redemption Exchange
Portfolio Purchases Charge (Load) Distributions Fees Fees
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT SELECT None None None None None
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT None None None None None
- ---------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS None None None None None
- ---------------------------------------------------------------------------------------------------------
TAX-EXEMPT None None None None None
- ---------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
RISK/RETURN SUMMARY
<TABLE>
<CAPTION>
Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Other Operating Expenses Total Annual
. . . . . . . . . . . . . . . . . . . . . . Total Other Portfolio
Management Distribution Servicing Transfer Other Operating Operating
Portfolio Fees(2) (12b-1) Fees Agent Fees Agency Fees Expenses(3) Expenses Expenses(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT SELECT 0.25% None 0.50% 0.02% 0.22% 0.74% 0.99%
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT 0.25% None 0.50% 0.02% 0.23% 0.75% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS 0.25% None 0.50% 0.02% 0.21% 0.73% 0.98%
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT 0.25% None 0.50% 0.02% 0.22% 0.74% 0.99%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOOTNOTES
(1) The Portfolios annual operating expenses are based on actual fees and
estimated expenses for the current fiscal year.
(2) As of the date of this Prospectus, The Northern Trust Company is
voluntarily waiving a portion of its management fees for the Government
Select Portfolio. As a result of the fee waiver, actual management fees
paid by the Government Select Portfolio are currently 0.10% of the
Portfolio's average daily net assets. Fee waivers may be terminated at any
time at the option of The Northern Trust Company.
(3) "Other Expenses" include (1) administration fees and all other ordinary
operating expenses of the Portfolios not listed above and (2) the payment
of a fee to Northern, Goldman Sachs & Co. ("Goldman Sachs") or other
institutions under a Service Plan equal to 0.08% of the average daily net
asset value of the Service Shares for systems support and related services.
Goldman Sachs is entitled to an administration fee from each Portfolio at
an annual rate of 0.10% of each Portfolio's average daily net assets.
Goldman Sachs has agreed to reimburse expenses (including fees payable to
Goldman Sachs as administrator, but excluding management fees, transfer
agency fees, payments under the Service Plan for Premier Shares and Service
Shares and extraordinary expenses) which exceeded on an annualized basis
0.10% of each Portfolio's average daily net assets. As a result of the
expense reimbursement, estimated "Other Expenses" are currently 0.18% of
each Portfolio's average daily net assets.
(4) As a result of the fee waivers and expense reimbursements, estimated actual
total annual operating expenses for the Portfolios are as set forth below.
Fee waivers (and voluntary expense reimbursements, if applicable) may be
terminated at any time at the option of Northern or Goldman Sachs. If this
occurs, "Other Operating Expenses" may increase without shareholder
approval.
<TABLE>
<CAPTION>
Total
Annual
Operating
Portfolio Expenses
------------------------------------------
<S> <C>
GOVERNMENT SELECT 0.80%
------------------------------------------
GOVERNMENT 0.95%
------------------------------------------
DIVERSIFIED ASSETS 0.95%
------------------------------------------
TAX-EXEMPT 0.95%
------------------------------------------
</TABLE>
17
<PAGE>
Portfolio Fees and Expenses continued
- --------------------------------------------------------------------------------
EXAMPLE
The following Example is intended to help you compare the cost of investing in
Premier Shares of a Portfolio (without fee waivers and expense reimbursements)
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated (with reinvestment of all dividends and distributions) and then redeem
all of your Premier Shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that a Portfolio's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SELECT
Premier Shares $101 $315
- --------------------------------------------------------------------------------
GOVERNMENT
Premier Shares $102 $318
- --------------------------------------------------------------------------------
DIVERSIFIED ASSETS
Premier Shares $100 $312
- --------------------------------------------------------------------------------
TAX-EXEMPT
Premier Shares $101 $315
- --------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
RISK/RETURN SUMMARY
Investment Adviser
The Northern Trust Company ("Northern" or the "Investment Adviser"), an Illinois
state-chartered bank and member of the Federal Reserve System, serves as
investment adviser for the Portfolios. The Investment Adviser is located at 50
South LaSalle Street, Chicago, Illinois 60675 and is a wholly owned subsidiary
of Northern Trust Corporation, a bank holding company. As of December 31, 1998,
Northern Trust Corporation and its subsidiaries had approximately $27.9 billion
in assets, $18.2 billion in deposits and employed over 8,150 persons.
Northern and its affiliates administrated in various capacities (including as
master trustee, investment manager or custodian) approximately $1.26 trillion of
assets as of December 31, 1998, including approximately $236 billion of assets
for which Northern and its affiliates had investment management responsibility.
Under its Advisory Agreement with the Trust, the Investment Adviser, subject to
the general supervision of the Trust's Board of Trustees, is responsible for
making investment decisions for the Portfolios and for placing purchase and sale
orders for portfolio securities.
19
<PAGE>
Advisory Fees
As compensation for its advisory services and its assumption of related
expenses, the Investment Adviser is entitled to an advisory fee from the
Portfolios, computed daily and payable monthly, at annual rates set forth in the
table below (expressed as a percentage of each Portfolio's respective average
daily net assets). The table also reflects the advisory fees (after voluntary
fee waivers) paid by the Portfolios as a percentage of net assets for the fiscal
year ended November 30, 1998.
<TABLE>
<CAPTION>
Advisory Fee Paid
Contractual for Fiscal Year
Portfolio Rate Ended 11/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SELECT 0.25% 0.10%
- --------------------------------------------------------------------------------
GOVERNMENT 0.25% 0.25%
- --------------------------------------------------------------------------------
DIVERSIFIED ASSETS 0.25% 0.25%
- --------------------------------------------------------------------------------
TAX-EXEMPT 0.25% 0.25%
- --------------------------------------------------------------------------------
</TABLE>
The difference, if any, between the contractual advisory fees and the actual
advisory fees paid by the Portfolios reflects that the Investment Adviser did
not charge the full amount of the advisory fees to which it would have been
entitled. The Investment Adviser may discontinue or modify its voluntary
limitations in the future at its discretion.
20
<PAGE>
RISK/RETURN SUMMARY
Portfolio Management
- --------------------------------------------------------------------------------
The Investment Adviser employs a team approach to the investment management of
the Portfolios, relying upon investment professionals under the leadership of
James M. Snyder, Chief Investment Officer and Executive Vice President of
Northern. Mr. Snyder oversees the management of all fixed income, equity and
money market assets managed by the Investment Adviser. Mr. Snyder joined
Northern Trust in 1980.
Other Portfolio Services
- --------------------------------------------------------------------------------
Northern also serves as transfer agent ("Transfer Agent") and custodian for each
Portfolio. As Transfer Agent, Northern performs various administrative servicing
functions, and any shareholder inquiries should be directed to it. Goldman Sachs
serves as the Portfolios' administrator and distributor. In addition, Northern
and its affiliates, banks, trust companies and other institutions and
organizations may enter into agreements for the provision of administrative
support services and personal and account maintenance services for Premier Share
investors. Northern, Goldman Sachs and other institutions may provide
consulting, technology and systems support services and receive fees relating to
cash management or sweep account services under a Service Plan described under
"Account Policies and Other Information - Servicing Agents" on page 28. Goldman
Sachs does not receive any compensation from the Trust for its distribution
services. Pursuant to an SEC order, the Portfolios may engage in portfolio
securities transactions with Goldman Sachs in the ordinary course of business.
It is expected that on or after May 1, 1999, First Data Distributors, Inc. will
replace Goldman Sachs as the Portfolios' distributor. It is also expected that
Northern and First Data Investor Services Group, Inc. (an affiliate of First
Data Distributors, Inc.) will replace Goldman Sachs to serve as the Portfolios'
co-administrators on or after such date, at substantially the same cost to the
Portfolios.
21
<PAGE>
Purchasing and Selling Premier Shares
- --------------------------------------------------------------------------------
INVESTORS
Institutional investors, which are acting on behalf of their customers, clients,
employees, participants and others ("Customers") and have agreed to provide (or
arrange for the provision of) administrative support and shareholder liaison
services to Customers under a servicing agreement with the Trust ("Servicing
Agreement"), may invest in Premier Shares of the Portfolios through their
institutional accounts at Northern or an affiliate. They may also establish
accounts directly with the Trust. There is no sales charge imposed on
investments. Institutional investors ("Institutions") include:
o Northern and its affiliates;
o Defined contribution plans having at least $30 million in assets or annual
contributions of at least $5 million; and
o Other institutions and organizations.
- --------------------------------------------------------------------------------
SHARE
CLASSES
Each Portfolio offers three classes of shares: Premier Shares, Service Shares
and Shares. Service Shares and Shares are described in separate prospectuses.
Shares of each class bear their pro rata portion of all operating expenses paid
by a Portfolio, except amounts payable under the Service Plan that has been
adopted for the Portfolios' Premier Shares and Service Shares and transfer
agency fees. Because of these class-specific expenses, the performance of the
Premier Shares of a Portfolio described in this Prospectus is expected to be
lower than the performance of both the Service Shares and Shares of the same
Portfolio, and the performance of a Portfolio's Service Shares is expected to be
lower than the performance of the same Portfolio's Shares.
- --------------------------------------------------------------------------------
OPENING AN
ACCOUNT
You can purchase Premier Shares of the Portfolios through your institutional
account at Northern (or an affiliate) or you may open an account directly with
the Trust.
Through an Institutional Account.
If you are opening an institutional account at Northern, a Northern
representative can assist you with all phases of your investment. The Trust does
not require a minimum initial investment for Institutions that invest through
their accounts at Northern. To purchase Premier Shares through your account,
contact your Northern representative for further information.
Directly from the Trust.
An Institution may open a shareholder account and purchase Premier Shares
directly from the Trust with an aggregate minimum initial investment of at least
$5 million in one or more Portfolios. There is no minimum for subsequent
investments.
- --------------------------------------------------------------------------------
By Mail.
Read this Prospectus carefully.
Complete and sign the new account application.
Include a certified corporate resolution (or other acceptable evidence of
authority).
Enclose a check or Federal Reserve draft payable to the specific
Portfolio. If investing in more than one Portfolio, please include a separate
check for each.
Mail your check, corporate resolution and completed application to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
All checks must be payable in U.S. dollars and drawn on a bank located in the
United States. Cash and third party checks are not acceptable.
22
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
By Telephone.
Read this Prospectus carefully.
Call the Transfer Agent at 1-800-637-1380.
To open a new account please provide:
o The name of the Portfolio in which you'd like to invest
o The number of Premier Shares or dollar amount to be invested
o The method of payment
To add to an existing account, please provide:
o The Institution's name
o Your Account Number
- --------------------------------------------------------------------------------
By Wire or Automated Clearing House Transfer ("ACH Transfer").
To open a new account:
Call the Transfer Agent at 1-800-637-1380 for instructions.
For more information about the purchase of Premier Shares, call the Transfer
Agent at 1-800-637-1380.
To add to an existing account:
Have your bank wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account No.)
(Reference Shareholder's Name)
- --------------------------------------------------------------------------------
SELLING
PREMIER
SHARES
Through an Institutional Account.
Institutions may sell (redeem) Premier Shares through their institutional
account by contacting their Northern account representative.
Directly through the Trust.
Institutions that purchase Premier Shares directly from the Trust may redeem
their Premier Shares through the Transfer Agent in one of the following ways:
- --------------------------------------------------------------------------------
By Mail.
Send a written request to:
Northern Institutional Funds
c/o The Northern Trust Company
P.O. Box 75943
Chicago, Illinois 60675-5943
The letter of instruction must include:
o The signature of a duly authorized person
o Your account number
o The name of the Portfolio
o The number of Premier Shares or the dollar amount to be redeemed.
- --------------------------------------------------------------------------------
By Telephone.
o Call the Transfer Agent at 1-800-637-1380 for instructions.
o During periods of unusual economic or market activity, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow the procedures outlined above under "Selling Premier Shares
By Mail."
- --------------------------------------------------------------------------------
By Wire.
o Call the Transfer Agent at 1-800-637-1380 for instructions.
o You must have given prior authorization for expedited wire redemption.
o The minimum amount that may be redeemed by this method is $10,000.
23
<PAGE>
Account Policies and Other Information
- --------------------------------------------------------------------------------
Automatic Investment Arrangements.
Institutions may purchase Premier Shares through their institutional accounts at
Northern either by directing automatic investment of cash balances in excess of
certain agreed upon amounts or by directing investments from time to time on a
non-automatic basis. Northern will place a purchase order generated under an
automatic investment direction either on the Business Day that funds are
available in the account or on the next Business Day, depending upon the terms
of the automatic investment arrangement. Similarly, Northern will place a
redemption order generated under an automatic investment direction either on the
Business Day Northern calculates the redemption amount needed to bring the
account balance up to the agreed upon amount or on the next Business Day,
depending upon the terms of the automatic investment arrangement. If a
redemption order is placed on the next Business Day, Northern will normally
provide funds by provisionally crediting the Institution's account on the day
the calculation is made. Institutions should contact Northern for more
information about their automatic investment arrangements.
Purchase and Redemption Minimums.
There is no purchase minimum for Institutions purchasing Premier Shares through
their institutional account at Northern. For Institutions opening an account
directly with the Trust, there is a minimum initial investment of $5 million in
one or more Portfolios. There is no minimum for subsequent investments. A
$10,000 minimum applies for redemptions by wire. The Trust reserves the right to
waive purchase and redemption minimums and to determine the manner in which a
minimum is satisfied.
Calculating Share Price. The Trust issues Premier Shares and redeems Premier
Shares at net asset value ("NAV"). The NAV for each share class of a Portfolio
is calculated by dividing the value of net assets attributed to that class by
the number of outstanding shares of the class. The NAV for each Portfolio and
class is calculated as of 3:00 p.m., Chicago time, each Business Day. The NAV
used in determining the price of your Premier Shares is the one calculated after
your purchase, exchange or redemption order is received or accepted as described
below.
Each Portfolio seeks to maintain an NAV of $1.00 per share by valuing the
obligations held by it at amortized cost in accordance with SEC regulations.
Amortized cost will normally approximate market value.
Timing of Purchase Requests. Requests accepted by the Transfer Agent or other
authorized intermediary by 1:00 p.m., Chicago time, on any Business Day will be
executed the same day, provided that either:
o The Transfer Agent receives the purchase price in Federal or other
immediately available funds prior to 1:00 p.m., Chicago time, on the same
Business Day;
o The order is accepted by an authorized intermediary and payment is to be
made by the close of the same Business Day in Federal or other immediately
available funds according to procedures authorized by the Trust; or
24
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
o Payment in Federal or other immediately available funds is received by the
close of the same Business Day in an institutional account maintained with
Northern or an affiliate.
Orders received by the Transfer Agent or other authorized intermediary on a
non-Business Day or after 1:00 p.m., Chicago time, on a Business Day will be
executed on the next Business Day, provided that payment is made as noted above.
We consider requests to be in "good order" when all required documents are
properly completed, signed and received, including a certified corporate
resolution or other acceptable evidence of authority. If an Institution pays for
Premier Shares by check, Federal funds generally will become available within
two Business Days after a purchase order is received.
If payment is not received as described above from an authorized intermediary on
the same Business Day of acceptance of an order by the authorized intermediary,
the authorized intermediary may be liable for fees and losses and the
transaction may be cancelled.
In certain circumstances, the Trust may advance the time by which purchase
orders must be received. See "Early Closings" on page 28.
Tax Identification Number. Federal regulations require you to provide to the
Transfer Agent a taxpayer identification number when you open an account.
Purchase orders without such a number or an indication that a number has been
applied for will not be accepted. If you have applied for a number, you must
provide it to the Transfer Agent within 60 days of the date of the order.
In-Kind Purchases and Redemptions. The Trust reserves the right to accept
payment for Premier Shares in the form of securities that are permissible
investments for a Portfolio. The Trust also reserves the right to pay
redemptions by a distribution "in-kind" of securities (instead of cash) from a
Portfolio. See the Statement of Additional Information for further information
about the terms of these purchases and redemptions.
Miscellaneous Purchase Information.
o Institutions are responsible for transmitting purchase orders to the
Transfer Agent and delivering required funds on a timely basis.
o Institutions are responsible for all losses and expenses of a Portfolio in
the event of any failure to make payment according to the procedures
outlined in this Prospectus. Northern may redeem shares from any account it
maintains to protect the Portfolios and Northern against loss. In addition,
a $20 charge will be imposed if a check does not clear.
25
<PAGE>
Account Policies and Other Information continued
- --------------------------------------------------------------------------------
o Premier Shares of a Portfolio are entitled to the dividends declared by the
Portfolio beginning on the Business Day the purchase order is executed,
provided payment in Federal or other immediately available funds is
received by the Transfer Agent by the time designated above.
o The Trust reserves the right to reject any purchase order. The Trust also
reserves the right to change or discontinue any of its purchase procedures.
Timing of Redemption and Exchange Requests. Redemption and exchange requests
will be effected at the NAV next determined after your exchange or redemption
order is received in good order. Good order means that the request includes the
following: the account number and Portfolio name; the amount of the transaction
(as specified in dollars or shares); and the signature of a duly authorized
person (except for telephone and wire redemptions). See "Account Policies and
Other Information -- Making Changes to Your Account Information."
If either the Transfer Agent or Northern (with respect to your institutional
account) receives a redemption order by 1:00 p.m., Chicago time, on a Business
Day, redemption proceeds will normally be paid in Federal funds or other
immediately available funds wired or sent by check to you or, if you so choose,
to your institutional account with Northern, on the same Business Day.
Redemption orders received after 1:00 p.m., Chicago time, will be effected the
next Business Day. Proceeds for redemption orders received on a non-Business Day
will normally be sent on the next Business Day after receipt in good order.
In certain circumstances, the Trust may advance the time by which redemption and
exchange orders must be received. See "Early Closings" on page 28.
Miscellaneous Redemption Information. All redemption proceeds will be sent by
check unless the Transfer Agent is directed otherwise. Redemption proceeds may
also be wired. A redemption request may not be processed if a shareholder has
failed to submit a completed and properly executed new account application,
including a corporate resolution or other acceptable evidence of authority.
o The Trust reserves the right to defer crediting, sending or wiring
redemption proceeds for up to 7 days after receiving the redemption order
if, in its judgment, an earlier payment could adversely affect a Portfolio.
o If you are redeeming recently purchased Premier Shares, your redemption
request may not be honored until your check or electronic transaction has
cleared. This may delay your transaction for up to 15 days.
o Institutions are responsible for transmitting redemption orders to the
Transfer Agent and crediting their Customers' accounts with redemption
proceeds on a timely basis.
26
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
o Redemption requests by mail must be signed by a person authorized by
acceptable documentation on file with the Transfer Agent.
o Dividends on Premier Shares are earned through and including the day prior
to the day on which they are redeemed.
o The Trust reserves the right to redeem Premier Shares held by any
shareholder who provides incorrect or incomplete account information or
when such involuntary redemptions are necessary to avoid adverse
consequences to the Trust and its shareholders.
o The Trust may require any information reasonably necessary to ensure that a
redemption request has been duly authorized.
o The Trust reserves the right to change or discontinue any of its redemption
procedures.
Exchange Privileges. Institutions and their Customers (to the extent permitted
by their account agreements) may exchange Premier Shares of a Portfolio for
Premier Shares of another Portfolio. The registration of both accounts involved
must be identical. A $1,000 minimum investment applies. An exchange is a
redemption of shares you own and the purchase of shares you are acquiring. It is
considered a taxable event and may result in a gain or loss.
The Trust reserves the right to change or discontinue the exchange privilege at
any time upon 60 days written notice to shareholders and to reject any exchange
request. Exchanges are only available in states where an exchange can legally be
made. Before making an exchange you should read the prospectus for the shares
you are acquiring.
Telephone Transactions. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, the Transfer Agent has adopted
procedures in an effort to establish reasonable safeguards against fraudulent
telephone transactions. If reasonable measures are taken to verify that
telephone instructions are genuine, the Trust and its service providers will not
be responsible for any loss resulting from fraudulent or unauthorized
instructions received over the telephone. In these circumstances, shareholders
will bear the risk of loss. During periods of unusual market activity, you may
have trouble placing a request by telephone. In this event, consider sending
your request in writing.
The proceeds of redemption orders received by telephone will be sent by check,
wire or transfer according to proper instructions. All checks will be made
payable to the shareholder of record and mailed only to the shareholder's
address of record.
The Trust reserves the right to refuse a telephone redemption.
Advance Notification of Large Transactions. The Trust requests that an
Institution give advance notice to the Transfer Agent by 11:00 a.m., Chicago
time, if it intends to place a purchase or redemption order of $5 million or
more on a Business Day.
27
<PAGE>
Account Policies and Other Information continued
- --------------------------------------------------------------------------------
Making Changes to Your Account Information. You may make changes to wiring
instructions, address of record, or other account information only in writing.
These instructions must be accompanied by a certified corporate resolution,
signature guarantee from an institution participating in the Stock Transfer
Agency Medallion Program ("STAMP"), or other acceptable evidence of authority.
In accordance with SEC regulations, the Trust and Transfer Agent may charge a
shareholder reasonable costs in locating a shareholder's current address.
Business Day. A "Business Day" is each Monday through Friday when Northern or
the New York Stock Exchange is open for business. A "Business Day" does not
include a holiday observed by Northern and the Exchange. In 1999 these holidays
are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
Early Closings. The Portfolios reserve the right to cease, or to advance the
time for, accepting purchase, redemption or exchange orders for same Business
Day credit when Northern or the Exchange closes early as a result of unusual
weather or other conditions. They also reserve this right when The Bond Market
Association recommends that securities markets close or close early.
Authorized Intermediaries. The Trust may authorize certain financial
intermediaries (including banks, trust companies, brokers and investment
advisers), which provide recordkeeping, reporting and processing services, to
accept purchase, redemption and exchange orders from their Customers on behalf
of the Trust. They may also designate other intermediaries to accept such
orders, if approved by the Trust. Authorized intermediaries are responsible for
transmitting orders and delivering funds on a timely basis. A Portfolio will be
deemed to have received an order when the order is accepted by the authorized
intermediary on a Business Day, and the order will be priced at the Portfolio's
per share NAV next determined.
Servicing Agents. Institutions perform (or arrange to have performed)
administrative support services and personal and account maintenance services
for Customers who are the beneficial owners of Premier Shares through Servicing
Agreements with the Trust ("Servicing Agents"). These Servicing Agreements are
permitted under the Trust's Service Plan ("Service Plan"). These services may
include:
o establishing and maintaining individual accounts and records;
o processing purchase, redemption and exchange orders;
o placing net purchase and redemption orders with Northern acting as the
Trust's Transfer Agent; and
o providing cash management or sweep accounts and similar programs and
services.
28
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
Servicing Agents will receive fees from the Portfolios for these services at an
annual rate of up to 0.25% of the average daily net asset value of the Premier
Shares beneficially owned by their Customers.
Personal and account maintenance services provided under the Service Plan may
include:
o providing information to investors regarding the Portfolios or relating to
the status of their accounts; and
o acting as liaison between investors and the Trust.
Servicing Agents will receive additional fees from the Portfolios for these
services at an annual rate of up to 0.25% of the average daily net asset value
of Premier Shares beneficially owned by their Customers. The Service Plan also
provides for the payment of fees to Northern, Goldman Sachs or other
Institutions at an annual rate of up to 0.08% of the average daily net asset
value of Premier Shares serviced by Institutions for ongoing consulting,
technology and systems support services relating to cash management or sweep
account services. All fees payable under the Service Plan are borne solely by
Premier Shares and not by the Portfolios' other share classes.
Northern may provide additional compensation to certain dealers and other
financial intermediaries who provide services to their Customers who invest in
the Trust or whose Customers purchase significant amounts of Premier Shares of a
Portfolio. The amount of such compensation may be made on a one-time and/or
periodic basis, and may represent all or a portion of the annual fees earned by
Northern as Investment Adviser (after adjustments). This compensation will be
paid by Northern or its affiliates and will not represent an additional expense
to the Trust or its shareholders.
