NORTHERN INSTITUTIONAL FUNDS
485APOS, 2001-01-17
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<PAGE>

        As filed with the Securities and Exchange Commission on January 17, 2001
                                 Securities Act of 1933 Registration No. 2-80543
                        Investment Company Act of 1940 Registration No. 811-3605

                  ------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM N-1A

        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933    [X]

          Pre-Effective Amendment No. ____   [ ]
          Post-Effective Amendment No. 46    [X]

                                              and/or

        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

          Amendment No. 47                   [X]
                       (Check appropriate box or boxes)

                  ------------------------------------------

                         NORTHERN INSTITUTIONAL FUNDS
              (Exact name of registrant as specified in charter)

                            50 South LaSalle Street
                            Chicago, Illinois 60675
                   (Address of principal executive offices)

             (Registrant's Telephone Number, including Area Code)
                                 800-637-1380

                  ------------------------------------------

W. Bruce McConnel                   with a copy to:
Drinker Biddle & Reath LLP          Linda Hoard, Secretary
One Logan Square                    PFPC Inc.
18/th/ and Cherry Streets           101 Federal Street, 6/th/ Floor
Philadelphia, Pennsylvania          Boston, Massachusetts 02110
19103-6996

(name and address of agent for service)

Approximate Date of Proposed Public Offering:  As soon as practicable after this
Registration Statement becomes effective.

It Is Proposed That This Filing Become Effective (Check Appropriate Box):
     [ ] immediately upon filing pursuant to paragraph (b)
     [ ] on _______ __, 2001 pursuant to paragraph (b)
     [X] 60 days after filing pursuant to paragraph (a)(1)
     [ ] On (date)pursuant to paragraph (a)(1)
     [ ] 75 days after filing pursuant to paragraph (a)(2)
     [ ] On [date] pursuant to paragraph (a)(2)

If appropriate, check the following box:
     [ ] This post-effective amendment designates a new effective date for a
          previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE>

                             Subject to Completion
                Preliminary Prospectus, Dated November 29, 2000


Information contained herein pertaining to the Northern Institutional Funds Core
Bond Portfolio is subject to completion or amendment.  A post-effective
amendment to the Northern Institutional Funds registration statement relating to
shares of the Core Bond Portfolio has been filed with the Securities and
Exchange Commission.  Shares of the Core Bond Portfolio may not be sold nor may
offers to buy shares of such Portfolio be accepted prior to the time the post-
effective amendment to the registration statement becomes effective.  This
prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of shares of the Core Bond Portfolio in any
State in which such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the securities laws of any such State.


Northern Institutional Funds
Core Bond Portfolio


Prospectus dated February __, 2001

An investment in the 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 the 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.

                                     Page 1
<PAGE>

Table of Contents

<TABLE>
<CAPTION>
                                                                                     Page
-----------------------------------------------------------------------------------------
<S>                                                                                  <C>
Overview                                                                               1

-----------------------------------------------------------------------------------------
Risk/Return Summary                           Core Bond Portfolio                      4
Information about the objective, principal
strategies and risk characteristics of the
Portfolio.
                                             --------------------------------------------
                                              Portfolio Performance                    6
                                             --------------------------------------------
                                              Portfolio Fees and Expenses              6

-----------------------------------------------------------------------------------------
Management of the Portfolio                   Investment Adviser                       8
Details that apply to the Portfolio.          Advisory Fees                            8
                                              Portfolio Management                     9
                                              Other Portfolio Services                 9

-----------------------------------------------------------------------------------------
</TABLE>

                                     Page 2
<PAGE>

<TABLE>
<S>                                          <C>                                     <C>
-----------------------------------------------------------------------------------------
About Your Account                            Purchasing and Selling Shares            9
How to open, maintain and close an account    .  Purchasing Shares                     9
                                              .  Opening an Account                   10
                                              .  Selling Shares                       11
                                             --------------------------------------------
                                              Account Policies and Other Information  11
                                              .  Purchase and Redemption Minimums     11
                                              .  Calculating Share Price              11
                                              .  Timing of Purchase Requests          12
                                              .  Additional Transaction Fee           12
                                              .  Tax Identification Number            12
                                              .  In-Kind Purchases and Redemptions    12
                                              .  Miscellaneous Purchase Information   12
                                              .  Timing of Redemption and Exchange
                                                 Requests                             13
                                              .  Miscellaneous Redemption Information 13
                                              .  Exchange Privileges                  13
                                              .  Telephone Transactions               14
                                              .  Making Changes to Your Account
                                                 Information                          14
                                              .  Business Day                         14
                                              .  Early Closings                       14
                                              .  Authorized Intermediaries            14
                                              .  Servicing Agents                     14
                                              .  Shareholder Communications           15

                                             --------------------------------------------
                                              Dividends and Distributions             15

                                             --------------------------------------------
                                              Tax Considerations                      16

-----------------------------------------------------------------------------------------
Risks, Securities and Techniques              Risks, Securities and Techniques        17
                                              .  Additional Information on Investment
                                                 Objectives, Principal Investment
                                                 Strategies and Related Risks         17
                                              .  Additional Description of Securities
                                                 and Common Investment Techniques     19

-----------------------------------------------------------------------------------------
For More Information                          Annual/Semiannual Report                26
                                              Statement of Additional Information     26

-----------------------------------------------------------------------------------------
</TABLE>

                                     Page 3
<PAGE>

Northern Institutional Core Bond Portfolio

Investment Objective

The Portfolio seeks to maximize total return consistent with reasonable risk.

Principal Investment Strategies

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:

 .    Obligations of the U.S. government, its agencies or instrumentalities and
     repurchase agreements collateralized by such obligations
 .    Obligations of state, local and foreign governments
 .    Obligations of domestic and foreign banks and corporations
 .    Zero coupon bonds, debentures, preferred stock and convertible securities
 .    Mortgage and other asset-backed securities
 .    Stripped securities evidencing ownership of future interest or principal
     payments on debt obligations

The Portfolio invests primarily in the investment grade debt obligations (i.e.
obligations rated within the top four rating categories by a Nationally
Recognized Statistical Rating Organization or determined by the Investment
Adviser to be of comparable quality) of domestic issuers. The Portfolio
may also invest to a lesser extent in U.S. dollar-denominated investment grade
obligations of foreign issuers.

In buying and selling securities for the Portfolio, the investment management
team uses a relative value approach. This approach involves an analysis of
general and economic conditions. It also involves the use of models that analyze
and compare expected returns and assumed risks. Under the relative value
approach, the investment management team will emphasize particular securities
and types of securities (such as treasury, agency, mortgage-related and
corporate securities) that the team believes will provide a favorable total
return in light of these risks. In this regard, the management team will
consider not only the income the Portfolio will receive from its investments,
but also the likelihood that particular securities or types of securities will
have a more favorable or improving credit outlook.

The Portfolio's dollar-weighted average maturity will, under normal market
conditions, range between five and fifteen years.

In seeking to achieve its investment objective, the Portfolio may make
significant investments in structured debt securities.  Structured debt
securities, which may be speculative in nature, are considered to be derivative
instruments because the value of the principal and/or interest on these
securities is based on changes in the specific value of the specific currencies,
interest rates, indices or other financial indicators.  For these reasons
structured debt securities present additional risk that the interest paid to the
Portfolio on a structured debt security will be less than expected, and that the
principal amount invested will not be returned to the Portfolio.  As a result,
investments in structured debt securities may adversely affect the Portfolio's
net asset value. The Portfolio may also invest, to a lesser extent, in futures
contracts, options, swaps and interest rate floors, caps and collars for both
hedging and non-hedging purposes.

                                     Page 4
<PAGE>

Principal Investment Risks

All of the Portfolio's investments carry some degree of risk which will affect
the value of the Portfolio's investments, its investment performance and the
price of its shares. As a result, loss of money is a risk of investing in the
Portfolio.

An investment in the 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 Portfolio and may
result in a loss of your investment.

 .    Market risk is the risk that the value of the securities in which the
     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.

 .    Liquidity risk is the risk that the Portfolio will not be able to pay
     redemption proceeds within the time periods described in this Prospectus
     because of unusual market conditions, an unusually high volume of
     redemption requests or other reasons.

 .    Interest rate/maturity risk is the risk that increases in prevailing
     interest rates will cause fixed income securities held by the 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 the 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 the Portfolio (such as a
     mortgage-backed security) earlier than expected. This may happen during a
     period of declining interest rates. Under these circumstances, the
     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.

 .    Debt extension risk is the risk that an issuer will exercise its right to
     pay principal on an obligation held by the 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.

 .    Counterparty failure 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.

 .    Guarantor (or credit enhancement) risk is the risk that changes in credit
     quality of a U.S. or foreign bank, insurance company or other financial
     institution could cause the Portfolio's investments in securities backed by
     guarantees, letters of credit, insurance or other credit enhancements
     issued by such bank or institution to decline in value.

                                     Page 5
<PAGE>

 .    Derivatives risk is the risk that loss may result from the Portfolio's
     investments in options, futures, swaps, structured debt securities and
     other derivative instruments, which may be leveraged. Investments in
     derivative instruments may result in losses exceeding the amounts invested.

 .    Structured debt securities risk is the risk that loss may result from the
     Portfolio's investments in structured debt securities, which are derivative
     instruments and may be leveraged. The value of structured debt securities
     may be adversely affected by changes in the interest rate payable on a
     security while held by the Portfolio. In some cases it is possible that the
     Portfolio may suffer a total loss on its investment in a structured debt
     security.

 .    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.

More information about the Portfolio's investment strategies and techniques is
provided in "Risks, Securities and Techniques" beginning on page 17.

Portfolio Performance
---------------------

The bar chart and performance table have been omitted because the Portfolio has
been in operation for less than one calendar year.

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 Portfolio. Each class of shares represents pro
rata interests in the 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 ("Northern Trust"), its affiliates, correspondent
banks and other institutions on their customers. (For more information, please
see "Account Policies and Other Information" on page 11.)

                                     Page 6
<PAGE>

<TABLE>
<CAPTION>
                                                                 Shareholder Fees (fees paid directly from your investment)

                                                   Sales       Additional     Deferred    Sales Charge    Redemption   Exchange
                                                   Charge     Transaction      Sales         (Load)          Fees        Fees
Portfolio                                          (Load)      Fee (as a       Charge      Imposed on
                                                 Imposed on    percentage      (Load)      Reinvested
                                                 Purchases     of amount                  Distributions
                                                               invested)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>           <C>           <C>            <C>           <C>
Core 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

<CAPTION>
                                     Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio
                                     assets)
                        Management   Distribution    Other    Servicing     Transfer        Other      Total Annual
                          Fees/1/    (12b-1) Fees  Expenses      Fees     Agency Fees     Operating      Portfolio
Portfolio                                                                                Expenses/2/     Operating
                                                                                                        Expenses/3/


-----------------------------------------------------------------------------------------------------------------------
<S>                     <C>          <C>           <C>        <C>         <C>           <C>            <C>
Core Bond
  Class A                     0.60%      None          0.17%    None             0.01%          0.16%          0.77%
  Class C                     0.60%      None          0.41%    0.15%            0.10%          0.16%          1.01%
  Class D                     0.60%      None          0.56%    0.25%            0.15%          0.16%          1.16%

</TABLE>


FOOTNOTES

1    As of the date of this Prospectus, Northern Trust Investments, Inc. ("NTI")
     intends to waive voluntarily a portion of its management fee for the
     Portfolio so that the actual management fees paid by the Portfolio will be
     0.25% for the current fiscal year. Fee waivers may be terminated at any
     time at the option of NTI.

2    "Other Operating Expenses" include administration or co-administration fees
     and all other ordinary operating expenses of the Portfolio not listed
     above. NTI and PFPC Inc., formerly First Data Investor Services Group, Inc.
     ("PFPC"), serve as the Portfolio's co-administrators, and are entitled to a
     co-administration fee from the Portfolio at an annual rate of 0.10% of the
     average daily net assets of the Portfolio. Under the Co-Administration
     Agreement with the Trust, which may be amended without shareholder
     approval, the co-administrators have agreed to reimburse expenses
     (including fees payable to NTI and PFPC as co-administrators, but excluding
     management fees, transfer agency fees, servicing fees and extraordinary
     expenses) which exceed on an annualized basis 0.10% of the Portfolio's
     average daily net assets. The Portfolio did not conduct investment
     operations during the fiscal year ended November 30, 1999. As a result,
     "Other Operating Expenses" for the Portfolio is based on estimated amounts
     the Portfolio expects to pay during the current fiscal year.

3    Set forth below are the management fees, distribution (12b-1) fees, other
     expenses and total annual operating expenses which would have been paid
     during the fiscal year ended November 30, 1999 as a result of fee waivers
     and expense reimbursements.


<TABLE>
<CAPTION>
Portfolio                                          Management   Distribution     Other       Total Annual
                                                      Fees      (12b-1) Fees   Expenses   Operating Expenses
------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>            <C>        <C>
Core Bond
     Class A                                          0.25%         0.00%        0.11%           0.36%
     Class C                                          0.25%         0.00%        0.35%           0.60%
     Class D                                          0.25%         0.00%        0.50%           0.75%
</TABLE>

                                     Page 7
<PAGE>

Fee waivers (and voluntary expense reimbursements, if applicable) may be
terminated at any time at the option of the Investment Adviser.  If this occurs,
the Portfolio's total annual operating expenses may increase without shareholder
approval.

