<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per Unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 011:* N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
i
<PAGE>
THE BENCHMARK FUNDS
July 14, 1997
Dear Unitholder:
You are cordially invited to attend a Special Meeting of Unitholders of The
Benchmark Funds (the "Trust"), to be held on Tuesday, September 2, 1997 at
9:30 a.m., Chicago time, at the offices of Goldman, Sachs & Co., 4900 Sears
Tower, Chicago, Illinois 60606.
At this important meeting, you will be asked to consider and take action on
the election of Trustees (Proposal 1) and the ratification of the selection of
independent public auditors, Ernst & Young LLP (Proposal 2). In addition, as
described more fully below, you will be asked to approve a change in the or-
ganization of the Trust and certain amendments relating to the investment pol-
icies of the Trust's investment portfolios (the "Portfolios") (Proposals 3, 4
and 5). In addition, Unitholders of the International Growth Portfolio will be
asked to approve a new investment advisory agreement with The Northern Trust
Company and RCB Trust Company, a subsidiary of Northern Trust Global Advisors,
Inc. (Proposal 6). We believe that these Proposals are important and will al-
low us to improve the Portfolios' operations.
In particular, Proposal 3 recommends the tax-free conversion of the Portfo-
lios into series of a newly-formed Delaware business trust. As discussed in
the accompanying Proxy Statement, this conversion will not result in any
change to the assets, fees or investment policies of the Portfolios; however,
the Trustees believe that organizing the Portfolios as series of a Delaware
business trust offers certain advantages. These advantages include a clear
limitation on Unitholder liability and potential cost savings. The dollar
value and number of Units of your investment in a Portfolio will not be af-
fected by the conversion.
Proposal 4 recommends that you approve a new fundamental investment policy
(and a related amendment to the Trust's Declaration of Trust) that will pro-
vide the Portfolios greater flexibility to invest in the securities of other
investment companies. The Trustees believe that this increased flexibility of-
fers the potential for greater efficiencies and will eliminate the need and
expense of further Unitholder action in the future.
Proposal 5 recommends an amendment to the fundamental investment restriction
on issuer diversification for each Portfolio (except the International Bond
Portfolio, which is non-diversified). The purpose of this change is to make
the restriction identical to the "diversification" definition in the Invest-
ment Company Act of 1940.
<PAGE>
Proposal 6 recommends that the Unitholders of the International Growth Port-
folio approve a new investment advisory agreement with The Northern Trust Com-
pany and RCB Trust Company which will allow that Portfolio to implement a
"manager of managers" structure and enter into sub-advisory agreements in the
future without further Unitholder approval. Under this Proposal, all fees pay-
able to the sub-advisers would be paid by the Portfolio's advisers, and the
current investment advisory fee rate payable by the Portfolio would not
change.
You should carefully read the Proxy Statement that discusses each Proposal
in detail. The formal Notice of Special Meeting of Unitholders and the Proxy
Statement setting forth in detail the matters to come before the meeting are
attached hereto, and a form of Proxy is enclosed for your use.
The Trustees have unanimously recommended that Unitholders approve each Pro-
posal to be acted upon at the Meeting.
The continuing interest of Unitholders in the affairs of the Portfolios is
gratefully acknowledged. Whether or not you expect to attend the meeting, it
is important that your Units be represented. Therefore, I urge you to vote FOR
the nominees for election as Trustees and each of the other proposals con-
tained in the Proxy Statement.
Sincerely,
LOGO
Nancy L. Mucker
Vice President
ATTENTION INVESTMENT MANAGERS: IF YOU HAVE THE AUTHORITY TO VOTE UNITS OF THE
PORTFOLIO(S) TO WHICH THIS PROXY RELATES, PLEASE VOTE. IF YOU DO NOT HAVE THIS
AUTHORITY, PLEASE FORWARD THIS MATERIAL TO YOUR CLIENT AT YOUR EARLIEST CONVE-
NIENCE. THE BENCHMARK FUNDS OFFER INSTITUTIONAL INVESTORS ACCESS TO THE NORTH-
ERN TRUST COMPANY'S INVESTMENT ADVISORY SERVICES. THE NORTHERN TRUST COMPANY
ALSO SERVES AS CUSTODIAN AND TRANSFER AGENT TO THE BENCHMARK FUNDS.
<PAGE>
THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
BALANCED PORTFOLIO
EQUITY INDEX PORTFOLIO
DIVERSIFIED GROWTH PORTFOLIO
FOCUSED GROWTH PORTFOLIO
SMALL COMPANY INDEX PORTFOLIO
INTERNATIONAL EQUITY INDEX PORTFOLIO
INTERNATIONAL GROWTH PORTFOLIO
GOVERNMENT SELECT PORTFOLIO
GOVERNMENT PORTFOLIO
DIVERSIFIED ASSETS PORTFOLIO
TAX-EXEMPT PORTFOLIO
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD SEPTEMBER 2, 1997
A Special Meeting of Unitholders (the "Meeting") of each investment portfo-
lio referred to above (the "Portfolios") of The Benchmark Funds (the "Trust")
will be held on September 2, 1997, at 9:30 a.m. (Chicago time) at the offices
of Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, for the
following purposes:
(1) With respect to the Trust, to elect eight Trustees;
(2) With respect to the Trust, to ratify or reject the selection of Ernst
& Young LLP as independent auditors of the Trust for the fiscal year
ending November 30, 1997;
(3) With respect to each Portfolio, to approve an Agreement and Plan of
Reorganization pursuant to which each Portfolio will be reorganized as
a series of The Benchmark Funds, a Delaware business trust;
(4) With respect to each Portfolio, (a) to approve a new fundamental
investment policy regarding investments in other investment company
securities, and (b) to approve a related amendment to the Trust's
Declaration of Trust;
(5) With respect to each Portfolio (except the International Bond
Portfolio), to amend the Portfolio's fundamental investment
restriction concerning issuer diversification;
<PAGE>
(6) WITH RESPECT TO THE INTERNATIONAL GROWTH PORTFOLIO ONLY, to approve a
new investment advisory agreement with The Northern Trust Company and
RCB Trust Company, a subsidiary of Northern Trust Global Advisors,
Inc., which will allow the Portfolio to implement a "manager of
managers" structure and enter into sub-advisory agreements in the
future without further Unitholder approval; and
(7) To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSALS RE-
LATING TO THE TRUST AND YOUR PORTFOLIO(S).
Unitholders of record of each Portfolio at the close of business on July 8,
1997 will be entitled to vote at the Meeting or at any adjournment or adjourn-
ments thereof. The proxy statement and proxy card are being mailed to
Unitholders on or about July 14, 1997.
It is important that you return your signed and dated Proxy Card promptly,
regardless of the size of your holdings, so that a quorum may be assured.
By Order of the Board of Trustees of The
Benchmark Funds,
LOGO
Michael J. Richman,
Secretary
July 14, 1997
PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD FOR THE UNITS HELD BY YOU AND
RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED SO THAT YOUR VOTE CAN BE RECORD-
ED. NO POSTAGE IS REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES. YOUR
PROMPT RETURN OF YOUR PROXY OR PROXIES MAY SAVE THE TRUST THE NECESSITY AND EX-
PENSE OF FURTHER SOLICITATIONS. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR
UNITS IN PERSON.
<PAGE>
THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
BALANCED PORTFOLIO
EQUITY INDEX PORTFOLIO
DIVERSIFIED GROWTH PORTFOLIO
FOCUSED GROWTH PORTFOLIO
SMALL COMPANY INDEX PORTFOLIO
INTERNATIONAL EQUITY INDEX PORTFOLIO
INTERNATIONAL GROWTH PORTFOLIO
GOVERNMENT SELECT PORTFOLIO
GOVERNMENT PORTFOLIO
DIVERSIFIED ASSETS PORTFOLIO
TAX-EXEMPT PORTFOLIO
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (collectively, the "Trust-
ees") of The Benchmark Funds (the "Trust") to be used at a Special Meeting of
Unitholders of the investment portfolios of the Trust listed above (the "Port-
folios") to be held at the offices of Goldman, Sachs & Co, 4900 Sears Tower,
Chicago, Illinois 60606, on Tuesday, September 2, 1997, at 9:30 a.m. (Chicago
time) for the purposes set forth in the accompanying Notice of Meeting. Such
meeting and any adjournment thereof is referred to as the "Meeting."
The Trustees have fixed the close of business on July 8, 1997 as the record
date (the "Record Date") for determining the Unitholders of each Portfolio en-
titled to notice of and to vote at the Meeting. Unitholders of record of each
Portfolio on the Record Date are entitled to one vote per Unit at the Meeting
or any adjournment of the Meeting relating to their Portfolio.
Appendix A hereto sets forth the number of Units of beneficial interest of
each Portfolio outstanding as of July 8, 1997. Appendix B hereto sets forth
the persons who owned beneficially more than 5% of the Units of any Portfolio
as of July 8, 1997.
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of The Northern Trust
<PAGE>
Company ("Northern Trust"), Goldman, Sachs & Co. ("Goldman Sachs") and by the
Trustees. In addition, employees of Northern Trust, its affiliates, correspon-
dent banks, brokers and similar record holders may solicit proxies by these
means, and may forward proxy materials and printed direction forms to the cus-
tomers on whose behalf they hold record ownership of Units of the Portfolios.
Northern Trust may engage an independent proxy solicitation firm to assist it
in soliciting proxies.
This Proxy Statement and the form of Proxy are being first mailed to
Unitholders on or about July 14, 1997.
The following table summarizes the Proposals to be voted on at the Meeting
and indicates those Unitholders who are being solicited with respect to each
Proposal. In connection with each of the matters set forth in the attached No-
tice of Meeting, all Units of a Portfolio (regardless of class) will vote to-
gether, and each Portfolio will either vote together with the other Portfolios
or separately as indicated.
SUMMARY OF VOTING ON PROPOSALS
<TABLE>
<CAPTION>
PROPOSAL UNITHOLDERS SOLICITED
-------- ---------------------
<S> <C>
1. Election of eight Trustees. The Trust with all Portfolios
voting as a single class.
2. Ratification of the selection of Ernst & The Trust with all Portfolios
Young LLP as independent auditors for the voting as a single class.
fiscal year ending November 30, 1997.
3. Approval of an Agreement and Plan of Each Portfolio voting
Reorganization pursuant to which each separately.
Portfolio will be reorganized as a series
of The Benchmark Funds, a Delaware business
trust.
4. (a) Approval of a new fundamental (a) Each Portfolio voting
investment policy regarding investments in separately as to the
other investment company securities; and investment policy; and (b)
(b) approval of a related amendment to the all Portfolios voting as a
Trust's Declaration of Trust. single class, as to the
amendment to the
Declaration of Trust.
5. Approval of amended fundamental investment Each Portfolio (except the
restriction concerning issuer International Bond
diversification. Portfolio) voting
separately.
6. Approval of a new investment advisory The International Growth
agreement with Northern Trust and RCB Trust Portfolio only voting as a
Company ("RCB Trust"), which will allow the single class.
International Growth Portfolio to implement
a "manager of managers" structure and enter
into sub-advisory agreements in the future
without further Unitholder approval
(International Growth Portfolio only).
</TABLE>
2
<PAGE>
The Trust will furnish, without charge, copies of the Portfolios' November
30, 1996 Annual Unitholders Report and May 31, 1997 Semi-Annual Report (when
available) to any Unitholder upon request addressed to Goldman, Sachs & Co.,
4900 Sears Tower, Chicago, Illinois 60606 or by telephone at 800-621-2550.
PROPOSAL 1
ELECTION OF TRUSTEES
(ALL PORTFOLIOS)
At the Meeting, Unitholders will be asked to consider the election of eight
Trustees, which constitutes the entire Board of Trustees of the Trust. Each
elected Trustee will hold office for an indefinite term until the earliest of
(1) the next meeting of Unitholders, if any, called for the purpose of consid-
ering the election or re-election of such Trustee and until the election and
qualification of his or her successor, if any, elected at such meeting; (2)
the date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or Unitholders, in accordance with the Trust's Agreement and Declara-
tion of Trust; or (3) in accordance with the current resolutions of the Board
of Trustees (which may be changed without Unitholder vote), on the last day of
the fiscal year of the Trust in which he or she attains the age of 72 years
(or, in the case of Mr. Gavin, until November 30, 1997). Normally, there will
be no meetings of Unitholders for the purpose of electing Trustees except as
required by the Investment Company Act of 1940 (the "1940 Act"). See "Addi-
tional Information--Unitholder Proposals." The Trustees may, as permitted by
the 1940 Act, appoint additional Trustees without Unitholder approval.
All Units represented by valid Proxies will be voted in the election of
Trustees for each Nominee named below, unless authority to vote for a particu-
lar Nominee is withheld. Each Nominee has consented to being named in this
Proxy Statement and to serve if elected. If a Nominee withdraws from the elec-
tion or is otherwise unable to serve, the named proxies will vote for the
election of such substitute Nominee as the Board of Trustees may recommend,
unless the Board decides to reduce the number of Trustees serving on the
Board.
Messrs. Condon, English, Gavin, Kelsey, Springer and Strubel are incumbent
Trustees who are standing for re-election. In addition, the Trustees of the
Trust have nominated Mr. Cline and Ms. Guthman as additional Trustees to be
voted on by the Unitholders.
3
<PAGE>
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information about each Nominee, in-
cluding each Nominee's principal occupation or employment during the past five
years. All of the Nominees are deemed "non-interested persons" of the Trust as
defined in the 1940 Act (the "Non-Interested Trustees").
<TABLE>
<CAPTION>
NAME, AGE AND
POSITIONS WITH PRINCIPAL OCCUPATION OR FIRST BECAME
TRUST EMPLOYMENT DURING LAST FIVE YEARS TRUSTEE
----------------- -------------------------------------------- -------------
<C> <S> <C>
William H. Vice Chairman of Ameritech (a telecommunica- 1984
Springer, 68 tions holding company), from February 1987
Chairman and to retirement in August 1992; Vice Chair-
Trustee man, Chief Financial and Administrative Of-
ficer of Ameritech prior to 1987; Director,
Walgreen Co. (a retail drug store busi-
ness); Director of Baker, Fentress & Co. (a
closed-end, non-diversified management in-
vestment company) from April 1992 to pres-
ent; Trustee, Goldman Sachs Trust from 1989
to present.
Richard Gordon Chairman, Hawthorne Investors, Inc. (a man- To be elected
Cline, 62 agement advisory services and private in- in 1997
Proposed Trustee vestment company) since January 1996;
Chairman and CEO of NICOR Inc. (a diversi-
fied public utility holding company) from
1986 to 1995, and President, 1992-1993; Di-
rector: Whitman Corporation (a diversified
holding company); Kmart Corporation (a re-
tailing company); Ryerson Tull, Inc. (a
metals distribution company); and Univer-
sity of Illinois Foundation.
Edward J. Condon, Chairman of The Paradigm Group, Ltd. (a fi- 1994
Jr., 57 nancial advisor) since July 1993; Vice
Trustee President and Treasurer of Sears, Roebuck
and Co. (a retail corporation) from Febru-
ary 1989 to July 1993; within the last five
years he has served as a Director of: Sears
Roebuck Acceptance Corp.; Discover Credit
Corp.; Sears Receivables Financing Group,
Inc.; Sears Credit Corp.; and Sears Over-
seas Finance N.V.; Member of the Board of
Managers of The Liberty Hampshire Company,
LLC; Vice Chairman and Director of
Energenics L.L.C.; Director of University
Eldercare, Inc.; Director of the Girl
Scouts of Chicago; and Trustee of Dominican
University.
John W. English, Private Investor; Vice President and Chief 1994
64 Investment Officer of The Ford Foundation
Trustee (a charitable trust) from 1981 until 1993;
Trustee: The China Fund, Inc.; Retail Prop-
erty Trust; Sierra Trust; American Red
Cross in Greater New York; Mote Marine Lab-
oratory; and United
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND
POSITIONS WITH PRINCIPAL OCCUPATION OR FIRST BECAME
TRUST EMPLOYMENT DURING LAST FIVE YEARS TRUSTEE
----------------- -------------------------------------------- -------------
<C> <S> <C>
Board for Christian Higher Education in
Asia. Director: University of Iowa Founda-
tion; Blanton-Peale Institutes of Religion
and Health; Community Foundation of Sara-
sota County; Duke Management Company; and
John Ringling Centre Foundation.
James J. Gavin, Vice Chairman from January 1985 to August 1982
Jr., 75 1987 and Senior Vice President-Finance and
Trustee Chief Financial Officer from 1975 to Janu-
ary 1985 of Borg-Warner Corporation (a di-
versified manufacturing company also en-
gaged in providing financial and protec-
tive services); Director: Service Corpora-
tion International (a funeral
service/cemetery company) since September
1986 and Huntco., Inc. (a major intermedi-
ate steel processor) since June 1993.
Sandra Polk Guth- President and CEO of Polk Bros. Foundation To be elected
man, 53 (an Illinois not-for-profit corporation) in 1997
Proposed from 1993 to present; Director of Business
Trustee Transformation from 1992-1993, and Mid-
western Director of Marketing from 1988-
1992, IBM Corporation; Director: MBIA In-
surance Corporation of Illinois (bank
holding company) since 1994 and Avondale
Financial Corporation (a stock savings and
loan holding company) since 1995.
Frederick T. Consultant to Goldman Sachs from December 1982
Kelsey, 70 1985 through February 1988; Director of
Trustee Goldman Sachs Funds Group and Vice Presi-
dent of Goldman Sachs from May 1981 until
his retirement in November 1985; President
and Treasurer of the Trust and other in-
vestment companies affiliated with Goldman
Sachs through August 1985; President from
1983 to 1985, and Trustee from 1983 to
1994, The Centerland Funds and its succes-
sor, The Pilot Funds; Trustee, various
management investment companies affiliated
with Zurich Kemper Investments.
Richard P. Managing Director, Tandem Partners, Inc. (a 1982
Strubel, 57 privately held management services firm)
Trustee since 1990; President and Chief Executive
Officer, Microdot, Inc. (a privately held
manufacturing firm) from 1984 to 1994;
Trustee, Goldman Sachs Trust from 1987 to
present; Director of Kaynar Technologies
Inc. (a leading manufacturer of aircraft
fasteners); Trustee of the University of
Chicago; Director of Children's Memorial
Medical Center.
</TABLE>
5
<PAGE>
Mr. Cline has certain banking, custodial, investment management and financ-
ing arrangements with Northern Trust.
As of July 8, 1997, no Nominee owned beneficially, directly or indirectly,
any Units of any Portfolio.
