<PAGE>
EXHIBIT (o)(1)
NORTHERN FUNDS
NORTHERN INSTITUTIONAL FUNDS
(the "Companies")
CODE OF ETHICS
--------------
I. Legal Requirement.
-----------------
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any officer or trustee of the Companies or of
their investment advisers or distributor (as well as other persons) in
connection with the purchase or sale by such person of a security "held or to be
acquired" by the Companies:
1. To employ any device, scheme or artifice to defraud the
Companies;
2. To make to the Companies any untrue statement of a material fact
or omit to state to the Companies a material fact necessary in
order to make the statements made, in light of the circumstances
under which they are made, not misleading;
3. To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the
Companies; or
4. To engage in any manipulative practice with respect to the
Companies' investment portfolios.
II. Purpose of the Code of Ethics.
-----------------------------
The Companies expect that their officers and trustees will conduct their
personal investment activities in accordance with (1) the duty at all times to
place the interests of the Companies' shareholders first, (2) the requirement
that all personal securities transactions be conducted consistent with this Code
of Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility,
and (3) the fundamental standard that investment company personnel should not
take inappropriate advantage of their positions.
In view of the foregoing, the provisions of Section 17(j) of the 1940 Act,
the Securities and Exchange Commission's 1940 Act Release No. 23958 on "Personal
Investment Activities of Investment Company Personnel" (August 24, 1999), the
"Report of the Advisory Group on Personal Investing" issued by the Investment
Company Institute on May 9, 1994, and the Securities and Exchange Commission's
September 1994 Report on "Personal Investment Activities of Investment Company
Personnel," the Companies' Boards of Trustees have determined to adopt this Code
of Ethics on behalf of the Companies to specify a code of conduct for certain
types of personal securities transactions which might involve conflicts of
interest or an appearance of impropriety, and to establish reporting
requirements and enforcement procedures.
-1-
<PAGE>
The Companies expect that their investment advisers and (if required)
distributor will adopt separate codes of ethics for their directors, officers
and personnel that are consistent with the purpose of this Code and applicable
regulations.
III. Definitions.
-----------
A. An "Access Person" means: (1) each trustee or officer of a Company;
(2) each employee (if any) of a Company (or of any company in a
control relationship to a Company) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by a Company
or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (3) any natural person in a
control relationship to a Company who obtains information concerning
recommendations made to the Company with regard to the purchase or
sale of a security.
For purposes of this Code of Ethics, an "Access Person" does not
include any person who is subject to the code of ethics adopted by a
Company's investment advisers or principal underwriter in compliance
with Rule 17j-1 under the 1940 Act.
B. "Restricted Trustee" or "Restricted Officer" means each trustee or
officer of a Company who is not also a director, officer, partner,
employee or controlling person of a Company's investment advisers,
custodian, transfer agent or principal underwriter.
C. An Access Person's "immediate family" includes a spouse, minor
children and adults living in the same household as the Access Person.
D. A security is "held or to be acquired" if within the most recent 15
days it (1) is or has been held by a Company, or (2) is being or has
been considered by a Company or either of its investment advisers for
purchase by the Company. A purchase or sale includes the writing of
an option to purchase or sell and any security that is exchangeable
for or convertible into, any security that is held or to be acquired
by a Company.
E. An "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not subject to the reporting
requirements of Sections 13 or 15(d) of the Securities Exchange Act of
1934.
F. "Investment Personnel" of a Company means:
(i) Any employee of a Company (or of any company in a control
relationship to the Company) who, in connection with his or her
regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities by the
Company.
-2-
<PAGE>
(ii) Any natural person who controls a Company and who obtains
information concerning recommendations made to the Company regarding
the purchase or sale of securities by the Company.
G. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2)
or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under
the Securities Act of 1933.