Example

The following Example is intended to help you compare the cost of investing in
the 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 the 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 the 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
          ----------------------------------------------------------
          Core Bond
           Class A                     $  79                $  246
           Class C                     $ 103                $  322
           Class D                     $ 118                $  368


Investment Adviser
------------------

Northern Trust Investments, Inc. ("NTI"), an Illinois state-chartered trust
company, serves as investment adviser for the Portfolio.  NTI, also referred to
as the Investment Adviser, is located at 50 S. LaSalle Street, Chicago, IL
60675.

NTI is a wholly-owned subsidiary of Northern Trust, an Illinois state-chartered
bank and member of the Federal Reserve System.  Northern Trust is a wholly-owned
subsidiary of Northern Trust Corporation, a bank holding company. As of June 30,
2000, Northern Trust Corporation and its subsidiaries had approximately $36.8
billion in assets, $22.3 billion in deposits and employed over 9,140 persons.

Northern Trust has for more than 100 years managed the assets of individuals,
charitable organizations, foundations and large corporate investors. Northern
Trust and its affiliates administered in various capacities (including as master
trustee, investment manager or custodian) approximately $1.6 trillion of assets
as of June 30, 2000, including approximately $333 billion of assets for which
Northern Trust 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 Portfolio and for placing purchase and sale
orders for portfolio securities.

Advisory Fees
-------------

As compensation for its advisory services and its assumption of related
expenses, the 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 the Portfolio's respective average daily net assets).

                                     Page 8
<PAGE>

Portfolio                               Contractual
                                           Rate
-----------------------------------------------------
Core Bond                                  0.60%

As stated under "Portfolio Fees and Expenses," the Investment Adviser expects to
voluntarily waive a portion of its advisory fee during the current fiscal year.
The Investment Adviser may discontinue or modify its voluntary limitation in the
future at its discretion.

Portfolio Management
--------------------

The Investment Adviser employs a team approach to the investment management of
the Portfolio. Below is information regarding the management of the Portfolio.

Mark J. Wirth, Senior Vice President of Northern Trust, and Steven M. Schafer,
Vice President of Northern Trust, are the management team leaders for the Core
Bond Portfolio.  Mr. Wirth joined Northern Trust in 1986 and during the past
five years has managed various fixed income portfolios.  Mr. Schafer joined
Northern Trust in 1988 and during the past five years has managed various fixed
income portfolios and has served as a credit analyst following industrial and
utility companies.


Other Portfolio Services
------------------------

Northern Trust serves as transfer agent ("Transfer Agent") and custodian for the
Portfolio. As Transfer Agent, Northern Trust performs various administrative
servicing functions, and any shareholder inquiries should be directed to it. The
fees that Northern Trust receives for its services in these capacities are
described in the Statement of Additional Information. NTI and PFPC Inc. serve as
co-administrators for the Portfolio. The fees that NTI and PFPC receive for
their co-administrative services are described on page 6 under "Portfolio Fees
and Expenses."

                         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 Portfolio through their institutional accounts at
Northern Trust 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:

     .    Northern Trust 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.

The Portfolio currently offers 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.

                                     Page 9
<PAGE>

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 6). In addition, any
person entitled to receive compensation for selling or servicing shares of the
Portfolio may receive different compensation with respect to one particular
class of shares over another in the same Portfolio.

Opening an Account

You may purchase shares of the Portfolio through your institutional account at
Northern Trust (or an affiliate) or you may open an account directly with the
Trust with a minimum initial investment of $5 million in the Portfolio or in one
or more other Northern Institutional Portfolios. There is no minimum for
subsequent investments.

Through an Institutional Account. If you are opening an institutional account at
Northern Trust, a Northern Trust representative can assist you with all phases
of your investment. To purchase shares through your account, contact your
Northern Trust representative for further information.

Directly from the Trust.  An Institution may open a shareholder account and
purchase shares directly from the Trust as described in this Prospectus.

     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 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.

     By Telephone
     Read this prospectus carefully.
     Call the Transfer Agent at (800) 637-1380.

     To open a new account please provide:
          .    The name of the Portfolio in which you would like to invest
          .    The number of 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 (800) 637-1380 for instructions.

                                    Page 10
<PAGE>

   For more information about the purchase of shares, call the Transfer Agent
   at (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 Trust 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:
     .    The signature of a duly authorized person
     .    Your account number
     .    The name of the Portfolio
     .    The number of shares or the dollar amount to be redeemed

By Telephone
     Call the Transfer Agent at (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 Shares - By
     Mail."

By Wire
     Call the Transfer Agent at (800) 637-1380 for instructions.
     You must have given prior authorization for expedited wire redemption.
     The minimum amount that may be redeemed by this method is $10,000.

Account Policies and Other Information
--------------------------------------

Purchase and Redemption Minimums. 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 the 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

                                    Page 11
<PAGE>

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 the Portfolio generally are valued at their
market prices. Shares of an investment company held by the 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 Adviser. Short-term obligations held by the
Portfolio are valued at their amortized cost which, according to the Investment
Adviser, approximates market value.

The 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:

     .    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;

     .    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

     .    Payment in Federal or other immediately available funds is received on
          the next Business Day in an institutional account maintained with
          Northern Trust 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 14.

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 the Portfolio. The Trust also reserves the right to pay redemptions by a
distribution "in-kind" of securities (instead of cash) from the 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.

                                    Page 12
<PAGE>

 . Institutions are responsible for all losses and expenses of the Portfolio in
  the event of any failure to make payment according to the procedures outlined
  in this Prospectus. Northern Trust may redeem shares from any account it
  maintains to protect the Portfolio and Northern Trust against loss. In
  addition, a $20 charge will be imposed if a check does not clear.

 . 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 14.

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 the Portfolio.

 . 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.

 . Institutions are responsible for transmitting redemption orders to the
  Transfer Agent and crediting their Customers' accounts with redemption
  proceeds on a timely basis.

 . Redemption requests by mail must be signed by a person authorized by
  acceptable documentation on file with the Transfer Agent.

 . 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.

 . The Trust may require any information reasonably necessary to ensure that a
  redemption 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 shares of the Portfolio for the same
class of shares of another Portfolio. The

                                    Page 13
<PAGE>

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 2001 these days are: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Early Closings.  The Portfolio reserves the right to cease, or to advance the
time for, accepting purchase, redemption or exchange orders for same Business
Day credit when Northern Trust or the Exchange closes early as a result of
unusual weather or other conditions. The Portfolio also reserves 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. The 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
("Service 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.

                                    Page 14
<PAGE>

Administrative support services may include:

     .    processing purchase and redemption requests from investors;

     .    placing net purchase and redemption orders with the Transfer Agent;

     .    providing necessary personnel and facilities to establish and maintain
          investor accounts and records; and

     .    providing information periodically to investors showing their
          positions in Portfolio shares.

Servicing Agents will receive fees from the Portfolio 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
Trust and NTI 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 the 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
NTI as Investment Adviser (after adjustments). This additional compensation will
be paid by Northern Trust, NTI 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 the 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 the 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 Portfolio on behalf of
their Customers may be required to register as dealers.

Shareholder Communications. Shareholders of record will be provided each year
with a semiannual report showing portfolio investments and other information as
of May 31 and, after the close of the Portfolio's fiscal year on November 30,
with an annual report containing audited financial statements. If you have
consented to the delivery of a single copy of the shareholder reports,
prospectuses or (if and when permitted by law) proxy or information statements
to all shareholders who share the same mailing address with your account, you
may revoke your consent at any time by contacting the Northern Institutional
Funds Center by phone at (800) 637-1380 or by mail at the Northern Institutional
Funds, P.O. Box 75943, Chicago, IL 60675.

Dividends and Distributions
---------------------------

Dividends and capital gain distributions of the Portfolio are automatically
reinvested in additional shares of the Portfolio without any sales charge or
additional purchase price amount.

                                    Page 15
<PAGE>

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 the
Portfolio:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                           Dividends, if any,     Capital Gains, if any,
                        Portfolio                          Declared and Paid        Declared and Paid
----------------------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>
Core Bond                                                       Monthly                 Annually
----------------------------------------------------------------------------------------------------------
</TABLE>

The Portfolio may, in some years, make additional dividends or distributions to
the extent necessary for the Portfolio to avoid incurring unnecessary tax
liabilities.

Tax Considerations
------------------

The 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 Portfolio's 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 Portfolio are taxable to
you as ordinary income. Distributions attributable to any excess of net long-
term capital gains of the Portfolio over net short-term capital losses are
generally taxable to you as long-term capital gains. This is true no matter how
long you own your shares.

There are certain tax requirements that the Portfolio must follow in order to
avoid Federal taxation. In their efforts to adhere to these requirements, the
Portfolio may have to limit its investment activity in some types of
instruments.

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 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 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 the Portfolio will generally be taxable to you
in the tax year in which they are paid, with one exception. Dividends and
distributions declared by the 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.

Tax effect of "buying a dividend." The 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

                                    Page 16
<PAGE>

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.

Shareholders who are nonresident aliens, foreign trusts or estates, or foreign
corporations or partnerships, may be subject to different United States Federal
income tax treatment. Your investment in the Portfolio could have additional tax
consequences. You should consult your tax professional for information regarding
all tax consequences applicable to your investments in the Portfolio. More tax
information is provided in the Statement of Additional Information. This short
summary is not intended as a substitute for careful tax planning.

                       RISKS, SECURITIES AND TECHNIQUES

This section takes a closer look at some of the Portfolio's principal investment
strategies and related risks. It also explores the various investment securities
and techniques that the investment management team may use. The Portfolio may
invest in other securities and is subject to further restrictions and risks
which are described in the Statement of Additional Information. Additionally,
the Portfolio may purchase other types of securities or instruments similar to
these described in this section if otherwise consistent with its investment
objective and policies.

ADDITIONAL INFORMATION ON INVESTMENT OBJECTIVE,
PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

Investment Objective.  The investment objective of the Portfolio may be changed
--------------------
by the Trust's Board of Trustees without shareholder approval. Shareholders
will, however, be notified of any changes. Any such change may result in the
Portfolio having an investment objective different from the objective which the
shareholder considered appropriate at the time of investment in the Portfolio.

Derivatives. The 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 rates, or indices. Many
types of instruments representing a wide range of potential risks and rewards
are derivatives, including futures contracts, options, interest rate swaps 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.  The 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 Portfolio may use derivatives for
     hedging purposes to offset a potential loss in one position by establishing
     an interest in an opposite position. The Portfolio 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 the 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, the
     Portfolio may suffer a loss whether or not the analysis of the investment
     management team is accurate.

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

                                    Page 17
<PAGE>

the principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference.

   Investment strategy. The 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, the
   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.

Investment Grade Securities.  A security is considered investment grade if, at
the time of purchase, it is rated in the following categories (including
sub-categories or gradations of such categories indicating relative standing):

     .    BBB or higher by Standard and Poor's Ratings Services ("S&P");
     .    Baa or higher by Moody's Investors Service, Inc. ("Moody's"); or
     .    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.  The Portfolio may invest in fixed income and
     convertible securities to the extent consistent with its investment
     objective and policies. These securities will generally be rated investment
     grade at the time of purchase. The Portfolio 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, 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 the
     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.

Temporary Investments.  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 the Portfolio.

     Investment strategy.  The 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.

     Special risks.  The Portfolio may not achieve its investment objective when
     its assets are invested in short-term obligations.

Maturity Risk.  The 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

                                    Page 18
<PAGE>

of asset-backed securities will be based on estimates of average life. As a
result, the Portfolio cannot guarantee that these estimates will, in fact, be
accurate or that their average maturities will remain within their specified
limits.

ADDITIONAL DESCRIPTION OF SECURITIES AND 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 Portfolio may purchase various types of asset-
     backed securities. The Portfolio will normally invest in asset-backed
     securities rated investment grade (rated BBB or better by S&P or Fitch, or
     Baa or better by Moody's) at the time of purchase. The Portfolio may also
     invest in unrated mortgage-backed securities which the Investment Adviser
     believes are of comparable quality. The Portfolio will not purchase non-
     mortgage asset-backed securities that are unrated by S&P, 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 Portfolio may 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 the Portfolio subject to the Portfolio's agreement to
repurchase them at a mutually agreed upon date and price (including interest).

     Investment strategy.  The Portfolio may borrow and enter into reverse
     repurchase agreements in amounts not exceeding one-third of its total
     assets (including the amount borrowed). The Portfolio may also borrow up to
     an additional 5% of its total assets for temporary purposes. The Portfolio
     may enter into reverse repurchase agreements 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 Portfolio declines 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 the
     Portfolio (from the investment of the proceeds) will be less

                                    Page 19
<PAGE>

     than the interest expense of the transaction, that the market value of the
     securities sold by the 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
Portfolio 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 Portfolio may acquire convertible securities.
     These securities are subject to the same rating requirements as fixed
     income securities held by 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.  To the extent consistent with their respective
     investment objectives, the Portfolio may invest a portion of its 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.

Downgraded Securities.  After its purchase, a portfolio security may be assigned
a lower rating or cease to be rated.  If this occurs, the 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 Portfolio may invest in U.S. dollar-denominated
commercial paper and other obligations of foreign issuers, including foreign
governments, or any of their political subdivisions, agencies or
instrumentalities, foreign commercial banks, foreign branches of U.S. banks and
foreign corporations.  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.  The Portfolio may purchase the U.S. dollar-
     denominated obligations of foreign issuers.

     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

                                    Page 20
<PAGE>

     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.

