NORTHERN FUNDS, 497, 2000-05-18

NORTHERN FUNDS
497, 2000-05-18

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Northern Funds

Global Communications Fund

Prospectus dated May 15, 2000

An investment in the Fund 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 Fund 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>

Table of Contents

<TABLE>
<CAPTION>
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Page
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<S> <C> <C>
RISK/RETURN SUMMARY Global Communications Fund 4
Information about the objectives, principal --------------------------------------------------------
strategies and risk characteristics of the Fund. Fund Performance 6
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Fund Fees and Expenses 7
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MANAGEMENT OF THE FUND Investment Adviser 8
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Advisory Fees 8
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Fund Management 9
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Other Fund Services 9
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ABOUT YOUR ACCOUNT Purchasing and Selling Shares
How to open, maintain and close an account. . Purchasing Shares 9
. Opening an Account 9
. Selling Shares 11
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Account Policies and Other Information
. Calculating Share Price 13
. Timing of Purchase Requests 13
. Social Security/Tax Identification Number 13
. In-Kind Purchases and Redemptions 14
. Miscellaneous Purchase Information 14
. Timing of Redemption and Exchange Requests 14
. Payment of Redemption Proceeds 14
. Miscellaneous Redemption Information 14
. Exchange Privileges 15
. Telephone Transactions 15
. Making Changes to Your Account Information 15
. Signature Guarantees 16
. Business Day 16
. Early Closings 16
. Authorized Intermediaries 16
. Service Organizations 16
. Shareholder Communications 17
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Dividends and Distributions 17
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Tax Considerations 17
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</TABLE>

Page 2
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Table of Contents

Page 3
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GLOBAL COMMUNICATIONS FUND

Investment Objective

The Fund seeks to provide long-term capital appreciation.

Principal Investment Strategies and Risks

Investment Strategies. In seeking to achieve its investment objective, the Fund
will invest, under normal market conditions, at least 65% of its total assets in
equity securities of domestic and foreign companies that are in the
communications industry. Communications companies are those that design,
develop, manufacture, distribute or sell communications services and equipment
that enable or enhance data, voice and video transmissions. Communications
companies use many different technologies, including but not limited to long
distance, local and cellular telephone; broadcasting and cable television;
wireless, wireline and fiber optic transmission of voice data and video traffic;
and other established and emerging technologies.

Using fundamental research and quantitative analysis, the investment management
team buys equity securities of communications companies it believes to have the
potential to outperform technology companies in general over the long term.
Similarly, the investment management team sells securities it believes no longer
have this potential. The team may also sell securities to maintain the desired
portfolio securities composition of the Fund, which may change in response to
market conditions. In selecting investments for the Fund, the management team
considers such factors as:

. Market share;

. Competitive leadership of a company's products or market niches;

. Revenue and earnings growth rates compared with relevant competitors;

. Market valuation compared to securities of other communications-
related companies and the stock's own historical norms; and

. A company's ability to raise money in the private and/or public
markets in order to finance business plans.

The types of equity securities in which the Fund may invest include common
stocks, preferred stocks, convertible debt obligations, convertible preferred
stocks, equity interests in trusts, partnerships, joint ventures, limited
liability companies and similar enterprises, warrants and stock purchase rights.
The Fund may invest in both small and large communications companies, without
regard to size. The Fund expects that it will generally invest in large
companies. At times, however, the Fund may make significant investments in small
companies and in initial public offerings ("IPOs"). An IPO is a company's first
offering of stock to the public.

The Fund will invest in the equity securities of communications companies in at
least three countries, although U.S. companies may dominate the Fund's
portfolio. The foreign markets in which the Fund may invest include mature
markets (such as Germany and Japan) and emerging markets (such as Argentina and
China). The Fund may make significant investments in mature foreign markets and
limited investments in emerging foreign markets. The investment management team
may engage in active trading, and will not consider portfolio turnover a
limiting factor in making decisions for the Fund.

In addition to the instruments described above, the Fund may use various
investment techniques in seeking its investment objective. You can learn more
about these techniques and their related risks by reading "Risks, Securities and
Techniques" beginning on page 19 of this Prospectus and the Statement of
Additional Information.

Page 4
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Risks. All of the Fund's investments carry some degree of risk, which will
affect the value of the Fund's portfolio, its investment performance and the
price of its shares. As a result, loss of money is a risk of investing in the
Fund.

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

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

. Stock risk is the risk that stock prices have historically risen and fallen
in periodic cycles. As of the date of this Prospectus, U.S. stock markets
and certain foreign stock markets were trading at or close to record high
levels. There is no guarantee that such levels will continue.

. Small cap stock risk is the risk that stocks of smaller companies may be
subject to more abrupt or erratic market movements than stocks of larger,
more established companies. Small companies may have limited product lines
or financial resources, or may be dependent upon a small or inexperienced
management group. In addition, small cap stocks typically are traded in
lower volume, and their issuers typically are subject to greater degrees of
changes in their earnings and prospects.

. Communications concentration risk is the risk that the securities of
communications companies may be subject to greater price volatility than
the securities of companies in other sectors. Communications companies may
produce or use products or services that prove commercially unsuccessful,
become obsolete or may be adversely affected by government regulation. The
securities of communications companies may experience significant price
movements caused by disproportionate investor optimism or pessimism.

. IPO risk is the risk that the price of IPO shares can be highly unstable
because of factors such as the absence of a prior public market, unseasoned
trading, the small number of shares available for trading and limited
investor information. The purchase of IPO shares may involve high
transaction costs. IPO shares are subject to market risk and liquidity
risk. When the Fund's asset base is small, a significant portion of the
Fund's performance could be attributable to investments in IPOs, because
such investments would have a magnified impact on the Fund. As the Fund's
assets grow, the effect of the Fund's investments in IPOs on the Fund's
performance probably will decline, which could reduce the Fund's
performance.

. Country risk is the potential for price fluctuations in foreign securities
because of political, financial and economic events in foreign countries.
These risks will normally be greatest when the Fund invests in emerging
markets. In addition, investments of more than 25% of the Fund's total
assets in securities of issuers located in one country will subject the
Fund to increased country risk with respect to the particular country.

. Currency risk is the potential for price fluctuations in the dollar value
of foreign securities because of changing currency exchange rates.

. Foreign regulatory risk is the risk that a foreign security could lose
value because of less stringent foreign securities regulations and
accounting and disclosure standards.

Page 5
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. Emerging markets risk is the risk that the securities markets of emerging
countries are less liquid, are especially subject to greater price
volatility, have smaller market capitalizations, have less government
regulation and are not subject to as extensive and frequent accounting,
financial and other reporting requirements as the securities markets of
more developed countries.

. Portfolio turnover risk is the risk that high portfolio turnover is likely
to result in increased Fund expenses which may result in lower investment
returns. High portfolio turnover is also likely to result in higher short-
term capital gains taxable to shareholders.

More information about the risks of investing in the Fund is provided in "Risks,
Securities and Techniques" beginning on page 19 of this Prospectus. You should
carefully consider the risks discussed in this section and "Risks, Securities
and Techniques" before investing in the Fund.

Fund Performance

The bar charts and the performance tables have been omitted because the Fund has
been in operation for less than one calendar year.

Page 6
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Fund Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. Please note that the following information does not reflect
any charges which may be imposed by The Northern Trust Company, its affiliates,
correspondent banks and other institutions on their customers. For more
information, please see "Account Policies and Other Information" on page
13.

<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------------------------
Sales Charge
Sales charge (Load) Imposed
(Load) Imposed Deferred Sales On Reinvested Redemption Exchange
Fund On Purchases Charge (Load) Distributions Fees/(1)/ Fees
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Communications None None None None None
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------------------------------------------------
Fund Management Distribution Other Total Annual Fund
Fees (12b-1) Fees/(2)/ Expenses/(3)/ Operating Expenses/(4)/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Communications 1.25% 0.00% 0.45% 1.70%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Footnotes

/1/ A fee of $15.00 may be applicable for each wire redemption.

/2/ The Fund does not expect to pay any 12b-1 fees during the current fiscal
year. The maximum distribution fee is 0.25% of the Fund's average net assets
under Northern Funds' Distribution and Service Plan.

/3/ These expenses include custodian, transfer agency and administration
expenses, proxy costs, if any, as well as other customary Fund expenses. The
co-administrators are entitled to a co-administration fee of 0.15%. "Other
Expenses" are based on estimated amounts the Fund expects to pay during the
current fiscal year.

/4/ As a result of voluntary fee reductions, waivers and reimbursements,
"Management Fees," "Other Expenses" and "Total Fund Operating Expenses"
which are expected to be actually incurred by the Fund during the current
fiscal year are set forth below. The voluntary fee reductions, waivers and
reimbursements may be modified or terminated at any time at the option of
the Investment Adviser. If this occurs, "Management Fees," "Other Expenses"
and "Total Fund Operating Expenses" may increase without shareholder
approval.

<TABLE>
<CAPTION>
Fund Management Distribution Other Total Annual Fund
Fees (12b-1) Fees Expenses Operating Expenses
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Communications 1.05% 0.00% 0.25% 1.30%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Page 7
<PAGE>

Example

The following Example is intended to help you compare the cost of investing in
the Fund (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 Fund 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 Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<TABLE>
<CAPTION>
Fund One Year 3 Years
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<S> <C> <C>
Global Communications $ 173 $ 536
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</TABLE>

Investment Adviser

The Northern Trust Company ("Northern Trust" or the "Investment Adviser"), an
Illinois state-chartered bank and member of the Federal Reserve System, serves
as investment adviser for the Fund.

The Investment Adviser is located at 50 S. LaSalle Street, Chicago, IL 60675 and
is a wholly-owned subsidiary of Northern Trust Corporation, a bank holding
company. As of March 31, 2000, Northern Trust Corporation and its
subsidiaries had approximately $33.2 billion in assets, $20.5 billion in
deposits and employed over 8,700 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 March 31, 2000, including approximately $323.1 billion of assets for
which Northern Trust and its affiliates had investment management
responsibility.

Under its Advisory Agreement with Northern Funds, the Investment Adviser,
subject to the general supervision of Northern Funds' Board of Trustees, is
responsible for making investment decisions for the Fund 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 Fund's respective average daily net assets).

Contractual
Fund Rate
- ---- ----
<S> <C>
Global Communications 1.25%
</TABLE>

As stated on page 7 under "Fund Fees and Expenses," the Investment Adviser
expects to waive voluntarily 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.

Page 8
<PAGE>

Fund Management

The Investment Adviser employs a team approach to the investment management of
the Fund, relying upon investment professionals under the leadership of James M.
Snyder, Chief Investment Officer and Executive Vice President of Northern Trust.

The management co-team leaders for the Global Communications Fund are Ken Turek,
CFA, Vice President of Northern Trust and Michael E. Eggly, CFA, Second Vice
President of Northern Trust. Mr. Turek joined Northern Trust in 1997 and manages
equity investment portfolios for institutional clients. From 1994 to 1997, Mr.
Turek was the chief equity officer of National Investment Services. Mr. Eggly
joined Northern Trust in 1999 and is currently a senior equity analyst
concentrating in telecommunications. From 1996 to 1999, he was an equity
research associate at Salomon Smith Barney. Prior thereto, he was co-founder and
vice president of Financial Insight Systems, a financial data and software
provider.

Other Fund Services

Northern Trust also serves as transfer agent ("Transfer Agent") and custodian
for the Fund. 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 those capacities are
described in the Statement of Additional Information. Northern Trust and PFPC
Inc. ("PFPC") act as co-administrators for Northern Funds. The fee that
Northern Trust and PFPC receive for their co-administrative services is
described on page 7 under "Fund Fees and Expenses."

Purchasing and Selling Shares

PURCHASING SHARES

You may purchase shares directly from Northern Funds or, if you maintain certain
accounts, through Northern Trust and certain other institutions. If you have any
questions or need assistance in opening an investment account or purchasing
shares, call (800) 595-9111.

OPENING AN ACCOUNT

Directly from the Fund. You may open a shareholder account and purchase shares
directly from the Fund with a minimum initial investment of $2,500 ($500 for an
IRA; $250 under the Automatic Investment Plan; and $500 for employees of
Northern Trust and its affiliates). The minimum subsequent investment is $50
(except for reinvestments of distributions for which there is no minimum). The
Fund reserves the right to waive these minimums.

For your convenience, there are a number of ways to invest directly in the Fund:

By Mail
. Read this Prospectus carefully
. Complete and sign the Purchase Application
. Enclose a check or money order payable to Northern Funds
. If you are investing on behalf of a corporation or other entity,
your Purchase Application must be accompanied by a certified
corporate resolution (or other acceptable evidence of authority).
. Mail your check, corporate resolution (if needed) and completed
Purchase Application to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

Page 9
<PAGE>

. For overnight delivery use the following address:

801 South Canal Street
Chicago, IL 60607
Attn: Northern Funds

. For subsequent investments:
- Enclose your check with the return remittance portion
of the confirmation of your previous investment; or
- Indicate on your check or a separate piece of paper
your name, address and account number

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 Wire
To open a new account:
. Call (800) 595-9111 for instructions
. Complete a Purchase Application and send it to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

To add to an existing account:
. Have your bank wire Federal funds to:

The Northern Trust Company
Chicago, IL
ABA Routing No. 0710-00152
(Reference 10 Digit Fund Account No.)
(Reference Shareholder's Name)

By Direct Deposit
To purchase additional shares:
. Determine if your employer has direct deposit capabilities through the
Automated Clearing House ("ACH")
. Have your employer send payments to:

ABA Routing No. 0710-00152
(Reference 10 Digit Fund Account No.)
(Reference Shareholder's Name)

. The minimum periodic investment for direct deposit is $50

By Automatic Investment
To open a new account:
. Complete a Purchase Application, including the Automatic Investment
section
. Send it to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

. The minimum initial investment is $250; $50 for monthly minimum
additions

Page 10
<PAGE>

To add to an account:
. Call (800) 595-9111 to obtain an Automatic Investment Plan Application
. The minimum for automatic investment additions is $50

If you discontinue participation in the plan, the Fund reserves the right to
redeem your account involuntarily, upon 30 days written notice, if the
account's net asset value is $1,000 or less. Involuntary redemptions will not
be made if the value of shares in an account falls below the minimum amount
solely because of a decline in the Fund's net asset value.

By Directed Reinvestment
You may elect to have your income dividends and capital gains distributions
automatically invested in another Northern Fund.
. Complete the Distribution Options section on the Purchase Application
. Reinvestments can only be directed to an existing Northern Funds
account (which must meet the minimum investment requirement)

By Exchange

You may open a new account or add to an existing account by exchanging shares
of one Fund for shares of any other Fund offered by Northern Funds. See
"Selling Shares - By Exchange." on page 12

By Internet
You may initiate transactions between Northern Trust banking and Northern
Funds accounts by using Northern Trust Private Passport. For details and to
sign up for this service, go to www.northerntrust.com/privatepassport or
contact your relationship manager.

Through Northern Trust and Other Institutions.

If you have an account with Northern Trust, you may purchase shares of the Fund
through Northern Trust. You may also purchase shares through other
institutions (together with Northern Trust, "Service Organizations") that have
entered into agreements with Northern Funds. To determine whether you may
purchase shares through your institution, contact your institution directly or
call (800) 595-9111. Northern Trust or another Service Organization may impose
charges against your account which will reduce the net return on an investment
in the Fund. These charges may include asset allocation fees, account
maintenance fees, sweep fees, compensating balance requirements or other charges
based upon account transactions, assets or income.

SELLING SHARES

Redeeming and Exchanging Directly from the Fund.

If you purchased shares of the Fund directly or, if you purchased your shares
through an account at Northern Trust or another Service Organization and you
appear on Northern Funds' records as the registered holder, you may redeem all
or part of your shares using one of the methods described below.

By Mail
Send a written request to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

The redemption request must include:
. The number of shares or the dollar amount to be redeemed

Page 11
<PAGE>

. The Fund account number
. A signature guarantee is also required if:
- The proceeds are to be sent elsewhere than the address
of record; or
- The redemption amount is greater than $50,000

By Wire
If you authorize wire redemptions on your Purchase Application, you can
redeem shares and have the proceeds sent by Federal wire transfer to a
previously designated account.
. You will be charged $15 for each wire redemption unless the
designated account is maintained at Northern Trust or an
affiliated bank
. Call the Transfer Agent at (800) 595-9111 for instructions
. The minimum amount that may be redeemed by this method is $250

By Systematic Withdrawal
If you own shares of the Fund with a minimum value of $10,000, you may
elect to have a fixed sum redeemed at regular intervals and distributed in
cash or reinvested in one or more other Northern Funds.
. Call (800) 595-9111 for an application form and additional
information
. The minimum amount is $250 per withdrawal

By Exchange
Northern Funds offers you the ability to exchange shares of one Northern
Fund for another Fund in the Northern Funds family.
. When opening an account, complete the Exchange Privilege section
of the Purchase Application or, if your account is already
opened, send a written request to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

. Shares being exchanged must have a value of at least $1,000
($2,500 if a new account is being established by the exchange)
. Call (800) 595-9111 for more information

By Telephone
If you authorize the telephone privilege on your Purchase Application, you
may redeem shares of the Fund by phone.
. If your account is already opened, send a written request to:

Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986

. The request must be signed by each owner of the account and must
be accompanied by signature guarantees
. Call (800) 595-9111 to use the telephone privilege
. 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 on page
11 under "Selling Shares - By Mail."

Page 12
<PAGE>

Redeeming and Exchanging Through Northern Trust and Other Institutions.

If you purchased your shares of the Fund through an account at Northern Trust
or another Service Organization, you may redeem or exchange your shares
according to the instructions pertaining to that account.

