<PAGE>
THE BENCHMARK FUNDS
MONEY MARKET PORTFOLIOS
SUPPLEMENT DATED JULY 24, 1995 TO PROSPECTUS DATED APRIL 1, 1995
The following is added to page 21 of the Prospectus under "Miscellaneous
Purchase Information," immediately following the first paragraph of that
section:
Institutions intending to place a purchase order of $5 million or more
directly with the Trust through the Transfer Agent are requested to give
advance notice to the Transfer Agent no later than 11:00 a.m. Chicago Time
on a Business Day in order to assist in the processing of the order.
The following is added to page 24 of the Prospectus under "Miscellaneous
Redemption Information," immediately before the first sentence in that section:
Exchanges and same day payment of redemption proceeds for orders of $5 million
or more placed directly with the Trust through the Transfer Agent will in no
event be made unless an Institution notifies the Transfer Agent of the order by
11:00 a.m. Chicago Time on a Business Day.
<PAGE>
The
Benchmark
Funds
Money
Market
Portfolios
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian:
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor:
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
<PAGE>
THE BENCHMARK FUNDS
THE NORTHERN TRUST COMPANY INVESTMENT ADVISER, TRANSFER
50 S. LaSalle Street AGENT AND CUSTODIAN
Chicago, Illinois 60675
312-630-6000
--------------------
This Prospectus describes four short-term money market portfolios (the
"Portfolios") offered by The Benchmark Funds (the "Trust") to institutional
investors. Each Portfolio, other than the Tax-Exempt Portfolio, seeks to
maximize current income to the extent consistent with the preservation of
capital and maintenance of liquidity. The Tax-Exempt Portfolio seeks to
provide, to the extent consistent with the preservation of capital and
prescribed portfolio standards, a high level of income exempt from regular
Federal income tax.
The GOVERNMENT SELECT PORTFOLIO invests in selected short-term obligations
of the U.S. Government, its agencies and instrumentalities the interest on
which is generally exempt from state income taxation.
The GOVERNMENT PORTFOLIO invests in short-term obligations of the U.S.
Government, its agencies and instrumentalities and related repurchase
agreements.
The DIVERSIFIED ASSETS PORTFOLIO invests in money market instruments of
both U.S. and foreign issuers, including certificates of deposit, bankers'
acceptances, commercial paper and repurchase agreements.
The TAX-EXEMPT PORTFOLIO invests primarily in short-term municipal
instruments the interest on which is exempt from regular Federal income
tax.
Each Portfolio is advised by The Northern Trust Company ("Northern"). Units are
sold and redeemed without any purchase or redemption charge imposed by the
Trust, although Northern and other institutions may charge their customers for
services provided in connection with their investments.
This Prospectus provides information about the Portfolios that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated April 1, 1995, is available upon request
without charge by writing to the Trust's distributor, Goldman, Sachs & Co.
("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or by calling
1-800-621-2550.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 1, 1995.
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <S> <C>
HIGHLIGHTS 3 Investment Adviser, Transfer Agent
---------- and Custodian 18
Description of Trust 3 Administrator and Distributor 19
Summary of Expenses 3 Expenses 19
FINANCIAL HIGHLIGHTS 5 INVESTING 20
-------------------- ---------
INVESTMENT INFORMATION 9 Purchase of Units 20
---------------------- Redemption of Units 22
Government Select Portfolio 9 Distributions 24
Government Portfolio 10 Taxes 24
Diversified Assets Portfolio 10
Tax-Exempt Portfolio 10 NET ASSET VALUE 26
Description of Securities and ---------------
Common Investment Techniques 11 PERFORMANCE INFORMATION 26
Investment Restrictions 17 -----------------------
ORGANIZATION 26
TRUST INFORMATION 18 ------------
----------------- MISCELLANEOUS 27
Board of Trustees 18 -------------
</TABLE>
2
<PAGE>
HIGHLIGHTS
DESCRIPTION OF TRUST
The Trust is an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment policies, as described below
under "Investment Information." All of the Portfolios are classified as
diversified companies. Northern serves as investment adviser, transfer agent
and custodian. Goldman Sachs serves as distributor and administrator.
Units of the Portfolios are offered exclusively to institutional investors. See
"Investing--Purchase of Units" and "Investing--Redemption of Units" for
information on how to place purchase and redemption orders.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. The
assets of each Portfolio will be invested in dollar-denominated debt securities
with remaining maturities of thirteen months or less as defined by the
Securities and Exchange Commission (the "SEC"), and each Portfolio's dollar-
weighted average portfolio maturity will not exceed 90 days. All securities
acquired by the Portfolios will be determined by Northern, under guidelines
established by the Trust's Board of Trustees, to present minimal credit risks,
and will be "Eligible Securities" as defined by the SEC. There can be no
assurance that the Portfolios will be able to achieve a stable net asset value
on a continuous basis, or that they will achieve their investment objectives.
Investors should note that one or more of the Portfolios may purchase variable
and floating rate instruments, enter into repurchase agreements, reverse
repurchase agreements and securities loans, acquire U.S. dollar-denominated
instruments of foreign issuers and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. None of the
Portfolios will invest in instruments denominated in a foreign currency.
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the unitholder
transaction expenses imposed by the Trust and the annualized operating expenses
the Government Select Portfolio, Diversified Assets Portfolio and Tax-Exempt
Portfolio incurred during the Trust's last fiscal year. With respect to the
Government Portfolio, the table sets forth certain information regarding
unitholder transaction expenses imposed by the Trust and the estimated
annualized operating expenses the Government Portfolio expects to incur during
the current fiscal year. Hypothetical examples based on the table are also
shown.
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Unitholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases....................... NONE NONE NONE NONE
Sales Charge Imposed on Rein-
vested Distributions............ NONE NONE NONE NONE
Deferred Sales Load Imposed on
Redemptions..................... NONE NONE NONE NONE
Redemption Fees.................. NONE NONE NONE NONE
Exchange Fees.................... NONE NONE NONE NONE
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Annual Operating Expenses After
Expense Reimbursements and Fee
Reductions (as a percentage of
average daily net assets)
Management Fees After Fee
Reductions..................... .10% .25% .25% .25%
12b-1 Fees...................... None None None None
Other Expenses After Expense
Reimbursements and Fee
Reductions..................... .10% .10% .10% .10%
---- ---- ---- ----
Total Operating Expenses.......... .20% .35% .35% .35%
==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES. Based on the foregoing table, you would pay the following
expenses on a hypothetical $1,000 investment, assuming a 5% annual return and
redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Select Portfolio..................... $2 $ 6 $11 $26
Government Portfolio............................ $3 $11 $19 $43
Diversified Assets Portfolio.................... $4 $11 $20 $44
Tax-Exempt Portfolio............................ $4 $11 $20 $44
</TABLE>
Operating expenses for the Government Portfolio are based on estimates of
expenses expected to be incurred during the fiscal year ended November 30,
1995. With respect to the other Portfolios, the costs and expenses included in
the table and hypothetical example are based on actual amounts incurred for the
fiscal year ended November 30, 1994. Annual operating expenses for the
Government Portfolio during the fiscal year ended November 30, 1994 (expressed
as a percentage of average daily net assets after fee adjustments and expense
limitations) were as follows: management fees and other expenses were .24% and
.10%, respectively, and total operating expenses were .34%.