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 the
Portfolio, at maturity, to take or make delivery of certain domestic or foreign
securities or the cash value of a securities index. When the 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 the 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.  The Portfolio may invest in futures contracts and
     options on futures contracts on domestic 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 the Portfolio's futures contracts may equal up to 100% of its
     total assets. However, the 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 the 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.

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.  The Portfolio may invest up to 15% of its net assets
     in securities that are illiquid. If otherwise consistent with its
     investment objectives and policies, the Portfolio may purchase commercial
     paper issued pursuant to Section 4(2) of the 1933 Act and 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 Adviser 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 the Portfolio. The practice of investing in
     Rule 144A Securities could increase the level of a Portfolio's illiquidity

                                    Page 21
<PAGE>

     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 the 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 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.

Interest Rate Swaps, Total Rate of Return Swaps, Credit Swaps and Interest Rate
Floors, Caps and Collars.  Interest rate swaps are contracts that obligate the
Portfolio and another party to exchange their rights to pay or receive interest.
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.  An interest rate collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates.  Total rate of return swaps are contracts that obligate a party
to pay or receive interest in exchange for the payment by the other party of the
total return generated by a security, a basket of securities, an index or an
index component.  Credit swaps are contracts involving the receipt of floating
or fixed rate payments in exchange for assuming potential credit losses of an
underlying security.  Credit swaps give one party to a transaction the right to
dispose of or acquire an asset (or group of assets), or the right to receive or
make a payment from the other party, upon the occurrence of specific credit
events.

     Investment strategy.  The Portfolio may enter into swap transactions and
     transactions involving interest rate floors, caps and collars for hedging
     purposes or to seek to increase total return.

     Special risks.  The use of swaps and interest rate floors, caps and collars
     is a highly specialized activity which involves investment techniques and
     risks different from those associated with ordinary portfolio securities
     transactions.  Like other derivative securities, the instruments can be
     highly volatile.  If the Investment Adviser is incorrect in its forecasts
     of market values, interest rates and currency exchange rates, the
     investment performance of the Portfolio would be less favorable than it
     would have been if these instruments were not used.  Because these
     instruments are normally illiquid, the Portfolio may not be able to
     terminate its obligations when desired.  In addition, if the Portfolio is
     obligated to pay the return under the terms of a total rate of return swap,
     Portfolio losses due to unanticipated market movements are potentially
     unlimited.  The Portfolio may also suffer a loss if the other party to a
     transaction defaults.

Investment Companies.  To the extent consistent with its investment objective
and policies, the Portfolio may invest in securities issued by other investment
companies, including money market funds, index funds and similar securities of
other issuers.

     Investment strategy.  Investments by the Portfolio in other investment
     companies will be subject to the limitations of the 1940 Act. Although the
     Portfolio does not expect to do so in the foreseeable future, the 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, the
     Portfolio would be subject to the same risks as any other investor in that
     company. In addition, it would bear a proportionate

                                    Page 22
<PAGE>

     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.

Mortgage Dollar Rolls.  A mortgage dollar roll involves the sale by the
Portfolio of securities for delivery in the future (generally within 30 days).
The Portfolio simultaneously contracts with the same counterparty to repurchase
substantially similar (same type, coupon and maturity) but not identical
securities on a specified future date. During the roll period, the Portfolio
loses the right to receive principal and interest paid on the securities sold.
However, the Portfolio benefits to the extent of any difference between (a) the
price received for the securities sold and (b) the lower forward price for the
future purchase and/or fee income plus the interest earned on the cash proceeds
of the securities sold.

     Investment strategy. The Portfolio may enter into mortgage dollar rolls in
     an effort to enhance investment performance. For financial reporting and
     tax purposes, the Portfolio treats mortgage dollar rolls as two separate
     transactions: one involving the purchase of a security and a separate
     transaction involving a sale. The Portfolio does not currently intend to
     enter into mortgage dollar rolls that are accounted for as a financing and
     does not treat them as borrowings.

     Special risks. Successful use of mortgage dollar rolls depends upon the
     Investment Adviser's ability to predict correctly interest rates and
     mortgage prepayments. If the Investment Adviser is incorrect in its
     prediction, the Portfolio may experience a loss. Unless the benefits of a
     mortgage dollar roll exceed the income, capital appreciation and gain or
     loss due to mortgage prepayments that would have been realized on the
     securities sold as part of the roll, the use of this technique will
     diminish the Portfolio's performance.

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.   The 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, securities indices or financial
     instruments. The 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 the 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. The Portfolio may "cover" a call option by owning the security
     underlying the option or through other means. Put options written by the
     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 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.

     The Portfolio will invest and trade in unlisted over-the-counter options
     only with firms deemed creditworthy by the Investment Adviser. 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.

Portfolio Turnover.  The investment management team will not consider the
portfolio turnover rate a limiting factor in making investment decisions for the
Portfolio. A high rate of portfolio turnover (100% or

                                    Page 23
<PAGE>

more) may involve higher brokerage commissions and other transaction costs,
which could reduce the Portfolio's return. It may also result in higher short-
term capital gains that are taxable to shareholders. The Trust expects that the
annual turnover rate of the Portfolio will generally not exceed 100%.

Preferred Stock. Preferred stocks are securities that represent an ownership
interest providing the holder with claims on the issuer's earnings and assets
before common stock owners but after bond owners.

     Investment strategy. To the extent consistent with its investment objective
     and policies, the Portfolio may invest in preferred stocks.

     Special risks. Unlike most debt securities, the obligations of an issuer of
     preferred stock, including dividend and other payment obligations, may not
     typically be accelerated by the holders of such preferred stock on the
     occurrence of an event of default or other non-compliance by the issuer of
     the preferred stock.

Repurchase Agreements.  Repurchase agreements involve the purchase of securities
by the Portfolio subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price.

     Investment strategy.  The 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 the Portfolio acquires the securities.

     Special risks.  In the event of a default, the 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, the 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 Portfolio may
lend securities on a short-term basis to banks, brokers-dealers, or other
qualified institutions. In exchange, the Portfolio 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 the Portfolio's total assets (including the loan
     collateral). Any cash collateral received by the 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, the Portfolio could experience delays in
     recovering its securities and may incur a capital loss. In addition, the
     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 issuers. 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 Portfolio 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

                                    Page 24
<PAGE>

     depress the price of certain stripped mortgage-backed securities and
     adversely affect the 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, the Portfolio may invest in a variety of U.S. Treasury
     obligations.  The 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, 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 a specified date 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. Some variable and floating rate
instruments have interest rates that are periodically adjusted as a result of
changes in inflation rates.

     Investment strategy.  The 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 the Portfolio
     if they are determined by the Investment Adviser to be of comparable
     quality to rated instruments eligible for purchase by the Portfolio.

     Special risks.  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 Portfolio 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

                                    Page 25
<PAGE>

contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period.

     Investment strategy.  The Portfolio may purchase or sell securities on a
     when-issued, delayed-delivery or forward commitment basis. Although the
     Portfolio would generally purchase securities in these transactions with
     the intention of acquiring the securities, the Portfolio 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.  The 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. The 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.


For More Information

ANNUAL/SEMIANNUAL REPORT

Additional information about the Portfolio's investments will be available in
the Portfolio's annual and semi-annual reports to shareholders when they are
prepared. In the Portfolio's annual reports, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Portfolio's performance during their last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION

Additional information about the Portfolio and its policies is also available in
the Portfolio's Statement of Additional Information ("SAI"). The SAI is
incorporated by reference into this Prospectus (is legally considered part of
this Prospectus).

The Portfolio's annual and semiannual reports, and the SAI, are available free
upon request by calling (800) 637-1380.

To obtain other information and for shareholder inquiries:

                                    Page 26
<PAGE>

By telephone - Call (800) 637-1380
By mail - Northern Institutional Funds
      P.O. Box 75943
      Chicago, IL  60675-5943

On the Internet - Text-only versions of the Portfolio's documents are available
on line and may be downloaded from 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. 20549-0102 or by electronic request at
[email protected]. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at (202) 942-8090.

                                     [LOGO]

811-3605

                                    Page 27
<PAGE>

                             Subject to Completion
   Preliminary Statement of Additional Information, Dated November 29, 2000


Information contained herein pertaining to the Core Bond Portfolio is subject to
completion or amendment.  A post-effective amendment to the registration
statement relating to, among other things, shares of the Core Bond Portfolio has
been filed with the Securities and Exchange Commission.  Shares of the Core Bond
Portfolio may not be sold nor may offers to buy shares of this Portfolio be
accepted prior to the time the post-effective amendment to the registration
statement becomes effective.  This statement of additional information shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of shares of the Core Bond Portfolio in any State in which
such offer, solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such State.

                                    PART B

                      STATEMENT OF ADDITIONAL INFORMATION

                         NORTHERN INSTITUTIONAL FUNDS

                              CORE BOND PORTFOLIO

     This Statement of Additional Information dated February __, 2001 (the
"Additional Statement") is not a prospectus. This Additional Statement should be
read in conjunction with the Prospectus for the Core Bond Portfolio (the
"Portfolio") of Northern Institutional Funds dated February __, 2001 (the
"Prospectus"). Copies of the Prospectus may be obtained without charge by
calling (800) 637-1380 (toll-free). Capitalized terms not otherwise defined have
the same meaning as in the Prospectus.
<PAGE>

                                     INDEX

                                                                          Page
                                                                          ----

ADDITIONAL INVESTMENT INFORMATION.......................................     3
    Classification and History..........................................     3
    Investment Objectives, Strategies and Risks.........................     3
    Investment Restrictions.............................................    11
ADDITIONAL TRUST INFORMATION............................................    14
    Trustees and Officers...............................................    14
    Investment Adviser, Transfer Agent and Custodian....................    19
    Portfolio Transactions..............................................    21
    Portfolio Valuation.................................................    21
    Co-Administrators and Distributor...................................    22
    Shareholder Servicing Plan..........................................    23
    Counsel and Auditors................................................    24
    In-Kind Purchases and Redemptions...................................    24
PERFORMANCE INFORMATION.................................................    24
TAXES...................................................................    26
    Federal - General Information.......................................    26
    Foreign Investors...................................................    27
DESCRIPTION OF SHARES...................................................    27
OTHER INFORMATION.......................................................    29

APPENDIX A..............................................................   A-1
APPENDIX B..............................................................   B-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 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 the 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 the Portfolio involves investment risks,
including possible loss of principal.

                                       2
<PAGE>

                       ADDITIONAL INVESTMENT INFORMATION

Classification and History

     Northern Institutional Funds (the "Trust") is an open-end, management
investment company. The Portfolio is classified as diversified under the
Investment Company Act of 1940, as amended (the "1940 Act").

     The 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 is the result of a reorganization of a
Massachusetts business trust formerly known as The Benchmark Funds on March 31,
1998. The Trust's name was changed from The Benchmark Funds to the Northern
Institutional Funds on July 15, 1998. The Trust also offers five money market,
six fixed income, one balanced, and eight equity portfolios, which are not
described in this document.

Investment Objectives, Strategies and Risks

     The following supplements the investment objectives, strategies and risks
of the Portfolio as set forth in the Prospectus. The investment objective of the
Portfolio may be changed without shareholder approval. Except as expressly noted
below, the Portfolio's investment policies also 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 Portfolio includes 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
("FNMA"), Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Intermediate Credit Banks and the Maritime
Administration.

     Securities guaranteed as to principal and interest by the U.S. Government,
its agencies or instrumentalities are also 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 any agency or instrumentality
thereof, and (b) participations in loans made to foreign governments or their
agencies that are so guaranteed.

     To the extent consistent with their respective investment objectives, the
Portfolio may invest in a variety of U.S. Treasury obligations and obligations
issued by or guaranteed by the U.S. Government or its agencies and
instrumentalities. Not all U.S. Government obligations carry the same credit
support. 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.

     Supranational Bank Obligations.  The 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 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." 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 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

                                       3
<PAGE>

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 objective, the 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 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
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 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 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

                                       4
<PAGE>

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
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.  The Portfolio may invest in bonds and other fixed
     -------------------
income securities of foreign issuers that are U.S. dollar-denominated.
Investment in foreign securities involves special risks. These include market
risk, interest rate risk and the risks of investing in securities of foreign
issuers and of companies whose securities are principally traded outside the
United States. The holdings of the Portfolio will be sensitive to changes in
interest rates and the interest rate environment. Generally, the prices of
foreign bonds and debt securities fluctuate inversely with interest rate
changes.

     There are other risks and costs involved in investing in foreign securities
which are in addition to the usual risks inherent in domestic investments.
Investment in foreign securities involves 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 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, the possible seizure or nationalization
of foreign holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions might adversely affect an investment
in foreign securities. Additionally, foreign banks and foreign branches of
domestic banks are subject to less stringent reserve requirements, and to
different accounting, auditing and recordkeeping requirements.

     Dividends and interest payable on the Portfolio's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such taxes
are not offset by credits or deductions allowed to investors under U.S. federal
income tax law, they may reduce the net return to the shareholders. See "Taxes."

     Countries in which the Portfolio may invest include, but 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.

                                       5
<PAGE>

     Interest Rate Swaps, Total Rate of Return Swaps, Credit Swaps, Interest
     -----------------------------------------------------------------------
Rate Floors and Caps.  The Portfolio may enter into swap transactions and
--------------------
transactions involving interest rate floors, caps and collars for hedging
purposes or to seek to increase total return. These instruments are privately
negotiated over-the-counter derivative products. A great deal of flexibility is
possible in the way these instruments are structured. 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 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. An interest rate collar
is a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates. Total rate of return swaps are contracts
that obligate a party to pay or receive interest in exchange for the payment by
the other party of the total return generated by a security, a basket of
securities, an index or an index component. Credit swaps are contracts involving
the receipt of floating or fixed rate payments in exchange for assuming
potential credit losses of an underlying security. Credit swaps give one party
to a transaction the right to dispose of or acquire an asset (or group of
assets), or the right to receive or make a payment from the other party, upon
the occurrence of specific credit events.