. Although Northern Funds imposes no charges when you redeem, when
shares are purchased through Northern Trust or another Service
Organization, a fee may be charged by those institutions for
providing services in connection with your account

. Contact your account representative at Northern Trust or other
Service Organization for more information about redemptions or
exchanges

Account Policies and Other Information

Calculating Share Price. Northern Funds issues shares and redeems shares at net
asset value ("NAV"). The NAV for the Fund is calculated by dividing the value
of the Fund's net assets by the number of the Fund's outstanding shares. The
NAV is calculated on each Business Day as of 3:00 p.m., Chicago time. 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 Fund generally are valued at their
market prices. Shares of an investment company held by the Fund are valued at
their NAV. 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 Fund are valued at their
amortized cost which, according to the Investment Adviser, approximates market
value.

The Fund may hold foreign securities that trade on weekends or other days when
the Fund 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 provided that either:

. The order is in proper form as described under "Purchasing and
Selling Shares" and accompanied by payment of the purchase price;
. The order is placed by Northern Trust or a Service Organization
and payment in Federal or other immediately available funds is to
be made on the next Business Day; or
. The order is accepted by an authorized intermediary and payment
in Federal or other immediately available funds is to be made on
the next Business Day in accordance with procedures acceptable to
Northern Funds.

Orders received by the Transfer Agent or other authorized intermediary on a non-
Business Day or after 3:00 p.m., Chicago time, on a Business Day will be
executed on the next Business Day, at that day's closing share price, provided
that payment is made as noted above.

Social Security/Tax Identification Number. Federal regulations require you to
provide a Social Security or other certified taxpayer identification number when
you open or reopen an account. Purchase Applications 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, the number must be provided and certified within 60 days
of the date of the Purchase Application.

Page 13
<PAGE>

In-Kind Purchases and Redemptions. Northern Funds reserves the right to accept
payment for shares in the form of securities that are permissible investments
for the Fund. Northern Funds also reserves the right to pay redemptions by a
distribution "in-kind" of securities (instead of cash) from the Fund. See the
Statement of Additional Information for further information about the terms of
these purchases and redemptions.

Miscellaneous Purchase Information.

. You will be responsible for all losses and expenses of the Fund 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 Fund and Northern Trust against loss. In addition,
a $20 charge will be imposed if a check does not clear.

. You may initiate transactions between Northern Trust banking and Northern
Funds accounts by using Northern Trust Private Passport. For additional
details, please visit our website at www.northerntrust.com/privatepassport
or contact your relationship manager.

. Northern Funds reserves the right to reject any purchase order. The Fund
also reserves the right to change or discontinue any of its purchase
procedures.

. In certain circumstances, Northern Funds may advance the time by which
purchase orders must be received. See "Early Closings" on page 16.

. Northern Funds may reproduce this Prospectus in an electronic format which
may be available on the Internet. If you have received this Prospectus in
its electronic format you, or your representative, may contact the Transfer
Agent for a free paper copy of this Prospectus by writing to the Northern
Funds Center at P.O. Box 75986, Chicago, IL 60675-5986, calling (800) 595-
9111 or sending an e-mail to: [email protected].

Timing of Redemption and Exchange Requests. Redemption and exchange requests
received in good order by the Transfer Agent or other authorized intermediary on
a Business Day by 3:00 p.m., Chicago time, will be executed on the same day. The
redemption or exchange will be effected at that day's closing share price.

Good order means that the request must include the following information:

. The account number and Fund name
. The amount of the transaction, in dollar amount or number of shares
. The signature of all account owners exactly as they are registered on
the account (except for online, telephone and wire redemptions)
. Required signature guarantees, if applicable
. Other supporting legal documents that might be required in the case of
estates, corporations, trusts and certain other accounts. Call (800)
595-9111 for more information about documentation that may be required
of these entities

In certain circumstances, Northern Funds may advance the time by which
redemption and exchange orders must be received. See "Early Closings" on page
16.

Payment of Redemption Proceeds. The Fund will make payment for redeemed shares
typically within one or two Business Days, but no later than the seventh day
after a redemption request is received in good order by the Transfer Agent or an
authorized intermediary (or such longer period permitted by the SEC). However,
if any portion of the shares to be redeemed represents an investment made by
check, the Fund may delay the payment of the redemption proceeds until the check
has cleared and collected. This may take up to fifteen days from the purchase
date.

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 Purchase Application.

Page 14
<PAGE>

. Northern Funds 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
Fund and its shareholders.

. Northern Funds may require any information reasonably necessary to ensure
that a redemption has been duly authorized.

. Northern Funds reserves the right, on 60 days written notice, to redeem the
shares held in any account if, at the time of redemption, the net asset
value of the remaining shares in the account falls below $1,000.
Involuntary redemptions will not be made if the value of shares in an
account falls below the minimum solely because of a decline in the Fund's
net asset value.

. Northern Funds reserves the right to change or discontinue any of its
redemption procedures.

. Northern Funds reserves the right to defer crediting, sending or wiring
redemption proceeds for up to seven days (or such longer period permitted
by the SEC) after receiving the redemption order if, in its judgment, an
earlier payment could adversely affect the Fund.

Exchange Privileges. You may exchange shares of one Northern Fund for another
only if the registration of both accounts is identical. An exchange is a
redemption of shares of one Fund and the purchase of shares of another Fund. It
is considered a taxable event and may result in a gain or loss. Northern Funds
reserves the right, at any time without prior notice to suspend, limit or
terminate the exchange privilege of any shareholder who makes more than eight
exchanges of shares in a year and/or two exchanges of shares in a calendar
quarter. Northern Funds may also modify or terminate the exchange privilege
with respect to any or all shareholders, and may 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 are 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, Northern Funds 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.

Northern Funds 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 signature guarantee from an
institution participating in the Stock Transfer Agency Medallion Program
("STAMP"), or other acceptable evidence of authority. Additional requirements
may be imposed. In accordance with SEC regulations, the Fund and Transfer Agent
may charge a shareholder reasonable costs in locating a shareholder's current
address.

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Signature Guarantees. If a signature guarantee is required, it must be from an
institution participating in STAMP, or other acceptable evidence of authority
must be provided. Additional requirements may be imposed by Northern Funds. In
addition to the situations described in this Prospectus, Northern Funds may
require signature guarantees in other circumstances based on the amount of a
redemption request or other factors.

Business Day. A "Business Day" is each Monday through Friday when the New York
Stock Exchange (the "Exchange") is open for business. In 2000, the Fund will be
closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving,
Christmas Day and Good Friday.

Early Closings. Northern Funds 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. They also reserve this right when The Bond
Market Association recommends that securities markets close or close early.

Authorized Intermediaries. Northern Funds 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 Fund. These financial intermediaries may also designate other
intermediaries to accept such orders, if approved by the Fund. Authorized
intermediaries are responsible for transmitting orders and delivering funds on a
timely basis. The Fund 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 Fund's per share NAV next determined.

Service Organizations. Northern Funds may enter into agreements with Service
Organizations such as banks, corporations, broker/dealers and other financial
institutions, including Northern Trust, concerning the provision of support
and/or distribution services to their customers who own Fund shares. These
services may include:

. support services such as assisting investors in processing purchase,
exchange and redemption requests;

. processing dividend and distribution payments from the Fund;

. providing information to customers showing their positions in the Fund; and

. providing subaccounting with respect to Fund shares beneficially owned by
customers or the information necessary for subaccounting.

In addition, Service Organizations may provide assistance, such as the
forwarding of sales literature and advertising to their customers, in connection
with the distribution of Fund shares.

For their services, Service Organizations may receive fees from a Fund at annual
rates of up to 0.25% of the average daily net asset value of the shares covered
by their agreements. Because these fees are paid out of the Fund's assets on an
on-going basis, they will increase the cost of your investment in the Fund. In
addition, Northern Trust may provide compensation to certain dealers and other
financial intermediaries who provide services to their customers who invest in
Northern Funds or whose customers purchase significant amounts of the Fund's
shares. The amount of such compensation may be made on a one-time and/or
periodic basis, and may represent all or a portion of the annual fees earned by
Northern Trust as Investment Adviser (after adjustments). This additional
compensation will be paid by Northern Trust or its affiliates and will not
represent an additional expense to Northern Funds or its shareholders.

Service Organizations may also charge their customers fees for providing
administrative services in connection with investments in the Fund. Investors
should contact their Service Organizations with respect to these fees and the
particular Service Organization's procedures for purchasing and redeeming
shares. It is the responsibility of Service Organizations to transmit purchase
and redemption orders and record those orders on a timely basis in accordance
with their agreements with their customers.

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<PAGE>

Conflict-of-interest restrictions may apply to the receipt of compensation paid
by Northern Funds in connection with the investment of fiduciary funds in Fund
shares. Institutions, including banks regulated by the Comptroller of the
Currency, Federal Reserve Board 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 their
legal counsel before entering into agreements with Northern Funds.

State securities laws regarding the registration of dealers may differ from
Federal law. As a result, Service Organizations investing in the Fund on behalf
of their customers may be required to register as dealers.

Agreements that contemplate the provision of distribution services by Service
Organizations are governed by a Distribution and Service Plan (the "Plan") that
has been adopted by Northern Funds pursuant to Rule 12b-1 under the 1940 Act.
Payments to Service Organizations, including Northern Trust, under the Plan are
not tied directly to their own out-of-pocket expenses and therefore may be used
as they elect (for example, to defray their overhead expenses), and may exceed
their direct and indirect costs.

Shareholder Communications. Shareholders of record will be provided each year
with a semiannual report showing portfolio investments and other information as
of September 30 and, after the close of the Fund's fiscal year on March 31, 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 Funds Center by phone at (800)
595-9111 or by mail at Northern Funds, P.O. Box 75986, Chicago, IL 60675-5986.
You may also send an e-mail to [email protected]. The Funds will begin
sending individual copies to you within 30 days after receipt of your
revocation.

Dividends and Distributions

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

You may, however, elect to have dividends or capital gain distributions (or
both) paid in cash or reinvested in shares of another Northern Fund at their net
asset value per share. If you would like to receive dividends or distributions
in cash or have them reinvested in another Northern Fund, you must notify the
Transfer Agent in writing. This election will become effective for
distributions paid two days after its receipt by the Transfer Agent. Dividends
and distributions may only be reinvested in a Northern Fund in which you
maintain an account.

The Fund's net investment income is declared and paid as a dividend annually.
Net realized capital gains may be distributed from time to time during Northern
Funds' fiscal year (but not less frequently than annually).

Tax Considerations

The Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of the Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions will
generally be taxable as ordinary income, except as discussed below. You will be
subject to income tax on Fund distributions regardless of whether they are paid
in cash or reinvested in additional shares. You will be notified annually of
the tax status of distributions to you.

You should note that if you purchase shares of the Fund just before a
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."

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<PAGE>

You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.

Any loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.

The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.

If you (a) have provided either an incorrect Social Security Number or Taxpayer
Identification Number or no number at all, (b) are subject to withholding by the
Internal Revenue Service for prior failure to properly include on your return
payments of interest or dividends, or (c) have failed to certify to Northern
Funds, when required to do so, that you are not subject to backup withholding or
are an "exempt recipient," then Northern Funds will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of the dividends and
distributions payable to you.

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

It is expected that the Fund will be subject to foreign withholding taxes with
respect to dividends or interest received from sources in foreign countries.
The Fund may make an election to treat a proportionate amount of such taxes as
constituting a distribution to each shareholder, which would allow each
shareholder either (1) to credit such proportionate amount of taxes against
Federal income tax liability or (2) to take such amount as an itemized
deduction.

Consult Your Tax Professional. Your investment in the Fund could have
additional tax consequences. You should consult your tax professional for
information regarding all tax consequences applicable to your investments in the
Fund. More tax information is provided in the Statement of Additional
Information. This short summary is not intended as a substitute for careful tax
planning.

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<PAGE>

RISKS, SECURITIES AND TECHNIQUES

ADDITIONAL INFORMATION ON FUND STRATEGIES, RISKS, SECURITIES AND TECHNIQUES

This section takes a closer look at some of the Fund's principal investment
strategies and related risks. It also explores the various investment
securities and techniques that the investment management team may use. The Fund
may invest in other securities and is subject to further restrictions and risks
which are described in the Statement of Additional Information. You should note
that the Fund's investment objective may be changed by Northern Funds' Board of
Trustees without shareholder approval. Shareholders will, however, be notified
of any changes. Any such change may result in the Fund having an investment
objective different from the objective which the shareholder considered
appropriate at the time of investment in the Fund.

ADDITIONAL INFORMATION ON PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

Concentration in Communications Securities. The Fund's concentration in
communications securities presents special risk considerations.

Investment Strategy. The Fund invests principally in companies that
design, develop, manufacture, distribute or sell communications services
and equipment that enable or enhance data, voice and video transmissions.
Such companies use many different technologies, including but not limited
to long distance, local and cellular telephone; broadcasting and cable
television; wireless, wireline and fiber optic transmission of voice data
and video traffic; and other established and emerging technologies.

Special Risks. Communications companies may produce or use products or
services that prove commercially unsuccessful or become obsolete rapidly.
These companies are typically subject to intense competitive pressures and,
particularly with respect to more traditional types of communications
companies (such as telephone companies), substantial government regulation.
Communications companies are often subject to short product cycles, new
technical innovations, aggressive pricing, changing consumer preferences,
dependency on patent or copyright protection, unfavorable regulatory
environments, rate regulation, lack of standardization or compatibility
with other technologies and the need for large capital commitments. These
factors can affect negatively the financial condition of communications
companies, and the Fund's concentration in these companies is expected to
be subject to more volatile price movements than a more diversified
securities portfolio. In certain instances, the securities of
communications companies may experience significant price movements caused
by disproportionate investor optimism or pessimism with little or no basis
in fundamental economic conditions. As a result of these and other
reasons, investments in the communications industry can experience sudden
and rapid appreciation and depreciation. You should, therefore, expect
that the net asset value of the Fund's shares will be more volatile than,
and may fluctuate independently of, broad stock market indices such as the
S&P 500(R) Index.

Derivatives. The Fund may purchase certain "derivative" instruments. A
derivative is a financial instrument whose value is derived from - or based upon
- - the performance of underlying assets, interest or currency exchange rates or
indices. Derivatives include futures contracts, options, equity swaps,
structured securities, forward currency contracts and structured debt
obligations.

Investment strategy. The Fund will invest in derivatives only if the
potential risks and rewards are consistent with the Fund's objective,
strategies and overall risk profile. The Fund may use derivatives for
hedging purposes to offset a potential loss in one position by establishing
an interest in an opposite position. The Fund 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 Fund'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

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<PAGE>

the assets on which it is based; (d) illiquidity risk that the Fund 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 Fund may suffer a loss whether or not the
analysis of the investment management team is accurate.

Foreign Investments. Foreign securities include direct investments in non-U.S.
dollar-denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers. Foreign securities also include
indirect investments such as American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.

Investment strategy. The Fund may invest a substantial portion of its
total assets in foreign securities including ADRs, EDRs and GDRs. The Fund
may also invest in foreign time deposits and other short-term instruments.

The Fund may invest more than 25% of its total assets in the securities of
issuers located in countries with securities markets that are highly
developed, liquid and subject to extensive regulation. Such countries may
include, but are not limited to Japan, the United Kingdom, France, Germany
and Switzerland.

Special risks. Foreign securities involve special risks and costs.
Foreign securities, and in particular foreign debt securities, are
sensitive to changes in interest rates. In addition, investment in the
securities of foreign governments involves the risk that foreign
governments may default on their obligations or may otherwise not respect
the integrity of their debt. The performance of investments in securities
denominated in a foreign currency will also depend, in part, on the
strength of the foreign currency against the U.S. dollar and the interest
rate environment in the country issuing the currency. Absent other events
which could otherwise affect the value of a foreign security (such as a
change in the political climate or an issuer's credit quality),
appreciation in the value of the foreign currency generally results in an
increase in value of a foreign currency-denominated security in terms of
U.S. dollars. A decline in the value of the foreign currency relative to
the U.S. dollar generally results in a decrease in value of a foreign
currency-denominated security.

Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with the level of currency
exchange rates, less complete financial information about the issuers, less
market liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to
different accounting, auditing and recordkeeping requirements.

Additional risks are involved when investing in countries with emerging
economies or securities markets. These countries are generally located in
the Asia/Pacific region, the Middle East, Eastern Europe, Central and South
America and Africa. In general, the securities markets of these countries
are less liquid, are subject to greater price volatility, have smaller
market capitalizations and have problems with securities registration and
custody. In addition, because the securities settlement procedures are less
developed in these countries, the Fund may be required to deliver
securities receiving payment and may also be unable to complete
transactions

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<PAGE>

during market disruptions. As a result of these and other risks,
investments in these countries generally present a greater risk of loss to
the Fund.

While the Fund's investments may be denominated in foreign currencies, the
portfolio securities and other assets held by the Fund are valued in U.S.
dollars. Currency exchange rates may fluctuate significantly over short
periods of time causing the Fund's net asset value to fluctuate as well.
Currency exchange rates can be affected unpredictably by the intervention
or the failure to intervene by U.S. or foreign governments or central
banks, or by currency controls or political developments in the U.S. or
abroad. To the extent that the Fund is invested in foreign securities
while also maintaining currency positions, it may be exposed to greater
combined risk. The Fund's net currency positions may expose it to risks
independent of its securities positions.