You should read your account agreement with your Institution carefully. Your
Institution's requirements may differ from those listed in this Prospectus. An
Institution may impose account charges, such as asset allocation fees, account
maintenance fees, and other charges that will reduce the net return on an
investment in a Portfolio. If you have agreed to maintain a minimum balance with
your Institution and the balance falls below this minimum, you may be required
to redeem all or a part of your investment in a Portfolio.
Conflict of interest restrictions may apply to the receipt of compensation from
the Trust by an Institution in connection with the investment of fiduciary funds
in Premier Shares of a Portfolio. Banks and other institutions regulated by the
Office of Comptroller of the Currency, Board of Governors of the Federal Reserve
System and state banking commissions, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before entering
into Servicing Agreements.
State securities laws regarding the registration of dealers may differ from
Federal law. As a result, Institutions investing in the Portfolios on behalf of
their Customers may be required to register as dealers.
29
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net income are declared daily and paid monthly by each Portfolio
to its shareholders. Net income includes the interest accrued on a Portfolio's
assets less estimated expenses. Each Portfolio's net realized short-term capital
gains, if any, are distributed at least annually. The Portfolios do not expect
to realize net long-term capital gains.
Dividends are paid as soon as practicable following the end of each month,
except in the case of a total redemption of Premier Shares in an account that is
not subject to a standing order for the purchase of additional Premier Shares.
In that event, dividends will be paid promptly along with the redemption
proceeds.
All distributions are paid by each Portfolio in cash or are automatically
reinvested (without any sales charge) in additional Premier Shares of the same
Portfolio. You may make arrangements to credit these distributions to your
account with Northern, its affiliates or its correspondent banks.
There are no fees or sales charges on reinvestments.
- --------------------------------------------------------------------------------
TAXES
Each Portfolio intends to qualify as a regulated investment company for Federal
tax purposes, and to distribute substantially all of its net income to
shareholders each year. Except for exempt-interest dividends paid by the
Tax-Exempt Portfolio, dividends and other distributions will be taxable as
ordinary income, unless you have a tax-advantaged account. This is true whether
dividends and distributions are received in cash or reinvested in Portfolio
Premier Shares.
There are certain tax requirements that the Portfolios must follow in order to
avoid Federal taxation. In their efforts to adhere to these requirements, the
Portfolios may have to limit their investment activity in some types of
instruments.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Exempt-interest dividends must, however, be
reported on your Federal income tax return. Shareholders who are recipients of
Social Security Act or Railroad Retirement Act benefits should note that
exempt-interest dividends will be taken into account in determining the
taxability of their benefit payments.
In certain instances, dividends paid by the Tax-Exempt Portfolio, while exempt
from regular Federal income tax, may be subject to the alternative minimum tax.
In addition, the Portfolio may invest a portion of its assets in securities that
generate income that is not exempt from Federal tax. Any dividends paid by the
Tax-Exempt Portfolio that are derived from taxable interest or from capital
gains will be subject to Federal income tax.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable. It will apply these percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages for
any particular day.
30
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
OTHER TAX
INFORMATION
Dividends and distributions from each Portfolio will generally be reportable by
you in the tax year in which they are paid with one exception. Dividends and
distributions declared by a Portfolio in October, November or December and paid
in January are taxed as though they were paid by December 31.
Every year, the Trust will send you information detailing the amount of ordinary
income and capital gains distributed to your account for the previous year.
Your investment in the Portfolios could have additional tax consequences. You
should consult your tax professional for information regarding all the tax
consequences applicable to your investments in the Portfolios. More information
is provided in the Statement of Additional Information. This short summary is
not intended as a substitute for careful tax planning.
In particular, although the Government Select Portfolio intends to invest
primarily in U.S. government securities the interest on which is generally
exempt from state income taxation, you should consult your own tax professional
to determine whether this is true in your own situation. Similarly, dividends
paid by the Portfolios (including the Tax-Exempt Portfolio) may be taxable under
state or local law as dividend income even though all or a portion of such
dividends may be derived from interest on obligations which, if realized
directly, would be exempt from such income taxes.
31
<PAGE>
Year 2000 Issues
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000" issues.
Many computer systems use two digits rather than four to identify the year.
Unless adapted, these systems may not be able to correctly distinguish the Year
2000 from the Year 1900. As the Year 2000 approaches, many systems may be unable
to accurately process certain date-based information, which could cause a
variety of operational problems for businesses. This could have a negative
effect on the companies in which the Portfolios invest, thus decreasing the
Portfolios' investment returns.
Northern Trust has implemented steps to prepare its critical computer systems
and processes for Year 2000 processing. It has established a dedicated Year 2000
Project Team whose members have significant systems development and maintenance
experience. Northern Trust's Year 2000 project includes a comprehensive testing
plan of its critical systems. Northern Trust has advised the Trust that it has
substantially completed work on its critical systems and that testing with
outside parties will be conducted during 1999.
Northern Trust also has a program to monitor and assess the efforts of other
parties, such as other service providers to the Portfolios. However, it cannot
control the success of those other parties' efforts. Contingency plans are being
established to provide Northern Trust with alternatives in case these entities
experience significant Year 2000 difficulties that impact Northern Trust.
Furthermore, even if the actions taken by Northern Trust are successful, the
normal operations of the Portfolios may, in any event, be disrupted
significantly by the failure of communications and public utility companies,
governmental entities, financial processors or others to perform their services
as a result of Year 2000 problems.
32
<PAGE>
APPENDICES
Appendix A
ADDITIONAL INFORMATION ON PORTFOLIO
RISKS, SECURITIES AND TECHNIQUES
This Appendix takes a closer look at some of the types of securities in which
the Portfolios may invest and their related risks. It also explores the various
investment techniques that the investment management team may, but is not
required to, use. The Portfolios may invest in other securities and are subject
to further restrictions and risks which are described in the Statement of
Additional Information.
- --------------------------------------------------------------------------------
Asset-Backed Securities. Asset-backed securities are sponsored by entities such
as government agencies, banks, financial companies and commercial or industrial
companies. Asset-backed securities represent participations in, or are secured
by and payable from, pools of assets such as mortgages, motor vehicle
installment sale contracts, installment loan contracts, leases of various types
of real and personal property, receivables from revolving credit (credit card)
agreements and other financial assets. Such asset pools are securitized through
the use of privately-formed trusts or special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pooled insurance policy
issued by a financial institution, or other credit enhancements.
Investment strategy. The Diversified Assets Portfolio and Tax-Exempt Portfolio
may purchase various types of asset-backed securities. The Government Portfolio
may only purchase mortgage-backed securities that are guaranteed by the U.S.
government, its agencies or instrumentalities.
Special risks. Securities that are backed by credit card, automobile and similar
types of receivables generally do not have the benefit of a security interest in
collateral that is comparable in quality to mortgage assets. In the event of
default, a Portfolio will have recourse only to the collateral, not to the
sponsor, except to the extent that the security is guaranteed. In the event of
default, a Portfolio may suffer a loss if it cannot sell collateral quickly and
receive the amount it is owed.
33
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Borrowings and Reverse Repurchase Agreements. The Portfolios may borrow money
from banks and the Government Select, Government and Diversified Assets
Portfolios may enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of money
market securities held by a Portfolio subject to the Portfolio's agreement to
repurchase them at a mutually agreed upon date and price (including interest).
Investment strategy. Each Portfolio may borrow in amounts not exceeding
one-third of its total assets. Each of the Government Select, Government
and Diversified Assets Portfolios may enter into reverse repurchase
agreements in amounts not exceeding one-third of its total assets. These
transactions may be entered into as a temporary measure for emergency
purposes or to meet redemption requests. Reverse repurchase agreements may
also be entered into when the investment management team expects that the
interest income to be earned from the investment of the transaction
proceeds will be greater than the related interest expense.
Special risks. Borrowings and reverse repurchase agreements involve
leveraging. If the securities held by the Portfolios decline in value while
these transactions are outstanding, the net asset value of the Portfolios'
outstanding shares will decline in value by proportionately more than the
decline in value of the securities. In addition, reverse repurchase
agreements involve the risks that the interest income earned by a Portfolio
(from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by
a Portfolio will decline below the price the Portfolio is obligated to pay
to repurchase the securities, and that the securities may not be returned
to the Portfolio.
Custodial Receipts for Treasury Securities. Custodial receipts are
participations in trusts that hold U.S. Treasury securities and are sold under
names such as TIGRs and CATS. Like other stripped obligations, they entitle the
holder to future interest or principal payments on the U.S. Treasury securities.
Investment strategy. The Government, Diversified Assets and Tax-Exempt
Portfolios may purchase custodial receipts. Investments by the Government
Portfolio in custodial receipts will not exceed 35% of the value of its
total assets.
Special risks. Like other stripped obligations, custodial receipts may be
subject to greater price volatility than ordinary debt obligations because
of the way in which their principal and interest are returned to investors.
Derivatives. Each Portfolio may purchase certain "derivative" instruments. A
derivative is a financial instrument whose value is derived from -- or based
upon -- the performance of underlying assets, interest or currency exchange
rates, or indices. Derivatives include structured debt obligations such as
collateralized mortgage obligations and other types of asset-backed securities,
"stripped" securities and various floating rate instruments.
Investment strategy. A Portfolio will invest in derivatives only if the
potential risks and rewards are consistent with the Portfolio's objective,
strategies and overall risk profile.
34
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Special risks. Engaging in derivative transactions involves special risks,
including (a) market risk that the Portfolio's derivatives position will
lose value; (b) credit risk that the counterparty to the transaction will
default; (c) leveraging risk that the value of the derivative instrument
will decline more than the value of the assets on which it is based; (d)
illiquidity risk that a Portfolio will be unable to sell its position
because of lack of market depth or disruption; (e) pricing risk that the
value of a derivative instrument will be difficult to determine; and (f)
operations risk that loss will occur as a result of inadequate systems or
human error. Many types of derivatives have been recently developed and
have not been tested over complete market cycles. For these reasons, a
Portfolio may suffer a loss whether or not the analysis of the investment
management team is accurate.
Diversification. Diversifying its holdings can help a Portfolio reduce the risks
of investing. In accordance with current SEC regulations, each Portfolio will
not invest more than 5% of the value of its total assets at the time of purchase
in the securities of any single issuer. However, a Portfolio may invest up to
25% of the value of its total assets in the securities of a single issuer for up
to three Business Days. These limitations do not apply to cash, certain
repurchase agreements, U.S. government securities or securities of other
investment companies. In addition, securities subject to certain unconditional
guarantees and securities that are not "First Tier Securities" as defined by the
SEC are subject to different diversification requirements as described in the
Statement of Additional Information.
Downgraded Securities. After its purchase, a portfolio security may be assigned
a lower rating or cease to be rated. If this occurs, a Portfolio may continue to
hold the issue if the Investment Adviser believes it is in the best interest of
the Portfolio and its shareholders.
Foreign Securities. The Diversified Assets Portfolio may invest in the
obligations of foreign governments, or any of their political subdivisions,
agencies or instrumentalities, foreign commercial banks and foreign branches of
U.S. banks. It may also invest in U.S. dollar-denominated commercial paper and
other obligations of foreign issuers. Foreign government obligations may include
debt obligations of supranational entities, including international
organizations (such as the European Coal and Steel Community and the
International Bank for Reconstruction and Development (also known as the World
Bank)) and international banking institutions and related government agencies.
Investment strategy. Investments by the Diversified Assets Portfolio in
foreign issuer obligations will not exceed 50% of the Portfolio's total
assets measured at the time of purchase.
Special risks. Foreign securities involve special risks and costs. Foreign
securities, and in particular foreign debt securities, are sensitive to
changes in interest rates. In addition, investment in the securities of
foreign governments involves the risk that foreign governments may default
on their obligations or may otherwise not respect the integrity of their
debt.
35
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with less complete financial
information about the issuers, less market liquidity, more market
volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend
income, possible seizure or nationalization of foreign holdings or the
adoption of other governmental restrictions might adversely affect an
investment in foreign securities. Additionally, foreign banks and foreign
branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements.
Illiquid or Restricted Securities. Illiquid securities include repurchase
agreements and time deposits with notice/termination dates of more than seven
days, certain variable amount master demand notes that cannot be called within
seven days, certain insurance funding agreements (see below), and other
securities that are traded in the U.S. but are subject to trading restrictions
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").
Investment strategy. Each Portfolio may invest up to 10% of its net assets
in securities that are illiquid. A domestically traded security which is
not registered under the 1933 Act will not be considered illiquid if the
Investment Adviser determines that an adequate trading market exists for
that security. If otherwise consistent with their investment objectives and
policies, the Portfolios may purchase commercial paper issued pursuant to
Section 4(2) of the 1933 Act and securities that are not registered under
the 1933 Act but can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. These securities will not be
considered illiquid so long as Northern determines, under guidelines
approved by the Trust's Board of Trustees, that an adequate trading market
exists.
Special risks. Because illiquid and restricted securities may be difficult
to sell at an acceptable price, they may be subject to greater volatility
and may result in a loss to a Portfolio. The practice of investing in
commercial paper available to qualified institutional buyers could increase
the level of illiquidity during any period that qualified institutional
buyers become uninterested in purchasing these securities.
Insurance Funding Agreements. An insurance funding agreement ("IFA") is an
agreement that requires a Portfolio to make cash contributions to a deposit fund
of an insurance company's general account. The insurance company then credits
interest to the Portfolio for a set time period.
36
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Investment Strategy. The Diversified Assets Portfolio may invest in IFAs
issued by insurance companies that meet quality and credit standards
established by the Investment Adviser.
Special risks. IFAs are not insured by a government agency -- they are
backed only by the insurance company that issues them. As a result, they
are subject to default risk. In addition, an active secondary market in
IFAs does not currently exist. This means that it may be difficult to sell
an IFA at an appropriate price.
Investment Companies. In connection with the management of their daily cash
positions, the Portfolios may invest in shares of other money market funds which
invest in short-term, high quality debt securities and securities issued by
other investment companies consistent with their investment objectives and
policies.
Investment strategy. Investments by a Portfolio in other money market funds
will be subject to the limitations of the Investment Company Act of 1940.
Although the Portfolios do not expect to do so in the foreseeable future,
each Portfolio is authorized to invest substantially all of its assets in
an open-end investment company that has the same investment objective,
policies and fundamental restrictions as the Portfolio.
Special risks. As a shareholder of another investment company, a Portfolio
would be subject to the same risks as any other investor in that company.
It would also bear a proportionate share of any fees or expenses paid by
that company. These expenses would be in addition to the advisory fees and
other expenses the Portfolio bears directly in connection with its own
operations.
Municipal and Related Instruments. Municipal instruments include debt
obligations issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies, authorities and
instrumentalities.
Municipal instruments include both "general" and "revenue" bonds and may be
issued to obtain funds for various public purposes. General obligations are
secured by the issuer's pledge of its full faith, credit and taxing power.
Revenue obligations are payable only from the revenues derived from a particular
facility or class of facilities. In some cases, revenue bonds are also payable
from the proceeds of a special excise or other specific revenue source such as
lease payments from the user of a facility being financed.
Municipal instruments also include "moral obligation" bonds, which are supported
by a moral commitment but not a legal obligation of a state or municipality, as
well as custodial receipts and certificates of participation that represent
interests in a pool of municipal instruments held by a trustee.
37
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
During extraordinary circumstances, the Tax-Exempt Portfolio may invest in AMT
obligations such as certain bonds issued to obtain funds to provide certain
water, sewage and solid waste facilities, qualified residential rental projects,
certain local electric, gas and other heating or cooling facilities, qualified
hazardous waste facilities, and government-owned airports, docks and wharves and
mass commuting facilities; certain qualified mortgage, student loan and
redevelopment bonds; and certain bonds issued as part of "small issues" for
industrial facilities.
Investment strategy. In connection with its investments in municipal
instruments, the Tax-Exempt Portfolio may invest more than 25% of its total
assets in (a) municipal instruments the interest upon which is paid solely
from revenues of similar projects, and (b) industrial development
obligations. The Tax-Exempt Portfolio may also invest more than 25% of the
value of its total assets in municipal instruments whose issuers are in the
same state. However, the Portfolio does not intend to invest more than 25%
of the value of its total assets in industrial development bonds or similar
obligations where the non-governmental entities supplying the revenues to
be paid are in the same industry.
The Diversified Assets Portfolio may invest up to 5% of its net assets in
municipal instruments or other securities issued by state and local
governmental bodies. Generally, this will occur when the yield of municipal
instruments, on a pre-tax basis, is comparable to that of other permitted
short-term taxable investments. Dividends paid by the Diversified Assets
Portfolio on such investments will be taxable to shareholders.
Special risks. Municipal instruments purchased by the Tax-Exempt Portfolio
may be backed by letters of credit or other forms of credit enhancement
issued by foreign (as well as domestic) banks and other financial
institutions. If the credit quality of these banks and financial
institutions declines, the Portfolio could suffer a loss to the extent that
the Portfolio is relying upon this credit support. Certain risks relating
to foreign banks and financial institutions are described on page 35 under
"Foreign Securities."
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Portfolio subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price.
Investment strategy. Each Portfolio may enter into repurchase agreements
with financial institutions such as banks and broker-dealers that are
deemed to be creditworthy by the Investment Adviser. Although the
securities subject to a repurchase agreement may have maturities exceeding
one year, settlement of the agreement will never occur more than one year
after a Portfolio acquires the securities.
Special risks. In the event of a default, a Portfolio will suffer a loss to
the extent that the proceeds from the sale of the underlying securities and
other collateral are less than the repurchase price and the Portfolio's
costs associated with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy, a Portfolio could suffer losses if a
court determines that the Portfolio's interest in the collateral is not
enforceable.
38
<PAGE>
APPENDICES
- --------------------------------------------------------------------------------
Securities Lending. In order to generate additional income, the Portfolios may
lend securities on a short-term basis to banks, brokers and dealers or other
qualified institutions. In exchange, the Portfolios will receive collateral
equal to at least 100% of the value of the securities loaned.
Investment strategy. Securities lending may represent no more than
one-third the value of a Portfolio's total assets (including the loan
collateral). Any cash collateral received by a Portfolio in connection with
these loans may be invested in U.S. government securities and other liquid
high-grade debt obligations.
Special risks. The main risk when lending portfolio securities is that the
borrower might become insolvent or refuse to honor its obligation to return
the securities. In this event, a Portfolio could experience delays in
recovering its securities and may possibly incur a capital loss. In
addition, a Portfolio may incur a loss in reinvesting the cash collateral
it receives.
Stripped Obligations. These securities are issued by the U.S. government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include stripped mortgage-backed securities, which are derivative
multi-class mortgage securities.
Investment strategy. Each of the Portfolios may purchase stripped
securities.
Special risks. Stripped securities are very sensitive to interest rate
changes and to the rate of principal prepayments. A rapid or unexpected
increase in mortgage prepayments could severely depress the price of
certain stripped mortgage-backed securities and adversely affect a
Portfolio's total returns.
United States Government Obligations. These include U.S. Treasury obligations,
such as bills, notes and bonds, which generally differ only in terms of their
interest rates, maturities and time of issuance. These also include obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities. Securities guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities are deemed to include (a)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or an agency or
instrumentality thereof, and (b) participations in loans made to foreign
governments or their agencies that are so guaranteed.
Investment strategy. To the extent consistent with its investment
objective, each Portfolio may invest in a variety of U.S. Treasury
obligations and obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities.
39
<PAGE>
Appendix A continued
- --------------------------------------------------------------------------------
Special risks. Not all U.S. government obligations carry the same
guarantees. Some, such as those of the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the
United States Treasury. Other obligations, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from
the United States Treasury; and others, such as those issued by the Federal
National Mortgage Association ("FNMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations.
Still others are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial
support to its agencies or instrumentalities if it is not obligated to do
so by law. There is no assurance that these commitments will be undertaken
or complied with in the future. In addition, the secondary market for
certain participations in loans made to foreign governments or their
agencies may be limited.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate.
Investment strategy. Each Portfolio may invest in rated and unrated
variable and floating rate instruments to the extent consistent with its
investment objective. Unrated instruments may be purchased by a Portfolio
if they are determined by the Investment Adviser to be of comparable
quality to rated instruments eligible for purchase by the Portfolio. The
Portfolios may invest in variable amount master demand notes.
Special risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate and
credit risk. Because there is no active secondary market for certain
variable and floating rate instruments, they may be more difficult to sell
if the issuer defaults on its payment obligations or during periods when
the Portfolios are not entitled to exercise their demand rights. As a
result, the Portfolios could suffer a loss with respect to these
instruments.
When-Issued Securities, Delayed Delivery Transactions and Forward Commitments. A
purchase of "when-issued" securities refers to a transaction made conditionally
because the securities, although authorized, have not yet been issued. A delayed
delivery or forward commitment transaction involves a contract to purchase or
sell securities for a fixed price at a future date beyond the customary
settlement period.
Investment strategy. Each Portfolio may purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis. Although the
Portfolios would generally purchase securities in these transactions with
the intention of acquiring the securities, the Portfolios may dispose of
such securities prior to settlement if the investment management team deems
it appropriate to do so.
Special risks. Purchasing securities on a when-issued, delayed delivery or
forward commitment basis involves the risk that the securities may decrease
in value by the time they are actually issued or delivered. Conversely,
selling securities in these transactions involves the risk that the value
of the securities may increase before the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
40
<PAGE>
APPENDICES
Appendix B
The financial highlights tables are intended to help you understand the
financial performance of the Government Select Portfolio's Premier Shares for
the period November 23, 1998 (Premier Shares issuance date) to November 30,
1998. Certain information reflects financial results for a single Premier Share.
The total returns in the tables represent the rate that an investor would have
earned or lost on an investment in Premier Shares of the Government Select
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP, whose report is included in
the Portfolios' annual report along with the Portfolios' financial statements.
The annual report is available upon request and without charge. As of November
30, 1998, Premier Shares of the other Portfolios had not been issued to the
public.
41
<PAGE>
Appendix B continued
Financial Highlights
GOVERNMENT SELECT PORTFOLIO
<TABLE>
<CAPTION>
Premier
Shares
.........
For the Period Ended November 30, 1998(c)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year $1.00
...............................................................................
Income from investment operations:
Net investment income 0.00
...............................................................................
Net gains or losses on securities (both realized and unrealized) 0.00
...............................................................................
Total income from investment operations 0.00
- --------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income 0.00
...............................................................................
Distributions (from capital gains) 0.00
...............................................................................
Total distributions to shareholders 0.00
- --------------------------------------------------------------------------------
Net asset value, end of year $1.00
Total return (a) 0.10%
...............................................................................
Ratio to average net assets of (b):
...............................................................................
Expenses, before waivers and reimbursements 0.99%
...............................................................................
Expenses, net of waivers and reimbursements 0.80%
...............................................................................
Net investment income, before waivers and reimbursements 4.52%
...............................................................................
Net investment income, net of waivers and reimbursements 4.71%
...............................................................................
Net assets at end of year (in thousands) $108
- --------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized.
(b) Ratios are annualized.
(c) For the period November 23, 1998 (Premier Share issue date) through
November 30, 1998. Per share amounts from net investment income and
distributions from net investment income are less than $0.01 per share.
42
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43
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APPENDICES
For More Information
- --------------------------------------------------------------------------------
ANNUAL/
SEMIANNUAL
REPORT
Additional information about the Portfolios' investments is available in the
Portfolios' annual and semiannual reports to shareholders.
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL
INFORMATION
Additional information about the Portfolios and their policies is also available
in the Portfolios' Statement of Additional Information ("SAI"). The SAI is
incorporated by reference into this Prospectus (is legally considered part of
this Prospectus).
