<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
BALANCED PORTFOLIO
EQUITY INDEX PORTFOLIO
DIVERSIFIED GROWTH PORTFOLIO
FOCUSED GROWTH PORTFOLIO
SMALL COMPANY INDEX PORTFOLIO
INTERNATIONAL EQUITY INDEX PORTFOLIO
INTERNATIONAL GROWTH PORTFOLIO
This Statement of Additional Information (the "Additional Statement")
dated April 1, 1997 is not a prospectus. This Additional Statement should be
read in conjunction with the Prospectus for the Balanced Portfolio, Equity Index
Portfolio, Diversified Growth Portfolio, Focused Growth Portfolio, Small Company
Index Portfolio, International Equity Index Portfolio and International Growth
Portfolio (the "Portfolios") of The Benchmark Funds (the "Prospectus") dated
April 1, 1997. Copies of the Prospectus may be obtained without charge by
calling Goldman, Sachs & Co. ("Goldman Sachs") toll-free at 1-800-621-2550
(outside Illinois) or by writing to the address stated above. Capitalized terms
not otherwise defined have the same meaning as in the Prospectus.
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INDEX
Page
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ADDITIONAL INVESTMENT INFORMATION B-4
Investment Objectives and Policies B-4
Investment Restrictions B-19
ADDITIONAL TRUST INFORMATION B-22
Trustees and Officers B-22
Investment Adviser, Transfer Agent and Custodian B-28
Portfolio Transactions B-35
Administrator and Distributor B-39
Unitholder Servicing Plan B-42
Counsel and Auditors B-44
In-Kind Purchases B-44
PERFORMANCE INFORMATION B-44
TAXES B-52
General B-55
Taxation of Certain Financial Instruments B-56
Foreign Investors B-57
Conclusion B-58
DESCRIPTION OF UNITS B-58
OTHER INFORMATION B-63
FINANCIAL STATEMENTS B-63
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APPENDIX A (Description of Bond Ratings) 1-A
APPENDIX B (Futures Contracts) 1-B
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS ADDITIONAL STATEMENT OR IN THE PROSPECTUS
IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIOS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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ADDITIONAL INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the investment objectives and policies of
the Balanced, Equity Index, Diversified Growth, Focused Growth, Small Company
Index, International Equity Index, and International Growth Portfolios of The
Benchmark Funds (the "Trust") as set forth in the Prospectus.
Warrants. The Balanced, Diversified Growth, Focused Growth, Small
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Company Index, International Equity Index and International Growth Portfolios
may purchase warrants and similar rights, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. The purchase of warrants involves the risk that a Portfolio could lose
the purchase value of a warrant if the right to subscribe to additional shares
is not exercised prior to the warrant's expiration. Also, the purchase of
warrants involves the risk that the effective price paid for the warrant added
to the subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security. A Portfolio will not invest more than 5% of
its total assets, taken at market value, in warrants. Warrants acquired by a
Portfolio in units or attached to other securities are not subject to this
restriction.
U.S. Government Obligations. Examples of types of U.S. Government
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obligations that may be acquired by the Portfolios includes U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, and the Maritime
Administration.
Foreign Securities. Unanticipated political or social developments
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may also affect the value of a Portfolio's investments in emerging market
countries and the availability to a Portfolio of additional investments in those
countries. The small size and inexperience of the securities markets in certain
of such countries and the limited volume of trading in securities in those
countries may make a Portfolio's investments in such countries illiquid and more
volatile than investments in Japan or most Western European countries, and a
Portfolio may be required to establish special custodial or other arrangements
before
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making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
such countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers.
Investors should understand that the expense ratios of the International Equity
Index and International Growth Portfolios can be expected to be higher than
those funds investing primarily in domestic securities. The costs attributable
to investing abroad are usually higher for several reasons, such as the higher
cost of investment research, higher cost of custody of foreign securities,
higher commissions paid on comparable transactions on foreign markets and
additional costs arising from delays in settlements of transactions involving
foreign securities.