INFORMATION CONCERNING MEETINGS OF TRUSTEES AND COMMITTEES
Five meetings of the Trustees were held during the fiscal year ended Novem-
ber 30, 1996. No incumbent Trustee attended fewer than seventy-five percent of
all meetings of the Board of Trustees and of any committee of which he was a
member that were held during such year.
The Trust has an Audit Committee comprised of Messrs. Strubel, Gavin and
Kelsey. The Audit Committee of the Trust held two meetings during the fiscal
year ended November 30, 1996. The functions performed by the Audit Committee
are to (i) meet with the Trust's independent auditors to review and approve
the scope and results of their professional services; (ii) review the proce-
dures for evaluating the adequacy of the Trust's accounting controls; (iii)
consider the range of audit fees; (iv) make recommendations to the Board of
Trustees regarding the engagement of the Trust's independent auditors; and (v)
consider such other matters pertaining to the Trust's books of account and fi-
nancial records as the Committee may determine.
The Board does not have a standing nominating committee. However, the Non-
Interested Trustees of the Trust are responsible for the selection and nomina-
tion of candidates to serve as Non-Interested Trustees. The Board of Trustees,
including the Non-Interested Trustees, are prepared to review nominations from
Unitholders to fill any future vacancies of the Board in written communica-
tions delivered to the Trust at its address on page 40.
REMUNERATION OF TRUSTEES
The Chairman of the Board earns a quarterly retainer of $9,375 and each
other Trustee earns a quarterly retainer of $6,250. Each Trustee, including
the Chairman of the Board, earns an additional fee of $1,500 for each meeting
attended, plus reimbursement of expenses incurred as a Trustee. In addition,
each member of the Audit Committee earns a fee of $1,500 for each meeting at-
tended and the Audit Committee Chairman earns a quarterly retainer of $1,250.
6
<PAGE>
The following table sets forth certain information about the compensation of
each Trustee for the fiscal year ended November 30, 1996.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR AGGREGATE
COMPENSATION RETIREMENT BENEFITS COMPENSATION
FROM THE ACCRUED AS PART OF FROM THE FUND
NAME OF TRUSTEE* PORTFOLIOS PORTFOLIO EXPENSES COMPLEX***
- ---------------- ------------ ------------------- -------------
<S> <C> <C> <C>
William H. Springer.............. $45,000 $ 0 $45,000
Edward J. Condon, Jr............. $32,500 $ 0 $32,500
John W. English.................. $31,000 $ 0 $31,000
James J. Gavin................... $35,500 $ 0 $35,500
Frederick T. Kelsey.............. $35,500 $5,325** $40,825
Richard P. Strubel............... $40,500 $ 0 $40,500
</TABLE>
- ---------
*This Table does not include $2,083 paid during the fiscal year ended No-
vember 30, 1996 to a retired Trustee.
**Interest from deferred compensation. The Trust's deferred compensation
plan was terminated as of April 30, 1997.
***The Fund Complex includes only the Trust.
OFFICERS
The following table sets forth information with respect to the officers of
the Trust. Each officer is elected by the Trustees. Each of the Treasurer, the
Vice Presidents and Secretary serves until the next annual meeting of the
Trustees and until his or her successor is chosen and qualified or until his
or her death, resignation, removal or disqualification. Each of the other of-
ficers holds office at the pleasure of the Trustees.
<TABLE>
<CAPTION>
FIRST
NAME, POSITION BECAME
AND AGE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OFFICER
----------------- -------------------------------------------------- -------
<C> <S> <C>
Nancy L. Mucker Vice President, Goldman Sachs (since April 1985); 1990
(47) Manager, Shareholder Servicing of GSAM (since No-
Vice President vember 1989).
John W. Mosior Vice President, Goldman Sachs; Manager, Share- 1990
(58) holder Servicing of GSAM (since November 1989).
Vice President
Scott M. Gilman Director, Mutual Fund Administration of GSAM 1990
(37) (since April 1994); Assistant Treasurer of
Treasurer Goldman Sachs Funds Management, Inc. (since March
1993); Vice President, Goldman Sachs (since March
1990).
John M. Perlowski Vice President, Goldman Sachs (since July 1995); 1997
(32) Director, Investors Bank and Trust Company (No-
Assistant Trea- vember 1993 to July 1995); Audit Manager of Ar-
surer thur Andersen, LLP (prior thereto).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FIRST
NAME, POSITION BECAME
AND AGE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OFFICER
----------------- -------------------------------------------------- -------
<C> <S> <C>
Michael J. Rich- Associate General Counsel of GSAM (since February 1992
man (36) 1994); Assistant General Counsel and Vice Presi-
Secretary dent of Goldman Sachs; Counsel to the Funds Group
of GSAM (since June 1992); Partner of Hale and
Dorr (September 1991 to June 1992).
Howard B. Surloff Assistant General Counsel and Vice President of 1993
(32) Goldman Sachs (since November 1993 and May 1994,
Assistant Secre- respectively); Counsel to the Funds Group, GSAM
tary (since November 1993); Associate, Shereff, Fried-
man, Hoffman & Goodman, LLP prior thereto.
Valerie Zondorak Counsel and Vice President of Goldman Sachs (since 1997
(31) March 1997); Counsel to the Funds Group, GSAM
Assistant Secre- (since March 1997); Associate, Shereff, Friedman,
tary Hoffman & Goodman, LLP prior thereto.
Steven Hartstein Legal Products Analyst, Goldman Sachs (since June 1996
(33) 1993); Funds Compliance Officer, Citibank Global
Assistant Secre- Asset Management (August 1991 to June 1993).
tary
Deborah Farrell Legal Assistant, Goldman Sachs (since January 1994). 1996
(26) Formerly at Cleary, Gottlieb, Steen and Hamilton.
Assistant Secre-
tary
</TABLE>
Each officer holds comparable positions with certain other investment compa-
nies for which Goldman, Sachs & Co. ("Goldman Sachs") or an affiliate acts as
the investment adviser or distributor. As a result of the responsibilities as-
sumed by Goldman Sachs and the Trust's investment adviser, custodian and
transfer agent, the Trust itself requires no employees. The Trust's officers
do not receive any compensation from the Trust for serving as such.
As of July 8, 1997, no officer beneficially owned, directly or indirectly,
any Units of any Portfolio.
THE TRUSTEES RECOMMEND THAT THE UNITHOLDERS VOTE "FOR" EACH NOMINEE LISTED
ABOVE.
REQUIRED VOTE
Because your Portfolio is a series of the Trust, your vote will be counted
together with the votes of Unitholders of the other series of the Trust, vot-
ing as a single class in the election of Trustees. Election of each Nominee of
the Trust requires a plurality of the Units of the entire Trust voted at the
Meeting. The eight Nominees who receive the highest number of votes cast at
the Meeting will be elected as Trustees. Cumulative voting is not permitted.
8
<PAGE>
PROPOSAL 2
RATIFICATION OR REJECTION OF
SELECTION OF INDEPENDENT AUDITORS
(ALL PORTFOLIOS)
As directed by the Trustees and required by the 1940 Act, the ratification
or rejection of the selection of the independent auditors for the Trust's fis-
cal year ending November 30, 1997 is to be voted upon at the Meeting. It is
intended that the persons named in the accompanying Proxy will vote for Ernst
& Young LLP, unless contrary instructions are given. If the selection of the
Trust's independent auditors is not ratified by the Unitholders at the Meet-
ing, the Board will reconsider such selection.
The Trust's financial statements for the fiscal year ended November 30, 1996
were audited by Ernst & Young LLP. In connection with its audit, Ernst & Young
LLP reviewed the Trust's annual reports to Unitholders and its filings with
the Securities and Exchange Commission ("SEC"). In addition to audit services,
Ernst & Young LLP reviews the Trust's federal and state tax returns, and pro-
vides consultation and assistance on accounting, internal control and related
matters.
At a meeting held on January 22, 1997, the Audit Committee met with repre-
sentatives of Ernst & Young LLP to review the services of the independent au-
ditors. The Audit Committee, in turn, reported on these matters at the meeting
of the Trustees held the same day. At the Board of Trustees' meeting held on
January 22, 1997, the Trustees unanimously selected Ernst & Young LLP as the
Trust's independent auditors for its fiscal year ending November 30, 1997. A
representative of Ernst & Young LLP is expected to be available at the Meeting
by telephone should any matter arise requiring consultation with the auditors,
and the auditors have been given the opportunity to make a statement if they
so desire.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS VOTE "FOR" THE RATIFICA-
TION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS.
REQUIRED VOTE
Because your Portfolio is a series of the Trust, your vote will be counted
together with the votes of Unitholders of the other series of the Trust, vot-
ing as a single class on the ratification of independent auditors. Ratifica-
tion of the independent auditors of the Trust requires the approval of a ma-
jority of the Units of the Trust voted at the Meeting.
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PROPOSAL 3
APPROVAL OF AN AGREEMENT AND
PLAN OF REORGANIZATION PURSUANT TO WHICH
EACH PORTFOLIO WILL BE REORGANIZED INTO A
SERIES OF A DELAWARE BUSINESS TRUST
(ALL PORTFOLIOS)
GENERAL
The Trustees have unanimously approved, subject to Unitholder approval, a
proposal for the Trust (which is referred to in this Proposal 3 as the "Massa-
chusetts Trust") on behalf of each Portfolio to effectuate the transactions
set forth in an Agreement and Plan of Reorganization, Conversion and Termina-
tion (the "Plan of Reorganization") with a newly established Delaware business
trust also named "The Benchmark Funds" (the "Delaware Trust"). The Plan of Re-
organization is attached to this Proxy Statement as Appendix C. The Plan of
Reorganization provides for the conversion (the "Conversion") of each Portfo-
lio from a separate series of the Massachusetts Trust into a corresponding
separate series of the Delaware Trust. Each series of the Massachusetts Trust
is referred to in this Proposal as a "current Portfolio." Consequently, if the
Conversions are approved by Unitholders of each Portfolio of the Massachusetts
Trust, all Portfolios currently in the Massachusetts Trust will become Portfo-
lios of the Delaware Trust.
The Trustees believe that a Delaware business trust as a form of organiza-
tion offers certain advantages for mutual funds over a Massachusetts business
trust. These advantages include granting the Trustees greater power to take
certain actions without the approval of shareholders of the Delaware business
trust (referred to herein as "Unitholders") and greater flexibility in methods
of voting and organization. A Delaware business trust also offers the advan-
tages of a clearer limitation upon the liability of Unitholders and Trustees.
The Trustees also believe that the Declaration of Trust of the Delaware Trust
(the "Delaware Trust Instrument") is clearer and more modern than the Massa-
chusetts Trust's organizational documents. While these same improvements
(other than the limitations on liability afforded under Delaware law) could be
achieved by amending the Massachusetts Trust's Declaration of Trust (the "Mas-
sachusetts Declaration of Trust"), the Trustees have concluded that, given the
other advantages of a Delaware business trust, it is preferable to enter into
the Plan of Reorganization than to amend the current organizational documents.
For a summary comparison of the Massachusetts Declaration of Trust and the
proposed Delaware Trust Instrument, see "Description of Certain Provisions of
the Delaware Trust Instrument" and "Certain Comparative Information About Mas-
sachusetts Business Trusts and Delaware Business Trusts" below.
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The Conversions will entail organizing the Delaware Trust, which will ini-
tially have 17 series, all corresponding to the current Portfolios (sixteen of
which are referred to in this proxy statement and one of which is a new Port-
folio, the Intermediate Bond Portfolio). Each series of the Delaware Trust
that corresponds to a current Portfolio is referred to in this Proposal as a
"successor Portfolio." To effect the Conversion, each current Portfolio will
transfer all of its assets and liabilities to the corresponding successor
Portfolio. As consideration for the transfer of such assets and liabilities
(together, "total assets"), each successor Portfolio will issue shares of ben-
eficial interest ("referred to herein as successor Portfolio Units") to the
current Portfolio whose total assets it has acquired and such current Portfo-
lio will distribute such successor Portfolio Units pro rata to the current
Portfolio Unitholders in exchange for their Units. Upon completion of the Con-
version, each Unitholder of the Delaware Trust will be the owner of full and
fractional successor Portfolio Units equal in number and aggregate net asset
value and of the same class as its Units of the corresponding current Portfo-
lio as of the date of the Conversion, and will have substantially the same re-
demption, liquidation and dividend rights as those offered by the current
Portfolios. Like the current Portfolio Units, the successor Portfolio Units
will have no par value and will not have preemptive rights. Following the Con-
version, each successor Portfolio will carry on the business of the corre-
sponding current Portfolio. The successor Portfolio will have the same invest-
ment adviser (other than as noted in Proposal 6 with respect to the Interna-
tional Growth Portfolio), other service providers, fee and expense structure
and investment objectives, policies and restrictions as the corresponding cur-
rent Portfolio. Any change in the composition of the Board of Trustees and in-
vestment restrictions approved at the Meeting with respect to a current Port-
folio, or any change in the investment advisory agreement for the Interna-
tional Growth Portfolio, will also apply to the corresponding successor Port-
folio. There may be deemed a momentary technical inconsistency with certain of
the policies and restrictions of a Portfolio (such as restrictions on invest-
ments in any one issuer and investments in other investment companies) during
the Conversion. Approval of the Plan of Reorganization will also constitute
approval to terminate the current Portfolios and the Massachusetts Trust.
The Conversions will be accomplished on a tax-free basis, and the dollar
value and number of Units of each investor's investment will not change.
REASONS FOR THE PROPOSED CONVERSION
The Massachusetts Trust is organized as a Massachusetts business trust. As
discussed above, the Trustees unanimously recommend Conversion of
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each Portfolio into a corresponding separate series of the Delaware Trust. The
Trustees believe that organizing the Portfolios as series of the Delaware Trust
offers certain advantages over maintaining them as series of the Massachusetts
Trust.
One advantage of a Delaware business trust is a clearer limitation of liabil-
ity of Unitholders and Trustees for the obligations of the trust. The Delaware
Business Trust Act (the "Delaware Act") expressly limits the liability of Dela-
ware business trust Unitholders for the debts or obligations of the business
trust to the same extent as for stockholders of for-profit Delaware corpora-
tions. Similarly, the Delaware Act provides that a series of a Delaware busi-
ness trust will not be liable for the debts or obligations of any other series
of the business trust. Under Massachusetts law, there are no comparable statu-
tory provisions. Although the possibility of incurring these types of liability
may be remote under Massachusetts law, the above provisions of the Delaware Act
provide greater certainty and protection against Unitholder liability and the
liability of one business trust series for the debts or obligations of another
series. However, it is possible that, under certain circumstances, courts in
some states may not enforce limited liability for Delaware business trust
Unitholders. Similarly, Delaware law clearly protects a Trustee from liability
for the obligations of the business trust, which may help the Delaware Trust
attract and retain qualified Trustees in the future.
Second, the Trustees believe that the Delaware business trust form of organi-
zation will enable the successor Portfolios to adopt new methods of operation
and employ new technologies that are expected to reduce costs of operation
when, and if, implemented. For example, Delaware law authorizes electronic or
telephonic communications between Unitholders and a Delaware business trust.
The Trustees may take advantage of this provision in the future to improve
Unitholder voting procedures and reduce associated costs.
Third, the Conversions offer the potential for future cost savings, although
no immediate cost savings are expected to result from the Conversions. These
cost savings may result from the differences between the Massachusetts Trust
and the Delaware Trust. For example, since the Trustees of a Delaware business
trust can take more actions without Unitholder approval than is currently per-
mitted under the Massachusetts Declaration of Trust, the Delaware Trust may be
required to hold fewer Unitholder meetings, potentially further reducing costs.
Although neither a Delaware business trust nor a Massachusetts business trust
is required to hold annual Unitholder meetings, Delaware law affords to the
Trustees greater latitude to adapt the Delaware Trust to future contingencies
without the necessity of holding a special Unitholder meeting. Under the Dela-
ware Trust Instrument, the Trust-
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<PAGE>
ees have the power to amend the Delaware Trust Instrument; to dissolve the
business trust; to incorporate the Delaware Trust; to merge or consolidate with
another entity; to sell, lease, exchange, transfer, pledge or otherwise dispose
of all or any part of the Delaware Trust's assets; to cause any series to be-
come a separate trust; and to change the Delaware Trust's domicile--all without
Unitholder vote.
Any exercise of authority by the Trustees will be subject to applicable state
and federal law. The flexibility of a Delaware business trust as a form of or-
ganization should help to assure that the Delaware Trust always operates under
the most advantageous structure and is able to take advantage of opportunities
to reduce the expense and frequency of future Unitholder meetings.
Finally, Delaware law explicitly provides that separate boards of trustees
may be authorized for each series of a Delaware business trust. Whether sepa-
rate boards of trustees can be authorized for series of a Massachusetts busi-
ness trust is unclear under Massachusetts law. The establishment of any board
of trustees of a registered investment company must comply with applicable se-
curities laws, including the provision of the 1940 Act regarding the election
of trustees by Unitholders.
BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION
The Trustees discussed the proposed Conversions preliminarily at a meeting
held on April 22, 1997 and in more detail at their July 8, 1997 quarterly Board
meeting. At the meeting held on July 8, 1997, after considering the matters
discussed above, the Trustees unanimously approved the adoption of the Plan of
Reorganization and determined that the Conversions: (i) are in the best inter-
est of the Portfolios and (ii) will not result in dilution of the interests of
the Unitholders of any Portfolio. In addition, the Trustees unanimously voted
to recommend to the Unitholders of each Portfolio that they approve the Plan of
Reorganization and the transactions contemplated thereunder. In taking such ac-
tion and making such recommendation, the Trustees took into consideration the
fact that the Conversions may provide operational efficiencies and additional
managerial flexibility to the Trustees. The Trustees believe that the Conver-
sions will be beneficial to present Unitholders of the Portfolios as well as to
potential investors.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF EACH PORTFOLIO APPROVE
THE PLAN OF REORGANIZATION PROVIDING FOR THE CONVERSION OF EACH PORTFOLIO FROM
A SERIES OF THE MASSACHUSETTS BUSINESS TRUST TO A SERIES OF THE DELAWARE BUSI-
NESS TRUST.