The Portfolios' annual and semiannual reports and the SAI are available free
upon request by calling 1-800-637-1380.
To obtain other information and for shareholder inquiries:
By telephone -- Call 1-800-637-1380
By mail -- Northern Institutional Funds
P.O. Box 75943
Chicago, IL 60675
On the Internet -- Text-only versions of the Portfolios' documents are available
on the SEC's website at http://www.sec.gov
You may review and obtain copies of Trust documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Trust documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Northern
Institutional Funds
PREMIER SHARES PROSPECTUS
811-3605
44
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================================================================================
INVESTMENT ADVISERS
The Northern Trust Company
Northern Trust Quantitative Advisers, Inc.
50 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT AND CUSTODIAN
The Northern Trust Company
================================================================================
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
SERVICE SHARES
PREMIER SHARES
NORTHERN INSTITUTIONAL FUNDS
4900 Sears Tower
Chicago, Illinois 60606
GOVERNMENT SELECT PORTFOLIO
GOVERNMENT PORTFOLIO
DIVERSIFIED ASSETS PORTFOLIO
TAX-EXEMPT PORTFOLIO
This Statement of Additional Information dated April 1, 1999 (the
"Additional Statement") is not a prospectus. Copies of the prospectuses dated
April 1, 1999 for the Service Shares and Premier Shares of the Government
Select, Government, Diversified Assets and Tax-Exempt Portfolios (the
"Portfolios") of Northern Institutional Funds (each, a "Prospectus") may be
obtained without charge by calling 1-800-637-1380 (toll-free) or by writing to
the address stated above. Each Portfolio also offers an additional share class,
Shares, that is described in a separate statement of additional information.
Capitalized terms not otherwise defined have the same meaning as in the
Prospectus.
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 are incorporated herein
by reference in the section entitled "Financial Statements." No other parts of
the annual report are incorporated herein by reference. Copies of the annual
report may be obtained upon request and without charge by calling 1-800-637-1380
(toll-free).
B-1
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INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION............................................B-3
Classification and History..........................................B-3
Investment Objectives, Strategies and Risks.........................B-3
Investment Restrictions............................................B-12
ADDITIONAL TRUST INFORMATION................................................B-16
Trustees and Officers..............................................B-16
Investment Adviser, Transfer Agent and Custodian...................B-21
Portfolio Transactions.............................................B-26
Administrator and Distributor......................................B-27
Counsel and Auditors...............................................B-29
In-Kind Purchases and Redemptions..................................B-29
Third-Party Fees and Requirements..................................B-29
PERFORMANCE INFORMATION.....................................................B-30
AMORTIZED COST VALUATION....................................................B-33
DESCRIPTION OF SERVICE SHARES AND PREMIER SHARES............................B-35
ADDITIONAL INFORMATION CONCERNING TAXES.....................................B-39
General B-39
Special Tax Considerations Pertaining to the Tax-Exempt Portfolio..B-40
Foreign Investors..................................................B-41
Conclusion.........................................................B-41
SERVICE PLAN................................................................B-41
OTHER INFORMATION...........................................................B-43
FINANCIAL STATEMENTS........................................................B-44
APPENDIX A...................................................................A-1
----------------
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering of Service Shares and Premier Shares made by the
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Trust or its distributor. The
Prospectus does not constitute an offering by the Trust or by the distributor in
any jurisdiction in which such offering may not lawfully be made.
An investment in a Portfolio is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Portfolios seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Classification and History
Northern Institutional Funds (the "Trust") is an open-end, management
investment company. Each Portfolio is classified as diversified under the
Investment Company Act of 1940, as amended (the "1940 Act").
Each Portfolio is a series of the Trust, which was formed as a Delaware
business trust on July 1, 1997 under an Agreement and Declaration of Trust (the
"Trust Agreement"). The Trust, formerly known as The Benchmark Funds, changed
its name to Northern Institutional Funds on July 15, 1998. The Portfolios were
formerly series of The Benchmark Funds, a Massachusetts business trust, and were
reorganized into the Trust on March 31, 1998.
Investment Objectives, Strategies and Risks
The following supplements the investment objectives, strategies and risks
of the Portfolios as set forth in the Prospectus. The investment objective of
each Portfolio may not be changed without the vote of the majority of the
Portfolio's outstanding shares. Except as expressly noted below, however, each
Portfolio's investment policies may be changed without shareholder approval.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit and Time
Deposits
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party.
As stated in the Prospectus, the Diversified Assets Portfolio may invest a
portion of its assets in the obligations of foreign banks and foreign branches
of domestic banks. Such obligations include Eurodollar Certificates of Deposit
("ECDs") which are U.S. dollar-denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States;
Eurodollar Time Deposits ("ETDs") which are U.S. dollar-denominated deposits in
a foreign branch of a U.S. bank or a foreign bank; Canadian Time Deposits
("CTDs") which are essentially the same as ETDs except they are issued by
Canadian offices of major Canadian banks; Schedule Bs, which are obligations
issued by Canadian branches of foreign or domestic banks; Yankee Certificates of
Deposit ("Yankee CDs") which are U.S. dollar-denominated certificates of deposit
B-3
<PAGE>
issued by a U.S. branch of a foreign bank and held in the United States; and
Yankee Bankers' Acceptances ("Yankee BAs") which are U.S. dollar-denominated
bankers' acceptances issued by a U.S. branch of a foreign bank and held in the
United States.
The Diversified Assets Portfolio may also invest in high quality commercial
paper and other obligations issued or guaranteed by U.S. and foreign
corporations and other issuers rated (at the time of purchase) A-2 or higher by
Standard & Poor's Ratings Group ("S&P"), Prime-2 or higher by Moody's Investors
Service, Inc. ("Moody's"), Duff 2 or higher by Duff & Phelps Credit Rating Co.
("D&P"), F-2 or higher by Fitch IBCA, Inc. ("Fitch") or TBW-2 or higher by
Thomson BankWatch, Inc. ("TBW"). The Diversified Assets Portfolio may also
invest in rated and unrated corporate bonds, notes, paper and other instruments
that are of comparable quality to the commercial paper permitted to be purchased
by the Portfolio.
Asset-Backed Securities
The Diversified Assets Portfolio may purchase asset-backed securities,
which are securities backed by mortgages, installment contracts, credit card
receivables or other assets. The average life of asset-backed securities varies
with the maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as a
result of mortgage prepayments. If an asset-backed security is purchased at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if an asset-backed
security is purchased at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will decrease, yield to
maturity.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. For this and other reasons, an asset-backed security's stated
maturity may be shortened, and the security's total return may be difficult to
predict precisely. Such difficulties are not, however, expected to have a
significant effect on the Portfolio since the remaining maturity of any
asset-backed security acquired, as calculated under applicable SEC regulations,
will be 397 days or less.
Asset-backed securities acquired by the Diversified Assets Portfolio may
include collateralized mortgage obligations ("CMOs") issued by private
companies. CMOs provide the holder with a specified interest in the cash flow of
a pool of underlying mortgages or other mortgage-backed securities. Issuers of
CMOs ordinarily elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be structured
in a variety of ways. The Portfolio will not purchase "residual" CMO interests,
which normally exhibit greater price volatility.
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U.S. Government Obligations
Examples of the types of U.S. Government obligations that may be acquired
by the Portfolios include U.S. Treasury Bills, Treasury Notes and Treasury Bonds
and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks,
Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Federal National Mortgage Association, Government National
Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, and the Maritime Administration.
Custodial Receipts for Treasury Securities
The Portfolios (other than the Government Select Portfolio) may acquire
U.S. Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the underwriters
of these certificates or other evidences of ownership of U.S. Treasury
securities have stated that, in their opinion, purchasers of the stripped
securities most likely will be deemed the beneficial holders of the underlying
U.S. Government obligations for Federal tax purposes. The Trust is not aware of
any binding legislative, judicial or administrative authority on this issue.
U.S. Treasury STRIPS
The Treasury Department has facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a Portfolio will be able to have its beneficial ownership of
zero coupon securities recorded directly in the book-entry record-keeping system
in lieu of having to hold certificates or other evidences of ownership of the
underlying U.S. Treasury securities. All Portfolios, including the Government
Select Portfolio, may acquire securities registered under the STRIPS program.
Bank and Deposit Notes
The Diversified Assets Portfolio may purchase bank and deposit notes. Bank
notes rank junior to deposit liabilities of banks and pari passu with other
senior, unsecured obligations of the bank. Bank notes are classified as "other
borrowings" on a bank's balance sheet, while deposit
B-5
<PAGE>
notes and certificates of deposit are classified as deposits. Bank notes are not
insured by the Federal Deposit Insurance Corporation or any other insurer.
Deposit notes are insured by the Federal Deposit Insurance Corporation only to
the extent of $100,000 per depositor per bank.
Variable and Floating Rate Instruments
With respect to the variable and floating rate instruments that may be
acquired by the Portfolios as described in the Prospectus, Northern will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instruments are subject to demand
features, will monitor their financial status and ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
of "high quality," the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. The Portfolios will invest in variable and
floating rate instruments only when Northern deems the investment to involve
minimal credit risk. Unrated variable and floating rate instruments will be
determined by Northern to be of comparable quality at the time of the purchase
to rated instruments that may be purchased by the Portfolios. In determining
weighted average portfolio maturity, an instrument may, subject to SEC
regulations, be deemed to have a maturity shorter than its nominal maturity
based on the period remaining until the next interest rate adjustment or the
time the Portfolio involved can recover payment of principal as specified in the
instrument. Variable and floating rate instruments held by a Portfolio will be
subject to the Portfolio's 10% limitation on illiquid investments when the
Portfolio may not demand payment of the principal amount within seven days
absent a reliable trading market.
Investment Companies
With respect to the investments of the Portfolios in the securities of
other investment companies, such investments will be limited so that, as
determined after a purchase is made, either (a) not more than 3% of the total
outstanding stock of such investment company will be owned by a Portfolio, the
Trust as a whole and their affiliated persons (as defined in the 1940 Act); or
(b)(i) not more than 5% of the value of the total assets of a Portfolio will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio.
Unaffiliated money market funds whose securities are purchased by the
Portfolios may not be obligated to redeem such securities in an amount exceeding
1% of their total outstanding securities during any period of less than 30 days.
Therefore, such securities that exceed this amount may be illiquid.
If required by the 1940 Act, each Portfolio expects to vote the shares of
other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
B-6
<PAGE>
A Portfolio may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policies and restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. A Portfolio may adhere
to more restrictive limitations with respect to its investments in securities
issued by other investment companies if required by the SEC or deemed to be in
the best interests of the Trust.
Repurchase Agreements
Each Portfolio may enter into repurchase agreements with financial
institutions, such as banks and broker-dealers, as are deemed creditworthy by
Northern under guidelines approved by the Trust's Board of Trustees. The
repurchase price under the repurchase agreements will generally equal the price
paid by a Portfolio plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the Trust's custodian (or subcustodian), in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. The seller
under a repurchase agreement will be required to maintain the value of the
securities which are subject to the agreement and held by a Portfolio in an
amount that exceeds the agreed upon repurchase price (including accrued
interest). Repurchase agreements are considered to be loans by a Portfolio under
the 1940 Act.
Reverse Repurchase Agreements
Each Portfolio (except the Tax-Exempt Portfolio) may borrow funds as a
temporary measure for emergency purposes or to meet redemption requests by
selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). The Portfolios may use the proceeds of
reverse repurchase agreements to purchase other securities either maturing, or
under an agreement to resell, at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Portfolio may
decline below the repurchase price. The Portfolios will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Portfolio will segregate liquid assets in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. Reverse repurchase agreements are considered
to be borrowings by a Portfolio under the 1940 Act.
Securities Lending
Collateral for loans of portfolio securities made by a Portfolio may
consist of cash, securities issued or guaranteed by the U.S. Government or its
agencies or irrevocable bank letters of credit (or any combination thereof). The
borrower of securities will be required to maintain the market value of the
collateral at not less than the market value of the loaned securities, and such
value will be monitored on a daily basis. When a Portfolio lends its securities,
it continues to receive interest on the securities loaned and may simultaneously
earn interest on the investment of the cash collateral which will be invested in
readily marketable, high-quality, short-term
B-7
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obligations. Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans will be called so that the
securities may be voted by a Portfolio if a material event affecting the
investment is to occur.
Forward Commitments and When-Issued Securities
Each Portfolio may purchase securities on a when-issued basis or purchase
or sell securities on a forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the Portfolio to purchase or
sell securities at a future date. The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are normally negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities. If
deemed advisable as a matter of investment strategy, however, a Portfolio may
dispose of or negotiate a commitment after entering into it. A Portfolio also
may sell securities it has committed to purchase before those securities are
delivered to the Portfolio on the settlement date. The Portfolio may realize a
capital gain or loss in connection with these transactions. For purposes of
determining a Portfolio's average dollar-weighted maturity, the maturity of
when-issued or forward commitment securities will be calculated from the
commitment date.
When a Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio will segregate liquid assets having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the Portfolio will segregate the portfolio securities themselves. These
procedures are designed to ensure that the Portfolio will maintain sufficient
assets at all times to cover its obligations under when-issued purchases and
forward commitments.
Insurance Funding Agreements
The Diversified Assets Portfolio may invest in insurance funding agreements
("IFAs"). An IFA is normally a general obligation of the issuing insurance
company and not a separate account. The purchase price paid for an IFA becomes
part of the general assets of the insurance company, and the contract is paid
from the company's general assets. Generally, IFAs are not assignable or
transferable without the permission of the issuing insurance companies, and an
active secondary market in IFAs may not exist.
Yields and Ratings
The yields on certain obligations, including the money market instruments
in which the Portfolios invest (such as commercial paper and bank obligations),
are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, financial
condition of the issuer, size of the offering, maturity of the obligation and
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<PAGE>
ratings of the issue. The ratings of S&P, Moody's, D&P, Fitch and TBW represent
their respective opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
Municipal Instruments
Municipal instruments are high quality, short-term instruments, the
interest on which is, in the opinion of bond counsel to the issuers, exempt from
Federal income tax. Opinions relating to the validity of municipal instruments
and to the exemption of interest thereon from regular Federal income tax are
rendered by bond counsel to the respective issuing authorities at the time of
issuance. Neither the Trust nor Northern will review the proceedings relating to
the issuance of municipal instruments or the bases for such opinions.
Municipal instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Tax-Exempt Portfolio may purchase short-term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Municipal instruments include industrial development bonds. Industrial
development bonds are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. Consequently, the credit quality of an
industrial revenue bond is usually directly related to the credit standing of
the private user of the facility involved.
The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of a
moral obligation bond is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal bonds with a series of maturity dates are called Serial Bonds.
The Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds") where the Portfolio obtains at
the time of purchase the right to put the bond back to the issuer or a third
party at par at least every thirteen months. Put Bonds with conditional puts
(that is, puts which cannot be exercised if the issuer defaults on its payment
obligations) will present risks that are different than those of other municipal
instruments because of the possibility that the Portfolio might hold a long-term
Put Bond on which a default occurs following its acquisition by the Portfolio.
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Municipal instruments purchased by the Tax-Exempt Portfolio may be backed
by letters of credit or other forms of credit enhancement issued by foreign (as
well as domestic) banks and other financial institutions. The credit quality of
these banks and financial institutions could, therefore, cause loss to a
Portfolio that invests in municipal instruments. Letters of credit and other
obligations of foreign financial institutions may involve certain risks in
addition to those of domestic obligations.
Although the Tax-Exempt Portfolio does not expect to do so during normal
market conditions, it may invest more than 25% of the value of its total assets
in municipal instruments whose issuers are in the same state. When a substantial
percentage of the Tax-Exempt Portfolio's assets is invested in instruments which
are used to finance facilities involving a particular industry, whose issuers
are in the same state or which are otherwise related, there is a possibility
that an economic, business or political development affecting one such
instrument would likewise affect the other related instruments.
The Tax-Exempt Portfolio may invest in fixed and variable rate notes and
similar debt instruments rated MIG-2, VMIG-2 or Prime-2 or higher by Moody's,
SP-2 or A-2 or higher by S&P, AA or higher by D&P or F-2 or higher by Fitch and
tax-exempt commercial paper and similar debt instruments rated Prime-2 or higher
by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2 or higher by
Fitch. The Tax-Exempt Portfolio may also invest in rated and unrated municipal
bonds, notes, paper or other instruments that are of comparable quality to the
tax-exempt commercial paper permitted to be purchased by the Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations are
held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of floating
or variable rate obligation that represents interests in a pool of municipal
obligations held by a bank.
An issuer's obligations under its municipal instruments are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal instruments may be materially
adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal instruments. For example, under the Tax Reform Act of 1986
interest on certain private activity bonds must be included in an investor's
Federal alternative minimum taxable income, and corporate investors
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must include all tax-exempt interest in their Federal alternative minimum
taxable income. The Trust cannot predict what legislation, if any, may be
proposed in the future in Congress as regards the Federal income tax status of
interest on municipal instruments. Future proposals could materially adversely
affect the availability of municipal instruments for investment by the
Tax-Exempt Portfolio and the liquidity and value of the Portfolio. In such an
event the Board of Trustees would reevaluate the Portfolio's investment
objective and policies and consider changes in its structure or possible
dissolution.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding shares of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from municipal
instruments except under extraordinary circumstances. During extraordinary
circumstances, the Portfolio may adopt a temporary defensive posture by holding
uninvested cash or invest in AMT obligations and taxable short-term securities.
Taxable investments will consist exclusively of instruments that may be
purchased by the Diversified Assets Portfolio. The risks associated with these
investments are described in the Prospectus.
Interest earned by the Tax-Exempt Portfolio on private activity bonds (if
any) that is treated as a specific tax preference item under the Federal
alternative minimum tax will not be deemed to have been derived from municipal
instruments for purposes of determining whether that Portfolio meets its
fundamental policy that at least 80% of its annual gross income be derived from
municipal instruments.
Standby Commitments
The Tax-Exempt Portfolio may enter into standby commitments with respect to
municipal instruments held by it. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option a specified municipal instrument at its
amortized cost value to the Portfolio plus accrued interest, if any. Standby
commitments may be exercisable by the Portfolio at any time before the maturity
of the underlying municipal instruments and may be sold, transferred or assigned
only with the instruments involved.
The Tax-Exempt Portfolio expects that standby commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a standby commitment either
separately in cash or by paying a higher price for municipal instruments which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding standby commitments held by the Portfolio will not exceed
1/2 of 1% of the value of the Portfolio's total assets calculated immediately
after each standby commitment is acquired.
The Portfolio intends to enter into standby commitments only with dealers,
banks and broker-dealers which, in Northern's opinion, present minimal credit
risks. The Portfolio will acquire standby commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a standby commitment will not affect the
valuation or assumed maturity of the underlying municipal instrument. The actual
standby commitment will be valued at zero in determining net asset value.
Accordingly, where the Portfolio
B-11
<PAGE>
pays directly or indirectly for a standby commitment, its cost will be reflected
as an unrealized loss for the period during which the commitment is held by the
Portfolio and will be reflected in realized gain or loss when the commitment is
exercised or expires.
Illiquid or Restricted Securities
The Portfolios may purchase commercial paper issued pursuant to Section
4(2) of the 1933 Act and securities that are not registered under the 1933 Act
but can be sold to "qualified institutional buyers" in accordance with Rule 144A
under the 1933 Act. These securities will not be considered illiquid so long as
Northern determines, under guidelines approved by the Trust's Board of Trustees,
that an adequate trading market exists. This practice could increase the level
of illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
Investment Restrictions
Each Portfolio is subject to the fundamental investment restrictions
enumerated below which may be changed with respect to a particular Portfolio
only by a vote of the holders of a majority of such Portfolio's outstanding
shares.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements for the Diversified Assets, Government and
Government Select Portfolios) except to secure permitted borrowings.
(3) Purchase or sell real estate or securities issued by real estate
investment trusts, but this restriction shall not prevent a Portfolio from
investing directly or indirectly in portfolio instruments secured by real
estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs.
(5) Invest in companies for the purpose of exercising control or
management.
(6) Act as underwriter of securities (except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies), purchase
securities on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance
of transactions), make short sales of securities or maintain a short
position, or write puts, calls or combinations thereof.
B-12
<PAGE>
(7) Make any investment inconsistent with the Portfolio's classification as
a diversified investment company under the 1940 Act.
(8) Purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation with respect to, and each Portfolio reserves freedom of action,
when otherwise consistent with its investment policies, to concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper)
issued or guaranteed by U.S. banks and U.S. branches of foreign banks and
repurchase agreements and securities loans collateralized by such U.S.
Government obligations or such bank obligations. For the purposes of this
restriction, state and municipal governments and their agencies and
authorities are not deemed to be industries; as to utility companies, the
gas, electric, water and telephone businesses are considered separate
industries; personal credit finance companies and business credit finance
companies are deemed to be separate industries; and wholly-owned finance
companies are considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents.
(9) Borrow money (other than pursuant to reverse repurchase agreements for
the Portfolios described above), except (a) as a temporary measure, and
then only in amounts not exceeding 5% of the value of the Portfolio's total
assets or (b) from banks, provided that immediately after any such
borrowing all borrowings of the Portfolio do not exceed one-third of the
Portfolio's total assets. No purchases of securities will be made if
borrowings subject to this restriction exceed 5% of the value of the
Portfolio's assets. The exceptions in (a) and (b) to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purposes or to facilitate management of the Trust's Portfolios by
enabling the Trust to meet redemption requests when the liquidation of
portfolio instruments is deemed to be disadvantageous or not possible. If
due to market fluctuations or other reasons the total assets of a Portfolio
fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may (a) purchase securities of other investment companies to the full
extent permitted under Section 12 of the 1940 Act (or any successor
provision thereto) or under any regulation or order of the Securities and
Exchange Commission; and (b) invest all or substantially all of its assets
in a single open-end investment company or series thereof with
substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
B-13
<PAGE>
The freedom of action reserved in Restriction No. 8 with respect to U.S.
branches of foreign banks is subject to the requirement that they are subject to
the same regulation as domestic branches of U.S. banks. Obligations of U.S.
branches of foreign banks may include certificates of deposit, bank and deposit
notes, bankers' acceptances and fixed time deposits. These obligations may be
general obligations of the parent bank or may be limited to the issuing branch.
Such obligations will meet the criteria for "Eligible Securities" as described
in the Prospectus.
In addition, as matters of fundamental policy, the Government Select
Portfolio, Government Portfolio and Diversified Assets Portfolio may not enter
into reverse repurchase agreements exceeding in the aggregate one-third of the
applicable Portfolio's total assets; and the Tax-Exempt Portfolio may not
acquire direct ownership of industrial development bonds if, as a result of such
acquisition, more than 5% of the value of its total assets would be invested in
industrial development bonds where payment of principal and interest is the
responsibility of companies (including their predecessors) with less than three
years of operating history and such bonds are not guaranteed as to principal and
interest by companies (including their predecessors) with three years or more of
operating history.
Except to the extent otherwise provided in Investment Restriction No. 8,
for the purpose of such restriction in determining industry classification the
Trust intends to use the industry classification titles in the Standard
Industrial Classification Manual.
In applying Restriction No. 8 above, a security is considered to be issued
by the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by a Portfolio, does not exceed 10% of the value of the Portfolio's total
assets.