Foreign Currency Transactions. In order to protect against a possible
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loss on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Balanced, Diversified Growth, Focused Growth,
International Equity Index and International Growth Portfolios are authorized to
enter into forward currency exchange contracts. These contracts involve an
obligation to purchase or sell a specified currency at a future date at a price
set at the time of the contract. Forward currency contracts do not eliminate
fluctuations in the values of portfolio securities but rather allow a Portfolio
to establish a rate of exchange for a future point in time.
When entering into a contract for the purchase or sale of a security,
a Portfolio may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When Northern anticipates that a particular foreign currency may
decline substantially relative to the U.S. dollar or other leading currencies,
in order to reduce risk, a Portfolio may enter into a forward contract to sell,
for a fixed amount, the amount of foreign currency approximating the value of
some or all of the Portfolio's securities denominated in such foreign currency.
Similarly, when the securities held by a Portfolio create a short position in a
foreign currency, the Portfolio may enter into a forward contract to buy, for a
fixed amount, an amount of foreign currency approximating the short position.
With respect to any forward foreign currency contract, it will not generally be
possible to match precisely the amount covered by that contract and the value of
the securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is entered
into and the date it matures. In addition, while forward contracts may offer
protection from losses resulting from
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declines or appreciation in the value of a particular foreign currency, they
also limit potential gains which might result from changes in the value of such
currency. A Portfolio may also incur costs in connection with forward foreign
currency exchange contracts and conversions of foreign currencies and U.S.
dollars.
In addition, with respect to the International Equity Index and
International Growth Portfolios, Northern may purchase or sell forward foreign
currency exchange contracts to seek to increase total return.
A separate account consisting of liquid assets equal to the amount of
a Portfolio's assets that could be required to consummate forward contracts will
be established with the Portfolios' custodian except to the extent the contracts
are otherwise "covered." For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market or
fair value. If the market or fair value of such securities declines, additional
cash or securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by the Portfolio. A forward
contract to sell a foreign currency is "covered" if a Portfolio owns the
currency (or securities denominated in the currency) underlying the contract, or
holds a forward contract (or call option) permitting the Portfolio to buy the
same currency at a price that is (i) no higher than the Portfolio's price to
sell the currency or (ii) greater than the Portfolio's price to sell the
currency provided the difference is maintained by the Portfolio in liquid assets
in a segregated account with its custodian. A forward contract to buy a foreign
currency is "covered" if a Portfolio holds a forward contract (or call option)
permitting the Portfolio to sell the same currency at a price that is (i) as
high as or higher than the Portfolio's price to buy the currency or (ii) lower
than the Portfolio's price to buy the currency provided the difference is
maintained by the Portfolio in liquid assets in a segregated account with its
custodian.
Options. Each Portfolio may buy put options and buy call options and
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write covered call and secured put options. Such options may relate to
particular securities, foreign and domestic stock indices, financial
instruments, or foreign currencies and may or may not be listed on a domestic or
foreign securities exchange or issued by the Options Clearing Corporation.
Options trading is a highly specialized activity which entails greater than
ordinary investment risk. Options on particular securities may be more volatile
than the underlying instruments, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying instruments themselves.
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The Portfolios will write call options only if they are "covered." In
the case of a call option on a security or currency, the option is "covered" if
a Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities held by it. For a call option on an
index, the option is covered if a Portfolio maintains with its custodian a
portfolio of securities substantially replicating the movement of the index, or
liquid assets equal to the contract value. A call option is also covered if a
Portfolio holds a call on the same security, currency or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written provided the difference is maintained by the Portfolio in
liquid assets in a segregated account with its custodian. The Portfolios will
write put options only if they are "secured" by liquid assets maintained in a
segregated account by the Portfolios' custodian in an amount not less than the
exercise price of the option at all times during the option period.