     Some transactions, such as interest rate swaps and total rate of return
swaps are entered into 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. If the other party to such a transaction defaults,
the Portfolio's risk of loss consists of the net amount of payments that the
Portfolio is contractually entitled to receive, if any. In contrast, other
transactions involve the payment of the gross amount owed. To the extent that
the amount payable by the Portfolio under a swap or an interest rate floor, cap
or collar is covered by segregated cash or liquid assets, the Portfolio and its
Investment Adviser believes that transactions do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to the Portfolio's borrowing restrictions.

     The Portfolio will not enter into a total rate of return, credit or
interest rate swap or interest rate floor, cap or collar transaction 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 Standard & Poor's
Ratings Group, Inc. ("S&P") or Fitch IBCA ("Fitch"), or A or P-1 or better by
Moody's Investors Service, Inc. ("Moody's") or, if unrated by such rating
organization, is determined to be of comparable quality by the Investment
Adviser. If there is a default by the other party to such transaction, the
Portfolio 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.

     The use of interest rate, total rate of return and credit swaps, as well as
interest rate caps, floors and collars, is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Investment Adviser is
incorrect in its forecasts of market values and interest rates, the investment
performance of the Portfolio would be less favorable than it would have been if
this investment technique were not used.

     Options.  The Portfolio may buy put options and buy call options and write
     --------
covered call and secured put options. Such options may relate to particular
securities, financial instruments, foreign or domestic securities indices or 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 gives the

                                       6
<PAGE>

purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligation
under the option contract. A put option for a particular security gives the
purchaser the right to sell the security at the stated exercise price to the
expiration date of the option, regardless of the market price of the security.
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 Portfolio will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if the Portfolio
owns the security underlying the call or has an absolute and immediate right to
acquire that security 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 the 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 the Portfolio holds a call on the same security 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 Portfolio 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 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.

     The Portfolio's obligation to sell a security subject to a covered call
option written by it, or to purchase a security 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, 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 from being called, to
permit the sale of the underlying security 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 (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 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 during such period.

     When the 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.

                                       7
<PAGE>

     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 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; 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.  The 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, the 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. The 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, the Portfolio may purchase a
futures contract as a hedge in anticipation of purchases of securities. In
addition, the 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
     -------------------
the 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 the 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 the Portfolio if a material event
affecting the investment is to occur.

     Forward Commitments, When-Issued Securities and Delayed Delivery
     ----------------------------------------------------------------
Transactions.  The 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.

     The 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, the Portfolio may
dispose of or negotiate a commitment after entering into it. The 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.

     When the 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 until three days prior to the settlement date, or otherwise cover
its position. 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 the 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

                                       8
<PAGE>

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.

     Commercial paper and other short-term obligations acquired by the Portfolio
will be rated A-2 or higher by S&P, P-2 or higher by Moody's, or F-2 or higher
by Fitch at the time of purchase or, if unrated, determined to be of comparable
quality by the Investment Adviser.

     Insurance Funding Agreements.  The 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.

     Zero Coupon, Pay-in-Kind and Capital Appreciation Bonds.  To the extent
     --------------------------------------------------------
consistent with its investment objective, the 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 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, 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 Portfolio, 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 Portfolio's 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
Portfolio include variable amount master demand

                                       9
<PAGE>

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 change 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 Portfolio 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 Adviser to be of comparable quality at the time of purchase to
rated instruments which may be purchased by the Portfolio.

     Variable and floating rate instruments, including inverse floaters, held by
the 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 Portfolio 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 the
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 the
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
Portfolio 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, the 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.

     The 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, the
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. The 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.  The Portfolio may agree to purchase portfolio
     ----------------------
securities from financial institutions subject to the seller's agreement to
repurchase them at a mutually agreed upon date and price ("repurchase
agreements"). Repurchase agreements are considered loans under the 1940 Act.
Securities subject to repurchase agreements are held either by the Trust's
custodian (or subcustodian, if any), or in the Federal Reserve/Treasury Book-
Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose the Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.

     Reverse Repurchase Agreements.  The Portfolio may borrow funds 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 Portfolio 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 the Portfolio may decline below
the repurchase price. The Portfolio will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, the 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 under the 1940 Act.

     Yields and Ratings.  The yields on certain obligations, including the
     -------------------
instruments in which the Portfolio may invest, are dependent on a variety of
factors, including general market economic 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, Fitch and Thompson Bank Watch, Inc. ("TBW") represent their
respective opinions as to the

                                       10
<PAGE>

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.

     If a security held by the Portfolio undergoes a rating revision, the
Portfolio may continue to hold the security if the Investment Adviser determines
such retention is warranted.

     Relative Value Approach.  In buying and selling securities for the
     ------------------------
Portfolio, the investment management team uses a relative value approach. This
approach involves an analysis of economic and market information, including
economic growth rates, interest and inflation rates, deficit levels, the shape
of the yield curve, sector and quality spreads and risk premiums. It also
involves the use of proprietary valuation models to analyze and compare expected
returns and assumed risks. Under the relative value approach, the investment
management team will emphasize particular securities and particular types of
securities that the team believes will provide a favorable return in light of
these risks.

     Calculation of Portfolio Turnover Rate.  The portfolio turnover rate for
     ---------------------------------------
the Portfolio 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 Portfolio to receive favorable tax treatment.

     Mortgage Dollar Rolls.  The Portfolio may enter into mortgage "dollar
     ----------------------
rolls" in which the Portfolio sells securities for delivery in the future
(generally within 30 days) and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity), but not
identical securities on a specified future date. During the roll period, the
Portfolio loses the right to receive principal and interest paid on the
securities sold. However, the Portfolio would benefit to the extent of any
difference between the price received for the securities sold and the lower
forward price for the future purchase (often referred to as the "drop") or fee
income plus the interest earned on the cash proceeds of the securities sold
until the settlement date of the forward purchase. Unless such benefits exceed
the income, capital appreciation and gain or loss due to mortgage prepayments
that would have been realized on the securities sold as part of the mortgage
dollar roll, the use of this technique will diminish the investment performance
of the Portfolio compared with what such performance would have been without the
use of mortgage dollar rolls. All cash proceeds will be invested in instruments
that are permissible investments for the applicable Portfolio. The Portfolio
will hold and maintain in a segregated account until the settlement date cash or
liquid assets, as permitted by applicable law, in an amount equal to its forward
purchase price.

     For financial reporting and tax purposes, the Portfolio treats mortgage
dollar rolls as two separate transactions:  one involving the purchase of a
security and a separate transaction involving a sale. The Portfolio does not
currently intend to enter into mortgage dollar rolls that are accounted for as a
financing.

     Mortgage dollar rolls involve certain risks including the following. If the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the mortgage-related securities
subject to the mortgage dollar roll may be restricted and the instrument which
the Portfolio is required to repurchase may be worth less than an instrument
which the Portfolio originally held. Successful use of mortgage dollar rolls
will depend upon the Investment Adviser's ability to manage the Portfolio's
interest rate and mortgage prepayments exposure. For these reasons, there is no
assurance that mortgage dollar rolls can be successfully employed.

Investment Restrictions

The Portfolio is subject to the fundamental investment restrictions enumerated
below which may be changed with respect to the Portfolio only by a vote of the
holders of a majority of the Portfolio's outstanding shares.

The Portfolio may not:

     (1) Make loans, except through (a) the purchase of debt obligations in
     accordance with the Portfolio's investment objective and policies, (b)
     repurchase agreements with banks, brokers, dealers and other financial
     institutions, (c) loans of securities, and (d) loans to affiliates of the
     Portfolio to the extent permitted by law.

     (2) Purchase or sell real estate, but this restriction shall not prevent
     the Portfolio from investing directly or indirectly in

                                       11
<PAGE>

     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.

     (3) Invest in commodities or commodity contracts, except that the Portfolio
     may invest in currency and financial instruments and contracts that are
     commodities or commodity contracts.

     (4) Invest in companies for the purpose of exercising control.

     (5) Act as underwriter of securities, except as the 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.

     (6) 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 the 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.

     (7) Borrow money, except that to the extent permitted by applicable law (a)
     the Portfolio may borrow from banks, other affiliated investment companies
     and other persons, and may engage in reverse repurchase agreements and
     other transactions which involve borrowings, in amounts up to 33 1/3% of
     its total assets (including the amount borrowed) or such other percentage
     permitted by law, (b) the Portfolio may borrow up to an additional 5% of
     its total assets for temporary purposes, (c) the Portfolio may obtain such
     short-term credits as may be necessary for the clearance of purchases and
     sales of portfolio securities, and (d) the Portfolio may purchase
     securities on margin. If due to market fluctuations or other reasons the
     Portfolio's borrowings exceed the limitations stated above, the Trust will
     promptly reduce the borrowings of the Portfolio in accordance with the 1940
     Act. In addition, as a matter of fundamental policy, the Portfolio will not
     issue senior securities to the extent such issuance would violate
     applicable law.

     (8) Notwithstanding any of the Trust's other fundamental investment
     restrictions (including, without limitation, those restrictions relating to
     issuer diversification, industry concentration and control), the 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.

     (9) The Portfolio may not make any investment inconsistent with the
     Portfolio's classification as a diversified investment company under the
     1940 Act.

     For the purposes of Restriction Nos. 1 and 7 above, the Portfolio expects
that it would be required to file an exemptive application with the SEC and
receive the SEC's approval of that application prior to entering into lending or
borrowing arrangements with affiliates. As of the date of this Additional
Statement, the Portfolio had not filed such an exemptive application.

     In applying Restriction No. 6 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. 6 for
the purpose of such restriction, in determining industry classification the
Trust intends to use the industry classification titles in the Bloomberg
Industry Group Classification. Securities held in escrow or separate accounts in
connection with the Portfolio's investment practices described in this
Additional Statement and the Prospectus are not deemed to be mortgaged, pledged
or hypothecated for purposes of the foregoing restrictions.

                                       12
<PAGE>

     Any restriction which involves a maximum percentage (other than the
restriction set forth in Investment Restriction (7)) will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition of securities or assets of, or borrowings by, the
Portfolio. The 1940 Act requires that if the asset coverage for borrowings at
any time falls below the limits described in Investment Restriction (7), the
Portfolio will, within three days thereafter (not including Sundays and
holidays), reduce the amount of its borrowings to an extent that the net asset
coverage of such borrowings shall conform to such limits.

                                       13
<PAGE>

                         ADDITIONAL TRUST INFORMATION

Trustees and Officers

The business and affairs of the Trust and the 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>
                                                   Position(s)               Principal Occupation(s)
Name and Address                 Age               with Trust                During the Past 5 Years
----------------                 ---               ----------                -----------------------
<S>                              <C>               <C>                       <C>
Richard G. Cline                 65                Trustee                   Chairman, Hawthorne Investors, Inc. (a management
4200 Commerce Court                                                          advisory services and private investment company)
Suite 300                                                                    since January 1996; Chairman, Hussman
Lisle, IL 60532                                                              International, Inc. (a refrigeration company)
                                                                             since 1998, Chairman and CEO of NICOR Inc. (a
                                                                             diversified public utility holding company) from
                                                                             1986 to 1995, and President, 1992 to 1993; Chairman,
                                                                             Federal Reserve Bank of Chicago from 1992 to
                                                                             1995; and Deputy Chairman from 1995 to 1996.
                                                                             Director: Whitman Corporation (a diversified
                                                                             holding company); Kmart Corporation (a retailing
                                                                             company); Ryerson Tull, Inc. (a metals
                                                                             distribution company) and University of Illinois
                                                                             Foundation. Trustee: Northern Funds.

Edward J. Condon, Jr.            60                Trustee                   Chairman of The Paradigm Group, Ltd. (a financial
Sears Tower, Suite 9650                                                      adviser) since July 1993; Vice President and
233 S. Wacker Drive                                                          Treasurer of Sears, Roebuck and Co. (a retail
Chicago, IL 60606                                                            corporation) from February 1989 to July 1993;
                                                                             Member of Advisory Board of Real-Time USA, Inc.
                                                                             (a software development company); Member of the
                                                                             Board of Managers of The Liberty Hampshire
                                                                             Company, LLC (a receivable securitization
                                                                             company); Vice Chairman and Director of
                                                                             Energenics L.L.C. (a waste to energy recycling
                                                                             company).  Director: University Eldercare, Inc.
                                                                             (an Alzheimer's disease research and treatment
                                                                             company); Financial Pacific Company (a small
                                                                             business leasing company).  Trustee: Dominican
                                                                             University. Trustee: Northern Funds.

Mr. Wesley M. Dixon, Jr.         73                Trustee                   Director of Kinship Capital Corporation (a
400 Skokie Blvd., Suite 300                                                  financial services company) since 1985 to 1996,
Northbrook, IL 60062                                                         Vice Chairman and Director of G.D. Searle & Co.
                                                                             (manufacture and sale of food products and
                                                                             pharmaceuticals) from 1977 to 1985 and President
                                                                             of G.D. Searle & Co. prior thereto.  Trustee:
                                                                             Northern Funds.