H. "Covered Security" means a security as defined in Section 2(a)(36) of
the 1940 Act, except that it does not include: (i) direct
obligations of the Government of the United States; (ii) banker's
acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt instruments (any instrument having a maturity
at issuance of less than 366 days and that is in one of the two
highest rating categories of a nationally recognized statistical
rating organization), including repurchase agreements; and (iii)
shares of registered open-end investment companies.
IV. Policies of the Company Regarding Personal Securities Transactions.
------------------------------------------------------------------
A. General Policy.
--------------
No Access Person of a Company shall engage in any act, practice or
course of business that would violate the provisions of Rule 17j-1(b)
set forth above, or in connection with any personal investment
activity, engage in conduct inconsistent with this Code of Ethics.
B. Specific Policies.
-----------------
1. Restrictions on Personal Securities Transactions By Access
Persons Other Than Restricted Trustees and Restricted Officers.
a. Except as provided below, no Access Person who is not a
Restricted Trustee or Restricted Officer may buy or sell
Covered Securities for his or her personal portfolio or the
portfolio of a member of his or her immediate family without
obtaining oral authorization from the compliance department
("Compliance Department") of The Northern Trust Company
("Northern") prior to effecting such security transaction.
-----
A written authorization for such security transaction will
be provided by the Compliance Department of Northern to the
person receiving the authorization (if granted) to
memorialize the oral authorization that was granted.
Note: If an Access Person has questions as to whether
purchasing or selling a security for his or her
personal portfolio or the portfolio of a member of his
or her immediate family requires prior oral
authorization, the
-3-
<PAGE>
Access Person should consult the Compliance Department
of Northern for clearance or denial of clearance to
trade prior to effecting any securities transactions.
-----
b. Pre-clearance approval under paragraph (a) will expire at
the close of business on the fifth trading day after the
date on which oral authorization is received, and the Access
Person is required to renew clearance for the transaction if
the trade is not completed before the authority expires.
c. No clearance will be given to an Access Person other than a
Restricted Trustee or Restricted Officer to purchase or sell
any security (1) on a day when any portfolio of a Company
has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn or (2) when the
Compliance Department of Northern has been advised by an
investment adviser that the same security is being
considered for purchase or sale for any portfolio of a
Company.
d. The pre-clearance requirements of this paragraph IV.B. do
not apply to the following securities:
(i) Securities that are not Covered Securities.
(ii) Securities which a Company's portfolios are not
permitted to purchase under the investment objectives
and policies set forth in the Company's then current
prospectus(es) under the Securities Act of 1933 or
the Company's registration statement on Form N-1A.
(iii) Securities purchased or sold in any account over
which the Access Person has no direct or indirect
influence or control.
(iv) Securities purchased or sold in a transaction which
is non-volitional on the part of either the Access
Person or the Companies.
(v) Securities acquired as a part of an automatic
dividend reinvestment plan.
(vi) Securities acquired upon the exercise of rights
issued by an issuer pro rata to all holders of a
--- ----
class of its securities, to the extent such rights
were acquired from such issuer, and sales of such
rights so acquired.
e. The pre-clearance requirement contained in this paragraph
IV.B. shall apply to all purchases of securities in an
---
Initial Public
-4-
<PAGE>
Offering or a Limited Offering in which any Investment
Personnel of a Company directly or indirectly acquires
beneficial ownership.
2. Restrictions on Personal Securities Transactions by Restricted
--------------------------------------------------------------
Trustees and Restricted Officers.
--------------------------------
Each Company recognizes that Restricted Trustees and Restricted
Officers do not have on-going, day-to-day involvement with the
operations of a Company. In addition, it has been the practice
of each Company to give information about securities purchased or
sold by the Company or considered for purchase or sale by the
Company to Restricted Trustees and Restricted Officers in
materials circulated more than 15 days after such securities are
purchased or sold by the Company or are considered for purchase
or sale by the Company. Accordingly, each Company believes that
less stringent controls are appropriate for Restricted Trustees
and Restricted Officers, and that such persons shall not be
subject to the pre-clearance requirements of this paragraph IV.B.