The introduction of a single currency, the euro, on January 1, 1999 for
participating nations in the European Economic and Monetary Union presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates
for currencies being converted into the euro; the fluctuation of the euro
relative to non-euro currencies during the transition period from January
1, 1999 to December 31, 2001 and beyond; whether the interest rate, tax and
labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other countries
in the European Union ("EU"), such as the United Kingdom and Denmark, into
the euro and the admission of other non-EU countries such as Poland, Latvia
and Lithuania as members of the EU may have an impact on the euro. These
or other factors, including political and economic risks, could cause
market disruptions, and could adversely affect the value of securities held
by the Fund. Because of the number of countries using this single
currency, a significant portion of the assets of the Fund may be
denominated in the euro.

Initial Public Offerings. An IPO is a company's first offering of stock to the
public.

Investment strategy. At times, the Fund may make significant investments in
IPOs.

Special risks. IPO shares can be highly unstable because of factors such as
the absence of a prior public market, unseasoned trading, the small number
of shares available for trading and limited investor information. The
purchase of IPO shares may involve high transaction costs. IPO shares are
subject to market risk and liquidity risk. When the Fund's asset base is
small, a significant portion of the Fund's performance could be
attributable to investments in IPOs, because such investments would have a
magnified impact on the Fund. As the Fund's assets grow, the effect of the
Fund's investments in IPOs on the Fund's performance probably will decline,
which could reduce the Fund's performance. Because IPO shares frequently
are volatile in price, the Fund may hold IPO shares for a very short period
of time. This may increase the turnover of the Fund's portfolio and may
lead to increased expenses to the Fund, such as commissions and transaction
costs. By selling shares, the Fund may realize taxable gains it will
subsequently distribute to shareholders. In addition, the market for IPO
shares can be speculative and/or inactive for extended periods of time.
There is no assurance that the Fund will be able to obtain allocable
portions of IPO shares. The limited number of shares available for trading
in some IPOs may make it more difficult for the Fund to buy or sell
significant amounts of shares without an unfavorable impact on prevailing
prices. Investors in IPO shares can be affected by substantial dilution in
the value of their shares, by sales of additional shares and by
concentration of control in existing management and principal
shareholders.

The Fund's investments in IPO shares may include the securities of
"unseasoned" companies (companies with less than three years of continuous
operations), which presents risks considerably greater than common stocks
of more established companies. These companies may have limited operating
histories and their prospects for profitability may be uncertain. These
companies may be involved in new and evolving businesses and may be
vulnerable to competition and changes in technology, markets and economic
conditions. They may be more dependent on key managers and third parties
and may have limited product lines.

Investment Grade Securities. A security is considered investment grade if, at
the time of purchase, it is rated:

. BBB or higher by Standard and Poor's Ratings Services ("S&P");

. Baa or higher by Moody's Investors Service, Inc. ("Moody's");

. BBB or higher by Duff & Phelps Credit Rating Co. ("Duff"); 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. Although the Fund expects to invest principally in
equity securities, it may invest a portion of its total assets in
convertible and fixed income securities when the investment management team
determines that such securities are desirable in light of the Fund's
investment objective and portfolio mix. Except as stated in the next
section, convertible and fixed income securities purchased by the Fund will
generally be rated investment grade. The Fund may also invest in unrated
securities if the Investment Adviser believes they are comparable in
quality.

Special risks. Although securities rated BBB by S&P, Duff or Fitch, or Baa
by Moody's are considered investment grade, they have certain speculative
characteristics. Therefore, they may be subject to a higher risk of
default than obligations with higher ratings. Subsequent to its purchase
by the Fund, a rated security may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. The
Investment Adviser will consider such an event in determining whether the
Fund should continue to hold the security.

Non-Investment Grade Securities. Non-investment grade convertible and fixed
income securities (sometimes referred to as "junk bonds") are generally rated BB
or below by S&P, Duff or Fitch, or Ba by Moody's.

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<PAGE>

Investment Strategy. The Fund's investments in convertible and fixed
income securities may include securities that are non-investment grade.
Investments in non-investment grade fixed income and convertible
securities will not exceed 15% of the Fund's total assets under normal
market conditions.

Special risks. Non-investment grade securities are considered predominately
speculative by traditional investment standards. The market value of these
low-rated securities tends to be more sensitive to individual corporate
developments and changes in interest rates and economic conditions than
higher-rated securities. In addition, they generally present a higher
degree of credit risk. Issuers of low-rated securities are often highly
leveraged, so their ability to repay their debt during an economic downturn
or periods of rising interest rates may be impaired. The risk of loss due
to default by these issuers is also greater because low-rated securities
generally are unsecured and are often subordinated to the rights of other
creditors of the issuers of such securities. Investment by the Fund in
defaulted securities poses additional risk of loss should non-payment of
principal and interest continue in respect of such securities. Even if such
securities are held to maturity, recovery by the Fund of its initial
investment and any anticipated income or appreciation will be uncertain.
The Fund may also incur additional expenses in seeking recovery on
defaulted securities.

The secondary market for lower quality securities is concentrated in
relatively few market makers and is dominated by institutional investors.
Accordingly, the secondary market for such securities is not as liquid as,
and is more volatile than, the secondary market for higher quality
securities. In addition, market trading volume for these securities is
generally lower and the secondary market for such securities could contract
under adverse market or economic conditions, independent of any specific
adverse changes in the condition of a particular issuer. These factors may
have an adverse effect on the market price and the Fund's ability to
dispose of particular portfolio investments. A less developed secondary
market may also make it more difficult for the Fund to obtain precise
valuations of the high yield securities in its portfolio. Investments
in lower quality securities, whether rated or unrated, will be more
dependent on Northern Trust's credit analysis than would be the case with
investments in higher quality securities.

Small Cap Investments. The Fund's investment in small cap companies presents
special risk considerations.

Investment strategy. At times, the Fund may make significant investments
in companies with small capitalizations.

Special risks. Investments in small capitalization companies involve
greater risk and portfolio price volatility than investments in larger
capitalization stocks. Among the reasons for the greater price volatility
of these investments are the less certain growth prospects of smaller firms
and the lower degree of liquidity in the markets for such securities. Small
capitalization companies may be thinly traded and may have to be sold at a
discount from current market prices or in small lots over an extended
period of time. Because of the lack of sufficient market liquidity, the
Fund may incur losses because it will be required to effect sales at a
disadvantageous time and only then at a substantial drop in price. Small
capitalization companies include "unseasoned" issuers that do not have an
established financial history; often have limited product lines, markets or
financial resources; may depend on or use a few key personnel for
management; and may be susceptible to losses and risks of bankruptcy.
Transaction costs for these investments are often higher than those of
larger capitalization companies. Investments in small capitalization
companies may be more difficult to price precisely than other types of
securities because of their characteristics and lower trading volumes.

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 liquidity to the Fund.

Investment strategy. The Fund 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 Fund may not achieve its investment objective when its
assets are invested in short-term obligations.

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<PAGE>

Portfolio Turnover. The investment management team will not consider the Fund
turnover rate a limiting factor in making investment decisions for the Fund. A
high portfolio turnover rate (100% or more) is likely to involve higher
brokerage commissions and other transactions costs, which could reduce the
Fund's return. It may also result in higher short-term capital gains that are
taxable to shareholders. Northern Funds expects that the annual portfolio
turnover rate of the Fund will generally not exceed 300%.

ADDITIONAL DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES

Asset-Backed Securities. Asset-backed securities are sponsored by entities such
as government agencies, banks, financial companies and commercial or industrial
companies. They represent interests in pools of mortgages or other cash-flow
producing assets such as automobile loans, credit card receivables and other
financial assets. In effect, these securities "pass through" the monthly
payments that individual borrowers make on their mortgages or other assets net
of any fees paid to the issuers. Examples of these include guaranteed mortgage
pass-through certificates, collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits ("REMICs").

Investment strategy. Subject to its investment objective and policies, the
Fund may purchase various types of asset-backed securities. The Fund will
invest in asset-backed securities rated investment grade (rated BBB or
better by S&P, Duff or Fitch, or Baa or better by Moody's) at the time of
purchase. The Fund may also invest in unrated mortgage-backed securities
which the Investment Adviser believes are of comparable quality.

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 Fund can borrow money and
enter into reverse repurchase agreements. Reverse repurchase agreements involve
the sale of securities held by the Fund subject to the Fund's agreement to
repurchase them at a mutually agreed upon date and price (including
interest).

Investment strategy. The Fund may borrow and enter into reverse repurchase
agreements in amounts not exceesing one-third of the value of its total
assets (including the amount borrowed). The Fund may also borrow up to an
additional 5% of its total assets for temporary purposes. The Fund may
enter into reverse repurchase agreements when the investment management
team expects that the interest income to be earned from the investment
income of the transaction will be greater than the related interest
expense.

Special risks. Borrowings and reverse repurchase agreements involve
leveraging. If the securities held by the Fund decline in value while these
transactions are outstanding, the net asset value of the Fund's 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 Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction,
that the

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<PAGE>

market value of the securities sold by the Fund will decline below the
price the Fund is obligated to pay to repurchase the securities, and that
the securities may not be returned to the Fund.

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
Fund 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 Fund may acquire convertible securities. These
securities are subject to the same rating requirements as fixed income
securities held by the Fund.

Currency Swaps. Currency swaps are contracts that obligate the Fund and another
party to exchange their rights to pay or receive specified amounts of currency.

Investment strategy. The Fund may enter into currency swaps to protect
against currency fluctuations.

Special risks. Currency swaps usually involve the delivery of the entire
principal value of one currency in exchange for the other currency.
Therefore, the entire principal value of a currency swap is subject to the
risk that the other party will default on its delivery obligations. Like
other derivative securities, swaps can be highly volatile. As a result,
they may not always be successful hedges and they could lower the Fund's
total return.

Equity Swaps. Equity swaps allow the parties to the swap agreement to exchange
components of return on one equity investment (e.g., a basket of equity
securities or an index) for a component of return on another non-equity or
equity investment, including an exchange of differential rates of return.

Investment strategy. The Fund may invest in equity swaps. Equity swaps
may be used to invest in a market without owning or taking physical custody
of securities in circumstances where direct investment may be restricted
for legal reasons or is otherwise impractical. Equity swaps may also be
used for other purposes, such as hedging or seeking to increase total
return.

Special risks. Equity swaps are derivative instruments and their values
can be very volatile. To the extent that the investment management team
does not accurately analyze and predict the potential relative fluctuation
on the components swapped with the other party, the Fund may suffer a loss.
The value of some components of an equity swap (such as the dividends on a
common stock) may also be sensitive to changes in interest rates.
Furthermore, during the period a swap is outstanding, the Fund may suffer a
loss if the counterparty defaults.

Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.

Investment strategy. The Fund may enter into forward currency exchange
contracts for hedging purposes and to help reduce the risks and volatility
caused by changes in foreign currency exchange rates. The Fund

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<PAGE>

may also enter into these contracts for speculative purposes (i.e., to
increase total return) or for cross-hedging purposes. Foreign currency
exchange contracts will be used at the discretion of the investment
management team, and the Fund is not required to hedge its foreign currency
positions.

Special risks. Forward foreign currency contracts are privately negotiated
transactions, and can have substantial price volatility. As a result, they
offer less protection against default by the other party than is available
for instruments traded on an exchange. When used for hedging purposes,
they tend to limit any potential gain that may be realized if the value of
the Fund's foreign holdings increases because of currency fluctuations.
When used for speculative purposes, forward currency exchange contracts may
result in additional losses that would not otherwise be incurred.

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 Fund, at maturity, to take or make delivery of certain domestic or foreign
securities, the cash value of a securities index or a stated quantity of a
foreign currency. When the Fund 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 Fund
sells an option on a futures contract, it becomes obligated to purchase or sell
a futures contract if the option is exercised.

Investment strategy. To the extent consistent with its investment
objective and policies, the Fund may invest in futures contracts and
options on futures contacts on domestic or foreign exchanges or boards of
trade. They may be used for hedging purposes, to increase total return or
to maintain liquidity to meet potential shareholder redemptions, invest
cash balances or dividends or minimize trading costs.

The value of the Fund's futures contracts may equal up to 100% of its total
assets. However, the Fund 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 Fund's
securities and the price of futures contracts and options; the possible
inability to close a futures contract when desired; losses due to
unanticipated market movements which are potentially unlimited; and the
possible inability of the investment management team to correctly predict
the direction of securities prices, interest rates, currency exchange rates
and other economic factors. Foreign exchanges or boards of trade generally
do not offer the same protections as U.S. exchanges.

Illiquid or Restricted Securities. Illiquid securities include repurchase
agreements and time deposits with notice/termination dates of more than seven
days, certain variable amount master demand notes that cannot be called within
seven days, certain 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 Fund may invest up to 15% of its net assets in
securities that are illiquid. If otherwise consistent with its investment
objective and policies, the Fund 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
Northern Funds' 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 Fund. The practice of investing in Rule
144A Securities could increase the level of the Fund's illiquidity during
any period that qualified institutional buyers become uninterested in
purchasing these securities.

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<PAGE>

Investment Companies. To the extent consistent with its investment objective
and policies, the Fund may invest in securities issued by other investment
companies, including money market funds, index funds, "country funds" (i.e.,
funds that invest primarily in issuers located in a specific foreign country or
region), S&P's Depository Receipts ("SPDRs") and similar securities of other
issuers.

Investment strategy. Investments by the Fund in other investment companies
will be subject to the limitations of the 1940 Act. Although the Fund does
not expect to do so in the foreseeable future, it 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 Fund.

Special risks. As a shareholder of another investment company, the Fund
would be subject to the same risks as any other investor in that company.
In addition, it would bear a proportionate share of any fees and expenses
paid by that company. These would be in addition to the advisory and other
fees paid directly by the Fund.

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. To the extent consistent with its investment
objective, the Fund may write (sell) covered call options, buy put options,
buy call options and write secured put options for hedging or cross-hedging
purposes or to earn additional income. Options may relate to particular
securities, foreign or domestic securities indices, financial instruments
or foreign currencies. The Fund 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 Fund's assets subject to options written by the Fund
will not be greater than 25% of its net assets at the time the option is
written. The Fund may "cover" a call option by owning the security
underlying the option or through other means. Put options written by the
Fund are "secured" if the Fund maintains liquid assets in a segregated
account in an amount at least equal to the exercise price of the option up
until the expiration date.

Special risks. Options trading is a highly specialized activity that
involves investment techniques and risks different from those associated
with ordinary Fund 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 Fund 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.

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

Investment strategy. The Fund 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
Fund acquires the securities.

Special risks. In the event of a default, the Fund 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 Fund's costs
associated with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy, the Fund could suffer additional
losses if a court determines that the Fund's interest in the collateral is
unenforceable.

Page 26
<PAGE>

Securities Lending. In order to generate additional income, the Fund may lend
securities on a short-term basis to banks, broker-dealers or other qualified
institutions. In exchange, the Fund 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 Fund's total assets (including the loan collateral).
Any cash collateral received by the Fund 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 Fund could experience delays in
recovering its securities and may incur a capital loss. In addition, the
Fund 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, 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. To the extent consistent with its investment
objective and policies, the Fund 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 change in prepayments could depress the price of certain
stripped securities and adversely affect the Fund's total return.

Structured Securities. The value of the principal of and/or interest on such
securities is determined by reference to changes in the value of specific
currencies, interest rates, commodities, indices or other financial indicators
(the "Reference") or the relative change in two or more References. The
interest rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference.

Investment strategy. The Fund may invest in structured securities to the
extent consistent with its investment objective and policies.

Special risks. The terms of some structured securities may provide that in
certain circumstances no principal is due at maturity and, therefore, the
Fund 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.

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 and policies, the Fund may invest in a variety of U.S. Treasury
obligations and also may invest in obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities.

Page 27
<PAGE>

Special risks. Not all U.S. government obligations carry the same credit
support. Some are supported by the full faith and credit of the United
States Treasury. Other obligations are supported by the right of the issuer
to borrow from the United States Treasury; and others 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. In addition, the secondary market for certain
participations in loans made to foreign governments or their agencies may
be limited.

Warrants. A warrant represents the right to purchase a security at a
predetermined price for a specified period of time.

Investment strategy. The Fund may invest up to 5% of its net assets at the
time of purchase in warrants and similar rights. The Fund may also
purchase bonds that are issued in tandem with warrants.

Special risks. Warrants are derivative instruments that present risks
similar to options.

When-Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a
contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period.

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

Page 28
<PAGE>

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 Fund may invest in zero coupon, pay-in-kind and
capital appreciation bonds to the extent consistent with its investment
objective and policies.

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 Fund's investments in zero
coupon, pay-in-kind and capital appreciation bonds may require the Fund to
sell some of its Fund securities to generate sufficient cash to satisfy
certain income distribution requirements.

Northern Trust is sometimes referred to as "The Northern Trust Bank" in
advertisements and other sales literature.

Page 29
<PAGE>

For More Information

ANNUAL/SEMIANNUAL REPORT

Additional information about the Fund's investments will be available in the
Fund's annual and semiannual reports to shareholders. In the Fund's annual
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year.

STATEMENT OF ADDITIONAL INFORMATION

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

The Fund's annual and semiannual reports will be, and the SAI is, available free
upon request by calling The Northern Funds Center at (800) 595-9111.

To obtain other information and for shareholder inquiries:
By telephone - Call (800) 595-9111
By mail - Northern Funds
P.O. Box 75986
Chicago, IL 60675-5986
On the Internet -
. On Northern Funds' website at http://www.northernfunds.com.
. Text-only versions of the Fund's documents are available on the
SEC's website at http://www.sec.gov.

You may review and obtain copies of Northern Funds' documents by visiting the
SEC's Public Reference Room in Washington, D.C. You may also obtain copies of
Northern Funds' documents, after paying a duplicating fee, by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102 or by electronic request
to: [email protected]. Information on the operation of the public reference
room may be obtained by calling the SEC at 1-202-942-8090.