During the Trust's last fiscal year, Northern voluntarily reduced its advisory
fee for the Government Select Portfolio (payable at the annual rate of .25% of
the Portfolio's average daily net assets). In addition, Goldman Sachs has
agreed to reduce or otherwise limit other expenses of the Portfolios on an
annualized basis to .10% of each such Portfolio's average daily net assets. The
expense information in the table has, accordingly, been presented to reflect
these fee reductions and reimbursements. Without the undertakings of Northern
and Goldman Sachs, for the fiscal year ended November 30, 1994, the total
annual operating expenses of the Government Select, Government, Diversified
Assets and Tax-Exempt Portfolios would have been .43%, .41%, .35% and .36%,
respectively; and other expenses of the Government Select, Government,
Diversified Assets and Tax-Exempt Portfolios would have been .18%, .16%, .10%
and .11%, respectively. For a more complete description of the Portfolios'
expenses, see "Financial Highlights" and "Trust Information" in this Prospectus
and the financial statements and related notes incorporated by reference into
the Additional Statement.
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS UNITHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
UNITHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF UNITS." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The following data have been audited by Ernst & Young LLP, independent auditors,
as indicated in their report incorporated by reference into the Additional
Statement from the annual report to unitholders for the fiscal year ended
November 30, 1994, and should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Additional Statement.
Selected Data for a Unit Outstanding
For the Fiscal Years Ended November 30
Government Select Portfolio
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 (a)
===============================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.0383 0.0299 0.0370 0.0578 0.0048
Net realized gain (loss) on
investments (0.0005) 0.0001 0.0001 0.0004 --
-------------------------------------------------------------------------------
Total income from investment
operations 0.0378 0.0300 0.0371 0.0582 0.0048
-------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (0.0383) (0.0299) (0.0370) (0.0578) (0.0048)
Net realized gain on
investments -- (0.0001) (0.0001) (0.0004) --
-------------------------------------------------------------------------------
Total distributions to
unitholders (0.0383) (0.0300) (0.0371) (0.0582) (0.0048)
-------------------------------------------------------------------------------
Net increase (decrease) (0.0005) -- -- -- --
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================
Total return (b)(c) 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio of net expenses to
average net assets (c) 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of net investment
income to average net
assets (c) 3.83% 2.99% 3.70% 5.78% 7.65%
Net assets at end of year
(in thousands) $493,718 $386,507 $264,756 $160,750 $44,215
Ratio information assuming no
voluntary waiver of advisory
and administration fees and
no expense limitations:
Ratio of expenses to average
net assets (c) 0.35% 0.35% 0.52% 0.60% 1.33%
Ratio of net investment
income to average net
assets (c) 3.68% 2.84% 3.38% 5.38% 6.52%
===============================================================================
</TABLE>
(a) Commenced investment operations on November 7, 1990.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(c) Annualized.
5
<PAGE>
Selected Data for a Unit Outstanding
For the Fiscal Years Ended November 30
Government Portfolio
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 (a)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.0360 0.0291 0.0371 0.0603 0.0788 0.0863 0.0683 0.0615 0.0594 0.0067
Net realized gain
(loss) on investments (0.0006) -- 0.0020 0.0015 0.0001 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.0354 0.0291 0.0391 0.0618 0.0789 0.0863 0.0683 0.0615 0.0594 0.0067
-------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.0360) (0.0291) (0.0371) (0.0603) (0.0788) (0.0863) (0.0683) (0.0615) (0.0594) (0.0067)
Net realized gain on
investments -- -- (0.0020) (0.0015) (0.0001) -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.0360) (0.0291) (0.0391) (0.0618) (0.0789) (0.0863) (0.0683) (0.0615) (0.0594) (0.0067)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.0006) -- -- -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================================================================
Total return (b)(c) 3.78% 2.91% 3.91% 6.18% 7.89% 8.63% 6.83% 6.15% 5.94% 0.67%
Ratio of net expenses
to average net assets
(c) 0.34% 0.34% 0.34% 0.35% 0.37% 0.50% 0.54% 0.44% 0.40% 0.39%
Ratio of net investment
income to average net
assets (c) 3.60% 2.92% 3.71% 6.03% 7.88% 8.63% 6.83% 6.15% 5.94% 7.64%
Net assets at end of
year (in thousands) $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517 $335,301 $218,530 $160,542 $ 9,500
Ratio information
assuming no voluntary
waiver of advisory and
administration fees
and no expense
limitations:
Ratio of expenses to
average net assets (c) 0.35% 0.35% 0.40% 0.40% 0.46% 0.50% 0.55% 0.55% 0.62% 0.84%
Ratio of net investment
income to average net
assets (c) 3.59% 2.91% 3.65% 5.98% 7.79% 8.63% 6.82% 6.04% 5.72% 7.19%
===============================================================================================================================
</TABLE>
(a) Commenced investment operations on October 29, 1985.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(c) Annualized.
6
<PAGE>
Selected Data for a Unit Outstanding
For the Fiscal Years Ended November 30
Diversified Assets Portfolio
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.0374 0.0300 0.0379 0.0618 0.0801 0.0898 0.0715 0.0630
Net realized
gain (loss) on
investments (0.0006) -- 0.0001 0.0001 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.0368 0.0300 0.0380 0.0619 0.0801 0.0898 0.0715 0.0630
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.0374) (0.0300) (0.0379) (0.0618) (0.0801) (0.0898) (0.0715) (0.0630)
Net realized
gain on
investments -- -- (0.0001) (0.0001) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------
Total
distributions to
unitholders (0.0374) (0.0300) (0.0380) (0.0619) (0.0801) (0.0898) (0.0715) (0.0630)
-----------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) (0.0006) -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================================================================================
Total return (a) 3.92% 3.00% 3.80% 6.19% 8.01% 8.98% 7.15% 6.30%
Ratio of net
expenses to
average net
assets 0.35% 0.34% 0.34% 0.35% 0.35% 0.37% 0.39% 0.41%
Ratio of net
investment
income to
average net
assets 3.74% 3.00% 3.79% 6.18% 8.01% 8.98% 7.15% 6.30%
Net assets at end
of year (in
thousands) $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756 $1,871,713 $1,528,203 $1,533,941
Ratio information
assuming no
voluntary waiver
of advisory and
administration
fees and no
expense
limitations:
Ratio of expenses
to average net
assets 0.35% 0.35% 0.35% 0.36% 0.36% 0.37% 0.39% 0.41%
Ratio of net
investment
income to
average net
assets 3.74% 2.99% 3.78% 6.17% 8.00% 8.98% 7.15% 6.30%
=======================================================================================================================
<CAPTION>
1986 1985
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR $ 1.00 $ 1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.0656 0.0790
Net realized
gain (loss) on
investments -- --
-----------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.0656 0.0790
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.0656) (0.0790)
Net realized
gain on
investments -- --
-----------------------------------------------------------------------------------------------------------------------
Total
distributions to
unitholders (0.0656) (0.0790)
-----------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) -- --
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------------------
Total return (a) 6.56% 7.90%
Ratio of net
expenses to
average net
assets 0.40% 0.44%
Ratio of net
investment
income to
average net
assets 6.56% 7.90%
Net assets at end
of year (in
thousands) $1,080,659 $783,612
Ratio information
assuming no
voluntary waiver
of advisory and
administration
fees and no
expense
limitations:
Ratio of expenses
to average net
assets 0.40% 0.46%
Ratio of net
investment
income to
average net
assets 6.56% 7.88%
=======================================================================================================================
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
7
<PAGE>
Selected Data for a Unit Outstanding
For the Fiscal Years Ended November 30
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.0240 0.0227 0.0295 0.0457 0.0571 0.0603 0.0492 0.0400 0.0430 0.0488
Net realized gain on
investments -- -- 0.0002 -- -- 0.0001 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.0240 0.0227 0.0297 0.0457 0.0571 0.0604 0.0492 0.0400 0.0430 0.0488
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.0240) (0.0227) (0.0295) (0.0457) (0.0571) (0.0603) (0.0492) (0.0400) (0.0430) (0.0488)
Net realized gain on
investments -- -- (0.0002) -- -- (0.0001) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.0240) (0.0227) (0.0297) (0.0457) (0.0571) (0.0604) (0.0492) (0.0400) (0.0430) (0.0488)
---------------------------------------------------------------------------------------------------------------------------------
Net increase -- -- -- -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================================================================================
Total return (a)(b) 2.62% 2.27% 2.97% 4.57% 5.71% 6.04% 4.92% 4.00% 4.30% 4.88%
Ratio of net expenses to
average net assets 0.35% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48% 0.45% 0.47% 0.43%
Ratio of net investment
income to average net
assets 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92% 4.00% 4.30% 4.88%
Net assets at end of
year (in thousands) $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680 $410,772 $456,467 $244,006
Ratio information
assuming no voluntary
waiver of advisory and
administration fees and
no expense limitations:
Ratio of expenses to
average net assets 0.35% 0.35% 0.39% 0.40% 0.43% 0.49% 0.48% 0.46% 0.50% 0.49%
Ratio of net investment
income to average net
assets 2.40% 2.26% 2.90% 4.52% 5.64% 6.03% 4.92% 3.99% 4.27% 4.82%
=================================================================================================================================
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(b) Annualized.