V. Procedures.
----------
A. Reporting of Holdings and Transactions.
--------------------------------------
In order to provide each Company with information to enable it to
determine with reasonable assurance whether the provisions of this
Code are being observed by its Access Persons:
1. Each Access Person of a Company other than a trustee who is not
an "interested person" of the Company (as defined in the 1940
Act) will submit to the Compliance Department of Northern an
initial holdings report in the form attached hereto as Exhibit A
that lists all Covered Securities beneficially owned/1/ by the
---
Access Person except as stated below. This report must be
submitted within ten days of becoming an Access Person, and must
include the title of each security, the number of shares held,
and the principal amount of the security. The report must also
include a list of any securities accounts maintained with any
broker, dealer or bank.
2. Each Access Person of a Company other than a trustee who is not
an "interested person" of the Company (as defined in the 1940
Act) will also submit to the Compliance Department of Northern an
annual holdings report attached hereto as Exhibit B no later than
thirty days after the end of the calendar year. Except as stated
below, the annual holdings report must list all Covered
---
Securities beneficially owned by the Access Person, the title of
each security, the number of shares held, and the principal
amount of the security, as well as a list of any securities
accounts maintained with any broker, dealer or bank.
-5-
<PAGE>
3. Each Access Person of a Company other than a Restricted Trustee
or Restricted Officer shall direct his or her broker to supply to
the Compliance Department of Northern, on a timely basis,
duplicate copies of confirmations of all securities transactions
in which the person has, or by reason of such transaction
acquires any direct or indirect beneficial ownership/1/ and
copies of periodic statements for all securities accounts.
4. Except as stated below, each Access Person of a Company, other
than a trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), shall submit reports in
substantially the form attached hereto as Exhibit C to the
Compliance Department of Northern, showing all transactions in
Covered Securities in which the person has, or by reason of such
transaction acquires, any direct or indirect beneficial
ownership, as well as all accounts established with brokers,
dealers or banks during the quarter in which any securities were
held for the direct or indirect benefit of the Access Person./2/
Such reports shall indicate each transaction in a security where
the Access Person knew at the time of the transaction or, in the
ordinary course of fulfilling his or her official duties as a
trustee or officer, should have known that during the 15-day
period immediately preceding or after the date of the
transaction, such security was purchased or sold, or such
security was being considered for purchase or sale, by a Company.
Such reports shall be filed no later than 10 days after the end
of each calendar quarter. An Access Person of a Company need not
make a quarterly transaction report under this paragraph if all
of the information required by this paragraph V.A.4. is contained
in the brokerage confirmation or account statement required to be
submitted under paragraph V.A.3. and is received by Northern's
Compliance Department in the time period stated above.
5. Each trustee who is not an "interested person" of the Company
need not make an initial or annual holdings report but shall
submit a quarterly
----------------
1. You will be treated as the "beneficial owner" of a security, and a security
will be held for your benefit, under this policy only if you have a direct or
indirect pecuniary interest in the security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the transaction.
(b) An indirect pecuniary interest is any nondirect financial interest,
but is specifically defined in the rules to include securities held by
members of your immediate family sharing the same household;
securities held by a partnership of which you are a general partner;
securities held by a trust of which you are the settlor if you can
revoke the trust without the consent of another person, or a
beneficiary if you have or share investment control with the trustee;
and equity securities which may be acquired upon exercise of an option
or other right, or through conversion.
For interpretive guidance on this test, you should consult counsel.
2. See footnote 1 above.
-6-
<PAGE>
report similar to that required under paragraph V.A.4. to the
Compliance Department of Northern, but only for a transaction in
a Covered Security (except as stated below) where he or she knew
at the time of the transaction or, in the ordinary course of
fulfilling his or her official duties as a trustee, should have
known that during the 15-day period immediately preceding or
after the date of the transaction, such security was purchased or
sold, or such security was being considered for purchase or sale,
by a Company.