[LOGO]

811-8236
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33-73404
811-8236

PART B

STATEMENT OF ADDITIONAL INFORMATION

GLOBAL COMMUNICATIONS FUND

NORTHERN FUNDS
(the "Trust")

This Statement of Additional Information dated May 15, 2000 (the
"Additional Statement") is not a prospectus. This Additional Statement should be
read in conjunction with the Prospectus dated May 15, 2000, as amended or
supplemented from time to time, for the Global Communications Fund (the "Fund")
of Northern Funds (the "Prospectus"). Copies of the Prospectus may be obtained
without charge from the Transfer Agent by writing to the Northern Funds Center,
P.O. Box 75986, Chicago, Illinois 60675-5986 or by calling (800) 595-9111.
Capitalized terms not otherwise defined have the same meaning as in the
Prospectus.
__________

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 Northern Funds or its distributor. The Prospectus does not
constitute an offering by Northern Funds or by the distributor in any
jurisdiction in which such offering may not lawfully be made.

- 1 -
<PAGE>

An investment in the Fund is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any government
agency. An investment in the Fund involves investment risks, including possible
loss of principal.

- 2 -
<PAGE>

INDEX

<TABLE>
<CAPTION>
Page
----
<S> <C>
ADDITIONAL INVESTMENT INFORMATION......................................... 4
Investment Objective and Policies.................................... 4
Investment Restrictions.............................................. 23

ADDITIONAL TRUST INFORMATION.............................................. 25
Classification and History........................................... 25
Trustees and Officers................................................ 26
Investment Adviser, Transfer Agent and Custodian..................... 34
Co-Administrators and Distributor.................................... 38
Service Organizations................................................ 40
Counsel and Auditors................................................. 41
In-Kind Purchases and Redemptions.................................... 41
Automatic Investing Plan............................................. 41
Directed Reinvestments............................................... 42
Redemptions and Exchanges............................................ 42
Retirement Plans..................................................... 42
Expenses............................................................. 42

PERFORMANCE INFORMATION................................................... 43
Global Communications Fund........................................... 43
General Information.................................................. 44

NET ASSET VALUE........................................................... 47

TAXES..................................................................... 47
Federal - General Information........................................ 47
Taxation of Certain Financial Instruments............................ 49

DESCRIPTION OF SHARES..................................................... 49

OTHER INFORMATION......................................................... 53

APPENDIX A................................................................ A-1
APPENDIX B................................................................ B-1
</TABLE>

- 3 -
<PAGE>

ADDITIONAL INVESTMENT INFORMATION

Investment Objective and Policies

The following supplements the investment objective, strategies and risks of
the Fund as set forth in the Prospectus. Except as expressly noted below, the
Fund's investment objective and policies may be changed without shareholder
approval. In addition to the instruments discussed below and in the Prospectus,
the Fund may purchase other types of financial instruments, however designated,
whose investment and credit quality characteristics are determined by the
Investment Adviser to be substantially similar to those of any other investment
otherwise permitted by the Fund's investment policies.

Global Communications Fund seeks to provide long-term capital appreciation
--------------------------
by investing at least 65% of its total assets in equity securities of domestic
and foreign companies that are engaged in the communications industry.

Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time
Deposits and Bank Notes. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party. Bank notes and bankers' acceptances rank junior to deposit liabilities of
the bank 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.

The Fund may invest a portion of its net assets in the obligations of
foreign banks and foreign branches of domestic banks. Such obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"),

- 4 -
<PAGE>

which are U.S. dollar-denominated certificates of deposit issued by a U.S.
branch of a foreign bank and held in the United States; and Yankee Bankers'
Acceptances ("Yankee BAs"), which are U.S. dollar-denominated bankers'
acceptances issued by a U.S. branch of a foreign bank and held in the United
States.

Zero Coupon, Pay-in-Kind and Capital Appreciation Bonds. To the extent
consistent with its investment objective, the Fund 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 Fund 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 Fund 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 Fund is nonetheless required to accrue income on such
investments for each taxable year and generally is required to distribute such
accrued amounts (net of deductible expenses, if any) to avoid being subject to
tax. Because no cash is generally received at the time of the accrual, the Fund
may be required to liquidate other portfolio securities to obtain sufficient
cash to satisfy federal tax distribution requirements applicable to the Fund.

Repurchase Agreements. The Fund 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 to be loans under the Investment Company Act of 1940
(the "1940 Act"). Although the securities subject to a repurchase agreement may
bear maturities exceeding one year, settlement for the repurchase agreement will
never be more than one year after the Fund's acquisition of the securities and
normally will be within a shorter period of time. Securities subject to
repurchase agreements are held either by Northern Funds' custodian or
subcustodian (if any), or in the Federal

- 5 -
<PAGE>

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 Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying obligations.

Reverse Repurchase Agreements. The Fund 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 Fund may use the proceeds of reverse repurchase
agreements to purchase other securities either maturing, or under an agreement
to resell, on a date simultaneous with or prior to the expiration of the reverse
repurchase agreement. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
repurchase price. The Fund will pay interest on amounts obtained pursuant to a
reverse repurchase agreement. While reverse repurchase agreements are
outstanding, a Fund will segregate liquid assets in an amount at least equal to
the market value of the securities, plus accrued interest, subject to the
agreement.

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 long-term variable and floating rate bonds (sometimes
referred to as "Put Bonds") where the Fund 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").

With respect to the rated and unrated variable and floating rate
instruments that may be acquired by the Fund to the extent consistent with its
investment objective, the Investment Adviser 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. In determining
weighted average portfolio maturity, an instrument may, subject to applicable
Securities and Exchange Commission ("SEC") regulations, be deemed to have a
maturity shorter than its nominal maturity based on the period remaining until
the next interest rate adjustment or the time the Fund can recover payment of
principal as specified in the instrument. Where necessary to ensure that a
variable or floating rate instrument is of the minimum required credit quality
for the Fund, 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 Fund
include variable amount master demand notes, which permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate, and 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 interest in inverse floaters is associated with greater volatility in
their market values. Accordingly, the duration of an inverse floater may exceed
its stated final maturity. The Fund 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 Fund.

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<PAGE>

Variable and floating rate instruments including inverse floaters held by a
Fund will be subject to the Fund's limitation on illiquid investments when the
Fund may not demand payment of the principal amount within seven days absent a
reliable trading market. 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 Fund
is not entitled to exercise its demand rights. As a result, the Fund could
suffer a loss with respect to these instruments.

Forward Commitments, When-Issued Securities and Delayed-Delivery
Transactions. The Fund 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 Fund 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 Fund 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 Fund may
dispose of or negotiate a commitment after entering into it. The Fund also may
sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date.

When the Fund purchases securities on a when-issued, delayed-delivery or
forward commitment basis, the Fund will segregate liquid assets having a value
(determined daily) at least equal to the amount of the Fund's purchase
commitments until three days prior to the settlement date, or will otherwise
cover its position. These procedures are designed to ensure that the Fund will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases, forward commitments and delayed-delivery transactions.

United States Government Obligations. Examples of the types of U.S.
Government obligations that may be acquired by the Fund include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Federal National Mortgage Association
("FNMA"), Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Intermediate Credit Banks and Maritime
Administration.

Supranational Bank Obligations. The Fund 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 among nations (e.g., the International Bank
for Reconstruction and Development). 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.

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<PAGE>

Stripped Obligations. 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 Fund may purchase securities registered in the STRIPS program.
Under the STRIPS program, the Fund is 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 Fund may acquire U.S. Government obligations and their
unmatured interest coupons that have been separated ("stripped") by their
holder, typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of the U.S.
Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury
Securities" ("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. The underlying
U.S. Treasury bonds and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these certificates or other
evidences of ownership of U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities most likely will be deemed the
beneficial holders of the underlying U.S. Government obligations for federal tax
purposes. Northern Funds is unaware of any binding legislative, judicial or
administrative authority on this issue.

Other types of stripped securities that may be purchased by the Fund
include 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 Fund 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.

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<PAGE>

Asset-Backed Securities. To the extent described in the Prospectus, the
Fund 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 periodically,
thus in effect "passing through" such 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.

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 Fund 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 Fund 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 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 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 FNMA include FNMA Guaranteed Mortgage Pass-
Through Certificates (also known as "Fannie Maes"), which are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States, but are supported by the right of the issuer to
borrow from the Treasury. FNMA is a government-sponsored organization owned
entirely by private

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<PAGE>

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 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 FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When FHLMC does not guarantee timely payment of principal, 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.

Warrants. The Fund may purchase warrants and similar rights, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying shares. The purchase of warrants
involves the risk that the Fund could lose the purchase value of a warrant if
the right to subscribe to additional shares is not exercised prior to the
warrant's expiration. Also, the purchase of warrants involves the risk that the
effective price paid for the warrant added to the subscription price of the
related security may exceed the value of the subscribed security's market price
such as when there is no movement in the level of the underlying security.

Foreign Investments. The Fund may invest a substantial portion of its
assets in the securities of foreign issuers, including eurodollar convertible
securities, which are fixed income securities that are issued in U.S. dollars
outside the United States and are convertible into or exchangeable for equity
securities of the same or a different issuer.

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 and in investments denominated in foreign currencies. Market
risk involves the possibility that stock prices will decline over short or even

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<PAGE>

extended periods. The stock markets tend to be cyclical, with periods of
generally rising prices and periods of generally declining prices. These cycles
will affect the value of the Fund. In addition, the performance of investments
in securities denominated in a foreign currency will depend on the strength of
the foreign currency against the U.S. dollar and the interest rate environment
in the country issuing the currency. Absent other events which could otherwise
affect the value of a foreign security (such as a change in the political
climate or an issuer's credit quality), appreciation in the value of the foreign
currency generally can be expected to increase the value of a foreign currency-
denominated security in terms of U.S. dollars. A rise in foreign interest rates
or decline in the value of the foreign currency relative to the U.S. dollar
generally can be expected to depress the value of a foreign currency-denominated
security.

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 the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity, more
market volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls, or 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.

The Fund may invest in foreign debt, including the securities of foreign
governments. Several risks exist concerning such investments, including the risk
that foreign governments may default on their obligations, may not respect the
integrity of such debt, may attempt to renegotiate the debt at a lower rate, and
may not honor investments by United States entities or citizens.

To the extent consistent with its investment objective and policies, the
Fund may also invest in obligations of the International Bank for Reconstruction
and Development (also known as the World Bank) which are supported by
subscribed, but unpaid, commitments of its member countries. There is no
assurance that these commitments will be undertaken or complied with in the
future.

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 social and
political developments there have affected Japanese securities and currency
markets, and have disrupted 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.

In addition, the Fund may invest its assets in countries with emerging
economies or securities markets. These countries are located in the Asia-Pacific
region, the Middle East, Eastern Europe, Latin

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<PAGE>

and South America and Africa. Political and economic structures in many of these
countries may be undergoing significant evolution and rapid development, and
these countries may lack the social, political and economic stability
characteristics of more developed countries. Some of these countries may have in
the past failed to recognize private property rights and may have at times
nationalized or expropriated the assets of private companies. In general, the
securities markets of these countries are less liquid, subject to greater price
volatility, have smaller market capitalizations and have problems with
securities registration and custody. As a result, the risks presented by
investments in these countries are heightened. Additionally, settlement
procedures in emerging countries are frequently less developed and reliable than
those in the United States and may involve the Fund's delivery of securities
before receipt of payment for their sale. Settlement or registration problems
may make it more difficult for the Fund to value its portfolio securities and
could cause the Fund to miss attractive investment opportunities, to have a
portion of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's
inability to complete its contractual obligations.

Although the Fund may invest in securities denominated in foreign
currencies, its portfolio securities and other assets are valued in U.S.
dollars. Currency exchange rates may fluctuate significantly over short periods
of time causing, together with other factors, the Fund's net asset value to
fluctuate as well. Currency exchange rates can be affected unpredictably by the
intervention or the failure to intervene by U.S. or foreign governments or
central banks, or by currency controls or political developments in the U.S. or
abroad. To the extent that the Fund's total assets, adjusted to reflect the
Fund's net position after giving effect to currency transactions, are
denominated in the currencies of foreign countries, the Fund will be more
susceptible to the risk of adverse economic and political developments within
those countries. The Fund is also subject to the possible imposition of exchange
control regulations or freezes on the convertibility of currency.

Investors should understand that the expense ratios of the Fund can be
expected to be higher than those of Funds investing primarily in domestic
securities. The costs attributable to investing abroad are usually higher for
several reasons, such as the higher cost of investment research, higher costs of
custody of foreign securities, higher commissions paid on comparable
transactions on foreign markets and additional costs arising from delays in
settlements of transactions involving foreign securities.

Dividends and interest payable on the Fund'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."

American Depository Receipts. The Fund can invest in ADRs. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities and are denominated in U.S.
dollars. Some institutions issuing ADRs may not be sponsored by the issuer.

A non-sponsored depository may not provide the same shareholder information
that a sponsored depository is required to provide under its contractual
arrangement with the issuer.

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<PAGE>

European Depository Receipts. The Fund can also invest in EDRs and GDRs.
EDRs and GDRs are receipts issued by a non-U.S. financial institution evidencing
ownership of underlying foreign or U.S. securities and are usually denominated
in foreign currencies. EDRs and GDRs may not be denominated in the same
currency as the securities they represent. Generally, EDRs and GDRs are
designed for use in the foreign securities markets.

Foreign Currency Transactions. In order to protect against a possible loss
on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Fund is authorized to enter into forward currency
exchange contracts. These contracts involve an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but rather may allow the Fund to establish a rate of
exchange for a future point in time.

When entering into a contract for the purchase or sale of a security, the
Fund may enter into a forward foreign currency exchange contract for the amount
of the purchase or sale price to protect against variations, between the date
the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.

In addition, when the Investment Adviser anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, the Fund may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. Similarly, when the securities held by the Fund create a
short position in a foreign currency, the Fund may enter into a forward contract
to buy, for a fixed amount, an amount of foreign currency approximating the
short position. The Fund's net long and short foreign currency exposure will not
exceed its total asset value. With respect to any forward foreign currency
contract, it will not generally be possible to match precisely the amount
covered by that contract and the value of the securities involved due to the
changes in the values of such securities resulting from market movements between
the date the forward contract is entered into and the date it matures. While
forward contracts may offer protection from losses resulting from declines or
appreciation in the value of a particular foreign currency, they also limit
potential gains which might result from changes in the value of such currency.
The Fund will also incur costs in connection with forward foreign currency
exchange contracts and conversions of foreign currencies and U.S. dollars.

In addition, Northern Trust may purchase or sell forward currency exchange
contracts for the Fund to seek to increase total return when Northern Trust
anticipates that the foreign currency will appreciate or depreciate in value.
The Fund may engage in cross-hedging by using forward contracts in one currency
to hedge against fluctuations in the value of securities denominated in a
different currency if Northern Trust believes that there is a pattern of
correlation between the two currencies.

Liquid assets equal to the amount of the Fund's assets that could be
required to consummate forward contracts will be segregated except to the extent
the contracts are otherwise "covered." The

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<PAGE>

segregated assets will be valued at market or fair value. If the market or fair
value of such assets declines, additional liquid assets will be segregated daily
so that the value of the segregated assets will equal the amount of such
commitments by the Fund. A forward contract to sell a foreign currency is
"covered" if the Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price that is (a) no higher
than the Fund's price to sell the currency or (b) greater than the Fund's price
to sell the currency provided the Fund segregates liquid assets in the amount of
the difference. A forward contract to buy a foreign currency is "covered" if the
Fund holds a forward contract (or put option) permitting the Fund to sell the
same currency at a price that is (a) as high as or higher than the Fund's price
to buy the currency or (b) lower than the Fund's price to buy the currency
provided the Fund segregates liquid assets in the amount of the difference.

Options. The Fund may buy put options and buy call options and write
covered call and secured put options. Such options may relate to particular
securities, foreign and domestic securities indices, financial instruments,
foreign currencies or the yield differential between two securities ("yield
curve options"), and may or may not be listed on a domestic or foreign
securities exchange and may or may not be issued by the Options Clearing
Corporation. A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price 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 prior to the expiration date of the
option, regardless of the market price of the security. Options on indices and
yield curve options provide the holder with the right to make or receive a cash
settlement upon exercise of the option. With respect to options on indices, the
amount of the settlement will equal 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. With respect to yield curve options, the
amount of the settlement will equal the difference between the yields of
designated securities.

Options trading is a highly specialized activity which entails greater than
ordinary investment risk. Options 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 Fund will write call options only if they are "covered." In the case of
a call option on a security or currency, the option is "covered" if the Fund
owns the instrument underlying the call or has an absolute and immediate right
to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, liquid assets in such amount are
segregated) upon conversion or exchange of other securities held by it. For a
call option on an index, the option is covered if the Fund maintains with its
custodian securities comprising the index or liquid assets equal to the contract
value. A call option is also covered if the Fund holds a call on the same
instrument or index as the call written where the exercise price of the call
held is (a) equal to or less than the exercise price of the call written, or
(b) greater than the exercise price of the call written provided the Fund
segregates liquid assets in the amount of the difference. The Fund 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.

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<PAGE>

With respect to yield curve options, a call (or put) option is covered if
the Fund holds another call (or put) option on the spread between the same two
securities and maintains in a segregated account liquid assets sufficient to
cover the Fund's net liability under the two options. Therefore, the Fund's
liability for such a covered option is generally limited to the difference
between the amount of the Fund's liability under the option written by the Fund
less the value of the option held by the Fund. 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. Yield curve options are traded over-the-counter, and because they
have been only recently introduced, established trading markets for these
securities have not yet developed.

