SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant X
-----
Filed by a Party other than the Registrant
----
Check the appropriate box:
X Preliminary Proxy Statement Confidential, for Use of the
---- ---- Commission Only
(as permitted by Rule 14a-
6(e)(2))
Definitive Proxy Statement
----
Definitive Additional Materials
----
Soliciting Material Pursuant to
---- Section 240.14a-11(c) or Section 240.14a-12
NORTHERN FUNDS
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
----
Fee computed on table below per Exchange Act Rules
---- 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
--- Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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XXXXX
[PRELIMINARY COPY]
NORTHERN FUNDS
January __, 2000
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Northern Funds (the "Trust"), to be held on March ___, 2000 at 9:30 a.m.,
Chicago time, at the offices of [address].
At this important meeting, you will be asked to consider and take action on
the election of Trustees (Proposal 1) and the ratification of the selection of
independent public auditors, Arthur Andersen LLP (Proposal 2). In addition, as
described more fully in the Proxy Statement, you will be asked to approve a
change in the organization of the Trust and certain amendments relating to the
investment policies of the Trust's investment portfolios (the "Funds")
(Proposals 3, 4 and 5). We believe that these proposals are important and will
allow us to improve the Funds' operations.
In particular, Proposal 3 recommends the tax-free conversion of the Funds
into portfolios of a newly-formed Delaware business trust. This conversion will
not result in any change to the assets, fees or investment policies of the
Funds; however, the Trustees believe that organizing the Funds as portfolios of
a Delaware business trust offers certain advantages. These advantages include a
clear limitation on Shareholder liability and potential cost savings. The
dollar value and number of Shares of your investment in a Fund will not be
affected by the conversion.
Proposal 4 recommends that you approve a new fundamental investment policy
(and a related amendment to the Trust's Declaration of Trust) that will provide
the Funds greater flexibility to invest in the securities of other investment
companies. The Trustees believe that this increased flexibility offers the
potential for greater efficiencies and will eliminate the need and expense of
further Shareholder action in the future.
Proposals 5(A)-(F) recommend amendments that are intended to modernize,
standardize and clarify certain of the Funds' fundamental investment policies.
You should carefully read the Proxy Statement that discusses each Proposal
in detail. The formal Notice of Special Meeting of Shareholders and the Proxy
Statement setting forth in detail the matters to come before the meeting are
attached, and a form of Proxy is enclosed for your use for each Fund in which
you are invested.
The Trustees have unanimously recommended that Shareholders approve each
Proposal to be acted upon at the Meeting.
The continuing interest of Shareholders in the affairs of the Funds is
gratefully acknowledged. Whether or not you expect to attend the meeting, it is
important that your Shares be represented. Therefore, I urge you to vote FOR
the nominees for election as Trustees and each of the other proposals contained
in the Proxy Statement.
Sincerely,
[Name and Title]
ATTENTION INVESTMENT MANAGERS: IF YOU HAVE THE AUTHORITY TO VOTE SHARES OF THE
FUND(S) TO WHICH THESE PROXY MATERIALS RELATE, PLEASE VOTE. IF YOU DO NOT HAVE
THIS AUTHORITY, PLEASE FORWARD THESE MATERIALS TO YOUR CLIENT AT YOUR EARLIEST
CONVENIENCE. THE NORTHERN FUNDS OFFER INVESTORS ACCESS TO THE NORTHERN TRUST
COMPANY'S INVESTMENT ADVISORY SERVICES. THE NORTHERN TRUST COMPANY ALSO SERVES
AS CO-ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT TO THE NORTHERN FUNDS.
[PRELIMINARY COPY]
NORTHERN FUNDS
MONEY MARKET FUNDS
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
U.S. GOVERNMENT SELECT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
CALIFORNIA MUNICIPAL MONEY MARKET FUND
FIXED INCOME FUNDS
U.S. GOVERNMENT FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT FUND
INTERMEDIATE TAX-EXEMPT FUND
CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND
FLORIDA INTERMEDIATE TAX-EXEMPT FUND
FIXED INCOME FUND
TAX-EXEMPT FUND
ARIZONA TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
INTERNATIONAL FIXED INCOME FUND
HIGH YIELD MUNICIPAL FUND
HIGH YIELD FIXED INCOME FUND
EQUITY FUNDS
INCOME EQUITY FUND
STOCK INDEX FUND
GROWTH EQUITY FUND
SELECT EQUITY FUND
MARKETPOWER FUND
MID CAP GROWTH FUND
SMALL CAP INDEX FUND
SMALL CAP FUND
SMALL CAP GROWTH FUND
INTERNATIONAL GROWTH EQUITY FUND
INTERNATIONAL SELECT EQUITY FUND
TECHNOLOGY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH __, 1999
A Special Meeting of Shareholders (the "Meeting") of each investment
portfolio referred to above (the "Funds") of Northern Funds (the "Trust") will
be held on March __, 2000, at 9:30 a.m. (Chicago time) at the offices of
[location] for the following purposes:
(1) With respect to the Trust, to elect twelve Trustees;
(2) With respect to the Trust, to ratify or reject the selection of Arthur
Andersen LLP as independent auditors of the Trust for the fiscal year
ending March 31, 2000;
(3) With respect to each Fund, to approve an Agreement and Plan of
Reorganization pursuant to which each Fund will be reorganized as a
portfolio of Northern Funds, a Delaware business trust;
(4) With respect to each Fund, to approve a new fundamental investment
policy regarding investments in other investment company securities
and a related amendment to the Trust's Declaration of Trust;
(5) With respect to each Fund, to approve amendments to the Fund's
fundamental investment policies; and
(6) To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSALS
RELATING TO THE TRUST AND YOUR FUND(S).
Shareholders of record of each Fund at the close of business on [date] will
be entitled to vote at the Meeting or at any adjournment. The Proxy Statement
and Proxy Card(s) are being mailed to Shareholders on or about January __, 2000.
It is important that you return your signed and dated Proxy Card(s)
promptly, regardless of the size of your holdings, so that a quorum may be
assured.
By Order of the Board of Trustees
of Northern Funds
Jeffrey A. Dalke,
Secretary
January __, 2000
PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD(S) FOR THE SHARES HELD BY YOU
AND RETURN THE PROXY CARD(S) IN THE ENVELOPE PROVIDED SO THAT YOUR VOTE CAN BE
RECORDED. A PROXY CARD IS ENCLOSED FOR EACH FUND IN WHICH YOU ARE INVESTED. NO
POSTAGE IS REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES. YOUR PROMPT
RESPONSE MAY SAVE THE TRUST THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS.
IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
[PRELIMINARY COPY]
NORTHERN FUNDS
MONEY MARKET FUNDS
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
U.S. GOVERNMENT SELECT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
CALIFORNIA MUNICIPAL MONEY MARKET FUND
FIXED INCOME FUNDS
U.S. GOVERNMENT FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT FUND
INTERMEDIATE TAX-EXEMPT FUND
CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND
FLORIDA INTERMEDIATE TAX-EXEMPT FUND
FIXED INCOME FUND
TAX-EXEMPT FUND
ARIZONA TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
INTERNATIONAL FIXED INCOME FUND
HIGH YIELD MUNICIPAL FUND
HIGH YIELD FIXED INCOME FUND
EQUITY FUNDS
INCOME EQUITY FUND
STOCK INDEX FUND
GROWTH EQUITY FUND
SELECT EQUITY FUND
MARKETPOWER FUND
MID CAP GROWTH FUND
SMALL CAP INDEX FUND
SMALL CAP FUND
SMALL CAP GROWTH FUND
INTERNATIONAL GROWTH EQUITY FUND
INTERNATIONAL SELECT EQUITY FUND
TECHNOLOGY FUND
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (the "Trustees") of Northern
Funds (the "Trust") to be used at a Special Meeting of Shareholders of the
investment portfolios of the Trust listed above (the "Funds"). The Special
Meeting will be held at the offices of [location], on March __, 2000, at 9:30
a.m. (Chicago time) for the purposes set forth in the accompanying Notice of
Meeting. The Special Meeting and any adjournment is referred to as the
"Meeting."
The Trustees have fixed the close of business on [date] as the record date
(the "Record Date") for determining the Shareholders of each Fund entitled to
notice of and to vote at the Meeting. Shareholders of record of each Fund on
the Record Date are entitled to one vote per Share at the Meeting.
Appendix A sets forth the number of Shares of beneficial interest of each
Fund outstanding as of January __, 2000. Appendix B sets forth the persons who
owned beneficially more than 5% of the Shares of any Fund as of that date.
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of The Northern Trust Company
("Northern Trust") and PFPC Inc. ("PFPC"), as well as by the Trustees. In
addition, employees of Northern Trust, its affiliates, correspondent banks,
brokers and similar record holders may solicit proxies by these means, and may
forward proxy materials and printed direction forms to the customers on whose
behalf they hold record ownership of Shares of the Funds. Northern Trust may
engage an independent proxy solicitation firm to assist it in soliciting
proxies.
This Proxy Statement and accompanying Proxy(ies) are being first mailed to
Shareholders on or about January __, 2000.
The following table summarizes the proposals to be voted on at the Meeting
and indicates those Shareholders who are being solicited with respect to each
proposal. In connection with each of the matters set forth in the attached
Notice of Meeting, each Fund will either vote together with the other Funds or
separately as indicated.
SUMMARY OF VOTING ON PROPOSALS
PROPOSAL SHAREHOLDERS SOLICITED
-------- ----------------------
1. Election of twelve Trustees. The Trust with all Funds
voting as a single class.
2. Ratification of the selection
of Arthur Andersen LLP as voting as a single class.
independent auditors for the
fiscal year ending March 31,
2000.
3. Approval of an Agreement and Each Fund voting separately.
Plan of Reorganization
pursuant to which each Fund
will be reorganized as a
portfolio of Northern Funds,
a Delaware business trust.
4. Approval of a new fundamental Each Fund voting separately.
investment policy regarding
investments in other
investment company securities
and a related amendment to
the Trust's Declaration of
Trust.
5.(A)-(F) Approval of amended Each Fund voting separately.
fundamental investment
policies.
The Trust will furnish, without charge, copies of the Funds' March 31, 1999
Annual Shareholders Report and September 30, 1999 Semi-Annual Report to any
Shareholder upon request addressed to Northern Funds, P.O. Box 75986, Chicago,
Illinois 60675-5986 or by telephone at 1-800-595-9111.
PROPOSAL 1
ELECTION OF TRUSTEES
(ALL FUNDS)
The Northern Trust Company serves as investment adviser to the Trust and to
the Northern Institutional Funds, each a mutual fund group. The Trustees of the
Trust and Northern Institutional Funds have determined that it would be in the
best interests of these two mutual fund groups for the same individuals to serve
as the Trustees of both groups. Therefore, at the Meeting, Shareholders will be
asked to consider the election of twelve Trustees, five of whom are currently
Trustees of the Trust, six of whom are currently Trustees of Northern
Institutional Funds and the twelfth is the President of Northern Trust Global
Investments.
Each elected Trustee will hold office for an indefinite term until the
earliest of (1) the next meeting of Shareholders, if any, called for the purpose
of considering the election or re-election of such Trustee and until the
election and qualification of his or her successor, if any, elected at such
meeting; (2) the date a Trustee resigns or retires, or a Trustee is removed by
the Board of Trustees or Shareholders, in accordance with the Trust's Agreement
and Declaration of Trust; or (3) in accordance with the current by-laws of the
Trust (which may be changed without Shareholder vote), on the last day of the
semi-annual fiscal period of the Trust (currently these periods end on March 31
and September 30) in which the earlier of the following events occur: (a) the
date a Trustee attains the age of 73 years; and (b) the twelfth anniversary of
the date a Trustee first becomes trustee. Normally, there will be no meetings
of Shareholders for the purpose of electing Trustees except as required by the
Investment Company Act of 1940 (the "1940 Act"). See "Additional Information _
Shareholder Proposals." The Trustees may, as permitted by the 1940 Act, appoint
additional Trustees without Shareholder approval.
All Shares represented by valid Proxies will be voted in the election of
Trustees for each Nominee named below, unless authority to vote for a particular
Nominee is withheld. Each Nominee has consented to being named in this Proxy
Statement and to serve if elected. If a Nominee withdraws from the election or
is otherwise unable to serve, the named proxies will vote for the election of
such substitute Nominee as the Board of Trustees may recommend, unless the Board
decides to reduce the number of Trustees serving on the Board.