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VOTE REQUIRED TO APPROVE PLAN OF REORGANIZATION
Approval of the Plan of Reorganization as to each Portfolio requires the af-
firmative vote of a majority of the Units of that Portfolio outstanding and
entitled to vote. For this purpose, a majority of the outstanding Units of a
Portfolio means the vote of the lesser of (a) 67% or more of the Units of the
Portfolio present at the Meeting, if the holders of more than 50% of the Units
of the Portfolio are present or represented by proxy, or (b) more than 50% of
the outstanding Units of the Portfolio (a "1940 Act Majority"). Units of all
classes of a Portfolio will be voted together as one class. The Plan of
Reorganization provides that in the event the Plan is approved with respect to
some but not all of the Portfolios, the Board of Trustees of the Trust may, in
the exercise of its sole discretion, determine to either abandon the Plan of
Reorganization with respect to all of the Portfolios or direct that the trans-
actions thereunder be consummated to the extent it deems advisable and to the
degree the transactions may be lawfully effected. If the Plan is approved with
respect to some but not all Portfolios, it is the current intention of the
Trust to abandon the Plan of Reorganization with respect to all Portfolios.
A vote FOR the Conversion will authorize each current Portfolio, as the sole
Unitholder of its corresponding successor Portfolio (i) to elect as Trustees
of the Delaware Trust (if Proposal 1 is approved), Messrs. Springer, Cline,
Condon, English, Gavin, Kelsey, Strubel and Ms. Guthman (see Proposal 1); (ii)
to ratify the selection of Ernst & Young LLP as the Delaware Trust's indepen-
dent auditors (see Proposal 2); (iii) to approve an investment advisory agree-
ment for each successor Portfolio that is substantially the same as each cur-
rent Portfolio's investment advisory agreement; (iv) to approve fundamental
investment restrictions for the successor Portfolios, which if Proposals 4 and
5 are approved, will be the same as the current investment restrictions in ef-
fect for the Portfolios, as amended by such Proposals; and (v) with respect to
the International Growth Portfolio only, to approve a new investment advisory
agreement with Northern Trust and RCB Trust which will allow that Portfolio to
implement a "manager of managers" structure (see Proposal 6). If the Conver-
sions are approved but Proposals 4 and/or 5 are not approved by a Portfolio's
Unitholders, the Portfolio as sole Unitholder of the successor Portfolio, will
vote to approve only the existing fundamental restrictions, as the case may
be. In addition, with respect to the International Growth Portfolio, if the
Conversion is approved but Proposal 6 is not approved, the Portfolio as sole
Unitholder of the successor International Growth Portfolio will vote to ap-
prove only the existing investment advisory agreement.
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<PAGE>
SUMMARY OF THE PLAN OF REORGANIZATION
The following discussion summarizes certain terms of the Plan of Reorganiza-
tion. This summary of the Plan of Reorganization is qualified in its entirety
by the provisions of the Plan of Reorganization, which is attached to this
Proxy Statement as Appendix C.
On the closing date of its Conversion (the "Closing Date"), each current
Portfolio will transfer all of its assets to its corresponding successor Port-
folio in exchange for the assumption by the successor Portfolio of all the lia-
bilities of that current Portfolio and the issuance to that current Portfolio
of Units of beneficial interest of that successor Portfolio ("successor Portfo-
lio Units") equal to the value (as determined by using the procedures in the
current prospectuses) on the date of the exchange of that current Portfolio's
net assets. Immediately thereafter, each current Portfolio will liquidate and
distribute successor Portfolio Units to each current Portfolio Unitholder's ac-
count pro rata in proportion to such current Portfolio Unitholder's beneficial
interest in the current Portfolio ("current Portfolio Units") in exchange for
such current Portfolio Units. In these exchanges, a successor Portfolio will
issue the appropriate number of successor Portfolio Units of each class of
Units that currently is outstanding, so that the current Portfolio will dis-
tribute, and holders of a particular class of current Portfolio Units will re-
ceive, the same number of successor Portfolio Units of the same class. As soon
as practicable after this distribution of successor Portfolio Units, each cur-
rent Portfolio will be wound up and terminated. Certificates evidencing full or
fractional successor Portfolio Units will not be issued. Upon completion of the
Conversion, each current Portfolio Unitholder will be the owner of full and
fractional successor Portfolio Units equivalent in number, class and aggregate
net asset value to the Unitholder's current Portfolio Units immediately before
the Conversion.
Assuming the Plan of Reorganization is approved, it is currently contemplated
that the Conversions will become effective during the first quarter of 1998 or
as soon thereafter as possible.
If, at any time before the Closing Date of the Conversions, the Trustees de-
termine that it would not be in the best interest of the Massachusetts Trust or
the Unitholders to proceed with the Conversions, the Conversions will not go
forward, notwithstanding the approval of the Conversions by the Unitholders at
the Meeting. The Massachusetts Trust and the Delaware Trust may at any time
waive compliance with any of the conditions contained in, or may amend, the
Plan of Reorganization; provided that such waiver or amendment does not materi-
ally adversely affect the interests of current Portfolio Unitholders.
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<PAGE>
EXPENSES OF THE CONVERSIONS
Each Portfolio will bear its own expenses associated with the transactions
contemplated by the Plan of Reorganization, except that Northern Trust and
correspondent banks, brokers and other entities that have entered into
Unitholder Servicing Agreements with the Trust will bear all mailing expenses
in connection with the solicitation of proxies on behalf of the Portfolios.
See "Additional Information--Manner and Cost of Proxy Solicitation" below. In
the event that the Conversions are completed, such expenses will be assumed by
each successor Portfolio. It is currently estimated that the aggregate ex-
penses of the Conversions will be approximately $105,800, which will be allo-
cated among the Portfolios.
TAX CONSEQUENCES OF THE CONVERSIONS
It is a condition to the consummation of the Conversions that the Massachu-
setts Trust and the Delaware Trust receive on or before the Closing Date an
opinion from Drinker Biddle & Reath LLP, counsel to the Massachusetts Trust
and the Delaware Trust, substantially to the effect that, among other things,
for federal income tax purposes, each Conversion will constitute a reorganiza-
tion under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended, and that no gain or loss will be recognized for federal income tax
purposes by each current Portfolio, each successor Portfolio, and the
Unitholders of each current Portfolio upon (1) the transfer of a current Port-
folio's assets to the corresponding successor Portfolio in exchange solely for
such successor Portfolio's Units and the assumption by such successor Portfo-
lio of that current Portfolio's liabilities or (2) the distribution in liqui-
dation by the current Portfolio of such successor Portfolio Units to the cur-
rent Portfolio Unitholders in exchange for their current Portfolio Units. The
opinion will further provide, among other things, that in counsel's view (i)
the tax basis of the successor Portfolio Units to be received by each current
Portfolio Unitholder will be the same as that of his or her current Portfolio
Units surrendered in exchange therefor and (ii) each current Portfolio
Unitholder's tax holding period for his or her successor Portfolio Units will
include such Unitholder's tax holding period for the current Portfolio Units
surrendered in exchange therefor, provided that such current Portfolio Units
were held as capital assets on the date of the exchange.
CONTINUATION OF UNITHOLDER ACCOUNTS AND PLANS
The Delaware Trust's transfer agent will establish accounts for all current
Portfolio Unitholders containing the appropriate number and class of successor
Portfolio Units to be received by that Unitholder under the Plan of Reorgani-
zation. Such accounts will be identical in all material respects to the
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accounts currently maintained by the Portfolios for each Unitholder. No action
by a Unitholder will be necessary in order to continue any automatic investment
plans currently maintained by a current Portfolio Unitholder.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
The Northern Trust Company, 50 S. LaSalle Street, Chicago, Illinois 60675,
currently serves as investment adviser, transfer agent and custodian for all
Portfolios of the Massachusetts Trust and will serve in the same capacity for
all Portfolios of the Delaware Trust (except the International Growth Portfo-
lio, for which Northern Trust and RCB Trust will serve as co-advisers provided
that Proposal 6 is approved by that Portfolio's Unitholders and implemented).
The Delaware Trust will adopt investment advisory, transfer agency and custody
agreements with respect to each successor Portfolio that will be identical, in
all material respects, to the agreements in effect for the Portfolios immedi-
ately before the Conversions (subject to the possible implementation of the new
investment advisory agreement for the International Growth Portfolio).
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP, Sears Tower, 233 S. Wacker Drive, Chicago, Illinois 60606-
6301, are presently the independent public auditors for the Massachusetts
Trust, and will continue to be the independent public auditors for the Portfo-
lios, subject to required ratification (see also Proposal 2).
DISTRIBUTION AND ADMINISTRATION AGREEMENTS
The Delaware Trust will adopt distribution and administration agreements with
respect to the Units of each successor Portfolio. The terms of the distribution
and administration agreements will be identical, in all material respects, to
the Portfolios' existing agreements with Goldman, Sachs & Co.
UNITHOLDER SERVICING PLAN
The Delaware Trust will adopt a Unitholder servicing plan with respect to
Class B, C and D Units, if any, of each successor Portfolio. The terms of the
plan, including the fees payable thereunder, will be identical, in all material
respects to the Portfolios' existing plan. Pursuant to the new plan, the Dela-
ware Trust on behalf of each successor Portfolio will assume the corresponding
current Portfolio's obligations under agreements with banks, corporations, bro-
kers, dealers and other financial institutions that act as "Servicing Agents."
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DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT
The following is a summary of certain provisions of the Delaware Trust In-
strument.
Series and Classes. As discussed above, the Delaware Trust Instrument permits
the Delaware Trust to issue series of its shares of beneficial interest (re-
ferred to herein as "Units") which represent interests in separate portfolios
of investments, including the successor Portfolios. The Delaware Trust is also
authorized to issue multiple classes of all series. The Massachusetts Declara-
tion of Trust permits the issuance of separate series and, except for the Di-
versified Assets, Government, Government Select and Tax-Exempt Portfolios,
classes of Units representing interests in the same Portfolio. No series is en-
titled to share in the assets of any other series or is liable for the expenses
or liabilities of any other series. The successor Portfolios would initially
have the same classes of Units as the current Portfolios, and these classes
would have substantially the same attributes as the classes of the current
Portfolios. The Trustees of the Delaware Trust are able to authorize the issu-
ance of additional series or classes of Units without prior Unitholder approv-
al.
Limitations on Derivative Actions. In addition to the requirements of Dela-
ware law, the Delaware Trust Instrument provides that a Unitholder of the Dela-
ware Trust may bring a derivative action on behalf of the Delaware Trust only
if the following conditions are met: (a) Unitholders eligible to bring such de-
rivative action under Delaware law who hold at least 10% of the outstanding
Units of the Delaware Trust, or 10% of the outstanding Units of the series or
class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such Unitholder request and to investigate the basis
of such claim. The Delaware Trust Instrument also provides that no person,
other than the Trustees, who is not a Unitholder of a particular series or
class shall be entitled to bring any derivative action, suit or other proceed-
ing on behalf of or with respect to such series or class. The Trustees will be
entitled to retain counsel or other advisers in considering the merits of the
request and may require an undertaking by the Unitholders making such request
to reimburse the Delaware Trust for the expense of any such advisers in the
event that the Trustees determine not to bring such action. No similar provi-
sions are applicable to the Massachusetts Trust.
Unitholder Meetings and Voting Rights. The Delaware Trust is not required to
hold annual meetings of Unitholders and does not intend to hold such meetings.
In the event that a meeting of Unitholders is held, each Unit of the Delaware
Trust will be entitled, as determined by the Trustees without
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the vote or consent of Unitholders, either to one vote for each Unit or to one
vote for each dollar of net asset value represented by such Units on all mat-
ters presented to Unitholders, including the election of Trustees (this method
of voting being referred to as "dollar-based voting"). However, to the extent
required by the 1940 Act or otherwise determined by the Trustees, series and
classes of the Delaware Trust will vote separately from each other. Unitholders
of the Delaware Trust do not have cumulative voting rights in the election of
Trustees. Meetings of Unitholders of the Delaware Trust, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the Units entitled to vote at such meet-
ing. The Unitholders of the Delaware Trust will have voting rights only with
respect to the limited number of matters specified in the Delaware Trust In-
strument and such other matters as the Trustees may determine or may be re-
quired by law.
The voting provisions of the Delaware Trust Instrument differ from those of
the Massachusetts Declaration of Trust in several important respects. The Mas-
sachusetts Trust is not authorized to use dollar-based voting. Instead, each
Unitholder has one vote for each Unit held, regardless of its net asset value
per Unit. This can have the effect of providing series with a lower net asset
value per Unit, such as money market funds, with a voting interest that is dis-
proportionate to their economic interest. Also, a greater number of matters re-
quire approval by Unitholders of the Trust. The Massachusetts Declaration of
Trust, in addition to the matters requiring approval of Unitholders of the Del-
aware Trust, requires approval of the reorganization or termination of the Mas-
sachusetts Trust or any of its series, with respect to certain legal proceed-
ings and with respect to certain amendments to the Massachusetts Declaration of
Trust (with limited exceptions).
Indemnification. The Delaware Trust Instrument provides for indemnification
of Trustees, officers and agents of the Delaware Trust unless the recipient is
liable by reason of willful misfeasance, bad faith, gross negligence or reck-
less disregard of the duties involved in the conduct of such person's office.
The Delaware Trust Instrument provides that, if any Unitholder or former
Unitholder of any series is held personally liable solely by reason of being or
having been a Unitholder and not because of the Unitholder's acts or omissions
or for some other reason, the Unitholder or former Unitholder (or heirs, execu-
tors, administrators, legal representatives or general successors) will be en-
titled, out of the assets belonging to the applicable series, to be held harm-
less from and indemnified against all loss and expense arising from such lia-
bility. The Delaware Trust, acting on behalf of any affected series, must, upon
request by such Unitholder, assume the defense of any
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claim made against such Unitholder for any act or obligation of the series and
satisfy any judgment thereon from the assets of the series.
Termination. The Delaware Trust Instrument permits the termination of the
Delaware Trust or of any series or class of the Delaware Trust (i) by a major-
ity of the affected Unitholders at a meeting of Unitholders of the Delaware
Trust, series or class; or (ii) by a majority of the Trustees without
Unitholder approval if the Trustees determine that such action is in the best
interest of the Delaware Trust or its Unitholders. The factors and events that
the Trustees may take into account in making such determination include (i) the
inability of the Delaware Trust or any series or class to maintain its assets
at an appropriate size; (ii) changes in laws or regulations governing the
Delaware Trust, or any series or class thereof, or affecting assets of the type
in which it invests; or (iii) economic developments or trends having a signifi-
cant adverse impact on their business or operations. The Massachusetts
Declaration of Trust permits the Trustees to terminate the Massachusetts Trust
only with Unitholder approval.
Merger, Consolidation, Sale of Assets, Etc. The Delaware Trust Instrument au-
thorizes the Trustees, without Unitholder approval (except as stated in the
next paragraph), to cause the Delaware Trust, or any series thereof, to merge
or consolidate with any corporation, association, trust or other organization
or sell or exchange all or substantially all of the property belonging to the
Delaware Trust, or any series thereof. In addition, the Trustees, without
Unitholder approval, may adopt a master-feeder structure by investing substan-
tially all of the assets of a series of the Delaware Trust in the securities of
another open-end investment company or pooled portfolio (see Proposal 4). The
reorganization of the Massachusetts Trust would require Unitholder approval.
The Delaware Trust Instrument also authorizes the Trustees, in connection
with the merger, consolidation, termination or other reorganization of the
Trust or any series or class, to classify the Unitholders of any class into one
or more separate groups and to provide for the different treatment of Units
held by the different groups, provided that such merger, consolidation, termi-
nation or other reorganization is approved by a majority of the outstanding
voting securities (as defined in the 1940 Act) of each group of Unitholders
that are so classified.
Amendments. The Delaware Trust Instrument permits the Trustees to amend the
Delaware Trust Instrument without a Unitholder vote. However, Unitholders of
the Delaware Trust have the right to vote on any amendment (i) that would ad-
versely affect the voting rights of Unitholders; (ii) that is required by law
to be approved by Unitholders; (iii) that would amend the
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voting provisions of the Delaware Trust Instrument; or (iv) that the Trustees
determine to submit to Unitholders. Amendments to the Massachusetts Declaration
of Trust, with certain limited exceptions, require approval of Unitholders.
Series of Trustees. The Trustees may appoint separate Trustees with respect
to one or more series or classes of the Delaware Trust's Units (the "Series
Trustees"). To the extent provided by the Trustees in the appointment of Series
Trustees, Series Trustees (a) may, but are not required to, serve as Trustees
of the Trust or any other series or class of the Delaware Trust; (b) may have,
to the exclusion of any other Trustee of the Delaware Trust, all the powers and
authorities of Trustees under the Delaware Trust Instrument with respect to
such series or class; and/or (c) may have no power or authority with respect to
any other series or class. The Massachusetts Declaration of Trust does not per-
mit the election of separate Trustees for a series or class. The Trustees are
not currently considering the appointment of Series Trustees for the Delaware
Trust.
CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS BUSINESS TRUSTS AND
DELAWARE BUSINESS TRUSTS
Unitholder Liability
Generally, Delaware business trust Unitholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware Act
entitles a Unitholder of a Delaware business trust to the same limitation of
liability as is available to Unitholders of private for-profit corporations.
However, no similar statutory or other authority limiting business trust
Unitholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a Unitholder is subject to the jurisdiction
of courts in such other states, those courts may not apply Delaware law and may
subject the Delaware Trust Unitholders to liability. To offset this risk, the
Delaware Trust Instrument (i) contains an express disclaimer of Unitholder lia-
bility for acts or obligations of the Delaware Trust and requires that notice
of such disclaimer be given in each agreement, obligation and instrument en-
tered into or executed by the Delaware Trust or its Trustees and (ii) provides
for indemnification out of the property of the applicable series of the Dela-
ware Trust of any Unitholder held personally liable for the obligations of the
Delaware Trust solely by reason of being or having been a Unitholder and not
because of the Unitholder's acts or omissions or for some other reason. Thus,
the risk of a Delaware business trust Unitholder incurring financial loss be-
yond his or her investment because of Unitholder liability is limited to cir-
cumstances in which all of the following factors are present: (1) a court ref-
uses to apply Delaware law; (2) the liability arises under tort law or, if not,
no contractual limitation of liability is in effect; and (3) the appli-
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cable series of the Delaware Trust is unable to meet its obligations. In light
of Delaware law, the nature of the Delaware Trust's business and the nature of
its assets, the risk of personal liability to a Delaware Trust Unitholder is
extremely remote.