The Fund's obligation to sell an instrument subject to a covered call
option written by it, or to purchase an instrument subject to a secured put
option written by it, may be terminated prior to the expiration date of the
option by the Fund'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 instrument, 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 instrument from being
called, to permit the sale of the underlying instrument or to permit the writing
of a new option containing different terms on such underlying instrument. 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 Fund 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 instrument (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 instrument or currency is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline or appreciation in the instrument during such period.

When the Fund purchases an option, the premium paid by it is recorded as an
asset of the Fund. When the Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund'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 Fund expires unexercised, the Fund realizes a loss equal to the
premium paid. If the Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium received by the
Fund 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 Fund expires on
the stipulated expiration date or if the Fund 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 Fund is exercised, the proceeds of the sale will be increased by the net
premium originally received and the Fund will realize a gain or loss.

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<PAGE>

There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded over-the-
counter or on an exchange may be absent for reasons which include the following:
there may be insufficient trading interest in certain options; restrictions may
be imposed by an exchange on opening transactions or closing transactions or
both; trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities or
currencies; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading value; or
one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

Futures Contracts and Related Options. The Fund may purchase and sell
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 retur n), or for liquidity management purposes. When used as a hedge, the
Fund 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 Fund may do so either to hedge
the value of its portfolio of securities as whole, or to protect against
declines, occurring prior to sales of securities, in the value of the securities
to be sold. Conversely, the Fund may purchase a futures contract as a hedge in
anticipation of purchases of securities. In addition, the Fund 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.

Participation in foreign futures and foreign options transactions involves
the execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the National Futures Association nor any domestic
exchange regulates activities of any foreign boards of trade, including the
execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable foreign
law. This is true even if the exchange is formally linked to a domestic market
so that a position taken on the market may be liquidated by a transaction on
another market. Moreover, such laws or regulations will vary depending on the
foreign country in which the foreign futures or foreign options transaction
occurs. For these reasons, persons who trade foreign futures or foreign options
contracts may not be afforded certain of the protective measures provided by the
Commodity Exchange Act, the Commodity Futures Trading Commission's ("CFTC")
regulations and the rules of the National Futures Association and any domestic
exchange, including the right to use reparations proceedings before the CFTC and
arbitration proceedings provided them by the National Futures Association or any
domestic futures exchange. In particular, the Fund's investments in foreign
futures or foreign options transactions may not be provided the same protections
in respect of transactions on United States futures exchanges. In addition, the
price of any foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance in the foreign
exchange rate

-16-
<PAGE>

between the time an order is placed and the time it is liquidated, offset or
exercised. For a detailed description of futures contracts and related options,
see Appendix B to this Additional Statement.

In connection with the Fund's position in a futures contract or related
option, the Fund will segregate liquid assets or will otherwise cover its
position in accordance with applicable SEC requirements.

Northern Funds intends to comply with the regulations of the Commodity
Futures Trading Commission exempting the Fund from registration as a "commodity
pool operator."

Securities Lending. Collateral for loans of portfolio securities made by
the Fund 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 Fund 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 Fund if a material event affecting the investment
is to occur.

Currency Swaps. The Fund may enter into currency swaps, which involve the
exchange of the rights of a Fund and another party to make or receive payments
in specific currencies.

Currency swaps usually involve the delivery of the entire principal value
of one designated currency in exchange for the other designated currency.
Inasmuch as these transactions are entered into for good faith hedging purposes,
the Fund and the Investment Adviser believe that such obligations do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Fund's borrowing restrictions.

The net amount of the excess, if any, of the Fund's obligations over its
entitlements with respect to each currency swap will be accrued on a daily
basis, and an amount of liquid assets having an aggregate net asset value at
least equal to such accrued excess, will be segregated by the Fund.

The Fund will not enter into a currency swap unless the unsecured
commercial paper, senior debt or the claims-paying ability of the other party
thereto is rated either A or A-1 or better by Standard and Poor's Ratings
Services ("S&P"), Duff & Phelps Credit Rating Co. ("Duff") or Fitch IBCA Inc.
("Fitch"), or A or P-1 or better by Moody's Investors Services, Inc.
("Moody's"). If there is a default by the other party to such transaction, the
Fund 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.

-17-
<PAGE>

Equity Swaps. The Fund may enter into equity swap contracts to invest in a
market without owning or taking physical custody of securities in circumstances
in which direct investment is restricted for legal reasons or is otherwise
impracticable. Equity swaps may also be used for hedging purposes or to seek to
increase total return. The counterparty to an equity swap contract will
typically be a bank, investment banking firm or broker/dealer. Equity swap
contracts may be structured in different ways. For example, a counterparty may
agree to pay the Fund the amount, if any, by which the notional amount of the
equity swap contract would have increased in value had it been invested in
particular stocks (or an index of stocks), plus the dividends that would have
been received on those stocks. In these cases, the Fund may agree to pay to the
counterparty the amount, if any, by which that notional amount would have
decreased in value had it been invested in the stocks. Therefore, the return to
the Fund on any equity swap contract should be the gain or loss on the notional
amount plus dividends on the stocks less the interest paid by the Fund on the
notional amount. In other cases, the counterparty and the Fund may each agree
to pay the other the difference between the relative investment performances
that would have been achieved if the notional amount of the equity swap contract
had been invested in different stocks (or indices of stocks).

The Fund will enter into equity swaps only on a net basis, which means that
the two payment streams are netted out, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Payments may be made
at the conclusion of an equity swap contract or periodically during its term.
Equity swaps do not involve the delivery of securities or other underlying
assets. Accordingly, the risk of loss with respect to equity swaps is limited
to the net amount of payments that the Fund is contractually obligated to make.
If the other party to an equity swap defaults, the Fund's risk of loss consists
of the net amount of payments that the Fund is contractually entitled to
receive, if any. Inasmuch as these transactions are entered into for hedging
purposes or are offset by segregated cash or liquid assets to cover the Fund's
potential exposure, the Fund and the Investment Adviser believe that
transactions do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's borrowing
restrictions.

The Fund will not enter into any equity swap transactions unless the
unsecured commercial paper, senior debt or claims-paying ability of the other
party is rated either A or A-1 or better by S&P's, Duff or Fitch, or A or P-1 or
better by Moody's. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction.

The use of equity swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Adviser is incorrect in
its forecasts of market values, the investment performance of the Fund would be
less favorable than it would have been if this investment technique were not
used.

Convertible Securities. Convertible securities entitle the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible securities mature or are redeemed, converted or exchanged.
Prior to conversion, convertible securities have characteristics similar to
ordin ary debt securities in that they normally provide a stable stream of
income with

-18-
<PAGE>

generally higher yields than those of common stock of the same or similar
issuers. Convertible securities rank senior to common stock in a corporation's
capital structure and therefore generally entail less risk than the
corporation's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.

In selecting convertible securities, the Investment Adviser will consider,
among other factors: an evaluation of the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; diversification of the
Fund's portfolio as to issuers; and whether the securities are rated by a rating
agency and, if so, the ratings assigned.

The value of convertible securities is a function of their investment value
(determined by yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if converted into the
underlying common stock). The investment value of convertible securities is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline, and by the
credit standing of the issuer and other factors. The conversion value of
convertible securities is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible securities is governed principally by their
investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their conversion value. In
addition, convertible securities generally sell at a premium over their
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding fixed income
securities.

Capital appreciation for the Fund may result from an improvement in the
credit standing of an issuer whose securities are held in the Fund or from a
general lowering of interest rates, or a combination of both. Conversely, a
reduction in the credit standing of an issuer whose securities are held by the
Fund or a general increase in interest rates may be expected to result in
capital depreciation to the Fund.

In general, investments in lower quality convertible securities are subject
to a significant risk of a change in the credit rating or financial condition of
the issuing entity. Investments in convertible securities of medium or lower
quality are also likely to be subject to greater market fluctuation and to
greater risk of loss of income and principal due to default than investments of
higher quality fixed-income securities. Such lower quality securities generally
tend to reflect short-term corporate and market developments to a greater extent
than higher quality securities, which react more to fluctuations in the general
level of interest rates. The Fund will generally reduce risk to the investor by
diversification, credit analysis and attention to current developments in trends
of both the economy and financial markets. However, while diversification
reduces the effect on the Fund of any single investment, it does not reduce the
overall risk of investing in lower quality securities.

-19-
<PAGE>

Risks Related to Small Company Securities. While the Investment Adviser
believes that smaller companies can provide greater growth potential than
larger, more mature firms, investing in the securities of such companies also
involves greater risk, portfolio price volatility and cost. Historically, small
capitalization stocks, in which the Fund may invest, and stocks of recently
organized companies, in which the Fund may also invest, have been more volatile
in price than the larger capitalization stocks included in the S&P 500 Index.
Among the reasons for this greater price volatility are the lower degree of
market liquidity (the securities of companies with small stock market
capitalizations may trade less frequently and in limited volume) and the greater
sensitivity of small companies to changing economic conditions. For example,
these companies are associated with higher investment risk due to the greater
business risks of small size and limited product lines, markets, distribution
channels and financial and managerial resources.

The values of small company stocks will frequently fluctuate independently
of the values of larger company stocks. Small company stocks may decline in
price as large company stock prices rise, or rise in price as large company
stock prices decline. You should, therefore, expect that the net asset value of
the Fund's shares will be more volatile than, and may fluctuate independently
of, broad stock market indices such as the S&P 500 Index.

The additional costs associated with the acquisition of small company
stocks include brokerage costs, market impact costs (that is, the increase in
market prices which may result when a Fund purchases thinly traded stock) and
the effect of the "bid-ask" spread in small company stocks. These costs will be
borne by all shareholders and may negatively impact investment performance.

Risks Related to Medium and Lower Quality Securities. Investments in medium
and lower quality securities present special risk considerations. Medium quality
securities, although considered investment grade, are also considered to have
speculative characteristics. Lower quality securities are considered
predominately speculative by traditional investment standards. In some cases,
these obligations may be highly speculative and have poor prospects for reaching
investment grade standard. While any investment carries some risk, certain risks
associated with lower quality securities are different from those for
investment-grade securities. The risk of loss through default is greater
because lower quality securities are usually unsecured and are often subordinate
to an issuer's other obligations. Additionally, the issuers of these securities
frequently have high debt levels and are thus more sensitive to difficult
economic conditions, individual corporate developments and rising interest
rates. Consequently, the market price of these securities may be quite volatile
and may result in wider fluctuations of the Fund's net asset value per share.

There remains some uncertainty about the performance level of the market
for lower quality securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the markets for lower quality securities (resulting in a greater number of
bond defaults) and the value of lower quality securities held in a portfolio of
investments.

The economy and interest rates can affect lower quality securities
differently than other securities. For example, the prices of lower quality
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher quality

-20-
<PAGE>

investments. In addition, during an economic downturn or period in which
interest rates are rising significantly, highly leveraged issuers may experience
financial difficulties, which, in turn, would adversely affect their ability to
service their principal and interest payment obligations, meet projected
business goals and obtain additional financing.

The market value of lower quality securities tends to reflect individual
corporate developments to a greater extent than that of higher quality
securities which react primarily to fluctuations in the general level of
interest rates. Lower quality securities are often issued in connection with a
corporate reorganization or restructuring or as a part of a merger, acquisition,
takeover or similar event. They are also issued by less established companies
seeking to expand. Such issuers are often highly leveraged, may not have
available to them more traditional methods of financing and are generally less
able than more established or less leveraged entities to make scheduled payments
of principal and interest in the event of adverse economic developments or
business conditions.

A holder's risk of loss from default is significantly greater for lower
quality securities than is the case for holders of other debt securities because
such securities are generally unsecured and are often subordinated to the rights
of other creditors of the issuers of such securities. Investment by the Fund in
defaulted securities poses additional risk of loss should nonpayment of
principal and interest continue in respect of such securities. Even if such
securities are held to maturity, recovery by the Fund of its initial investment
and any anticipated income or appreciation will be uncertain. The Fund may also
incur additional expenses in seeking recovering on defaulted securities. If an
issuer of a security defaults, the Fund may incur additional expenses to seek
recovery. In addition, periods of economic uncertainty would likely result in
increased volatility for the market prices of lower quality securities as well
as the Fund's net asset value. In general, both the prices and yields of lower
quality securities will fluctuate.

The secondary market for lower quality securities is concentrated in
relatively few market makers and is dominated by institutional investors,
including mutual funds, insurance companies and other financial institutions.
Accordingly, the secondary market for such securities is not as liquid as, and
is more volatile than, the secondary market for higher quality securities. In
addition, market trading volume for high yield fixed income securities is
generally lower and the secondary market for such securities could contract
under adverse market or economic conditions, independent of any specific adverse
changes in the condition of a particular issuer. These factors may have an
adverse effect on the market price and the Fund's ability to dispose of
particular portfolio investments. A less developed secondary market may also
make it more difficult for the Fund to obtain precise valuations of the high
yield securities in its portfolio.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower quality
convertible securities held by the Fund, especially in a thinly traded market.
Illiquid or restricted securities held by the Fund may involve special
registration responsibilities, liabilities and costs, and could involve other
liquidity and valuation difficulties.

The credit ratings assigned by a rating agency evaluate the safety of a
rated security's principal and interest payments, but do not address market
value risk and, therefore, may not fully

-21-
<PAGE>

reflect the true risks of an investment. Because the ratings of the rating
agencies may not always reflect current conditions and events, in addition to
using recognized rating agencies and other sources, the Investment Adviser
performs its own analysis of the issuers whose lower quality securities the Fund
holds. Because of this, the Fund's performance may depend more on its Investment
Adviser's credit analysis than is the case of mutual funds investing in higher
quality securities.

Investment Companies. With respect to the investments of the Fund 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 Fund,
Northern Funds 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 Fund
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
Fund.

Certain investment companies whose securities are purchased by the Fund 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 Fund 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 Fund may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policy and restrictions as the Fund. However, the Fund
currently intends to limit its investment in securities issued by other
investment companies to the extent described above. The Fund 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 Northern Funds.

Yields and Ratings. The yields on certain obligations, including the money
market instruments in which the Fund invests, are dependent on a variety of
factors, including general 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's, Moody's, Duff, Fitch and Thomson BankWatch, Inc. represent their
respective opinions as to the quality of the obligations they undertake to rate.
Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. For a more complete discussion of ratings, see
Appendix A to this Additional Statement.

Subject to the limitations stated in the Prospectus, if a security held by
the Fund undergoes a rating revision, the Fund may continue to hold the security
if the Investment Adviser determines such retention is warranted.

Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
Fund 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, changes in the holdings of

-22-
<PAGE>

specific issuers, changes in country and currency weightings, cash requirements
for redemption of shares and by requirements which enable the Funds to receive
favorable tax treatment. The Fund had not commenced operations during the fiscal
year ended March 31, 2000. The Fund is not restricted by policy with regard to
portfolio turnover and will make changes in its investment portfolio from time
to time as business and economic conditions as well as market prices may
dictate.

Miscellaneous. Securities may be purchased on margin only to obtain such
short-term credits as are necessary for the clearance of purchases and sales of
securities. The Fund will not engage in selling securities short. The Fund may,
however, make short sales against the box although the Fund has no current
intention to do so in the coming year. "Selling short against the box" involves
selling a security that the Fund owns for delivery at a specified date in the
future.

Investment Restrictions

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

The Fund may not:

(1) Make loans, except through (a) the purchase of debt
obligations in accordance with the Fund'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 Fund to the extent permitted by law.

(2) Purchase or sell real estate or real estate limited
partnerships, but this restriction shall not prevent the Fund from
investing directly or indirectly in portfolio instruments secured by real
estate or interests therein or acquiring securities of real estate
investment trusts or other issuers that deal in real estate.

(3) Invest in commodities or commodity contracts, except that
the Fund 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 Fund may be
deemed to be an underwriter under the Securities Act of 1933 (the "1933
Act") in connection with the purchase and sale of portfolio instruments in
accordance with its investment objective and portfolio management policies.

(6) Purchase, except during temporary defensive periods, the
securities of any issuer, if, as a result of such purchase, less than 25%
of the assets of the Fund would be invested in the securities of issuers
that are in the communications industry.

-23-
<PAGE>

(7) Borrow money, except that to the extent permitted by
applicable law (a) the Fund 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 Fund may borrow up to an
additional 5% of its total assets for temporary purposes, (c) the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities, and (d) the Fund may purchase
securities on margin. If due to market fluctuations or other reasons the
Fund's borrowings exceed the limitations stated above, Northern Funds will
promptly reduce the borrowings of the Fund in accordance with the 1940 Act.
In addition, as a matter of fundamental policy, the Fund will not issue
senior securities to the extent such issuance would violate applicable law.

(8) Make any investment inconsistent with the Fund's
classification as a diversified company under the 1940 Act.

(9) Notwithstanding any of the Fund's other fundamental
investment restrictions (including, without limitation, those restrictions
relating to issuer diversification, industry concentration and control),
the Fund may: (a) purchase securities of other investment companies to the
full extent permitted under Section 12 or any other provision of the 1940
Act (or any successor provision thereto) or under any regulation or order
of the SEC; 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
Fund.

* * * *

For the purpose of Investment Restrictions (1) and (7) above, the Fund
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 May 15, 2000, the Fund
had not filed such an exemptive application.

For the purpose of Investment Restriction (6), in determining industry
classification, communications companies are those that design, develop,
manufacture, distribute or sell communication services and equipment that enable
or enhance data, voice and video transmissions.

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 Fund, does not exceed 10% of
the value of the Fund's total assets.