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information about each Nominee,
including each Nominee's principal occupation or employment during the past five
years. Messrs. Cline, Condon, Dixon, Dolan, English, Springer and Strubel and
Ms. Guthman are deemed "non-interested persons" of the Trust as defined in the
1940 Act (the "Non-Interested Trustees").
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION OR BECAME
POSITIONS WITH TRUST EMPLOYMENT DURING LAST FIVE YEARS TRUSTEE
- --------------------- --------------------------------- -------
Richard G. Cline, 64 Chairman, Hawthorne Investors, Inc. (a To be
Proposed Trustee management advisory services and private elected in
investment company) since 1996; 2000
Chairman, Hussman International, Inc. (a
refrigeration company) since 1998;
Chairman and Chief Executive Officer of
NICOR Inc. (a diversified public utility
holding company) from 1986 to 1995, and
President, 1992-1993; Chairman, Federal
Reserve Bank of Chicago from 1992 to
1995, and Deputy Chairman from 1995 to
1996. Director: Whitman Corporation (a
diversified holding company); Kmart
Corporation (a retailing company);
Ryerson Tull, Inc. (a metals
distribution company); and University of
Illinois Foundation. Trustee: Northern
Institutional Funds.
Edward J. Condon, Chairman of The Paradigm Group, Ltd. (a To be
Jr., 59 financial advisor) since July 1993; Vice elected in
Proposed Trustee President and Treasurer of Sears, 2000
Roebuck and Co. (a retail corporation)
from February 1989 to July 1993; Member
of Advisory Board of Real-Time USA,
Inc.; Member of the Board of Managers of
The Liberty Hampshire Company, LLC; Vice
Chairman and Director of Energenics
L.L.C. Director: University Eldercare,
Inc.; Financial Pacific Company.
Trustee: Dominican University; Northern
Institutional Funds.
Wesley M. Dixon, 72 Director of Earl Kinship Capital 1994
Trustee Corporation since 1985; Vice Chairman
and Director of G.D. Searle & Co.
(manufacture and sale of food products
and pharmaceuticals) from 1977 to 1983
and President of G.D. Searle & Co. prior
thereto.
William J. Dolan, Partner of Arthur Andersen & Co. S.C. 1994
Jr., 67 (accounting firm) from 1966 to 1989.
Trustee Financial Consultant, Ernst & Young from
1992 to 1993 and 1997. Director:
Household Bank; First Central National
Life Insurance Company.
John W. English, 66 Private Investor; Vice President and Chief To be
Proposed Trustee Investment Officer of The Ford elected in
Foundation (a charitable trust) from 2000
1981 until 1993. Trustee: The China
Fund, Inc.; Select Sector SPDR Trust; WM
Funds; American Red Cross in Greater New
York; Mote Marine Laboratory; United
Board for Christian Higher Education in
Asia; Northern Institutional Funds.
Director: University of Iowa
Foundation; Blanton-Peale Institutes of
Religion and Health; Community
Foundation of Sarasota County; Duke
Management Company; John Ringling Centre
Foundation.
Raymond E. George, Senior Vice President and Senior Fiduciary 1994
Jr., 69<F1> Officer of The Northern Trust Company
Trustee until his retirement in October 1993.
Sandra Polk Guthman, President and Chief Executive Officer of To be elected
55 Polk Bros. Foundation (an Illinois not- in 2000
Proposed Trustee for-profit corporation) from 1993 to
present; Director of Business
Transformation from 1992-1993, and
Midwestern Director of Marketing from
1988-1992, IBM Corporation. Director:
MBIA Insurance Corporation of Illinois;
MB Financial Corp. (a stock savings and
loan holding company). Trustee:
Northern Institutional Funds.
Michael E. Murphy, President of Sara Lee Foundation since 1998
63<F2> November 1997; Vice Chairman and Chief
Trustee Administrative Officer of Sara Lee
Corporation (consumer products) 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.; True North Communications, Inc.;
American General Corporation; GATX
Corporation; Bassett Furniture
Industries, Inc.
Mary Jacobs Skinner, Partner in the law firm of Sidley & 1998
Esq., 42 Austin.
Trustee<F3>
William H. Springer, Vice Chairman of Ameritech (a To be
70 telecommunications holding company) from elected in
Proposed Trustee February 1987 until his retirement in 2000
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: Northern
Institutional Funds; Goldman Sachs
Trust; Goldman Sachs Variable Insurance
Trust.
Richard P. Strubel, President and Chief Operating Officer, To be
60 UNext.com since 1999; Managing Director, elected in
Proposed Trustee Tandem Partners, Inc. (a privately held 2000
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.; Children's Memorial Medical
Center. Trustee: University of
Chicago; Northern Institutional Funds;
Goldman Sachs Trust; Goldman Sachs
Variable Insurance Trust.
Stephen B. Timbers, President of Northern Trust Global To be
55<F4> Investments, Northern Trust Corporation elected in
Proposed Trustee since 1998; President, Chief Executive 2000
Officer and Director of Zurich Kemper
Investments from 1996 to 1998;
President, Chief Operating Officer and
Director of Kemper Corporation from 1992
to 1996; President and Director of
Kemper Funds from 1990 to 1998;
Director: LTV Corporation.
- -------------------------------
<F1> Mr. George is deemed to be an "interested" Trustee because he owns shares
of Northern Trust Corporation.
<F2> Mr. Murphy is deemed to be an "interested" Trustee because he owns shares
of Northern Trust Corporation.
<F3> Ms. Skinner is deemed to be an "interested" Trustee because her law firm
provides legal services to Northern Trust.
<F4> Mr. Timbers is deemed to be an "interested" Trustee because he is an
officer, director, employee and shareholder of Northern Trust Corporation.
Messrs. Cline, George and Murphy have certain banking, custodial,
investment management and financing arrangements with Northern Trust and its
affiliates. Other Nominees and the organizations with which they are associated
have had in the past, and may have in the future, similar arrangements. The
Trust has been advised that such arrangements have been and are expected to be
in the ordinary course of business and the terms of such arrangements have been
and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers.
Appendix C sets forth information regarding the Shares of the Funds owned
beneficially, directly or indirectly, by the Nominees and the officers of the
Trust.
INFORMATION CONCERNING MEETINGS OF TRUSTEES AND COMMITTEES
Four meetings of the Trustees were held during the fiscal year ended March
31, 1999. No incumbent Trustee attended fewer than seventy-five percent of all
meetings of the Board of Trustees and of any committee of which he or she was a
member that were held during such year.
At a meeting held on November 17, 1999, the Board of Trustees appointed an
Audit Committee whose members are Mr. Dolan and James Cozad (an incumbent
Trustee who will retire in March 2000). The functions performed by the Audit
Committee are to: (1) consider matters pertaining to the Trust's books of
account, financial records and internal accounting controls; (2) act as the
principal liaison between the Board of Trustees and the Trust's independent
auditors and make recommendations to the Board regarding the auditor's
engagement and compensation; (3) ensure receipt from the independent accountants
of a formal written statement delineating relationships between the independent
accountants and the Trust; (4) meet with the independent auditors to review the
scope and results of the audit; and (5) review annually the program established
by the Trust and its service providers for monitoring compliance with their
respective Codes of Ethics and internal conflict of interest guidelines. The
Audit Committee is expected to hold its first meeting during the first [quarter]
of year 2000.
The Board of Trustees also has a standing nominating committee consisting
of Messrs. Dixon, Dolan and Cozad. The Nominating Committee is responsible for
the selection and nomination of candidates to serve as Non-Interested Trustees.
The Nominating Committee has selected and nominated the Non-Interested Trustees
who are Nominees for election at the Meeting. The Board of Trustees, including
the Non-Interested Trustees, are prepared to review nominations from
Shareholders to fill any future vacancies of the Board in written communications
delivered to the Trust at its address on page __.
REMUNERATION OF TRUSTEES
Trustees, other than Mr. Timbers (if elected), are entitled to the
following remuneration. The Chairman of the Board earns a quarterly retainer of
$7,500 and each other Trustee earns a quarterly retainer of $6,250. Each
Trustee, including the Chairman of the Board, earns an additional fee of $1,250
for each meeting attended, plus reimbursement of expenses incurred as a Trustee.
In addition, each member of the Audit Committee earns a fee of $1,500 for each
meeting attended and the Audit Committee Chairman earns a quarterly retainer of
$1,250.
The following table sets forth certain information about the compensation
of each Trustee for the fiscal year ended March 31, 1999.
AGGREGATE PENSION OR AGGREGATE
COMPENSATION RETIREMENT BENEFITS COMPENSATION
FROM THE ACCRUED AS PART OF FROM THE FUND
NAME OF TRUSTEE<F1> FUNDS FUND EXPENSES COMPLEX<F3>
- ------------------- ------------ ------------------ --------------
Wesley M. Dixon, Jr....... $27,500 $ 0 $27,500
William J. Dolan, Jr...... $30,000 $ 0 $30,000
Raymond E. George......... $30,000 $ 0 $30,000
Michael E. Murphy......... $30,000 $ 0 $30,000
Mary Jacobs Skinner<F2>... $22,500 $ 0 $22,500
<F1> This Table does not include $30,000 paid during the fiscal year ended March
31, 1999 to James Cozad, who will retire from the Board of Trustees in
March 2000 and $35,000 paid to the Trust's former Chairman, who retired in
September 1999.
<F2> Ms. Skinner was appointed a Trustee on September 18, 1998.
<F3> The Fund Complex includes the Trust and Northern Institutional Funds.
OFFICERS
The following table sets forth information with respect to the officers of
the Trust. Each officer is elected by the Trustees. Each officer serves until
his or her successor is duly elected by the Trustees or until his or her death,
resignation, removal or disqualification.
FIRST
NAME, POSITION PRINCIPAL OCCUPATION(S) BECAME
AND AGE DURING PAST FIVE YEARS OFFICER
-------------- ----------------------- -------
Jylanne M. Dunne, 39 Senior Vice President for Distribution 1999
President Services at PFPC Inc., formerly First
Data Investor Services Group, Inc.
Richard H. Rose, 43 Vice President and Division Manager of 1999
Vice President Mutual Fund Administration at PFPC.
Brian R. Curran, 32 Director of Fund Administration at PFPC 1999
Treasurer since 1997; Director of Fund
Administration at State Street Bank and
Trust Co. from February 1997 to October
1997; Senior Auditor at Price
Waterhouse L.L.P. February 1994 to
February 1997.
Judith E. Clear, 33 Client Treasury Manager of Mutual Fund 1999
Assistant Treasurer Administration at PFPC since 1997;
Compliance Manager at Citizens Trust
from 1994 to 1996.
Jeffrey A. Dalke, 49 Partner in the law firm of Drinker 1993
Secretary Biddle & Reath LLP.
Linda J. Hoard, 52 Counsel at PFPC since 1998; Attorney 1999
Assistant Secretary Consultant for Fidelity Investments,
Investors Bank & Trust Company and PFPC
from September 1994 to June 1998.
Therese Hogan, 36 Director of the State Regulation 1999
Assistant Secretary Department at PFPC.
The Trust's officers (except Mr. Dalke) are employees of PFPC, the Trust's
co-administrator. Certain of these officers hold comparable positions with
other investment companies for which PFPC or an affiliate provides
administrative services. As a result of the responsibilities assumed by PFPC
and the Trust's investment adviser, custodian and transfer agent, the Trust
itself requires no employees. The Trust's officers do not receive any
compensation from the Trust for serving as such.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" EACH NOMINEE LISTED
ABOVE.
REQUIRED VOTE
Because your Fund is a portfolio of the Trust, your vote will be counted
together with the votes of Shareholders of the other portfolios of the Trust,
voting as a single class in the election of Trustees. Election of each Nominee
of the Trust requires a plurality of the Shares of the entire Trust voted at the
Meeting. The twelve Nominees who receive the highest number of votes cast at
the Meeting will be elected as Trustees. Cumulative voting is not permitted.
PROPOSAL 2
RATIFICATION OR REJECTION OF
SELECTION OF INDEPENDENT AUDITORS
(ALL FUNDS)
As directed by the Trustees and required by the 1940 Act, the ratification
or rejection of the selection of the independent auditors for the Trust's fiscal
year ending March 31, 2000 is to be voted upon at the Meeting. It is intended
that the persons named in the accompanying Proxy will vote for Arthur Andersen
LLP, unless contrary instructions are given. If the selection of the Trust's
independent auditors is not ratified by the Shareholders at the Meeting, the
Board will reconsider such selection.
The Trust's financial statements for the fiscal year ended March 31, 1999
were audited by Arthur Andersen LLP. In connection with its audit, Arthur
Andersen LLP reviewed the Trust's annual reports to Shareholders and its filings
with the Securities and Exchange Commission ("SEC"). In addition to audit
services, Arthur Andersen LLP reviews the Trust's federal and state tax returns,
and provides consultation and assistance on accounting, internal controls and
related matters.
At a meeting held on May 20, 1999, the Board of Trustees met with
representatives of Arthur Andersen LLP to review the services of the independent
auditors. At that meeting, the Trustees unanimously selected Arthur Andersen
LLP as the Trust's independent auditors for its fiscal year ending March 31,
2000. A representative of Arthur Andersen LLP is expected to be available at
the Meeting by telephone should any matter arise requiring consultation with the
auditors, and the auditors have been given the opportunity to make a statement
if they so desire.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE TRUST'S INDEPENDENT AUDITORS.