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
The Portfolios intend, as a non-fundamental policy, to diversify their
investments in accordance with current SEC regulations. Investments in the
securities of any single issuer (excluding cash, cash items, certain repurchase
agreements, U.S. Government securities and securities of other investment
companies) will be limited to not more than 5% of the value of a Portfolio's
total assets at the time of purchase, except that 25% of the value of the total
assets of each Portfolio may be invested in the securities of any one issuer for
a period of up to three Business Days. A security that has an unconditional
guarantee meeting special SEC requirements (a "Guarantee") does not need to
satisfy the foregoing issuer diversification requirements that would otherwise
apply, but the Guarantee is instead subject to the following diversification
requirements: immediately after the acquisition of the security, a Portfolio may
not have invested more than 10% of its total assets in securities issued by or
subject to Guarantees from the same person, except that a Portfolio may, subject
to certain conditions, invest up to 25% of its total assets in securities issued
or subject to Guarantees of the same person. This percentage is 100% if the
Guarantee is issued by the U.S. Government or an agency thereof. In addition,
the Tax-Exempt Portfolio will limit its investments in certain conduit
securities that are not rated in the highest
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<PAGE>
short-term rating category as determined by two nationally recognized
statistical rating organizations (each an "NRSRO") (or one NRSRO if the security
is rated by only one NRSRO) or, if unrated, are not of comparable quality to
First Tier Securities ("Second Tier Securities"), to 5% of its total assets,
with investments in any one such issuer being limited to no more than 1% of the
Portfolio's total assets or $1 million, whichever is greater, measured at the
time of purchase. Conduit securities subject to this limitation are municipal
instruments that are not subject to a Guarantee and involve an arrangement
whereunder a person, other than a municipal issuer, provides for or secures
repayment of the security and are not: (i) fully and unconditionally guaranteed
by a municipal issuer; or (ii) payable from the general revenues of the
municipal issuer or other municipal issuers; or (iii) related to a project owned
and operated by a municipal issuer; or (iv) related to a facility leased to and
under the control of an industrial or commercial enterprise that is part of a
public project which, as a whole, is owned and under the control of a municipal
issuer. The Diversified Assets Portfolio will limit its investments in all
Second Tier Securities (that are not subject to a Guarantee) in accordance with
the foregoing percentage limitations.
In addition to the foregoing, each Portfolio is subject to additional
diversification requirements imposed by SEC regulations on the acquisition of
securities subject to other types of demand features.
B-15
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers
The business and affairs of the Trust and each Portfolio are managed under
the direction of the Trust's Board of Trustees. Information pertaining to the
Trustees and officers of the Trust is set forth below.
<TABLE>
<CAPTION>
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ----------- --- ---------- -------------------
<S> <C> <C> <C>
William H. Springer 69 Chairman Director of Walgreen Co. (a retail drug
701 Morningside Drive and store business) since April 1988;
Lake Forest, IL 60045 Trustee Director of Baker, Fentress & Co. (a
closed-end, non-diversified management
investment company) from April 1992 to
present; Trustee of Goldman Sachs Trust
from 1989 to present.
Richard Gordon Cline 64 Trustee Chairman and Director of Hussman
4200 Commerce Court, Suite 300 International Inc. (commercial
Lisle, IL 60532 refrigeration company) since January
1998; Chairman of Hawthorne Inc. (a
management advisory services and private
investment company) since January 1996;
Chairman, President and CEO of NICOR
Inc. (a diversified public utility
holding company) from 1985 to 1996;
Chairman and Director of the Federal
Reserve Bank of Chicago from 1992 to
1995; Director of Central DuPage Health
System, Pet Incorporated, Whitman
Corporation (a diversified holding
company), Kmart Corporation (a retailing
company), Ryerson Tull, Inc. (a metals
distribution company) and University of
Illinois Foundation.
</TABLE>
B-16
<PAGE>
<TABLE>
<S> <C> <C> <C>
Edward J. Condon, Jr. 58 Trustee Chairman and CEO of The Paradigm Group,
Sear Tower, Suite 9650 Ltd. (a financial advisor) since July
233 S. Wacker Drive 1993; within the last five years he has
Chicago, IL 60606 served as Vice Chairman and Director of
Energenics L.L.C; Director of Financial
Pacific Company; Member of the Board of
Managers of The Liberty Hampshire
Company, LLC; Member of Advisory Board
of Real-Time U.S.A., Inc; Member of the
Board of Directors of University Elder
Care, Inc; Member of the Board of
Directors of the Girl Scouts of Chicago;
Member of the Board of Trustees of
Dominican University.
John W. English 66 Trustee Private Investor since 1993; Vice
50-H New England Ave. President and Chief Investment Officer
P.O. Box 640 of The Ford Foundation (a charitable
Summit, NJ 07902-0640 trust) from 1981 until 1993; Trustee of
The China Fund, Inc., American Red Cross
in Greater New York, Mote Marine
Laboratory, State Street's Select Sector
SPDR Trust, Washington Mutual's WM Funds
and United Board for Christian Higher
Education in Asia. Director of
University of Iowa Foundation,
Blanton-Peale Institutes of Religion and
Health, Community Foundation of Sarasota
County and Duke Management Company.
Sandra Polk Guthman 55 Trustee President and CEO of Polk Bros.
420 N. Wabash Avenue Foundation (an Illinois not-for-profit
Suite 204 corporation) from 1993 to present;
Chicago, IL 60611 Director of Business Transformation from
1992-1993 and Midwestern Director of
Marketing from 1988-1992 for IBM
Corporation; Director of MBIA Insurance
Corporation of Illinois (bank holding
company) since 1994 and Avondale
Financial Corporation (a stock savings
and loan holding company) since 1995.
</TABLE>
B-17
<PAGE>
<TABLE>
<S> <C> <C> <C>
Frederick T. Kelsey 71 Trustee Consultant to Goldman Sachs from
3133 Laughing Gull Court December 1985 through February 1988;
Johns Island, SC 29455 Director of Goldman Sachs Funds Group
and Vice President of Goldman Sachs from
May 1981 until his retirement in
November 1985; President and Treasurer
of the Trust and other investment
companies affiliated with Goldman Sachs
through August 1985, President from 1983
to 1985 and Trustee from 1983 to 1994 of
The Centerland Funds and its successor,
The Pilot Funds; Trustee of various
management investment companies
affiliated with Zurich Kemper
Investments.
Richard P. Strubel 59 Trustee Managing Director of Tandem Partners,
737 N. Michigan Avenue Inc. (a privately held management
Suite 1405 services firm) since 1990; President and
Chicago, IL 60611 CEO of Microdot, Inc. (a privately held
manufacturing firm) from January 1984 to
October 1994; Trustee of Goldman Sachs
Trust from 1987 to present; Director of
Kaynar Technologies Inc. (a leading
manufacturer of aircraft fasteners)
since March 1997; Trustee of the
University of Chicago; Director of
Children's Memorial Medical Center.
Gordon F. Linke 42 Vice Vice President of Goldman Sachs Funds
555 California Street President Group (since March 1992); Corporate
San Francisco, CA 94104 Finance Officer of Bank of America
(prior thereto).
James A. Fitzpatrick 39 Vice Vice President of Goldman Sachs Asset
4900 Sears Tower President Management (since April 1997); Vice
Chicago, IL 60606 President and General Manager of First
Data Corporation - Investors Services
Group prior thereto.
Nancy L. Mucker 49 Vice Vice President of Goldman Sachs (since
4900 Sears Tower President April 1985); Co-Manager, Shareholder
Chicago, IL 60606 Servicing of Goldman Sachs Asset
Management (since November 1989).
</TABLE>
B-18
<PAGE>
<TABLE>
<S> <C> <C> <C>
John Perlowski 34 Treasurer Vice President of Goldman Sachs (since
One New York Plaza July 1995); Director of Investors Bank
New York, NY 10004 and Trust Company (November 1993 to July
1995); Audit Manager of Arthur Andersen,
LLP (prior thereto).
Michael J. Richman 38 Secretary General Counsel of the Funds Group,
85 Broad Street Goldman Sachs Asset Management (since
New York, NY 10004 December 1997); Associate General
Counsel of Goldman Sachs Asset
Management (February 1994 to December
1997); Vice President of Goldman Sachs
(since 1992) and Associate General
Counsel of Goldman Sachs (since December
1998); Counsel to the Funds Group of
Goldman Sachs Asset Management (since
June 1992); Partner of Hale and Dorr,
September 1991 to June 1992).
Deborah A. Farrell 27 Assistant Legal Assistant, Goldman Sachs (since
85 Broad Street Secretary January 1996); Executive Secretary,
New York, NY 10004 Goldman Sachs (January 1994 - January
1996); Cleary, Gottlieb, Steen &
Hamilton (September 1990 - January
1994).
Steven E. Hartstein 35 Assistant Associate, Goldman Sachs (December 1998
85 Broad Street Secretary - present); Legal Products Analyst,
New York, NY 10004 Goldman Sachs (June 1993 - December
1998).
Howard B. Surloff 33 Assistant General Counsel to the Funds Group
85 Broad Street Secretary (since February 1999); Assistant General
New York, NY 10004 Counsel, Goldman Sachs Asset Management
(December 1997 to February 1999); Vice
President and Assistant General Counsel,
Goldman Sachs (since November 1993 and
May 1994, respectively); Counsel to the
Funds Group, Goldman Sachs Asset
Management (since November 1993);
Associate of Shereff, Friedman, Hoffman
& Goodman, LLP (prior thereto).
</TABLE>
B-19
<PAGE>
<TABLE>
<S> <C> <C> <C>
Valerie A. Zondorak 33 Assistant Assistant General Counsel, Goldman Sachs
85 Broad Street Secretary Asset Management and the Funds Group
New York, NY 10004 (since December 1997); Vice President
and Assistant General Counsel, Goldman
Sachs (since December 1997) and Vice
President and Counsel to Goldman Sachs
(since March 1997); Associate of
Shereff, Friedman, Hoffman & Goodman,
LLP (prior thereto).
</TABLE>
None of the Trustees is an "interested person" under the 1940 Act. Certain
of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such Trustees and officers that all such transactions have been and
are expected to be in the ordinary course of business and the terms of such
transactions, including all loans and loan commitments by such persons, have
been and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers. Messrs. Springer, Kelsey, Strubel,
Richman, Perlowski, Fitzpatrick, Surloff and Hartstein and Mmes. Farrell, Mucker
and Zondorak hold similar positions with one or more investment companies that
are advised by Goldman Sachs. As a result of the responsibilities assumed by
Northern under its Advisory Agreement, Transfer Agency Agreement, Custodian
Agreement and Foreign Custody Agreement with the Trust and by Goldman Sachs
under its Administration Agreement and Distribution Agreement with the Trust,
the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment
companies of which Goldman Sachs, Goldman Sachs Asset Management, or an
affiliate thereof is the investment adviser, administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,750 and the Chairman of the
Board earns a quarterly retainer of $10,125. Each Trustee, including the
Chairman of the Board, earns an additional fee of $2,500 for each meeting
attended, plus reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of
three members including a Chairman of the Committee. The Audit Committee members
are Messrs. Condon, Kelsey and Strubel (Chairman). Each member earns a fee of
$2,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,500.
Each Trustee will hold office for an indefinite term until the earliest of
(1) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Trustee and until the election
and qualification of his or her successor, if any, elected at such meeting; (2)
the date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without
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<PAGE>
shareholder vote), on the last day of the fiscal year of the Trust in which he
or she attains the age of 72 years.
The Trust's officers do not receive fees from the Trust for services in
such capacities, although Goldman Sachs, of which they are also officers,
receives fees from the Trust for administrative services.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1998:
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Total Compensation
Compensation from Accrued as Part of from Trust Paid to
Name of Trustee Trust Trust's Expenses Trustees
- --------------- ----- ---------------- --------
<S> <C> <C> <C>
William H. Springer $46,750 $0 $46,750
Richard G. Cline $34,000 $0 $34,000
Edward J. Condon, Jr. $37,000 $0 $37,000
John W. English $32,500 $0 $32,500
Sandra Polk Guthman $34,000 $0 $34,000
Frederick T. Kelsey $37,000 $0 $37,000
Richard P. Strubel $42,250 $0 $42,250
</TABLE>
Investment Adviser, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. As of December 31, 1998, Northern and its
affiliates had over $236 billion in assets under management for clients
including public and private retirement funds, endowments, foundations, trusts,
corporations, and individuals. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of Federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances
B-21
<PAGE>
as well as with longer-term investment needs, and (iv) charitable and
not-for-profit organizations, such as endowments and foundations, demanding
investment management solutions that balance the requirement for sufficient
current income to meet operating expenses and the need for capital appreciation
to meet future investment objectives.
Northern employs a team approach to the investment management of the
Portfolios, relying upon investment professionals under the leadership of James
M. Snyder, Chief Investment Officer and Executive Vice President of Northern.
Under its Advisory Agreement with the Trust, Northern, subject to the
general supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for each Portfolio and placing purchase and sale orders for
the portfolio transactions of the Portfolios. In connection with portfolio
transactions for the Portfolios, which are generally done at a net price without
a broker's commission, Northern's Advisory Agreement provides that Northern
shall attempt to obtain the best net price and execution.
Northern's investment advisory duties for the Trust are carried out through
its Trust Department. On occasions when Northern deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by it (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Investment Advisory
Agreement provides that Northern, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased for such
Portfolio with those to be sold or purchased for such other accounts in order to
obtain best net price and execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by Northern in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Portfolio and other accounts
involved. In some instances, this procedure may adversely affect the size of the
position obtainable for a Portfolio or the amount of the securities that are
able to be sold for a Portfolio. To the extent that the execution and price
available from more than one broker or dealer are believed to be comparable, the
Investment Advisory Agreement permits Northern, at its discretion but subject to
applicable law, to select the executing broker or dealer on the basis of
Northern's opinion of the reliability and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services
to others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, Northern has undertaken
to (1) answer customer inquiries regarding the current yield of, and certain
other matters (e.g. account status information) pertaining to, the Trust, (2)
process purchase and redemption transactions, including transactions generated
by any service provided outside of the Agreement by Northern, its affiliates or
correspondent banks whereby customer account cash balances are automatically
invested in shares of the Portfolios, and the disbursement of the proceeds of
redemptions, (3)
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<PAGE>
establish and maintain separate omnibus accounts with respect to shareholders
investing through Northern or any of its affiliates and correspondent banks and
act as transfer agent and perform sub-accounting services with respect to each
such account, (4) provide periodic statements showing account balances, (5) mail
reports and proxy materials to shareholders, (6) provide information in
connection with the preparation by the Trust of various regulatory reports and
prepare reports to the Trustees and management, (7) answer inquiries (including
requests for prospectuses and statements of additional information, and
assistance in the completion of new account applications) from investors and
respond to all requests for information regarding the Trust (such as current
price, recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions), (8) respond
to and seek to resolve all complaints of investors with respect to the Trust or
their accounts, (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors,
(10) furnish the Trust all pertinent Blue Sky information, (11) perform all
required tax withholding, (12) preserve records, and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more
sub-transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer
Agency Agreement with respect to Service Shares and Premier Shares described in
this Additional Statement and the assumption by Northern of related expenses,
Northern is entitled to a fee from the Trust, calculated daily and payable
monthly, at the following annual rates: (i) .01% of the average daily net asset
value of the outstanding Service Shares of each Portfolio; and (ii) .02% of the
average daily net asset value of the outstanding Premier Shares of each
Portfolio. The transfer agency fee attributable to each class of shares is borne
solely by that class. Northern's affiliates and correspondent banks may receive
compensation for performing the services described in the preceding paragraph
that Northern would otherwise receive. Conflict-of-interest restrictions under
state and Federal law (including the Employee Retirement Income Security Act of
1974) may apply to the receipt by such affiliates or correspondent banks of such
compensation in connection with the investment of fiduciary funds in Service
Shares and Premier Shares of the Portfolios.
Under its Custodian Agreement with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's securities
held by Northern under the Custodian Agreement, and (6) maintains the accounting
records of the Trust. Northern may employ one or more subcustodians, provided
that Northern, subject to certain monitoring responsibilities, shall have no
more responsibility or liability to the Trust on account of any action or
omission of any subcustodian so employed than such subcustodian has to Northern
and that the responsibility or liability of the subcustodian to Northern shall
conform to the resolution of the Trustees of the Trust authorizing the
appointment of the particular subcustodian. Northern may also appoint agents to
carry out such of the provisions of the Custodian Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under the Agreement.
B-23
<PAGE>
As compensation for the services rendered to the Trust by Northern as
custodian, and the assumption by Northern of certain related expenses, Northern
is entitled to payment from the Trust as follows: (i) $18,000 annually for each
Portfolio, plus (ii) 1/100th of 1% annually of each Portfolio's average daily
net assets to the extent they exceed $100 million, plus (iii) a fixed dollar fee
for each trade in portfolio securities, plus (iv) a fixed dollar fee for each
time that Northern as custodian receives or transmits funds via wire, plus (v)
reimbursement of expenses incurred by Northern as custodian for telephone,
postage, courier fees, office supplies and duplicating. The fees referred to in
clauses (iii) and (iv) are subject to annual upward adjustments based on
increases in the Consumer Price Index for All Urban Consumers, provided that
Northern may permanently or temporarily waive all or any portion of any upward
adjustment.
Northern's fees under the Custodian Agreement are subject to reduction
based on the Portfolios' daily uninvested cash balances (if any).
Unless sooner terminated, each of the Advisory Agreement, Transfer Agency
Agreement and Custodian Agreement between Northern and the Trust will continue
in effect with respect to a particular Portfolio until April 30, 1999, and
thereafter for successive 12-month periods, provided that the continuance is
approved at least annually (1) by the vote of a majority of the Trustees who are
not parties to the agreement or "interested persons" (as such term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval and (2) by the Trustees or by the vote of a
majority of the outstanding shares of such Portfolio (as defined below under
"Other Information"). Each agreement is terminable at any time without penalty
by the Trust (by specified Trustee or shareholder action) on 60 days' written
notice to Northern and by Northern on 60 days' written notice to the Trust.
For the fiscal years ended November 30 as indicated, the amount of advisory
fees incurred by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $1,460,037 $ 1,018,270 $ 772,113
Government Portfolio 3,337,292 3,243,435 2,617,746
Diversified Assets Portfolio 10,271,332 8,945,126 7,832,358
Tax-Exempt Portfolio 1,712,721 1,731,407 1,885,156
</TABLE>
In addition, for the fiscal years ended November 30, 1998, 1997 and 1996,
Northern waived advisory fees with respect to the Government Select Portfolio in
the amounts of $2,193,181, $1,527,701 and $1,157,788, respectively.
B-24
<PAGE>
For the fiscal years ended November 30 as indicated, the amount of transfer
agency fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 28,041 $30,361 $22,274
Government Portfolio 51,087 35,042 31,048
Diversified Assets Portfolio 182,267 127,270 64,579
Tax-Exempt Portfolio 28,191 22,028 14,883
</TABLE>
For the fiscal years ended November 30 as indicated, the amount of
custodian fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 181,920 $ 97,683 $ 96,787
Government Portfolio 179,186 140,110 131,957
Diversified Assets Portfolio 425,371 412,075 360,387
Tax-Exempt Portfolio 86,026 100,513 105,936
</TABLE>
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern believes that it may perform the services
contemplated by its agreements with the Trust without violation of such banking
laws or regulations, which are applicable to it. It should be noted, however,
that future changes in either Federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates, as
well as future judicial or administrative decisions or interpretations of
current and future statutes and regulations, could prevent Northern from
continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Northern and change its method of operations.
It is not anticipated, however, that any change in the Trust's method of
operations would affect the net asset value per share of any Portfolio or result
in a financial loss to any shareholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates would consider the possibility of
offering to perform some or all of the services now provided by Goldman Sachs.
It is not possible, of course, to predict whether or in what form such
restrictions might be relaxed or the terms upon which Northern and its
affiliates might offer to provide services for consideration by the Trustees.
B-25
<PAGE>
Northern is active as an underwriter of municipal instruments. Under the
1940 Act, the Portfolios are precluded, subject to certain exceptions, from
purchasing in the primary market those municipal instruments with respect to
which Northern is serving as a principal underwriter. In the opinion of
Northern, this limitation will not significantly affect the ability of the
Portfolios to pursue their respective investment objectives.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of money market instruments. Its activities in this regard could have some
effect on the market for those instruments which the Portfolios acquire, hold or
sell.
Under a Service Mark License Agreement with the Trust, Northern Trust
Corporation has agreed that the name "Northern Institutional Funds" may be used
in connection with the Trust's business on a royalty-free basis. Northern Trust
Corporation has reserved to itself the right to grant the non-exclusive right to
use the name "Northern Institutional Funds" to any other person. The Agreement
provides that at such time as the Agreement is no longer in effect, the Trust
will cease using the name "Northern Institutional Funds."
Portfolio Transactions
For the fiscal years ended November 30, 1998, 1997 and 1996, all portfolio
transactions for the Portfolios were executed on a principal basis and,
therefore, no brokerage commissions were paid by the Portfolios. Purchases by
the Portfolios from underwriters of portfolio securities, however, normally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include the spread between the dealer's cost for a given
security and the resale price of the security.
During the fiscal year ended November 30, 1998, the Government Portfolio
acquired and sold securities of ABN-AMRO, Bear Stearns & Co., J.P. Morgan
Securities, Inc., UBS Securities, SBC Warburg, Inc. and Warburg Dillon Read,
each a regular broker/dealer. At November 30, 1998, the Government Portfolio
owned the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: ABN-AMRO, with an
approximate aggregate market value of $200,000,000; Bear Stearns & Co., with an
approximate aggregate market value of $350,000,000; J.P. Morgan Securities,
Inc., with an approximate aggregate market value of $200,000,000; and Warburg
Dillon Read, with an approximate aggregate market value of $50,000,000.
During the fiscal year ended November 30, 1998, the Diversified Assets
Portfolio acquired and sold securities of HSBC Securities, Inc., J.P. Morgan
Securities, Inc., Lehman Brothers, Inc., Morgan Stanley Group, Inc., Salomon
Brothers, Inc., UBS Securities and Warburg Dillon Read, each a regular
broker/dealer. At November 30, 1998, the Diversified Assets Portfolio owned the
following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Bankers Trust & Co., with an
approximate aggregate market value of $56,246,000; J.P. Morgan Securities, Inc.,
with an approximate aggregate market value of $78,001,000; Morgan Stanley Group,
Inc., with an approximate aggregate market value of $24,832,000; and Warburg
Dillon Read, with an approximate aggregate market value of $50,000,000.
B-26
<PAGE>
During the fiscal year ended November 30, 1998, neither the Government
Select Portfolio nor the Tax-Exempt Portfolio acquired, sold or owned any
securities of their regular broker/dealers or their parents.
Administrator and Distributor
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as
administrator and distributor for the Portfolios. Under its Administration
Agreement with the Trust, Goldman Sachs, subject to the general supervision of
the Trust's Board of Trustees, acts as the Trust's Administrator. In this
capacity, Goldman Sachs (1) provides supervision of all aspects of the Trust's
non-investment advisory operations (the parties giving due recognition to the
fact that certain of such operations are performed by Northern pursuant to the
Trust's agreements with Northern), (2) provides the Trust, to the extent not
provided pursuant to such agreements, with such personnel as are reasonably
necessary for the conduct of the Trust's affairs, (3) arranges, to the extent
not provided pursuant to such agreements, for the preparation at the Trust's
expense of its tax returns, reports to shareholders, periodic updating of the
prospectuses issued by the Trust, and reports filed with the SEC and other
regulatory authorities (including qualification under state securities or Blue
Sky laws of the Trust's shares), and (4) provides the Trust, to the extent not
provided pursuant to such agreements, with adequate office space and equipment
and certain related services in Chicago.
Subject to the limitations described below, as compensation for its
administrative services and the assumption of related expenses, Goldman Sachs is
entitled to a fee from each Portfolio, computed daily and payable monthly, at an
annual rate of .10% of the average daily net assets of each Portfolio. For the
fiscal years ended November 30 as indicated, Goldman Sachs received fees under
the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $1,460,037 $1,048,482 $ 897,049
Government Portfolio 1,334,907 1,208,401 1,036,172
Diversified Assets Portfolio 4,108,503 3,082,370 2,079,083
Tax-Exempt Portfolio 685,084 749,232 885,446
</TABLE>
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs agreed that, if its administration fees (less expense
reimbursements paid by Goldman Sachs to the Trust and less certain marketing
expenses paid by Goldman Sachs) exceed a specified amount ($1 million for the
Trust's first twelve investment portfolios plus $50,000 for each additional
portfolio) during the current fiscal year, Goldman Sachs will waive a portion of
its administration fees during the following fiscal year. This undertaking may
be terminated by Goldman Sachs at any time without the consent of the Trust or
the shareholders. There have been no waivers pursuant to this agreement during
the last three fiscal years.