8
<PAGE>
INVESTMENT INFORMATION
----------------------
The investment objective of each Portfolio, other than the Tax-Exempt
Portfolio, is to seek to maximize current income to the extent consistent with
the preservation of capital and maintenance of liquidity by investing
exclusively in high quality money market instruments. The Tax-Exempt Portfolio
seeks to provide its unitholders, to the extent consistent with the
preservation of capital and prescribed portfolio standards, with a high level
of income exempt from Federal income tax by investing primarily in municipal
instruments. The investment objective of a Portfolio may not be changed without
the vote of the majority of the outstanding units of the particular Portfolio
(as defined below under "Organization"). Except as expressly noted below,
however, a Portfolio's investment policies may be changed without a vote of
unitholders.
All securities acquired by the Portfolios will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks and will be "Eligible Securities" as defined by the SEC. Eligible
Securities consist of (i) securities that either (a) have short-term debt
ratings at the time of purchase in the two highest rating categories by at
least two unaffiliated nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (b)
are comparable in priority and security with a security issued by an issuer
which has such ratings, and (ii) securities that are unrated (including
securities of issuers that have long-term but not short-term ratings) but are
of comparable quality as determined in accordance with guidelines approved by
the Board of Trustees. The purchase of single rated and unrated securities by
the Diversified Assets Portfolio will be ratified by the Board of Trustees. The
Additional Statement includes a description of applicable NRSRO ratings.
Each Portfolio is managed so that the average maturity of all instruments in
the Portfolio (on a dollar-weighted basis) will not exceed 90 days. In no event
will the Portfolios purchase any securities which mature more than 13 months
from the date of purchase (except for certain variable and floating rate
instruments and securities collateralizing repurchase agreements). Securities
in which the Portfolios invest may not earn as high a level of income as long-
term or lower quality securities, which generally have greater market risk and
more fluctuation in market value.
GOVERNMENT SELECT PORTFOLIO
The Government Select Portfolio seeks to achieve its investment objective by
investing exclusively in securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. In making
investments, Northern will seek to acquire, under normal market conditions,
only those U.S. Government securities the interest on which is generally exempt
from state income taxation. Securities generally eligible for this exemption
include those issued by the U.S. Treasury and certain U.S. Government agencies
and instrumentalities, including the Federal Home Loan Bank, Federal Farm
Credit Banks Funding Corp. and the Student Loan Marketing Association. The
Portfolio intends to limit investments to only the foregoing exempt U.S.
Government securities. However, under extraordinary circumstances, such as when
appropriate exempt securities are unavailable, the Portfolio may make
investments in non-exempt U.S. Government securities and cash equivalents, and
may hold uninvested cash. See "Investing--Taxes" below for certain tax
considerations.
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GOVERNMENT PORTFOLIO
The Government Portfolio seeks to achieve its investment objective by investing
exclusively in:
(A) Marketable securities issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities
(including the International Bank for Reconstruction and Development) and
custodial receipts with respect thereto; and
(B) Repurchase agreements relating to the above instruments.
DIVERSIFIED ASSETS PORTFOLIO
In pursuing its investment objective, the Diversified Assets Portfolio may
invest in a broad range of government, bank and commercial obligations that are
available in the money markets. In particular, the Portfolio may invest in:
(A) U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
(B) U.S. dollar-denominated obligations of foreign commercial banks where
such banks have total assets in excess of $5 billion;
(C) High quality commercial paper and other obligations issued or
guaranteed by U.S. and foreign corporations and other issuers rated (at the
time of purchase) A-2 or higher by Standard & Poor's Ratings Group ("S&P"),
Prime-2 or higher by Moody's Investors Service, Inc. ("Moody's"), Duff 2 or
higher by Duff & Phelps Credit Rating Co. ("D&P"), F-2 or higher by Fitch
Investors Service, Inc. ("Fitch") or TBW-2 or higher by Thomson BankWatch,
Inc. ("TBW"), as well as high quality corporate bonds rated (at the time of
purchase) AA or higher by S&P, D&P, Fitch or TBW or Aa or higher by
Moody's;
(D) Unrated notes, paper and other instruments that are of comparable
quality as determined by Northern under guidelines established by the
Trust's Board of Trustees and are subsequently ratified by the Board;
(E) Asset-backed securities (including interests in pools of assets such as
mortgages, installment purchase obligations and credit card receivables);
(F) Securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and custodial
receipts with respect thereto;
(G) Dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities thereof;
(H) Repurchase agreements relating to the above instruments; and
(I) Securities issued or guaranteed by state or local governmental bodies.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio invests primarily in high quality short-term
instruments, the interest on which is, in the opinion of bond counsel for the
issuers, exempt from regular Federal income tax ("Municipal
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Instruments"). Such opinions may contain various assumptions, qualifications or
exceptions that are reasonably acceptable to Northern. In particular, the
Portfolio may invest in:
(A) Fixed and variable rate notes and similar debt instruments rated MIG-2,
VMIG-2 or Prime-2 or higher by Moody's, SP-2 or A-2 or higher by S&P, AA or
higher by D&P or F-2 or higher by Fitch;
(B) Tax-exempt commercial paper and similar debt instruments rated Prime-2
or higher by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2
or higher by Fitch;
(C) Municipal bonds rated Aa or higher by Moody's or AA or higher by S&P,
D&P or Fitch;
(D) Unrated notes, paper or other instruments that are of comparable
quality as determined by Northern under guidelines established by the
Trust's Board of Trustees; and
(E) Municipal bonds and notes which are guaranteed as to principal and
interest by the U.S. Government or an agency or instrumentality thereof or
which otherwise depend directly or indirectly on the credit of the United
States.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding units of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from Municipal
Instruments except under extraordinary circumstances, such as when Northern
believes that market conditions indicate that the Portfolio should adopt a
temporary defensive posture by holding uninvested cash or investing in taxable
short-term securities ("Taxable Investments"). Taxable Investments will consist
exclusively of instruments that may be purchased by the Diversified Assets
Portfolio.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
BANK OBLIGATIONS. Domestic and foreign bank obligations in which the
Diversified Assets Portfolio may invest include certificates of deposit, bank
and deposit notes, bankers' acceptances and fixed time deposits. Such
obligations may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Total assets of a bank are determined on the basis of
the bank's most recent annual financial statements.