Mr. William J. Dolan, Jr.        68                Trustee                   Partner of Arthur Andersen & Co. S.C. (an
1534 Basswood Circle                                                         accounting firm) from 1966 to 1989.  Financial
Glenview, IL 60025                                                           Consultant, Ernst & Young (an accounting firm)
                                                                             from 1992 to 1993 and 1997.  Trustee: Northern
                                                                             Funds.
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                   Position(s)               Principal Occupation(s)
Name and Address                 Age               with Trust                During the Past 5 Years
----------------                 ---               ----------                -----------------------
<S>                              <C>               <C>                       <C>
John W. English                  67                Trustee                   Private Investor; Vice President and Chief
50-H New England Ave.                                                        Investment Officer of The Ford Foundation (a
P.O. Box 640                                                                 charitable trust) from 1981 to 1993. Director:
Summit, NJ 07902-0640                                                        the University of Iowa Foundation, the
                                                                             Blanton-Peale Institutes of Religion and Health,
                                                                             and the Community Foundation of Sarasota County.
                                                                             Former Director: the Duke Management Company
                                                                             (manager of the Duke University endowment fund)
                                                                             and the John Ringling Centre Foundation (a
                                                                             non-profit historical preservation organization).
                                                                             Trustee: The China Fund, Inc., Select Sector SPDR
                                                                             Trust; WM Funds; American Red Cross in Greater
                                                                             New York; Mote Marine Laboratory (a non-profit
                                                                             marine research facility); and United Board for
                                                                             Christian Higher Education in Asia. Trustee:
                                                                             Northern Funds.




Mr. Raymond E. George, Jr. *     70                Trustee                   Senior Vice President and Senior Fiduciary
703 Prospect Avenue                                                          Officer of The Northern Trust Company from 1990
Winnetka, IL 60093                                                           to 1993. Trustee: Northern Funds.

Sandra Polk Guthman              56                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 to 1993, and Midwestern Director of Marketing
                                                                             from 1988-1992, IBM (a technology company);
                                                                             Director: MBIA Insurance Corporation of Illinois
                                                                             (a municipal bond insurance company). Trustee:
                                                                             Northern Funds.

Mr. Michael E. Murphy**          64                Trustee                   President of Sara Lee Foundation  (philanthropic
Suite 2222                                                                   organization) since November 1997.  Vice Chairman
20 South Clark Street                                                        and Chief Administrative Officer of Sara Lee
Chicago, IL 60603                                                            Corporation (a consumer product company) from
                                                                             November 1994 to October 1997; Vice Chairman and
                                                                             Chief Financial and Administrative Officer of
                                                                             Sara Lee Corporation from July 1993 to November
                                                                             1994. Director: Payless Shoe Source, Inc., (a
                                                                             retail shoe store business); True North
                                                                             Communications, Inc. (a global advertising and
                                                                             communications holding company); American General
                                                                             Corporation (a diversified financial services
                                                                             company); GATX Corporation (a railroad holding
                                                                             company); Bassett Furniture Industries, Inc. (a
                                                                             furniture manufacturer) Trustee: Northern Funds.

Mary Jacobs Skinner, Esq.***     43                Trustee                   Partner in the law firm of Sidley & Austin.
One First National Plaza                                                     Trustee: Northern Funds.
Chicago, IL 06063
</TABLE>

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                   Position(s)               Principal Occupation(s)
Name and Address                 Age               with Trust                During the Past 5 Years
----------------                 ---               ----------                -----------------------
<S>                              <C>               <C>                       <C>
William H. Springer              71                Chairman and Trustee      Vice Chairman of Ameritech (a telecommunications
701 Morningside Drive                                                        holding company) from February 1987 to August
Lake Forest, IL 60045                                                        1992; Vice Chairman, Chief Financial and
                                                                             Administrative Officer of Ameritech prior to
                                                                             1987. Director: Walgreen Co. (a retail drug store
                                                                             business); Baker, Fentress & Co. (a closed-end,
                                                                             non-diversified management investment company).
                                                                             Trustee: Goldman Sachs Trust; Goldman Sachs
                                                                             Variable Insurance Trust. Trustee: Northern Funds.

Richard P. Strubel               61                Trustee                   President and Chief Operating Officer, UNext.com
Unext.com                                                                    (a provider of educational services via the
500 Lake Cook Road                                                           internet) since 1999; Managing Director of Tandem
Suite 150                                                                    Partners, Inc. (a privately held management
Deerfield, IL 60015-5609                                                     services firm) from 1990 to 1999; President and
                                                                             Chief Executive Officer, Microdot, Inc. (a
                                                                             privately held manufacturing firm) from 1984 to
                                                                             1994; Director: Gildan Activewear, Inc. (an
                                                                             athletic clothing marketing and manufacturing
                                                                             company); Children's Memorial Medical Center.
                                                                             Trustee: University of Chicago; Goldman Sachs
                                                                             Trust; Goldman Sachs Variable Insurance Trust.
                                                                             Trustee: Northern Funds.

Stephen Timbers****              56                Trustee                   President of Northern Trust Global Investments, a
50 South LaSalle Street                                                      division of Northern Trust Corporation and
Chicago, IL 60675                                                            Executive Vice President, The Northern Trust
                                                                             Company since 1998; President, Chief Executive
                                                                             Officer and Director of Zurich Kemper Investments
                                                                             (a financial services company) from 1996 to 1998;
                                                                             President, Chief Operating Officer and Director
                                                                             of Kemper Corporation (a financial services
                                                                             company) from 1992 to 1996; President and
                                                                             Director of Kemper Funds (a registered investment
                                                                             company) from 1990 to 1998.  Director: LTV
                                                                             Corporation (a steel producer) and Northern Trust
                                                                             Investments (previously known as Northern Trust
                                                                             Quantitative Advisors, Inc.). Trustee: Northern
                                                                             Funds.
</TABLE>

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                   Position(s)               Principal Occupation(s)
Name and Address                 Age               with Trust                During the Past 5 Years
----------------                 ---               ----------                -----------------------
<S>                              <C>               <C>                       <C>
Lloyd A. Wennlund                42                President                 Senior Vice President and other positions at The
50 South LaSalle Street                                                      Northern Trust Company, President of Northern
Chicago, IL 60675                                                            Trust Securities, Inc., and Managing Executive,
                                                                             Mutual Funds for Northern Trust Global
                                                                             Investments (since 1989).

Brian R. Curran                  33                Vice President and        Vice President at PFPC (formerly FDISG) (since
4400 Computer Drive                                Treasurer                 1997); Director of Fund Administration at
Westborough, MA 01581                                                        State Street Bank & Trust Company (February
                                                                             1997 to October 1997); Senior Auditor at Price
                                                                              Waterhouse L.L.P. (a public accounting firm)
                                                                             (February 1994 to February 1997).

Eric K. Schweitzer               39                Vice President            Senior Vice President at Northern Trust Company;
50 South LaSalle Street                                                      Director of Distribution, Product Management and
Chicago, IL  60675                                                           Client Services in Mutual Fund Group of Northern
                                                                             Trust Global Investments; Managing Director of
                                                                             Mutual Funds for U.S. Bancorp (1997-2000)

Suzanne E. Anderson              28                Assistant Treasurer       Client Treasury Manager of Mutual Fund
4400 Computer Drive                                                          Administration at PFPC Inc. (since August 1998);
Westborough, MA 01581                                                        Manager of Fund Administration at State Street
                                                                             Bank & Trust Company (October 1996 to August
                                                                             1998); Fund Administrator at State Street Bank &
                                                                             Trust Company (October 1995 to October 1996);
                                                                             Mutual Fund Accountant at The Boston Company
                                                                             (prior thereto).

Jeffrey A. Dalke                 50                Secretary                 Partner in the law firm of Drinker Biddle & Reath
One Logan Square                                                             LLP.
18/th/ and Cherry Streets
Philadelphia, PA 19103-6996

Linda J. Hoard                   53                Assistant Secretary       Vice President at PFPC Inc. (since 1998);
101 Federal Street                                                           Attorney Consultant for Fidelity Management &
Boston, MA 02110                                                             Research (a financial service company); Investors
                                                                             Bank & Trust Company (a financial service provider)
                                                                             and FDISG (September 1994 to June 1998).
</TABLE>


*     Mr. George is deemed to be an "interested" Trustee because he owns shares
      of Northern Trust Corporation.
**    Mr. Murphy is deemed to be an "interested" Trustee because he owns shares
      of Northern Trust Corporation.
***   Ms. Skinner is deemed to be an "interested" Trustee because her law firm
      provides legal services to Northern Trust.
****  Mr. Timbers is deemed to be an "interested" Trustee because he is an
      officer, director, employee and shareholder of Northern Trust Corporation
      and/or Northern Trust and NTI.

     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 Adviser, Northern Trust, PFPC, Northern Funds Distributors,
LLC ("NFD") and their respective affiliates. The Trust has been advised by such
Trustees and officers that all such transactions

                                       17
<PAGE>

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. As a result of
the responsibilities assumed by the Investment Adviser under the Advisory
Agreement with the Trust, by Northern Trust under its Transfer Agency Agreement,
Custodian Agreement and Foreign Custody Agreement with the Trust, by NTI under
its Co-Administration Agreement with the Trust, by PFPC under its Co-
Administration Agreement with the Trust and by NFD under its Distribution
Agreement with the Trust, the Trust itself requires no employees.

     Each officer holds comparable positions with Northern Funds, and certain
officers hold comparable positions with certain other investment companies of
which NFD, PFPC or an affiliate thereof is the administrator and/or distributor.

     Each Trustee, except Mr. Timbers, earns an annual retainer of $30,000 and
the Chairman of the Board earns an annual retainer of $40,000. Each Trustee,
including the Chairman of the Board, earns an additional fee of $1,500 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 (Chairman), Strubel and Dolan. Each member earns an
annual fee of $1,500 and the Chairman earns an annual fee of $3,500.

     The Trustees have also established a Nominating Committee consisting of
three members, including a Chairman of the Committee. The Nominating Committee
members are Messrs. Dixon (Chairman) and Cline and Ms. Guthman. Each member
earns an annual fee of $1,500 and the Chairman earns an annual fee of $3,500.

     The Trustees have also established a Valuation Committee consisting of four
members, including a Chairman of the Committee. The Valuation Committee members
are Messrs. George (Chairman), English and Murphy and Ms. Skinner. Each member
earns an annual fee of $1,500 and the Chairman earns an annual fee of $3,500.

     Each Trustee will hold office for an indefinite term until the earliest of
(i) 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; (ii)
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 (iii) effective December 31, 2001, 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 PFPC, of which certain of the Trust's officers are
also officers (except Messrs. Dalke, Schweitzer and Wennlund), receives fees
from the Trust for administrative services.

     Drinker Biddle & Reath LLP, of which Mr. Dalke is a partner, receives fees
from the Trust for legal services.

     The Northern Trust Company, of which Messrs. Timbers, Schweitzer and
Wennlund are officers, receives fees from the Trust as custodian and transfer
agent.

     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, 1999:

                                        Total Compensation
                                            from Fund
                                           Complex**
                                           ---------
                                       $
          Steven Timbers*                      0
          William H. Springer               53,000
          Richard G. Cline                  39,500
          Edward J. Condon, Jr.             44,500
          John W. English                   39,500
          Sandra Polk Guthman               39,500
          Frederick T. Kelsey***            44,500
          Richard P. Strubel                50,500
          Wesley M. Dixon, Jr.*             22,500
          William J. Dolan, Jr.*            22,500
          Raymond E. George, Jr.*           21,250

                                       18
<PAGE>

          Michael E. Murphy*                22,500
          Mary Jacobs Skinner*              22,500

*    Became a Trustee of the Northern Institutional Funds as of March 28, 2000.
**   Fund complex includes twenty-two investment portfolios of the Trust and
     thirty-three portfolios of Northern Funds, a separately registered
     investment company.
***  Mr. Kelsey retired from the Board of Trustees on November 30, 1999.

       The Trust does not provide pension or retirement benefits to its
       Trustees.

     The Trust and its investment adviser have adopted codes of ethics (the
"Codes of Ethics") under Rule 17j-1 of the 1940 Act. The Codes of Ethics permit
personnel, subject to the Codes of Ethics and their provisions, to invest in
securities, including securities that may be purchased or held by the Trust.

Investment Adviser, Transfer Agent and Custodian

     Northern Trust Investments, Inc. ("NTI" or the "Investment Adviser") is the
Portfolio's investment adviser. NTI, a wholly-owned subsidiary of Northern
Trust, serves as investment adviser principally to institutional clients. As of
June 30, 2000, the Investment Adviser and its affiliates had approximately $36.8
billion in assets under management for clients including public and private
retirement funds, endowments, foundations, trusts, corporations, other
investment companies and individuals.

     Northern Trust 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 Trust 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. Northern
Trust is a wholly-owned subsidiary of Northern Trust Corporation, a bank holding
company.

     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.

     Under the 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 Portfolio and placing
purchase and sale orders for portfolio transactions of the Portfolio. The
Advisory Agreement with the Trust provides that in selecting brokers or dealers
to place orders for transactions, the Investment Adviser shall attempt to obtain
best net price and execution. In assessing the best overall terms available for
any transaction, the Investment Adviser is to consider all factors it deems
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 Adviser may consider the brokerage and research
services provided to the Portfolio and/or other accounts over which the
Investment Adviser or an affiliate of Northern Trust exercises 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
Adviser 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

                                       19
<PAGE>

purchased from and sold to dealers include a dealer's mark-up or mark-down.

     The Portfolio 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 Portfolio will engage in this practice, however, only when the Investment
Adviser believes such practice to be in the Portfolio's interest.