Unlike Delaware, in Massachusetts there is no statute relating to business
trusts that entitles Unitholders of a Massachusetts business trust to the same
limitation of liability as is extended to Unitholders of a Massachusetts corpo-
ration. Unitholders of a Massachusetts business trust may, therefore, under
certain circumstances, be held personally liable under Massachusetts law for
the obligations of the Massachusetts business trust. The Massachusetts Declara-
tion of Trust, like the Delaware Trust Instrument, contains an express dis-
claimer of Unitholder liability and requires that notice of such disclaimer be
given in each agreement entered into or executed by the Massachusetts business
trust or its Trustees. The Massachusetts Declaration of Trust also provides for
indemnification out of the trust property. Thus, the Trustees believe the risk
of Unitholder liability is also remote for Unitholders of the Massachusetts
Trust.
Liability of Trustees
The Delaware Trust Instrument provides that the Trustees will not be liable
to any person other than the Delaware Trust or a Unitholder and that a Trustee
will not be liable for any act as a Trustee. However, nothing in the Delaware
Trust Instrument protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office. The Massachusetts Declaration of Trust provides that its Trust-
ees will not be liable for errors of judgment or mistakes of fact or law, sub-
ject to substantially the same provisions concerning bad faith, gross negli-
gence and reckless disregard as those described above.
PROPOSAL 4
APPROVAL OF A NEW FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTMENTS IN OTHER
INVESTMENT COMPANY SECURITIES; AND APPROVAL OF A RELATED AMENDMENT TO THE
MASSACHUSETTS DECLARATION OF TRUST
(ALL PORTFOLIOS)
GENERAL
The Portfolios are currently authorized to invest in securities issued by
other investment companies when consistent with their respective investment ob-
jectives and policies. The proposed new fundamental policy will broaden
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this authority in two respects. First, the new policy will allow each Portfo-
lio to invest all or substantially all of its assets in a single open-end in-
vestment company or series thereof with substantially the same fundamental ob-
jective, policies and restrictions as the Portfolio. Second, the new policy
will otherwise permit each Portfolio to purchase the securities of other in-
vestment companies to the full extent permitted under Section 12 (or any other
provision) of the 1940 Act and any regulation or order of the SEC notwith-
standing any of the Trust's other fundamental investment restrictions (includ-
ing, without limitation, those restrictions relating to issuer diversifica-
tion, industry concentration and control).
Background. Several mutual funds have developed so-called master-feeder
structures under which they invest all their assets in a single pooled invest-
ment (a "Pooled Portfolio"), which is also usually a registered investment
company. For example, funds offering different types of shareholder services
might pool their investments. This structure allows several funds with differ-
ent features, but substantially the same investment objective, restrictions
and policies, to combine their investments instead of managing them separate-
ly. If approved by Unitholders at the Meeting, the Proposal will allow the
Portfolios to use this structure through the adoption of the proposed new fun-
damental investment policy and the proposed related amendment to the Massachu-
setts Declaration of Trust. The Delaware Trust Instrument would also permit
the Portfolios to use this structure, but if the Proposal is not adopted the
Portfolios would not utilize this master-feeder flexibility.
In addition, under Section 12 of the 1940 Act the Portfolios are currently
allowed to make other investments in the securities of other investment compa-
nies (not using the master-feeder structure) so long as not more than 3% of
the total outstanding stock of any investment company is owned by the Portfo-
lios and their affiliated persons (as defined in the 1940 Act) immediately af-
ter a purchase is made. Investments by the Portfolios (except the Interna-
tional Equity Index Portfolio) in other investment companies are, however,
currently limited by certain fundamental investment restrictions, including
restrictions that limit the amount of assets that a Portfolio may invest in
any single investment company and in investment companies generally. If the
Proposal is approved by Unitholders at the Meeting, each Portfolio will be au-
thorized to make these investments to the full extent permitted by the 1940
Act and the SEC.
Purpose of the Proposal. Northern Trust regularly reviews various options
for structuring mutual funds. A primary purpose of investing in a Pooled Port-
folio is to achieve operational efficiencies. The Portfolios currently take
advantage of the ability to issue multiple classes of Units,
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which offer many of the same advantages as investing in a Pooled Portfolio.
While neither the Board of Trustees nor Northern Trust has determined that any
Portfolio should invest in a Pooled Portfolio, the Trustees believe that it
could be in the best interests of the Portfolios to adopt such a structure to
allow for investing by one or more of the Portfolios in a Pooled Portfolio at a
future date.
At present, some of the Portfolios' fundamental investment restrictions and
policies may prevent a Portfolio from investing all of its assets in another
investment company. Similarly, it is possible that the Massachusetts Declara-
tion of Trust could be construed to require Unitholder approval of the sale of
substantially all of the assets of a Portfolio to the Pooled Portfolio. To
eliminate any doubt in these respects, and to avoid the costs associated with a
subsequent Unitholder meeting, the Trustees recommend that Unitholders of each
Portfolio vote to permit the assets of such Portfolio to be invested in a
Pooled Portfolio, without an additional vote of Portfolio Unitholders, if the
Trustees determine in the future that the adoption of a master-feeder structure
is in the best interest of the Portfolio and its Unitholders. If Unitholders
approve this Proposal, any fundamental and non-fundamental restrictions and
policies of the Portfolios that currently prohibit investment in securities of
a single investment company would be appropriately modified to permit
investment in Pooled Portfolios. These policies include, for example, the re-
strictions concerning a Portfolio acting as an underwriter and a Portfolio's
investments in: the securities of any one issuer; securities of any issuer if
more than 10% of such issuer's voting securities are held by a Portfolio; com-
panies for purposes of control; and issuers in any one industry.
A Portfolio's methods of operation and Unitholder services would not neces-
sarily be materially affected by its investment in Pooled Portfolios, except
that the assets of the Portfolio would be managed as part of a larger pool. If
a Portfolio invested all of its assets in a Pooled Portfolio, it is currently
anticipated that the Portfolio would hold only a single investment security and
the Pooled Portfolio would directly invest in individual investment securities.
The investment advisory and other services provided to a Portfolio by Northern
Trust or its affiliates could continue to be provided by Northern Trust or its
affiliates, but the investment advisory services would normally be provided to
and paid for by the Pooled Portfolio rather than the Portfolio. The Trustees
would retain the right to withdraw the Portfolio's investment from the respec-
tive Pooled Portfolio at any time. The Portfolio would then resume investing
directly in securities as it does currently.
At present, the Trustees are not considering any proposal that any of the
Portfolios adopt a master-feeder structure. The Trustees will authorize invest-
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ing a Portfolio's assets in a Pooled Portfolio only if they determine that
pooling is in the best interests of a Portfolio and its Unitholders and if
they determine that the investment will not have material adverse tax or other
consequences to the Portfolio or its Unitholders. In determining whether a
Portfolio should invest in a Pooled Portfolio, the Trustees will consider,
among other things, the opportunity to reduce costs and to achieve operational
efficiencies. The Trustees will not authorize investment in a Pooled Portfolio
if doing so would increase costs to Unitholders, unless they perceive a corre-
sponding increase in benefits to Unitholders. There is no assurance that cost
reductions or increased efficiencies will be achieved.
Northern Trust and its affiliates may benefit from the use of a Pooled Port-
folio if overall assets are increased since Northern Trust's fees under its
existing agreements are based, in part, on the amount of those assets. Also,
Northern Trust's or its affiliates' expenses of providing investment and other
services to a Portfolio may be reduced.
As stated above, the Proposal will also allow the Portfolios to make other
investments in the securities of other investment companies (not using the
master-feeder structure) to the full extent permitted by the 1940 Act and the
SEC. For example, although the 1940 Act permits each Portfolio to make such
investments so long as not more than 3% of the total outstanding stock of any
investment company is owned by the Portfolio and its affiliated persons, the
fundamental investment restrictions of each Portfolio (except the Interna-
tional Bond and International Equity Index Portfolios) provide that a Portfo-
lio must limit its investments so that, with respect to 75% of its total as-
sets, not more than 5% will be invested in the securities of any one issuer
(with certain exceptions). The Board of Trustees believes that the removal of
these restrictions with respect to investments in other investment company se-
curities may be advantageous to the Portfolios. For example, the International
Equity Index Portfolio, in order to achieve greater portfolio diversification
at a low cost, currently invests more than 15% of its assets in World Equity
Benchmark SharesSM ("WEBS"), which are issued by a registered investment com-
pany that invests directly in foreign issuers. Although Northern Trust antici-
pates that the investments of the other Portfolios in investment company secu-
rities will not exceed 25% in the foreseeable future, the Proposal, if ap-
proved, will give the Portfolios this latitude should Northern Trust deem the
investments appropriate. As an investor in other investment companies, a Port-
folio would indirectly bear its proportionate share of any management fees and
other expenses paid by such other investment companies in addition to the fees
and expenses paid directly by the Portfolio.
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PROPOSED FUNDAMENTAL POLICY
In order to provide the Portfolios greater authority to invest in the securi-
ties of other investment companies as discussed above, the Trustees recommend
that the Unitholders of each Portfolio adopt the following fundamental policy:
Notwithstanding any of the Trust's other fundamental investment restric-
tions (including, without limitation, those restrictions relating to is-
suer diversification, industry concentration and control), each Portfolio
may: (a) purchase securities of other investment companies to the full
extent permitted under Section 12 or any other provision of the 1940 Act
(or any successor provision thereto) or under any regulation or order of
the Securities and Exchange Commission; and (b) invest all or substan-
tially all of its assets in a single open-end investment company or se-
ries thereof with substantially the same investment objective, policies
and fundamental restrictions as the Portfolio.
PROPOSED AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST
In order to permit each Portfolio of the Trust to invest in a Pooled Portfo-
lio at a future date, the Trustees also recommend that the Unitholders adopt
the following amendment to the Massachusetts Declaration of Trust:
Notwithstanding anything else herein, the Trustees may, without
Unitholder approval unless such approval is required by applicable law,
invest all or a portion of the Trust Property of any Series, or dispose
of all or a portion of the Trust Property of any Series, and invest the
proceeds of such disposition in interests issued by one or more other in-
vestment companies or pooled portfolios. Any such other investment com-
pany or pooled portfolio may (but need not) be a trust (formed under the
laws of any state or jurisdiction) (or subtrust thereof) which is classi-
fied as a partnership for federal income tax purposes. Notwith-standing
anything else herein, the Trustees may, without Unitholder approval un-
less such approval is required by applicable law, cause a Series that is
organized in the master-feeder fund structure to withdraw or redeem its
Trust Property from the master fund and cause such series to invest its
Trust Property directly in securities and other financial instruments or
in another master fund.
BOARD OF TRUSTEES EVALUATION AND RECOMMENDATION
At meetings held on April 22, 1997 and July 8, 1997, after considering the
matters discussed above and other matters deemed to be relevant, the Trustees
unanimously adopted and voted to recommend to the Unitholders
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that they adopt (a) the proposed new fundamental investment policy and (b) the
amendment to the Massachusetts Declaration of Trust set forth above. In taking
such action and making such recommendations, the Trustees took into considera-
tion that the proposed modifications may provide operational and investment ef-
ficiencies and facilitate the introduction of new investment portfolios of the
Trust and, thereby, increase the investment options available to Unitholders.
Except as described in this Proxy Statement, approval of this Proposal 4 will
not change any of the investment programs and services or operations that are
described in the Portfolios' current Prospectuses and this Proxy Statement.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE UNITHOLDERS OF EACH PORTFOLIO
ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTMENTS IN OTHER IN-
VESTMENT COMPANY SECURITIES AND APPROVE A RELATED AMENDMENT TO THE DECLARATION
OF TRUST.
REQUIRED VOTE
Approval of the new fundamental investment policy requires the vote of a 1940
Act Majority of the Units (described in Proposal 3) of each Portfolio voting
separately. Approval of the amendment to the Massachusetts Declaration of Trust
requires the vote of a majority of the Units of the Trust voting together as a
single class. If either Proposal is not approved by one or more of the Portfo-
lios, the Trustees will consider what further action, if any, will be taken.
PROPOSAL 5
AMENDMENT OF THE PORTFOLIOS' FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
ISSUER DIVERSIFICATION
(ALL PORTFOLIOS EXCEPT THE INTERNATIONAL BOND PORTFOLIO)
To be diversified under the 1940 Act, a Portfolio must not, with respect to
75% of its total assets, invest more than 5% of its total assets in the securi-
ties of any one issuer or acquire more than 10% of the outstanding voting secu-
rities of any one issuer. These restrictions apply only at the time of invest-
ment. A Portfolio may invest up to 25% of its total assets without regard to
these restrictions. In addition, these restrictions do not apply to holdings of
or investments in cash, cash items, certain repurchase agree-
27
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ments, U.S. Government securities or securities of other investment companies.
Currently, the fundamental investment restriction concerning issuer diversifi-
cation for each Portfolio except the International Bond Portfolio (which is
non-diversified) is narrower than the 1940 Act restrictions in not listing as
exclusions cash, cash items or securities of other investment companies. In ad-
dition, under its fundamental investment restriction, the Diversified Assets
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (other than the U.S. Government), except for repurchase agree-
ments, certificates of deposit and bankers' acceptances. The Proposal simpli-
fies the contents of the current restrictions. As proposed, the restriction
would require diversification only to the extent required under the 1940 Act.
Additional diversification requirements are imposed upon the Portfolios to be
treated as money market funds and as regulated investment companies for federal
tax purposes. These requirements are not required to be reflected in the pro-
posed investment restriction and will not be affected by the Proposal. At the
July 8, 1997 meeting, the Trustees approved, subject to Unitholder approval,
that each Portfolio adopt the following investment restriction in lieu of its
current fundamental policy:
The Portfolio may not make any investment inconsistent with the Portfo-
lio's classification as a diversified company under the 1940 Act. This
restriction does not, however, apply to any Portfolio classified as a
non-diversified company under the 1940 Act.
BOARD OF TRUSTEES' RECOMMENDATION
The Trustees believe that the proposed amendment to the Portfolios' invest-
ment restrictions will more clearly reflect current regulatory practice, will
provide a more complete range of investment opportunities and will clarify and
simplify the restrictions.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE UNITHOLDERS OF EACH PORTFOLIO
VOTE "FOR" THE ADOPTION OF THE PROPOSED AMENDED INVESTMENT RESTRICTION.
REQUIRED VOTE
Approval of the proposed amendment to a Portfolio's fundamental investment
restriction concerning issuer diversification requires the affirmative vote of
a 1940 Act Majority of that Portfolio's outstanding Units (described in Pro-
posal 3). If the proposed amendment is not approved with respect to a Portfo-
lio, the current investment restriction will continue in effect unchanged for
that Portfolio.
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PROPOSAL 6
APPROVAL OF REVISED INVESTMENT
ADVISORY AGREEMENT TO IMPLEMENT
"MANAGER OF MANAGERS" STRUCTURE
(INTERNATIONAL GROWTH PORTFOLIO ONLY)
BACKGROUND
In 1995 Northern Trust Corporation acquired RCB International Inc., a regis-
tered investment adviser which has since changed its name to Northern Trust
Global Advisors, Inc. ("NTGA"). One of NTGA's subsidiaries, RCB Trust Company
("RCB Trust"), a Connecticut state-chartered trust company, specializes in
evaluating and monitoring the qualifications and performance of international
and other investment advisers. In connection with the acquisition of NTGA,
Northern Trust has reconsidered the manner in which investment management serv-
ices are being provided to the International Growth Portfolio of the Trust.
Since the Portfolio's organization in 1994, Northern Trust has provided all in-
vestment management services to the Portfolio. Northern Trust is now consider-
ing the possibility that certain investment management services, including the
selection of portfolio securities, might be provided for the International
Growth Portfolio in the future by one or more sub-advisers.
At a meeting of the Board of Trustees held on July 8, 1997 Northern Trust ex-
plained that it had not yet developed a final recommendation regarding the use
of RCB Trust's "manager of managers" structure for the International Growth
Portfolio or the firm or firms that might be retained as sub-advisers for the
International Growth Portfolio. Northern Trust believed, however, that such a
recommendation might be finalized and presented to the Trustees before year-
end. Therefore, in order to avoid the expense of another Unitholder meeting,
Northern Trust recommended that the Unitholders of the International Growth
Portfolio be asked at the Meeting, in accordance with requirements of the 1940
Act, to approve a new investment advisory agreement (the "New Agreement") ap-
pointing Northern Trust and RCB Trust (together, the "Advisers") as the invest-
ment advisers of the International Growth Portfolio and authorizing the Advis-
ers to retain sub-advisers for the Portfolio. All fees payable to the sub-ad-
visers under the New Agreement would be payable by the Advisers and not by the
Portfolio, and the current investment advisory fee rate payable by the Portfo-
lio would not change.
In connection with the foregoing recommendation, Northern Trust noted that
Section 15(a) of the 1940 Act requires that all agreements pursuant to which
persons serve as investment advisers to investment companies be approved by
shareholders. As interpreted, this requirement would apply to ap-
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pointment of sub-advisers to the International Growth Portfolio of the Trust.
The SEC has, however, granted conditional exemptions from the shareholder ap-
proval requirements to other investment companies. Therefore, Northern Trust
has also recommended, and the Board of Trustees has approved, the filing of an
application seeking such an exemption for the Trust. If the exemption is
granted by the SEC and the New Agreement is approved at the Meeting by the
Unitholders of the International Growth Portfolio, the Board of Trustees would
be able, without further Unitholder approval, to appoint sub-advisers for the
Portfolio in the future. The Board would not, however, be able to replace
Northern Trust and RCB Trust as the Advisers to the International Growth Port-
folio without complying with the 1940 Act and applicable regulations governing
Unitholder approval of advisory agreements.
DESCRIPTION OF NEW AGREEMENT
Currently, Northern Trust provides investment advisory services to the Inter-
national Growth Portfolio pursuant to an Investment Advisory Agreement dated
October 5, 1990 between Northern Trust and the Trust, as amended by Addendum
No. 4 thereto dated March 25, 1994 (the "Current Agreement"). The New Agreement
is identical in all material respects to the Current Agreement, except that the
New Agreement appoints both Northern Trust and RCB Trust as the Advisers of the
Portfolio and allows the Advisers to (1) delegate their duties to sub-advisers,
(2) implement a "manager of managers" structure and (3) enter into sub-advisory
agreements in the future without further Unitholder approval. A copy of the New
Agreement is attached to this Proxy Statement as Appendix D, and the following
description of the New Agreement is qualified in its entirety by reference to
that Exhibit.