FOREIGN OBLIGATIONS. In addition to the obligations of foreign commercial banks
and foreign branches of U.S. banks, the Diversified Assets Portfolio may
acquire commercial obligations issued by Canadian corporations and Canadian
counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Diversified Assets
Portfolio may also invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations may include debt obligations of
supranational entities, including international organizations (such as the
European Coal and Steel Community) designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies.
Obligations of foreign issuers acquired by the Diversified Assets Portfolio may
involve risks that are different than those of obligations of domestic issuers.
These risks include unfavorable political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
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obligations. In addition, foreign branches of U.S. banks and foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks and, generally, there may be less publicly
available information regarding such issuers. The Trust could also encounter
difficulties in obtaining or enforcing a judgment against a foreign issuer
(including a foreign branch of a U.S. bank).
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolios may purchase rated and
unrated variable and floating rate instruments, which may have stated
maturities in excess of the Portfolios' maturity limitations but will, in any
event, permit a Portfolio to demand payment of the principal of the instrument
at least once every 13 months on not more than thirty days' notice (unless the
instrument is issued or guaranteed by the U.S. Government or an agency or
instrumentality thereof). In the case of the Diversified Assets Portfolio, such
instruments may include variable amount master demand notes that permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by Northern to be of comparable quality at the
time of the purchase to rated instruments purchasable by the Portfolios. The
absence of an active secondary market with respect to particular variable and
floating rate instruments could, however, make it difficult for a Portfolio to
dispose of instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss with
respect to such instruments. Variable and floating rate instruments held by a
Portfolio will be subject to the Portfolio's 10% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days and a reliable trading market is absent.
UNITED STATES GOVERNMENT OBLIGATIONS. Each Portfolio may invest in a variety of
U.S. Treasury obligations, consisting of bills, notes and bonds, which
principally differ only in their interest rates, maturities and time of
issuance. These obligations include "stripped" securities issued by the U.S.
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
The Portfolios may also invest in other securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities. Obligations of certain
agencies and instrumentalities, such as the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others are supported only by the credit of the
instrumentalities. No assurance can be given that the U.S. Government would
provide financial support to its agencies or instrumentalities if it is not
obligated to do so by law. Obligations of the International Bank for
Reconstruction and Development (also known as the World Bank) are supported by
subscribed but unpaid commitments of its member countries. There is no
assurance that these commitments will be undertaken or complied with in the
future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations may therefore be regarded as
illiquid.
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CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolios (other than the
Government Select Portfolio) may also purchase participations in trusts that
hold U.S. Treasury securities (such as TIGRs and CATS) where the trust
participations evidence ownership in either the future interest payments or the
future principal payments on the U.S. Treasury obligations. These
participations are normally issued at a discount to their "face value," and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Investments by the Government Portfolio in such custodial receipts will not
exceed 35% of the value of that Portfolio's total assets.
REPURCHASE AGREEMENTS. Each Portfolio (other than the Government Select
Portfolio) may, in accordance with its investment objective, policies and
guidelines established by the Trust's Board of Trustees, agree to purchase
portfolio securities from financial institutions subject to the seller's
agreement to repurchase them at a mutually agreed upon date and price
("repurchase agreements"). Although the securities subject to a repurchase
agreement may bear maturities exceeding 13 months, settlement for the
repurchase agreement will never be more than one year after a Portfolio's
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements are held either by the
Trust's custodian or subcustodian (if any), or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose a Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
REVERSE REPURCHASE AGREEMENTS. The Government Select Portfolio, Government
Portfolio and Diversified Assets Portfolio may enter into reverse repurchase
agreements which involve the sale of money market securities held by a
Portfolio, with an agreement to repurchase the securities at an agreed upon
price (including interest) and date. A Portfolio will use the proceeds of
reverse repurchase agreements to purchase other money market securities either
maturing, or under an agreement to resell, at a date simultaneous with or prior
to the expiration of the reverse repurchase agreement. A Portfolio will utilize
reverse repurchase agreements, which may be viewed as borrowings by the
Portfolio, when it is anticipated that the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. The use of reverse repurchase
agreements may be regarded as leveraging. Reverse repurchase agreements involve
the risks that the interest income earned in the investment of the proceeds of
the transaction will be less than the interest expense of the reverse
repurchase agreement, that the market value of the securities sold by a
Portfolio may decline below the price of the securities the Portfolio is
obligated to repurchase and that the securities may not be returned to the
Portfolio. During the time a reverse repurchase agreement is outstanding, the
Portfolio will maintain a segregated account with the Trust's custodian
containing U.S. Government or other appropriate high-grade debt securities
having a value at least equal to the repurchase price. A Portfolio may enter
into reverse repurchase agreements with banks, brokers and dealers, and has the
authority to enter into reverse repurchase agreements in amounts not exceeding
in the aggregate one-third of the Portfolio's total assets. See "Additional
Investment Information--Investment Restrictions" in the Additional Statement.
SECURITIES LENDING. The Portfolios may seek additional income from time to time
by lending their portfolio securities on a short-term basis to banks, brokers
and dealers under agreements requiring that the loans be secured by collateral
in the form of cash, cash equivalents or U.S. Government securities or
irrevocable bank
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letters of credit maintained on a current basis equal in value to at least the
market value of the securities loaned. A Portfolio may not make such loans in
excess of 33 1/3% of the value of the Portfolio's total assets. Loans of
securities involve risks of delay in receiving additional collateral or in
recovering the securities loaned, or possibly loss of rights in the collateral
should the borrower of the securities become insolvent.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Portfolio may purchase
when-issued securities and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date, or if the value of the security to be sold increases prior to
the settlement date. Although a Portfolio would generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring
securities, the Portfolio may dispose of a when-issued security or forward
commitment prior to settlement if Northern deems it appropriate to do so.
INVESTMENT COMPANIES. In connection with the management of their daily cash
positions, the Portfolios may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or penny-
rounding method of valuation. As a shareholder of another investment company, a
Portfolio would bear, along with other shareholders, its pro rata portion of
the other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory fees and other expenses the
Portfolio bears directly in connection with its own operations. Securities of
the investment companies will be acquired by a Portfolio within the limits
prescribed by the 1940 Act, and will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks. The Trust has been advised by its counsel that exempt-interest dividends
received by the Tax-Exempt Portfolio as a shareholder of a regulated investment
company paying such dividends will receive the same Federal tax treatment as
interest received by the Portfolio on Municipal Instruments held by it.
MUNICIPAL AND RELATED INSTRUMENTS. Municipal Instruments in which the Tax-
Exempt Portfolio may invest include debt obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities.
Municipal Instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Portfolio may purchase short-term Tax Anticipation
Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
Municipal Instruments include both "general" and "revenue" obligations. General
obligations are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue obligations are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source such as the user of the facility being financed.
Industrial development bonds are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of an industrial revenue bond is usually directly related to the credit
standing of the private user of the facility involved.