REQUIRED VOTE
Because your Fund is a portfolio of the Trust, your vote will be counted
together with the votes of Shareholders of the other portfolios of the Trust,
voting as a single class on the ratification of independent auditors.
Ratification of the independent auditors of the Trust requires the approval of a
majority of the Shares of the Trust voted at the Meeting.
PROPOSAL 3
APPROVAL OF AN AGREEMENT AND
PLAN OF REORGANIZATION PURSUANT TO WHICH
EACH FUND WILL BE REORGANIZED INTO A
SERIES OF A DELAWARE BUSINESS TRUST
(ALL FUNDS)
GENERAL
The Trustees have unanimously approved, subject to Shareholder approval, a
proposal for the Trust (which is referred to in this Proposal 3 as the
"Massachusetts Trust") on behalf of each Fund to effectuate the transactions set
forth in an Agreement and Plan of Reorganization, Conversion and Termination
(the "Plan of Reorganization") with a newly established Delaware business trust
also named "Northern Funds" (the "Delaware Trust"). The Plan of Reorganization
is attached to this Proxy Statement as Appendix D. The Plan of Reorganization
provides for the conversion (the "Conversion") of each Fund from a separate
series of the Massachusetts Trust into a corresponding separate series of the
Delaware Trust. Each series of the Massachusetts Trust is referred to in this
Proposal as a "current Fund." Consequently, if the Conversions are approved by
Shareholders of each Fund of the Massachusetts Trust, all Funds currently in the
Massachusetts Trust will become Funds of the Delaware Trust.
The Trustees believe that a Delaware business trust as a form of
organization offers certain advantages for mutual funds over a Massachusetts
business trust. These advantages include greater flexibility in methods of
voting and organization. A Delaware business trust also offers the advantages
of a clearer limitation upon the liability of Shareholders and Trustees. In
addition, the Trustees believe that the Declaration of Trust of the Delaware
Trust (the "Delaware Trust Instrument") is clearer and more modern than the
Massachusetts Trust's organizational documents. For a summary comparison of the
Massachusetts Trust's Declaration of Trust (the "Massachusetts Declaration of
Trust") and the proposed Delaware Trust Instrument, see "Description of Certain
Provisions of the Delaware Trust Instrument" and "Certain Comparative
Information About Massachusetts Business Trusts and Delaware Business Trusts"
below.
The Conversions will entail organizing the Delaware Trust, which will
initially have 30 series, all corresponding to the current Funds (twenty-nine of
which are referred to in this Proxy Statement and one of which is a new Fund,
the Tax-Exempt Money Market Fund). Each series of the Delaware Trust that
corresponds to a current Fund is referred to in this Proposal as a "successor
Fund." To effect the conversion, each current Fund will transfer all of its
assets and liabilities to the corresponding successor Fund. As consideration
for the transfer of such assets and liabilities (together, "total assets"), each
successor Fund will issue shares of beneficial interest ("successor Fund
Shares") to the current Fund whose total assets it has acquired and such current
Fund will distribute such successor Fund Shares pro rata to the current Fund
Shareholders in exchange for their Shares. Upon completion of the Conversion,
each Shareholder of the Delaware Trust will be the owner of full and fractional
successor Fund Shares equal in number and aggregate net asset value as its
Shares of the corresponding current Fund as of the date of the Conversion, and
will have substantially the same redemption, liquidation and dividend rights as
those offered by the current Funds. Like the current Fund Shares, the successor
Fund Shares will have a per Share par value of $.0001 and will not have
preemptive rights. Following the Conversion, each successor Fund will carry on
the business of the corresponding current Fund. The successor Fund will have
the same investment adviser, other service providers, fee and expense structure
and investment objectives, policies and restrictions as the corresponding
current Fund. Any change in the composition of the Board of Trustees and
investment policies approved at the Meeting with respect to a current Fund will
also apply to the corresponding successor Fund. There may be deemed a momentary
technical inconsistency with certain of the policies and restrictions of a Fund
(such as restrictions on investments in any one issuer and investments in other
investment companies) during the Conversion. Approval of the Plan of
Reorganization will also constitute approval to terminate the current Funds and
the Massachusetts Trust.
The Conversions will be accomplished on a tax-free basis, and the dollar
value and number of Shares of your investment will not change.
REASONS FOR THE PROPOSED CONVERSION
The Massachusetts Trust is organized as a Massachusetts business trust. As
discussed above, the Trustees unanimously recommend Conversion of each Fund into
a corresponding separate series of the Delaware Trust. The Trustees believe
that organizing the Funds as series of the Delaware Trust offers certain
advantages over maintaining them as series of the Massachusetts Trust.
One advantage of a Delaware business trust is a clearer limitation of
liability of Shareholders and Trustees for the obligations of the trust. The
Delaware Business Trust Act (the "Delaware Act") expressly limits the liability
of Delaware business trust Shareholders for the debts or obligations of the
business trust to the same extent as for stockholders of for-profit Delaware
corporations. Similarly, the Delaware Act provides that a series of a Delaware
business trust will not be liable for the debts or obligations of any other
series of the business trust. Under Massachusetts law, there are no comparable
statutory provisions. Although the possibility of incurring these types of
liability may be remote under Massachusetts law, the above provisions of the
Delaware Act provide greater certainty and protection against Shareholder
liability and the liability of one business trust series for the debts or
obligations of another series. However, it is possible that, under certain
circumstances, courts in some states may not enforce limited liability for
Delaware business trust Shareholders. Similarly, Delaware law clearly protects
a Trustee from liability for the obligations of the business trust, which may
help the Delaware Trust attract and retain qualified Trustees in the future.
Second, the Trustees believe that the Delaware business trust form of
organization will enable the successor Portfolios to adopt new methods of
operation and employ new technologies that are expected to reduce costs of
operation when, and if, implemented. For example, Delaware law authorizes
electronic or telephonic communications between Shareholders and a Delaware
business trust. The Trustees may take advantage of this provision in the future
to improve Shareholder voting procedures and reduce associated costs.
Third, Delaware law explicitly provides that separate boards of trustees
may be authorized for each series of a Delaware business trust. Whether
separate boards of trustees can be authorized for series of a Massachusetts
business trust is unclear under Massachusetts law. The establishment of any
board of trustees of a registered investment company must comply with applicable
securities laws, including the provision of the 1940 Act regarding the election
of trustees by Shareholders.
BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION
[The Trustees discussed the proposed Conversions preliminarily at a meeting
held on November 17, 1999 and in greater detail at a meeting held on January 20,
2000. At the latter meeting, after considering the matters discussed above, the
Trustees unanimously approved the adoption of the Plan of Reorganization and
determined that the Conversions: (1) are in the best interest of the Funds and
(2) will not result in dilution of the interests of the Shareholders of any
Fund. In addition, the Trustees unanimously voted to recommend to the
Shareholders of each Fund that they approve the Plan of Reorganization and the
transactions contemplated thereunder.] In taking such action and making such
recommendation, the Trustees took into consideration the fact that the
Conversions may provide operational efficiencies and additional managerial
flexibility to the Trustees. The Trustees believe that the Conversions will be
beneficial to present Shareholders of the Funds as well as to potential
investors.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF EACH FUND APPROVE
THE PLAN OF REORGANIZATION PROVIDING FOR THE CONVERSION OF EACH FUND FROM A
SERIES OF THE MASSACHUSETTS BUSINESS TRUST TO A SERIES OF THE DELAWARE BUSINESS
TRUST.
VOTE REQUIRED TO APPROVE PLAN OF REORGANIZATION
Approval of the Plan of Reorganization as to each Fund requires the
affirmative vote of a majority of the Shares of that Fund outstanding and
entitled to vote. For this purpose, a majority of the outstanding Shares of a
Fund means the vote of the lesser of (1) 67% or more of the Shares of the Fund
present at the Meeting, if the holders of more than 50% of the Shares of the
Fund are present or represented by proxy, or (2) more than 50% of the
outstanding Shares of the Fund (a "1940 Act Majority"). The Plan of
Reorganization provides that in the event the Plan is approved with respect to
some but not all of the Funds, the Board of Trustees of the Trust may, in the
exercise of its sole discretion, determine to either abandon the Plan of
Reorganization with respect to all of the Funds or direct that the transactions
thereunder be consummated to the extent it deems advisable and to the degree the
transactions may be lawfully effected. If the Plan is approved with respect to
some but not all Funds, it is the current intention of the Trust to abandon the
Plan of Reorganization with respect to all Funds.
A vote FOR the Conversion will authorize each current Fund, as the sole
Shareholder of its corresponding successor Fund (1) to elect as Trustees of the
Delaware Trust (if Proposal 1 is approved), Messrs. Cline, Condon, Dixon, Dolan,
English, George, Murphy, Springer, Strubel and Timbers and Mmes. Guthman and
Skinner (see Proposal 1); (2) to ratify the selection of Arthur Andersen LLP as
the Delaware Trust's independent auditors (see Proposal 2); (3) to approve an
investment advisory agreement for each successor Fund that is substantially the
same as each current Fund's investment advisory agreement; and (4) to approve
fundamental investment policies for the successor Funds which, to the extent,
Proposals 4 and 5 are approved, will be the same as the current fundamental
investment policies in effect for the Funds, as amended by such proposals. If
the Conversions are approved but a proposed change described in Proposals 4
and/or 5 is not approved by a Fund's Shareholders, the proposed change that is
not approved will not be implemented for the successor Fund.
SUMMARY OF THE PLAN OF REORGANIZATION
The following discussion summarizes certain terms of the Plan of
Reorganization. This summary of the Plan of Reorganization is qualified in its
entirety by the provisions of the Plan of Reorganization, which is attached to
this Proxy Statement as Appendix D.
On the closing date of its Conversion (the "Closing Date"), each current
Fund will transfer all of its assets to its corresponding successor Fund in
exchange for the assumption by the successor Fund of all the liabilities of that
current Fund and the issuance to that current Fund of Shares of beneficial
interest of that successor Fund ("successor Fund Shares") equal to the value (as
determined by using the procedures in the current Prospectuses) on the date of
the exchange of that current Fund's net assets. Immediately thereafter, each
current Fund will liquidate and distribute successor Fund Shares to each current
Fund Shareholder's account pro rata in proportion to such current Fund
Shareholder's beneficial interest in the current Fund ("current Fund Shares") in
exchange for such current Fund Shares. In these exchanges, a successor Fund
will issue the appropriate number of successor Fund Shares of each class of
Shares that currently is outstanding, so that the current Fund will distribute,
and holders of a particular class of current Fund Shares will receive, the same
number of successor Fund Shares of the same class. As soon as practicable after
this distribution of successor Fund Shares, each current Fund will be wound up
and terminated. Certificates evidencing full or fractional successor Fund
Shares will not be issued. Upon completion of the Conversion, each current Fund
Shareholder will be the owner of full and fractional successor Fund Shares
equivalent in number, class and aggregate net asset value to the Shareholder's
current Fund Shares immediately before the Conversion.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Conversions will become effective during the first half of
year 2000 or as soon thereafter as possible.
If, at any time before the Closing Date of the Conversions, the Trustees
determine that it would not be in the best interest of the Massachusetts Trust
or the Shareholders to proceed with the Conversions, the Conversions will not go
forward, notwithstanding the approval of the Conversions by the Shareholders at
the Meeting. The Massachusetts Trust and the Delaware Trust may at any time
waive compliance with any of the conditions contained in, or may amend, the Plan
of Reorganization; provided that such waiver or amendment does not materially
adversely affect the interests of current Fund Shareholders.
EXPENSES OF THE CONVERSIONS
Each Fund will bear its own expenses associated with the transactions
contemplated by the Plan of Reorganization, except that Northern Trust and
correspondent banks, brokers and other entities that have entered into
Shareholder Servicing Agreements with the Trust will bear all mailing expenses
in connection with the solicitation of proxies on behalf of the Funds. See
"Additional Information _ Manner and Cost of Proxy Solicitation" below. In the
event that the Conversions are completed, such expenses will be assumed by each
successor Fund. It is currently estimated that the aggregate expenses of the
Conversions will be approximately $________, which will be allocated among the
Funds.
TAX CONSEQUENCES OF THE CONVERSIONS
It is a condition to the consummation of the Conversions that the
Massachusetts Trust and the Delaware Trust receive on or before the Closing Date
an opinion from Drinker Biddle & Reath LLP, counsel to the Massachusetts Trust
and the Delaware Trust, substantially to the effect that, among other things,
for federal income tax purposes, each Conversion will constitute a
reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended, and that no gain or loss will be recognized for federal income tax
purposes by each current Fund, each successor Fund, and the Shareholders of each
current Fund upon (1) the transfer of a current Fund's assets to the
corresponding successor Fund in exchange solely for such successor Fund's Shares
and the assumption by such successor Fund of that current Fund's liabilities, or
(2) the distribution in liquidation by the current Fund of such successor Fund
Shares to the current Fund Shareholders in exchange for their current Fund
Shares. The opinion will further provide, among other things, that in counsel's
view (1) the tax basis of the successor Fund Shares to be received by each
current Fund Shareholder will be the same as that of his or her current Fund
Shares surrendered in exchange therefor, and (2) each current Fund Shareholder's
tax holding period for his or her successor Fund Shares will include such
Shareholder's tax holding period for the current Fund Shares surrendered in
exchange therefor, provided that such current Fund Shares were held as capital
assets on the date of the exchange.