6. The reporting requirements of this paragraph V do not apply to
securities transactions effected for, and any Covered Securities
held in, any account over which an Access Person does not have
any direct or indirect influence or control.
7. PFPC Inc. shall notify each Access Person of the Companies who
may be subject to the pre-clearance requirement or required to
make reports pursuant to this Code that such person is subject to
the pre-clearance requirement or this reporting requirement and
shall deliver a copy of this Code to each such person.
B. Review and Recordkeeping.
------------------------
1. Each Company's investment advisers and (if required) principal
underwriter shall adopt, maintain and enforce separate codes of
ethics with respect to their personnel in compliance with Rule
17j-1 under the 1940 Act, and shall forward to the Company's
administrator and the Company's counsel copies of such codes and
all future amendments and modifications thereto. The board of
trustees, including a majority of the trustees who are not
"interested persons" of a Company (as defined in the 1940 Act),
shall approve this Code of Ethics, and the code of ethics of each
investment adviser and principal underwriter of the Company, and
any material amendments to such codes. Such approval must be
based on a determination that such codes contain provisions
reasonably necessary to prevent access persons of a Company and
its investment advisers and principal underwriter from engaging
in any conduct prohibited under such codes and under Rule 17j-1
under the 1940 Act. Any material changes to an investment
adviser's or principal underwriter's code must be approved by the
board no later than six months after such change. Before
approving any material amendments to an investment adviser's or
principal underwriter's code of ethics, the board must receive a
certification from the investment adviser or principal
underwriter that it has adopted procedures reasonably necessary
to prevent access persons from violating its code of ethics.
-7-
<PAGE>
2. The Compliance Department of Northern shall:
a. review all initial holdings, annual holdings and quarterly
transactions reports required to be made by a Company's
Access Persons pursuant to this Code, and as appropriate
compare the reports with the pre-clearance authorizations
received;
b. maintain copies of this Code of Ethics and the names of the
persons who are required to report their securities
transactions pursuant to the Code and the names of all
persons responsible for reviewing such reports;
c. keep all reports submitted by Access Persons pursuant to
this Code in a safe and secure location, and shall not
disclose the reports or their contents to any person except
as necessary to perform the responsibilities of Compliance
Department;
d. submit to the Chairman of the board of trustees of the
Companies within 60 days after the end of each calendar
quarter a written report listing (i) any transaction that
appears to evidence a possible violation of this Code, or
(ii) any apparent violation of the reporting requirements
stated herein; and
e. promptly investigate any securities transaction listed
pursuant to subparagraph (d)(i) above and submit periodic
status reports with respect to each such investigation to
the Chairman of the board of trustees of the Companies.
3. The Compliance Department of each of the Companies' investment
advisers and (if required) principal underwriter, respectively,
shall:
a. maintain copies of the codes of ethics adopted by such
investment advisers and principal underwriter, the names of
the persons who are required to report their securities
transactions pursuant to such codes and the names of all
persons responsible for reviewing such reports;
b. submit to the board of trustees of each Company within 60
days after the end of each calendar quarter a written report
listing any transaction that constituted a violation of the
code of ethics adopted by the Company's investment advisers
or principal underwriter and the disciplinary actions/3/
taken in response to such violation.
--------------------
3. Disciplinary action may include, but is not limited to, any action that has
a material financial effect upon the individual involved, such as fining,
suspending, or demoting an employee, imposing a substantial fine or requiring
the disgorgement of profits.
-8-
<PAGE>
4. At each quarterly board of trustees' meeting the Chairman of the
board of trustees of each Company shall report on any reported
securities transaction that occurred during the prior quarter
that appears to have been inconsistent with the provisions of
this Code.
5. The board shall consider reports made to it hereunder and shall
determine whether the policies established in this Code have been
violated, and what sanctions, if any, should be imposed on the
violator, including but not limited to a letter of censure,
removal or suspension from office, termination of employment, or
the unwinding of the transaction and the disgorgement of any
profits to the Companies.