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The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a moral
obligation bond is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal bonds with a series of maturity dates are called Serial Bonds. The
Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds") where the Portfolio obtains
at the time of purchase the right to put the bond back to the issuer or a third
party at par at least every thirteen months. Put Bonds with conditional puts
(that is, puts which cannot be exercised if the issuer defaults on its payment
obligations) will present risks that are different than those of other
Municipal Instruments because of the possibility that the Portfolio might hold
a long-term Put Bond on which a default occurs following its acquisition by the
Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations
are held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of
floating or variable rate obligation that represents interests in a pool of
municipal obligations held by a bank.
The Tax-Exempt Portfolio may acquire "standby commitments" with respect to the
Municipal Instruments it holds. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option specified Municipal Instruments at a
specified price. The acquisition of a standby commitment may increase the cost,
and thereby reduce the yield, of the Municipal Instruments to which the
commitment relates. The Portfolio will acquire standby commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Municipal Instruments purchased by the Tax-Exempt Portfolio may be backed by
letters of credit issued by foreign (as well as domestic) banks. Letters of
credit, like other obligations of foreign banks, may involve certain risks in
addition to those of domestic obligations. (See "Foreign Obligations" above.)
As stated, the Tax-Exempt Portfolio expects to invest primarily in Municipal
Instruments. However, the Portfolio may from time to time hold uninvested cash
or invest a portion of its assets in Taxable Investments. The Portfolio does
not intend to invest more than 25% of the value of its total assets in
industrial development bonds or similar obligations where the non-governmental
entities supplying the revenues from which such bonds or obligations are to be
paid are in the same industry. The Portfolio may, however, invest 25% or more
of its total assets in (a) Municipal Instruments the interest upon which is
paid solely from revenues of similar projects, and (b) industrial development
obligations. In addition, although the Tax-Exempt Portfolio does not expect to
do so during normal market conditions, it may invest more than 25% of the value
of its total assets in Municipal Instruments whose issuers are in the same
state. When a substantial percentage of the Portfolio's assets is invested in
instruments which are used to finance facilities involving a particular
industry, whose issuers are in the same state or which are otherwise related,
there is a possibility that an
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economic, business or political development affecting one such instrument would
likewise affect the other related instruments. The Tax-Exempt Portfolio did not
invest 25% or more of its assets in any of these categories during the year
ended November 30, 1994, except for industrial development obligations.
So long as other suitable Municipal Instruments are available for investment,
the Tax-Exempt Portfolio does not intend to invest in "private activity bonds"
the interest from which may be treated as an item of tax preference to
unitholders under the Federal alternative minimum tax.
The Diversified Assets Portfolio may also invest up to 5% of its net assets
from time to time in municipal instruments or other securities issued by state
and local governmental bodies when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of other permitted short-term taxable investments.
Dividends paid on such investments will be taxable to unitholders.
ISSUER DIVERSIFICATION. In accordance with current SEC regulations, each of the
Government Select, Government and Diversified Assets Portfolios intends to
limit investments in the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such securities) to not more than
5% of the value of its total assets at the time of purchase, provided that the
Diversified Assets Portfolio may invest up to 25% of the value of its total
assets in certificates of deposit and bankers' acceptances of any one issuer
for a period of up to three business days. In addition, each of these three
Portfolios will limit investments in Eligible Securities that are not in the
highest rating category as determined by two NRSROs (or one NRSRO if the
security is rated by only one NRSRO) or, if unrated, are not of comparable
quality, to 5% of its total assets, with investments in any one such issuer
being limited to no more than 1% of its total assets or $1 million, whichever
is greater.
The Tax-Exempt Portfolio will not purchase the securities of any one issuer,
other than securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities (or repurchase agreements collateralized by such
securities), if immediately after the purchase more than 5% of the value of its
total assets would be invested in such issuer, except that up to 25% of the
value of the total assets of the Tax-Exempt Portfolio may be invested without
regard to this restriction.
DERIVATIVE INSTRUMENTS. Each Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest rates or indices, and include
(but are not limited to) various structured debt obligations (including certain
variable and floating rate instruments). Derivative instruments present, to
varying degrees, market risk that the performance of the underlying assets,
interest rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
risk that, if interest rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument will not correlate
exactly to the value of the underlying assets, rates or indices on which it is
based; and operations risk that loss will occur as a result of inadequate
systems and controls, human error or otherwise. Some derivative instruments are
complex, and for those instruments that have been developed recently, data is
lacking regarding their actual performance over complete market cycles.
Northern will evaluate the risks
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presented by the derivative instruments purchased by the Portfolios, and will
determine, in connection with its day-to-day management of the Portfolios, how
they will be used in furtherance of the Portfolios' investment objectives. It
is possible, however, that Northern's evaluations will prove to be inaccurate
or incomplete and, even when accurate and complete, it is possible that the
Portfolios will, because of the risks discussed above, incur loss as a result
of their investments in derivative instruments.
ILLIQUID OR RESTRICTED SECURITIES. A Portfolio will not invest more than 10% of
its net assets in securities which are illiquid, including repurchase
agreements and time deposits that do not provide for payment to the Trust
within seven days after notice and certificates of participation for which
there is no readily available secondary market and certain securities which are
subject to trading restrictions because they are not registered under the
Securities Act of 1933 (the "1933 Act"). In accordance with the current
position of the staff of the SEC, municipal custodial receipts representing
rights only to either future interest or to future principal payments will be
considered illiquid.
If otherwise consistent with its investment objective and policies, the
Portfolios may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and securities that are not registered under the 1933 Act but can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as Northern
determines, under guidelines approved by the Trust's Board of Trustees, that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
MISCELLANEOUS. Although the Portfolios will generally not seek profits through
short-term trading, each Portfolio may dispose of any portfolio security prior
to its maturity if, on the basis of a revised credit evaluation of the issuer
or other considerations, Northern believes such disposition is advisable.
Subsequent to its purchase, a portfolio security may be assigned a lower rating
or cease to be rated. Such an event would not necessarily require the
disposition of the security, if the continued holding of the security is
determined to be in the best interest of the Portfolio and its unitholders.
In determining the creditworthiness of the issuers of portfolio securities that
may be purchased and held by the Portfolios, Northern gathers and reviews
historical financial data and, through the use of a proprietary software
computer program, analyzes and attempts to assess the fundamental strengths and
weaknesses of individual issuers, industries and market sectors. Exposure
limits are established by Northern for each security in conformance with the
objectives and policies stated in this Prospectus, and are thereafter adjusted
periodically in response to changes in relevant credit factors.
The Portfolios do not intend to purchase certificates of deposit of Northern or
its affiliate banks, commercial paper issued by Northern's parent holding
company or other securities issued or guaranteed by Northern, its parent
holding company or their subsidiaries or affiliates.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of
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the outstanding units of a Portfolio. Each Portfolio will limit its investments
so that less than 25% of the Portfolio's total assets will be invested in the
securities (other than U.S. Government securities and repurchase agreements
collateralized by such securities) of issuers in any one industry. Each
Portfolio may borrow money from banks for temporary or emergency purposes or to
meet redemption requests, provided that the Portfolio maintains asset coverage
of at least 300% for all such borrowings.
In order to permit the sale of its units in certain states, the Trust may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus. Should the Trust determine that any such
commitment is no longer in the best interests of the Trust, it will revoke the
commitment by terminating sales of its units in the state involved.
TRUST INFORMATION
-----------------
BOARD OF TRUSTEES
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for each Portfolio.