Under the New Agreement, the Advisers would agree to provide a continuous in-
vestment program for the Portfolio, as well as the determination of investments
to be purchased or sold for the Portfolio and the supervision of the Portfo-
lio's assets. The Advisers would be authorized to perform their duties by tak-
ing such actions themselves or by delegating some or all of their duties to one
or more sub-advisers. Notwithstanding any such delegation, however, the Advis-
ers, subject to review and approval by the Board of Trustees of the Trust,
would (1) set the Portfolio's overall investment strategies, (2) monitor and
evaluate the performance of the Portfolio's sub-advisers, (3) recommend to the
Board of Trustees whether an agreement with a sub-adviser should be approved,
renewed, modified or terminated, (4) allocate and re-allocate the Portfolio's
assets among different sub-advisers as deemed appropriate, and (5) oversee a
sub-adviser's compliance with the Portfolio's investment objective, policies
and restrictions.
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The Advisers would bear all expenses incurred by them in connection with
their activities under the New Agreement, including the payment of any fees,
compensation or expenses to the International Growth Portfolio's sub-advisers
but excluding the cost of securities purchased or sold by the Portfolio and re-
lated brokerage commissions, transaction costs and taxes (if any). The Portfo-
lio would continue to be responsible for all non-investment advisory expenses
incurred in its operations (other than certain expenses borne by the Portfo-
lio's administrator, distributor, transfer agent and custodian).
As compensation for the services rendered to the International Growth Portfo-
lio by the Advisers under the New Agreement, and the Advisers' assumption of
related expenses, the Advisers would be entitled to a total fee, computed daily
and payable monthly, at a maximum annual rate of 1% of the average net assets
of the Portfolio (before any voluntary waivers or reimbursements). All fees
payable to any sub-advisers would be payable by the Advisers.
In executing transactions the Advisers and sub-advisers for the International
Growth Portfolio would be required to seek to obtain the best overall terms
available. In evaluating the best overall terms available and in selecting the
broker or dealer to execute a particular transaction, the brokerage and re-
search services (as those terms are defined in section 28(e) of the Securities
Exchange Act of 1934) provided to the Portfolio and/or other accounts over
which an Adviser, sub-adviser or affiliate exercises investment discretion
could be considered. Further, on occasions when the purchase or sale of a secu-
rity is deemed to be in the best interests of the Portfolio as well as other
fiduciary or agency accounts managed by the Advisers or the sub-advisers, the
securities to be sold or purchased for the Portfolio could be aggregated with
those to be sold or purchased for such other accounts in order to obtain best
overall terms available. The allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, would be made in the man-
ner considered to be most equitable and consistent with the fiduciary obliga-
tions owed to the Portfolio and the other accounts involved. In some instances,
this procedure might adversely affect the size of the position obtainable for
the Portfolio or the amount of the securities that are able to be sold for the
Portfolio.
In the New Agreement Northern Trust agrees that the name "The Benchmark" may
be used in connection with the Portfolio's business on a royalty-free basis.
Northern Trust has reserved to itself the right to grant the non-exclusive
right to use the name "The Benchmark" to any other person. The New Agreement
provides further that at such time as the agreement is no longer in effect, the
Portfolio will cease using the name "The Benchmark."
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The New Agreement provides that the Advisers may render similar services to
others so long as their services under the agreement are not impaired. The New
Agreement also provides that the Trust will indemnify the Advisers against cer-
tain liabilities (including liabilities under the federal securities laws re-
lating to untrue statements or omissions of material fact and actions that are
in accordance with the terms of the agreement) or, in lieu thereof, will con-
tribute to the resulting losses. Neither Adviser would, however, be entitled to
indemnification or contribution under the New Agreement with respect to any li-
ability to which it is subject by reason of its willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the reck-
less disregard to its obligations and duties.
The New Agreement would be terminable with respect to the International
Growth Portfolio at any time, without penalty, by the Trust (by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding Units of
the Portfolio) or by the Advisers on 60 days' written notice. In addition, the
New Agreement would terminate immediately in the event it is assigned. Unless
sooner terminated, the New Agreement would continue in effect with respect to
the Portfolio through April 30 of the year following the date of its execution
and thereafter from year to year, provided that such continuance is specifi-
cally approved at least annually (a) by the vote of a majority of those members
of the Trust's Board of Trustees who are not "interested persons" as defined in
the 1940 Act of any party to the agreement, cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the Board of Trustees or
by vote of a majority of the outstanding Units of the Portfolio.
DESCRIPTION OF "MANAGER OF MANAGERS" STRUCTURE AND PROPOSED EXEMPTIVE
APPLICATION
Under the "manager of managers" structure, the International Growth Portfolio
would operate in a manner that is different from the Trust's other Portfolios
and most other investment companies. Most investment companies operate under a
structure in which a single related group of companies provide investment advi-
sory services. Typically, the investment company pays the advisory fee to its
investment adviser which, in turn, compensates internal portfolio managers who
make specific securities selections. In contrast, under the "manager of manag-
ers" structure, the Advisers would evaluate prospective sub-advisers for the
International Growth Portfolio, make recommendations to the Board of Trustees
regarding the use of particular sub-advisers and monitor the performance of any
sub-advisers approved by the Trustees. The Advisers would be responsible for
communicating performance targets and evaluations to the Portfolio's sub-advis-
ers, supervising the sub-advisers'
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compliance with the Portfolio's investment objective, guidelines and policies
and recommending to the Board of Trustees whether the Portfolio's sub-advisory
agreements should be renewed, modified or terminated. The Advisers would also
recommend to the Board the addition of new sub-advisers as deemed appropriate.
As stated above, in connection with the implementation of the "manager of
managers" structure, the Trust intends to apply to the SEC for an exemption
from Section 15(a) of the 1940 Act to allow the Board of Trustees, without fur-
ther Unitholder approval, to appoint sub-advisers for the Portfolio in the fu-
ture, and to cause the Portfolio to enter into (and, if appropriate, thereafter
modify) sub-advisory agreements with those sub-advisers. Unitholder meetings
can entail substantial costs which could reduce the desired benefits of the
"manager of managers" structure. These costs must be weighed against the bene-
fits of Unitholder scrutiny of proposed contracts involving new terms or sub-
advisers. However, even in the absence of Unitholder approval, any proposal to
add or replace sub-advisers would receive careful review. First, the Advisers
would assess the Portfolio's needs and, if they believed additional or replace-
ment sub-advisers could benefit the Portfolio, would search for suitable alter-
native sub-advisers. Second, any recommendations made by the Advisers would
have to be approved by a majority of the Trustees, including a majority of the
Trustees who are not "interested persons" within the meaning of the 1940 Act.
Finally, any selection of additional or replacement sub-advisers would have to
comply with conditions contained in the SEC exemption, if granted, including
conditions relating to Unitholder notification regarding the firms that are ap-
pointed as the Portfolio's sub-advisers.
The Trust anticipates that it may request that the SEC also grant an exemp-
tion from certain disclosure requirements to allow the Trust to provide "aggre-
gate fee disclosure" in its public filings for the International Growth Portfo-
lio. It is currently contemplated that this "aggregate fee disclosure" would
show: (1) the total advisory fee charged by the Advisers to the Portfolio; (2)
the aggregate fees paid by the Advisers to all sub-advisers managing assets of
the Portfolio (and not the fees paid separately to each sub-adviser); and (3)
the net advisory fee retained by the Advisers with respect to the Portfolio af-
ter the Advisers pay all sub-advisers managing assets of the Portfolio.
Under the "manager of managers" structure, future amendments to the New
Agreement would remain subject to the Unitholder and Trustee approval require-
ments of Section 15 of the 1940 Act and related proxy disclosure requirements.
In addition, although the Trustees would be allowed to
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change the fees payable to a sub-adviser without Unitholder approval under the
"manager of managers" structure, the Trustees could not increase the rate of
the fees payable by the Portfolio to the Advisers under the New Agreement with-
out first obtaining Unitholder approval.
BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION
At a meeting held on July 8, 1997, the Board of Trustees, including a major-
ity of those Trustees who were not "interested persons" of any party to the
agreement as defined in the 1940 Act, approved the New Agreement, which allows
the Portfolio to implement a "manager of managers" structure and enter into
sub-advisory agreements in the future without obtaining further Unitholder ap-
proval. In approving the New Agreement, the Trustees considered the following
factors to be of material importance: (1) the experience and qualifications of
RCB Trust in providing "manager of managers" services; (2) the fact that the
terms of the New Agreement, including the advisory fee rate payable by the In-
ternational Growth Portfolio, are substantially identical to the terms of the
Current Agreement; (3) the relative investment management resources of Northern
Trust and other investment management firms that might be retained to provided
sub-advisory services to the Portfolio; (4) the flexibility that may be ob-
tained through the proposed exemption from the SEC with respect to the Trust's
use of the "manager of managers" structure; (5) the experience of other invest-
ment companies that have adopted a "manager of managers" structure; and (6) the
desire to avoid another Unitholder meeting while Northern Trust finalizes its
recommendation.
Based on their consideration, analysis and evaluation of the above factors
and other information deemed by them to be relevant, the Board concluded that
approval of the New Agreement would be in the best interest of the Portfolio
and its Unitholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF THE INTERNATIONAL
GROWTH PORTFOLIO VOTE "FOR" THE APPROVAL OF THE NEW INVESTMENT ADVISORY AGREE-
MENT.
REQUIRED VOTE
The New Agreement is being submitted for approval at the Meeting by a 1940
Act Majority of the Units (described in Proposal 3) of the International Growth
Portfolio, voting separately, as a result of the requirements of the 1940 Act
and the conditions the Trust expects the SEC to place on the proposed exemption
described in this Proxy Statement. Because the Trust
34
<PAGE>
does not intend at present to implement a "manager of managers" structure with
respect to its other Portfolios, only the International Growth Portfolio will
vote on the New Agreement. If approved by a 1940 Act Majority of the Units of
the International Growth Portfolio at the Meeting, the New Agreement will be-
come effective with respect to that Portfolio only after the SEC has granted
the proposed exemption described in this Proxy Statement and the Board of
Trustees has received from Northern Trust, and has approved, a final recommen-
dation to implement a "manager of managers" structure with respect to the Port-
folio. There is no assurance that the SEC will grant the proposed exemption on
terms acceptable to the Trust. If the New Agreement is not approved by a 1940
Act Majority of the Units of the International Growth Portfolio, the Current
Agreement will continue in effect with respect to that Portfolio.
ADDITIONAL INFORMATION
OTHER INFORMATION REGARDING NORTHERN TRUST AND RCB TRUST
Northern Trust and RCB Trust. Northern Trust, a member of the Federal Reserve
System, is an Illinois state-chartered commercial bank with principal offices
located at 50 South LaSalle Street, Chicago, Illinois 60675. RCB Trust, a Con-
necticut state-chartered trust company, has principal offices at 300 Atlantic
Street, Stamford, Connecticut 06901.
Northern Trust is a direct wholly-owned subsidiary, and RCB Trust is an indi-
rect wholly-owned subsidiary, of Northern Trust Corporation, a bank holding
company. All of the capital stock of RCB Trust is owned by NTGA. All of the
capital stock of NTGA, which has its principal offices at 300 Atlantic Street,
Stamford, Connecticut 06901, is owned by Northern Trust Corporation. Northern
Trust Corporation has its principal offices at 50 South LaSalle Street, Chica-
go, Illinois 60675. To the Trust's knowledge, no persons owned beneficially or
of record 10% or more of any class of issued and outstanding voting securities
of Northern Trust Corporation at June 30, 1997.
The name and principal occupation of the principal executive officers and
each director of Northern Trust as of June 30, 1997 are set forth in Appendix E
to this Proxy Statement. All of the principal executive officers and directors
of Northern Trust may be reached c/o Northern Trust, 50 South LaSalle Street,
Chicago, Illinois 60675.
The name and principal occupation of the principal executive officers and
each director of RCB Trust as of June 30, 1997 are also set forth in Appendix E
to this Proxy Statement. All of the principal executive officers
35
<PAGE>
and directors of RCB Trust may be reached c/o RCB Trust, 300 Atlantic Street,
Stamford, Connecticut 06901.
Other Investment Companies Advised by Northern Trust and RCB Trust. The ta-
ble below sets forth certain information concerning other investment companies
registered under the 1940 Act ("registered investment companies") advised by
Northern Trust and which have investment objectives similar to that of the In-
ternational Growth Portfolio. RCB Trust does not currently advise any other
registered investment companies. Northern Trust was waiving, as of the date of
this Proxy Statement, some or all of the fees payable by the funds listed be-
low. Such waivers are not reflected in the table.
INVESTMENT COMPANIES ADVISED BY NORTHERN TRUST
<TABLE>
<CAPTION>
ANNUAL FEE
(BASED ON
NET ASSETS AVERAGE
AS OF JUNE NET
NAME OF INVESTMENT COMPANY AND/OR PORTFOLIO 30, 1997 ASSETS)
- ------------------------------------------- ------------ ----------
<S> <C> <C>
Northern Funds
-International Growth Equity Fund...................... $185,000,128 1.20%
------------ ----
-International Select Equity Fund...................... 119,978,637 1.20%
------------ ----
$304,978,765
============
</TABLE>
Current Agreement. The Current Agreement for the International Growth Port-
folio was approved by the Board of Trustees of the Trust on July 20, 1993 and
by Goldman, Sachs & Co., as the Portfolio's sole Unitholder, on March 24, 1994
pursuant to the requirements of the 1940 Act. The Board of Trustees of the
Trust reapproved the Current Agreement on January 24, 1996 and January 22,
1997 in connection with its annual review of the Trust's advisory arrangements
required by the 1940 Act.
For the fiscal year ended November 30, 1996, the aggregate investment advi-
sory fee paid by the International Growth Portfolio to Northern Trust under
the Current Agreement was $1,089,874. For the same period, Northern Trust vol-
untarily waived advisory fees totalling $272,159 with respect to the Interna-
tional Growth Portfolio.
Other Payments to Northern Trust and its Affiliates. Northern Trust serves
as the International Growth Portfolio's transfer agent and custodian. Under
the Trust's transfer agency agreement, Northern Trust is entitled to transfer
agency fees, payable monthly, at the annual rate of .01%, .05%, .10% and .15%
of the average daily net asset value of the Class A, B, C and D Units, respec-
tively, of the Portfolio. The Trust pays Northern Trust, with respect to the
Portfolio, an annual custody fee of: (i) $35,000, plus (ii) 9/100th
36
<PAGE>
of 1% of the Portfolio's average daily net assets. In addition, Northern Trust
is reimbursed for certain expenses it incurs as custodian for the Portfolio.
Northern Trust and its affiliates are also entitled to receive fees ("Plan
Fees") under the Trust's Unitholder Servicing Plan at the maximum annual rates
of .10%, .15% and .25% of the average daily net asset value of the Portfolio's
Class B, C and D Units, respectively, held or serviced by such entities for
beneficial Unitholders. These fees are for administrative support services,
which may include processing purchase and redemption requests from investors;
placing net purchase and redemption orders; providing necessary personnel and
facilities to establish and maintain investor accounts and records; and provid-
ing information periodically to investors showing their positions in Portfolio
Units.
The table below sets forth the transfer agency and custodial fees paid to
Northern Trust and its affiliates with respect to the International Growth
Portfolio during the fiscal year ended November 30, 1996:
<TABLE>
<CAPTION>
CUSTODY
TRANSFER AGENCY FEES
FEES PAID PAID
--------------- -------
<S> <C>
$13,559 $170,117
</TABLE>
No Plan Fees were paid to Northern Trust and its affiliates with respect to
the Portfolio during the fiscal year ended November 30, 1996.
It is expected that Northern Trust will continue to serve as the Portfolio's
transfer agent and custodian and to provide services under the Unitholder Ser-
vicing Plan after the Meeting.
Banking Matters. Banking laws and regulations currently prohibit a bank hold-
ing company registered under the Federal Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered open-end investment company continu-
ously engaged in the issuance of its shares, but such banking laws and regula-
tions do not prohibit such a holding company or affiliate or banks generally
from acting as investment adviser, transfer agent or custodian to such an in-
vestment company, or from purchasing shares of such a company as agent for and
upon the order of customers. Northern Trust believes that it may perform the
services contemplated by its agreements with the Trust without violation of
such banking laws or regulations which are applicable to it. It should be not-
ed, however, that future changes in either federal or state statutes and regu-
lations relating to the permissible activities of banks and their subsidiaries
or affiliates, as well as future judicial or administrative decisions or inter-
pretations of current and future statutes
37
<PAGE>
and regulations, could prevent Northern Trust from continuing to perform such
services for the Trust.
Should future legislative, judicial or administrative action prohibit or re-
strict the activities of Northern Trust in connection with the provision of
services on behalf of the Trust, the Trust might be required to alter materi-
ally or discontinue its arrangements with Northern Trust and change its method
of operations. It is not anticipated, however, that any change in the Trust's
method of operations would affect the net asset value per Unit of any Portfolio
or result in a financial loss to any Unitholder.
OTHER BUSINESS
As of the date of this Proxy Statement, the Trustees are not aware of any
matters to be presented for action at the Meeting other than those described
above. Should other business properly be brought before the Meeting, it is in-
tended that the accompanying Proxy will be voted thereon in accordance with the
judgment of the persons named as proxies.
PROXIES AND VOTING AT THE MEETING
The enclosed Proxy is revocable by a Unitholder at any time before it is ex-
ercised by written notice to the Trust (addressed to the Secretary at the
Trust's principal executive offices), by executing a superseding proxy or by
attending the Meeting and voting in person. All valid proxies received prior to
the Meeting (including any adjournment thereof) will be voted at the Meeting.
Matters on which a choice has been provided will be voted as indicated on the
proxy and, if no instruction is given, the persons named as proxies will vote
the Units represented thereby in favor of the matters set forth in each Pro-
posal and will use their best judgment in connection with the transaction of
such other business as may properly come before the Meeting.
In the event that at the time any session of the Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of
any of Proposals 1 through 6 have not been received, the persons named as prox-
ies may propose one or more adjournments of the Meeting to permit further so-
licitation of proxies with respect to such Proposal(s). Any such adjournment
will require the affirmative vote of a majority of the Units of the Trust (or
the affected Portfolio) present and voting in person or by proxy at the session
of the Meeting to be adjourned. The persons named as proxies will vote those
proxies which they are entitled to vote in favor of any such
38
<PAGE>
Proposal in favor of such an adjournment, and will vote those proxies required
to be voted against any such Proposal against any such adjournment. A
Unitholder vote may be taken on one or more of the Proposals in this Proxy
Statement with respect to one or more Portfolios prior to such adjournment if
sufficient votes for their approval have been received and it is otherwise ap-
propriate.