B-27
<PAGE>
Prior to April 1, 1998, Goldman Sachs voluntarily agreed to reimburse each
Portfolio for its expenses (including fees payable to Goldman Sachs as
administrator, but excluding the fees payable to Northern for its duties as
investment adviser and extraordinary expenses) which exceeded on an annualized
basis .10% of each Portfolio's average daily net assets.
For the fiscal years ended November 30 as indicated, the effect of these
reimbursements by Goldman Sachs was to reduce other expenses by the following
amounts:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 544,124 $360,250 $364,826
Government Portfolio 606,764 262,895 305,696
Diversified Assets Portfolio 1,328,789 477,791 0
Tax-Exempt Portfolio 279,774 305,530 382,218
</TABLE>
Effective April 1, 1998, (upon the offering of the Service and Premier
Shares), Goldman Sachs agreed to reimburse expenses of each Portfolio (including
fees payable to Goldman Sachs as administrator, but excluding the fees payable
to Northern for its duties as adviser and transfer agent, payments under the
service plan (described below) for Service and Premier Shares, and certain
extraordinary expenses) which exceed on an annualized basis .10% of each
Portfolio's average daily net assets. Unless sooner terminated, the
Administration Agreement will continue in effect with respect to a particular
Portfolio until April 30, 1999, and thereafter for successive 12-month periods,
provided that the agreement is approved annually (1) by the vote of a majority
of the Trustees who are not parties to the agreement or "interested persons" (as
such term is defined by the 1940 Act) of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval, and (2) by the
Trustees or by the vote of a majority of the outstanding shares of such
Portfolio (as defined below under "Other Information"). The Administration
Agreement is terminable at any time without penalty by the Trust (upon specified
Trustee or shareholder action) on 60 days' written notice to Goldman Sachs and
by Goldman Sachs on 60 days' written notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman
Sachs, as agent, sells shares of each Portfolio on a continuous basis. Goldman
Sachs is not obligated to sell any certain number of shares of any Portfolio.
Goldman Sachs pays the cost of printing and distributing prospectuses to persons
who are not shareholders of Trust shares (excluding preparation and typesetting
expenses) and of sales presentations, mailings, advertising and other
distribution efforts. No compensation is payable by the Trust to Goldman Sachs
for such distribution services.
The Administration Agreement and the Distribution Agreement provide that
Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
B-28
<PAGE>
Counsel and Auditors
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago,
Illinois 60606, have been selected as auditors of the Trust. In addition to
audit services, Ernst & Young LLP reviews the Trust's Federal and state tax
returns, and provides consultation and assistance on accounting, internal
control and related matters.
In-Kind Purchases and Redemptions
Payment for shares of a Portfolio may, in the discretion of Northern, be
made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind securities
payment, a Portfolio will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Portfolio and that the Portfolio receive satisfactory assurances that it will
have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Portfolio; and that adequate
information be provided concerning the basis and other tax matters relating to
the securities.
Although each Portfolio generally will redeem shares in cash, each
Portfolio reserves the right to pay redemptions by a distribution in kind of
securities (instead of cash) from such Portfolio. The securities distributed in
kind would be readily marketable and would be valued for this purpose using the
same method employed in calculating the Portfolio's net asset value per share.
If a shareholder receives redemption proceeds in kind, the shareholder should
expect to incur transaction costs upon the disposition of the securities
received in the redemption.
Third-Party Fees and Requirements
Shares are sold and redeemed without any purchase or redemption charge
imposed by the Trust, although Northern and other institutions may charge their
customers for services provided in connection with their investments.
The exercise of voting rights and the delivery to Customers of shareholder
communications from the Trust will be governed by the Customers' account
agreements with the Institutions. Customers should read the Prospectus in
connection with any relevant agreement describing the services provided by an
Institution and any related requirements and charges, or contact the Institution
at which the Customer maintains its account for further information.
B-29
<PAGE>
PERFORMANCE INFORMATION
The performance of a class of shares of a Portfolio may be compared to
those of other money market funds with similar investment objectives and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of a class of shares may be compared to data
prepared by IBC Financial Data, Inc. or other independent mutual fund reporting
services. Performance data as reported in national financial publications such
as Money Magazine, Morningstar, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the performance of a class of shares of a Portfolio.
From time to time, the Portfolios may advertise their "yields" and
"effective yields", and the Government Select Portfolio and Tax-Exempt Portfolio
may advertise their "tax-equivalent yields" and tax-equivalent effective yields.
Yield, effective yield, tax equivalent yield and tax-equivalent effective yield
are computed separately for each class of shares. Each class of shares has
different fees and expenses, and consequently, may have different yields for the
same period. These yield figures will fluctuate, are based on historical
earnings and are not intended to indicate future performance. "Yield" refers to
the net investment income generated by an investment in the Portfolio over a
seven-day period identified in the advertisement. This net investment income is
then "annualized." That is, the amount of net investment income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment.
In arriving at such quotations as to "yield," the Trust first determines
the net change, exclusive of capital changes, during the seven-day period in the
value of a hypothetical pre-existing account having a balance of one Service
Share or Premier Share at the beginning of the period, then divides such net
change by the value of the account at the beginning of the period to obtain the
base period return, and then multiplies the base period return by 365/7.
"Effective yield" is calculated similarly but, when annualized, the net
investment income earned by an investment in the Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The "effective
yield" with respect to the Service Shares and Premier Shares of a Portfolio is
computed by adding 1 to the base period return (calculated as above), raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result.
The "tax-equivalent yield" demonstrates the level of taxable yield
necessary to produce an after-tax yield equivalent to a Portfolio's tax-free
yield. It is calculated by taking that portion of the seven-day "yield" which is
tax-exempt and adjusting it to reflect the tax savings associated with a stated
tax rate. The "tax-equivalent current yield" will always be higher than the
Portfolio's yield.
B-30
<PAGE>
"Tax-equivalent yield" is computed by dividing the tax-exempt portion of
the yield by 1 minus a stated income tax rate, and then adding the quotient to
the taxable portion of the yield, if any. There may be more than one
tax-equivalent current yield, if more than one stated income tax rate is used.
The "tax-equivalent effective yield" demonstrates the level of taxable
yield necessary to produce an after-tax yield equivalent to a Portfolio's
tax-free effective yield. It is calculated by taking that portion of the
seven-day "effective yield" which is tax-exempt and adjusting it to reflect the
tax savings associated with a stated tax rate. The "tax-equivalent effective
yield" will always be higher than the Portfolio's effective yield.
"Tax-equivalent effective yield" is computed by dividing the tax-exempt
portion of the effective yield by 1 minus a stated income tax rate, and then
adding the quotient to the taxable portion of the effective yield, if any. There
may be more than one tax-equivalent effective yield, if more than one stated
income tax rate is used.
Quotations of yield, effective yield, tax-equivalent current yield and
tax-equivalent effective yield provided by the Trust are carried to at least the
nearest hundredth of one percent. Any fees imposed by Northern, its affiliates
or correspondent banks on their customers in connection with investments in
shares of the Portfolios are not reflected in the calculation of yields for the
Portfolios.
The annualized yield of each Portfolio with respect to Service Shares for
the seven-day period ended November 30, 1998 was as follows (1):
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio N/A N/A N/A N/A
Government Portfolio N/A N/A N/A N/A
Diversified Assets
Portfolio 4.64% 4.74% N/A N/A
Tax-Exempt Portfolio N/A N/A N/A N/A
</TABLE>
The information set forth in the foregoing table reflects certain fee
reductions and expense limitations. See "Additional Trust Information -
Administrator and Distributor" and "-- Investment Adviser, Transfer Agent and
Custodian." In the absence of such fee reductions and
- ----------
(1) An income tax rate of 39% is used in the calculation of tax-equivalent
current yield and tax-equivalent effective yield.
B-31
<PAGE>
expense limitations, the annualized yield of each Portfolio with respect to
Service Shares for the same seven-day period would have been as follows (2):
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio N/A N/A N/A N/A
Government Portfolio N/A N/A N/A N/A
Diversified Assets
Portfolio 4.61% 4.71% N/A N/A
Tax-Exempt Portfolio N/A N/A N/A N/A
</TABLE>
The annualized yield of each Portfolio with respect to Premier Shares for
the seven-day period ended November 30, 1998 was as follows (3):
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio 4.29% 4.39% N/A N/A
Government Portfolio N/A N/A N/A N/A
Diversified Assets
Portfolio N/A N/A N/A N/A
Tax-Exempt Portfolio N/A N/A N/A N/A
</TABLE>
The information set forth in the foregoing table reflects certain fee
reductions and expense limitations. See "Additional Trust Information -
Administrator and Distributor" and "-- Investment Adviser, Transfer Agent and
Custodian." In the absence of such fee reductions and expense limitations, the
annualized yield of each Portfolio with respect to Premier Shares for the same
seven-day period would have been as follows (4):
- ----------
(2) An income tax rate of 39% is used in the calculation of tax-equivalent
current yield and tax-equivalent effective yield.
(3) An income tax rate of 39% is used in the calculation of tax-equivalent
current yield and tax-equivalent effective yield.
(4) An income tax rate of 39% is used in the calculation tax-equivalent current
yield and tax-equivalent effective yield.
B-32
<PAGE>
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Government Select
Portfolio 4.10% 4.19% N/A N/A
Government Portfolio N/A N/A N/A N/A
Diversified Assets
Portfolio N/A N/A N/A N/A
Tax-Exempt Portfolio N/A N/A N/A N/A
</TABLE>
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Each Portfolio's yields fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. The
annualization of one week's income is not necessarily indicative of future
actual yields. Actual yields will depend on such variables as portfolio quality,
average portfolio maturity, the type of portfolio instruments acquired, changes
in money market interest rates, portfolio expenses and other factors. Yields are
one basis investors may use to analyze a class of shares of the Portfolio as
compared to comparable classes of shares of other money market funds and other
investment vehicles. However, yields of comparable classes of shares of other
money market funds and other investment vehicles may not be comparable because
of the foregoing variables, and differences in the methods used in valuing their
portfolio instruments, computing net asset value and determining yield.
Each Portfolio may also quote from time to time the total return of its
Service Shares or Premier Shares in accordance with SEC regulations.
The yields and total returns of each class of shares of a Portfolio will be
calculated separately from the yields and total returns of the other share
classes.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset
value of $1.00 per share and, in this connection, values its instruments on the
basis of amortized cost pursuant to Rule 2a-7 under the 1940 Act. This method
values a security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price a Portfolio would receive if the Portfolio sold the instrument. During
such periods the yield to investors in the Portfolio may differ somewhat from
that obtained in a similar entity which uses available indications as to market
value to value its portfolio instruments. For example, if the use of amortized
cost resulted in a lower (higher) aggregate Portfolio value on a particular day,
a prospective investor in the Portfolio would be able to obtain a somewhat
higher (lower) yield and ownership interest than would result from investment in
such similar entity and existing investors would receive less (more) investment
B-33
<PAGE>
income and ownership interest. However, the Trust expects that the procedures
and limitations referred to in the following paragraphs of this section will
tend to minimize the differences referred to above.
Under Rule 2a-7, the Trust's Board of Trustees, in supervising the Trust's
operations and delegating special responsibilities involving portfolio
management to Northern, has established procedures that are intended, taking
into account current market conditions and the Portfolios' investment
objectives, to stabilize the net asset value of each Portfolio, as computed for
the purposes of purchases and redemptions, at $1.00 per share. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per share and the net asset value
per share based upon available indications of market value. Available
indications of market value used by the Trust consist of actual market
quotations or appropriate substitutes which reflect current market conditions
and include (a) quotations or estimates of market value for individual portfolio
instruments and/or (b) values for individual portfolio instruments derived from
market quotations relating to varying maturities of a class of money market
instruments. In the event the Market Value Difference of a given Portfolio
exceeds certain limits or Northern believes that the Market Value Difference may
result in material dilution or other unfair results to investors or existing
shareholders, the Trust will take action in accordance with the 1940 Act and the
Trustees will take such steps as they consider appropriate (e.g., selling
portfolio instruments to shorten average portfolio maturity or to realize
capital gains or losses, reducing or suspending shareholder income accruals,
redeeming shares in kind, or utilizing a net asset value per share based upon
available indications of market value which under such circumstances would vary
from $1.00) to eliminate or reduce to the extent reasonably practicable any
material dilution or other unfair results to investors or existing shareholders
which might arise from Market Value Differences. In particular, if losses were
sustained by a Portfolio, the number of outstanding shares might be reduced in
order to maintain a net asset value per share of $1.00. Such reduction would be
effected by having each shareholder proportionately contribute to the
Portfolio's capital the necessary shares to restore such net asset value per
share. Each shareholder will be deemed to have agreed to such contribution in
these circumstances by investing in the Portfolio.
Rule 2a-7 requires that each Portfolio limit its investments to instruments
which Northern determines (pursuant to guidelines established by the Board of
Trustees) to present minimal credit risks and which are "Eligible Securities" as
defined by the SEC and described in the Prospectus. The Rule also requires that
each Portfolio maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its policy of maintaining a stable net asset value
per share and precludes the purchase of any instrument deemed under the Rule to
have a remaining maturity of more than 397 calendar days. Should the disposition
of a portfolio security result in a dollar-weighted average portfolio maturity
of more than 90 days, the Rule requires a Portfolio to invest its available cash
in such a manner as to reduce such maturity to the prescribed limit as soon as
reasonably practicable.
B-34
<PAGE>
DESCRIPTION OF SERVICE SHARES AND PREMIER SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trustees may hereafter create series in addition to the Trust's
seventeen existing series, which represent interests in the Trust's seventeen
respective portfolios. The Trust Agreement also permits the Board of Trustees to
classify or reclassify any unissued shares into classes within a series.
Pursuant to such authority, the Trustees have authorized the issuance of an
unlimited number of shares of beneficial interest in three separate classes of
shares in each of the Portfolios: Shares, Service Shares and Premier Shares.
This Additional Statement (and the related Prospectus) relates only to the
Service Shares and Premier Shares of the four Portfolios discussed herein. For
information on the other class of shares in each Portfolio and on the Trust's
other investment portfolios, call the toll-free number on page 1.
Under the terms of the Trust Agreement, each share of each Portfolio is
without par value, represents an equal proportionate interest in the particular
Portfolio with each other share of its class in the same Portfolio and is
entitled to such dividends and distributions out of the income belonging to the
Portfolio as are declared by the Trustees. Upon any liquidation of a Portfolio,
shareholders of each class of a Portfolio are entitled to share pro rata in the
net assets belonging to that class available for distribution. Shares do not
have any preemptive or conversion rights. The right of redemption is described
under "About Your Account - Selling Shares and Account Policies and Other
Information" in the Prospectus and under "Amortized Cost Valuation" in this
Additional Statement. In addition, pursuant to the terms of the 1940 Act, the
right of a shareholder to redeem shares and the date of payment by a Portfolio
may be suspended for more than seven days (a) for any period during which the
New York Stock Exchange is closed, other than the customary weekends or
holidays, or trading in the markets the Portfolio normally utilizes is closed or
is restricted as determined by the SEC, (b) during any emergency, as determined
by the SEC, as a result of which it is not reasonably practicable for the
Portfolio to dispose of instruments owned by it or fairly to determine the value
of its net assets, or (c) for such other period as the SEC may by order permit
for the protection of the shareholders of the Portfolio. The Trust may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions. In addition, shares of each
Portfolio are redeemable at the unilateral option of the Trust if the Trustees
determine in their sole discretion that failure to so redeem may have material
adverse consequences to the shareholders of the Portfolio. Shares when issued as
described in the Prospectus are validly issued, fully paid and nonassessable,
except as stated below. In the interests of economy and convenience,
certificates representing Service Shares and Premier Shares of the Portfolios
are not issued.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying assets
of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust.
B-35
<PAGE>
Expenses with respect to the Portfolios are normally allocated in proportion to
the net asset value of the respective Portfolios except where allocations of
direct expenses can otherwise be fairly made.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Portfolio affected by the matter. A Portfolio is affected by a matter
unless it is clear that the interests of each Portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
Portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a Portfolio only if approved by a majority of the outstanding
shares of such Portfolio. However, the Rule also provides that the ratification
of the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees are exempt from the separate
voting requirements stated above. In addition, shareholders of each of the
classes in a particular investment portfolio have equal voting rights except
that only shares of a particular class of an investment portfolio will be
entitled to vote on matters submitted to a vote of shareholders (if any)
relating to shareholder servicing expenses and transfer agency fees that are
payable by that class.
The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees and,
accordingly, the holders of more than 50% of the aggregate voting power of the
Trust may elect all of the Trustees irrespective of the vote of the other
shareholders. Meetings of shareholders of the Trust, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the shares entitled to vote at such
meeting. The shareholders of the Trust will have voting rights only with respect
to the limited number of matters specified in the Trust Agreement and such other
matters as the Trustees may determine or may be required by law. The Trust does
not presently intend to hold annual meetings of shareholders except as required
by the 1940 Act or other applicable law. The Trustees will promptly call a
meeting of shareholders to vote upon the removal of any Trustee when so
requested in writing by the record holders of 10% or more of the outstanding
shares. To the extent required by law, the Trust will assist in shareholder
communications in connection with such a meeting.
The Trust Agreement authorizes the Trustees, without shareholder approval
(except as stated in the next paragraph), to cause the Trust, or any series
thereof, to merge or consolidate with any corporation, association, trust or
other organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
B-36
<PAGE>
The Trust Agreement also authorizes the Trustees, in connection with the
merger, consolidation, termination or other reorganization of the Trust or any
series or class, to classify the shareholders of any class into one or more
separate groups and to provide for the different treatment of shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of shareholders that are so
classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement
without a shareholder vote. However, shareholders of the Trust have the right to
vote on any amendment: (i) that would adversely affect the voting rights of
shareholders; (ii) that is required by law to be approved by shareholders; (iii)
that would amend the voting provisions of the Trust Agreement; or (iv) that the
Trustees determine to submit to shareholders.
The Trust Agreement permits the termination of the Trust or of any series
or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders
are not personally liable for obligations of the Trust. The Delaware Act
entitles shareholders of the Trust to the same limitation of liability as is
available to shareholders of private for-profit corporations. However, no
similar statutory or other authority limiting business trust shareholder
liability exists in many other states. As a result, to the extent that the Trust
or a shareholder is subject to the jurisdiction of courts in such other states,
those courts may not apply Delaware law and may subject the shareholders to
liability. To offset this risk, the Trust Agreement (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into or executed by the Trust or its Trustees and (ii)
provides for indemnification out of the property of the applicable series of the
Trust of any shareholder held personally liable for the obligations of the Trust
solely by reason of being or having been a shareholder and not because of the
shareholder's acts or omissions or for some other reason. Thus, the risk of a
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (3) the applicable series of the Trust is unable to
meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any
person other than the Trust or a shareholder and that a Trustee will not be
liable for any act as a Trustee. However, nothing in the Trust Agreement
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless
B-37
<PAGE>
disregard of the duties involved in the conduct of his or her office. The Trust
Agreement provides for indemnification of Trustees, officers and agents of the
Trust unless the recipient is liable by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agreement
provides that a shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis
of such claim. The Trust Agreement also provides that no person, other than the
Trustees, who is not a shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to retain
counsel or other advisers in considering the merits of the request and may
require an undertaking by the shareholders making such request to reimburse the
Trust for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the Trust
Agreement with respect to such series or class; and/or (c) may have no power or
authority with respect to any other series or class. The Trustees are not
currently considering the appointment of Series Trustees for the Trust.
As of January 5, 1999, substantially all of the Portfolios' outstanding
shares were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, Northern possessed sole or shared voting and/or
investment power for its customer accounts with respect to less than 10% of the
Trust's outstanding shares. As of the same date, the Trust's Trustees and
officers as a group owned beneficially less than 1% of the outstanding shares of
each class of each Portfolio. Northern has advised the Trust that no persons
beneficially owned five percent or more of the outstanding Service Shares or
Premier Shares of the Portfolios' classes as of January 5, 1999.
Northern has advised the Trust that the following persons (whose mailing
address is: c/o The Northern Trust Company, 50 South LaSalle, Chicago, IL 60675)
beneficially owned five percent or more of the outstanding shares of the
Portfolios' classes as of January 5, 1999:
B-38
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Shares Shares
------ ------
<S> <C> <C>
TAX-EXEMPT PORTFOLIO:
Shares
Tisch 401K Plan 50,904,790 6.62%
EGAP & Company 39,850,021 5.18%
GOVERNMENT SELECT PORTFOLIO:
Shares
Arcadia Trust 89,540,557 5.19%
</TABLE>
ADDITIONAL INFORMATION CONCERNING TAXES
General
Each Portfolio will elect to be taxed separately as a regulated investment
company (a "RIC"). To qualify as a RIC, each Portfolio generally must distribute
an amount equal to at least the sum of 90% of its investment company taxable
income and 90% of its net tax-exempt interest income (if any) (net investment
income and the excess of net short-term capital gain over net long-term capital
loss), if any, for each year (the "Distribution Requirement") and satisfy
certain other requirements.
Each Portfolio must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from the
sale or other disposition of stock or securities or foreign currencies, or from
other income derived with respect to its business of investing in such stock,
securities or currencies. Also , at the close of each quarter of the taxable
year, it is generally required that at least 50% of the value of each
Portfolio's assets must consist of cash and cash items, U.S. Government
securities, securities of other RICs and securities of other issuers (as to
which the Portfolio has invested more than 5% of the value of its total assets
in securities of such issuer and as to which the Portfolio does not hold more
than 10% of the outstanding voting securities of such issuer), and no more than
25% of the value of each Portfolio's total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other RICs), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses. Each
Portfolio intends to comply with these RIC requirements.
If for any taxable year any Portfolio were not to qualify as a RIC, all of
its taxable income would be subject to tax at regular corporate rates without
any deduction for distributions to shareholders. In such event, all
distributions by the Portfolio would be taxable to shareholders as ordinary
income to the extent of the Portfolio's current and accumulated earnings and
profits, and would be eligible for the dividends-received deduction in the case
of corporate shareholders.
The Internal Revenue Code imposes a nondeductible 4% excise tax on RICs
that fail currently to distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Portfolio intends to
B-39
<PAGE>
make sufficient distributions or deemed distributions of its ordinary taxable
income and capital gain net income each calendar year to avoid liability for
this excise tax. Each Portfolio also intends to make sufficient distributions or
deemed distributions each year to avoid liability for corporate income tax. If a
Portfolio were to fail to make sufficient distributions, it could be liable for
corporate income tax and for excise tax.
The Trust will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends and gross sale proceeds paid to any
shareholder (i) who has provided either an incorrect tax identification number
or no number at all, (ii) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of taxable interest or
dividend income properly, or (iii) who has failed to certify to the Trust, when
required to do so, that he or she is not subject to backup withholding or that
he or she is an "exempt recipient."
Special Tax Considerations Pertaining to the Tax-Exempt Portfolio
As described above and in the Prospectus, the Tax-Exempt Portfolio is
designed to provide investors with current tax-exempt interest income. Investors
in the Portfolio should note that taxpayers are required to report the receipt
of tax-exempt interest and "exempt-interest dividends" on their Federal income
tax returns and that in two circumstances such amounts, while exempt from
regular Federal income tax, are taxable to persons subject to alternative
minimum taxes. First, tax-exempt interest and "exempt-interest dividends"
derived from certain private activity bonds issued after August 7, 1986
generally will constitute an item of tax preference for corporate and
noncorporate taxpayers in determining alternative minimum tax liability. Second,
all tax-exempt interest and "exempt-interest dividends" must be taken into
account by corporate taxpayers in determining certain adjustments for
alternative minimum tax purposes.