A Portfolio's obligation to sell a security subject to a covered call
option written by it, or to purchase a security or currency subject to a secured
put option written by it, may be terminated prior to the expiration date of the
option by the Portfolio's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying security or currency, exercise price and expiration date) as the
option previously written. Such a purchase does not result in the ownership of
an option. A closing purchase transaction will ordinarily be effected to
realize a profit on an outstanding option, to prevent an underlying security or
currency from being called, to permit the sale of the underlying security or
currency or to permit the writing of a new option containing different terms on
such underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the original
option, in which event the Portfolio will have incurred a loss in the
transaction. There is no assurance that a liquid secondary market will exist
for any particular option. An option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security or
currency (in the case of a covered call option) or liquidate the segregated
account (in the case of a secured put option) until the option expires or the
optioned security or currency is delivered upon exercise with the result that
the writer in such circumstances will be subject to the risk of market decline
or appreciation in the security or currency during such period.
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When a Portfolio purchases an option, the premium paid by it is
recorded as an asset of the Portfolio. When the Portfolio writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Portfolio is included in the liability section of the Portfolio's statement
of assets and liabilities as a deferred credit. The amount of this asset or
deferred credit will be subsequently marked-to-market to reflect the current
value of the option purchased or written. The current value of the traded
option is the last sale price or, in the absence of a sale, the current bid
price. If an option purchased by the Portfolio expires unexercised the
Portfolio realizes a loss equal to the premium paid. If the Portfolio enters
into a closing sale transaction on an option purchased by it, the Portfolio will
realize a gain if the premium received by the Portfolio on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by the Portfolio expires on the stipulated
expiration date or if the Portfolio enters into a closing purchase transaction,
it will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option written by the
Portfolio is exercised, the proceeds of the sale will be increased by the net
premium originally received and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain
options. For example, there are significant differences between the securities,
currency and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on a national securities exchange
("Exchange") may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities or currencies;
unusual or unforeseen circumstances may interrupt normal operations on an
Exchange; the facilities of an Exchange or the Options Clearing Corporation may
not at all times be adequate to handle current trading value; or one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by the Options Clearing Corporation as a result of
trades on that Exchange would continue to be exercisable in accordance with
their terms.
B-8
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Supranational Bank Obligations. The Balanced Portfolio may invest in
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obligations of supranational banks. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the World
Bank). Obligations of supranational banks may be supported by appropriated but
unpaid commitments of their member countries and there is no assurance that
these commitments will be undertaken or met in the future.
Stripped Securities. The Balanced Portfolio may purchase stripped
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securities. The Treasury Department has facilitated transfers of ownership of
zero coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." The
Portfolio may purchase securities registered in the STRIPS program. Under the
STRIPS program, the Portfolio will be able to have its beneficial ownership of
zero coupon securities recorded directly in the book-entry record-keeping system
in lieu of having to hold certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
In addition, the Balanced Portfolio may acquire U.S. Government
obligations and their unmatured interest coupons that have been separated
("stripped") by their holder, typically a custodian bank or investment brokerage
firm. Having separated the interest coupons from the underlying principal of
the U.S. Government obligations, the holder will resell the stripped securities
in custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on
Treasury Securities" ("CATS"). The stripped coupons are sold separately from
the underlying principal, which is usually sold at a deep discount because the
buyer receives only the right to receive a future fixed payment on the security
and does not receive any rights to periodic interest (cash) payments. The
underlying U.S. Treasury bonds and notes themselves are held in book-entry form
at the Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are ostensibly owned by the bearer or holder), in
trust on behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S. Treasury securities have
stated that, in their opinion, purchasers of the stripped securities most likely
will be deemed the beneficial holders of the underlying U.S. Government
obligations for Federal tax purposes. The Trust is not aware of any binding
legislative, judicial or administrative authority on this issue.
B-9
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The Prospectus discusses other types of stripped securities that may
be purchased by the Portfolio, including stripped mortgage-backed securities
("SMBS"). SMBS are usually structured with two or more classes that receive
different proportions of the interest and principal distributions from a pool of
mortgage-backed obligations. A common type of SMBS will have one class receiving
all of the interest, while the other class receives all of the principal.