     On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other fiduciary
or agency accounts managed by it (including any other portfolio, investment
company or account for which the Investment Adviser acts as adviser), the
Advisory Agreement provides that the Investment Adviser, to the extent permitted
by applicable laws and regulations, may aggregate the securities to be sold or
purchased for the 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 Adviser 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 the
Portfolio or the amount of the securities that are able to be sold for the
Portfolio.

     The Advisory Agreement provides that the Investment Adviser may render
similar services to others so long as its services under such Agreements is not
impaired thereby. The Advisory Agreement also provides that the Trust will
indemnify the Investment Adviser 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, with respect to shares
held by Institutions, Northern Trust has undertaken to perform some or all of
the following services: (i) establish and maintain an omnibus account in the
name of each Institution; (ii) process purchase orders and redemption requests
from an Institution, and furnish confirmations and disburse redemption proceeds;
(iii) act as the income disbursing agent of the Trust; (iv) answer inquiries
from Institutions; (v) provide periodic statements of account to each
Institution; (vi) process and record the issuance and redemption of shares in
accordance with instructions from the Trust or its administrator; (vii) 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); (viii) preserve
records; and (ix) furnish necessary office space, facilities and personnel.
Under the Transfer Agency Agreement, with respect to shares held by investors,
Northern Trust has also undertaken to perform some or all of the following
services: (i) establish and maintain separate accounts in the name of the
investors; (ii) process purchase orders and redemption requests, and furnish
confirmations in accordance with applicable law; (iii) disburse redemption
proceeds; (iv) process and record the issuance and redemption of shares in
accordance with instructions from the Trust or its administrator; (v) act as
income disbursing agent of the Trust in accordance with the terms of the
Prospectus and instructions from the Trust or its administrator; (vi) provide
periodic statements of account; (vii) 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); (viii) respond to and
seek to resolve all complaints of investors with respect to the Trust or their
accounts; (ix) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors;
(x) furnish the Trust with all pertinent Blue Sky information; (xi) perform all
required tax withholding; (xii) preserve records; and (xiii) furnish necessary
office space, facilities and personnel. Northern Trust may appoint one or more
sub-transfer agents in the performance of its services.

     As compensation for the services rendered by Northern Trust under the
Transfer Agency Agreement and the assumption by Northern Trust of related
expenses, Northern Trust 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 Portfolio.

     Under its Custodian Agreement with the Trust, Northern Trust (i) holds the
Portfolio's cash and securities, (ii) maintains such cash and securities in
separate accounts in the name of the Portfolio, (iii) makes receipts and
disbursements of funds on behalf of the Portfolio, (iv) receives, delivers and
releases securities on behalf of the Portfolio, (v) collects and receives all
income, principal and other payments in respect of the Portfolio's investments
held by Northern Trust under the Agreement, and (vi) maintains the accounting
records of the Trust. Northern Trust may employ one or more subcustodians,
provided that Northern Trust, 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 Trust

                                       20
<PAGE>

and that the responsibility or liability of the subcustodian to Northern Trust
shall conform to the resolution of the Trustees of the Trust authorizing the
appointment of the particular subcustodian. In addition, the Trust's custodial
arrangements provide, with respect to foreign securities, that Northern Trust
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 Trust may also appoint agents to carry out such of the provisions
of the Custodian Agreement as Northern Trust may from time to time direct,
provided that the appointment of an agent shall not relieve Northern Trust of
any of its responsibilities under either Agreement.

     As compensation for the services rendered to the Trust by Northern Trust as
custodian to the Portfolio, and the assumption by Northern Trust of certain
related expenses, Northern Trust is entitled to payment from the Trust as
follows: (i) $18,000 annually for the Portfolio, plus (ii) 1/100th of 1%
annually of the 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 Trust as
Custodian receives or transmits funds via wire, plus (v) reimbursement of
expenses incurred by Northern Trust 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 Trust may
permanently or temporarily waive all or any portion of any upward adjustment.

     Northern Trust's fees under the Custodian Agreement are subject to
reduction based on the Portfolio's daily uninvested cash balances (if any).

     Unless sooner terminated, the Advisory Agreement will continue in effect
with respect to the Portfolio until ______, 2002, and the Custodian Agreement
and the Transfer Agency Agreement will continue in effect with respect to the
Portfolio until April 30, 2001.  Each agreement will continue in effect
thereafter for successive 12-month periods, provided that the continuance is
approved at least annually (i) 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 (ii) by the Trustees or by the vote of a
majority of the outstanding shares of the 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 Trust or NTI and by Northern Trust or NTI on 60 days' written
notice to the Trust.

     Under a Service Mark License Agreement (the "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 the Portfolio effects brokerage transactions with NFD or
PFPC or any broker/dealer affiliated directly or indirectly with the Investment
Adviser, 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.

Portfolio Valuation

     U.S. and foreign investments held by the 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 Portfolio 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

                                       21
<PAGE>

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.

Co-Administrators and Distributor

     NTI and PFPC, 4400 Computer Drive, Westborough, Massachusetts 01581, act as
co-administrators for the Portfolio under a Co-Administration Agreement with the
Trust. Subject to the general supervision of the Trust's Board of Trustees, NTI
and PFPC (the "Co-Administrators") provide supervision of all aspects of the
Trust's non-investment advisory operations and perform various corporate
secretarial, treasury and blue sky services, including but not limited to: (i)
maintaining office facilities and furnishing corporate officers for the Trust;
(ii) furnishing data processing services, clerical services, and executive and
administrative services and standard stationery and office supplies; (iii)
performing all functions ordinarily performed by the office of a corporate
treasurer, and furnishing the services and facilities ordinarily incident
thereto, such as expense accrual monitoring and payment of the Trust's bills,
preparing monthly reconciliation of the Trust's expense records, updating
projections of annual expenses, preparing materials for review by the Board of
Trustees and compliance testing; (iv) preparing and submitting reports to the
Trust's shareholders and the SEC; (v) preparing and printing financial
statements; (vi) preparing monthly Portfolio profile reports; (vii) preparing
and filing the Trust's federal and state tax returns (other than those required
to be filed by the Trust's custodian and transfer agent) and providing
shareholder tax information to the Trust's transfer agent; (viii) assisting in
marketing strategy and product development; (ix) performing oversight/management
responsibilities, such as the supervision and coordination of certain of the
Trust's service providers; (x) effecting and maintaining, as the case may be,
the registration of shares of the Trust for sale under the securities laws of
various jurisdictions; (xi) assisting in maintaining corporate records and good
standing status of the Trust in its state of organization; and (xii) monitoring
the Trust's arrangements with respect to services provided by Servicing Agents
to their customers who are the beneficial owners of shares, pursuant to
servicing agreements between the Trust and such Servicing Agents.

     Subject to the limitations described below, as compensation for their
administrative services and the assumption of related expenses, the Co-
Administrators are entitled to a fee from the Portfolio, computed daily and
payable monthly, at an annual rate of 0.10% of the average daily net assets of
the Portfolio. The Co-Administrators will reimburse the Portfolio for its
expenses (including administration fees payable to the Co-Administrators, but
excluding advisory fees, transfer agency fees, servicing fees and extraordinary
expenses) which exceed on an annualized basis 0.10% of the Portfolio's average
daily net assets.

     Unless sooner terminated, the Co-Administration Agreement among NTI, PFPC
and the Trust will continue in effect until April 30, 2001, and thereafter for
successive one-year terms with respect to the Portfolio, provided that the
Agreement is approved annually (1) by the Board of Trustees or (2) by the vote
of a majority of the outstanding shares of the Portfolio (as defined below under
"Other Information"), provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to the Agreement and
who are not interested persons (as defined in the 1940 Act) of any party
thereto, by vote cast in person at a meeting called for the purpose of voting on
such approval. The Co-Administration Agreement is terminable at any time after
April 30, 2001 without penalty by the Trust on at least 60 days written notice
to the Co-Administrators. Each Co-Administrator may terminate the Co-
Administration Agreement with respect to itself at any time after April 30, 2001
without penalty on at least 60 days written notice to the Trust and the other
Co-Administrator.

     The Trust may terminate the Co-Administration Agreement prior to April 30,
2001 in the event that the Trust or its shareholders incur damages in excess of
$100,000 as a result of the willful misfeasance, bad faith or negligence of the
Co-Administrators, or the reckless disregard of their duties under the
Agreement. The Trust may also terminate the Co-Administration Agreement prior to
April 30, 2001 in the event that the Co-Administrators fail to meet one of the
performance standards set forth in the Agreement.

     The Trust has entered into a Distribution Agreement with NFD under which
NFD, as agent, sells shares of the Portfolio on a continuous basis. NFD pays the
cost of printing and distributing prospectuses to persons who are not
shareholders of the Trust (excluding preparation and typesetting expenses) and
of certain other distribution efforts. NFD is a wholly-owned subsidiary of
Provident Distributors, Inc. ("PDI"). PDI, based in King of Prussia,
Pennsylvania, is a wholly-owned subsidiary of PFPC, a Co-Administrator for the
Portfolio. Prior to its acquisition by PFPC, PDI was an independently owned and
operated broker-dealer. Between May 1, 1999 and November 30, 1999, First Data
Distributors, Inc. ("FDDI") acted as the Trust's distributor pursuant to a
distribution agreement similar to the Distribution Agreement currently in effect
with NFD. No compensation is payable by the Trust to NFD for such distribution
services. Prior to May 1, 1999, Goldman, Sachs Co. acted as the Trust's
distributor pursuant to a distribution agreement similar to the Distribution
Agreement
                                       22
<PAGE>

currently in effect with NFD.

     The Co-Administration Agreement provides that the Co-Administrators may
render similar services to others so long as their services under such Agreement
are not impaired thereby. The Co-Administration Agreement also provides that the
Trust will indemnify each Co-Administrator against all claims except those
resulting from the willful misfeasance, bad faith or negligence of such Co-
Administrator, or the Co-Administrator's breach of confidentiality. The
Distribution Agreement provides that the Trust will indemnify NFD against
certain liabilities relating to untrue statements or omissions of material fact
except those resulting from the reliance on information furnished to the Trust
by NFD, or those resulting from the willful misfeasance, bad faith or negligence
of NFD, or NFD's breach of confidentiality.

     Under a Service Mark License Agreement (the "License Agreement") with NFD,
Northern Trust Corporation agrees that the name "Northern Institutional Funds"
may be used in connection with Northern Institutional Funds' 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 License Agreement provides that at such time
as the License Agreement is no longer in effect NFD will cease using the name
"Northern Institutional Funds."

Shareholder Servicing Plan

     As stated in the 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 Portfolio's 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.

     Services provided by or arranged to be provided by Servicing Agents under
their servicing agreements may include: (i) establishing and maintaining
separate account records of Customers or other investors; (ii) 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; (iii) 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; (iv) issuing confirmations to Customers or other investors in accordance
with applicable law; (v) arranging for the timely transmission of funds
representing the net purchase price or redemption proceeds; (vi) processing
dividend payments on behalf of Customers or other investors; (vii) providing
information periodically to Customers or other investors showing their positions
in shares; (viii) responding to Customer or other investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the Servicing Agents; (ix) 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; (x)
providing or arranging for another person to provide subaccounting with respect
to shares of certain classes beneficially owned by Customers or other investors;
(xi) 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; (xii) providing such office space, facilities and
personnel as may be required to perform their services under the servicing
agreements; (xiv) maintaining appropriate management reporting and statistical
information; (xiii) paying expenses related to the preparation of educational
and other explanatory materials in connection with the development of investor
services; (xv) developing and monitoring investment programs; and (xvi)
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 Portfolio and their
shareholders by affording the Portfolio greater flexibility in connection with
the servicing of the accounts of the beneficial owners of their shares in an
efficient manner.

                                       23
<PAGE>

Counsel and Auditors

     Drinker Biddle & Reath LLP, with offices at One Logan Square, 18th and
Cherry Streets, Philadelphia, Pennsylvania 19103-6996, 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 the Portfolio may, in the discretion of Northern
Trust, 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 Trust.  In connection with an in-kind
securities payment, the 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 the Portfolio generally will redeem shares in cash, the Portfolio
reserves the right to pay redemptions by a distribution in kind of securities
(instead of cash) from the 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 the 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), the Lehman Mutual Fund Intermediate Tax
Exempt Index, S&P 500 Index, S&P/Barra Growth Index, the Russell 2000 Index, the
Europe and Australia Far East Equity Index ("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 the Portfolio.

     The Portfolio calculates its total returns for each class of shares
separately on an "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 Portfolio 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.

     The Portfolio computes "average annual total return" for a class of shares
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:

                                       24
<PAGE>

                                P (1+T)/n/  = ERV

    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.

     The Portfolio computes "aggregate total return" for a class of shares 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 yield of a class of shares in the 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 Portfolio's 30-day (or one month) standard yield is calculated for each
class of the Portfolio 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 by the 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.



                                       25
<PAGE>

                                     TAXES

     The following summarizes certain additional tax considerations generally
affecting the Portfolio and its shareholders that are not described in the
Prospectus. 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.
Potential investors should consult their tax advisers with specific reference to
their own tax situations.

     The discussions of tax consequences in the Prospectus and this Additional
Statement are based on the Internal Revenue Code of 1986, as amended (the
"Code"), and the laws and regulations issued thereunder as in effect on the date
of this Additional Statement. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.