The Portfolio is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Shares of the
Portfolio would not be suitable for tax-exempt institutions or for retirement
plans qualified under Section 401 of the Code, H.R.10 plans and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, would not gain any additional benefit from the Portfolio's
dividends being tax-exempt. In addition, the Portfolio may not be an appropriate
investment for persons or entities that are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
which regularly uses a part of such facilities in its trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, or which occupies more than 5% of the usable area of such
facilities or for which such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, partnerships and its partners
and an S corporation and its shareholders.
In order for the Tax-Exempt Portfolio to pay Federal exempt-interest
dividends for any taxable year, at the close of each taxable quarter at least
50% of the aggregate value of the
B-40
<PAGE>
Portfolio must consist of tax-exempt obligations. The Tax-Exempt Portfolio
intends to comply with this requirement.
Income from the Tax-Exempt Portfolio may not be tax-exempt in its entirety
and may be subject to taxes in certain jurisdictions.
Interest on indebtedness incurred by a shareholder to purchase or carry
Tax-Exempt Portfolio shares will generally not be deductible for Federal income
tax purposes.
Foreign Investors
Foreign shareholders generally will be subject to U.S. withholding tax at a
rate of 30% (or a lower treaty rate, if applicable) on distributions by a
Portfolio of net investment income, other ordinary income, and the excess, if
any, of net short-term capital gain over net long-term capital loss for the
year, regardless of the extent, if any, to which the income or gain is derived
from non-U.S. investments of the Portfolio. For this purpose, foreign
shareholders include individuals other than U.S. citizens, residents and certain
nonresident aliens, and foreign corporations, partnerships, trusts and estates.
Different tax consequences may apply to a foreign shareholder engaged in a U.S.
trade or business or present in the U.S. for 183 days or more in a year. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of investing in a Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which
are in effect on the date of this Additional Statement. Such laws and
regulations may be changed by legislative or administrative action. No attempt
is made to present a detailed explanation of the tax treatment of the Portfolio
or its shareholders, and the discussion here and in the Prospectus is not
intended as a substitute for careful tax planning. Shareholders are advised to
consult their tax advisers with specific reference to their own tax situation,
including the application of state and local taxes.
Although each Portfolio expects to qualify as a RIC and to be relieved of
all or substantially all Federal taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, each Portfolio may be subject to the
tax laws of such states or localities.
SERVICE PLAN
The Trust, on behalf of the Portfolios, has adopted a Service Plan (the
"Plan") with respect to the Service Shares and Premier Shares. Under the Plan,
the Trust, on behalf of the Service Shares and the Premier Shares of each
Portfolio, is authorized to pay to Northern a monthly or quarterly service fee
in respect of (i) administrative support services performed and expenses
incurred in connection with such Portfolio's Service Shares and Premier Shares
and (ii) personal and account maintenance services performed and expenses
incurred in connection with such Portfolio's Premier Shares as set forth below.
The fee paid for such services (the "Service Fee")
B-41
<PAGE>
during any one year shall not exceed: (i) .33% of the average daily net asset
value of the Service Shares of such Portfolio and (ii) .58% of the average daily
net asset value of the Premier Shares of such Portfolio during such period;
provided, however, that the fee paid for personal and account maintenance
services and expenses shall not exceed .25% of the average daily net asset value
of the Premier Shares of such Portfolio for such period. Northern will determine
the amount of the Service Fee to be paid to one or more brokers, dealers, other
financial institutions or other industry professionals (collectively, "Servicing
Agents") and the basis on which such payments will be made. Payments to a
Servicing Agent will be subject to compliance by the Servicing Agent with the
terms of the related Plan agreement entered into by the Servicing Agent. The
Service Fees payable pursuant to this Plan shall not pertain to services or
expenses which are primarily intended to result in the sales of Service Shares
and Premier Shares.
Payments of the Service Fee with respect to Service Shares and Premier
Shares will be used to compensate or reimburse Northern and the Servicing Agents
for administrative support services and expenses, which may include without
limitation: (i) acting or arranging for another party to act, as recordholder
and nominee of Service Shares and Premier Shares of a Portfolio beneficially
owned by Customers; (ii) establishing and maintaining individual accounts and
records with respect to Service Shares and Premier Shares of a Portfolio owned
by Customers; (iii) processing and issuing confirmations concerning Customer
orders to purchase, redeem and exchange Service Shares and Premier Shares of a
Portfolio; (iv) receiving and transmitting funds representing the purchase price
or redemption proceeds of Service Shares and Premier Shares of a Portfolio; (v)
processing dividend payments on behalf of Customers; (vi) forwarding shareholder
communications from the Trust (such as proxy statements and proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices); (vii) providing such statistical and other information as may
be reasonably requested by the Trust or necessary for the Trust to comply with
applicable federal or state law; (viii) facilitating the inclusion of a
Portfolio in investment, retirement, asset allocation, cash management or sweep
accounts or similar programs or services offered to their Customers or to
Customers of other Servicing Agents; (ix) facilitating electronic or computer
trading and/or processing in a Portfolio to their Customers or to Customers of
other Servicing Agents; and (x) performing any other similar administrative
support services. Payments of the Service Fee with respect to the Premier Shares
will also be used to compensate or reimburse Northern and the Servicing Agents
for personal and account maintenance services and expenses, which may include,
without limitation: (i) providing facilities to answer inquiries and respond to
correspondence with Customers and other investors about the status of their
accounts or about other aspects of the Trust or the applicable Portfolio; (ii)
assisting Customers in completing application forms, selecting dividend and
other account options and opening custody accounts with the Servicing Agents;
(iii) providing services to Customers intended to facilitate, or improve their
understanding of the benefits and risks of, a Portfolio to Customers, including
asset allocation and other similar services; (iv) acting as liaison between
Customers and the Trust, including obtaining information from the Trust and
assisting the Trust in correcting errors and resolving problems; and (v)
performing any similar personal and account maintenance services.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Servicing Agent's receipt of compensation
paid by the Trust in connection with the investment of fiduciary funds in
Service or Premier Shares. Servicing Agents, including banks regulated by the
Comptroller of the Currency, the Federal Reserve Board or the Federal
B-42
<PAGE>
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal advisers before investing
fiduciary assets in Service or Premier Shares.
The Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of such Plan or the related agreements, approved the Plan and
related agreement for each Portfolio at a meeting called for the purpose of
voting on such Plan and related agreement on January 27, 1998. The Plan and
related agreement will remain in effect until April 30, 1999 and will continue
in effect thereafter only if such continuance is specifically approved annually
by a vote of the Board of Trustees in the manner described above.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the Board of Trustees in
the manner described above. The Plan may be terminated as to the Service Class
and the Premier Class at any time by a majority of the non-interested Trustees.
A service agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees as described above or by any
party to the agreement on not more than sixty (60) days' written notice to any
other party to the agreement. Each service agreement shall terminate
automatically if assigned. While the Plan is in effect, the selection and
nomination of those Trustees who are not interested persons shall be committed
to the non-interested members of the Board of Trustees. The Board of Trustees
has determined that, in its judgment, there is a reasonable likelihood that the
Plan will benefit each Portfolio and holders of Service and Premier Shares of
such Portfolio. The Plan provides that the Board of Trustees will review, at
least quarterly, a written report of the amount expended under the Plan and the
purposes of the expenditures.
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the rules and
regulations of the SEC. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern
and Goldman Sachs, brokerage fees and commissions, fees for the registration or
qualification of Portfolio shares under Federal or state securities laws,
expenses of the organization of the Portfolio, taxes, interest, costs of
liability insurance, fidelity bonds, indemnification or contribution, any costs,
expenses or losses arising out of any liability of or claim for damages or other
relief asserted against the Trust for violation of any law, legal, tax and
auditing fees and expenses, Service Fees, expenses of preparing and printing
prospectuses, statements of additional information, proxy materials, reports and
notices and the printing and distributing of the same to the Trust's
shareholders and regulatory authorities, compensation and expenses of its
Trustees, expenses for industry organizations such as the
B-43
<PAGE>
Investment Company Institute, miscellaneous expenses and extraordinary expenses
incurred by the Trust.
The term "majority of the outstanding shares" of either the Trust or a
particular Portfolio means, with respect to the approval of an investment
advisory agreement or a change in a fundamental investment restriction, the vote
of the lesser of (i) 67% or more of the shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as
to the contents of any contract or other documents referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1998 (the "Annual Report")
are hereby incorporated herein by reference and attached hereto. No other parts
of the Annual Report, including without limitation, "Management's Discussion of
Portfolio Performance," are incorporated by reference herein. Copies of the
Annual Report may be obtained by writing to Northern Institutional Funds, 4900
Sears Tower, Chicago, Illinois 60606, or by calling 1-800-637-1380 (toll-free).
B-44
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------
Diversified Assets Portfolio
<C> <C> <S> <C>
AGENCY DISCOUNT NOTE--0.5%
Administration of
Environment and
Housing Programs
Federal Home Loan
Mortgage Corp.
$25,000 4.95% 12/10/98 $ 24,969
- ------------------------------------------------------
TOTAL AGENCY DISCOUNT NOTE $ 24,969
- ------------------------------------------------------
BANK NOTES--2.0%
Domestic Depository Institutions--0.3%
Bank One Milwaukee
$17,000 5.55% 1/29/99 $ 16,999
----------
Foreign Depository Institutions--0.1%
Abbey National PLC
2,500 5.70 6/11/99 2,508
----------
Holding and Other Investment Compa-
nies--1.6%
JP Morgan and Co.,
Inc.
78,000 5.75 3/10/99 78,001
- ------------------------------------------------------
TOTAL BANK NOTES $ 97,508
- ------------------------------------------------------
CERTIFICATES OF DEPOSIT--6.5%
Domestic Depository Institutions--2.6%
Bankers Trust Co.
$16,250 6.01% 12/10/98 $ 16,251
25,000 5.58 1/22/99 24,998
15,000 5.71 7/1/99 14,997
Crestar Bank
20,000 5.59 2/2/99 19,999
Union Bank of
California
47,000 5.65 12/8/98 47,000
----------
123,245
----------
Foreign Depository Institutions--3.9%
Banque Nationale
De Paris, New York
20,000 5.52 2/18/99 19,992
20,000 5.71 3/30/99 19,993
25,000 5.75 4/23/99 24,995
Barclays Bank, New
York
5,000 5.56 2/25/99 4,999
Canadian Imperial
Bank of Commerce,
New York
25,000 5.74 4/28/99 24,989
Societe Generale,
New York
40,000 5.70 1/7/99 40,001
15,000 5.71 3/5/99 14,999
2,000 5.75 4/19/99 2,000
15,000 5.765 4/19/99 14,998
UBS Bank
19,500 5.75 5/7/99 19,551
----------
186,517
- ------------------------------------------------------
TOTAL CERTIFICATES OF DE-
POSIT $ 309,762
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
COMMERCIAL PAPER--42.1%
Asset-Backed Securities--18.1%
Altair Funding
Corp.
$10,000 5.40% 1/21/99 $ 9,923
Beta Finance Corp.
16,000 5.10 3/10/99 15,776
6,000 5.10 3/24/99 5,904
Centauri Funding
50,000 5.32 3/8/99 49,283
20,000 5.10 3/25/99 19,677
Concord Minutemen
Capital Co.
36,000 5.40 1/22/99 35,719
Cooperative
Association of
Tractor Dealers,
Series A
2,400 5.23 3/17/99 2,363
Corporate
Receivables Corp.
25,000 5.31 12/7/98 24,978
1,250 5.35 12/9/98 1,248
CPI Funding
20,227 5.07 2/25/99 19,982
29,000 4.93 4/26/99 28,420
Dakota
Certificates
Program
25,000 5.46 12/3/98 24,992
25,000 5.46 12/4/98 24,989
Grayhawk Funding
60,000 5.15 12/18/98 59,854
7,500 5.05 3/16/99 7,389
12,500 5.105 3/16/99 12,314
International
Securitization
Corp.
23,000 5.02 4/26/99 22,532
Kitty Hawk Funding
Corp.
34,000 5.46 2/16/99 33,603
KZH Crescent II
Corp.
3,102 5.55 12/4/98 3,100
KZH Cypress Tree I
Corp.
10,000 5.55 12/4/98 9,995
KZH Holding Corp.
III
2,560 5.55 12/21/98 2,552
MPF, Ltd.
53,000 5.53 2/12/99 52,406
Pooled Account
Receivables Corp.
32,263 5.35 2/12/99 31,913
R.O.S.E., Inc.
44,319 5.25 12/2/98 44,312
SALTS(III) Cayman
Islands Corp.
15,000 5.719 12/18/98 15,000
75,000 5.85 1/25/99 75,000
Sheffield
Receivables Corp.
25,000 5.11 2/12/99 24,741
23,000 5.26 2/26/99 22,708
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
Diversified Assets Portfolio--Continued
Asset-Backed Securities--Continued
<C> <C> <S> <C>
Silver Tower US
Funding
$ 3,600 5.49% 12/10/98 $ 3,595
5,000 5.50 12/22/98 4,984
9,275 5.05 3/18/99 9,136
14,500 5.02 5/18/99 14,160
Thames Asset
Global
Securitization
25,000 5.32 1/8/99 24,860
6,997 5.45 1/14/99 6,950
10,000 5.45 1/15/99 9,932
11,000 5.40 1/26/99 10,908
10,000 5.15 2/16/99 9,890
21,451 5.40 2/16/99 21,203
Trident Capital
Finance, Inc.
25,000 5.50 12/8/98 24,973
14,000 5.472 12/11/98 13,979
12,500 5.30 12/15/98 12,474
Twin Towers, Inc.
22,000 5.40 2/1/99 21,795
--------
869,512
--------
Banking--0.8%
Bankers Trust New
York Corp.
39,500 5.48 1/22/99 39,188
--------
Communications--1.6%
Cincinnati Bell,
Inc.
5,000 5.50 12/1/98 5,000
35,000 5.05 12/4/98 34,985
GTE Corp.
5,000 5.25 12/4/98 4,998
10,000 5.25 12/7/98 9,991
15,000 5.20 12/14/98 14,972
5,000 5.40 1/26/99 4,958
--------
74,904
--------
Computers and Office Machines--2.7%
BTR Dunlop
Finance, Inc.
25,000 5.50 12/7/98 24,977
54,000 5.45 2/18/99 53,354
24,500 5.34 2/23/99 24,195
12,500 5.34 2/25/99 12,340
15,000 5.25 3/8/99 14,788
--------
129,654
--------
Diversified Financial Services--2.7%
Chrysler Financial
Corp.
31,000 5.25 12/7/98 30,973
Ford Motor Credit
Corp.
59,000 5.45 12/1/98 59,000
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------
<C> <C> <S> <C>
General Motors Ac-
ceptance Corp.
$20,000 5.50% 12/2/98 $ 19,997
10,000 5.50 12/3/98 9,997
10,000 5.50 12/9/98 9,988
---------
129,955
---------
Electrical Services--1.2%
Centerior Fuel
Corp. (LOC
Barclays Bank)
35,029 5.20 12/14/98 34,963
CSW Credit, Inc.
10,000 5.25 12/4/98 9,996
15,000 5.37 12/17/98 14,964
---------
59,923
---------
Electronic and Other Electric Compo-
nents--1.7%
General Electric
Capital Corp.
60,000 5.50 12/24/98 59,789
25,000 5.48 2/26/99 24,669
---------
84,458
---------
Food and Kindred Products--2.8%
Cargill Global
Funding, Inc.
34,000 5.45 12/1/98 34,000
Coca Cola
Enterprises, Inc.
50,000 5.50 12/8/98 49,947
9,000 5.51 12/10/98 8,988
Diageo PLC
10,000 5.47 12/4/98 9,995
8,000 5.472 12/11/98 7,988
24,000 5.33 12/11/98 23,964
---------
134,882
---------
Foreign Depository Institutions--5.2%
Abbey National
PLC, North America
30,000 5.35 12/8/98 29,969
90,000 5.458 12/22/98 89,713
Credit Communal de
Belgique
30,000 5.47 12/18/98 29,923
Generale Bank,
Inc.
50,000 5.49 12/1/98 50,000
Societe Generale
North America,
Inc.
30,000 5.475 12/21/98 29,909
Spintab
AB/Swedmortgage
4,000 5.55 12/28/98 3,983
Svenska
Handelsbanken,
Inc.
15,000 5.47 12/17/98 14,964
---------
248,461
---------
Industrial Instruments--0.7%
Johnson Controls,
Inc.
15,000 5.30 2/23/99 14,815
Xerox Credit Corp.
17,500 5.32 3/5/99 17,257
---------
32,072
---------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------
<C> <C> <S> <C>
Insurance--0.9%
Aetna Service Co.
$12,000 5.28% 1/22/99 $ 11,907
18,000 5.20 2/19/99 17,790
Torchmark, Inc.
15,000 5.30 1/19/99 14,892
-----------
44,589
-----------
Municipalities--0.2%
Texas Municipal
Power Agency,
Series 1997
9,300 5.37 12/10/98 9,300
-----------
Nondepository Business Credit Institu-
tions--2.6%
FBA Properties,
Inc. (Nations
Bank, Georgia LOC)
5,575 5.45 12/30/98 5,551
Finova Capital
Corp.
5,000 5.35 12/15/98 4,990
50,000 5.40 1/14/99 49,670
27,500 5.40 1/19/99 27,298
5,000 5.28 2/17/99 4,943
18,000 5.30 2/19/99 17,788
15,000 5.18 3/12/99 14,782
-----------
125,022
-----------
Nondepository Personal Credit Institu-
tions--0.3%
Cendant Residen-
tial Mortgage
Trust
12,500 5.43 12/11/98 12,481
-----------
Petroleum Refining and Related Indus-
tries--0.3%
Koch Industries,
Inc.
12,500 5.43 12/4/98 12,494
-----------
Toys, Games and Hobbies--0.3%
Mattel, Inc.
15,340 5.43 12/4/98 15,333
- ------------------------------------------
TOTAL COMMERCIAL PAPER $ 2,022,228
- ------------------------------------------
CORPORATE NOTES--14.0%
Asset Backed Securities--
4.6%
Beta Finance
60,000 5.64 2/4/99 60,000
Liberty Light FRN
25,000 5.374 10/8/99 24,978
Restructured Asset
Certificates with
Enhanced Returns,
Series 1998-MM-B-
11
33,000 5.69 12/28/98 33,000
Salts(II) Cayman
Islands Corp., P-
Floats
20,000 5.738 12/18/98 20,000
Syndicated Loan
Funding Trust,
Series 1998-7
50,000 5.777 12/15/99 50,000
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
Triangle Funding,
Ltd., 1998-1A 1
PP, FRN
$30,000 5.353% 10/15/99 $ 30,000
----------
217,978
----------
Broker--0.5%
Morgan Stanley
Trust Certificates
1996-2
24,832 5.105 12/23/98 24,832
----------
Electronic and Other Elec-
trical Components--0.7%
Heller Financial,
Inc. FRN
35,000 5.64 11/15/99 35,065
----------
Insurance Carriers--2.0%
Transamerica
Financial Corp.
FRN
25,000 5.45 10/22/99 25,000
United Health Care
Corp.
70,000 5.65 12/1/99 70,000
----------
95,000
----------
Municipal Investments--1.0%
Crozer Keystone
Health System,
VRDN
7,600 5.69 12/2/98 7,600
Metal Forming &
Coining Corp.
Project (National
City Bank--LOC)
9,870 5.03 12/7/98 9,870
Public Service
Electric and Gas
Co.
1st and Refunding
Mortgage Bond
Series YY
30,000 5.85 5/1/99 30,000
----------
47,470
----------
Nondepository Personal
Credit Institutions--3.1%
Associates Corp.
P-Floats, FRN
50,000 5.465 4/5/09 50,000
Beneficial Corp.
FRN
5,000 5.57 9/23/99 5,000
CIT Group Holdings
57,500 5.08 8/30/99 57,461
Countrywide Home
Loan FRN
25,000 5.275 8/4/99 24,992
Household Finance
Co. FRN
13,000 5.444 1/14/99 13,000
----------
150,453
----------
Railroad Transportation--
0.8%
Communaute Urbaine
de Lille
Custodial Tax
Receipts STN 98-8
37,260 5.40 4/1/99 37,260
----------
Transportation Equipment--
1.3%
Chrysler Financial
Corp.
5,000 6.28 6/22/99 5,030
GE Engine
Receivables 1995-1
Trust FRN
10,394 5.264 12/7/98 10,394
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
Diversified Assets Portfolio--Continued
<C> <C> <S> <C>
Transportation Equipment--Con-
tinued
GE Engine
Receivables 1996-1
Trust, FRN
$ 34,732 5.264% 12/7/98 $ 34,732
General Motors
Acceptance Corp.,
FRN
12,500 4.965 6/11/99 12,495
----------
62,651
- -----------------------------------------------------------
TOTAL CORPORATE NOTES $ 670,709
- -----------------------------------------------------------
EURODOLLAR TIME DEPOSITS--
10.1%
Banco Central
Hispanoamericano,
Grand Cayman Islands
$ 50,000 5.00% 12/1/98 $ 50,000
Compagnie Financiere
de CIC, Grand Cayman
Islands
35,000 5.50 12/1/98 35,000
Deutsche Bank, Grand
Cayman Islands
160,000 5.44 12/1/98 160,000
Halifax Building
Society, Halifax
160,000 5.50 12/1/98 160,000
KBC BANK, Grand
Cayman Islands
38,807 5.25 12/1/98 38,807
Monte Dei Paschi di
Siena, Grand Cayman
Islands
40,000 5.44 12/1/98 40,000
- -----------------------------------------------------------
TOTAL EURODOLLAR TIME DEPOSITS $ 483,807
- -----------------------------------------------------------
GUARANTEED INVESTMENT
CONTRACTS--4.6%
General American
Life Insurance Co.,
FRN
$ 75,000 5.24% 12/7/98 $ 75,000
25,000 5.24 12/30/98 25,000
Integrity Life
Insurance Co., FRN
30,000 5.89 12/7/98 30,000
Transamerica Life
Insurance and
Annuity Co., FRN
30,000 5.344 12/1/98 30,000
25,000 5.327 12/12/98 25,000
35,000 5.334 12/30/98 35,000
- -----------------------------------------------------------
TOTAL GUARANTEED INVESTMENT
CONTRACTS $ 220,000
- -----------------------------------------------------------
MUNICIPAL INVESTMENTS--7.7%
City of Minneapolis-
St. Paul (Minnesota)
Metro Airport GO
Bond
$ 28,930 5.70% 12/1/98 $ 28,930
City of Seattle
(Washington) Ltd. GO
Bond Series C
46,525 4.75 12/7/98 46,525
County of Kern
(California) Pension
Obligation
18,000 5.339 12/1/98 18,000
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- --------------------------------------
<C> <C> <S> <C>
County of Los
Angeles
(California)
Pension
Obligation
$ 40,000 5.07% 12/7/98 $ 40,000
County of
Sonoma
(California)
Pension
Obligation
22,800 5.239 12/1/98 22,800
Health
Insurance Plan
of Greater New
York VRDN,
Series 1990 B-1
17,500 5.09 7/1/16 17,500
State of New
Jersey Economic
Development
Authority
25,000 5.636 10/1/21 25,000
State of
Virginia
Housing
Development
Authority
171,105 4.75 12/7/98 171,105
- --------------------------------------
TOTAL MUNICIPAL
INVESTMENTS $ 369,860
- --------------------------------------
U.S. GOVERNMENT
OBLIGATIONS--1.0%
U.S. Treasury Bills
$ 15,000 4.39% 4/1/99 $ 14,779
10,000 4.17 4/8/99 9,852
25,000 4.365 4/29/99 24,548
- --------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS $ 49,179
- --------------------------------------
REPURCHASE AGREEMENTS--
1.0%
Joint Repurchase
Agreement--1.0%
Warburg Dillon
Read LLC, Dated
6/25/98 (U.S.