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS
The Delaware Trust's transfer agent will establish accounts for all current
Fund Shareholders containing the appropriate number and class of successor Fund
Shares to be received by that Shareholder under the Plan of Reorganization.
Such accounts will be identical in all material respects to the accounts
currently maintained by the Funds for each Shareholder. No action by a
Shareholder will be necessary in order to continue any automatic investment
plans currently maintained by a current Fund Shareholder.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Except as noted below, Northern Trust, 50 South LaSalle Street, Chicago,
Illinois 60675, currently serves as investment adviser, transfer agent and
custodian for all the Funds of the Massachusetts Trust and will serve in the
same capacity for the corresponding Funds of the Delaware Trust. Northern Trust
Quantitative Advisors, Inc., 50 South LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser for the Stock Index, Small Cap Index and Small Cap
Funds of the Massachusetts Trust and will serve in the same capacity for the
corresponding Funds of the Delaware Trust. The Delaware Trust will adopt
investment advisory, transfer agency and custody agreements with respect to each
successor Fund that will be identical, in all material respects, to the
agreements in effect for the Funds immediately before the Conversions.
INDEPENDENT PUBLIC AUDITORS
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603, are
presently the independent public auditors for the Massachusetts Trust, and will
continue to be the independent public auditors for the Funds, subject to
required ratification (see also Proposal 2).
DISTRIBUTION AND CO-ADMINISTRATION AGREEMENTS
The Delaware Trust will adopt distribution and co-administration agreements
with respect to the Shares of each successor Fund. The terms of the
distribution and co-administration agreements will be identical, in all material
respects, to the Funds' existing agreements.
DISTRIBUTION AND SERVICE PLANS
The Delaware Trust will adopt a Distribution and Service Plan and a Service
Plan with respect to each Fund. The terms of the plans, including the fees
payable thereunder, will be identical in all material respects to the Funds'
existing plans. Pursuant to the plans, the Delaware Trust on behalf of each
successor Funds' will assume the corresponding current Fund's obligations under
agreements with banks, corporations, brokers, dealers and other financial
institutions that act as "Service Organizations."
DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT
The following is a summary of certain provisions of the Delaware Trust
Instrument.
Series and Classes. As discussed above, the Delaware Trust Instrument
permits the Delaware Trust to issue series of its shares of beneficial interest
(referred to as "Shares") which represent interests in separate portfolios of
investments, including the successor Funds. The Delaware Trust is also
authorized to issue multiple classes of all series. Similarly, the
Massachusetts Declaration of Trust permits the issuance of separate series and
multiple classes of Shares representing interests in the same Fund. No series
is entitled to share in the assets of any other series or is liable for the
expenses or liabilities of any other series. The Trustees of both the Delaware
Trust and the Massachusetts Trust are able to authorize the issuance of
additional series or classes of Shares without prior Shareholder approval.
Limitations on Derivative Actions. In addition to the requirements of
Delaware law, the Delaware Trust Instrument provides that a Shareholder of the
Delaware Trust may bring a derivative action on behalf of the Delaware Trust
only if the following conditions are met: (1) Shareholders eligible to bring
such derivative action under Delaware law who hold at least 10% of the
outstanding Shares of the Delaware 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 (2) the Trustees must be afforded a
reasonable amount of time to consider such Shareholder request and to
investigate the basis of such claim. The Delaware Trust Instrument also
provides that no person, other than the Trustees, who is not a Shareholder of a
particular series or class shall be entitled to bring any derivative action,
suit or other proceeding on behalf of or with respect to such series or class.
The Trustees will be entitled to retain counsel or other advisers in considering
the merits of the request and may require an undertaking by the Shareholders
making such request to reimburse the Delaware Trust for the expense of any such
advisers in the event that the Trustees determine not to bring such action. The
Massachusetts Trust Instrument provides that no person other than the Trustees,
who is not a Shareholder of a particular series or class, may bring a derivative
action, suit or proceeding on behalf of that series or class.
Shareholder Meetings and Voting Rights. The Delaware Trust is not required
to hold annual meetings of Shareholders and does not intend to hold such
meetings. In the event that a meeting of Shareholders is held, each Share of
the Delaware Trust will be entitled, as determined by the Trustees without the
vote or consent of Shareholders, either to one vote for each Share or to one
vote for each dollar of net asset value represented by such Shares on all
matters presented to Shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Delaware Trust will vote separately from each other.
Shareholders of the Delaware Trust do not have cumulative voting rights in the
election of Trustees. The Shareholders of the Delaware Trust will have voting
rights only with respect to the limited number of matters specified in the
Delaware Trust Instrument and such other matters as the Trustees may determine
or may be required by law.
The Massachusetts Trust is not authorized to use dollar-based voting.
Instead, each Shareholder has one vote for each Share held, regardless of its
net asset value per Share. This can have the effect of providing series with a
lower net asset value per Share, such as money market funds, with a voting
interest that is disproportionate to their economic interest. Like the Delaware
Trust Instrument, the Massachusetts Declaration of Trust also limits the number
of matters on which Shareholders are entitled to vote.
Indemnification. The Delaware Trust Instrument provides for
indemnification of Trustees, officers and agents of the Delaware Trust unless
the recipient is liable by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office.
The Delaware Trust Instrument provides that, if any Shareholder or former
Shareholder of any series is held personally liable solely by reason of being or
having been a Shareholder and not because of the Shareholder's acts or omissions
or for some other reason, the Shareholder or former Shareholder (or heirs,
executors, administrators, legal representatives or general successors) will be
entitled, out of the assets belonging to the applicable series, to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Delaware Trust, acting on behalf of any affected series, must,
upon request by such Shareholder, assume the defense of any claim made against
such Shareholder for any act or obligation of the series and satisfy any
judgment thereon from the assets of the series. The Massachusetts Declaration
of Trust includes similar provisions.
Termination. The Delaware Trust Instrument permits the termination of the
Delaware Trust or of any series or class of the Delaware Trust (1) by a majority
of the affected Shareholders at a meeting of Shareholders of the Delaware Trust,
series or class; or (2) by a majority of the Trustees without Shareholder
approval if the Trustees determine that such action is in the best interest of
the Delaware Trust or its Shareholders. The Massachusetts Declaration of Trust
includes similar provisions.
Merger, Consolidation, Sale of Assets, Etc. The Delaware Trust Instrument
authorizes the Trustees, without Shareholder approval (except as stated in the
next paragraph), to cause the Delaware Trust, or any series thereof, to merge or
consolidate with any corporation, association, trust or other organization or
sell or exchange all or substantially all of the property belonging to the
Delaware Trust, or any series thereof. The Massachusetts Declaration of Trust
includes similar provisions (except for those stated in the next paragraph).
The Delaware Trust Instrument authorizes the Trustees, in connection with
the merger, consolidation, termination or other reorganization of the Trust or
any series or class, to classify the Shareholders of any class into one or more
separate groups and to provide for the different treatment of Shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of Shareholders that are so
classified.
Amendments. The Delaware Trust Instrument permits the Trustees to amend
the Delaware Trust Instrument without a Shareholder vote. However, Shareholders
of the Delaware Trust have the right to vote on any amendment (1) that would
adversely affect the voting rights of Shareholders; (2) that is required by law
to be approved by Shareholders; (3) that would amend the voting provisions of
the Delaware Trust Instrument; or (4) that the Trustees determine to submit to
Shareholders. The Massachusetts Declaration of Trust includes similar
provisions.
Series of Trustees. The Trustees may appoint separate Trustees with
respect to one or more series or classes of the Delaware Trust's Shares (the
"Series Trustees"). To the extent provided by the Trustees in the appointment
of Series Trustees, Series Trustees (1) may, but are not required to, serve as
Trustees of the Trust or any other series or class of the Delaware Trust; (2)
may have, to the exclusion of any other Trustee of the Delaware Trust, all the
powers and authorities of Trustees under the Delaware Trust Instrument with
respect to such series or class; and/or (3) may have no power or authority with
respect to any other series or class. The Massachusetts Declaration of Trust
does not permit the election of separate Trustees for a series or class. The
Trustees are not currently considering the appointment of Series Trustees for
the Delaware Trust.
CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS BUSINESS TRUSTS AND DELAWARE
BUSINESS TRUSTS
Shareholder Liability
Generally, Delaware business trust Shareholders are not personally liable
for obligations of the Delaware business trust under Delaware law. The Delaware
Act entitles a Shareholder of a Delaware business trust to the same limitation
of liability as is available to Shareholders of private for-profit corporations.
However, no similar statutory or other authority limiting business trust
Shareholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a Shareholder is subject to the jurisdiction
of courts in such other states, those courts may not apply Delaware law and may
subject the Delaware Trust Shareholders to liability. To offset this risk, the
Delaware Trust Instrument (1) contains an express disclaimer of Shareholder
liability for acts or obligations of the Delaware Trust and requires that notice
of such disclaimer be given in each agreement, obligation and instrument entered
into or executed by the Delaware Trust or its Trustees and (2) provides for
indemnification out of the property of the applicable series of the Delaware
Trust of any Shareholder held personally liable for the obligations of the
Delaware Trust solely by reason of being or having been a Shareholder and not
because of the Shareholder's acts or omissions or for some other reason. Thus,
the risk of a Delaware business trust Shareholder incurring financial loss
beyond his or her investment because of Shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the liability arises under tort law or, if
not, no contractual limitation of liability is in effect; and (3) the applicable
series of the Delaware Trust is unable to meet its obligations. In light of
Delaware law, the nature of the Delaware Trust's business and the nature of its
assets, the risk of personal liability to a Delaware Trust Shareholder is
extremely remote.
Unlike Delaware, in Massachusetts there is no statute relating to business
trusts that entitles Shareholders of a Massachusetts business trust to the same
limitation of liability as is extended to Shareholders of a Massachusetts
corporation. Shareholders of a Massachusetts business trust may, therefore,
under certain circumstances, be held personally liable under Massachusetts law
for the obligations of the Massachusetts business trust. The Massachusetts
Declaration of Trust, like the Delaware Trust Instrument, contains an express
disclaimer of Shareholder liability and requires that notice of such disclaimer
be given in each agreement entered into or executed by the Massachusetts
business trust or its Trustees. The Massachusetts Declaration of Trust also
provides for indemnification out of the trust property. Thus, the Trustees
believe the risk of Shareholder liability is also remote for Shareholders of the
Massachusetts Trust.
Liability of Trustees
The Delaware Trust Instrument provides that the Trustees will not be liable
to any person other than the Delaware Trust or a Shareholder and that a Trustee
will not be liable for any act as a Trustee. However, nothing in the Delaware
Trust Instrument protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. The Massachusetts Declaration of Trust provides that its Trustees
will not be liable for errors of judgment or mistakes of fact or law, subject to
substantially the same provisions concerning bad faith, gross negligence and
reckless disregard as those described above.
PROPOSAL 4
APPROVAL OF A NEW FUNDAMENTAL POLICY
REGARDING INVESTMENTS IN OTHER INVESTMENT
COMPANY SECURITIES AND A
RELATED AMENDMENT TO THE
MASSACHUSETTS DECLARATION OF TRUST
(ALL FUNDS)
GENERAL
The Funds are currently authorized to invest in securities issued by other
investment companies when consistent with their respective investment objectives
and policies. The proposed new fundamental policy will broaden this authority
in two respects. First, the new policy will allow each Fund to invest all or
substantially all of its assets in a single open-end investment company or
series thereof with substantially the same fundamental objective, policies and
restrictions as the Fund. Second, the new policy will otherwise permit each
Fund to purchase the securities of other investment companies to the full extent
permitted under Section 12 (or any other provision) of the 1940 Act and any
regulation or order of the SEC notwithstanding any of the Trust's other
fundamental investment restrictions (including, without limitation, those
restrictions relating to issuer diversification, industry concentration and
control).
Background. Several mutual funds have developed so-called master-feeder
structures under which they invest all their assets in a single pooled
investment (a "Pooled Portfolio"), which is also usually a registered investment
company. For example, funds offering different types of shareholder services
might pool their investments. This structure allows several funds with
different features, but substantially the same investment objective,
restrictions and policies, to combine their investments instead of managing them
separately. If approved by Shareholders at the Meeting, the Proposal will allow
the Funds to use this structure through the adoption of the proposed new
fundamental investment policy and a related amendment to the Massachusetts
Declaration of Trust. The Delaware Trust Instrument would also permit the Funds
to use this structure, but if the proposal is not adopted the Funds would not
utilize this master-feeder flexibility.