Federal - General Information

     The Portfolio intends to qualify as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1, of Code. As a regulated
investment company, the Portfolio is generally exempt from federal income tax on
its net investment income and realized capital gains which it distributes to
shareholders, provided that it distributes an amount equal to at least the sum
of 90% of its tax-exempt income and 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 the year (the "Distribution Requirement")
and satisfies certain other requirements of the Code that are described below.

     In addition to satisfaction of the Distribution Requirement, the Portfolio
must derive with respect to a taxable year 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, loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from income derived with respect to its business of investing in such stock,
securities, or currencies (the "Income Requirement").

     In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of the Portfolio's assets must
generally consist of cash and cash items, U.S. Government Securities, securities
of other regulated investment companies, 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 that 10% of the outstanding voting securities of such issuer), and no more
than 25% of the value of the 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.

     The Portfolio does not expect to pay dividends that qualify for the
dividends-received deduction for corporations.

     If for any taxable year the Portfolio were not to qualify as a regulated
investment company, 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 would be taxable 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 Code imposes a non-deductible 4% excise tax on regulated investment
companies 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). The 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.

     Although the 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, the Portfolio may be subject to the
tax laws of such states or localities.

     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

                                       26
<PAGE>

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 the
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 the 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 the Portfolio.

                             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
twenty-two existing series, which represent interests in the Trust's twenty-two
respective portfolios, one of which is 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 the Portfolio is
without par value, represents an equal proportionate interest in the Portfolio
with each other share of its class in the 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 the Portfolio, shareholders of
each class of the 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 the Portfolio may be suspended for more than seven days
(i) 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, (ii)
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 (iii) 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 the 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 Portfolio are
not issued.

     The proceeds received by the 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 the Portfolio. The underlying assets
of the Portfolio will be segregated on the books of account, and will be charged
with the liabilities in respect to the Portfolio and with a share of the general
liabilities of the Trust. General liabilities of the Trust are normally
allocated in proportion to the net asset value of the Trust's respective
investment 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

                                       27
<PAGE>

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.

     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

                                       28
<PAGE>

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: (i) a court refuses to apply Delaware law; (ii) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (iii) 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:  (i) 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 (ii) 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
(i) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (ii) 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 (iii) 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.


                               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.

     The Portfolio is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees and expenses payable to Northern Trust,
NTI and PFPC, 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 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.

                                       29
<PAGE>

     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.

                                       30
<PAGE>

                                 APPENDIX A


Commercial Paper Ratings
------------------------

          A Standard & Poor's commercial paper rating is a current opinion of
the creditworthiness of an obligor with respect to financial obligations 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:

          "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.

          "A-3" - Obligations exhibit 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.

          "B" - Obligations are regarded as having significant speculative
characteristics.  The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

          "C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

          "D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

          Moody's commercial paper ratings are opinions of the ability of
issuers to honor senior financial obligations and contracts. These obligations
have an original maturity not exceeding one year, unless explicitly noted. The
following summarizes the rating categories used by Moody's for commercial paper:

          "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.

          "Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

          "Not Prime" - Issuers do not fall within any of the Prime rating
categories.

                                      A-1
<PAGE>

          Fitch 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 for short-term obligations:

          "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.

          "F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to non-
investment grade.

          "B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

          "C" - Securities possess high default risk. This designation indicates
a capacity for meeting financial commitments which is solely reliant upon a
sustained, favorable business and economic environment.

          "D" - Securities are in actual or imminent payment default.


          Thomson Financial 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 Financial BankWatch:

          "TBW-1" - This designation represents Thomson Financial 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 Financial 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."

          "TBW-3" - This designation represents Thomson Financial BankWatch's
lowest investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

          "TBW-4" - This designation represents Thomson Financial BankWatch's
lowest rating category and indicates that the obligation is regarded as non-
investment grade and therefore speculative.


Corporate and Municipal Long-Term Debt Ratings
----------------------------------------------

          The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

          "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.

          "A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

                                      A-2
<PAGE>

          "BBB" - An obligation 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.

          Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

          "BB" - An obligation rated "BB" is less vulnerable to nonpayment 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.

          "B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations 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.

          "CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

          "CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

          "C" - An obligation rated "C" is currently highly vulnerable to non-
payment. The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.

          "D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.

          PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

     The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

          "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.

          "A" - Bonds 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 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.

                                      A-3
<PAGE>

          "Ba" - Bonds are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

          "B" - Bonds generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

          "Caa " - Bonds are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

          "Ca" - Bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

          "C" - Bonds are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

          Con. (...) - Bonds for which the security depends on 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 operations experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. The parenthetical rating denotes probable credit stature upon
completion of construction or elimination of the basis of the condition.

          Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa." 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 ratings used by 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 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.

          "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 capacity. This is the lowest
investment grade 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 change 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.

          "CCC," "CC" and "C" - Bonds have high default risk.  Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments.  "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

                                      A-4
<PAGE>

          "DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.

          Entities rated in this category have defaulted on some or all of their
obligations.  Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process.  Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

          To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.

          `NR' indicates the Fitch does not rate the issuer or issue in
question.

          Thomson Financial 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:

          "AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.

          "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.

          "A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

          "BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.

          "BB," - A rating of BB suggests that the likelihood of default is
considerably less than for lower-rated issues, although there are significant
uncertainties that could affect the ability to adequately service debt
obligations.

          "B" - Issues rated B show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a timely basis.

          "CCC" - Issues rated CCC clearly have a high likelihood of default,
with little capacity to address further adverse changes in financial
circumstances.

          "CC" - This rating is applied to issues that are subordinate to other
obligations rated CCC and are afforded less protection in the event of
bankruptcy or reorganization.

          "D" - This designation indicates that the long-term debt is in
default.

          PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

                                      A-5
<PAGE>

Municipal Note Ratings
----------------------

          A Standard and Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:

          "SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service 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.

          "SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.


          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:

          "MIG-1"/"VMIG-1" - This designation denotes superior credit quality.
Excellent protection afforded by established cash flows, highly reliable
liquidity support or demonstrated broad-based access to the market for
refinancing.

          "MIG-2"/"VMIG-2" - This designation denotes strong credit quality.
Margins of protection are ample although not so large as in the preceding group.

          "MIG-3"/"VMIG-3" - This designation denotes acceptable credit.
Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.

          "MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

          "SG" - This designation denotes speculative-grade credit quality. Debt
instruments in this category lack margins of protection.

          Fitch uses the short-term ratings described under Commercial Paper
Ratings for municipal notes.

                                      A-6
<PAGE>

                                   APPENDIX B

As stated in its Prospectus, the Portfolio 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, the 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.

          The 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 the Portfolio, through
using futures contracts.

          Interest rate futures contracts can also be used by the 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 the 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 the 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.

          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 the 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, the Portfolio is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Portfolio pays the difference and
realizes a loss. Similarly, the closing out of a futures contract purchase is
effected by the Portfolio entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Portfolio realizes a gain,
and if the purchase price exceeds the offsetting sale price, the 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. The 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. The Portfolio may trade in any interest rate
futures contracts for which there exists a public market, including, without
limitation, the foregoing instruments.

                                      B-1
<PAGE>

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.

          The 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. The 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, the
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, the Portfolio may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that the 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.
The 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.

          Index futures contracts may also be used by the Portfolio for non-
hedging (speculative) purposes, to increase total return.

III.  Margin Payments

          Unlike purchases or sales of portfolio securities, no price is paid or
received by the 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 the 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
Portfolio, even when futures are used for hedging (non-speculative) purposes. In
connection with the use of futures for hedging purposes, one risk arises because
of the imperfect correlation between movements in the price of the futures and
movements in the price of the instruments which are the subject of a 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 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

                                      B-2
<PAGE>

futures, or if otherwise deemed to be appropriate by the Investment Adviser.
Conversely, the Portfolio 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 Adviser.
It is also possible that, where the 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 the 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. First, 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 Adviser may
still not result in a successful hedging transaction over a short time frame.

          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
Portfolio intends 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 Portfolio 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 Portfolio is also subject to the
Investment Adviser's ability to predict correctly movements in the direction of
the market. For example, if the 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
Portfolio may have to sell securities at a time when they may be disadvantageous
to do so.


VI.  Options on Futures Contracts

          The Portfolio may purchase and write (sell) call and put options on
the futures contracts described above. A futures

                                      B-3
<PAGE>

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. The 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

          The 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.

                                      B-4
<PAGE>

PART C.

                               OTHER INFORMATION

ITEM 23.  EXHIBITS
-------------------


The following exhibits are incorporated herein by reference to Post-Effective
Amendment No. 31 to Registrant's Registration Statement on Form N-1A (the
"Registration Statement") (Accession No. 0000950130-96-001086), Post-Effective
Amendment No. 32 to such Registration Statement (Accession No. 0000950130-97-
000170), Post-Effective Amendment No. 33 to such Registration Statement
(Accession No. 0000950130-97-001306), Post-Effective Amendment No. 34 to such
Registration Statement (Accession No. 0000950130-97-002471), Post-Effective
Amendment No. 35 to such Registration Statement (Accession No. 0000950131-97-
005862), Post-Effective Amendment No. 36 to such Registration Statement
(Accession No. 0000950131-98-00216), Post-Effective Amendment No. 37 to such
Registration Statement (Accession No. 0000950131-98-00512), Post-Effective
Amendment No. 38 to such Registration Statement (Accession No. 0000950131-98-
002030), Post-Effective Amendment No. 39 to such Registration Statement
(Accession No. 00009150131-99-000461), Post-Effective Amendment No. 40 to such
Registration Statement (Accession No. 0000927405-99-000282), Post-Effective
Amendment No. 41 to such Registration Statement (Accession No. 0000927405-99-
000333), Post-Effective Amendment No. 43 to such Registration Statement
(Accession No. 0000927405-00-000027) and Post-Effective Amendment No. 44 to such
Registration Statement (Accession No. 0000950131-00-002147):

     (a)  (1)  Agreement and Declaration of Trust dated November 1, 1997
               (Accession No. 0000950131-98-00216).

          (2)  Amendment No. 1 dated January 27, 1998 to the Agreement and
               Declaration of Trust (Accession No. 0000950131-99-000461).

          (3)  Amendment No. 2 dated May 15, 1998 to the Agreement and
               Declaration of Trust (Accession No. 0000950131-99-000461).

          (4)  Amendment No. 3 dated October 5, 1999 to the Agreement and
               Declaration of Trust (Accession No. 0000927405-99-000333).

          (5)  Amendment No. 4 dated January 24, 2000 to the Agreement and
               Declaration of Trust (Accession No. 0000927405-00-000027).

          (6)  Amendment No. 5 dated May 2, 2000 to the Agreement and
               Declaration of Trust is filed herewith.

          (7)  Amendment No. 6 to the Agreement and Declaration of Trust is
               filed herewith.

     (b)  (1)  By-Laws dated November 8, 1997 (Accession No. 0000950131-98-
               00216).
<PAGE>

     (2)  Amended and Restated By-Laws adopted August 2, 2000 are filed
          herewith.

(c)  None.

(d)  (1)  Investment Advisory Agreement dated March 31, 1998 between the
          Registrant and The Northern Trust Company (the "Investment Advisory
          Agreement") (Accession No. 0000950131-99-000461).

     (2)  Addendum No. 1 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (3)  Addendum No. 2 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (4)  Addendum No. 3 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (5)  Addendum No. 4 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (6)  Addendum No. 5 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (7)  Addendum No. 6 dated March 31, 1998 to the Investment Advisory
          Agreement (Accession No. 0000950131-99-000461).

     (8)  Assumption Agreement dated April 1, 1998 between The Northern
          Trust Company and Northern Trust Quantitative Advisors, Inc.
          (Accession No. 0000950131-99-000461).

     (9)  Form of Assumption Agreement dated ______, 2001 between the
          Registrant, The Northern Trust Company and Northern Trust Investments,
          Inc. is filed herewith.

     (10) Form of Investment Advisory Agreement is filed herewith.

(e)  (1)  Distribution Agreement between the Registrant and Northern Funds
          Distributors, LLC.  (Accession No. 0000927405-00-000027).

     (2)  Form of Distribution Agreement between the Registrant and Northern
          Funds Distributors, LLC dated _______, 2000 is filed herewith.

(f)  Not Applicable.

                                       2
<PAGE>

(g)  (1)  Custodian Agreement dated June 8, 1992 between the Registrant and The
          Northern Trust Company (Accession No. 0000950131-98-002030).

     (2)  Addendum No. 1 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950130-96-001086).

     (3)  Addendum No. 2 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950130-96-001086).

     (4)  Addendum No. 3 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950130-97-002471).

     (5)  Addendum No. 4 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950131-97-005862).

     (6)  Addendum No. 5 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950131-98-002030).

     (7)  Addendum No. 6 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950131-98-002030).

     (8)  Addendum No. 7 to the Custodian Agreement between the Registrant and
          The Northern Trust Company (Accession No. 0000950131-99-000461).

     (9)  Foreign Custody Agreement between the Registrant and The Northern
          Trust Company (Accession No. 0000950131-98-002030).

     (10) Addendum No. 1 to the Foreign Custody Agreement between the Registrant
          and The Northern Trust Company (Accession No. 0000950130-97-002471).

     (11) Addendum No. 2 to the Foreign Custody Agreement between the Registrant
          and The Northern Trust Company (Accession No. 0000950131-98-002030).

     (12) Addendum No. 3 to the Foreign Custody Agreement between the Registrant
          and The Northern Trust Company (Accession No. 0000950131-99-000461).

     (13) Foreign Custody Monitoring Agreement dated March 31, 1998 between the
          Registrant and The Northern Trust Company (Accession No. 0000950131-99
          -000461).