Government
Securities
Colld.) Accrued
Interest $116
$ 50,000 5.25% 12/1/98 $ 50,000
- --------------------------------------
TOTAL REPURCHASE
AGREEMENTS $ 50,000
- --------------------------------------
TOTAL INVESTMENTS--89.5% $4,298,022
- --------------------------------------
Other assets, less
liabilities--10.5% 503,868
- --------------------------------------
NET ASSETS--100.0% $4,801,890
- --------------------------------------
- --------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------
Government Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--51.6%
Fannie Mae Discount Notes--18.0%
$ 26,175 5.368% 12/29/98 $ 26,066
78,000 5.07 2/25/99 77,055
78,000 4.98 3/26/99 76,759
65,000 4.91 4/20/99 63,759
55,000 4.88 4/29/99 53,889
--------
297,528
--------
Fannie Mae Medium Term Notes--4.5%
46,000 5.38 2/9/99 45,989
28,000 5.49 8/3/99 27,979
--------
73,968
--------
Fannie Mae Medium Term Note FRN--3.9%
65,000 5.025 12/1/98 64,966
--------
FHLB Discount Note--3.3%
54,214 5.15 12/1/98 54,214
--------
FHLB Medium Term Notes--8.1%
20,800 5.52 3/23/99 20,795
13,000 5.50 3/26/99 12,996
39,000 5.527 6/10/99 38,969
42,000 5.54 7/13/99 41,987
19,000 5.536 7/15/99 18,991
--------
133,738
--------
Freddie Mac Discount Note--12.3%
19,000 5.071 2/26/99 18,767
78,000 5.06 2/26/99 77,046
80,000 4.90 3/12/99 78,900
29,200 4.91 4/9/99 28,686
--------
203,399
--------
SLM Holding Corp. Medium Term Notes--1.5%
26,000 5.40 2/10/99 25,995
- ----------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $853,808
- ----------------------------------------------------------------------
REPURCHASE AGREEMENTS--48.4%
Repurchase Agreements--45.4%
ABN-Amro Securities, Inc., Dated 11/30/98,
Repurchase Price $200,030
(U.S. Government Securities Colld.)
$200,000 5.45% 12/1/98 $200,000
Bear Stearns Security Corp, Dated 11/30/98,
Repurchase Price $350,054
(U.S. Government Securities Colld.)
350,000 5.52 12/1/98 350,000
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Maturity
Principal Amount Rate Date Amortized Cost
- -------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C> <C>
J.P. Morgan Securities, Inc., Dated 11/30/98,
Repurchase Price $200,028
(U.S. Government Securities Colld.)
$200,000 5.35% 12/1/98 $ 200,000
----------
750,000
----------
Joint Repurchase Agreement--3.0%
Warburg Dillon Reed LLC, Dated 6/25/98,
(U.S. Government Securities Colld.) Accrued
Interest $128
$ 50,000 5.25% 12/1/98 $ 50,000
- -------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 800,000
- -------------------------------------------------------------------
TOTAL INVESTMENTS--100.0% $1,653,808
- -------------------------------------------------------------------
Liabilities, less other assets--0.0% (938)
- -------------------------------------------------------------------
NET ASSETS--100.0% $1,652,870
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------
Government Select Portfolio
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--100.0%
Federal Farm Credit Bank--0.7%
$ 12,000 5.70% 12/1/98 $ 12,000
----------
FHLB--9.0%
21,000 5.435 2/2/99 20,994
22,750 5.52 3/23/99 22,745
14,000 5.50 3/26/99 13,996
13,000 5.61 4/8/99 12,996
25,000 5.63 5/5/99 24,988
42,000 5.527 6/10/99 41,965
15,000 5.536 7/15/99 14,993
----------
152,677
----------
FHLB Discount Notes--89.0%
430,435 5.151 12/1/98 430,435
11,905 4.777 12/4/98 11,900
162,000 4.94 1/29/99 160,704
147,000 4.941 1/29/99 145,824
81,200 4.951 1/29/99 80,549
36,865 4.982 1/29/99 36,568
208,200 5.099 2/12/99 206,074
218,000 4.961 2/17/99 215,686
51,000 5.043 2/17/99 50,450
52,000 5.006 2/24/99 51,393
123,000 4.94 5/12/99 120,332
----------
1,509,915
----------
SLM Holding Corp.--1.3%
22,000 5.74 12/17/98 21,999
- -----------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $1,696,591
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Maturity Amortized
Shares Rate Date Cost
- ----------------------------------------
<C> <S> <C> <C>
OTHER INVESTMENT--0.0%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Dreyfus Treasury Prime Cash
Management,
Class A
1 -- -- $ 1
- ----------------------------------------
TOTAL OTHER INVEST-
MENT $ 1
- ----------------------------------------
TOTAL INVESTMENTS--
100.0% $1,696,592
- ----------------------------------------
Liabilities, less
other assets--0.0% (1,615)
- ----------------------------------------
NET ASSETS--100.0% $1,694,977
- ----------------------------------------
- ----------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio
MUNICIPAL INVESTMENTS--94.2%
Alabama--1.7%
Greenville City IDR VRDN,
Series 1992, Allied-Signal,
Inc. Project (Allied-Signal,
Inc. Gtd.)
<S> <C> <C> <C>
$ 1,350 3.30% 12/2/98 $ 1,350
Jefferson County Sewer Revenue
VRDN, Series A (FGIC Insured)
5,050 3.45 12/1/98 5,050
McIntosh IDB Environmental
Improvement Revenue VRDN,
Series D (CIBA Specialty
Chemical Corp. Gtd.)
4,300 3.25 12/1/98 4,300
Mobile PCR Revenue VRDN, Series
1994A, Alabama Power Co.
Project (Alabama Power Co.
Gtd.)
2,200 3.30 12/1/98 2,200
--------
12,900
--------
Alaska--1.0%
Alaska Housing Finance Corp.
VRDN, Series 1994 PT-37,
Merrill P-Floats (Banque
National Paris LOC)
7,170 3.43 12/3/98 7,170
--------
California--3.0%
California State GO VRDN,
Series 1997H, Bank of America
(U.S. Government Securities
Colld.)
200 3.23 12/7/98 200
California Statewide Community
Development Authority
TRAN VRDN, Series 1998, LB
FR/RI-A23 Trust Receipts
(California Statewide
Community Development
Authority Insured)
5,000 3.30 12/8/98 5,000
Irvine Ranch Consolidated Water
District VRDN,
Series 1993 B, Districts 2,
102, 103, & 206
(Toronto Dominion Bank LOC)
9,550 3.20 12/1/98 9,550
San Marcos Public Facilities
Authority Revenue VRDN, Series
1989 B BTP-188, Civic Center
Project
(U.S. Government Securities
Colld.)
7,961 3.60 3/25/99 7,961
--------
22,711
--------
Florida--3.7%
Broward County HFA Revenue
VRDN, Sanctuary Park
Apartments Multifamily Project
(PNC LOC)
4,600 3.45 12/4/98 4,600
Florida State Board of
Education Capital Outlay GO
VRDN, Series 1998-9, ABN-Amro
MuniTops (FSA Insured)
3,500 3.43 12/3/98 3,500
Florida State Board of
Education GO, Series 1989A,
Eagle Trust 96C0915 (U.S.
Government Securities Colld.)
5,205 3.80 12/1/98 5,205
Florida State Board of
Education Public Education
Capital VRDN, Series 1991-B
BTP-223 (U.S. Government
Securities Colld.)
4,000 3.65 12/3/98 4,000
Florida State Board of
Education VRDN, Series 1993E,
Eagle Trust 940901
5,500 3.28 12/3/98 5,500
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Orange County HFA VRDN,
Citicorp Eagle Trust,
Series 1987-A (GNMA Securities
Colld.)
<S> <C> <C> <C>
$ 4,660 3.23% 12/2/98 $ 4,660
--------
27,465
--------
Georgia--8.0%
DeKalb County Development
Authority PCR VRDN, Series
1987, General Motors Corp.
Project (General Motors Corp.
Gtd.)
4,200 3.25 12/2/98 4,200
Fulton County Development
Authority IDR,
Citicorp Eagle Trust 981001
11,000 3.10 8/2/99 11,000
Fulton County Development
Authority IDR VRDN, General
Motors Corp. Project (General
Motors Corp. Gtd.)
2,100 3.25 2/2/98 2,100
Georgia State GO TOB, Series
1993 F BTP-82A
9,900 3.35 3/4/99 9,900
Georgia State GO VRDN, Series
1994 D BTP-100
6,035 3.35 3/4/99 6,035
Georgia State Unlimited GO
VRDN, P-Floats PA-246
10,200 3.30 12/3/98 10,200
Georgia State Unlimited GO
VRDN, P-Floats PA-248
7,340 3.30 12/3/98 7,340
Metro Atlanta Rapid Transit
Authority Sales Tax Revenue
VRDN, Series A-MTC#16, BOCM
Muni Trust Certified (MBIA
Insured)
8,000 3.30 12/7/98 8,000
Municipal Gas Authority Gas Revenue VRDN, Series B
(Wachovia Bank NA LOC)
1,300 3.05 12/7/98 1,300
--------
60,075
--------
Hawaii--2.1%
Hawaii State GO VRDN, Series 5
(FGIC Insured)
12,620 3.63 12/3/98 12,620
Hawaii Department of Budget &
Finance Special Purpose IDR,
Kaiser Permanente Project
(Kaiser Permanente Gtd.)
3,000 3.80 3/1/99 3,000
--------
15,620
--------
Idaho--0.5%
Idaho Health Facilities
Authority Hospital Revenue
VRDN, Series 1995, St. Luke's
Medical Center Project
(Credit Suisse First Boston
LOC)
3,700 3.30 12/1/98 3,700
--------
Illinois--11.4%
Chicago Board of Education
VRDN, BTP-239
(AMBAC Insured)
9,320 3.60 12/2/98 9,320
Chicago GO Refunding GO VRDN,
Series 1998 M,
Bank of America Partnership
(FGIC Insured)
5,000 3.70 8/4/99 5,000
Chicago GO VRDN, Series 1997-
SSP-7, Building Acquisition
Certificates (FSA Insured)
8,300 3.35 12/2/98 8,300
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio--Continued
Chicago O'Hare Airport Revenue
VRDN, Series 1983-D, AMR,
Inc. Project (Royal Bank of
Canada LOC)
<S> <C> <C> <C>
$ 1,100 3.30% 12/1/98 $ 1,100
DuPage Water Commission
Water/Sewer VRDN
8,400 3.26 12/3/98 8,400
Illinois Development Finance
Authority PCR VRDN,
Series 1994, UNO-VEN Co.
Project (First Chicago NBD
Bank LOC)
2,200 3.15 12/1/98 2,200
Illinois Education Facility
Authority VRDN, Series 1985,
University of Chicago
4,900 3.23 12/3/98 4,900
Illinois Health Facilities
Authority VRDN, Series 1990,
Gottlieb Health Resources,
Inc. (Harris Trust and
Savings Bank LOC)
2,000 3.15 12/2/98 2,000
Illinois Health Facilities
Authority VRDN, Series E,
Franciscan Eldercare (LaSalle
National Bank LOC)
2,500 3.20 12/2/98 2,500
Illinois Sales TRB, Series K
(U.S. Government Securities
Colld.)
1,000 7.00 6/15/99 1,035
Illinois State GO VRDN, Series 1998 PCR-10,
Citibank TOB (FSA Insured)
5,000 3.28 12/7/98 5,000
Illinois State GO VRDN, Series
38
12,885 3.63 12/3/98 12,885
Illinois State GO VRDN, Series
39
12,075 3.63 12/3/98 12,075
Metropolitan Pier & Exposition
Authority Dedicated Sales
TRB, BTP-230 A (U.S.
Government Securities Colld.)
6,000 3.60 12/7/98 6,000
Naperville City IDR VRDN,
General Motors Corp. Project
(General Motors Corp. Gtd.)
1,480 3.25 12/2/98 1,480
Peoria IDR VRDN, Series 1997, Peoria Production Shop
Project (Bank One LOC)
2,905 3.30 12/3/98 2,905
--------
85,100
--------
Indiana--3.6%
Gary Environmental Improvement
PCR, U.S. Steel Corp. Project
(Bank of New York LOC)
3,000 3.35 1/22/99 3,000
Indiana Bond Bank Operating
Municipal Notes,
Series 1998 A-2, Advanced
Funding Program
7,425 4.00 1/20/99 7,429
Indiana Development Finance
Authority IDR VRDN,
Series 1997, Bayer Corp.
Project (Bayer Corp. Gtd.)
1,300 3.35 12/1/98 1,300
Indiana Development Finance
Authority VRDN,
Series 1997, Culver
Educational Foundation
Project (Chase Manhattan Bank
LOC)
2,000 3.15 12/2/98 2,000
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------------
Indiana State Toll Road
Commission VRDN, Series PA-
253 (U.S. Government
Securities Colld.)
<S> <C> <C> <C>
$ 3,900 3.30% 12/3/98 $ 3,900
Indiana Transportation
Authority Highway Revenue
VRDN, Series 1998A, Citicorp
Eagle Trust 981402
7,750 3.10 8/2/99 7,750
Jasper County PCR CP, Series
1988D,
Northern Indiana Public
Service Project
(Northern Indiana Public
Service Gtd.)
2,000 3.30 1/22/99 2,000
--------
27,379
--------
Iowa--2.2%
Council Bluffs City PCR
Revenue VRDN, Series 1995,
Iowa-Illinois Gas and
Electric Project
(MidAmerican Energy Co. Gtd.)
6,600 3.25 12/2/98 6,600
Iowa Finance Authority SFM
Revenue VRDN,
Series 1997A
6,085 3.43 12/1/98 6,085
Iowa Student Loan Liquidity
Student Loan Revenue
3,500 3.10 12/1/98 3,500
--------
16,185
--------
Kansas--1.2%
LaCygne City Environmental Revenue Refunding VRDN,
Series 1994, Kansas City Power & Light Project
(Kansas City Power & Light Gtd.)
2,882 3.30 12/2/98 2,882
Lawrence City GO Temporary Notes, Series 1998-1
6,355 3.79 6/1/99 6,355
--------
9,237
--------
Kentucky--1.4%
Danville City Lease Revenue
CP, Municipal Pooled
Lease Program (PNC Bank LOC)
3,000 3.25 1/12/99 3,000
Mayfield City Lease Revenue
VRDN, Series 1996, Kentucky
League of Cities Pooled
Project
(PNC Bank LOC)
7,200 3.25 12/2/98 7,200
--------
10,200
--------
Louisiana--1.5%
Greater Baton Rouge Port
Commission PCR Bonds,
Series 1983-A, Dow Chemical
Co. Project
(Dow Chemical Co. Gtd.)
5,035 3.95 12/15/98 5,035
Huntington City IDR PCR VRDN,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
1,900 3.30 12/2/98 1,900
Louisiana Public Facilities
Authority PCR VRDN,
Series 1992, Allied-Signal,
Inc. Project
(Allied-Signal, Inc. Gtd.)
4,515 3.30 12/2/98 4,515
--------
11,450
--------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
MAINE--1.0%
Maine State GO Municipal
General Purpose Bond
<S> <C> <C> <C>
$ 4,215 4.50% 6/15/99 $ 4,232
Maine State GO Municipal
Highway Bond
3,000 4.50 6/15/99 3,012
--------
7,244
--------
MARYLAND--0.9%
Maryland State Community
Development Administration SFM
Revenue, Series 1993 PT-12,
Merrill P-Floats (Maryland
Community Development
Authority Gtd.)
6,399 3.43 12/1/98 6,399
Maryland State Economic
Development Authority Pooled
Revenue VRDN, Series 1995
(NationsBank LOC)
100 3.20 12/3/98 100
--------
6,499
--------
MASSACHUSETTS--1.7%
Gloucester County Renewal BAN
5,098 4.00 8/5/99 5,109
Massachusetts Bay
Transportation Authority GO
Notes,
Series 1998 A
8,000 4.25 2/26/99 8,012
--------
13,121
--------
MINNESOTA--1.4%
East Grand Forks Independent
School District 595 GO,
Minnesota School District
Credit Enhancement Program
2,000 3.90 6/30/99 2,003
Minnesota HFA SFM VRDN, Series
1998-F
8,500 3.65 8/9/99 8,500
--------
10,503
--------
MISSOURI--0.6%
Missouri Development Finance
Board Infrastructure Revenue
VRDN, Series 1997B, Science
City at Union Station
(Canadian Imperial Bank of
Commerce LOC)
1,300 3.55 12/1/98 1,300
St. Louis County IDA Hospital
VRDN, Series 1996-B,
Friendship Village West County
Project (LaSalle National Bank
LOC)
3,270 3.20 12/30/98 3,270
--------
4,570
--------
MONTANA--0.1%
Forsyth City, Rosebud County
PCR VRDN, Series 1988,
Pacificorp Project (Rabobank
Group LOC)
1,000 3.75 12/1/98 1,000
--------
NEVADA--2.2%
Clark County School District GO
VRDN (FSA Insured)
10,000 3.33 12/3/98 10,000
Nevada State Municipal Bond
Bank GO VRDN, Series 1997
SGB31 (FGIC Insured)
6,650 3.33 12/3/98 6,650
--------
16,650
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
NEW YORK--2.3%
New York City GO VRDN,
Subordinated Series 1993 E-3
(Morgan Guaranty Trust Co.
LOC)
<S> <C> <C> <C>
$ 300 3.20% 12/1/98 $ 300
New York City Municipal Water
Finance Authority VRDN (MBIA
Insured)
3,800 3.28 12/2/98 3,800
New York State Environmental
Facility Corp. PCR Bond, Eagle
Trust (FSA Insured)
10,000 3.40 4/1/99 10,000
New York State Environmental
Facility Corp. Water PCR Bond
(FSA Insured)
2,000 3.23 12/3/98 2,000
Pooled Puttable VRDN P-Floats,
Bankers Trust, Series PPT2
1,215 3.53 12/3/98 1,215
--------
17,315
--------
NORTH CAROLINA--1.2%
Buncombe County PCR IDR VRDN,
Series 1996,
Cooper Industries, Inc.
Project (Cooper Industries,
Inc Gtd.)
3,200 3.30 12/2/98 3,200
Persons County Industrial
Facilities and PCR VRDN,
Series 1992A, Carolina Power &
Light Project (Carolina Power
& Light Gtd.)
5,500 3.25 12/1/98 5,500
--------
8,700
--------
OHIO--4.2%
Greystone Revenue Senior VRDN,
Series Trust 1998-1, (Credit
Suisse First Boston)
14,500 3.58 12/3/98 14,500
Ohio Air Quality Facilities
Revenue Bond,
Series 1988A, Ohio Edison Co.
Project
(Toronto Dominion Bank LOC)
4,000 3.65 2/1/99 4,000
Ohio State Higher Education
Capital Facilities VRDN,
Series 1994 A, BTP-69 (AMBAC
Insured)
8,545 3.65 12/3/98 8,545
Ohio State Turnpike Commission
VRDN, Series A
(FGIC Insured)
2,000 3.63 12/3/98 2,000
Red Roof Inns Mortgage Bond
Trust VRDN
(National City Bank LOC)
2,714 3.33 12/15/98 2,714
--------
31,759
--------
OREGON--0.7%
Portland City Water/Sewer
System VRDN, Series A
(FGIC Insured)
5,365 3.30 12/4/98 5,365
--------
PENNSYLVANIA--5.0%
Allegheny County Environment
Improvement
IDA Revenue CP, Series 1987
USX Corp.
Project (Commerzbank LOC)
4,000 3.35 1/22/99 4,000
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
Allegheny County Hospital
Development Authority Revenue
VRDN, Series A, Presbyterian
Health Center
(MBIA Insured)
<S> <C> <C> <C>
2,900 3.30% 12/3/98 $ 2,900
Allegheny County Hospital
Development Authority
Revenue VRDN, Series B-1,
Presbyterian
University Hospital (NBD Bank
LOC)
$ 4,900 3.30 12/4/98 4,900
Pennsylvania Turnpike
Commission Revenue VRDN,
Series 1998-Q
4,100 3.35 12/1/98 4,100
Philadelphia Hospital and
Higher Education Facilities
Authority VRDN, Series A,
Children's Hospital Project
6,450 3.30 12/1/98 6,450
Philadelphia School District
TRAN, Series 1998/99 A
(First Union National Bank
LOC)
7,000 4.25 6/30/99 7,024
Philadelphia TRAN, Series
1998/99 A
6,000 4.25 6/30/99 6,021
Warren County Hospital
Authority VRDN, Series 1994 B,
Warren General Hospital
Project (PNC Bank LOC)
1,650 3.30 12/3/98 1,650
-------
37,045
-------
SOUTH CAROLINA--2.5%
Lexington County Pollution
Control Finance Authority
IDR VRDN, Series 1992A,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
1,880 3.30 12/2/98 1,880
Lexington County Revenue IDR
VRDN, Series 1992,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
800 3.30 12/2/98 800
Piedmont Municipal Power Agency
Revenue VRDN
(MBIA Insured)
5,000 3.70 12/1/98 5,000
Public Service Authority Santee
Cooper VRDN,
Series 1998A BTP-318
10,670 3.35 12/3/98 10,670
-------
18,350
-------
SOUTH DAKOTA--1.2%
South Dakota HDA Homeownership
Mortgage Housing VRDN, Series
1996 PT-73-A, Merrill P-Floats
8,945 3.30 12/3/98 8,945
-------
TENNESSEE--1.2%
Shelby County GO VRDN, Series B
BTP-216
4,000 3.17 6/8/99 4,000
Series B BTP-263
5,000 3.60 12/3/98 5,000
-------
9,000
-------
TEXAS--10.7%
Austin City School District
Building and Refunding VRDN,
Series ML/SG-68 (PSF of Texas
Gtd.)
4,900 3.30 12/3/98 4,900
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
Bastrop City Independent School
District GO VRDN,
Series 1997 SGB 37 (PSF of
Texas Gtd.)
<S> <C> <C> <C>
$ 6,870 3.63% 12/7/98 $ 6,870
Denton City Independent School
District GO Bond, Series B
(PSF of Texas Gtd.)
6,000 3.65 8/15/99 6,000
Grand Prairie Housing Finance
Corp. VRDN, Series 1985,
Lincoln Windcliff Project
(General Electric Corp. Gtd.)
900 3.20 12/2/98 900
Harris County GO VRDN, Series
19, Toll Road Unlimited
Subordinate Lien CR138
11,880 3.23 12/3/98 11,880
Harris County Tax Revenue
Receipts, SAK-21
7,910 3.40 12/2/98 7,910
Harris County Health Facility
Development Corp. VRDN, Series
1994, Methodist Hospital
2,300 3.35 12/1/98 2,300
Harris County Toll Road
Unlimited Tax Revenue VRDN,
Series 1994 A, Citicorp Eagle
Trust 954302
6,420 3.28 12/3/98 6,420
Hurst Euless Bedford
Independent School District
GO VRDN, PT-1050 (PSF of Texas
Gtd.)
4,000 3.30 12/3/98 4,000
Pearland Independent School
District GO VRDN,
ML/SG Trust Receipts SG-106
(PSF of Texas Gtd.)
4,000 3.30 12/3/98 4,000
San Antonio Independent School
District GO VRDN,
ROCS Series 30 (PSF of Texas
Gtd.)