As transfer agent, Northern performs various unitholder servicing functions,
and any unitholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of December 31, 1994, Northern Trust
Corporation and its subsidiaries had approximately $18.6 billion in assets,
$11.7 billion in deposits and employed over 6,500 persons.
Northern administered in various capacities (including as master trustee,
investment manager or custodian) approximately $498.6 billion of assets as of
December 31, 1994, including approximately $82.4 billion of assets for which
Northern had investment management responsibility. Included in administered
assets were approximately $52.4 billion of money market instruments.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolios and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an annual
rate of .25% of the average daily net assets of each Portfolio.
For serving as investment adviser during the fiscal year ended November 30,
1994, Northern earned fees (after waivers) paid by the Government Portfolio,
the Diversified Assets Portfolio and the Tax-Exempt Portfolio at
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the rate of .25% (per annum) of each Portfolio's average daily net assets. For
serving as investment adviser during the fiscal year ended November 30, 1994,
Northern earned fees (after waivers) paid by the Government Select Portfolio at
the rate of .10% (per annum) of its average daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as administrator
and distributor for the Portfolios. Subject to the limitations described below
under "Expenses," as compensation for its administrative services (which
include supervision with respect to the Trust's non-investment advisory
operations) and the assumption of related expenses, Goldman Sachs is entitled
to a fee from each Portfolio, computed daily and payable monthly, at an annual
rate of .25% of the first $100 million, .15% of the next $200 million, .075% of
the next $450 million and .05% of any excess over $750 million of the average
daily net assets of each Portfolio. No compensation is payable by the Trust to
Goldman Sachs for its distribution services.
Ms. Marcia L. Beck, President of the Trust, Ms. Pauline F. Taylor, Vice
President of the Trust, Ms. Nancy L. Mucker, Vice President of the Trust, Mr.
John W. Mosior, Vice President of the Trust, Mr. Paul W. Klug, Vice President
of the Trust, Mr. Scott M. Gilman, Treasurer of the Trust, Mr. Michael J.
Richman, Secretary of the Trust and Mr. Howard B. Surloff, Assistant Secretary
of the Trust, are officers and employees of Goldman Sachs.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," each Portfolio is responsible for the payment of its
expenses. Such expenses include, without limitation, the fees and expenses
payable to Northern and Goldman Sachs, brokerage fees and commissions, any
portfolio losses, fees for the registration or qualification of Portfolio units
under Federal or state securities laws, expenses of the organization of the
Trust or of additional Portfolios, taxes, interest, costs of liability
insurance, fidelity bonds, indemnification or contribution, any costs, expenses
or losses arising out of any liability of, or claim for damages or other relief
asserted against the Trust for violation of any law, legal, tax services and
auditing fees and expenses, expenses of preparing and printing prospectuses,
statements of additional information, proxy materials, reports and notices and
the printing and distributing of the same to the Trust's unitholders and
regulatory authorities, compensation and expenses of its Trustees, expenses for
industry organizations such as the Investment Company Institute, miscellaneous
expenses and extraordinary expenses incurred by the Trust.
Goldman Sachs has agreed in its Administration Agreement with the Trust that if
in any fiscal year the sum of a Portfolio's expenses (including the fees
payable to Goldman Sachs as Administrator, but excluding the fees payable to
Northern for its duties as investment adviser and taxes, interest, brokerage
expenses relating to the purchase and sale of securities and extraordinary
expenses such as for litigation) exceeds on an annualized basis .10% of such
Portfolio's average daily net assets for such fiscal year it will reimburse
such Portfolio for the amount of the excess. In addition, as stated under
"Highlights--Summary of Expenses," Northern intends to voluntarily reduce its
advisory fee for the Government Select Portfolio during the Trust's current
fiscal year, and Goldman Sachs has also voluntarily undertaken additional fee
reductions on behalf
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of the Portfolios. The result of these reimbursements and fee reductions will
be to increase the yields of the Portfolios during the periods for which the
reimbursements and reductions are made.
INVESTING
---------
PURCHASE OF UNITS
Units of the Portfolios are sold on a continuous basis by the Trust's
distributor, Goldman Sachs, to institutional investors that either maintain
certain qualified accounts with Northern or its affiliates or invest an
aggregate of at least $5 million in one or more Portfolios of the Trust.
Goldman Sachs has established procedures for purchasing units in order to
accommodate different types of institutional investors.
PURCHASE OF UNITS THROUGH QUALIFIED ACCOUNTS. Units are offered to Northern,
its affiliates and other institutions and organizations (the "Institutions")
acting on behalf of their customers, clients, employees and others (the
"Customers") and for their own account. Institutions may purchase units through
procedures established by Northern and its affiliates in connection with the
requirements of their qualified accounts, or through procedures set forth
herein with respect to Institutions that invest directly. Any Institution
maintaining a qualified account at Northern or an affiliate may make purchases
through such qualified account either by directing automatic investment of cash
balances in excess of certain agreed upon amounts or by directing investments
from time to time on a non-automatic basis. The nature of an Institution's
relationship with Northern or an affiliate determines which procedure is
available, and the Institution should contact Northern or an affiliate for
further information in this regard. There is no minimum initial investment for
Institutions that maintain qualified accounts with Northern or its affiliates.
PURCHASE OF UNITS DIRECTLY FROM THE TRUST. Institutions that purchase units
directly may do so by means of one of the following procedures, provided they
make an aggregate minimum initial investment of $5 million in one or more
Portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase units of a Portfolio
by mail should mail a check or Federal Reserve draft payable to the
specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company, P.O.
Box 75943, Chicago, Illinois 60675-5943. An application will be incomplete
if it does not include a corporate resolution with the corporate seal and
secretary's certification within the preceding 30 days, or other acceptable
evidence of authority. If an Institution desires to purchase the units of
more than one Portfolio, the Institution should send a separate check for
each Portfolio. All checks must be payable in U.S. dollars and drawn on a
bank located in the United States. A $20 charge will be imposed if a check
does not clear. The proceeds of redemptions of units purchased by check may
be delayed up to 15 days to allow the Trust to determine that the check has
cleared and been paid. Cash and third party checks are not acceptable for
the purchase of Trust units.
PURCHASE BY TELEPHONE. An Institution desiring to purchase units of a
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to identify
the name of the Portfolio with respect to which units are to be purchased
and the manner of payment. Please indicate whether a new account is being
established or an additional payment is being made to an existing account.
If an additional payment is being made to an existing account, please
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provide the Institution's name and Portfolio Account Number. Purchase
orders are effected upon receipt by the Transfer Agent of Federal funds or
other immediately available funds in accordance with the terms set forth
below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase units
of a Portfolio by wire or ACH Transfer should call the Transfer Agent at
1-800-637-1380 for instructions if it is not making an additional payment to
an existing account. An Institution that wishes to add to an existing account
should wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Unitholder's Name)
For other information concerning requirements for the purchase of units,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. A purchase order for Portfolio units received by
the Transfer Agent by 1:00 p.m., Chicago time, on a Business Day (as defined
under "Miscellaneous") will be effected on that Business Day at the net asset
value determined on that day with respect to a Portfolio, provided that the
Transfer Agent receives the purchase price in Federal funds or other
immediately available funds prior to 1:00 p.m., Chicago time, on the same
Business Day such order is received. Orders received after 1:00 p.m. will be
effected at the next determined net asset value, provided that payment is
received as provided herein. If an Institution accepts a purchase order from a
Customer on a non-Business Day, the order will not be executed until it is
received and accepted by the Transfer Agent on a Business Day in accordance
with the foregoing procedures. An order generated pursuant to an automatic
investment direction of an Institution that has a qualified account with
Northern or its affiliates will normally be placed on the first Business Day
after the Business Day on which the funds are available in such account. Units
of a Portfolio are entitled to the dividends declared by the Portfolio
beginning on the Business Day the purchase order is executed.