However, in some instances, one class will receive some of the interest and most
of the principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience greater
than anticipated prepayments of principal, the Portfolio may fail to fully
recoup its initial investment in these securities. The market value of the class
consisting entirely of principal payments generally is extremely volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest are generally higher than prevailing market
yields on other mortgage-backed obligations because their cash flow patterns are
also volatile and there is a risk that the initial investment will not be fully
recouped. SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Trust's Board of Trustees if they can be disposed of promptly in the ordinary
course of business at a value reasonably close to that used in the calculation
of the net asset value per unit.
Asset-Backed Securities. The Balanced Portfolio may purchase asset
-----------------------
backed securities, which are securities backed by mortgages, installment
contracts, credit card receivables or other assets. Asset-backed securities
represent interests in "pools" of assets in which payments of both interest and
principal on the securities are made monthly, thus in effect "passing through"
monthly payments made by the individual borrowers on the assets that underlie
the securities, net of any fees paid to the issuer or guarantor of the
securities. The average life of asset-backed securities varies with the
maturities of the underlying instruments, and the average life of a mortgage-
backed instrument, in particular, is likely to be substantially less than the
original maturity of the mortgage pools underlying the securities as a result of
mortgage prepayments. For this and other reasons, an asset-backed security's
stated maturity may be shortened, and the security's total return may be
difficult to predict precisely. Asset-backed securities acquired by the
Portfolio may include collateralized mortgage obligations ("CMOs") issued by
private companies.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities
guaranteed by the Government National Mortgage Association ("GNMA") include GNMA
Mortgage
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Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-
owned U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of the principal and interest by
FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the
United States, created pursuant to an Act of Congress, which is owned entirely
by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United
States or by any Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on account
of its guarantee of ultimate payment of principal at any time after default on
an underlying mortgage, but in no event later than one year after it becomes
payable.
Non-mortgage asset-backed securities involve certain risks that are
not presented by mortgage-backed securities. Primarily, these securities do not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that
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recoveries on repossessed collateral may not, in some cases, be able to support
payments on these securities.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Balanced
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Portfolio may enter into interest rate swaps for hedging purposes and not for
speculation. Interest rate swaps, floors and caps involve the exchange by the
Portfolio with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate payments.
The Portfolio will typically use interest rate swaps to preserve a return on a
particular investment or portion of its portfolio or to shorten the effective
duration of its portfolio investments. The purchase of an interest rate floor or
cap entitles the purchaser to receive payments of interest on a notional
principal amount from the seller, to the extent the specified index falls below
(floor) or exceeds (cap) a predetermined interest rate. The Portfolio will only
enter into interest rate swaps or interest rate floor or cap transactions on a
net basis, i.e. the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments.
The International Equity Index and International Growth Portfolios may
enter into currency swaps, which involve the exchange of the rights of a
Portfolio and another party to make or receive payments in specified currencies.
Currency swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency.
Inasmuch as interest rate and currency swaps are entered into for good
faith hedging purposes, the Trust and Northern believe that such transactions do
not constitute senior securities as defined in the 1940 Act and, accordingly,
will not treat them as being subject to the Portfolios' borrowing restrictions.
The net amount of the excess, if any, of a Portfolio's obligations over its
entitlements with respect to interest rate or currency swaps will be accrued on
a daily basis and an amount of liquid assets having an aggregate net asset value
at least equal to such accrued excess will be maintained in a segregated account
by the Portfolio's custodian.
The Balanced Portfolio will not enter into an interest rate swap,
floor or cap transaction, and the International Equity Index and International
Growth Portfolios will not enter into currency swap transactions unless the
unsecured commercial paper, senior debt or the claims-paying ability of the
other party thereto is rated either A or A-l or better by S&P, Duff or Fitch, or
A or P-1 or better by Moody's. If there is a default by the other party to such
transaction, the Portfolios will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with markets
for other similar instruments which are traded in the interbank market.