6. At least once a year, Northern's Compliance Department shall
provide to the board with respect to this Code of Ethics, and
each Company's investment advisers and (if required) principal
underwriter shall provide to the board with respect to their
codes of ethics, a written report which contains: (a) a summary
of existing procedures concerning personal investing by their
access persons and any changes in the procedures during the past
year; (b) an evaluation of current compliance procedures and a
report on any recommended changes in existing restrictions or
procedures based upon their experience under such codes, industry
practices, or developments in applicable laws and regulations;
(c) a description of any issues arising under such codes of
ethics or procedures since the last report, including but not
limited to, information about material violations of such codes
or procedures and sanctions imposed in response to material
violations; and (d) a certification that the procedures which
have been adopted are those reasonably necessary to prevent their
access persons from violating their respective codes of ethics.
The trustees shall consider such written reports not less
frequently than annually.
7. This Code and any code that has been in effect during the past
five years, a record of any violation of such codes and any
action taken as a result of the violation, a copy of each report
made by an Access Person under this Code (including any written
information provided in lieu of the reports under paragraph
V.A.3.), any written reports provided pursuant to paragraph
V.B.6., lists of all persons required to make reports lists of
all persons responsible for reviewing such reports and a record
or any decision and the reasons supporting a decision to approve
the acquisition by Investment Personnel of securities in an
Initial Public Offering or Limited Offering under paragraph
IV.B.1.e., shall be preserved with the Companies' records for the
period and in the manner required by Rule 17j-1.
VI. Certification.
Each Access Person will be required to certify annually that he or she has
read and understood this Code of Ethics, and will abide by it. Each Access
Person will further certify that
-9-
<PAGE>
he or she has disclosed or reported all personal securities transactions
required to be disclosed or reported under this Code of Ethics. A form of such
certification is attached hereto as Exhibit D.
Northern Funds Board of Trustees
Adopted: August 2, 2000 Northern Institutional Funds Board of Trustees
-10-
<PAGE>
Exhibit A
NORTHERN FUNDS
NORTHERN INSTITUTIONAL FUNDS
Initial Holdings Report
To: Compliance Department of The Northern Trust Company
On [date] I became an "Access Person" of Northern Funds and Northern
Institutional Funds. As of that date, I had a direct or indirect beneficial
ownership interest* in the securities listed below which are required to be
reported pursuant to Rule 17j-1 under the Investment Company Act of 1940:
Title of Number Principal
Security of Shares Amount
-------- --------- ---------
As of [date] I maintained accounts with the brokers, dealers and banks
listed below in which securities were held for my direct or indirect benefit:
Name of Broker, Dealer or Bank
------------------------------
This report (i) excludes securities and accounts over which I had no direct
or indirect influence or control; (ii) excludes securities not required to be
reported (that is, direct obligations of the U.S. Government, shares issued by
mutual funds and unit investment trusts, bankers' acceptances, bank certificates
of deposit, commercial paper and high quality short-term debt instruments); and
(iii) is not an admission that I have or had any direct or indirect beneficial
ownership in the securities or accounts listed above.
Date: ______________________ Signature: _________________________
Print Name: ________________________
______________________________
* You will be treated as the "beneficial owner" of a security only if you
have a direct or indirect pecuniary interest in the security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the security.
(b) An indirect pecuniary interest is any nondirect financial interest,
but is specifically defined to include securities held by members of
your immediate family sharing the same household; securities held by a
partnership of which you are a general partner; securities held by a
trust of which you are the settlor if you can revoke the trust without
the consent of another person, or a beneficiary if you have or share
investment control with the trustee; and equity securities which may
be acquired upon exercise of an option or other right, or through
conversion.
For interpretive guidance, you should consult counsel.