A majority of the Units entitled to vote with respect to a Proposal shall be
a quorum for the transaction of business with respect to that Proposal at the
Meeting, but any lesser number shall be sufficient for adjournments. Absten-
tions will be treated as Units that are present at the Meeting, but will not be
counted as a vote in favor of a Proposal. Accordingly, an abstention from vot-
ing on a Proposal has the same effect as a vote against Proposals 2 through 6.
If a broker or nominee holding Units in "street name" indicates on the proxy
that it does not have discretionary authority to vote as to a particular Pro-
posal, those Units will not be considered as present at the Meeting with re-
spect to the Proposal. Accordingly, a "broker non-vote" has no effect on the
voting in determining whether a proposal has been adopted pursuant to subsec-
tion (i) of the 1940 Act Majority definition. In addition, a "broker non-vote"
has no effect on the voting in determining whether a Nominee has been elected a
Trustee pursuant to Proposal 1. However, in determining whether a proposal has
been adopted pursuant to subsection (ii) of the 1940 Act Majority definition, a
"broker non-vote" will have the same effect as a vote against the Proposal.
Appendix B hereto sets forth the persons who owned beneficially more than 5%
of the Units of any Portfolio as of July 8, 1997, the Record Date for the Meet-
ing. For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25 percent of the voting securities of a
company is presumed to "control" such company. As shown in Appendix B, on the
Record Date Northern Trust was the beneficial owner of a majority of the out-
standing Units of the various Portfolios because it possessed sole or shared
voting power and/or investment power with respect to Units on behalf of its
customer accounts. Northern Trust has advised the Trust that it intends to vote
the Units over which it has voting power "FOR" and "WITHHOLD ALL" in the elec-
tion of each Trustee named in Proposal 1 in the same proportions as the total
votes that are cast "FOR" and "WITHHOLD ALL" in such election by the other
Unitholders of the Trust. Northern Trust has further advised the Trust that it
intends to vote the Units over which it has voting power "FOR" each of the
other Proposals listed in this Proxy Statement. In certain instances, such as
Proposal 6, the votes cast by Northern Trust will be sufficient to approve the
Proposal regardless of the votes cast by other Unitholders of a Portfolio.
39
<PAGE>
MANNER AND COST OF PROXY SOLICITATION
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of Northern Trust, Goldman
Sachs and by the Trustees. In addition, employees of Northern Trust, its affil-
iates, correspondent banks, brokers and similar record holders may solicit
proxies by these means, and may forward proxy materials and printed direction
forms to the customers on whose behalf they hold record ownership of Units of
the Trust. The Northern Trust may engage an independent proxy solicitation firm
to assist it in soliciting proxies.
Each Portfolio will bear its allocable portion of proxy solicitation
expenses, including the cost of preparing and assembling materials used in con-
nection with the solicitation of proxies. Correspondent banks, brokers and
other entities that have entered into a Unitholder Servicing Agreement with the
Trust on behalf of a Portfolio will bear the mailing expenses associated with
the solicitation of proxies from Unitholders on whose behalf they serve as
recordholder. Northern Trust will bear all other mailing expenses associated
with the solicitation of proxies and will reimburse correspondent banks, bro-
kers and other similar record holders who have not entered into Unitholder Ser-
vicing Agreements for their reasonable expenses incurred in forwarding proxy
materials to beneficial owners.
UNITHOLDER PROPOSALS
Neither the Massachusetts Trust nor the Delaware Trust is required, nor does
either intend, to hold annual meetings of Unitholders each year for the elec-
tion of Trustees and other business. Instead, meetings will be held only when
and if required (for example, whenever less than a majority of the Board of
Trustees holding office has been elected by the Unitholders or when the Trust-
ees have received a written request to call a meeting for the purpose of voting
on the question of the removal of any Trustee from the holders of record of at
least 10% of the outstanding Units). Any Unitholders desiring to present a pro-
posal for consideration at the next meeting for Unitholders of their Portfolio
must submit the proposal in writing, so that it is received by the appropriate
Portfolio within a reasonable time before any meeting.
INFORMATION ABOUT DISTRIBUTOR AND ADMINISTRATOR
Goldman, Sachs & Co., the Trust's distributor and administrator, has its
principal offices at 85 Broad Street, New York, New York 10004.
INFORMATION ABOUT THE TRUST
The Trust currently has, and the Delaware Trust will have, its principal of-
fices at 4900 Sears Tower, Chicago, Illinois 60606.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
July 14, 1997
40
<PAGE>
APPENDIX A
As of July 8, 1997, each Portfolio had the following number of Units out-
standing:
<TABLE>
<CAPTION>
OUTSTANDING
PORTFOLIO UNITS
- --------- ----------------
<S> <C>
U.S. Government Securities Portfolio........................... 4,309,424.58
Short-Intermediate Bond Portfolio.............................. 8,580,662.62
U.S. Treasury Index Portfolio.................................. 977,530.90
Bond Portfolio................................................. 21,920,428.63
International Bond Portfolio................................... 1,398,078.52
Balanced Portfolio............................................. 4,245,738.72
Equity Index Portfolio......................................... 45,029,408.47
Diversified Growth Portfolio................................... 9,846,083.13
Focused Growth Portfolio....................................... 7,808,225.45
Small Company Index Portfolio.................................. 8,602,135.91
International Equity Index Portfolio........................... 3,516,992.42
International Growth Portfolio................................. 11,016,326.90
Government Select Portfolio.................................... 1,056,219,907.70
Government Portfolio........................................... 1,128,579,192.20
Diversified Assets Portfolio................................... 3,607,691,776.68
Tax-Exempt Portfolio........................................... 725,814,704.06
</TABLE>
A-1
<PAGE>
APPENDIX B
As of July 8, 1997, The Northern Trust Company, 50 South LaSalle Street,
Chicago, IL 60675, possessed sole or shared voting and/or investment power for
its customer accounts with respect to the outstanding Units of each Portfolio
as follows:
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
---------------------------
AMOUNT OF PERCENTAGE
PORTFOLIO UNITS OF UNITS (%)
- --------- -------------- ------------
<S> <C> <C>
U.S. Government Securities Portfolio................ 556,632.91 12.92
Short-Intermediate Bond Portfolio................... 3,657,854.28 42.63
U.S. Treasury Index Portfolio....................... 291,011.31 29.77
Bond Portfolio...................................... 11,439,984.54 52.19
International Bond Portfolio........................ 1,029,131.37 73.61
Balanced Portfolio.................................. 3,174,609.66 74.77
Equity Index Portfolio.............................. 19,400,356.74 43.08
Diversified Growth Portfolio........................ 7,434,584.16 75.51
Focused Growth Portfolio............................ 4,997,842.35 64.01
Small Company Index Portfolio....................... 5,174,893.21 60.16
International Equity Index Portfolio................ 1,187,087.40 33.75
International Growth Portfolio...................... 7,501,967.10 68.10
Government Select Portfolio......................... 23,860,736.50 2.26
Government Portfolio................................ 50,596,780.49 4.48
Diversified Assets Portfolio........................ 323,352,030.95 8.96
Tax-Exempt Portfolio................................ 36,172,019.64 4.98
</TABLE>
In addition, as of July 8, 1997, the following persons or entities owned
beneficially more than 5% of the outstanding Units of the following Port-
folios:
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING UNITS
-----------------------
AMOUNT OF PERCENTAGE
UNITHOLDER NAME AND ADDRESS UNITS OF UNITS (%)
- --------------------------- ---------- ------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES PORTFOLIO
Electrical Insurance Trust.............................. 540,024.24 12.53
221 North LaSalle Street
Chicago, IL 60601-1273
Illinois State Painters
Welfare Fund........................................... 228,641.91 5.31
303 East Ohio Street
Chicago, IL 60611
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
--------------------------
AMOUNT OF PERCENTAGE OF
UNITHOLDER NAME AND ADDRESS UNITS UNITS (%)
- --------------------------- ------------ -------------
<S> <C> <C>
Schlumberger Limited
Master Profit Sharing Trust......................... 1,803,292.72 41.85
277 Park Avenue
New York, NY 10172
Schlumberger Ltd. Master Pension Trust............... 348,744.67 8.09
277 Park Avenue
New York, NY 10172
Sheet Metal Work H & W Northern...................... 384,986.89 8.93
106 North Schmale Road
Carol Stream, IL 60188
SHORT-INTERMEDIATE BOND PORTFOLIO
U A Local 393
Health and Welfare Fund............................. 468,668.14 5.68
1120 Bascom Avenue
San Jose, CA 95128-3590
U.S. TREASURY INDEX PORTFOLIO
The Accreditation Council for
Graduate Medical Education.......................... 61,266.86 6.27
515 North State Street
Chicago, IL 60610
Herget National Bank of Pekin........................ 76,011.80 7.78
33 South Fourth Street
Pekin, IL 61554
Liberty Healthcare System, Inc.
Jersey City Medical Center.......................... 211,250.93 21.61
50 Baldwin Avenue
Jersey City, NJ 07304
Liberty Healthcare System, Inc.
Jersey City Medical Center.......................... 53,326.49 5.46
50 Baldwin Avenue
Jersey City, NJ 07304
The Old Second National Bank......................... 52,188.72 5.34
37 South River Street
Aurora, IL 60507
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
--------------------------
AMOUNT OF PERCENTAGE OF
UNITHOLDER NAME AND ADDRESS UNITS UNITS (%)
- --------------------------- ------------ -------------
<S> <C> <C>
Purina Mills Inc.
Master Retirement Trust--TBIF....................... 146,061.62 14.94
1401 S. Hanley Road
St. Louis, MO 63144
BOND PORTFOLIO
Americlean Systems Inc.
Salaried Pension Plan............................... 1,175,528.87 5.36
26935 Northwestern Highway
Southfield, MI 48034
The Northern Trust Company
Pension Plan........................................ 1,940,811.96 8.85
50 South LaSalle Street
Chicago, IL 60675
The Northern Trust Company
Thrift Incentive Plan--Fund B....................... 1,415,373.71 6.46
50 South LaSalle Street
Chicago, IL 60675
Phycor, Inc.......................................... 1,725,662.63 7.87
30 Burton Hills Boulevard
Nashville, TN 37215
INTERNATIONAL BOND PORTFOLIO
Doe Run Resources Corp.
Retirement Plan..................................... 175,148.05 12.53
1801 Park 270 Drive, Suite 300
St. Louis, MO 63146
The Northern Trust Company
Pension Plan........................................ 837,739.39 59.92
50 South LaSalle Street
Chicago, IL 60675
Peoples State Bank St. Joseph........................ 108,153.67 7.74
830 Pleasant Street
St. Joseph, MI 49085
BALANCED PORTFOLIO
Jordan Industries.................................... 436,102.63 10.27
50 South LaSalle Street
Chicago, IL 60657
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
--------------------------
AMOUNT OF PERCENTAGE OF
UNITHOLDER NAME AND ADDRESS UNITS UNITS (%)
- --------------------------- ------------ -------------
<S> <C> <C>
Laporte, Inc.
Retirement Plus Program............................. 352,303.64 8.30
Street One Woodlawn Green, Suite 240
Charlotte, NC 28217
The Northern Trust Company
Thrift Plan Balanced Fund........................... 1,390,272.71 32.76
50 South LaSalle Street
Chicago, IL 60675
Tetra Pak Inc........................................ 774,633.72 18.25
52 Vanderbilt Avenue, 13th Floor
New York, NY 10017
EQUITY INDEX PORTFOLIO
Libbey-Owens-Ford Co................................. 3,785,102.98 8.46
811 Madison Avenue, PO Box 799
Toledo, OH 43697-0799
The Northern Trust Company
Pension Plan........................................ 2,664,965.02 5.96
50 South LaSalle Street
Chicago, IL 60675
The Northern Trust Company
Thrift Incentive Plan Fund C........................ 7,975,886.20 17.83
50 South LaSalle Street
Chicago, IL 60675
DIVERSIFIED GROWTH PORTFOLIO
The Northern Trust Company........................... 3,611,053.85 37.08
Pension Plan
50 South LaSalle Street
Chicago, IL 60675
Pension Plan for the Home Office
Employees of Mutual Trust-EQ........................ 501,622.51 5.15
1200 Jorie Boulevard
Oak Brook, IL 60522
FOCUSED GROWTH PORTFOLIO
Doe Run Resources Corp.
Retirement Plan..................................... 1,022,398.20 13.09
1801 Park 270 Dr. Suite 300
St. Louis, MO 63146
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
--------------------------
AMOUNT OF PERCENTAGE OF
UNITHOLDER NAME AND ADDRESS UNITS UNITS (%)
- --------------------------- ------------ -------------
<S> <C> <C>
Kitch Drutchas Wagner and Kenney PC.................. 394,346.25 5.05
50 South LaSalle Street
Chicago, IL 60675
The Northern Trust Company
Thrift Plan Focused Growth Fund..................... 3,342,570.77 42.81
50 South LaSalle Street
Chicago, IL 60675
Rexene Retirement.................................... 478,370.26 6.13
5005 LBJ Freeway/Occidental Tower 500
Dallas, TX 75244
SMALL COMPANY INDEX PORTFOLIO
Doe Run Resources Corp.
Retirement Plan..................................... 587,298.17 6.83
1801 Park 270 Dr. Suite 300
St. Louis, MO 63146
The Northern Trust Company
Pension Plan........................................ 3,042,686.09 35.39
50 South LaSalle Street
Chicago, IL 60675
INTERNATIONAL EQUITY INDEX PORTFOLIO
NI-Gas Investment and Thrift Trust................... 840,154.65 31.46
1844 Perry Road
Naperville, IL 60563
The Northern Trust Pension Plan...................... 1,158,975.90 43.40
50 South LaSalle Street
Chicago, IL 60675
The Northern Trust TIP Plan.......................... 374,184.96 14.01
50 South LaSalle Street
Chicago, IL 60675
Sisters of the Precious Blood........................ 197,211.16 7.39
4000 Denlinger Road
Dayton, OH 45426
INTERNATIONAL GROWTH PORTFOLIO
Indresco............................................. 961,971.51 8.75
2121 San Jacinto Street, Suite 2500
Dallas, TX 75221
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
---------------------------
AMOUNT OF PERCENTAGE OF
UNITHOLDER NAME AND ADDRESS UNITS UNITS (%)
- --------------------------- ------------- -------------
<S> <C> <C>
FNB North Dakota.................................... 914,970.98 8.32
One North Fourth Street
Grand Forks, ND 58201
The Northern Trust Company
Pension Plan....................................... 1,363,888.38 12.40
50 South LaSalle Street
Chicago, IL 60675
Tuthill Corp. Master Retirement Trust............... 673,592.00 6.13
908 Elm Street, Suite 100
Hinsdale, IL 60521
White Cap, Inc...................................... 621,435.48 5.65
1140 31st Avenue
Downers Grove, IL 60515
GOVERNMENT SELECT PORTFOLIO
St. George International
Palos Comm. Hospital............................... 63,854,988.64 5.98
12251 S. 80th Avenue
Palos Hts., IL 60463
Acadia Trust, N.A................................... 55,488,369.77 5.20
511 Congress Street
9th Fl, Trust Dept.
Portland, ME 04101
GOVERNMENT PORTFOLIO
Morton International................................ 60,629,903.43 5.25
100 N. Riverside Plaza
Chicago, Il 60606-1596
TAX-EXEMPT PORTFOLIO
HCI Incorporated--MacKay Shield..................... 46,969,058.71 6.34
1 Park Plaza
BLDG 3--5th Fl.
Nashville, TN 37202-0550
</TABLE>
B-6
<PAGE>
APPENDIX C
AGREEMENT AND PLAN OF
REORGANIZATION, CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION is
made as of the 8th day of July, 1997, by and between The Benchmark Funds, a
Massachusetts business trust (the "Registrant"), on behalf of each of its series
(each a "Portfolio" and collectively the "Portfolios"), and The Benchmark Funds
(the "Trust"), a Delaware business trust.
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1)(F) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and is intended to effect the reorganization (a
"Reorganization") of each Portfolio as a new series of the Trust (each a
"Successor Portfolio" and collectively the "Successor Portfolios"). Each
Reorganization will include the transfer of all of the assets of a Portfolio to
a corresponding Successor Portfolio of the Trust solely in exchange for (1) the
assumption by the Successor Portfolio of all liabilities of the Portfolio and
(2) the issuance by the Trust to the Portfolio of Shares of beneficial interest
(herein referred to as "Units") of the Successor Portfolio. The aggregate number
of Units of each subseries (hereafter "class") of the Successor Portfolio (the
"Successor Portfolio Units") issued to the Portfolio will be equal to the number
of Units of beneficial interest ("Units") of the corresponding Portfolio class
outstanding immediately before the Reorganization. These transactions will be
promptly followed by a pro rata distribution by each Portfolio of the Successor
Portfolio Units it receives in the exchange described above to the holders of
corresponding Portfolio Units in exchange for those Portfolio Units, in
liquidation of each Portfolio, all upon the terms and conditions hereinafter set
forth in this Agreement.
In consideration of the promises and of the covenants and agreements
herein-after set forth, the parties hereto covenant and agree as follows.
1. TRANSFER OF ASSETS OF THE PORTFOLIOS IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SUCCESSOR PORTFOLIO UNITS
1.1 Subject to the terms and conditions set forth herein and on the basis
of the representations and warranties contained herein, each Portfolio agrees to
transfer all of its assets (as described in paragraph 1.2) and to assign and
transfer all of its liabilities to a corresponding Successor Portfolio organized
solely for the purpose of acquiring all of the assets and assuming all of the
liabilities of that Portfolio. The Trust, on behalf of each Successor Portfolio,
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agrees that in exchange for all of the assets of the corresponding Portfolio:
(1) the Successor Portfolio shall assume all of the liabilities of such Port-
folio, whether contingent or otherwise, then existing including, without limi-
tation, all fees and expenses incurred in connection with the transactions
contemplated hereby and (2) the Trust shall issue Successor Portfolio Units to
the Portfolio. The number of Successor Portfolio Units of each class to be is-
sued by the Trust on behalf of each Successor Portfolio will be identical to
the number of Units of the corresponding class and Portfolio outstanding on
the Closing Date provided for in paragraph 3.1. Such transactions shall take
place at the Closing provided for in paragraph 3.1.
1.2 The assets of each Portfolio to be acquired by the corresponding Succes-
sor Portfolio shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable), any tax
operating losses, any claims or rights of action or rights to register Units
under applicable securities laws, any books or records of the Portfolio and
other property owned by the Portfolio and any deferred or prepaid expenses
shown as assets on the books of the Portfolio on the Closing Date provided for
in paragraph 3.1.