     (14) Addendum No. 8 to Custodian Agreement between the Registrant and The
          Northern Trust Company (Accession No. 00009150131-99-000461).

     (15) Form of Addendum No. 9 to the Custodian Agreement between the
          Registrant and the Northern Trust Company is filed herewith.

                                       3
<PAGE>

(h)  (1)  Agreement and Plan of Reorganization between the Registrant and The
          Benchmark Tax-Exempt Fund (Accession No. 0000950131-98-002030).

     (2)  Revised and Restated Transfer Agency Agreement dated January 8, 1993
          between the Registrant and The Northern Trust Company (Accession No.
          0000950131-98-002030).

     (3)  Addendum No. 1 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950130-96-001086).

     (4)  Addendum No. 2 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950130-96-001086).

     (5)  Addendum No. 3 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950130-97-002471).

     (6)  Addendum No. 4 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950131-97-005862).

     (7)  Addendum No. 5 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950131-98-002030).

     (8)  Addendum No. 6 to the Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950131-99-000461).

     (9)  Shareholder Servicing Plan for Class C and D Shares and Related Forms
          of Servicing Agreement (Accession No. 0000927405-00-000027).

     (10) Service Plan for the Service and Premier Classes of Shares and Related
          Forms of Servicing Agreement (Accession No. 0000927405-00-000027).

     (11) Amended and Restated Co-Administration Agreement dated October 5, 1999
          among the Registrant, Northern Trust Company and First Data Investor
          Services Group, Inc. (now known as PFPC Inc.) (Accession No.
          0000927405-00-000027).

     (12) Addendum No. 7 to Revised and Restated Transfer Agency Agreement
          between the Registrant and The Northern Trust Company (Accession No.
          0000950131-00-002147).

                                       4
<PAGE>

          (13) Form of Addendum No. 8 to Revised and Restated Transfer Agency
               Agreement is filed herewith.

          (14) Form of Assignment and Assumption Agreement dated ______, 2000
               among the Registrant, The Northern Trust Company, Northern Trust
               Investments, Inc. and PFPC Inc. is filed herewith.

          (15) Form of Schedule A to amended and Restated Co-Administration
               Agreement is filed herewith.

     (i)  Opinion of Drinker Biddle & Reath LLP is filed herewith.

     (j)  Consent of Drinker Biddle & Reath LLP is filed herewith.

     (k)  None.

     (l)  (1)  Subscription Agreement with Goldman, Sachs & Co. (Accession No.
               0000950131-98-002030).

          (2)  Amendment No. 1 to Subscription Agreement with Goldman, Sachs &
               Co. (Accession No. 0000950131-98-002030).

          (3)  Amendment No. 2 to Subscription Agreement with Goldman, Sachs &
               Co. (Accession No. 0000950131-98-002030).

          (4)  Amendment No. 3 to Subscription Agreement with Goldman, Sachs &
               Co. (Accession No. 0000950131-98-002030).

     (m)  None.

     (n)  Amended and Restated Plan pursuant to Rule 18f-3 for Operation of a
          Multi-Class System (Accession No. 0000927405-99-000333).

     (o)  (1)  Code of Ethics of Trust is filed herewith.

          (2)  Code of Ethics of Adviser is filed herewith.


ITEM 24.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-----------------------------------------------------------------------

Registrant is controlled by its Board of Trustees.

ITEM 25.  INDEMNIFICATION
-------------------------

                                       5
<PAGE>

Section 3 of Article IV of the Registrant's Agreement and Declaration of Trust
provides for indemnification of the Registrant's Trustees and officers under
certain circumstances. A copy of such Agreement and Declaration of Trust was
filed as Exhibit 1 to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A.

Paragraph 7 of the Investment Advisory Agreement between the Registrant and The
Northern Trust Company provides for indemnification of The Northern Trust
Company or, in lieu thereof, contribution by the Registrant, under certain
circumstances. A copy of the Investment Advisory Agreement was filed as Exhibit
(d)(1) to Post-Effective Amendment No. 39 to Registrant's Registration Statement
on Form N-1A.

Article 10 of the Amended and Restated Co-Administration Agreement dated October
5, 1999 among the Registrant, Northern Trust Company and First Data Investor
Services Group, Inc. (now known as PFPC Inc.) provides that the Registrant will
indemnify Northern Trust Company and First Data Investor Services Group, Inc.
(now known as PFPC Inc.) (each a "Co-Administrator") against all claims except
those resulting from the willful misfeasance, bad faith or negligence of such
Co-Administrator, or the Co-Administrator's breach of confidentiality. A copy of
the Amended and Restated Co-Administration Agreement was filed as Exhibit
(h)(11) to Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A.

Paragraph 3 of the Distribution Agreement dated December 1, 1999 between the
Registrant and Northern Funds Distributors, LLC ("NFD") provides that the
Registrant will indemnify NFD against certain liabilities relating to untrue
statements or omissions of material fact except those resulting from the
reliance on information furnished to the Registrant by NFD, or those resulting
from the willful misfeasance, bad faith or negligence of NFD, or NFD's breach of
confidentiality. A copy of the Distribution Agreement was filed as Exhibit
(e)(1) to Post-Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A.

A mutual fund trustee and officer liability policy purchased by the Registrant
insures the Registrant and its Trustees and officers, subject to the policy's
coverage limits and exclusions and varying deductibles, against loss resulting
from claims by reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 26.  BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
--------------------------------------------------------------


Northern Trust Investments, Inc. ("NTI"), formerly known as Northern Trust
Quantitative Advisors, Inc., is a wholly-owned subsidiary of Northern Trust
Corporation. The list required by this Item 26 of officers and directors of NTI,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV, filed by NTI pursuant to the Investment Advisers Act of 1940 (SEC File
No. 801-333580).

                                       6
<PAGE>

ITEM 27.  PRINCIPAL UNDERWRITERS
--------------------------------

     (a)  Northern Funds Distributors, LLC (the "Distributor"), acts as
          distributor for Northern Institutional Funds pursuant to a
          distribution agreement dated December 1, 1999. The Distributor also
          acts as underwriter for Northern Funds.

     (b)  The information required by this Item 27(b) with respect to each
          director, officer, or partner of Northern Funds Distributors, LLC is
          incorporated by reference to Schedule A of Form BD filed by Northern
          Funds Distributors, LLC with the Securities and Exchange Commission
          pursuant to the Securities Act of 1934 (File No. 8-51242).

     (c)  Not Applicable.


ITEM 28.  LOCATION OF ACCOUNTS AND RECORDS
------------------------------------------

The Agreement and Declaration of Trust, By-laws and minute books of the
Registrant are in the physical possession of PFPC Inc., 101 Federal Street,
Boston, Massachusetts 02110.  Records for Northern Funds Distributors, LLC, the
distributor, are located at Four Falls Corporate Center, 6/th/ Floor, West
Conshohocken, Pennsylvania 19428-2961.  All other accounts, books and other
documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of The Northern Trust Company, 50 S. LaSalle Street, Chicago,
Illinois 60675 and  NTI, 50 S. LaSalle Street, Chicago Illinois 60690.


ITEM 29.  MANAGEMENT SERVICES
-----------------------------

Not Applicable.


ITEM 30.  UNDERTAKINGS
----------------------

Not Applicable.

                                       7
<PAGE>

                                  SIGNATURES
                                  ----------

          Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 46 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia and Commonwealth of Pennsylvania on the 17/th/ day of January,
2001.

                         NORTHERN INSTITUTIONAL FUNDS
                         ----------------------------


                                    By:/*/ Lloyd A. Wennlund*
                                       -----------------------------------
                                       Lloyd A. Wennlund
                                       President


          Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 46 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.

         Name                      Title                         Date
         ----                      -----                         ----

/*/ Lloyd A. Wennlund*             President                January 17, 2001
------------------------------
    Lloyd A. Wennlund

/*/ Richard G. Cline*              Trustee                  January 17, 2001
------------------------------
    Richard G. Cline

/*/ Edward J. Condon, Jr.*         Trustee                  January 17, 2001
------------------------------
    Edward J. Condon, Jr.

/*/ Wesley M. Dixon, Jr.*          Trustee                  January 17, 2001
------------------------------
    Wesley M. Dixon, Jr.

/*/ William J. Dolan, Jr.*         Trustee                  January 17, 2001
------------------------------
    William J. Dolan, Jr.

/*/ John W. English*               Trustee                  January 17, 2001
------------------------------
    John W. English

/*/ Raymond E. George, Jr.*        Trustee                  January 17, 2001
------------------------------
    Raymond E. George, Jr.

/*/ Sandra Polk Guthman*           Trustee                  January 17, 2001
------------------------------
    Sandra Polk Guthman

/*/ Michael E. Murphy*             Trustee                  January 17, 2001
------------------------------
    Michael E. Murphy

/*/ Mary Jacobs Skinner*           Trustee                  January 17, 2001
------------------------------
    Mary Jacobs Skinner

/*/ William H. Springer*           Trustee                  January 17, 2001
------------------------------

                                       8
<PAGE>

    William H. Springer

/*/ Richard P. Strubel*            Trustee                  January 17, 2001
------------------------------
    Richard P. Strubel

/*/ Stephen B. Timbers*            Trustee                  January 17, 2001
------------------------------
    Stephen B. Timbers

/*/ Brian R. Curran*               Treasurer                January 17, 2001
------------------------------     (Chief Financial
    Brian R. Curran                and Accounting
                                   Officer)



*By: /s/ Jeffrey A. Dalke
    --------------------------
     Jeffrey A. Dalke
     Attorney-in-fact

                                       9
<PAGE>

                         NORTHERN INSTITUTIONAL FUNDS
                         ----------------------------

                               POWER OF ATTORNEY
                               -----------------

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, being a Trustee of
Northern Institutional Funds, a business trust organized under the laws of the
State of Delaware (the "Trust"), does hereby make, constitute and appoint
Archibald E. King III, Lloyd A. Wennlund, Brian R. Curran, Jeffrey A. Dalke and
Linda J. Hoard, and each of them, attorneys-in-fact and agents of the
undersigned with full power and authority of substitution and resubstitution, in
any and all capacities, to execute for and on behalf of the undersigned any and
all filings and amendments to the Registration Statement on Form N-1A relating
to the shares of the Trust and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
that said attorneys-in-fact and agents, and each of them, deem advisable or
necessary to enable the Trust to effectuate the intents and purposes hereof, and
the undersigned hereby fully ratifies and confirms all that said attorneys-in-
fact and agents, or any of them, or their or his or her substitute or
substitutes, shall do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has subscribed his or her name this
22/nd/ day of August, 2000.

     /s/ Richard G. Cline                  /s/ Sandra Polk Guthman
     ------------------------------        ----------------------------
     Richard G. Cline                      Sandra Polk Guthman

     /s/ Edward J. Condon, Jr.             /s/ Michael E. Murphy
     ------------------------------        ----------------------------
     Edward J. Condon, Jr.                 Michael E. Murphy

     /s/ Wesley M. Dixon, Jr.              /s/ Mary Jacobs Skinner
     ------------------------------        ----------------------------
     Wesley M. Dixon, Jr.                  Mary Jacobs Skinner

     /s/ William J. Dolan                  /s/ William H. Springer
     ------------------------------        ----------------------------
     William J. Dolan                      William H. Springer

     /s/ John W. English                   /s/ Richard P. Strubel
     ------------------------------        ----------------------------
     John W. English                       Richard P. Strubel

     /s/ Raymond E. George, Jr.            /s/ Stephen B. Timbers
     ------------------------------        ----------------------------
     Raymond E. George, Jr.                Stephen B. Timbers
<PAGE>

                         NORTHERN INSTITUTIONAL FUNDS

                           Certificate of Secretary


     The following resolution was duly adopted by the Board of Trustees of
Northern Institutional Funds (the "Trust") on August 2, 2000 and remains in
effect on the date hereof:


     RESOLVED, that the form of Powers of Attorney presented to this meeting
appointing Archibald E. King III, Lloyd A. Wennlund, Brian R. Curran, Jeffrey A.
Dalke and Linda J. Hoard as attorneys in-fact for the Trustees of the Trust and
for the President and Treasurer of the Trust with regard to all filings or
amendments to the Trust's Registration Statement with the Securities and
Exchange Commission made by the Trust, Northern and PFPC Inc. or any one of them
individually, be, and it hereby is, approved.


                                                  NORTHERN INSTITUTIONAL FUNDS


                                             By:  /s/ Jeffrey A. Dalke
                                                  --------------------
                                                  Jeffrey A. Dalke
                                                  Secretary


Dated: January 17, 2001
<PAGE>

                                 EXHIBIT INDEX


Exhibit No.    Description
-----------    -----------

(a)(6)         Amendment No. 5 to the Agreement and Declaration of Trust

(a)(7)         Amendment No. 6 to the Agreement and Declaration of Trust

(b)(2)         Amended and Restated By-Laws

(d)(10)        Form of Assumption Agreement

(d)(11)        Form of Investment Advisory Agreement

(e)(2)         Form of Distribution Agreement

(g)(5)         Form of Addendum No.  9 to Custodian Agreement

(h)(13)        Form of Addendum No. 8 to Revised and Restated Transfer Agency
               Agreement

(h)(14)        Form of Assignment and Assumption Agreement

(h)(15)        Form of Schedule A to Co-Administration Agreement

(i)            Opinion of Drinker Biddle & Reath LLP

(j)            Consent of  Drinker Biddle & Reath LLP

(o)(1)         Code of Ethics of Trust

(o)(2)         Code of Ethics of Adviser

                                      11


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