MISCELLANEOUS PURCHASE INFORMATION. Units are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more Portfolios. The Trust reserves
the right to waive this minimum and to determine the manner in which the
minimum investment is satisfied. There is no minimum for subsequent
investments.
Institutions may impose minimum investment and other requirements on Customers
purchasing units through them. Depending on the terms governing the particular
account, Institutions may impose account charges such as asset allocation fees,
account maintenance fees, compensating balance requirements or other charges
based upon account transactions, assets or income, which will have the effect
of reducing the net return on an investment in a Portfolio. The exercise of
voting rights and the delivery to Customers of unitholder communications from
the Trust will be governed by the Customers' account agreements with the
Institutions. Customers should read this Prospectus in connection with any
relevant agreement describing the services provided by an Institution and any
related requirements and charges, or contact the Institution at which the
Customer maintains its account for further information.
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Institutions that purchase units on behalf of customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
Federal funds on a timely basis. An Institution will be responsible for all
losses and expenses of a Portfolio as a result of a check that does not clear,
an ACH transfer that is rejected, or any other failure to make payment in the
time and manner described above, and Northern may redeem units from an account
it maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. In those cases in which an
Institution pays for units by check, Federal funds will generally become
available two Business Days after a purchase order is received. Federal
regulations require that the Transfer Agent be furnished with a taxpayer
identification number upon opening or reopening an account. Purchase orders
without such a number or an indication that a number has been applied for will
not be accepted. If a number has been applied for, the number must be provided
and certified within sixty days of the date of the order.
In the interests of economy and convenience, certificates representing units of
the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such institutions may be
required to register as dealers pursuant to state law.
REDEMPTION OF UNITS
Institutions may redeem units of a Portfolio through procedures established by
Northern and its affiliates in connection with the requirements of their
qualified accounts or through procedures set forth herein with respect to
Institutions that invest directly.
REDEMPTION OF UNITS THROUGH QUALIFIED ACCOUNTS. Institutions may redeem units
in their qualified accounts at Northern or its affiliates. For Institutions
that participate in an automatic investment service described above under
"Purchase of Units," Northern or its affiliates will calculate on each Business
Day the number of units that need to be redeemed in order to bring the
Institution's account up to any agreed upon minimum amount. Redemption requests
on behalf of such Institutions will be placed not later than the first Business
Day following the Business Day on which the calculation of the amount to be
redeemed is made. Northern or its affiliates normally will, however, provide
funds by provisionally crediting the qualified account of the Institution on
the Business Day on which the calculation is made. Institutions should contact
Northern or an affiliate for further information regarding redemptions through
qualified accounts.
REDEMPTION OF UNITS DIRECTLY. Institutions that purchase units directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
units in accordance with the procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem units by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of units or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem units by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, unitholders
should follow procedures outlined above under "Redemption by Mail."
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REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, units can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange units by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the unitholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instruments.
All checks will be made payable to the unitholder of record and mailed only
to the unitholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape recordings for six months, and will
request a form of identification if such identification has been furnished
to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification within the preceding 30 days), (ii) a signature
guarantee by a financial institution that is a participant in the Stock
Transfer Agency Medallion Program ("STAMP") in accordance with rules
promulgated by the SEC (a signature notarized by a notary public is not
acceptable) or (iii) such other means or evidence of authority as may be
acceptable to the Transfer Agent. A redemption request by mail will not be
effective unless signed by a person authorized by the corporate resolution
or other acceptable evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
units of a Portfolio having a value of at least $1,000 for units of certain
other portfolios of the Trust as to which the Institution or Customer maintains
an existing account with an identical title.
Exchanges will be effected by a redemption of units of the portfolio held and
the purchase of units of the portfolio acquired. Customers of Institutions
should contact their Institutions for further information regarding the Trust's
exchange privilege and Institutions should contact the Transfer Agent as
appropriate. Customers and Institutions exercising the exchange privilege
should read the relevant Prospectus prior to making an exchange. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to unitholders of record and to reject any
exchange request. Exchanges are only available in states where an exchange can
legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
units are effected at the net asset value per unit next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction
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(as specified in dollars or units); and the signature of a duly authorized
person (except for telephone and wire redemptions). See "Investing--Redemption
of Units--Other Requirements." Exchange orders are effected at the net asset
value per unit next determined after receipt in good order by the Transfer
Agent. If received by Northern with respect to a qualified account it maintains
or the Transfer Agent by 1:00 p.m., Chicago time, on a Business Day, a
redemption request normally will result in proceeds being credited to such
account or sent on the next Business Day, unless payment in immediately
available funds on the same Business Day is specifically requested. Redemption
orders received after 1:00 p.m. will be effected the next Business Day.
Proceeds for redemption orders received on a non-Business Day will normally be
sent on the second Business Day after receipt in good order.
MISCELLANEOUS REDEMPTION INFORMATION. All redemption proceeds will be sent by
check unless Northern or the Transfer Agent is directed otherwise. The ACH
system may be utilized for payment of redemption proceeds. Redemption of units
may not be effected if a unitholder has failed to submit a completed and
properly executed (with corporate resolution or other acceptable evidence of
authority) new account application. The proceeds of redemptions of units
purchased by check may be delayed up to 15 days to allow the Trust to determine
that the check has cleared and been paid. The Trust reserves the right to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving the redemption order if, in its judgment, an earlier payment could
adversely affect a Portfolio.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized. Dividends on units are earned through and
including the day prior to the day on which they are redeemed.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his units to the
extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Unitholders of each Portfolio are entitled to dividends and distributions
arising from the net income and capital gains, if any, earned on investments
held by the particular Portfolio. Each Portfolio's net income is declared daily
as a dividend to unitholders of record at the close of business on the day the
dividend is declared (or 3:00 p.m., Chicago time, on non-business days).
Net income of each Portfolio includes interest accrued on the assets of such
Portfolio less the estimated expenses charged to such Portfolio. Net realized
short-term capital gains of each Portfolio will be distributed at least
annually. The Portfolios do not expect to realize net long-term capital gains.
Dividends declared during a calendar month (including dividends with respect to
units redeemed at any time during the month) will be paid as soon as
practicable following the end of the month. All distributions are paid by each
Portfolio in cash. Arrangements may be made for the crediting of such
distributions to a unitholder's account with Northern, its affiliates or its
correspondent banks.
TAXES
Management of the Trust intends that each Portfolio will qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best
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interest of the Portfolio's unitholders. Such qualification generally relieves
each Portfolio of liability for Federal income taxes to the extent its earnings
are distributed in accordance with the Code, but unitholders, unless otherwise
exempt, will pay income or capital gains taxes on amounts so distributed
(except distributions that constitute "exempt-interest dividends" or that are
treated as a return of capital). Dividends paid from net short-term capital
gains are treated as ordinary income dividends. None of the Portfolios'
distributions will be eligible for the corporate dividends received deduction.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Investors in the Portfolio should note, however,
that taxpayers are required to report the receipt of tax-exempt interest and
"exempt-interest dividends" on their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
taxable to persons subject to alternative minimum and environmental taxes.