1.3 Immediately after delivery to each Portfolio of corresponding Successor
Portfolio Units, a duly authorized officer of Registrant shall cause each
Portfolio, as the sole Unitholder of the corresponding Successor Portfolio, to
(i) elect the Trustees of the Trust; (ii) ratify the selection of the Trust's
independent auditors; (iii) approve an investment advisory agreement for the
Successor Portfolio in substantially the same form as the investment advisory
agreement in effect with respect to the Portfolio immediately prior to the
Closing of the reorganization, including in the case of the International
Growth Portfolio any changes adopted to the Portfolio's investment advisory
agreement at the meeting of Unitholders scheduled for September 2, 1997 (the
"Unitholder Meeting"), and (iv) adopt investment objectives, investment poli-
cies and investment restrictions which are substantially identical to those of
the Portfolio immediately prior to the Closing of the reorganization, includ-
ing any changes thereto approved by the Unitholders of the Portfolio at the
Unitholder Meeting.
1.4 On the Closing Date each Portfolio will distribute in liquidation the
Successor Portfolio Units of each class to each Unitholder of record, deter-
mined as of the close of business on the Closing Date, of the corresponding
class of the Portfolio pro rata in proportion to such Unitholder's beneficial
interest in that class and in exchange for that Unitholder's Units. Such dis-
tribution will be accomplished by the transfer of the Successor Portfolio
Units
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then credited to the account of each Portfolio on the Unit records of the
Trust to open accounts on those records in the names of such Portfolio
Unitholders and representing the respective pro rata number of each class of
the Successor Portfolio Units received from the Successor Portfolios which is
due to such Portfolio Unitholders. Fractional Successor Portfolio Units shall
be rounded to the third place after the decimal point.
1.5 Ownership of the Successor Portfolio Units by each Successor Portfolio
Unitholder shall be recorded separately on the books of The Northern Trust
Company ("Northern Trust"), as the Trust's transfer agent.
1.6 Any transfer taxes payable upon the issuance of Successor Portfolio
Units in a name other than the registered holder of the Portfolio Units on the
books of any Portfolio shall be paid by the person to whom such Successor
Portfolio Units are to be distributed as a condition of such transfer.
1.7 The legal existence of each Portfolio and the Registrant shall be termi-
nated as promptly as reasonably practicable after the Closing Date. After the
Closing Date, each Portfolio and the Registrant shall not conduct any business
except in connection with its liquidation and termination.
2. VALUATION
2.1 The value of each Portfolio's assets to be acquired by the Trust on be-
half of the corresponding Successor Portfolio hereunder shall be the net asset
value computed as of the valuation time provided in the Portfolio's prospec-
tus(es) on the Closing Date using the valuation procedures set
forth in the Portfolio's current prospectus(es) and statement of additional
information.
2.2 The value of full and fractional Successor Portfolio Units of each class
to be issued in exchange for each Portfolio's assets shall be equal to the
value of the net assets of the corresponding class of such Portfolio on the
Closing Date, and the number of such Successor Portfolio Units of each class
shall equal the number of full and fractional Portfolio Units outstanding on
the Closing Date.
2.3 All computations of value shall be made by Northern Trust (the "Custodi-
an"), as custodian for the Portfolios and the Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of each Portfolio's assets in exchange for the assumption
by the corresponding Successor Portfolio of the Portfolio's liabilities and
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the issuance of Successor Portfolio Units to the Portfolio, as described
above, together with related acts necessary to consummate such acts (the
"Closing"), shall occur at the offices of Goldman, Sachs & Co., 4900 Sears
Tower, Chicago, Illinois 60606 on March 31, 1998 ("Closing Date"), or at such
other place or date as the parties may agree in writing.
3.2 At the Closing each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts or other documents as such
other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Registrant represents and warrants, on behalf of itself and each Portfo-
lio, as follows:
4.1.A. At the Closing Date, Registrant, on behalf of the Portfolios,
will have good and marketable title to the assets to be transferred to the
Trust, on behalf of the Successor Portfolios, pursuant to paragraph 1.1,
and will have full right, power and authority to sell, assign, transfer
and deliver such assets hereunder. Upon delivery and in payment for such
assets, the Trust on behalf of the Successor Portfolios will acquire good
and marketable title thereto subject to no restrictions on the full trans-
fer thereof, including such restrictions as might arise under the Securi-
ties Act of 1933, as amended (the "1933 Act");
4.1.B. The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary ac-
tion on the part of Registrant. This Agreement constitutes a valid and
binding obligation of Registrant and each Portfolio enforceable in accor-
dance with its terms, subject to the approval of each Portfolio's
Unitholders;
4.1.C. No consent, approval, authorization or order of any court or gov-
ernmental authority is required for the consummation by the Registrant, on
behalf of the Portfolios, of the transactions contemplated herein, except
such as shall have been obtained prior to the Closing Date; and
4.1.D. The Registrant will file with the Securities and Exchange Commis-
sion ("SEC") proxy materials (the "Proxy Statement") complying in all ma-
terial respects with the requirements of the Securities Exchange Act of
1934, as amended, the 1940 Act, and applicable rules and regulations
thereunder, relating to a meeting of its Unitholders to be called to con-
sider and act upon the transactions contemplated herein.
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4.2 The Trust represents and warrants, on behalf of itself and each Succes-
sor Portfolio, as follows:
4.2.A. Successor Portfolio Units issued in connection with the transac-
tions contemplated herein will be duly and validly issued and outstanding
and fully paid and non-assessable by the Trust;
4.2.B. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Trust, and
this Agreement constitutes a valid and binding obligation of the Trust and
each Successor Portfolio enforceable against the Trust and each Successor
Portfolio in accordance with its terms;
4.2.C. No consent, approval, authorization or order of any court or gov-
ernmental authority is required for the consummation by the Trust or the
Successor Portfolios of the transactions contemplated herein, except such
as shall have been obtained prior to the Closing Date; and
4.2.D The Trust, on behalf of the Successor Portfolios, shall use all
reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such state securities laws as it may deem
appropriate in order to operate after the Closing Date.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT, THE PORTFOLIOS, THE
TRUST AND THE SUCCESSOR PORTFOLIOS
The obligations of Registrant, the Portfolios, the Trust and the Successor
Portfolios are each subject to the conditions that on or before the Closing
Date:
5.1 This Agreement and the transactions contemplated herein shall have been
approved by the Trustees of the Registrant and the Trust and by the requisite
vote of the Registrant's Unitholders in accordance with applicable law;
5.2 All consents of other parties and all other consents, orders and permits
of federal, state and local regulatory authorities (including those of the SEC
and of state securities authorities) deemed necessary by the Trust or Regis-
trant to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain
any such consent, order or permit would not involve a risk of a material ad-
verse effect on the assets or properties of the Trust, Portfolios, Registrant
or Successor Portfolios, provided that either party hereto may waive any of
such conditions for itself or its respective series;
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5.3 The Registrant and the Trust shall have received on or before the Closing
Date an opinion of Drinker Biddle & Reath LLP satisfactory to them, substan-
tially to the effect that for federal income tax purposes:
5.3.A. The acquisition of all of the assets of each Portfolio by its
corresponding Successor Portfolio solely in exchange for the issuance of
Successor Portfolio Units to the Portfolio and the assumption by the Suc-
cessor Portfolio of all of the liabilities of the Portfolio, followed by
the distribution in liquidation by the Portfolio of such Successor Portfo-
lio Units to the Portfolio Unitholders in exchange for their Portfolio
Units and the termination of the Portfolio, will constitute a reorganiza-
tion within the meaning of Section 368(a)(1)(F) of the Code, and the Port-
folio and the Successor Portfolio will each be "a party to a reorganiza-
tion" within the meaning of Section 368(b) of the Code;
5.3.B. No gain or loss will be recognized by any Portfolio upon (i) the
transfer of all of its assets to its corresponding Successor Portfolio
solely in exchange for the issuance of Successor Portfolio Units to the
Portfolio and the assumption by the Successor Portfolio of the Portfolio's
liabilities and (ii) the distribution by the Portfolio of such Successor
Portfolio Units to the Portfolio Unitholders;
5.3.C. No gain or loss will be recognized by any Successor Portfolio
upon its receipt of all of the corresponding Portfolio's assets solely in
exchange for the issuance of the Successor Portfolio Units to the Portfo-
lio and the assumption by the Successor Portfolio of all of the liabili-
ties of the Portfolio;
5.3.D. The tax basis of the assets acquired by a Successor Portfolio
from its corresponding Portfolio will be, in each instance, the same as
the tax basis of those assets in the Portfolio's hands immediately prior
to the transfer;
5.3.E. The tax holding period of the assets of each Portfolio in the
hands of its corresponding Successor Portfolio will, in each instance, in-
clude the Portfolio's tax holding period for those assets;
5.3.F. Each Portfolio's Unitholders will not recognize gain or loss upon
the exchange of all of their Units of the Portfolio solely for Successor
Portfolio Units as part of the transaction;
5.3.G. The tax basis of the Successor Portfolio Units received by Port-
folio Unitholders in the transaction will be, for each Unitholder, the
same as the tax basis of the Portfolio Units surrendered in exchange
therefor; and
5.3.H. The tax holding period of the Successor Portfolio Units received
by Portfolio Unitholders will include, for each Unitholder, the
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tax holding period for the Portfolio Units surrendered in exchange there-
for, provided that such Portfolio Units were held as capital assets on the
date of the exchange.
The Registrant and the Trust each agree to make and provide representations
with respect to the Portfolios and the Successor Portfolios, respectively,
which are reasonably necessary to enable Drinker Biddle & Reath LLP to deliver
an opinion substantially as set forth in this paragraph 5.3, which opinion may
address such other federal income tax consequences, if any, that Drinker Bid-
dle & Reath LLP believes to be material to the Reorganization.
6. BROKERAGE FEES
The Trust, on behalf of the Successor Portfolios, and Registrant, on behalf
of the Portfolios, each represent and warrant to the other that there are no
broker's or finder's fees payable in connection with the transactions contem-
plated hereby.
7. TERMINATION
This Agreement may be terminated by the mutual agreement of the Trust and
Registrant and the parties may abandon the reorganization contemplated hereby,
notwithstanding approval thereof by the Unitholders of the Registrant, at any
time prior to Closing, if circumstances should develop that, in the parties
judgment, make proceeding with the Agreement inadvisable.
8. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; provided, however, that
following the approval of this Agreement by any Portfolio's Unitholders, no
such amendment may have the effect of changing the provisions for determining
the number of Successor Portfolio Units to be paid to that Portfolio's
Unitholders under this Agreement to the detriment of such Portfolio
Unitholders without their further approval. Without limiting the foregoing, in
the event Unitholder approval of this Agreement and the transactions contem-
plated herein is obtained with respect to one or more Portfolios but not with
respect to other Portfolios, with the result that the transactions contem-
plated by this Agreement may be consummated with respect to one or more, but
not all, of the Portfolios, the Board of Trustees of the Registrant may, in
the exercise of its sole and unilateral discretion, determine to either aban-
don this Agreement with respect to all of the Portfolios or direct that the
transactions described herein be consummated to the degree the Board deems ad-
visable and to the degree such transactions may be lawfully effected.
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9. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; SURVIVAL; WAIVER
9.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or inter-
pretation of this Agreement.
9.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
9.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
9.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Nothing herein ex-
pressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and their re-
spective successors and assigns any rights or remedies under or by reason of
this Agreement.
9.5 All persons dealing with the Trust, the Portfolios, Registrant or the
Successor Portfolios must look solely to the property of the Trust, the Port-
folios, Registrant or the Successor Portfolios, respectively, for the enforce-
ment of any claims against the Trust, the Portfolios, Registrant or the Suc-
cessor Portfolios, as neither the Trustees, officers, agents nor Unitholders
of the Trust or Registrant assume any personal liability for obligations en-
tered into on behalf of the Trust or Registrant, respectively. No series of
Registrant or the Trust shall be responsible for any obligations assumed by or
on behalf of any other series of Registrant or the Trust under this Agreement.
9.6 The representations, warranties, covenants and agreements of the parties
contained herein shall not survive the Closing Date, except for the provisions
of Section 1.7.
9.7 The Trust or the Registrant, after consultation with their respective
counsel and by consent of their respective Boards of Trustees, Executive Com-
mittees or an officer authorized by such Boards of Trustees, may waive any
condition to their respective obligations hereunder if, in their or such offi-
cer's judgment, such waiver will not have a material adverse effect on the in-
terests of the Unitholders of the Trust and the Registrant.
10. NOTICES
Any notice, report, statement or demand required or permitted by any provi-
sions of this Agreement shall be in writing and shall be given by prepaid tel-
egraph, telecopy or certified mail addressed to the Registrant or the Trust,
each at Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, At-
tention: Secretary.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer.
[SIGNATURE LINES OMITTED]
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APPENDIX D
THE BENCHMARK FUNDS
INVESTMENT ADVISORY AGREEMENT
(INTERNATIONAL GROWTH PORTFOLIO)
AGREEMENT made this day of , 199 among THE BENCHMARK FUNDS, a
Massachusetts business trust (the "Trust"), THE NORTHERN TRUST COMPANY, an Il-
linois state bank ("Northern"), and RCB Trust Company, a Connecticut state-
chartered trust company ("RCB Trust").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust presently offers Units in a portfolio known as the Inter-
national Growth Portfolio (such Portfolio (the "Current Portfolio") together
with all other portfolios hereafter made subject to this Agreement being
herein collectively referred to as the "Portfolios"); and
WHEREAS, the Trust desires to retain Northern and RCB Trust (the "Advisers")
to render investment advisory services to the Current Portfolio as indicated
below and the Advisers are willing to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants here-
inafter set forth, the parties hereto agree as follows:
1. Appointment of Advisers.
(a) The Trust hereby appoints the Advisers to act as investment ad-
visers to the Current Portfolio for the period and on the terms herein
set forth. The Advisers hereby accept such appointment and agree to
render the services herein set forth for the compensation herein pro-
vided.
(b) In the event that the Trust establishes one or more portfolios
other than the Current Portfolio with respect to which it desires to
retain the Advisers to act as investment advisers hereunder, it shall
notify the Advisers in writing. If the Advisers are willing to
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render such services under this Agreement they shall notify the Trust
in writing whereupon such portfolio shall become a Portfolio hereunder
and shall be subject to the provisions of this Agreement to the same
extent as the Current Portfolio except to the extent that said provi-
sions (including those relating to the compensation payable by the
Trust to the Advisers) are modified with respect to such Portfolio in
writing by the Trust and the Advisers at the time.
2. Delivery of Documents. The Trust has delivered (or will deliver as
soon as is possible) to the Advisers copies of each of the following docu-
ments:
(a) Agreement and Declaration of Trust dated as of July 15, 1982,
together with all Amendments thereto (such Agreement and Declaration
of Trust, as presently in effect and as amended from time to time, is
herein called the "Trust Agreement"), copies of which are also on file
with the Secretary of The Commonwealth of Massachusetts;
(b) By-Laws of the Trust (such By-Laws, as presently in effect and
as amended from time to time, are herein called the "By-Laws");
(c) Administration Agreement between the Trust and its
Administrator;
(d) Distribution Agreement between the Trust and its
Distributor;
(e) Custodian Agreement between the Trust and its Custodian;
(f) Transfer Agency Agreement between the Trust and its Transfer
Agent;
(g) The Trust's Unitholder Servicing Plan and related
Servicing Agreements;
(h) Prospectus and Statement of Additional Information for the Cur-
rent Portfolio (such Prospectus and Statement of Additional Informa-
tion, as presently in effect and as amended, supplemented and/or su-
perseded from time to time, is herein called the "Prospectus" and
"Statement of Additional Information," respectively); and
(i) Post-Effective Amendment No. 34 to the Trust's Registration
Statement on Form N-1A (No. 2-80543) under the Securities Act of 1933
(the "1933 Act") and Amendment No. 35 to the Trust's Registration
Statement on such form (No. 811-3605) under the 1940 Act filed as a
single document with the Securities and Exchange Commission (the "Com-
mission") (such Registration
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Statement, as presently in effect and as amended from time to time, is
herein called the "Registration Statement").
The Trust agrees to promptly furnish the Advisers from time to time with
copies of all amendments of or supplements to or otherwise current ver-
sions of any of the foregoing documents not heretofore furnished.
3. Duties of Advisers and Delegation.
(a) Subject to the general supervision of the Trustees of the Trust,
the Advisers shall provide for the management of the investment opera-
tions of a Portfolio and the composition of a Portfolio's assets, in-
cluding the purchase, retention and disposition thereof. In this re-
gard, the Advisers shall provide for:
(i) a continuous investment program for a Portfolio, the deter-
mination from time to time of which investments or securities will
be purchased, retained or sold by a Portfolio and which portion of
the assets will be invested or held uninvested as cash, and the
supervision of a Portfolio's assets; and
(ii) the placement of orders for a Portfolio either directly
with the issuer or with any broker and/or dealer or other persons
who deal in the securities in which the Portfolio in question is
dealing. Any person executing portfolio transactions or selecting
brokers or dealers for a Portfolio shall use its best judgment to
obtain the best overall terms available. In assessing the best
overall terms available for any transaction, all factors deemed
relevant may be considered, including the breadth of the market in
the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasona-
bleness of the commission, if any, both for the specific transac-
tion and on a continuing basis. In evaluating the best overall
terms available and in selecting the broker or dealer to execute a
particular transaction, the brokerage and research services (as
those terms are defined in section 28(e) of the Securities Ex-
change Act of 1934) provided to the Portfolio and/or other ac-
counts over which an Adviser, sub-adviser and/or affiliate exer-
cises investment discretion may be considered. In addition, any
person executing portfolio transactions may, when it deems the
purchase or sale of a security to be in the best interests of a
Portfolio as well as other fiduciary or agency accounts managed by
it, aggregate, to the extent permitted by applicable laws and reg-
ulations, the securities to be sold or purchased in order to ob-
tain best overall
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<PAGE>
terms available execution. In such event, allocation of the secu-
rities so purchased or sold, as well as the expenses incurred in
the transaction, will be made in the manner considered to be most
equitable and consistent with the fiduciary obligations owed to
the Portfolio and to such other accounts.