Each Investment Restriction which involves a maximum percentage (other than
the restriction set forth above in Investment Restriction (7)) will not be
considered violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition or encumbrance of securities or assets
of the Fund. The 1940 Act requires that if the asset coverage for borrowings at
any time falls below the limits described in Investment Restriction (7), the
Fund 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.

-24-
<PAGE>

ADDITIONAL TRUST INFORMATION

Classification and History

Northern Funds is an open-end, management investment company. The Fund is
classified as diversified under the 1940 Act and is a series of the Trust which
was formed as a Massachusetts business trust on October 12, 1993 under an
Agreement and Declaration of Trust. At a meeting of shareholders held on March
21, 2000, the Northern Funds' shareholders approved an Agreement and Plan of
Reorganization pursuant to which the Trust will be reorganized as a Delaware
business trust. See "Description of Shares."

-25-
<PAGE>

Trustees and Officers

The business and affairs of the Trust are managed under the direction of
the Trusts' Board of Trutees. Information pertaining to the Trustees and
officers of Northern Funds is set forth below.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Name Position(s) Principal Occupation(s)
and Address Age with Trust During Past 5 Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mr. Richard G. Cline 65 Trustee Chairman, Hawthorne
4200 Commerce Court, Investors, Inc. (a
Suite 300 management advisory
Lisle, IL 60532 services and private
investment company) since
January 1996; Chairman,
Hussman 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);
University of Illinois
Foundation. Trustee:
Northern Institutional
Funds
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Mr. Edward J. Condon, Jr. 60 Trustee Chairman of The Paradigm
Sears Tower, Suite 9650 Group, Ltd. (a financial
233 S. Wacker Drive advisor) since July 1993;
Chicago, IL 60606 Vice President and
Treasurer of Sears,
Roebuck and Co. (a retail
corporation) from February
l989 to July 1993; Member
of Advisory Board of
Real-
</TABLE>

-26-
<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Time USA, Inc. (a
software development
company); Member of the
Board of Managers of The
Liberty Hampshire Company,
LLC (a receivables funding
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 Institutional
Funds.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Mr. Wesley M. Dixon, Jr. 72 Trustee Director of Kinship
400 Skokie Blvd. Corporation (a financial
Suite 300 services company) 1985 to
Northbrook, IL 60062 1996; 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 Institutional
Funds
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Mr. William J. Dolan, Jr. 67 Trustee Partner of Arthur Andersen
1534 Basswood Circle & Co. S.C. (accounting
Glenview, IL 60025 firm) from 1966 to 1989.
Financial Consultant,
Ernst & Young from 1992 to
1993 and 1997. Trustee:
Northern Institutional
Funds
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Mr. John W. English 67 Trustee Private Investor; Vice
- --------------------------------------------------------------------------------------------------------
</TABLE>

-27-
<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50-H New England Ave. President and Chief
P.O. Box 640 Investment Officer of The
Summit, NJ 07902-0640 Ford Foundation (a
charitable trust) from
1981 to 1993. Director:
University of
Iowa Foundation;
Blanton-Peale Institutes
of Religion and Health;
Community Foundation of
Sarasota County. Former
Director: Duke Management
Company (manager of the
Duke University endowment
fund); 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 Institutional
Funds.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Mr. Raymond E. George, Jr.* 69 Trustee Senior Vice President and
703 Prospect Avenue Senior Fiduciary Officer
Winnetka, IL 60093 of The Northern Trust
Company from 1990 to
1993. Trustee: Northern
Institutional Funds
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Ms. Sandra Polk Guthman 56 Trustee President and CEO of
420 N. Wabash Avenue Polk Bros. Foundation
Suite 204 (an Illinois not-for-
Chicago, IL 60611 profit corporation) from
1993 to present; Director
of Business Transformation
1992 to 1993, and
- --------------------------------------------------------------------------------------------------------
</TABLE>

-28-
<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Midwestern
Director of Marketing
1988 to 1992, IBM
(a technology company). Director:
MBIA Insurance Corporation
of Illinois (a municipal
bond insurance company).
Trustee: Northern
Institutional Funds.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Mr. Michael E. Murphy ** 63 Trustee President of Sara Lee
Suite 2222 Foundation (philanthropic
20 South Clark Street organization) since
Chicago, IL 60603 November 1997; Vice
Chairman and Chief
Administrative Officer
of Sara Lee 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
Institutional Funds.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Mary Jacobs Skinner, Esq. *** 42 Trustee Partner in the law firm of
One First National Plaza Sidley & Austin. Trustee:
Chicago, IL 06063 Northern Institutional
Funds
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Mr. William H. Springer 71 Chairman and Trustee Vice Chairman of
</TABLE>

-29-
<PAGE>

<TABLE>

- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
701 Morningside Drive Ameritech (a telecommunications
Lake Forest, IL 60045 holding company) from February 1987 to
August 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 Institutional Funds.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Mr. Richard P. Strubel 61 Trustee President and Chief
737 N. Michigan Avenue Operating Officer,
Suite 1405 UNext.com (a provider of educational
Chicago, IL 60611 services via the internet) since 1999;
Managing Director of Tandem
Partners, Inc. (a privately held
management 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
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

-30-
<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Funds.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Mr. Stephen B. Timbers**** 55 Trustee President of Northern
50 South LaSalle Street, B-3 Funds Global Investments,
Chicago, IL 60675 a division of Northern
Trust Corporation, and
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, Inc.
(formerly known as Northern Trust
Quantitative Advisors, Inc.).
Trustee: Northern Institutional
Funds.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Ms. Jylanne M. Dunne 40 President Senior Vice President for
4400 Computer Drive Distribution Services at
Westborough, MA 01581 PFPC Inc. ("PFPC"), -
(formerly First Data
Investor Services Group,
Inc. ("FDISG")), since 1988.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Mr. Archibald E. King 42 Vice President Senior Vice President and
50 South LaSalle Street other positions at the
Chicago, IL 60675 Northern Trust Company
since 1979.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Mr. Lloyd A Wennlund 42 Vice President Senior Vice President and
50 South LaSalle Street other positions at the
Chicago, IL 60675 Northern Trust Company,
President of Northern Trust
Securities, Inc., and
Managing Executive, Mutual
Funds for Northern Trust
Global Investments since
1989.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Mr. Brian R. Curran 32 Vice President and Director of Fund
4400 Computer Drive Treasurer Administration at PFPC
Westborough, MA 01581 since 1997; Director of
Fund Administration at
State Street Bank and
Trust Company from
February 1997 to October
- --------------------------------------------------------------------------------------------------------------
</TABLE>

-31-
<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997; Senior Auditor at
Price Waterhouse L.L.P.
(an accounting firm) from
February 1994 to February
1997.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Ms. Judith E. Clear 33 Assistant Treasurer Client Treasury Manager of
4400 Computer Drive Mutual Fund Administration
Westborough, MA 01581 at PFPC since 1997;
Compliance Manager at
Citizens Trust from 1994
to 1996.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Ms. Suzanne E. Anderson 27 Assistant Treasurer Client Treasury Manager of
4400 Computer Drive Mutual Fund Administration
Westborough, MA 01581 at PFPC since August 1998;
Manager of Fund
Administration at State
Street Bank & Trust Company
from October 1996 to August
1998; Fund Administrator at
State Street Bank & Trust
Company from October 1995 to
October 1996; Mutual Fund
Accountant at the Boston
Company prior thereto.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Jeffrey A. Dalke, Esq. 49 Secretary Partner in the law firm of
One Logan Square Drinker Biddle & Reath LLP.
18th and Cherry Streets
Philadelphia, PA
19103-6996
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Linda J. Hoard, Esq. 52 Assistant Secretary Vice President at PFPC
4400 Computer Drive since 1998; Attorney
Westborough, MA 01581 Consultant for Fidelity
Investments & Co. ( a
financial service company),
Investors Bank & Trust
Company (a financial service
provider) and PFPC (formerly
FDISG) from September 1994
to June 1998.
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Ms. Therese Hogan 37 Assistant Secretary Director of the State
4400 Computer Drive Regulation Department at
Westborough, MA 01581 PFPC since 1994.
- --------------------------------------------------------------------------------------------------------
</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 Corporation.
**** 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 and Northern Trust Investments, Inc.

Certain of the Trustees and officers and the organizations with which they
are associated have had in the past, and may have in the future, transactions
with Northern 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 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 Northern Funds'
service providers under Northern Funds' Advisory Agreement, Transfer Agency
Agreement, Custodian Agreement, Foreign Custodian Agreement, Co-Administration
Agreement and Distribution Agreement, Northern Funds itself requires no
employees.

-32-

<PAGE>

Each officer holds comparable positions with certain other investment
companies for which NFD, PFPC or an affiliate thereof is the investment adviser,
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
earns an additional fee of $1,500, and the Chairman of the Board earns an
additional fee of $3,500, 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, Jr. (Chairman), Dolan, Jr. and Strubel. 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.

The Trust's officers do not receive fees from the Trust for services in
such capacities. All of the Trust's officers (except Messrs. Dalke, King and
Wennlund) are employees of PFPC, which 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.

Northern Trust Company, of which Mr. King and Mr. Wennlund are officers,
receives fees from the Trust as investment adviser, custodian, transfer agent
and co-administrator.

For the fiscal year ended March 31, 2000, the Trustees received the
following compensation:

<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Total Compensation
Compensation as Part of Trust from the Trust
Name of Trustee* from the Trust Expense Complex**
============================================================================================
<S> <C> <C> <C>
Wesley M. Dixon, Jr. $31,250 None $33,750
----------------------------------------------------------------------------------------
William J. Dolan, Jr. $32,500 None $35,000
----------------------------------------------------------------------------------------
Raymond E. George, Jr. $31,250 None $33,750
----------------------------------------------------------------------------------------
Michael E. Murphy $30,000 None $30,000
----------------------------------------------------------------------------------------
Mary Jacobs Skinner $32,500 None $35,000
----------------------------------------------------------------------------------------
Richard G. Cline*** $ 1,250 None $45,750
----------------------------------------------------------------------------------------
Edward J. Condon, Jr.*** $ 1,250 None $50,750
----------------------------------------------------------------------------------------
John W. English*** $ 1,250 None $48,250
----------------------------------------------------------------------------------------
Sandra Polk Guthman*** $ 1,250 None $45,750
----------------------------------------------------------------------------------------
William H. Springer*** $ 1,250 None $59,250
----------------------------------------------------------------------------------------
Richard P. Strubel*** $ 1,250 None $56,750
----------------------------------------------------------------------------------------
Stephen B. Timbers*** None None None
============================================================================================
</TABLE>

-33-
<PAGE>

* This Table does not include the following amounts paid during the fiscal
year ended March 31, 2000: $17,500 paid to a former Trustee who retired in
September 1999 and $35,000 paid to a former Trustee who retired in March 2000.

** Fund Complex includes thirty-one investment portfolios of the Trust and
twenty-one portfolios of Northern Institutional Funds, a separately registered
investment company.

*** Messrs. Cline, Condon, Jr., English, Springer, Strubel and Timbers and Ms.
Guthman joined the Board of Trustees effective as of March 28, 2000.

Investment Adviser, Transfer Agent and Custodian

Northern Trust is a wholly-owned subsidiary of The Northern Trust
Corporation, a Chicago-based multi-bank holding company with subsidiaries in
Colorado, Illinois, Florida, Michigan, New York, Arizona, Georgia, California
and Texas. Northern Trust has for more than 100 years managed the assets of
individuals, charitable organizations, foundations and large corporate
investors. One of the nation's leading providers of trust and investment
management services, Northern Trust first entered the mutual fund business in
1983 by offering money market funds to institutional clients. As part of its
investment advisory services, Northern Trust offers extensive research services
to its clients. As of the date of this Additional Statement, nearly 300
financial institutions nationwide purchase Northern Trust's economic advisory
services. As of March 31, 2000, Northern Trust Corporation and its subsidiaries
had approximately $33.2 billion in assets and $20.5 billion in deposits.
Northern Trust is one of the strongest banking organizations in the United
States and its clients include public and private retirement funds, endowments,
foundations, trusts, corporations and individuals. Northern Funds complements
the banking and personal trust services available through Northern Trust by
allowing Northern Trust's banking and trust clients to consolidate the
management of their finances and thereby move one step closer to one-stop
financial shopping. Northern Funds utilizes a state-of-the-art investor services
center. Also, trained investment representatives are available at Northern
Trust's offices to assist investors in allocating their investments. 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 manages the Fund through a team of professionals,
led by portfolio managers who follow a disciplined process to develop investment
strategies. The purpose of this approach is to promote consistent management.
The portfolio managers draw upon the resources of Northern Trust's research
department with specialists in economic analysis, investment strategy, credit
quality and tax law, and which supplies information on interest rates, GNP
growth, corporate profits and other factors. As of March 31, 2000, the
Investment Adviser and its affiliates administered approximately $1.6 trillion
in assets, including $323.1 billion for which the Investment Adviser and its
affiliates had investment management responsibility, for clients including
public and private retirement funds, endowments, foundations, trusts,
corporations, other investment companies and individuals.

Subject to the general supervision of the Board of Trustees, Northern Trust
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Fund, and also provides certain ancillary services.
The Investment Adviser is also responsible for monitoring and preserving the
records required to be maintained under the regulations of the SEC (with certain

-34-
<PAGE>

exceptions unrelated to its activities for Northern Funds). In making investment
recommendations for the Fund, investment advisory personnel may not inquire or
take into consideration whether issuers of securities proposed for purchase or
sale for the Fund's accounts are customers of Northern Trust's commercial
banking department. These requirements are designed to prevent investment
advisory personnel for the Fund from knowing which companies have commercial
business with Northern Trust and from purchasing securities where they know the
proceeds will be used to repay loans to the bank.

Northern Fund's Investment Advisory and Ancillary Services Agreement with
Northern Trust (the "Advisory Agreement") has been approved by the Board of
Trustees, including the "non-interested" Trustees, and the initial shareholder
of Northern Funds. The Advisory Agreement provides that in executing portfolio
transactions and in selecting brokers or dealers (a) with respect to common and
preferred stocks, the Investment Adviser shall use its best judgment to obtain
the best overall terms available, and (b) with respect to other securities, the
Investment Adviser shall attempt to obtain best net price and execution.
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.

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 Fund and/or other accounts over which the Investment Adviser or an affiliate
of the Investment Adviser 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.

Supplemental research information so received is in addition to, and not in
lieu of, services required to be performed by the Investment Adviser and does
not reduce the advisory fees payable to the Investment Adviser by the Fund. The
Trustees will periodically review the commissions paid by the Fund to consider
whether the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Fund. It is possible that
certain of the supplemental research or other services received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.

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

-35-
<PAGE>

market in the instruments involved except in those circumstances where more
favorable prices and execution are available elsewhere. The cost of foreign and
domestic securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down.

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

Northern Trust's investment advisory duties for Northern Funds are carried
out through its Trust Department. On occasions when the Investment Adviser deems
the purchase or sale of a security to be in the best interests of the Fund 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 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 Fund with those to be sold or purchased for such other
accounts in order to obtain the best overall terms available with respect to
common and preferred stocks and the best net price and execution with respect to
other securities. 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 Fund and other accounts
involved. In some instances, this procedure may adversely affect the size of the
position obtainable for the Fund or the amount of the securities that are able
to be sold for the Fund. To the extent that the execution and price available
from more than one broker or dealer are believed to be comparable, the Agreement
permits the Investment Adviser, at its discretion but subject to applicable law,
to select the executing broker or dealer on the basis of the Investment
Adviser's opinion of the reliability and quality of the broker or dealer.

The Advisory Agreement provides that the Investment Adviser may render
similar services to others so long as its services under such Agreement are not
impaired thereby. The Advisory Agreement also provides that Northern Funds 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.

From time to time, the Investment Adviser may voluntarily waive a portion
or all of its fees otherwise payable to it with respect to the Fund.

Under its Transfer Agency Agreement with Northern Funds, Northern Trust has
undertaken, among other things, to perform the following services: (a) answer
shareholder inquiries and respond to requests for information regarding Northern
Funds; (b) process purchase and redemption transactions; (c) establish and
maintain shareholder accounts and subaccounts; (d) furnish confirmations in
accordance with applicable law, and provide periodic account statements to each
shareholder; (e) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to
shareholders; (f) act as income disbursing

-36-
<PAGE>

agent; and (g) maintain appropriate records relating to its services. 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 Northern Funds, payable
monthly, at an annual rate of .10% of the average daily net asset value of the
Fund.

Northern Trust maintains custody of the assets of the Fund pursuant to the
terms of its Foreign Custody Agreement with Northern Funds. Under this
agreement, Northern Trust (a) holds the Fund's cash and securities, (b)
maintains such cash and securities in separate accounts in the name of the Fund,
(c) makes receipts and disbursements of funds on behalf of the Fund, (d)
receives, delivers and releases securities on behalf of the Fund, (e) collects
and receives all income, principal and other payments in respect of the Fund's
investments held by Northern Trust under the agreement, and (f) maintains the
accounting records of Northern Funds. Northern Trust may employ one or more
subcustodians under the Foreign Custody Agreement, provided that Northern Trust
shall, subject to certain monitoring responsibilities, have no more
responsibility or liability to Northern Funds on account of any action or
omission of any subcustodian so employed than such subcustodian has to Northern
Trust and that the responsibility or liability of the subcustodian to Northern
Trust shall conform to the resolution of the Trustees of Northern Funds
authorizing the appointment of the particular subcustodian. Northern Trust may
also appoint an agent to carry out such of the provisions of the Foreign Custody
Agreement as Northern Trust may from time to time direct. Under its Foreign
Custody Agreement, Northern Trust has entered into agreements with financial
institutions and depositories located in foreign countries with respect to the
custody of the Fund's foreign securities.