3,000 3.63 12/3/98 3,000
Texas State TRAN, Series A59
10,000 3.45 12/2/98 10,000
Texas State Water Financing
Assistance Refunding GO VRDN,
Series 1998A BTP-309
5,385 3.60 12/3/98 5,385
Trinity River IDA IDR VRDN,
Automatic Data Processing,
Inc. Project (Automatic Data
Processing, Inc. Gtd.)
6,200 3.70 12/1/98 6,200
--------
79,765
--------
UTAH--0.7%
Utah State GO VRDN
5,000 3.65% 3/18/99 5,000
--------
VIRGINIA--4.7%
Norfolk GO VRDN, Eagle Trust
No. 944601
10,100 3.28 12/3/98 10,100
Roanoke IDA Hospital Revenue
VRDN, Series 1997A, Carilion
Health System Obligated Group
5,000 3.35 12/1/98 5,000
Roanoke IDA VRDN, Series A,
Roanoke Memorial Hospital
7,700 3.35 12/1/98 7,700
Town of Louisa IDA PCR CP,
Series 1984, Virginia Electric
& Power Co. Project (Virginia
Electric Power Co. Gtd.)
3,400 3.60 12/16/98 3,400
4,200 3.10 2/17/99 4,200
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Investments
November 30, 1998
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,700 3.25 1/12/99 4,700
------
35,100
------
Town of Louisa PCR CP, Series
1987 (Virginia Electric &
Power Co. Gtd.)
Washington--6.2%
Kent City Economic Development
Corp. IDR VRDN, Associated
Grocers Project (Bank of
America LOC)
3,500 4.02 12/2/98 3,500
Port of Seattle Passenger
Facility Charge VRDN
(MBIA Insured)
10,000 3.45 12/2/98 10,000
Washington State GO VRDN,
Smith-Barney Soc Gen Trust,
Series 1993 B SGB-13
11,950 3.33 12/3/98 11,950
Washington State Public Power
Supply System Revenue Bond,
Series A,
4,000 5.30 7/1/99 4,043
1,000 7.20 7/1/99 1,022
Washington State Public Power
Supply System VRDN, Citicorp
Eagle Trust 944701
10,000 3.33 12/3/98 10,000
Washington State Refunding GO
VRDN,
Series R-92-A, BTP-101
6,000 3.30 12/3/98 6,000
------
46,515
------
Wisconsin--4.1%
Kenosha Unified School District
TRAN, Series 1998-99
4,700 3.38 9/28/99 4,700
Pleasant Prairie PCR VRDN,
Series 1995 B, Wisconsin
Electric Power Co. Project
(Wisconsin Electric Power Co.
Gtd.)
1,830 3.20 12/3/98 1,830
Racine Unified School District
TRAN, Series 1998/99
5,000 4.00 7/7/99 5,012
Wisconsin State GO VRDN, Series
16
19,000 3.63 12/3/98 19,000
------
30,542
------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------------------------------------
Principal
Amount/ Maturity Amortized
Shares Rate Date Cost/Value
- -------------------------------------------------------------------------------------------------
Wyoming--0.3%
Green River City PCR VRDN,
Allied-Signal, Inc. Project
(Allied-Signal, Inc. Gtd.)
<S> <C> <C> <C>
$ 2,225 3.30% 12/2/98 $ 2,225
- -------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $704,405
- -------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--2.3%
AIM Tax Free Money Market Fund
7,485 -- -- $ 7,485
Dreyfus Tax Exempt Cash Management Fund
400 -- -- 400
Federated Tax-Free Trust Money
Market Fund #15
8,540 -- -- 8,540
Federated Tax-Free Trust Money
Market Fund #73
820 -- -- 820
Provident Municipal Fund
137 -- -- 137
- -------------------------------------------------------------------------------------------------
TOTAL OTHER INVESTMENTS $ 17,382
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--96.5% $721,787
- -------------------------------------------------------------------------------------------------
Other assets, less liabilities--3.5% 26,364
- -------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $748,151
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1998
(All amounts in thousands, except net asset value per share)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost $4,248,022 $853,808 $1,696,592 $721,787
Repurchase agreements, at cost 50,000 800,000 -- --
Cash -- -- 1 --
Receivables:
Interest 29,537 4,711 3,295 7,234
Fund shares sold 855,792 58,639 9,868 34,158
Investment securities sold -- -- -- 9,300
Administrator 87 199 159 54
Other assets 3 82 41 6
- -------------------------------------------------------------------------------
TOTAL ASSETS 5,183,441 1,717,439 1,709,956 772,539
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund shares redeemed 362,967 57,382 7,388 18,820
Distributions to shareholders 17,157 6,429 7,083 1,792
Investment Securities Purchased -- -- -- 3,500
Accrued expenses:
Advisory fees 848 331 143 147
Administration fees 339 132 143 59
Custodian fees 34 11 14 6
Transfer agent fees 23 8 6 4
Other liabilities 183 276 202 60
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 381,551 64,569 14,979 24,388
- -------------------------------------------------------------------------------
NET ASSETS $4,801,890 $1,652,870 $1,694,977 $748,151
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $4,802,827 $1,652,855 $1,694,973 $748,096
Accumulated net realized gains
(losses) on investment transac-
tions (937) 15 4 55
- -------------------------------------------------------------------------------
NET ASSETS $4,801,890 $1,652,870 $1,694,977 $748,151
- -------------------------------------------------------------------------------
Total shares outstanding (no par
value), unlimited shares autho-
rized
Shares 4,795,767 1,652,855 1,694,866 748,096
Service Shares 7,060 -- -- --
Premier Shares -- -- 108 --
- -------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share
Shares $ 1.00 $ 1.00 $ 1.00 $ 1.00
Service Shares $ 1.00 -- -- --
Premier Shares -- -- $ 1.00 --
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended November 30, 1998
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $232,461 $74,343 $80,546 $24,823
- -------------------------------------------------------------------------------
Expenses:
Investment advisory fees 10,271 3,337 3,653 1,713
Administration fees 4,109 1,335 1,460 685
Custodian fees 425 179 182 86
Professional fees 244 80 73 38
Transfer agent fees 182 51 28 28
Registration fees 277 211 190 76
Trustee fees and expenses 117 40 33 18
Other 152 63 51 44
- -------------------------------------------------------------------------------
Total expenses 15,777 5,296 5,670 2,688
Less voluntary waivers of invest-
ment advisory fees -- -- (2,193) --
Less expenses reimbursable by Ad-
ministrator (1,328) (607) (544) (280)
- -------------------------------------------------------------------------------
Net expenses 14,449 4,689 2,933 2,408
- -------------------------------------------------------------------------------
Net investment income 218,012 69,654 77,613 22,415
Net realized gains on investment
transactions 430 108 2 61
- -------------------------------------------------------------------------------
Net increase in net assets re-
sulting from operations $218,442 $69,762 $77,615 $22,476
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended November 30, 1998 and 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Assets Government Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
-------------------------- -------------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets from:
Operations:
Net investment
income $ 218,012 $ 189,676 $ 69,654 $ 67,160 $ 77,613 $ 53,967 $ 22,415 $ 23,443
Net realized
gains on
investment
transactions 430 207 108 212 2 78 61 27
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations 218,442 189,883 69,762 67,372 77,615 54,045 22,476 23,470
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders-
Shares:
Net investment
income (217,888) (189,676) (69,654) (67,160) (77,613) (53,976) (22,415) (23,443)
Realized Gains -- -- -- -- -- -- (174) --
- --------------------------------------------------------------------------------------------------------------------------
Total
distributions (217,888) (189,676) (69,654) (67,160) (77,613) (53,976) (22,589) (23,443)
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders-
Service:
Net investment
income (124) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total
distributions (124) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Shareholder
transactions (at
$1.00 per share)-
Share:
Proceeds from
the sale of
shares 53,687,791 49,976,344 16,723,046 16,517,258 8,794,437 6,143,005 5,796,229 5,626,217
Reinvested
distributions 9,197 2,169 748 580 5,934 4,952 210 172
Cost of shares
redeemed (52,844,174) (49,216,663) (16,122,433) (16,735,164) (8,344,898) (5,744,991) (5,633,334) (5,679,764)
- --------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
shareholder
transactions-
Shares 852,814 761,850 601,361 (217,326) 455,473 402,966 163,105 (53,375)
- --------------------------------------------------------------------------------------------------------------------------
Shareholder share
transactions (at
$1.00 per share)-
Service:
Proceeds from
the sale of
shares 21,636 -- -- -- -- -- -- --
Cost of shares
redeemed (14,576) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
shareholder
transactions-
Service 7,060 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Shareholder share
transactions (at
$1.00 per share)-
Premier:
Proceeds from
the sale of
shares -- -- -- -- 110 -- -- --
Cost of shares
redeemed -- -- -- -- (1) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
shareholder
transactions-
Premier -- -- -- -- 109 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 860,304 762,057 601,469 (217,114) 455,584 403,044 162,992 (53,348)
Net assets--
beginning of
year 3,941,586 3,179,529 1,051,401 1,268,515 1,239,393 836,349 585,159 638,507
- --------------------------------------------------------------------------------------------------------------------------
Net assets--end
of year $ 4,801,890 $ 3,941,586 $ 1,652,870 $ 1,051,401 $1,694,977 $1,239,393 $ 748,151 $ 585,159
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Diversified Assets Portfolio
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
from:
Net investment
income (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.36% 5.42% 5.30% 5.78%(b) 3.92% 3.00% 3.80% 6.19% 8.01%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.35% 0.35% 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35%
Expenses, before
waivers and re-
imbursements 0.38% 0.36% 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36%
Net investment
income, net of
waivers and
reimbursements 5.31% 5.30% 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01%
Net investment
income, before
waivers and
reimbursements 5.28% 5.29% 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00%
Net assets at end
of year (in thou-
sands) $4,794,830 $3,941,586 $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of year $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
from:
Net investment
income (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 8.98%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.37%
Expenses, before
waivers and re-
imbursements 0.37%
Net investment
income, net of
waivers and
reimbursements 8.98%
Net investment
income, before
waivers and
reimbursements 8.98%
Net assets at end
of year (in thou-
sands) $1,871,713
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Service
-------
1998(c)
- ----------------------------------------------
<S> <C>
Net asset value, beginning of year $1.00
Income from investment operations:
Net investment income 0.02
- ----------------------------------------------
Total income from investment oper-
ations 0.02
- ----------------------------------------------
Distributions to shareholders
from:
Net investment income (0.02)
- ----------------------------------------------
Total distributions to sharehold-
ers (0.02)
- ----------------------------------------------
Net asset value, end of year $1.00
- ----------------------------------------------
Total return (a) 1.76%
Ratio to average net assets of:
(d)
Expenses, net of waivers and re-
imbursements 0.69%
Expenses, before waivers and re-
imbursements 0.72%
Net investment income, net of
waivers and reimbursements 4.94%
Net investment income, before
waivers and reimbursements 4.91%
Net assets at end of year (in
thousands) $ 7,060
- ----------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per
share received from Northern Trust Corporation.
(c) For the period July 1, 1998 (Service shares issue date) through November
30, 1998.
(d) Annualized for periods less than one year.
See accompanying notes to financial statements.
18
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Government Portfolio
<TABLE>
<CAPTION>
Shares
------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.04 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.04 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment
income (0.04) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- --------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.04) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.28% 5.31% 5.20% 5.64%(b) 3.78% 2.91% 3.91% 6.18% 7.89%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37%
Expenses, before
waivers and reim-
bursements 0.40% 0.37% 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46%
Net investment
income, net of
waivers and
reimbursements 5.22% 5.18% 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88%
Net investment
income, before
waivers and
reimbursements 5.17% 5.16% 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79%
Net assets at end
of year (in thou-
sands) $1,652,870 $1,051,401 $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of year $1.00
Income from in-
vestment opera-
tions:
Net investment
income 0.09
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.09
- --------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment
income (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 8.63%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.50%
Expenses, before
waivers and reim-
bursements 0.50%
Net investment
income, net of
waivers and
reimbursements 8.63%
Net investment
income, before
waivers and
reimbursements 8.63%
Net assets at end
of year (in thou-
sands) $423,517
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
year.
(b) Total return for the year ended November 30, 1995 would have been 5.53%
absent the effect of a capital contribution equivalent to $.0011 per
share received from Northern Trust Corporation.
See accompanying notes to financial statements.
19
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Government Select Portfolio
<TABLE>
<CAPTION>
Shares
----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990(a)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------------
Distributions to share-
holders from:
Net investment income (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (0.05) (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Total return (b) 5.38% 5.41% 5.31% 5.82%(c) 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before waiv-
ers and reimbursements 0.39% 0.39% 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and
reimbursements 5.31% 5.30% 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and
reimbursements 5.12% 5.11% 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $1,694,869 $1,239,393 $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Premier
----------
1998(e)
- ---------------------------------------
<S> <C>
Net asset value, begin-
ning of year $1.00
Income from investment
operations:
Net investment income 0.00
- ---------------------------------------
Total income from in-
vestment operations 0.00
- ---------------------------------------
Distributions to share-
holders from:
Net investment income (0.00)
- ---------------------------------------
Total distributions to
shareholders (0.00)
- ---------------------------------------
Net asset value, end of
year $1.00
- ---------------------------------------
Total return (b) 0.10%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.80%
Expenses, before waiv-
ers and reimbursements 0.99%
Net investment income,
net of waivers and
reimbursements 4.71%
Net investment income,
before waivers and
reimbursements 4.52%
Net assets at end of
year (in thousands) $108
- ---------------------------------------
</TABLE>
(a) For the period November 7, 1990 (commencement of operations) through
November 30, 1990.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per share
received from Northern Trust Corporation.
(d) Annualized for periods less than one year.
(e) For the period November 23, 1998 (Premier share issue date) through
November 30, 1998. Per share amounts from net investment income and
distributions from net investment income are less than $0.01 per share.
See accompanying notes to financial statements.
20
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Financial Highlights
For the Years Ended November 30,
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
Shares
-----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from invest-
ment operations:
Net investment in-
come 0.03 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.03 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment in-
come (0.03) (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders (0.03) (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total return (a) 3.31% 3.44% 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04%
Ratio to average
net assets of:
Expenses, net of
waivers and reim-
bursements 0.35% 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49%
Expenses, before
waivers and reim-
bursements 0.39% 0.39% 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49%
Net investment in-
come, net of waiv-
ers and
reimbursements 3.27% 3.38% 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03%
Net investment in-
come, before waiv-
ers and
reimbursements 3.23% 3.34% 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03%
Net assets at end
of year (in thou-
sands) $748,151 $585,159 $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the end of the year.
See accompanying notes to financial statements.
21
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
1. Organization
Northern Institutional Funds (the "Trust") is a Delaware business trust which
was formed on July 1, 1997, and is registered under the Investment Company Act
of 1940 (as amended) as an open-end management investment company. The Trust,
formerly known as The Benchmark Funds, changed its name effective July 15,
1998. The Trust includes seventeen portfolios, each with its own investment
objective. Prior to March 31, 1998, each portfolio was a series of The
Benchmark Funds, a Massachusetts business trust, which reorganized into the
Trust at the close of business on that date. The Northern Trust Company
("Northern") is the investment adviser for all of the Trust's money market
portfolios and is the custodian and transfer agent for the Trust. Goldman,
Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the money market
portfolios.
The Trust includes four diversified money market portfolios: Diversified
Assets Portfolio, Government Portfolio, Government Select Portfolio and Tax-
Exempt Portfolio (the "Portfolios"). Each of these Portfolios has three
classes of shares: Shares, Services Shares and Premier Shares. Each class is
distinguished by the level of administrative, liaison and transfer agent
service provided. As of November 30, 1998, Shares, Service Shares and Premier
Shares are outstanding for certain Portfolios.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(a) Investment Valuation
Investments are valued at amortized cost, which approximates market value.
Under the amortized cost method, investments purchased at a discount or
premium are valued by amortizing the difference between the original purchase
price and maturity value of the issue over the period to maturity.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
Each Portfolio may enter into joint repurchase agreements with non-affiliated
counterparties through a master repurchase agreement with Northern. Northern
administers and manages these repurchase agreements in accordance with and as
part of its duties under its investment advisory agreements with the
Portfolios and does not collect any additional fees from the Portfolios. The
Diversified Assets and Government Portfolios had entered into such joint
repurchase agreements as of November 30, 1998, as reflected in the
accompanying Statements of Investments.
(c) Interest Income
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(d) Federal Taxes
It is each Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and tax-exempt income to its
shareholders. Therefore, no provision is made for federal taxes.
At November 30, 1998, the Portfolios had approximately the following amount
of capital loss carryforwards for U.S. federal income tax purposes:
<TABLE>
<CAPTION>
Amount Year of Expiration
- -----------------------------------------------------
(in thousands)
<S> <C> <C>
Diversified Assets $939 2002
- -----------------------------------------------------
</TABLE>
This amount is available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
(e) Expenses
Expenses arising in connection with a specific Portfolio are allocated to that
Portfolio. Certain expenses arising in connection with a class of shares are
allocated to that class of shares.
Expenses incurred which do not specifically relate to an individual Portfolio
are allocated among the Portfolios based on each Portfolio's relative average
net assets for the year.
22
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Notes to Financial Statements
November 30, 1998
(f) Distributions
Each Portfolio's net investment income is declared daily as a dividend to
shareholders of record as of 3:00 p.m., Chicago time. Net realized short-term
capital gains, if any,
in excess of net capital loss carryforwards, are declared and distributed at
least annually.
Distributions of net investment income with respect to a calendar month
(including with respect to shares redeemed at any time during the month) are
made as soon as practicable following the end of the month. Distributions are
made by each Portfolio to Northern in cash or automatically reinvested in
additional shares of the Portfolio. Northern has undertaken to credit or
arrange for the crediting of such distributions to each shareholder's account
with Northern, its affiliates or its correspondents.
3. Advisory, Transfer Agency, Custodian and Other Agreements
As compensation for the services rendered as investment adviser, including the
assumption by Northern of the expenses related thereto, Northern is entitled
to a fee, computed daily and payable monthly, at an annual rate of .25% of
each Portfolio's average daily net assets.
Until further notice, Northern has voluntarily agreed to waive .15% of its
advisory fee for the Government Select Portfolio, reducing such fee to .10%
per annum. The effect of this waiver by Northern for the year ended November
30, 1998 was to reduce advisory fees as shown on the accompanying Statements
of Operations.
As compensation for the services rendered as custodian and transfer agent,
including the assumption by Northern of the expenses related thereto, Northern
receives compensation based on a pre-determined schedule of charges approved
by the Board.
4. Administration and Distribution Agreements
The Trust has an administration agreement with Goldman Sachs whereby each
Portfolio pays the administrator a fee, computed daily and payable monthly, at
an annual rate of .10% of each Portfolio's average daily net assets.
In addition during the fiscal year prior to April 1, 1998, if the sum of a
Portfolio's expenses, including the administration fee, but excluding the fees
payable to Northern pursuant to duties as advisor, and certain extraordinary
expenses (such as taxes, interest and indemnification expenses), exceeded on
an annualized basis .10% of a Portfolio's average daily net assets, Goldman
Sachs reimbursed each Portfolio for the amount of the excess pursuant to the
terms of the administration agreement. On April 1, 1998, upon the offering of
the Portfolios' Premier Shares and Service Shares, Goldman Sachs reimbursed,
each Portfolio's expense (including fees payable to Goldman Sachs as
administrator, but excluding the fees payable to Northern for its duties as
adviser and transfer agent, payments under the service plan for the
Portfolios' Premier Shares and Service Shares and certain extraordinary
expenses) which exceeded on an annualized basis .10% of the Portfolio's
average daily net assets.
No administration fees were waived under this agreement during the year ended
November 30, 1998. Furthermore, Goldman Sachs voluntarily agreed to reimburse
each Portfolio for certain expenses in the event that such expenses, as
defined, exceed on an annualized basis .10% of its average daily net assets.
Expenses reimbursed during the year ended November 30, 1998 are shown on the
accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
5. Service Plan
The Trust has adopted a Service Plan pursuant to which the Trust may enter
into agreements with Northern, its affiliates or other institutions
("Servicing Agents") under which they will render certain administrative
support services and in some cases personal and account maintenance services
for their customers or investors who beneficially own Service and Premier
Shares. As compensation under the Service Plan, the institution or other
financial intermediary receives a fee at an annual rate of up to .25% and .50%
of the average daily net asset value of the outstanding Service and Premier
Shares, respectively. Furthermore, the Service Plan also provides for the
payment of fees to Northern, Goldman Sachs or other institutions for
consulting services, technology and systems support services to the Service
and Premier Shares customers at an annual rate of up to .08% of the average
daily net asset value of such shares serviced.
6. Bank Loans
Prior to January 16, 1998, the Trust maintained a $5,000,000 revolving bank
credit line and a $15,000,000 conditional revolving credit line for liquidity
and other purposes. As of January 16, 1998, the Trust maintains a $100,000,000
revolving bank credit line and a $15,000,000 conditional revolving credit line
for liquidity and other purposes. Borrowings under this arrangement bear
interest at 1% above the federal funds rate and are secured by pledged
securities equal to or exceeding 120% of the outstanding balance.
There were no borrowings under this agreement during the year ended November
30, 1998.
23
<PAGE>
Northern Institutional Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
Report of Independent Auditors
To the Shareholders and Trustees of
Northern Institutional Funds
Money Market Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Diversified Assets,
Government, Government Select and Tax-Exempt Portfolios, comprising the Money
Market Portfolios of the Northern Institutional Funds, as of November 30,
1998, and the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period then ended and
financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of the
investments owned at November 30, 1998 by physical examination of the
securities held by the custodian and by correspondence with central
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Diversified Assets, Government, Government Select and Tax-Exempt Portfolios,
comprising the Money Market Portfolios of the Northern Institutional Funds, at
November 30, 1998, the results of their operations for the year then ended and
the changes in their net assets for each of the two years in the period then
ended and financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 15, 1999
24
<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's ("S&P") commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. The following summarizes the rating categories used by
Standard and Poor's for commercial paper that is a permissible investment for
the Portfolios:
"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper that is a permissible investment
for the Portfolios:
"Prime-1" - Issuers (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: leading market
positions in well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
The following summarizes the rating categories used by Duff & Phelps for
commercial paper that is a permissible investment for the Portfolios:
A-1
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"D-1+" - Debt possesses the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
Duff & Phelps employs three designations, "D-1+," "D-1" and "D-1-," within
the highest rating category.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations that are permissible investments
for the Portfolios:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation indicates a
satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal and interest of debt instruments with original maturities
of one year or less. The following summarizes the ratings used by Thomson
BankWatch for short-term obligations that are permissible investments for the
Portfolios:
"TBW-1" - This designation represents Thomson BankWatch's highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's second-highest
category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."
A-2
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Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt that are permissible investments for the
Portfolios:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
PLUS (+) OR MINUS (-) - The "AA" rating classification may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt that are permissible investments for the Portfolios:
"Aaa" - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the "Aaa" securities.
Con. (---) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
A-3
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Note: Moody's applies numerical modifiers 1, 2, and 3 in the rating
classification "Aa". The modifier 1 indicates that the obligation ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of its generic
rating category.
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt that are permissible investments for
the Portfolios:
"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
To provide more detailed indications of credit quality, the "AA" and "A"
ratings may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate and
municipal bonds that are permissible investments for the Portfolio:
"AAA" - Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of credit risk and are
assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
To provide more detailed indications of credit quality, the Fitch IBCA
rating "AA" may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within the major rating category.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings for those
investments which are permissible investments for the Portfolios:
"AAA" - This designation indicates that the ability to repay principal and
interest on a timely basis is extremely high.
A-4
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"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.
PLUS (+) OR MINUS (-) - The ratings "AAA" and "AA" may include a plus or
minus sign designation which indicates where within the respective category the
issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes that are permissible investments for the Portfolios:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity to
pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes that are permissible investments for the Portfolios:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins of
protection that are ample although not so large as in the preceding group.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes that are permissible investments
for the Portfolios.
A-5