In addition, under Section 12 of the 1940 Act the Funds are currently
allowed to make other investments in the securities of other investment
companies (not using the master-feeder structure) so long as not more than 3% of
the total outstanding stock of any investment company is owned by the Funds and
their affiliated persons (as defined in the 1940 Act) immediately after a
purchase is made. Investments by the Funds (except the International Fixed
Income, Florida Intermediate Tax-Exempt, California Intermediate Tax-Exempt,
Arizona Tax-Exempt, California Tax-Exempt, MarketPower, Tax-Exempt Money Market,
Short-Intermediate U.S. Government, Small Cap Index, Small Cap Growth, Mid Cap
Growth, High Yield Municipal and High Yield Funds) in other investment companies
are, however, currently limited by certain fundamental investment restrictions,
including restrictions that limit the amount of assets that a Fund may invest in
any single investment company and in investment companies generally. If the
Proposal is approved by Shareholders at the Meeting, each Fund will be
authorized to make these investments to the full extent permitted by the 1940
Act and the SEC.
Purpose of the Proposal. Northern Trust regularly reviews various options
for structuring mutual funds. A primary purpose of investing in a Pooled
Portfolio is to achieve possible operational efficiencies. While neither the
Board of Trustees nor Northern Trust has determined that any Fund should invest
in a Pooled Portfolio, the Trustees believe that it could be in the best
interests of the Funds to adopt such a structure to allow for investing by one
or more of the Funds in a Pooled Portfolio at a future date.
At present, some of the Funds' fundamental investment restrictions and
policies may prevent a Portfolio from investing all of its assets in another
investment company. To avoid the costs associated with a subsequent Shareholder
meeting, the Trustees recommend that Shareholders of each Fund vote to permit
the assets of such Fund to be invested in a Pooled Portfolio, without an
additional vote of Fund Shareholders, if the Trustees determine in the future
that the adoption of a master-feeder structure is in the best interest of the
Fund and its Shareholders. If Shareholders approve this Proposal, any
fundamental and non-fundamental restrictions and policies of the Funds that
currently prohibit investment in securities of a single investment company would
be appropriately modified to permit investment in Pooled Portfolios. These
policies include, for example, the restrictions concerning a Fund acting as an
underwriter and a Fund's investments in: (1) the securities of any one issuer;
(2) securities of any issuer if more than 10% of such issuer's voting securities
are held by a Fund; (3) companies for purposes of control; and (4) issuers in
any one industry.
A Fund's methods of operation and Shareholder services would not
necessarily be materially affected by its investment in Pooled Portfolios,
except that the assets of the Fund would be managed as part of a larger pool.
If a Fund invested all of its assets in a Pooled Portfolio, it is currently
anticipated that the Fund would hold only a single investment security and the
Pooled Portfolio would directly invest in individual investment securities. The
investment advisory and other services provided to a Fund by Northern Trust or
its affiliates could continue to be provided by Northern Trust or its
affiliates, but the investment advisory services would normally be provided to
and paid for by the Pooled Portfolio rather than the Fund. The Trustees would
retain the right to withdraw the Fund's investment from the respective Pooled
Portfolio at any time. The Fund would then resume investing directly in
securities as it does currently.
At present, the Trustees are not considering any proposal that any of
the Funds adopt a master-feeder structure. The Trustees will authorize
investing a Fund's assets in a Pooled Portfolio only if they determine that
pooling is in the best interests of a Fund and its Shareholders and if they
determine that the investment will not have material adverse tax or other
consequences to the Fund or its Shareholders. In determining whether a Fund
should invest in a Pooled Portfolio, the Trustees will consider, among other
things, the opportunity to reduce costs and to achieve operational efficiencies.
The Trustees will not authorize investment in a Pooled Portfolio if doing so
would increase costs to Shareholders, unless they perceive a corresponding
increase in benefits to Shareholders. There is no assurance that cost
reductions or increased efficiencies will be achieved.
Northern Trust and its affiliates may benefit from the use of a Pooled
Portfolio if overall assets are increased since Northern Trust's fees under its
existing agreements are based, in part, on the amount of those assets. Also,
Northern Trust's or its affiliates' expenses of providing investment and other
services to a Fund may be reduced.
As stated above, the proposal will also allow the Funds to make other
investments in the securities of other investment companies (not using the
master-feeder structure) to the full extent permitted by the 1940 Act and the
SEC. For example, although the 1940 Act permits each Fund to make such
investments so long as not more than 3% of the total outstanding stock of any
investment company is owned by the Fund and its affiliated persons, the
fundamental investment restrictions of each Fund (except the Funds listed
previously) provide that a Fund must limit its investments so that, with respect
to 75% of its total assets, not more than 5% will be invested in the securities
of any one issuer (with certain exceptions). The Board of Trustees believes
that the removal of these restrictions with respect to investments in other
investment company securities may be advantageous to the Funds. For example, a
Fund that seeks to invest in foreign securities may choose to invest in World
Equity Benchmark Shares/SM ("WEBS"), which are issued by a registered investment
company that invests directly in foreign issuers. Although Northern Trust
anticipates that the investments of the Funds in investment company securities
will not exceed 25% in the foreseeable future, the proposal, if approved, will
give the Funds this latitude should Northern Trust deem the investments
appropriate. As an investor in other investment companies, a Fund would
indirectly bear its proportionate share of any management fees and other
expenses paid by such other investment companies in addition to the fees and
expenses paid directly by the Fund.
PROPOSED FUNDAMENTAL POLICY AND RELATED AMENDMENT TO THE DECLARATION OF TRUST
In order to provide the Funds greater authority to invest in the securities
of other investment companies as discussed above, the Trustees recommend that
the Shareholders of each Fund approve the following fundamental policy:
Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each 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
Securities and Exchange Commission; and (b) invest all or substantially all
of its assets in a single open-end investment company or series thereof
with substantially the same investment objective, policies and fundamental
restrictions as the Fund.
The Trustees also recommend that the Shareholders approve the following
amendment to the Massachusetts Declaration of Trust:
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by applicable law, invest all or
a portion of the Trust Property of any Series, or dispose of all or a
portion of the Trust Property of any Series, and invest the proceeds of
such disposition in interests issued by one or more other investment
companies or pooled portfolios. Any such other investment company or
pooled portfolio may (but need not) be a trust (formed under the laws of
any state or jurisdiction) (or subtrust thereof) which is classified as a
partnership for federal income tax purposes. Notwithstanding anything else
herein, the Trustees may, without Shareholder approval unless such approval
is required by applicable law, cause a Series that is organized in the
master-feeder fund structure to withdraw or redeem its Trust Property from
the master fund and cause such series to invest its Trust Property directly
in securities and other financial instruments or in another master fund.
BOARD OF TRUSTEES EVALUATION AND RECOMMENDATION
[At a meeting held on January 20, 2000, after considering the matters
discussed above and other matters deemed to be relevant, the Trustees
unanimously adopted and voted to recommend to the Shareholders that they approve
the proposed new fundamental investment policy and related amendment to the
Massachusetts Declaration of Trust set forth above.] In taking such action and
making such recommendations, the Trustees took into consideration that the
proposed modifications may provide operational and investment efficiencies and
facilitate the introduction of new investment portfolios of the Trust and,
thereby, increase the investment options available to Shareholders.
Except as described in this Proxy Statement, approval of this Proposal 4
will not change any of the investment programs and services or operations that
are described in the Funds' current Prospectus and this Proxy Statement.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND
APPROVE A NEW FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTMENTS IN OTHER
INVESTMENT COMPANY SECURITIES AND A RELATED AMENDMENT TO THE DECLARATION OF
TRUST.
REQUIRED VOTE
In order for the new fundamental investment policy and related amendment to
the Massachusetts Declaration of Trust to be effective for a Fund, they must be
approved by the affirmative vote of a 1940 Act Majority of that Fund's
outstanding Shares (described in Proposal 3). If they are not approved with
respect to a Fund, the new fundamental investment policy and related amendment
will not be effective for that Fund.
PROPOSALS 5(A)-(F)
AMENDMENT OF THE FUNDS' FUNDAMENTAL
INVESTMENT POLICIES
GENERAL
The Trustees recommend to the Shareholders of each Fund that they approve
proposals to amend certain of the Funds' fundamental investment policies. These
investment policies may be changed by a Fund only with the approval of a 1940
Act Majority of the outstanding Shares of that Fund.
One reason for the proposals is to adopt insofar as possible a uniform
statement of fundamental investment policies for the mutual funds advised by
Northern Trust. This uniformity will facilitate comparison of different Funds'
investment policies as well as administration of the policies. The proposals
would also result in a clearer and simpler statement of these policies.
Another reason for amending the Funds' investment policies is to delete
policies that were adopted in response to state "Blue Sky" laws and regulations
limiting certain types of investment company practices and investments. States
no longer have the power to enforce these restrictions, and the elimination of
the restrictions may increase investment management flexibility for the Funds.
An additional reason for amending Funds' investment policies is to provide
the Funds with the flexibility to implement an interfund lending program if the
Trustees determine this is desirable in the future and, generally, to ensure
that the Funds have the maximum borrowing flexibility that is possible under the
1940 Act.
The following is a summary of the proposed changes to the Funds'
fundamental investment policies. The policies are summarized individually below
and will be voted upon separately. In order to fully achieve the benefits set
forth above, the Trustees recommend that Shareholders approve each of the
proposals.
PROPOSAL 5(A)
INVESTMENT POLICY ON COMMODITIES
(ALL FUNDS)
The 1940 Act requires that the Funds have a fundamental investment policy
regarding investments in commodities. While the Funds do not invest in physical
commodities or commodity contracts, the Funds (other than the money market Funds
identified below) may enter into financial futures contracts, options on futures
and, in certain cases, currency contracts. Any financial futures contract or
related option is currently considered to be a commodity contract. As a result
of the continuing development of new types of investment products, it is
possible that other types of financial instruments may also be deemed to be
commodity contracts in the future.
The Funds' current fundamental investment policy regarding commodities
provides that no Fund may "purchase or sell commodities or commodity contracts
or oil or gas or other mineral exploration or development programs or leases,
except that each Fund may, to the extent appropriate to its investment policies,
purchase securities of companies engaging in whole or in part in such
activities, and (other than the money market Funds identified below) may enter
into futures contracts and related options and forward currency exchange
contracts in accordance with its investment objective and policies." The Trust's
"money market" Funds are the Money Market Fund, U.S. Government Money Market
Fund, U.S. Government Select Money Market Fund, Tax-Exempt Money Market Fund,
Municipal Money Market Fund and California Municipal Money Market Fund.
The proposed amended fundamental investment policy is intended to provide a
standardized policy for all of the Funds. It is also intended to ensure that
the Trust's money market Funds are able to continue to enter into financial
futures contracts and related options for hedging and other permissible purposes
in the future, and to clarify that other types of financial instruments and
contracts are not permitted.
In addition, the proposed policy eliminates the existing restriction
regarding investments in oil, gas and other mineral exploration or development
programs. This restriction was previously imposed by state law and is no longer
required. Its elimination is not expected to have a material effect on the
Funds' investment practices.
As amended, each Fund's fundamental investment policy with respect to
commodities would be as follows:
The Fund may not 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.
PROPOSAL 5(B)
INVESTMENT POLICIES ON BORROWING AND LENDING
(ALL FUNDS)
The Board of Trustees is recommending that Shareholders approve amendments
to the Funds' fundamental investment policies on borrowing and lending to: (1)
permit the Funds to implement an interfund lending program if and when approved
by the Trustees and the SEC; and (2) ensure that the Funds have the maximum
borrowing flexibility allowed by law. This Proposal applies to each Fund except
the Market Command Fund, which currently has policies like the one proposed
below.
Interfund Lending Program. Under their current investment policies, the
-------------------------
Funds are permitted to borrow from banks but not (with limited exceptions) from
other Funds or persons. Under an interfund lending program, a Fund could borrow
from other affiliated investment companies if it made good sense. For example,
if available cash is insufficient to meet Shareholder redemptions, it may be
advantageous for a Fund to borrow money for a short time instead of raising cash
by selling portfolio securities, which could be disruptive to the Fund's
investment strategy. In this circumstance, an interfund lending program could
benefit a Fund by facilitating its flexibility to use the most cost-effective
alternative to satisfy these short-term borrowing requirements. In particular,
a Fund needing cash may be able to obtain lower interest rates through an
interfund lending program, and a Fund lending the cash may be able to obtain a
higher interest rate than it may obtain on alternative short-term investments
(such as the rates on repurchase agreements). In this manner, an interfund
lending program could match the borrowing and lending needs of different Funds.