As compensation for the services rendered to the Fund under the Foreign
Custody Agreement, and the assumption by Northern Trust of certain related
expenses, Northern Trust is entitled to payment from the Fund as follows: (a)
$35,000 annually for the Fund, plus (b) 9/100th of 1% annually of the Fund's
average daily net assets, plus (c) reimbursement for fees incurred by Northern
Trust as foreign Custodian for telephone, postage, courier fees, office supplies
and duplicating. As compensation for basic accounting services rendered to the
Fund by Northern Trust, Northern Trust is entitled to receive $25,000 for the
first $50 million of the Fund's average daily net assets and 1/100th of 1% of
the Fund's average daily net assets in excess of $50 million.

Northern's fees under the Foreign Custody Agreement are subject to
reduction based on the Fund's daily uninvested cash balances (if any).

-37-
<PAGE>

Unless sooner terminated, Northern Funds' Advisory Agreement, Transfer
Agency Agreement and Foreign Custody Agreement will continue in effect with
respect to the Fund until March 31, 2001, and thereafter for successive 12-month
periods, provided that the continuance is approved at least annually (a) 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 (b) by the Trustees or by the vote of a majority of the outstanding
shares of the Fund (as defined under "Description of Shares"). Each agreement is
terminable at any time without penalty by Northern Funds (by specified Trustee
or shareholder action) on 60 days' written notice to Northern Trust and by
Northern Trust on 60 days' written notice to Northern Funds.

In the Advisory Agreement, Northern Trust agrees that the name "Northern"
may be used in connection with Northern Funds' business on a royalty-free basis.
Northern Trust has reserved to itself the right to grant the non-exclusive right
to use the name "Northern" to any other person. The Advisory Agreement provides
that at such time as the Agreement is no longer in effect, Northern Funds will
cease using the name "Northern."

Co-Administrators and Distributor

Northern Trust and PFPC, 4400 Computer Drive, Westborough, Massachusetts
01581, act as co-administrators for the Fund under a Co-Administration Agreement
with Northern Funds. Subject to the general supervision of Northern Funds'
Board of Trustees, Northern Trust and PFPC (the "Co-Administrators") provide
supervision of all aspects of Northern Funds' non-investment advisory operations
and perform various corporate secretarial, treasury and blue sky services,
including but not limited to: (a) maintaining office facilities and furnishing
corporate officers for Northern Funds; (b) furnishing data processing services,
clerical services, and executive and administrative services and standard
stationery and office supplies; (c) 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 Northern Funds' bills, preparing monthly reconciliation of
Northern Funds' expense records, updating projections of annual expenses,
preparing materials for review by the Board of Trustees and compliance testing;
(d) preparing and submitting reports to Northern Funds' shareholders and the
SEC; (e) preparing and printing financial statements; (f) preparing monthly Fund
profile reports; (g) preparing and filing Northern Funds' federal and state tax
returns (other than those required to be filed by Northern Funds' custodian and
transfer agent) and providing shareholder tax information to Northern Funds'
transfer agent; (h) assisting in marketing strategy and product development; (i)
performing oversight/management responsibilities, such as the supervision and
coordination of certain of Northern Funds' service providers; (j) effecting and
maintaining, as the case may be, the registration of shares of Northern Funds
for sale under the securities laws of various jurisdictions; (k) assisting in
maintaining corporate records and good

-38-
<PAGE>

standing status of Northern Funds in its state of organization; and (l)
monitoring Northern Funds' arrangements with respect to services provided by
Service Organizations to their customers who are the beneficial owners of
shares.

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 Fund, computed daily and payable
monthly, at an annual rate of 0.15% of the average daily net assets of the Fund.

Unless sooner terminated, the Co-Administration Agreement will continue in
effect until September 30, 2001, and thereafter for successive one-year terms
with respect to the Fund, 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 Fund (as defined below under "Description of Shares"), 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 September 30, 2001 without penalty by
Northern Funds 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 September 30, 2001 without penalty on at least 60
days' written notice to Northern Funds and the other Co-Administrator.

Northern Funds may terminate the Co-Administration Agreement prior to
September 30, 2001 in the event that Northern Funds 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. Northern Funds may also terminate the Co-
Administration Agreement prior to September 30, 2001 in the event that the Co-
Administrators fail to meet one of the performance standards set forth in the
Agreement.

Northern Funds has also entered into a Distribution Agreement under which
NFD, as agent, sells shares of each Fund on a continuous basis. NFD pays the
cost of printing and distributing prospectuses to persons who are not
shareholders of Northern Funds (excluding preparation and typesetting expenses)
and of certain other distribution efforts. No compensation is payable by
Northern Funds to NFD for such distribution services. NFD is a wholly-owned
subsidiary of Provident Distributors, Inc. ("PDI"). PDI, based in West
Conshohocken, Pennsylvania, is an independently owned and operated broker-
dealer.

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
Northern Funds 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 Northern Funds 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 Northern
Funds by NFD, or those

-39-
<PAGE>

resulting from the willful misfeasance, bad faith or negligence of NFD, or NFD's
breach of confidentiality.

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

Service Organizations

As stated in the Fund's Prospectus, the Fund may enter into agreements from
time to time with Service Organizations providing for support and/or
distribution services to customers of the Service Organizations who are the
beneficial owners of Fund shares. Under the agreements, the Fund may pay
Service Organizations up to .25% (on an annualized basis) of the average daily
net asset value of the shares beneficially owned by their customers. Support
services provided by Service Organizations under their agreements may include:
(a) processing dividend and distribution payments from the Fund; (b) providing
information periodically to customers showing their share positions; (c)
arranging for bank wires; (d) responding to customer inquiries; (e) providing
subaccounting with respect to shares beneficially owned by customers or the
information necessary for subaccounting; (f) forwarding shareholder
communications; (g) assisting in processing share purchase, exchange and
redemption requests from customers; (h) assisting customers in changing dividend
options, account designations and addresses; and (i) other similar services
requested by the Fund. In addition, Service Organizations may provide
assistance (such as the forwarding of sales literature and advertising to their
customers) in connection with the distribution of Fund shares.

The Fund's arrangements with Service Organizations under the agreements are
governed by two Plans (a Service Plan and a Distribution and Service Plan),
which have been adopted by the Board of Trustees. Because the Distribution and
Service Plan contemplates the provision of services related to the distribution
of Fund shares (in addition to support services), that Plan has been adopted in
accordance with Rule 12b-1 under the 1940 Act. In accordance with the Plans,
the Board of Trustees reviews, at least quarterly, a written report of the
amounts expended in connection with the Fund's arrangements with Service
Organizations and the purposes for which the expenditures were made. In
addition, the Fund's arrangements with Service Organizations must be approved
annually by a majority of the Trustees, including a majority of the Trustees who
are not "interested persons" of the Fund as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements (the "Disinterested
Trustees").

The Board of Trustees believes that there is a reasonable likelihood that
their arrangements with Service Organizations will benefit the Fund and its
shareholders. Any material amendment to the arrangements with Service
Organizations under the agreements must be approved by a majority of the Board
of Trustees (including a majority of the Disinterested Trustees), and any
amendment to increase materially the costs under the Distribution and Service
Plan with respect to the Fund must be approved by the holders of a majority of
the outstanding shares of the Fund involved. So long as

-40-
<PAGE>

the Distribution and Service Plan is in effect, the selection and nomination of
the members of the Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Northern Funds will be committed to the
discretion of such disinterested Trustees.

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
Northern Funds .

Arthur Andersen LLP, independent accountants, 33 West Monroe Street,
Chicago, Illinois 60603-5385 serve as auditors for Northern Funds.

In-Kind Purchases and Redemptions

Payment for shares of the Fund may, in the discretion of Northern Trust, be
made in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of
payment, contact the Transfer Agent. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Fund and that the Fund 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 Fund; and that adequate information be provided
concerning the basis and other tax matters relating to the securities.

Although the Fund generally will redeem shares in cash, the Fund reserves
the right to pay redemptions by a distribution in kind of securities (instead of
cash) from the Fund. The securities distributed in kind would be readily
marketable and would be valued for this purpose using the same method employed
in calculating the Fund'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.

Automatic Investing Plan

The Automatic Investing Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market performance,
a fixed dollar amount is invested in shares at predetermined intervals. This
may help investors reduce their average cost per share because the agreed upon
fixed investment amount allows more shares to be purchased during periods of
lower share prices and fewer shares during periods of higher share prices. In
order to be effective, Dollar Cost Averaging should usually be followed on a
sustained, consistent basis. Investors should be aware, however, that shares
bought using Dollar Cost Averaging are purchased without regard to their price
on the day of investment or to market trends. Dollar Cost Averaging does not
assure a profit and does not protect against losses in a declining market. In
addition, while investors may find Dollar Cost Averaging to be beneficial, it
will not prevent a loss if an investor ultimately redeems shares at a price
which is lower than their purchase price. An investor may want to consider his
or her financial ability to continue purchases through periods of low price
levels.

-41-
<PAGE>

Directed Reinvestments

In addition to having your income dividends and/or capital gains
distributions reinvested in shares of the Fund from which such distributions are
paid, you may elect the directed reinvestment option and have dividends and
capital gains distributions automatically invested in another Northern Fund.
Reinvestments can only be directed to an existing Northern Funds account (which
must meet the minimum investment requirement). Directed reinvestments may be
used to invest funds from a regular account to another regular account, from a
qualified plan account to another qualified plan account, or from a qualified
plan account to a regular account. Directed reinvestments from a qualified plan
account to a regular account may have adverse tax consequences including
imposition of a penalty tax and, therefore, you should consult your own tax
adviser before commencing these transactions.

Redemptions and Exchanges

Exchange requests received on a Business Day prior to the time shares of
the Fund involved in the request are priced will be processed on the date of
recei pt. "Processing" a request means that shares in the Fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new Fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share next determined coincident to or after the time of
redemption. Exchange requests received on a Business Day after the time shares
of the Fund involved in the request are priced will be processed on the next
Business Day in the manner described above.

Northern Funds may redeem shares involuntarily to reimburse the Fund for
any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Fund's Prospectus from time to
time. Northern Funds may also redeem shares involuntarily if the redemption is
appropriate to carry out Northern Funds' responsibilities under the 1940 Act.

Retirement Plans

Shares of the Fund may be purchased in connection with certain tax-
sheltered retirement plans, including profit-sharing plans, 401(k) plans, money
purchase pension plans, target benefit plans and individual retirement accounts.
Further information about how to participate in these plans, the fees charged
and the limits on contributions can be obtained from Northern Trust. To invest
through any of the tax-sheltered retirement plans, please call Northern Trust
for information and the required separate application. To determine whether the
benefits of a tax-sheltered retirement plan are available and/or appropriate, a
shareholder should consult with a tax adviser.

Expenses

Except as set forth above and in this Additional Statement, each Fund is
responsible for the payment of its expenses. These expenses include, without
limitation, the fees and expenses payable to Northern Trust and PFPC, brokerage
fees and commissions, fees for the registration or

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<PAGE>

qualification of Fund shares under federal or state securities laws, expenses of
the organization of Northern Funds, 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 Northern Funds for violation of any law, legal, tax and
auditing fees and expenses, expenses of preparing and printing prospectuses,
statements of additional information, proxy materials, reports and notices and
the printing and distributing of the same to the Fund's shareholders and
regulatory authorities, compensation and expenses of its Trustees, payments to
Service Organizations, fees of industry organizations such as the Investment
Company Institute, and miscellaneous and extraordinary expenses incurred by
Northern Funds.

Northern Trust and PFPC intend to voluntarily reimburse a portion of the
Fund's expenses and/or reduce their advisory and administrative fees from the
Fund during the current fiscal year. The result of these reimbursements and fee
reductions will be to increase the performance of the Fund during the periods
for which the reductions and reimbursements are made.

PERFORMANCE INFORMATION

Global Communications Fund

The Fund calculates its total return on an "average annual total return"
basis for various periods. Average annual total return reflects the average
annual percentage change in value of an investment in the Fund over the
measuring period. Total return for the Fund 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 Fund
during the period are reinvested in the shares of the Fund. When considering
average total return figures for periods longer than one year, it is important
to note that the annual total return of a Fund for any one year in the period
might have been more or less than the average for the entire period. The Fund
may also advertise from time to time the total return on a year-by-year or other
basis for various specific periods by means of quotations, charts, graphs or
schedules.

The Fund calculates its "average annual total return" by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment
according to the following formula:

T = (ERV /1/n/
--- - 1
p)

Where: T = average annual total return;

ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1, 5 or 10
year (or other) periods at the end of the applicable
period (or a fractional portion thereof);

-43-
<PAGE>

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed in years.

The Fund calculates its "aggregate total return" by determining the
aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:

Aggregate Total Return = T = [(ERV - 1
---
p)]

The yield of the Fund is computed based on the Fund's net income during a
specified 30-day (or one month) period. More specifically, the Fund's yield is
computed by dividing the per share net income during the relevant 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 Fund calculates its 30-day (or one month) standard yield in accordance
with the method prescribed by the SEC for mutual funds:

Yield = 2[(a-b + 1)/6/ - 1]
---
cd

Where: a = dividends and interest earned during the period;

b = expenses accrued for the period (net of reimbursements);

c = average daily number of shares outstanding during the
period entitled to receive dividends; and

d = net asset value per share on the last day of the period.

General Information

Any fees imposed by Northern Trust or other Service Organizations on their
customers in connection with investments in the Fund are not reflected in
Northern Funds' calculations of performance for the Fund.

The Fund's performance will fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. Past
performance is not necessarily indicative of future return. Actual performance
will depend on such variables as portfolio quality, average portfolio maturity,
the type of portfolio instruments acquired, changes in interest rates, portfolio
expenses and other factors. Performance is one basis investors may use to
analyze the Fund as compared to other funds and other investment vehicles.
However, performance of other funds and other investment vehicles may not be
comparable because of the foregoing variables, and differences in

-44-
<PAGE>

the methods used in valuing their portfolio instruments, computing net asset
value and determining performance.

The performance of the Fund may be compared to those of other mutual funds
with similar investment objectives and to stock, bond 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 the Fund may be compared to data prepared by Lipper Analytical
Services, Inc. or to the S&P 500 Index, the Morgan Stanley High-Technology 35
Index, the S&P MidCap 400 Index, the Russell 2000 or 1000 Small Stock Index, the
Consumer Price Index or the Dow Jones Industrial Average. Performance of the
Fund may also be compared to the Morgan Stanley Capital International Europe,
Australia and Far East Index ("EAFE"), the Morgan Stanley EAFE blended with
Emerging Markets Free Index and the J.P. Morgan International Government Bond
Index. Performance data as reported in national financial publications such as
Money, 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 the Fund. From time to time, the Fund may also quote the mutual
fund ratings of Morningstar, Inc. and other services in its advertising
materials.

Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices. The Fund may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the Fund. The
Fund may also compare performance to that of other compilations or indices that
may be developed and made available in the future.

The Fund may also from time to time include discussions or illustrations of
the effects of compounding in advertisements. "Compounding" refers to the fact
that, if dividends or other distributions on the Fund investment are reinvested
by being paid in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original
investment in the Fund, but also of the additional Fund shares received through
reinvestment.

The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in tax-
deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset

-45-
<PAGE>

classes, including but not limited to, stocks, bonds and Treasury bills. From
time to time advertisements, sales literature, communications to shareholders or
other materials may summarize the substance of information contained in
shareholder reports (including the investment composition of the Fund), as well
as the views of Northern Trust as to current market, economic, trade and
interest rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to the
Fund. In addition, selected indices may be used to illustrate historic
performance of selected asset classes. The Fund may also include in
advertisements, sales literature, communications to shareholders or other
materials, charts, graphs or drawings which illustrate the potential risks and
rewards of investment in various investment vehicles, including but not limited
to, stocks, bonds, treasury bills and shares of the Fund. In addition,
advertisements, sales literature, communications to shareholders or other
materials may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternative to
certificates of deposit and other financial instruments. Such sales literature,
communications to shareholders or other materials may include symbols, headlines
or other material which highlight or summarize the information discussed in more
detail therein.

Materials may include lists of representative clients of Northern Trust.
Materials may refer to the CUSIP number of the Fund and may illustrate how to
find the listings of the Fund in newspapers and periodicals. Materials may also
include discussions of other Funds, products, and services.

The Fund may quote various measures of volatility and benchmark correlation
in advertising. In addition, the Fund may compare these measures to those of
other funds. Measures of volatility seek to compare the historical share price
fluctuations or total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. Measures of
volatility and correlation may be calculated using averages of historical data.

The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.

The Fund may advertise its current interest rate sensitivity, duration,
weighted average maturity or similar maturity characteristics.

Advertisements and sales materials relating to the Fund may include
information regarding the background and experience of its portfolio managers.

-46-
<PAGE>

NET ASSET VALUE

Securities held by the Fund that are listed on a recognized U.S. or foreign
securities exchange are valued at the last quoted sales price on the securities
exchange on which the 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 securities listed on a U.S. exchange are not
traded on a valuation date, they will be valued at the last quoted bid price.
If securities traded on a foreign securities exchange are not traded on a
valuation date, they will be valued at the most recent quoted sales price.
Securities that are traded in the U.S. over-the-counter markets, absent a last
quoted sales price, 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. Any securities for which no
current quotations are readily available are valued at fair value as determined
in good faith by Northern Trust under the supervision of the Board of Trustees.
Temporary short-term investments are valued at amortized cost which Northern
Trust has determined, pursuant to Board authorization, approximates market
value. Securities may be valued on the basis of prices provided by independent
pricing services when those prices are believed to reflect the fair market value
of the securities.