(b) The Advisers shall perform their duties under this Agreement ei-
ther by taking such actions themselves or by delegating some or all of
their duties to one or more sub-advisers pursuant to a written sub-ad-
visory agreement or agreements. Each such sub-advisory agreement shall
be approved by the Board of Trustees of the Trust and the unitholders
of the Portfolio in accordance with and to the extent required by the
1940 Act or any rule or order of the SEC. The Advisers will be solely
responsible for payment of any fees, compensation or expenses to any
such sub-adviser under any such sub-advisory agreement, and a Portfo-
lio shall have no liability therefor. Notwithstanding the delegation
of any of their duties to any sub-adviser, the Advisers, subject to
review and approval by the Board of Trustees of the Trust, shall:
(i) set a Portfolio's overall investment strategies;
(ii) monitor and evaluate the performance of sub-advisers;
(iii) recommend to the Board of Trustees whether an agreement
with any proposed or current sub-adviser should be approved, modi-
fied or terminated;
(iv) as deemed appropriate by the Advisers, allocate and re-al-
locate a Portfolio's assets among sub-advisers; and
(v) oversee compliance by a Portfolio's sub-advisers with the
Portfolio's investment objective, policies and restrictions.
4. Other Covenants.
(a) The Advisers, in connection with their rights and duties with
respect to a Portfolio,
(i) shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a
like capacity and familiar with such matters would use in the con-
duct of an enterprise of a like character and with like aims; and
(ii) shall act in conformity with the Trust Agreement, By-Laws,
Registration Statement, Prospectus and Statement of
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Additional Information and the instructions and directions of the
Trustees of the Trust, and will use their best efforts to comply
with and conform to the requirements of the 1940 Act and all other
applicable federal and state laws, regulations and
rulings.
(b) The Advisers shall:
(i) comply with all applicable Rules and Regulations of the SEC
and will in addition conduct their activities under this Agreement
in accordance with other applicable law; and
(ii) maintain a policy and practice of conducting their invest-
ment advisory services hereunder independently of the commercial
banking operations of Northern and any of its affiliated banks.
When investment recommendations are made for a Portfolio, the in-
vestment advisory personnel will not inquire or take into consid-
eration whether the issuer of securities proposed for purchase or
sale for the Portfolio's account are customers of the commercial
banking department of Northern or any of its affiliated banks.
(c) The Advisers shall not, unless permitted by the SEC:
(i) permit a Portfolio to execute transactions with the Advisers
or Goldman, Sachs & Co.; or
(ii) permit a Portfolio 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 sub-
sidiaries or affiliates.
(d) The Advisers shall render to the Trustees of the Trust such pe-
riodic and special reports as the Trustees may reasonably request.
(e) The services of the Advisers hereunder are not deemed exclusive
and the Advisers shall be free to render similar services to others
(including other investment companies) so long as their services under
this Agreement are not impaired thereby.
5. Expenses. During the term of this Agreement, the Advisers shall pay
all costs incurred by them in connection with the performance of their du-
ties under this Agreement, other than the cost (including taxes, brokerage
commissions and other transactions costs, if any) of securities purchased
or sold for a Portfolio.
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6. Compensation.
(a) For the services provided and the expenses assumed by the Advis-
ers pursuant to this Agreement with respect to the Current Portfolio,
the Trust shall pay as full compensation therefor an aggregate fee to
the Advisers at an annual rate of 1.00% of the Current Portfolio's av-
erage net assets.
(b) The fee shall be computed based on net assets on each day and
shall be paid to the Advisers monthly. Such fee as is attributable to
a Portfolio shall be a separate charge to the Portfolio and shall be
the several (and not joint or joint and several) obligation of the
Portfolio.
7. Books and Records. The Advisers agree to maintain, and preserve for
the periods prescribed by Rule 31a-2 of the Commission under the 1940 Act,
such records as are required to be maintained by Rule 31a-1 of the Commis-
sion under the 1940 Act (other than clause (b)(4) and paragraphs (c), (d)
and (e) thereof). The Advisers further agree that all records which they
maintain for the Trust are the property of the Trust and they shall sur-
render promptly to the Trust any of such records upon the Trust's request.
8. Indemnification.
(a) The Trust hereby agrees to indemnify and hold harmless the Ad-
visers, their directors, officers, and employees and each person, if
any, who controls either of them (collectively, the "Indemnified Par-
ties") against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject un-
der the 1933 Act, the Securities Exchange Act of 1934 or other federal
or state statutory law or regulation, at common law or otherwise, in-
sofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a mate-
rial fact or any omission or alleged omission to state a material
fact required to be stated or necessary to make the statements
made not misleading in the Registration Statement, the Prospectus,
the Statement of Additional Information, or any application or
other document filed in connection with the qualification of the
Trust or Units of the Trust under the Blue Sky or securities laws
of any jurisdiction ("Application"), except insofar as such loss-
es, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any such untrue statement or omis-
sion or alleged untrue statement or omission either pertaining to
a breach of the Advisers' du-
D-6
<PAGE>
ties in connection with this Agreement or made in reliance upon
and in conformity with information furnished by, through or on be-
half of the Advisers for use in connection with the Registration
Statement, any Application, the Prospectus or the Statement of Ad-
ditional Information; or
(ii) subject to clause (i) above, the Advisers acting in accor-
dance with the terms hereof;
and the Trust shall reimburse each Indemnified Party for any legal or
other expense incurred by such Indemnified Party in connection with
investigating or defending any such loss, claim, damages, liability or
action.
(b) If the indemnification provided for in paragraph 8(a) is due in
accordance with the terms of such paragraph but is for any reason held
by a court to be unavailable from the Trust, then the Trust shall con-
tribute to the aggregate amount paid or payable by the Trust and the
Indemnified Parties as a result of such losses, claims, damages or li-
abilities (or actions in respect thereof) in such proportion as appro-
priate to reflect (i) the relative benefits received by the Trust and
such Indemnified Parties in connection with the operation of the
Trust, (ii) the relative fault of the Trust and such Indemnified Par-
ties, and (iii) any other relevant equitable considerations. The Trust
and the Advisers agree that it would not be just and equitable if con-
tribution pursuant to this subparagraph (b) were determined by pro
rata allocation or other method of allocation which does not take ac-
count of the equitable considerations referred to above in this sub-
paragraph (b). The amount paid or payable as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) re-
ferred to above in this subparagraph (b) shall be deemed to include
any legal or other expense incurred by the Trust and the Indemnified
Parties in connection with investigating or defending any such loss,
claim, damage, liability or action. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(c) It is understood, however, that nothing in this paragraph 8
shall protect any Indemnified Party against, or entitle any Indemni-
fied Party to indemnification against, or contribution with respect
to, any liability to the Trust or its Unitholders to which such Indem-
nified Party is subject, by reason of its willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by rea-
son of a reckless disregard to its obligations and duties, under
D-7
<PAGE>
this Agreement or otherwise, to an extent or in a manner inconsis-
tent with Section 17 of the 1940 Act.
9. Duration and Termination. Insofar as the holders of Units represent-
ing the interests in the Current Portfolio are affected by this Agree-
ment, it shall continue, unless sooner terminated as provided herein, un-
til April 30 of the year following the year first above written, and, in-
sofar as the holders of Units representing the interests in each of the
other Portfolios are affected by this Agreement, it (as supplemented by
the terms specified in any notice and agreement pursuant to paragraph
1(b) hereof) shall continue (assuming approval by the initial holder(s)
of Units of such Portfolio) until April 30 of the year following the year
in which the Portfolio becomes a Portfolio hereunder, and with respect to
each Portfolio thereafter shall continue automatically for periods of one
year so long as each such latter continuance is approved at least annu-
ally (a) by the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons (as defined by the
1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Trustees of the Trust
or by vote of a majority of the outstanding Units (as defined with re-
spect to voting securities in the 1940 Act) representing the interests in
such Portfolio; provided, however, that this Agreement may be terminated
by the Trust as to any Portfolio at any time, without the payment of any
penalty, by vote of a majority of the Trustees of the Trust or by vote of
a majority of the outstanding Units (as so defined) representing the in-
terests in the Portfolio affected thereby on 60 days' written notice to
the Advisers, or by the Advisers at any time, without the payment of any
penalty, on 60 days' written notice to the Trust. This Agreement shall
automatically and immediately terminate in the event of its assignment
(as defined by the 1940 Act).
10. Name of the Trust. Northern agrees that the name "The Benchmark"
may be used in the name of each Portfolio and that such name, any related
logos and any service marks containing the words "The Benchmark" may be
used in connection with the Portfolio's business only for so long as this
Agreement (including any continuance or amendment hereof) remains in ef-
fect and that such use shall be royalty free. At such time as this Agree-
ment shall no longer be in effect, each Portfolio shall cease such use.
The Trust acknowledges that it has no rights to the name "The Benchmark,"
such logos or service marks other than those granted in this paragraph
and that Northern reserves to itself the right to grant the nonexclusive
right to use the name "The Benchmark," such logos or service marks to any
other person, including, but not limited to, another investment company.
D-8
<PAGE>
11. Status of Advisers as Independent Contractors. The Advisers shall
for all purposes herein be deemed to be independent contractors and
shall, unless otherwise expressly provided herein or authorized by the
Trustees of the Trust from time to time, have no authority to act for or
represent the Trust in any way or otherwise be deemed agents of the
Trust.
12. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved (a) by vote of a
majority of those Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on
such amendment, and (b) by vote of a majority of the outstanding Units
(as defined with respect to voting securities by the 1940 Act) represent-
ing the interests in each Portfolio affected by such amendment.
13. Unitholder Liability. This Agreement is executed by or on behalf of
the Trust with respect to each Portfolio and the obligations hereunder
are not binding upon any of the Trustees, officers or Unitholders of the
Trust individually but are binding only upon the Trust and its assets and
property. All obligations of the Trust under this Agreement shall apply
only on a Portfolio-by-Portfolio basis, and the assets of one Portfolio
shall not be liable for the obligations of another Portfolio.
14. Miscellaneous. The Trust's Declaration of Trust as amended to date
is on file with the Secretary of The Commonwealth of Massachusetts. The
captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or oth-
erwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be construed in accordance with applicable federal
law and (except as to paragraph 13 hereof which shall be construed in ac-
cordance with the laws of The Commonwealth of Massachusetts) the laws of
the State of Illinois and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors (subject to
the last sentence of paragraph 9) and, to the extent provided in para-
graph 8 hereof, each Indemnified Party. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to
impose any duty upon, any party to do anything in violation of any appli-
cable laws or regulations. Any provision in this Agreement requiring com-
pliance with any statute or regulation shall mean such statute or regula-
tion as amended and in effect from time to time.
D-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be ex-
ecuted as of the day and year first above written.
[SIGNATURES AND SEALS OMITTED]
D-10
<PAGE>
APPENDIX E
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF NORTHERN TRUST AS OF JUNE 30,
1997:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION (IF
OTHER
THAN OCCUPATION AS
POSITION WITH OFFICER AND/OR DIRECTOR
NAME NORTHERN TRUST OF NORTHERN TRUST)
- ---- -------------- ------------------------
<S> <C> <C>
Gregg D. Behrens Executive Vice N/A
President
J. David Brock Executive Vice N/A
President
Duane L. Burnham Director Chairman and Chief
Executive Officer,
Abbott Laboratories
Dolores E. Cross Director President, Chicago State
University
Susan Crown Director Vice President, Henry
Crown and Company
Robert S. Hamada Director Professor of Finance and
Dean, The University of
Chicago Graduate School
of Business
Barry G. Hastings President, Chief President, Chief
Operating Officer Operating Officer and
and Director Director, Northern Trust
Corporation
Robert A. Helman Director Partner, Mayer Brown &
Platt
Arthur L. Kelly Director Managing Partner, KEL
Enterprises Ltd.
Frederick A. Krehbiel Director Chairman and Chief
Executive Officer, Molex
Incorporated
John V.N. McClure Executive Vice N/A
President
James J. Mitchell Executive Vice Executive Vice President,
President Northern Trust
Corporation
William G. Mitchell Director Retired Vice Chairman,
Centel Corporation;
Director, The Interlake
Corporation and The
Sherwin-Williams Co.
Edward J. Mooney Director Chairman, Chief Executive
Officer and President,
Nalco Chemical Company
J. Terrance Murray Executive Vice N/A
President
William A. Osborn Chairman and Chief Chairman and Chief
Executive Officer Executive Officer,
Northern Trust
Corporation
Sheila A. Penrose Executive Vice Executive Vice President,
President Northern Trust
Corporation
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION (IF
OTHER
THAN OCCUPATION AS
POSITION WITH OFFICER AND/OR DIRECTOR
NAME NORTHERN TRUST OF NORTHERN TRUST)
- ---- -------------- ------------------------
<S> <C> <C>
Perry R. Pero Senior Executive Senior Executive Vice
Vice President President and Chief
and Chief Financial Officer,
Financial Northern Trust
Officer Corporation
Peter L. Rossiter Executive Vice Executive Vice
President, President, General
General Counsel Counsel and Secretary,
and Secretary Northern Trust
Corporation
Harold B. Smith Director Chairman of the
Executive Committee,
Illinois Tool Works
Inc.
William D. Smithburg Director Chairman, President and
Chief Executive
Officer, The Quaker
Oats Company
James M. Snyder Executive Vice Executive Vice
President President, Northern
Trust Corporation
Mark Stevens Executive Vice Executive Vice
President President, Northern
Trust Corporation
Bide L. Thomas Director Retired President,
Commonwealth Edison;
Director, R.R.
Donnelley & Sons
Company and MYR Group
Inc.
William S. Trukenbrod Executive Vice Executive Vice
President President, Northern
Trust Corporation
Jeffrey H. Wessel Executive Vice N/A
President
</TABLE>
E-2
<PAGE>
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF RCB TRUST AS OF JUNE 30, 1997:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION (IF
OTHER
THAN OCCUPATION AS
POSITION WITH OFFICER AND/OR DIRECTOR
NAME RCB TRUST OF RCB TRUST)
- ---- ------------- ------------------------
<S> <C> <C>
Edgar W. Barksdale, Jr. Chairman, President, Chief
President and Executive Officer and
Chief Executive Director, Northern Trust
Officer Global Advisors, Inc.
("NTGA")
William H. Clarkin Executive Vice Executive Vice President,
President NTGA
Harold B. Finn III Director Partner, Finn Dixon &
Herling LLP
Marilyn R. Freeman Executive Vice Executive Vice President,
President NTGA
William L. Green Executive Vice Executive Vice President,
President NTGA
George F. Keane Director Retired Chief Executive
Officer, Endowment
Advisers and The Common
Fund; Chairman, Trigen
Energy; Director,
Nicholas-Applegate
Investment Trust, The
Bramwell Funds and The
Universal Bond Fund;
Advisor, Associated
Energy Managers; Member,
Investment Advisory
Committee of the New
York State Common
Retirement Fund;
Chairman, Investment
Committee of the United
Negro College Fund and
School, College and
University Underwriters,
Ltd.
Elizabeth A. Knope Executive Vice Executive Vice President,
President NTGA
David M. Mace Executive Vice Executive Vice President,
President NTGA
John J. Mackowski Director Retired Chairman and
Chief Executive Officer,
Atlantic Mutual
Companies of New York;
Director, Transatlantic
Holdings Inc. and F.W.
Woolworth Company
Eugene P. Markowski Director, Director, Executive Vice
Executive Vice President, Treasurer,
President, Secretary, Chief
Comptroller, Financial Officer and
Treasurer, Chief Operating Officer,
Secretary, Chief NTGA
Financial Officer
and Chief
Operating Officer
Robert J. Russell Executive Vice Executive Vice President,
President NTGA
</TABLE>
E-3
<PAGE>
THE BENCHMARK FUNDS
[Fund Name]
This proxy is solicited on behalf of the Board of Trustees of The Benchmark
Funds for the Special Meeting of Unitholders (the "Meeting") to be held on
September 2, 1997. The undersigned hereby appoints Nancy Mucker, John Mosior and
Michael Richman, and each of them, attorneys and proxies for the undersigned,
with full power of substitution and revocation to represent the undersigned and
to vote on behalf of the undersigned all Units of the above-named investment
portfolio of The Benchmark Funds which the undersigned holds of record on July
8, 1997 and is entitled to vote at the Meeting to be held at the offices of
Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois, 60606 on September 2,
1997, at 9:30 a.m., Central Standard Time, and at any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of the Special Meeting of
Unitholders and accompanying Proxy Statement and hereby instructs said attorneys
and proxies to vote said Units as indicated hereon. In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the Meeting. A majority of the proxies present and acting at the Meeting
in person or by substitute (or, if only one shall be present, then that one)
shall have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
PLEASE SIGN AND DATE THE PROXY CARD, RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION. Place the ballot so that the
return address, located on the reverse side of the mail-in stub, appears through
the window of the envelope.
Please indicate your vote by an "X" in the appropriate box on the reverse side.
This proxy, if properly executed, will be voted in the manner directed by the
Unitholder. If no direction is made, this proxy will be voted FOR all
Proposals. Please refer to the Proxy Statement for a discussion of the
Proposals.
THE BENCHMARK FUNDS
PROXY SERVICES
P.O. BOX 9139
FARMINGDALE, NY 11735
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [x]
BENCHM
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
For Withhold For All Except
All All
Vote on Directors
1. Election of eight Trustees. [_] [_] [_]
Richard G. Cline, Edward J. Condon, John W. English,
James J. Gavin, Jr., Sandra P. Guthman, Frederick T.
Kelsey, William H. Springer, Richard P. Strubel
INSTRUCTION:
To withhold authority to vote,
mark "For All Except" and
write the nominee's name
on the line below.
- -----------------------------
Vote on Proposals For Against Abstain
2. Ratification of the selection [_] [_] [_]
and Ernst & Young LLP as
the independent auditors of
the Trust for the fiscal year
ending November 30, 1997.
3. Approval of an Agreement [_] [_] [_]
and Plan of Reorganization.
4a. Approval of a new [_] [_] [_]
fundamental investment
policy regarding investments
in other investment company
securities.
4b. Approval of related [_] [_] [_]
amendment to the Trust's
Declaration of Trust.
5. Approval of amendment to [_] [_] [_]
fundamental investment
restriction on issuer
diversification. (Each
Portfolio except
International Bond
Portfolio.)
6. Approval of a new [_] [_] [_]
investment advisory
agreement with The
Northern Trust Company
and RCB Trust Company, a
subsidiary of Northern
Trust Global Advisors,
Inc., which will allow the
International Growth
Portfolio to implement a
"manager of managers"
structure and enter into
sub-advisory agreements in
the future without obtaining
further Unitholder
approval. (International Growth
Portfolio only.)
<PAGE>
Please sign exactly as your name appears on this proxy. If joint owners,
EITHER may sign this proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your
full title.
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Signature [Please Sign Within Box] Date
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Signature [Joint Owners] Date