First, tax-exempt interest and "exempt-interest dividends" derived from certain
private activity bonds issued after August 7, 1986 generally will constitute an
item of tax preference for corporate and noncorporate taxpayers in determining
alternative minimum and environmental tax liability. Second, all tax-exempt
interest and "exempt-interest dividends" must be taken into account by
corporate taxpayers in determining certain adjustments for alternative minimum
and environmental tax purposes. Unitholders who are recipients of Social
Security Act or Railroad Retirement Act benefits should note that tax-exempt
interest and "exempt-interest dividends" will be taken into account in
determining the taxability of their benefit payments. To the extent, if any,
that dividends paid by the Tax-Exempt Portfolio to its unitholders are derived
from taxable interest or from capital gains, such dividends will be subject to
Federal income tax, whether or not such dividends are reinvested.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which is exempt from the regular Federal income tax, which
constitutes an item of tax preference for purposes of the Federal alternative
minimum tax, and which is fully taxable and will apply such percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages
for any particular day.
The Trust will send written notices to unitholders annually regarding the tax
status of distributions made by each Portfolio. Dividends declared in October,
November or December of any year payable to unitholders of record on a
specified date in those months will be deemed for Federal tax purposes to have
been paid by a Portfolio and to have been received by the unitholders on
December 31 of that year, if the dividends are actually paid during the
following January.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting the Portfolios and their unitholders and is
not intended as a substitute for careful tax planning. Accordingly, investors
should consult their tax advisers with specific reference to their own Federal,
state and local tax situation. In particular, although the Government Select
Portfolio intends to invest primarily in U.S. Government securities the
interest on which is generally exempt from state income taxation, an investor
should consult his or her own tax adviser to determine whether distributions
from the Portfolio are exempt from state income taxation in the investor's own
state. Similarly, dividends paid by the Portfolios may be taxable to investors
under state or local law as dividend income even though all or a portion of
such dividends may be derived from interest on obligations which, if realized
directly, would be exempt from such income taxes. Future legislative or
administrative changes or court decisions may materially affect the tax
consequences of investing in one or more of the Portfolios.
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NET ASSET VALUE
---------------
The net asset value per unit of each Portfolio for purposes of purchases and
redemptions is calculated by Northern as of 3:00 p.m., Chicago time,
immediately after the declaration of net income earned by unitholders of
record, on each Business Day (as defined below under "Miscellaneous"), except
for days during which no units are tendered to the Portfolio for redemption
and no orders to purchase or sell units are received by the Portfolio and
except for days on which there is an insufficient degree of trading in the
Portfolio's securities for changes in the value of such securities to
materially affect the net asset value per unit. Net asset value per unit of
each Portfolio is calculated by adding the value of all securities and other
assets of the Portfolio, subtracting the liabilities of the Portfolio and
dividing by the number of units of the Portfolio outstanding.
In seeking to maintain a net asset value of $1.00 per unit with respect to
each Portfolio for purposes of purchases and redemptions, the Trust values the
portfolio securities held by a Portfolio pursuant to the amortized cost
method. Under this method, investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period of maturity. See "Amortized Cost
Valuation" in the Additional Statement.
PERFORMANCE INFORMATION
-----------------------
From time to time the Portfolios may advertise their "yields" and "effective
yields" and the Government Select Portfolio and Tax-Exempt Portfolio may
advertise their "tax-equivalent yields." These yield figures will fluctuate,
are based on historical earnings and are not intended to indicate future
performance. "Yield" refers to the net investment income generated by an
investment in the Portfolio over a seven-day period identified in the
advertisement. This net investment income is then "annualized." That is, the
amount of net investment income generated by the investment during that week
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. "Effective yield" is calculated similarly but,
when annualized, the net investment income earned by an investment in the
Portfolio is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment. The "tax-equivalent yield" demonstrates the level of taxable
yield necessary to produce an after-tax yield equivalent to a Portfolio's tax-
free yield. It is calculated by taking that portion of the seven-day "yield"
which is tax-exempt and adjusting it to reflect the tax savings associated
with a stated tax rate. The "tax-equivalent yield" will always be higher than
the Portfolio's yield.
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Yield will be affected by portfolio quality, composition, maturity,
market conditions and the level of the Portfolio's operating expenses.
ORGANIZATION
------------
The Trust was formed as a Massachusetts business trust on July 15, 1982 under
an Agreement and Declaration of Trust (the "Trust Agreement"). The Trust
offers sixteen separate series of units of beneficial interest, each series
evidencing interests in a separate investment portfolio. This Prospectus
describes four of
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the Trust's portfolios; the other portfolios are described in separate
prospectuses. The Trust's Tax-Exempt Portfolio is the successor to a separate
series of The Benchmark Tax-Exempt Fund, which was organized on July 15, 1982
and which transferred its assets and liabilities to the Tax-Exempt Portfolio
pursuant to a reorganization on October 5, 1990.
The Trust Agreement permits the Board of Trustees to issue an unlimited number
of units of beneficial interest of each of the Trust's series. The Trust
Agreement further authorizes the Board of Trustees to classify or reclassify
any unissued units into any number of additional series of units. Each unit of
a Portfolio is without par value, represents an equal proportionate interest in
that Portfolio and is entitled to such dividends and distributions earned on
such Portfolio's assets as are declared in the discretion of the Board of
Trustees.
The Trust's unitholders are entitled to one vote for each full unit held and
proportionate fractional votes for fractional units held. Each series entitled
to vote on a matter will vote thereon in the aggregate and not by series,
except as otherwise required by law or when the matter to be voted on affects
only the interests of unitholders of a particular series. The Additional
Statement gives examples of situations in which the law requires voting by
series. Voting rights are not cumulative and, accordingly, the holders of more
than 50% of the aggregate units of the Trust may elect all of the Trustees
irrespective of the vote of the other unitholders.
The Trust does not presently intend to hold annual meetings of unitholders
except as required by the 1940 Act or other applicable law. Pursuant to the
Trust Agreement, the Trustees will promptly call a meeting of unitholders to
vote upon the removal of any Trustee when so requested in writing by the record
holders of 10% or more of the outstanding units. To the extent required by law,
the Trust will assist in unitholder communications in connection with such a
meeting.
The term "majority of the outstanding units" of either the Trust or a
particular Portfolio means the vote of the lesser of (i) 67% or more of the
units of the Trust or such Portfolio present at a meeting, if the holders of
more than 50% of the outstanding units of the Trust or such Portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding units
of the Trust or such Portfolio.
The Trust Agreement provides that each unitholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
-------------
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is 1-800-621-2550.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open for trading, which is Monday
through Friday, except for holidays observed by Northern and/or the Exchange
other than Good Friday. For 1995 the holidays of Northern and/or the Exchange
are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Columbus Day, Thanksgiving and Christmas Day.
Notice of purchase or redemption orders to be executed on Good Friday, or any
other day Northern is open for business and the Exchange is closed,
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must be received by the Transfer Agent no later than 11:00 a.m. Chicago time on
the prior Business Day if the amount of the order is in excess of $1,000,000.
On those days when Northern or the Exchange closes early as a result of unusual
weather or other circumstances, the right is reserved to advance the time on
that day by which purchase and redemption requests must be received. In
addition, on any Business Day when the Public Securities Association (PSA)
recommends that the securities markets close early, the Portfolios reserve the
right to cease or to advance the deadline for accepting purchase and redemption
orders for same Business Day credit up to one hour before the PSA recommended
closing time. Purchase and redemption requests received after the advanced
closing time will be effected on the next Business Day.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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