Specifically, the interfund lending program could allow the Funds' investment
advisers, on any given day, to match the Funds wishing to borrow money to
satisfy redemption requests and the Funds with available money to lend. By
arranging loans between the matched Funds instead of banks, the Funds may be
able to borrow money more cost-effectively and lend money more profitably.
Interfund lending would be permitted only if the terms are at least as favorable
as the terms a Fund could otherwise negotiate with a third party and if a
transaction is conducted in accordance with safeguards imposed by the SEC on
interfund lending programs.
When one Fund lends money to another Fund, the lending Fund will be subject
to the credit risk that the borrowing Fund may fail to repay the loan. However,
the Funds presently face similar risks when lending money to unaffiliated
companies. The Trustees believe that the risks presented by an interfund
lending program will be minimal. If a Fund borrows or lends money through the
program, the borrowing or lending activity must be consistent with the Fund's
investment objective and investment policies.
The Trustees have not decided whether to implement an interfund lending
program for the Funds. However, in order to avoid the expense of another
possible Shareholder meeting in the future to consider this issue, the Trustees
are recommending that Shareholders approve an amendment to the Funds'
fundamental investment policies at the Meeting to provide the flexibility for
interfund lending.
In order for the Funds to engage in an interfund lending program,
regulatory approval of the SEC will also be required because, among other
reasons, the program may be considered to be among affiliated parties. If the
proposed amendments to the Fund's fundamental investment policies are approved
by Shareholders, the proposed interfund lending program will be implemented only
to the extent permitted by rule or by order of the SEC. If SEC permission is
not granted, the Funds will not be able to implement the interfund lending
program even though Shareholders have approved the proposal. No prediction can
be made as to whether the SEC would grant such permission.
Other Changes. Under the proposed amended borrowing investment policy a
-------------
Fund will be permitted to: (1) borrow from banks, affiliated investment
companies and other persons (if permitted by the SEC) in amounts up to 33-1/3%
of its total assets or such other percentage permitted by law; and (2) borrow up
to an additional 5% of its total assets for temporary purposes. In addition,
the amended borrowing policy states expressly that a Fund may obtain short-term
credits as necessary for the clearance of portfolio securities transactions and
may purchase securities on margin. Under the proposed amended policy,
borrowings are not limited to extraordinary or emergency purposes or to enable
the Trust to meet redemption requests, but may be used for investment leverage
purposes. Finally, the amended policy expressly provides that a Fund will not
issue senior securities to the extent such issuance would violate applicable
law. These changes are intended to ensure that the Funds have the maximum
borrowing flexibility allowed by law.
Current and Proposed Fundamental Investment Policies. The Funds' current
----------------------------------------------------
fundamental investment policies relating to borrowing and lending are as
follows:
(1) Borrowing. No Fund may borrow money (other than pursuant to
---------
reverse repurchase agreements), except (a) as a temporary measure, and then
only in amounts not exceeding 5% of the value of a Fund's total assets or
(b) from banks, provided that immediately after any such borrowing all
borrowings of the Fund do not exceed one-third of the Fund's total assets.
The exceptions in (a) and (b) to this restriction are not for investment
leverage purposes but are solely for extraordinary or emergency purposes or
to facilitate management of a Fund by enabling Northern Funds to meet
redemption requests when the liquidation of portfolio instruments is deemed
to be disadvantageous or not possible. If due to market fluctuations or
other reasons the total assets of a Fund fall below 300% of its borrowings,
Northern Funds will reduce the borrowings of such Fund in accordance with
the 1940 Act. In addition, as a matter of fundamental policy, the Funds
may not enter into reverse repurchase agreements exceeding in the aggregate
one-third of their respective total assets, and will not issue senior
securities except as stated in their Prospectus or Statement of Additional
Information.
(2) Lending. No Fund may make loans, except (a) through the purchase
-------
of debt obligations in accordance with the Fund's investment objective and
policies, (b) through repurchase agreements with banks, brokers, dealers
and other financial institutions, and (c) loans of securities.
As amended, the Funds' fundamental investment policies relating to
borrowing and lending will provide as follows:
(1) Borrowing. No Fund may borrow money, except that to the extent
---------
permitted by applicable law (a) a 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) a Fund may
borrow up to an additional 5% of its total assets for temporary purposes,
(c) a Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities, and (d) a Fund
may purchase securities on margin. If due to market fluctuations or other
reasons a Fund's borrowings exceed the limitations stated above, the Trust
will promptly reduce the borrowings of such Fund in accordance with the
1940 Act. In addition, as a matter of fundamental policy, a Fund will not
issue senior securities to the extent such issuance would violate
applicable law.
(2) Lending. No Fund may 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) an interfund
lending program with other affiliated funds.
PROPOSAL 5(C)
INVESTMENT POLICY ON ISSUER DIVERSIFICATION
(ALL DIVERSIFIED FUNDS)
To be diversified under the 1940 Act, a Fund must not, with respect to 75%
of its total assets, invest more than 5% of its total assets in the securities
of any one issuer or acquire more than 10% of the outstanding voting securities
of any one issuer. These restrictions apply only at the time of investment. A
Fund may invest up to 25% of its total assets without regard to these
restrictions. In addition, these restrictions do not apply to holdings of or
investments in cash, cash items, certain repurchase agreements, U.S. Government
securities or securities of other investment companies. Currently, the
fundamental investment policy concerning issuer diversification for each Fund,
except the International Fixed Income, California Municipal Money Market,
California Intermediate Tax-Exempt, California Tax-Exempt, Florida Intermediate
Tax-Exempt, Arizona Tax-Exempt and Market Command Funds (which are non-
diversified), is narrower than the 1940 Act restrictions in not listing as
exclusions cash, cash items or (for some Funds) securities of other investment
companies. The proposal simplifies the wording of the current policy. As
proposed, the policy would require diversification only to the extent required
under the 1940 Act. Additional diversification requirements are imposed upon
the Funds to be treated as money market funds and as regulated investment
companies for federal tax purposes. These requirements are not required to be
reflected in the proposed investment policy and will not be affected by the
proposal. The Trustees, therefore, recommend that the Shareholders of each
diversified Fund approve the following investment restriction in lieu of its
current fundamental policy:
The Fund may not make any investment inconsistent with the Fund's
classification as a diversified company under the 1940 Act. This
restriction does not, however, apply to any Fund classified as a non-
diversified company under the 1940 Act.
PROPOSAL 5(D)
INVESTMENT POLICY ON MORTGAGING
(ALL FUNDS EXCEPT THE MARKET COMMAND FUND)
To comply with state securities laws in effect at the time of their
organization, the Funds adopted a fundamental investment policy limiting their
ability to mortgage or pledge assets. More particularly, this policy provides
that the Funds may not "mortgage, pledge, or hypothecate any assets (other than
pursuant to reverse repurchase agreements) except to secure permitted
borrowings."
This investment policy does not, however, apply to the following Fund that
commenced operations after the time that states lost their authority to regulate
mutual fund investments: Market Command Fund.
The Trustees believe that because this investment policy is no longer
required and is obsolete, the investment restriction should be eliminated.
PROPOSAL 5(E)
INVESTMENT POLICY ON PUTS AND CALLS
(ALL FUNDS EXCEPT THE TAX-EXEMPT MONEY MARKET, SHORT-INTERMEDIATE U.S.
GOVERNMENT, CALIFORNIA INTERMEDIATE TAX-EXEMPT, ARIZONA TAX-EXEMPT, HIGH YIELD
MUNICIPAL, HIGH YIELD FIXED INCOME, SMALL CAP INDEX, SMALL CAP GROWTH AND MARKET
COMMAND FUNDS)
To comply with state securities laws in effect at the time of their
organization, many of the Funds also adopted a fundamental investment policy
limiting their ability to write certain put and call options. More
particularly, this policy provides that these Funds may not "write puts, calls
or combinations thereof, except for transactions in options on securities,
financial instruments, currencies and indices of securities; futures contracts;
options on futures contracts; forward currency exchange contracts; short sales
against the box; interest rate and currency swaps; and pair-off transactions."
This investment policy does not, however, apply to the following Funds that
commenced operations after the time that states lost their authority to regulate
mutual fund investments: the Tax-Exempt Money Market Fund, Short-Intermediate
U.S. Government Fund, California Intermediate Tax-Exempt Fund, Arizona Tax-
Exempt Fund, High Yield Municipal Fund, High Yield Fixed Income Fund, Small Cap
Index Fund, Small Cap Growth Fund and MarketPower Fund. In addition, this
restriction does not apply to any type of option, futures contract, forward
contract, short sale, swap or pair-off transaction unless it involves a put,
call or combination thereof written by a Fund.
The Trustees believe that because this investment policy is no longer
required, is obsolete and is inconsistent with the investment policy of those
Funds that have been recently organized, the investment restriction should be
eliminated for all of the Funds.
PROPOSAL 5(F)
INVESTMENT POLICY ON MUNICIPAL INVESTMENTS
(TAX-EXEMPT AND MUNICIPAL FUNDS ONLY)
As a matter of fundamental policy, the Tax-Exempt Money Market, Municipal
Money Market, California Municipal Money Market, Intermediate Tax-Exempt,
California Intermediate Tax-Exempt, Florida Intermediate Tax-Exempt, Tax-Exempt,
Arizona Tax-Exempt, California Tax-Exempt and High Yield Municipal Funds (the
"Tax-Exempt and Municipal Funds") are required to derive at least 80% of their
respective annual gross incomes from municipal instruments except in
extraordinary circumstances. Municipal instruments are debt instruments, the
interest on which is, in the opinion of counsel (if any), exempt from regular
Federal income tax. The Trustees recommend that the Shareholders of the Tax-
Exempt and Municipal Funds approve the amendment of this fundamental policy to
provide that these Funds will invest at least 80% of their respective net
assets in municipal instruments.
Northern Trust believes that this revision will simplify calculations of
the Tax-Exempt and Municipal Funds' holdings. A policy based upon a percentage
of a Fund's net assets will be easier to monitor and control than a policy based
upon a percentage of income since a Fund's income can vary due to a variety of
factors. SHAREHOLDERS SHOULD NOTE THAT THE PROPOSED AMENDMENT TO THE TAX-EXEMPT
AND MUNICIPAL FUNDS' FUNDAMENTAL POLICY DOES NOT INVOLVE ANY CHANGE IN THE
INVESTMENT OBJECTIVES OF THESE FUNDS.
The Board of Trustees recommends that Shareholders approve the proposal to
amend the Tax-Exempt and Municipal Funds' fundamental policy to provide as
follows:
As a matter of fundamental policy, at least 80% of the net assets of
each Tax-Exempt and Municipal Fund will be invested in debt instruments,
the interest on which is, in the opinion of bond counsel or counsel for
issuers, if any, exempt from regular Federal income tax, except in
extraordinary circumstances such as when the Investment Adviser believes
that market conditions indicate that a Fund should adopt a temporary
defensive posture by holding uninvested cash or investing in taxable
securities.
BOARD OF TRUSTEES' RECOMMENDATION
The Trustees believe that each proposed amendment to the Funds' fundamental
investment policies will more clearly reflect current regulatory practice, will
increase investment management flexibility and will clarify and simplify the
policies.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE
"FOR" THE APPROVAL OF THE PROPOSED AMENDED INVESTMENT POLICIES.
REQUIRED VOTE
Approval of each proposed amendment to a Fund's fundamental investment
policies requires the affirmative vote of a 1940 Act Majority of that Fund's
outstanding Shares (described in Proposal 3). If a proposed amendment is not
approved with respect to a Fund, the corresponding current investment policy
will continue in effect unchanged for that Fund.
ADDITIONAL INFORMATION
OTHER BUSINESS
As of the date of this Proxy Statement, the Trustees are not aware of any
matters to be presented for action at the Meeting other than those described
above. Should other business properly be brought before the Meeting, it is
intended that the accompanying Proxy(ies) will be voted thereon in accordance
with the judgment of the persons named as proxies.
PROXIES AND VOTING AT THE MEETING
A Proxy is revocable by a Shareholder at any time before it is exercised by
written notice to the Trust (addressed to the Secretary at the Trust's principal
office), by executing a superseding Proxy or by attending the Meeting and voting
in person. All valid Proxies received prior to the Meeting (including any
adjournment thereof) will be voted at the Meeting. Matters on which a choice
has been provided will be voted as indicated on a Proxy and, if no instruction
is given, the persons named as proxies will vote the Shares represented thereby
in favor of the matters set forth in each proposal and will use their best
judgment in connection with the transaction of such other business as may
properly come before the Meeting.
In the event that at the time any session of the Meeting is called to order
a quorum is not present in person or by proxy, the persons named as proxies may
vote those Proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of
any of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of Proxies with respect to such proposal(s). Any such adjournment will require
the affirmative vote of a majority of the Shares of the Trust (or the affected
Fund) present and voting in person or by proxy at the session of the Meeting to
be adjourned. The persons named as proxies will vote those Proxies which they
are entitled to vote in favor of any such proposal in favor of such an
adjournment, and will vote those Proxies required to be voted against any such
proposal against any such adjournment. A Shareholder vote may be taken on one
or more of the proposals in this Proxy Statement with respect to one or more
Funds prior to such adjournment if sufficient votes for their approval have been
received and it is otherwise appropriate.