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Futures Contracts and Related Options. Each Portfolio may invest in
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futures contracts and may purchase and sell call and put options on futures
contracts for hedging purposes, for speculative purposes (to seek to increase
total return), or for liquidity management purposes. For a detailed
description of futures contracts and related options, see Appendix B to this
Additional Statement.
Real Estate Investment Trusts. The Small Company Index Portfolio may
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invest in equity real estate investment trusts ("REITs") that constitute a part
of the Russell 2000 Small Stock Index. REITs pool investors' funds for
investment primarily in commercial real estate properties. Investments in REITs
may subject the Portfolio to certain risks. REITs may be affected by changes in
the value of the underlying property owned by the trust. REITs are dependent
upon specialized management skill, may not be diversified and are subject to the
risks of financing projects. REITs are also subject to heavy cash flow
dependency, defaults by borrowers, self liquidation and the possibility of
failing to qualify for the beneficial tax treatment available to REITs under the
Internal Revenue Code of 1986, as amended, and to maintain exemption from the
1940 Act. As a shareholder in a REIT, the Portfolio would bear, along with
other shareholders, its pro rata portion of the REIT's operating expenses.
These expenses would be in addition to the advisory and other expenses the
Portfolio bears directly in connection with its own operations.
Securities Lending. Collateral for loans of portfolio securities made
------------------
by a Portfolio may consist of cash, securities issued or guaranteed by the U.S.
Government or its agencies or irrevocable bank letters of credit (or any
combination thereof). The borrower of securities will be required to maintain
the market value of the collateral at not less than the market value of the
loaned securities, and such value will be monitored on a daily basis. When a
Portfolio lends its securities, it continues to receive dividends and interest
on the securities loaned and may simultaneously earn interest on the investment
of the cash collateral. Although voting rights, or rights to consent, attendant
to securities on loan pass to the borrower, such loans will be called so that
the securities may be voted by a Portfolio if a material event affecting the
investment is to occur.
Forward Commitments, When-Issued Securities and Delayed Delivery
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Transactions. When a Portfolio purchases securities on a when-issued, delayed
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delivery or forward commitment basis, the Portfolio's custodian (or
subcustodian) will maintain in a segregated account liquid assets having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the custodian or subcustodian will hold the portfolio securities themselves in a
segregated account while the
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commitment is outstanding. These procedures are designed to ensure that the
Portfolio will maintain sufficient assets at all times to cover its obligations
under when-issued purchases, forward commitments and delayed delivery
transactions.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time
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Deposits and Bank Notes. Commercial paper represents short-term unsecured
- -----------------------
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party. Bank notes rank junior to deposit liabilities of banks and pari passu
---- -----
with other senior, unsecured obligations of the bank. Bank notes are classified
as "other borrowings" on a bank's balance sheet, while deposit notes and
certificates of deposit are classified as deposits. Bank notes are not insured
by the Federal Deposit Insurance Corporation or any other insurer. Deposit notes
are insured by the Federal Deposit Insurance Corporation only to the extent of
$100,000 per depositor per bank.
Each Portfolio may invest a portion of its assets in the obligations
of foreign banks and foreign branches of domestic banks. Such obligations
include Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-
denominated certificates of deposit issued by offices of foreign and domestic
banks located outside the United States; Eurodollar Time Deposits ("ETDs") which
are U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or a
foreign bank; Canadian Time Deposits ("CTDs") which are essentially the same as
ETDs except they are issued by Canadian offices of major Canadian banks;
Schedule Bs, which are obligations issued by Canadian branches of foreign or
domestic banks; Yankee Certificates of Deposit ("Yankee CDs") which are U.S.
dollar-denominated certificates of deposit issued by a U.S. branch of a foreign
bank and held in the United States; and Yankee Bankers' Acceptances ("Yankee
BAs") which are U.S. dollar-denominated bankers' acceptances issued by a U.S.
branch of a foreign bank and held in the United States.