11
<PAGE>
Exhibit B
NORTHERN FUNDS
NORTHERN INSTITUTIONAL FUNDS
Annual Holdings Report
To: Compliance Department of The Northern Trust Company
As of [date], I had a direct or indirect beneficial ownership interest* in
the securities listed below which are required to be reported pursuant to Rule
17j-1 under the Investment Company Act of 1940:
Title of Number Principal
Security of Shares Amount
-------- --------- ---------
As of [date] I maintained accounts with the brokers, dealers and banks
listed below in which securities were held for my direct or indirect benefit:
Name of Broker, Dealer or Bank
------------------------------
This report (i) excludes securities and accounts over which I had no direct
or indirect influence or control; (ii) excludes securities not required to be
reported (that is, direct obligations of the U.S. Government, shares issued by
mutual funds and unit investment trusts, bankers' acceptances, bank certificates
of deposit, commercial paper and high quality short-term debt instruments); and
(iii) is not an admission that I have or had any direct or indirect beneficial
ownership in the securities or accounts listed above.
Date: ______________________ Signature: _________________________
Print Name: ________________________
______________________________
* You will be treated as the "beneficial owner" of a security only if you
have a direct or indirect pecuniary interest in the security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the security.
(b) An indirect pecuniary interest is any nondirect financial interest,
but is specifically defined to include securities held by members of
your immediate family sharing the same household; securities held by a
partnership of which you are a general partner; securities held by a
trust of which you are the settlor if you can revoke the trust without
the consent of another person, or a beneficiary if you have or share
investment control with the trustee; and equity securities which may
be acquired upon exercise of an option or other right, or through
conversion.
For interpretive guidance, you should consult counsel.
12
<PAGE>
Exhibit C
NORTHERN FUNDS
NORTHERN INSTITUTIONAL FUNDS
(the "Companies")
Quarterly Transaction Report
For the Calendar Quarter Ended _______________________
(month/day/year)
To: Compliance Department of The Northern Trust Company
A. Securities Transactions. During the quarter referred to above, the
-----------------------
following transactions were effected in securities of which I had, or by reason
of such transactions acquired, direct or indirect beneficial ownership, and
which are required to be reported pursuant to the Code of Ethics of the
Companies:
<TABLE>
<CAPTION>
Number of Nature of Broker/Dealer
Interest Rate Shares or Dollar Transaction Or Bank
Title of and Maturity Date Date of Principal Amount of (Purchase, Through Whom
Security (If Applicable) Transaction Amount Transaction Sale, Other) Price Effected
-------- ------------------ ----------- --------- ----------- ------------ ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
___________________
* Transactions that are asterisked indicate transactions in a security where I
knew at the time of the transaction or, in the ordinary course of fulfilling my
official duties as a trustee or officer, should have known that during the 15-
day period immediately preceding or after the date of the transaction, such
security was purchased or sold, or such security was being considered for
purchase or sale, by the Companies.
B. New Brokerage Accounts. During the quarter referred to above, I
----------------------
established the following accounts in which securities were held during the
quarter for my direct or indirect benefit:
Name of Broker, Dealer or Bank Date Account Was Established
------------------------------ ----------------------------
C. Other Matters. This report (i) excludes transactions with respect to
-------------
which I had no direct or indirect influence or control, (ii) excludes other
transactions not required to be reported, and (iii) is not an admission that I
have or had any direct or indirect beneficial ownership in the securities listed
above.
Date: ____________________ Signature:______________________
Print Name:_____________________
13
<PAGE>
Exhibit D
NORTHERN FUNDS
NORTHERN INSTITUTIONAL FUNDS
(the "Companies")
ANNUAL CERTIFICATE
Pursuant to the requirements of the Code of Ethics of the Companies,
the undersigned hereby certifies as follows:
1. I have read the Companies' Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I am subject
to it.
3. Since the date of the last Annual Certificate (if any) given
pursuant to the Code of Ethics, I have reported all personal
securities transactions and provided any securities holdings
reports required to be reported under the requirements of the
Code of Ethics.
Date: __________________________________
Print Name
__________________________________
Signature
14