A majority of the Shares entitled to vote with respect to a proposal will
be a quorum for the transaction of business with respect to that proposal at the
Meeting, but any lesser number will be sufficient for adjournments. Abstentions
will be treated as Shares that are present at the Meeting, but will not be
counted as a vote at the Meeting. Accordingly, an abstention from voting on a
Proposal has the same effect as a vote against Proposals 3 through 5(A)-(F). If
a broker or nominee holding Shares in "street name" indicates on the Proxy that
it does not have discretionary authority to vote as to a particular proposal,
those Shares will not be considered as present at the Meeting with respect to
the proposal. Accordingly, a "broker non-vote" may affect the Trust's ability
to achieve a quorum at the Meeting, and will also have the same effect as a vote
against Proposals 3 through 5(A)-(F).
Appendix B hereto sets forth the persons who owned beneficially more than
5% of the Shares of any Fund as of [date], the Record Date for the Meeting. For
purposes of the 1940 Act, any person who owns directly or through one or more
controlled companies more than 25 percent of the voting securities of a company
is presumed to "control" such company. (As shown in Appendix B, on the Record
Date Northern Trust was the beneficial owner of a majority of the outstanding
Shares of the various Funds because it possessed sole or shared voting power
and/or investment power with respect to Shares on behalf of its customer
accounts.) Northern Trust has advised the Trust that it intends to vote the
Shares over which it has voting power "FOR" and "WITHHOLD ALL" in the election
of each Trustee named in Proposal 1 in the same proportions as the total votes
that are cast "FOR" and "WITHHOLD ALL" in such election by the other
Shareholders of the Trust. Northern Trust has further advised the Trust that it
intends to vote the Shares over which it has voting power "FOR" each of the
other proposals listed in this Proxy Statement. (In certain instances, the
votes cast by Northern Trust will be sufficient to approve the proposal
regardless of the votes cast by other Shareholders of a Fund.)
MANNER AND COST OF PROXY SOLICITATION
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of Northern Trust, PFPC and by
the Trustees. In addition, employees of Northern Trust, its affiliates,
correspondent banks, brokers and similar record holders may solicit proxies by
these means, and may forward proxy materials and printed direction forms to the
customers on whose behalf they hold record ownership of Shares of the Trust.
Northern Trust may engage an independent proxy solicitation firm to assist it in
soliciting proxies.
Each Fund will bear its allocable portion of proxy solicitation expenses,
including the cost of preparing and assembling materials used in connection with
the solicitation of proxies. Northern Trust will bear all other mailing
expenses associated with the solicitation of proxies and will reimburse
correspondent banks, brokers and other similar record holders who have not
entered into Shareholder Servicing Agreements for their reasonable expenses
incurred in forwarding proxy materials to beneficial owners.
SHAREHOLDER PROPOSALS
Neither the Massachusetts Trust nor the Delaware Trust is required, nor
does either intend, to hold annual meetings of Shareholders each year for the
election of Trustees and other business. Instead, meetings will be held only
when and if required (for example, whenever less than a majority of the Board of
Trustees holding office has been elected by the Shareholders or when the
Trustees have received a written request to call a meeting for the purpose of
voting on the question of the removal of any Trustee from the holders of record
of at least 10% of the outstanding Shares). Any Shareholders desiring to
present a proposal for consideration at the next meeting for Shareholders of
their Fund must submit the proposal in writing so that it is received by the
appropriate Fund within a reasonable time before any meeting.
INFORMATION ABOUT DISTRIBUTOR AND CO-ADMINISTRATOR
Northern Funds Distributors LLC, the Trust's Distributor, has offices at
Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428.
PFPC Inc., the Trust's Co-Administrator, has offices at 4400 Computer Drive,
Westborough, Massachusetts 01581.
INFORMATION ABOUT THE TRUST
The Trust currently has, and the Delaware Trust will have, its principal
office at 50 South LaSalle Street, Chicago, Illinois 60675.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
January __, 2000
APPENDIX A
As of [date], each Fund had the following number of Shares outstanding:
FUND OUTSTANDING SHARES
- ---- ------------------
APPENDIX B
As of [date], The Northern Trust Company, 50 South LaSalle Street, Chicago,
IL 60675, possessed sole or shared voting and/or investment power for its
customer accounts with respect to the outstanding Shares of each Fund as
follows:
AMOUNT AND PERCENTAGE OF
OUTSTANDING SHARES
-------------------------------
AMOUNT OF PERCENTAGE
FUND SHARES OF SHARES (%)
- ---- ------------- -------------
In addition, as of [date], the following persons or entities owned
beneficially more than 5% of the outstanding Shares of the following Funds:
AMOUNT AND PERCENTAGE OF
OUTSTANDING SHARES
-------------------------------
AMOUNT OF PERCENTAGE
SHAREHOLDER NAME AND ADDRESS SHARES OF SHARES (%)
- ---------------------------- ------------- -------------
APPENDIX C
As of November 30, 1999, the Nominees and officers of the Trust owned
beneficially Shares of the Funds as set forth below.
Name of Amount Percentage
Fund Beneficial Owner of Shares of Shares %
- ---- ----------------- -------------- ----------------
Growth Equity<F2> Raymond E. George 310,142<F8> <F1>
Michael E. Murphy 9,639<F8> <F1>
Stephen B. Timbers 10,193 <F1>
Mid Cap Growth<F3> Edward J. Condon, Jr. 4,292 <F1>
William J. Dolan, Jr. 1,453 <F1>
Raymond E. George 20,869<F8> <F1>
Select Equity<F4> Edward J. Condon, Jr. 1,684 <F1>
Michael E. Murphy 6,531<F8> <F1>
Stephen B. Timbers 12,176 <F1>
Small Cap Michael E. Murphy 6,255<F8> <F1>
Small Cap Raymond E. George 11,681<F8> <F1>
Growth<F5> Stephen B. Timbers 16,820 <F1>
Stock Index Stephen B. Timbers 87,691 <F1>
Technology<F6> Edward J. Condon, Jr. 1,765 <F1>
William J. Dolan, Jr. 221 <F1>
Michael E. Murphy 1,371<F8> <F1>
Stephen B. Timbers 9,082
International Stephen B. Timbers 9,260 <F1>
Growth
International Edward J. Condon, Jr. 2,778 <F1>
Select Equity
Tax-Exempt Stephen B. Timbers 30,431 <F1>
High Yield Stephen B. Timbers 10,858 <F1>
Municipal
High Yield Stephen B. Timbers 11,835 <F1>
Fixed Income
Money Market<F7> Richard G. Cline <F1>
Raymond E. George 106,810<F8> <F1>
Stephen B. Timbers 7,748 <F1>
Municipal Raymond E. George 7,891<F8> <F1>
Money Market
Tax-Exempt William J. Dolan, Jr. 14,606 <F1>
Money Market
- --------------------------------------------------------------------------------
<F1> Less than 1% of the Fund's outstanding shares.
<F2> The total number of Shares beneficially owned by Messrs. George, Murphy and
Timbers together was 329,974, which is less than 1% of the Fund's
outstanding Shares.
<F3> The total number of Shares beneficially owned by Messrs. Condon, Dolan,
George and Timbers was 39,664, which is less than 1% of the Fund's
outstanding Shares.
<F4> The total number of Shares beneficially owned by Messrs. Condon, Murphy and
Timbers together was 20,391, which is less than 1% of the Fund's
outstanding Shares.
<F5> The total number of Shares beneficially owned by Messrs. George and Timbers
was 20,501, which is less than 1% of the Fund's outstanding Shares.
<F6> The total number of Shares beneficially owned by Messrs. Condon, Dolan,
Murphy and Timbers was 12,439, which is less than 1% of the Fund's
outstanding Shares.
<F7> The total number of Shares beneficially owned by Messrs. Cline, George and
Timbers was __________, which is less than 1% of the Fund's outstanding
Shares.
<F8> The Nominee shares voting and investment power over these Shares with
another person.
APPENDIX D
AGREEMENT AND PLAN OF
REORGANIZATION, CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION is
made as of the ___th day of January, 2000, by and between Northern Funds, a
Massachusetts business trust (the "Registrant"), on behalf of each of its series
(each a "Fund" and collectively the "Funds"), and Northern Funds (the "Trust"),
a Delaware business trust.
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended (the "Code"), and is intended to effect the reorganization (a
"Reorganization") of each Fund as a new series of the Trust (each a "Successor
Fund" and collectively the "Successor Funds"). Each Reorganization will include
the transfer of all of the assets of a Fund to a corresponding Successor Fund of
the Trust solely in exchange for (1) the assumption by the Successor Fund of all
liabilities of the Fund and (2) the issuance by the Trust to the Fund of shares
of beneficial interest (herein referred to as "Shares") of the Successor Fund.
The aggregate number of Shares of each subseries (hereafter "class") of the
Successor Fund (the "Successor Fund Shares") issued to the Fund will be equal to
the number of shares of beneficial interest ("Shares") of the corresponding Fund
class outstanding immediately before the Reorganization. These transactions
will be promptly followed by a pro rata distribution by each Fund of the
Successor Fund Shares it receives in the exchange described above to the holders
of corresponding Fund Shares in exchange for those Fund Shares, in liquidation
of each Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows.
1. TRANSFER OF ASSETS OF THE FUNDS IN EXCHANGE FOR ASSUMPTION OF LIABILITIES
AND ISSUANCE OF SUCCESSOR FUND SHARES
1.1 Subject to the terms and conditions set forth herein and on the
basis of the representations and warranties contained herein, each Fund agrees
to transfer all of its assets (as described in paragraph 1.2) and to assign and
transfer all of its liabilities to a corresponding Successor Fund organized
solely for the purpose of acquiring all of the assets and assuming all of the
liabilities of that Fund. The Trust, on behalf of each Successor Fund, agrees
that in exchange for all of the assets of the corresponding Fund: (1) the
Successor Fund shall assume all of the liabilities of such Fund, whether
contingent or otherwise, then existing including, without limitation, all fees
and expenses incurred in connection with the transactions contemplated hereby
and (2) the Trust shall issue Successor Fund Shares to the Fund. The number of
Successor Fund Shares of each class to be issued by the Trust on behalf of each
Successor Fund will be identical to the number of Shares of the corresponding
class and Fund outstanding on the Closing Date provided for in paragraph 3.1.
Such transactions shall take place at the Closing provided for in paragraph 3.1.
1.2 The assets of each Fund to be acquired by the corresponding
Successor Fund shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable), any tax
operating losses, any claims or rights of action or rights to register Shares
under applicable securities laws, any books or records of the Fund and other
property owned by the Fund and any deferred or prepaid expenses shown as assets
on the books of the Fund on the Closing Date provided for in paragraph 3.1.
1.3 Immediately after delivery to each Fund of corresponding Successor
Fund Shares, a duly authorized officer of Registrant shall cause each Fund, as
the sole Shareholder of the corresponding Successor Fund, to (i) elect the
Trustees of the Trust; (ii) ratify the selection of the Trust's independent
auditors; (iii) approve an investment advisory agreement for the Successor Fund
in substantially the same form as the investment advisory agreement in effect
with respect to the Fund immediately prior to the Closing of the reorganization,
and (iv) adopt investment objectives, investment policies and investment
restrictions which are substantially identical to those of the Fund immediately
prior to the Closing of the reorganization, including any changes thereto
approved by the Shareholders of the Fund at the meeting of Shareholders
scheduled for March __, 2000 (the "Shareholder Meeting").
1.4 On the Closing Date each Fund will distribute in liquidation the
Successor Fund Shares of each class to each Shareholder of record, determined as
of the close of business on the Closing Date, of the corresponding class of the
Fund pro rata in proportion to such Shareholder's beneficial interest in that
class and in exchange for that Shareholder's Shares. Such distribution will be
accomplished by the transfer of the Successor Fund Shares then credited to the
account of each Fund on the Share records of the Trust to open accounts on those
records in the names of such Fund Shareholders and representing the respective
pro rata number of each class of the Successor Fund Shares received from the
Successor Funds which is due to such Fund Shareholders. Fractional Successor
Fund Shares shall be rounded to the third place after the decimal point.
1.5 Ownership of the Successor Fund Shares by each Successor Fund
Shareholder shall be recorded separately on the books of The Northern Trust
Company ("Northern Trust"), as the Trust's transfer agent.
1.6 Any transfer taxes payable upon the issuance of Successor Fund
Shares in a name other than the registered holder of the Fund Shares on the
books of any Fund shall be paid by the person to whom such Successor Fund Shares
are to be distributed as a condition of such transfer.