Northern Trust is not required to calculate the net asset value of the Fund
on days during which no shares are tendered to the Fund for redemption and no
orders to purchase or sell shares are received by the Fund, or on days on which
there is an insufficient degree of trading in the Fund's portfolio securities
for changes in the value of such securities to affect materially the net asset
value per share.

TAXES

The following summarizes certain additional tax considerations generally
affecting the Fund 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 Fund or its shareholders, and the discussions here and in the
Prospectus are 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 federal and state 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 Fund intends to qualify as a regulated investment company under Part I
of Subchapter M of Subtitle A, Chapter 1 of the Code. As a regulated investment
company, the Fund 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%

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<PAGE>

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 Fund 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 or foreign currencies,
or from other 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 Fund's assets must 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 Fund has
not invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of the
Fund'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 the Fund controls and which are
engaged in the same or similar trades or businesses.

The Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is taxable
to shareholders as long-term capital gain, regardless of the length of time the
shareholder has held the shares, whether such gain was recognized by the Fund
prior to the date on which a shareholder acquired shares of the Fund and whether
the distribution was paid in cash or reinvested in shares. In addition,
investors should be aware that any loss realized upon the sale, exchange or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that have been paid
with respect to such shares.

Dividends and distributions from the Fund will generally be taxable to you
in the tax year in which they are paid, with one exception. Dividends and
distributions declared by the Fund in October, November or December and paid in
January are taxed as though they were paid by December 31.

In the case of corporate shareholders, distributions of the Fund for any
taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" from domestic corporations
received by the Fund for the year. A dividend usually will be treated as a
"qualifying dividend" if it has been received from a domestic corporation. A
portion of the dividends paid by the Fund may constitute "qualifying dividends."

If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income to the extent of the Fund's current and

-48-
<PAGE>

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 to currently 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 Fund 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 Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income 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 Fund may be subject
to the tax laws of such states or localities.

Taxation of Certain Financial Instruments

The tax principles applicable to transactions in financial instruments and
futures contacts and options that may be engaged in by the Fund, and investments
in passive foreign investment companies ("PFICs"), are complex and, in some
cases, uncertain. Such transactions and investments may cause the Fund to
recognize taxable income prior to the receipt of cash, thereby requiring the
Fund to liquidate other positions, or to borrow money, so as to make sufficient
distributions to shareholders to avoid corporate-level tax. Moreover, some or
all of the taxable income recognized may be ordinary income or short-term
capital gain, so that the distributions may be taxable to shareholders as
ordinary income.

In addition, in the case of any shares of a PFIC in which the Fund invests,
the Fund may be liable for corporate-level tax on any ultimate gain or
distributions on the shares if the Fund fails to make an election to recognize
income annually during the period of its ownership of the shares.

DESCRIPTION OF SHARES

The Trust Agreement permits Northern Funds' 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 different investment portfolios.
Northern Funds may hereafter create series in addition to Northern Funds'
existing series, which represent interests in thirty-one portfolios, one of
which is discussed in this Additional Statement. Under the terms of the Trust
Agreement, each share of the Fund has a par value of $.0001, represents a
proportionate interest in the Fund with each other share of its class and is
entitled to such dividends and distributions out of the income belonging to the
Fund as are declared by the Trustees. Upon any liquidation of the Fund,
shareholders of each class of a Fund 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
"Redeeming and Exchanging Shares" in the Prospectus. Pursuant to the terms of
the 1940 Act, the right of a shareholder to redeem shares and the date of
payment by the Fund may be suspended for more than seven days (a) for any period
during which the New

-49-
<PAGE>

York Stock Exchange is closed, other than the customary weekends or holidays, or
trading in the markets the Fund normally utilizes is closed or is restricted as
determined by the SEC, (b) during any emergency, as determined by the SEC, as a
result of which it is not reasonably practicable for the Fund to dispose of
instruments owned by it or fairly to determine the value of its net assets, or
(c) for such other period as the SEC may by order permit for the protection of
the shareholders of the Fund. Northern Funds may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions. In addition, Northern Funds reserves the right to adopt,
by action of the Trustees, a policy pursuant to which it may, without
shareholder approval, redeem upon not less than 30 days' notice all of the
Fund's shares if such shares have an aggregate value below a designated amount
and if the Trustees determine that it is not practical, efficient or advisable
to continue the operation of the Fund and that any applicable requirements of
the 1940 Act have been met. 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
Fund are not issued.

The proceeds received by the Fund 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 Fund. The underlying assets of the Fund
will be segregated on the books of account, and will be charged with the
liabilities in respect to the Fund and with a share of the general liabilities
of Northern Funds. Expenses with respect to the portfolios of Northern Funds
are normally allocated in proportion to the net asset value of the respective
portfolios except where allocations of direct expenses can otherwise be fairly
made.

Shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held. Each investment
portfolio of Northern Funds entitled to vote on a matter will vote in the
aggregate and not by portfolio, except as required by law or when the matter to
be voted on affects only the interests of shareholders of a particular
portfolio.

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 Northern Funds shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each investment portfolio affected by such matter. Rule 18f-2 further
provides that an investment portfolio shall be deemed to be affected by a matter
unless the interests of each investment portfolio in the matter are
substantially identical or the matter does not affect any interest of the
investment portfolio. Under the Rule, the approval of an investment advisory
agreement, a distribution plan subject to Rule 12b-1 under the 1940 Act 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.

The term "majority of the outstanding shares" of either Northern Funds or a
particular Fund or investment portfolio means, with respect to the approval of
an investment advisory agreement, a

-50-
<PAGE>

distribution plan or a change in a fundamental investment policy, the vote of
the lesser of (a) 67% or more of the shares of Northern Funds or such Fund or
portfolio present at a meeting, if the holders of more than 50% of the
outstanding shares of Northern Funds or such Fund or portfolio are present or
represented by proxy, or (b) more than 50% of the outstanding shares of
Northern Funds or such Fund or portfolio.

As of February 23, 2000 Northern and its affiliates held of record
substantially all of the outstanding shares of Northern Funds as agent,
custodian, trustee or investment adviser on behalf of their customers. At such
date, The Northern Trust Company, 50 S. LaSalle Street, Chicago, Illinois 60675,
and its affiliate banks held as beneficial owner five percent or more of the
outstanding shares of Northern Funds because they possessed sole or shared
voting or investment power with respect to such shares. As of February 23, 2000
the names and share ownership of the entities or individuals which held of
record or beneficially more than 5% of the outstanding shares of any investment
portfolio of Northern Funds were as follows: Money Market Fund: Short Term
-----------------
Investment Fund of The Northern Trust Company, 15.8%; Northern Trust Bank
Florida - M&I Sweep Account, 5.1%; U.S. Government Money Market Fund: TNT -
---------------------------------
Miami on behalf of its customers, 7.5%; Northern Trust Bank Florida M&I Sweep
Account, 7.5%; Sahara Enterprises, 6.8%; Municipal Money Market Fund: TNT -
---------------------------
Miami on behalf of its customers, 27.3%; U.S. Government Select Money Market
-----------------------------------
Fund: TNT- Miami on behalf of its customers, 35.5%; Northern Trust Bank
- ----
Florida - M&I Sweep Account, 14.6%; Florida Intermediate Tax-Exempt Fund:
------------------------------------
Donaldson, Lufkin & Jenrette, 9.4%; Auto House Trust, 6.3%; California Municipal
--------------------
Money Market Fund: Northern Trust Bank California - M&I Sweep Account, 13.6%;
- -----------------
Stock Index Fund: CCT Combs Funds, 8.3%; Select Equity Fund: Donaldson, Lufkin &
- ---------------- ------------------
Jenrette, 11.9%; Technology Fund: Donaldson, Lufkin & Jenrette, 5.9%; Fixed
-----
Income Fund: CCT Combs Funds, 7.8%; High Yield Fixed Income Fund: Northern Trust
- ----------- ----------------------------
Company Pension Plan, 6.9%; Small Cap Index Fund: CCT Combs Funds, 14.2%; Dupont
--------------------
JB, 7.6%. The address of all of the above persons is c/o The Northern Trust
Bank, 50 S. LaSalle Street, Chicago, Illinois 60675.

As a general matter, Northern Funds does not hold annual or other meetings
of shareholders. This is because the Trust Agreement provides for shareholder
voting only for the election or removal of one or more Trustees, if a meeting is
called for that purpose, and for certain other designated matters. Each Trustee
serves until the next meeting of shareholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the shareholders or two-thirds of the Trustees. In addition, the
Trustees have adopted a by-law (changeable without shareholder approval) that
provides that a Trustee will cease to serve as a Trustee effective as of the
last calendar day in the semi-annual fiscal period of Northern Funds in which
the earlier of the following events occurs: (a) the date such Trustee attains
the age of seventy-three years; and (b) the twelfth anniversary of the date of
such Trustee's written acceptance to serve as a Trustee.

Northern Funds does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law.
Pursuant to the Trust Agreement, the Trustees will promptly call a meeting of
shareholders to vote upon the removal of any Trustee when so requested in
writing by the record holders of 10% or more of the outstanding shares. To the
extent required by law, Northern Funds will assist in shareholder communications
in connection with the

-51-
<PAGE>

meeting. Shareholders 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 Northern Funds may elect all of the Trustees, irrespective of the vote
of the other shareholders.

Under Massachusetts law, there is a possibility that shareholders of a
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of the trust. The Trust Agreement contains an
express disclaimer of shareholder (as well as Trustee and officer) liability for
acts or obligations of Northern Funds and requires that notice of such
disclaimer be given in each contract, undertaking or instrument entered into or
executed by Northern Funds or the Trustees. The Trust Agreement provides for
indemnification out of Trust property of any shareholder charged or held
personally liable for the obligations or liabilities of Northern Funds solely by
reason of being or having been a shareholder of Northern Funds and not because
of such shareholder's acts or omissions or for some other reason. The Trust
Agreement also provides that Northern Funds shall, upon proper and timely
request, assume the defense of any charge made against any shareholder as such
for any obligation or liability of Northern Funds and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Northern Funds itself
would be unable to meet its obligations.

The Trust Agreement provides that each Trustee of Northern Funds will be
liable for his own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
("disabling conduct"), and for nothing else, and will not be liable for errors
of judgment or mistakes of fact or law. The Trust Agreement provides further
that Northern Funds will indemnify Trustees and officers of Northern Funds
against liabilities and expenses incurred in connection with litigation and
other proceedings in which they may be involved (or with which they may be
threatened) by reason of their positions with Northern Funds, except that no
Trustee or officer will be indemnified against any liability to Northern Funds
or its shareholders to which he would otherwise be subject by reason of
disabling conduct.

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.

At a meeting of shareholders held on March 21, 2000, the shareholders of
the Trust's other investment Portfolios approved an Agreement and Plan of
Reorganization (the "Plan of Reorganization") pursuant to which the Trust will
be reorganized as a Delaware business trust. The sole shareholder of the Fund
prior to its commencement of operations has also approved the Plan of
Reorganization. The Trust expects that the reorganization will occur during the
second or third quarter of year 2000 or as soon thereafter as possible. The
reorganization is to be accomplished on a tax-free basis, with no change in the
dollar value or number of the Trust's outstanding shares. After the
reorganization, the attributes of the shares of the Trust will be substantially
similar to the attributes of shares described above in this section, except that
the Trustees will be able to determine whether shareholders will vote at
shareholder meetings on the basis of (a) one vote for each share owned; or (b)
one vote for each dollar of net asset value represented by each share owned
("dollar-based voting").

-52-

<PAGE>

In addition a shareholder of the reorganized Trust may bring a derivative
action on behalf of the Trust only if the following conditions are met: (a)
shareholders eligible to bring such derivative action under Delaware law who
hold at least 10% of the outstanding shares of the Trust, or 10% of the
outstanding shares of the series or class to which such action relates, must
join in the request for the Trustees to commence such action; and (b) the
Trustees must be afforded a reasonable amount of time to consider such
shareholder request and to investigate the basis of such claim. The Trust
Agreement of the reorganized Trust will also provide that no person, other than
the Trustees, who is not a shareholder of a particular series or class will 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.

After the reorganization, the Trustees may appoint separate Trustees with
respect to one or more series or classes of the Trust's shares (the "Series
Trustees"). To the extent provided by the Trustees in the appointment of Series
Trustees, Series Trustees (a) may, but are not required to, serve as Trustees of
the Trust or any other series or class of the Trust; (b) may have, to the
exclusion of any other Trustee of the Trust, all the powers and authorities of
Trustees under the Trust Agreement with respect to such series or class; and/or
(c) may have no power or authority with respect to any other series or class.
The Trustees are not currently considering the appointment of Series Trustees
for the Trust.

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
1933 Act with respect to the securities offered by Northern Funds' 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.

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.

-53-
<PAGE>

APPENDIX A

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

A Standard & Poor's ("S&P") commercial paper rating is a current
opinion of the credit worthiness 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 S&P 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 repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:

"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

A-1
<PAGE>

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.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

A-2
<PAGE>

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This designation
indicates the best 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
that default is a real possibility and that the capacity for meeting financial
commitments 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

A-3
<PAGE>

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.

"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.

A-4
<PAGE>

"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" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been 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 S&P 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.

"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

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

"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

A-5
<PAGE>

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.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

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 long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater economic
stress.

A-6
<PAGE>

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:

"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.

"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

A-7
<PAGE>

"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", "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.

"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 of the obligor. While expected recovery values are
highly speculative and cannot be estimated with any precession, 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 IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:

"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.

A-8
<PAGE>

"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," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having Financial speculative characteristics regarding the
likelihood of timely payment of principal and interest. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation.

"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.

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

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

A-9
<PAGE>

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection that are ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. 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 quality. Debt instruments
in this category lack of margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.

A-10
<PAGE>

APPENDIX B

To the extent stated in the Prospectus, the Fund may enter into
certain futures transactions. Such transactions are described 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 five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.

A Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Fund, by using futures contracts.

Interest rate future contracts can also be used by a Fund for non-
hedging (speculative) purposes to increase total return.

Description of Interest Rate Futures Contracts. An interest rate
----------------------------------------------
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Fund, 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 the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the Fund'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 the sale exceeds

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<PAGE>

the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund 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. 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 U.S. Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month U.S. Treasury Bills; and ninety-day commercial
paper. The Funds may trade in any interest rate futures contracts for which
there exists a public market, including, without limitation, the foregoing
instruments.

II. Index Futures Contracts
-----------------------

General. A stock or bond index assigns relative values to the stocks
-------
or bonds included in the index, which fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indexes, such as Standard & Poor's 500 or the New York
Stock Exchange Composite Index. In contrast, certain exchanges offer futures
contracts on narrower market indexes, such as the Standard & Poor's 100 or
indexes based on an industry or market indexes, such as Standard & Poor's 100 or
indexes based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the Commodity
Futures Trading Commission. Transactions on such exchanges are cleared through a
clearing corporation, which guarantees the performance of the parties to each
contract. To the extent consistent with its investment objective, a Fund may
also engage in transactions, from time to time, in foreign stock index futures
such as the ALL-ORDS (Australia), CAC-40 (France), TOPIX (Japan) and the FTSE-
100 (United Kingdom).

A Fund may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Fund may do so either to hedge the value of its portfolio as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. A long
futures position may be terminated without a corresponding purchase of
securities.

In addition, a Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Fund 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

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<PAGE>

comprised of securities of a particular industry group. A Fund 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 a Fund for non-hedging
(speculative) purposes to increase total return.

III. Futures Contracts on Foreign Currencies
---------------------------------------

A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Fund to hedge against
exposure to fluctuations in exchange rates between the U.S. dollar and other
currencies arising from multinational transactions.

IV. Margin Payments
---------------

Unlike purchases or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially, a
Fund will be required to deposit with the broker or in a segregated account with
a custodian or 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 Fund 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-market." For example, when a particular Fund 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 Fund
will be entitled to receive from the broker a variation margin payment equal to
that increase in value. Conversely, where the Fund 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 Fund would be required to make a variation margin payment to the broker.
Prior to expiration of the futures contract, Northern Trust 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 Fund'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 Fund, and the Fund
realizes a loss or gain.

V. Risks of Transactions in Futures Contracts
------------------------------------------

There are several risks in connection with the use of futures by a
Fund. 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 the hedge. The price of the

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<PAGE>

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 Fund 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 Fund involved will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of the instruments which
are the subject of the hedge. To compensate for the imperfect correlation of
movements in the price of instruments being hedged and movements in the price of
futures contracts, a Fund may buy or sell futures contracts in a greater dollar
amount than the dollar amount of instruments being hedged if the volatility over
a particular time period of the prices of such instruments has been greater than
the volatility over such time period of the futures, or if otherwise deemed to
be appropriate by the Investment Adviser. Conversely, a Fund 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 a Fund
has sold futures to hedge its portfolio against a decline in the market, the
market may advance and the value of instruments held in the Fund may decline. If
this occurred, the Fund 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 or a currency before a Fund is able to invest its cash (or
cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Investment Adviser may
still not result in a successful hedging transaction over a short time frame.

B- 4
<PAGE>

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, a Fund 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 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 trading 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 a Fund is also subject to the Investment
Adviser's ability to predict correctly movements in the direction of the market.
For example, if a Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund 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 Fund 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. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.

VI. Options on Futures Contracts
----------------------------

A Fund may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund 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.

B- 5
<PAGE>

Net option premiums received will be included as initial margin deposits. As an
example, in anticipation of a decline in interest rates, a Fund may purchase
call options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of the securities held by
a Fund is expected to decline as a result of an increase in interest rates, the
Fund might purchase put options or sell call options on futures contracts rather
than sell futures contracts.

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). 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 the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. 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 frequently
involve less potential risk to the Fund 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
-------------

Accounting for futures contracts will be in accordance with generally
accepted accounting principles.

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