1.7 The legal existence of each Fund and the Registrant shall be
terminated as promptly as reasonably practicable after the Closing Date. After
the Closing Date, each Fund and the Registrant shall not conduct any business
except in connection with its liquidation and termination.
2. VALUATION
2.1 The value of each Fund's assets to be acquired by the Trust on
behalf of the corresponding Successor Fund hereunder shall be the net asset
value computed as of the valuation time provided in the Fund's prospectus(es) on
the Closing Date using the valuation procedures set forth in the Fund's current
prospectus(es) and statement of additional information.
2.2 The value of full and fractional Successor Fund Shares of each class
to be issued in exchange for each Fund's assets shall be equal to the value of
the net assets of the corresponding class of such Fund on the Closing Date, and
the number of such Successor Fund Shares of each class shall equal the number of
full and fractional Fund Shares outstanding on the Closing Date.
2.3 All computations of value shall be made by Northern Trust (the
"Custodian"), as custodian for the Funds and the Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of each Fund's assets in exchange for the assumption by
the corresponding Successor Fund of the Fund's liabilities and the issuance of
Successor Fund Shares to the Fund, as described above, together with related
acts necessary to consummate such acts (the "Closing"), shall occur at the
offices of [location] on March 31, 2000 ("Closing Date"), or at such other place
or date as the parties may agree in writing.
3.2 At the Closing each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts or other documents as
such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Registrant represents and warrants, on behalf of itself and each
Fund, as follows:
4.1A. At the Closing Date, Registrant, on behalf of the Funds, will
have good and marketable title to the assets to be transferred to the
Trust, on behalf of the Successor Funds, pursuant to paragraph 1.1, and
will have full right, power and authority to sell, assign, transfer and
deliver such assets hereunder. Upon delivery and in payment for such
assets, the Trust on behalf of the Successor Funds will acquire good and
marketable title thereto subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities
Act of 1933, as amended (the "1933 Act");
4.1B. The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action
on the part of Registrant. This Agreement constitutes a valid and binding
obligation of Registrant and each Fund enforceable in accordance with its
terms, subject to the approval of each Fund's Shareholders;
4.1C. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Registrant,
on behalf of the Funds, of the transactions contemplated herein, except
such as shall have been obtained prior to the Closing Date; and
4.1D. The Registrant will file with the Securities and Exchange
Commission ("SEC") proxy materials (the "Proxy Statement") complying in all
material respects with the requirements of the Securities Exchange Act of
1934, as amended, the 1940 Act, and applicable rules and regulations
thereunder, relating to a meeting of its Shareholders to be called to
consider and act upon the transactions contemplated herein.
4.2 The Trust represents and warrants, on behalf of itself and each
Successor Fund, as follows:
4.2A. Successor Fund Shares issued in connection with the
transactions contemplated herein will be duly and validly issued and
outstanding and fully paid and non-assessable by the Trust;
4.2B. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Trust, and
this Agreement constitutes a valid and binding obligation of the Trust and
each Successor Fund enforceable against the Trust and each Successor Fund
in accordance with its terms;
4.2C. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Trust or the
Successor Funds of the transactions contemplated herein, except such as
shall have been obtained prior to the Closing Date; and
4.2D. The Trust, on behalf of the Successor Funds, shall use all
reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such state securities laws as it may deem
appropriate in order to operate after the Closing Date.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT, THE FUNDS, THE TRUST AND
THE SUCCESSOR FUNDS
The obligations of Registrant, the Funds, the Trust and the Successor Funds
are each subject to the conditions that on or before the Closing Date:
5.1 This Agreement and the transactions contemplated herein shall have
been approved by the Trustees of the Registrant and the Trust and by the
requisite vote of the Registrant's Shareholders;
5.2 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the SEC and of state securities authorities) deemed necessary by the Trust or
Registrant to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Trust, Funds, Registrant or Successor
Funds, provided that either party hereto may waive any of such conditions for
itself or its respective series;
5.3 The Registrant and the Trust shall have received on or before the
Closing Date an opinion of Drinker Biddle & Reath LLP satisfactory to them,
substantially to the effect that for federal income tax purposes:
5.3A. The transfer of all of the assets and liabilities of each Fund
to its corresponding Successor Fund solely in exchange for the issuance of
Successor Fund Shares to the Fund, followed by the distribution in
liquidation by the Fund of such Successor Fund Shares to the Fund
Shareholders in exchange for their Fund Shares and the termination of the
Fund, will constitute a reorganization within the meaning of Section
368(a)(1)(F) of the Code, and the Fund and the Successor Fund will each be
"a party to a reorganization" within the meaning of Section 368(b) of the
Code;
5.3B. No gain or loss will be recognized by any Fund upon (i) the
transfer of all of its assets to its corresponding Successor Fund solely in
exchange for the issuance of Successor Fund Shares to the Fund and the
assumption by the Successor Fund of the Fund's liabilities and (ii) the
distribution by the Fund of such Successor Fund Shares to the Fund
Shareholders;
5.3C. No gain or loss will be recognized by any Successor Fund upon
its receipt of all of the corresponding Fund's assets solely in exchange
for the issuance of the Successor Fund Shares to the Fund and the
assumption by the Successor Fund of all of the liabilities of the Fund;
5.3D. The tax basis of the assets acquired by a Successor Fund from
its corresponding Fund will be, in each instance, the same as the tax basis
of those assets in the Fund's hands immediately prior to the transfer;
5.3E. The tax holding period of the assets of each Fund in the hands
of its corresponding Successor Fund will, in each instance, include the
Fund's tax holding period for those assets;
5.3F. Each Fund's Shareholders will not recognize gain or loss upon
the exchange of all of their Shares of the Fund solely for Successor Fund
Shares as part of the transaction;
5.3G. The tax basis of the Successor Fund Shares received by Fund
Shareholders in the transaction will be, for each Shareholder, the same as
the tax basis of the Fund Shares surrendered in exchange therefor; and
5.3H. The tax holding period of the Successor Fund Shares received
by Fund Shareholders will include, for each Shareholder, the tax holding
period for the Fund Shares surrendered in exchange therefor, provided that
such Fund Shares were held as capital assets on the date of the exchange.
The Registrant and the Trust each agree to make and provide representations
with respect to the Funds and the Successor Funds, respectively, that are
reasonably necessary to enable Drinker Biddle & Reath LLP to deliver an opinion
substantially as set forth in this paragraph 5.3, which opinion may address such
other federal income tax consequences, if any, that Drinker Biddle & Reath LLP
believes to be material to the Reorganization.
6. BROKERAGE FEES
The Trust, on behalf of the Successor Funds, and Registrant, on behalf of
the Funds, each represent and warrant to the other that there are no broker's or
finder's fees payable in connection with the transactions contemplated hereby.
7. TERMINATION
This Agreement may be terminated by the mutual agreement of the Trust and
Registrant and the parties may abandon the reorganization contemplated hereby,
notwithstanding approval thereof by the Shareholders of the Registrant, at any
time prior to Closing, if circumstances should develop that, in the parties
judgment, make proceeding with the Agreement inadvisable.
8. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; provided, however, that
following the approval of this Agreement by any Fund's Shareholders, no such
amendment may have the effect of changing the provisions for determining the
number of Successor Fund Shares to be paid to that Fund's Shareholders under
this Agreement to the detriment of such Fund Shareholders without their further
approval. Without limiting the foregoing, in the event Shareholder approval of
this Agreement and the transactions contemplated herein is obtained with respect
to one or more Funds but not with respect to other Funds, with the result that
the transactions contemplated by this Agreement may be consummated with respect
to one or more, but not all, of the Funds, the Board of Trustees of the
Registrant may, in the exercise of its sole and unilateral discretion, determine
to either abandon this Agreement with respect to all of the Funds or direct that
the transactions described herein be consummated to the degree the Board deems
advisable and to the degree such transactions may be lawfully effected.
9. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; SURVIVAL; WAIVER
9.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
9.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
9.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
9.5 All persons dealing with the Trust, the Funds, Registrant or the
Successor Funds must look solely to the property of the Trust, the Funds,
Registrant or the Successor Funds, respectively, for the enforcement of any
claims against the Trust, the Funds, Registrant or the Successor Funds, as
neither the Trustees, officers, agents nor Shareholders of the Trust or
Registrant assume any personal liability for obligations entered into on behalf
of the Trust or Registrant, respectively. No series of Registrant or the Trust
shall be responsible for any obligations assumed by or on behalf of any other
series of Registrant or the Trust under this Agreement.
9.6 The representations, warranties, covenants and agreements of the
parties contained herein shall not survive the Closing Date, except for the
provisions of Section 1.7.
9.7 The Trust or the Registrant, after consultation with their
respective counsel and by consent of their respective Boards of Trustees,
Executive Committees or an officer authorized by such Boards of Trustees, may
waive any condition to their respective obligations hereunder if, in their or
such officer's judgment, such waiver will not have a material adverse effect on
the interests of the Shareholders of the Trust and the Registrant.
10. NOTICES
Any notice, report statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Registrant or the Trust,
each at [address], Attention: Secretary.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer.
[SIGNATURE LINES OMITTED]
XXXXX
VOTE THIS PROXY CARD TODAY
NORTHERN FUNDS
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60675
[INDIVIDUAL FUND NAME]
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF NORTHERN FUNDS (THE "TRUST")
FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS (THE "MEETING") OF THE ABOVE-
REFERENCED FUND OF THE TRUST TO BE HELD ON MARCH , 2000 AT 9:30 A.M. (CHICAGO
---
TIME) IN THE OFFICES LOCATED AT
---------------------------------------------.
The undersigned hereby appoints and and
------------------- ------------------
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-referenced Meeting, and at all adjournments thereof, all
shares of common stock of the above-referenced Fund held of record by the
undersigned on the record date for the Meeting, upon the following matters, and
at their discretion upon any other matter which may properly come before the
Meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS
PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS.
Proposal 1
Election of Trustee
FOR ALL NOMINEES LISTED BELOW (EXCEPT WITHHOLD AUTHORITY TO VOTE
- --- AS MARKED TO THE CONTRARY BELOW) --- FOR ALL NOMINEES LISTED BELOW.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH HIS OR HER NAME IN THE LIST BELOW:
Richard G. Cline, Edward J. Condon, Jr., Wesley M. Dixon, William J. Dolan, John
W. English, Raymond E. George, Jr., Sandra Polk Guthman, Michael E. Murphy, Mary
Jacobs Skinner, William H. Springer, Richard P. Strubel, Stephen B. Timbers.
FOR AGAINST ABSTAIN
Proposal 2
To ratify or reject the selection of Arthur --- --- ---
Andersen LLP as the Trust's independent
accountants for its fiscal year ending
March 31, 2000.
FOR AGAINST ABSTAIN
Proposal 3
To approve an Agreement and Plan of --- --- ---
Reorganization pursuant to which each
Fund will be reorganized as a portfolio
of Northern Funds, a Delaware business
trust.
FOR AGAINST ABSTAIN
Proposal 4
To approve a new fundamental investment --- --- ---
policy regarding investments in other
investment company securities and a
related amendment to the Trust's
Declaration of Trust.
FOR AGAINST ABSTAIN
Proposals 5(A)-(F)
To approve amendments to the fundamental
investment policies of the specified Funds:
A) With respect to all Funds, the
investment policy on commodities; --- --- ---
B) With respect to all Funds, the
investment policies on borrowing
and lending; --- --- ---
C) With respect to all Diversified
Funds, the investment policy on
issuer diversification; --- --- ---
D) With respect to all Funds except
the MarketCommand Fund, the
investment policy on mortgaging; --- --- ---
E) With respect to all Funds except
the Tax-Exempt Money Market, Short-
Intermediate U.S. Government,
California Intermediate Tax-Exempt,
Arizona Tax-Exempt, High Yield
Municipal, High Yield Fixed Income,
Small Cap Index, Small Cap Growth
and MarketCommand Funds, the
investment policy on puts and
calls; and --- --- ---
F) With respect to the Tax-Exempt and
Municipal Funds only, the investment
policy on municipal investments. --- --- ---
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE TRUST AND THE PROXY STATEMENT DATED JANUARY , 2000.
---
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
----------------------------
Signature(s), (Title(s), if
applicable)
Please sign above exactly as
name(s) appear(s) hereon.
Corporate or partnership
proxies should be signed in
full corporate or partnership
name by an authorized officer.
Each joint owner should sign
personally. When signing as a
fiduciary, please give full
title as such.
DATE: , 2000
----------------
XXXXX
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense involved in validating your vote if you
fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration
on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION VALID SIGNATURES
- ------------- -----------------
CORPORATE ACCOUNTS
(1) ABC Corp..................................ABC Corp.
(2) ABC Corp................................ John Doe , Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer............... John Doe
(4) ABC Corp. Profit Sharing Plan........... John Doe, Treasurer
TRUST ACCOUNTS
(1) ABC Trust............................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78........................ Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA......... John B. Smith
(2) John B. Smith........................... John B. Smith, Jr., Executor