Variable and Floating Rate Instruments. With respect to the variable
--------------------------------------
and floating rate instruments that may be acquired by the Portfolios, Northern
will consider the earning power, cash
B-14
<PAGE>
flows and other liquidity ratios of the issuers and guarantors of such
instruments and, if the instruments are subject to demand features, will
continuously monitor their financial status and ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument
meets the Portfolios' quality requirements, the issuer's obligation to pay the
principal of the instrument will be backed by an unconditional bank letter or
line of credit, guarantee or commitment to lend.
Repurchase Agreements. Each Portfolio may enter into repurchase
---------------------
agreements with financial institutions, such as banks and broker-dealers, as are
deemed creditworthy by Northern under guidelines approved by the Trust's Board
of Trustees. The repurchase price under the repurchase agreements will
generally equal the price paid by a Portfolio plus interest negotiated on the
basis of current short-term rates (which may be more or less than the rate on
the securities underlying the repurchase agreement). Securities subject to
repurchase agreements will be held by the Trust's custodian (or subcustodian),
in the Federal Reserve/Treasury book-entry system or by another authorized
securities depository. Repurchase agreements are considered to be loans by a
Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds for
-----------------------------
temporary or emergency purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price ("reverse repurchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Portfolio may decline below the repurchase price. The Portfolio will
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
While reverse repurchase agreements are outstanding, a Portfolio will maintain
in a segregated account liquid assets in an amount at least equal to the market
value of the securities, plus accrued interest, subject to the agreement.
Reverse repurchase agreements are considered to be borrowings by a Portfolio
under the 1940 Act.
Pair-Off Transactions. Subject to the requirements of the 1940 Act,
---------------------
the Balanced Portfolio may engage in pair-off transactions involving securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
In a pair-off transaction Northern will commit to purchase or sell a security.
Then, prior to the settlement date, Northern will "pair-off" the purchase or
sale with a matching sale or purchase of the same security that settles prior
to, or on, the original settlement date. Profits or losses on the pair-off
transaction are settled by the Portfolio's paying or receiving the difference
between the purchase and sale prices from the counter party in the transaction
(which will be a bank, broker-dealer or other financial institution determined
to be creditworthy by Northern).
B-15
<PAGE>
A pair-off transaction that involves an initial sale by the Portfolio
of a security that it does not own (or does not have the right to obtain at no
added cost) will be considered a short sale of the security. Until the sale is
paired-off as described above, the Portfolio will maintain on a daily basis a
segregated account containing liquid assets at such a level that (a) the amount
deposited in the segregated account will equal the current value of the security
sold short and (b) the amount deposited in the segregated account will not be
less than the market value of the security at the time it was sold short.
Similarly, a segregated account will be maintained for a pair-off transaction
that involves an initial purchase by the Portfolio of a security on a forward
commitment or when-issued basis as described more fully in this Additional
Statement.
The Portfolio will not enter into a pair-off transaction that involves
either a short sale or a forward commitment or when-issued purchase if, after
effect is given to the sale or purchase, the total market value of all open
pair-off transactions would exceed 25% of the value of the Portfolio's net
assets.
Although pair-off transactions represent a strategy that may be used
by Northern in attempting to earn additional income for the Portfolio resulting
from short-term price movements in the securities markets, the transactions may
result in losses instead. In addition, pair-off transactions may produce higher
than normal portfolio turnover which may result in increased transaction costs
to the Portfolio and gains from the sale of securities deemed to have been held
for less than three months. Such gains must not exceed 30% of the Portfolio's
gross income in a taxable year in order for the Portfolio to qualify as a
regulated investment company under the Internal Revenue Code of 1986.
Investment Companies. To the extent required by the 1940 Act and the
--------------------
regulations and orders of the SEC thereunder, each Portfolio currently intends
to limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made, not
more than 3% of the total outstanding stock of any one investment company will
be owned by the Portfolio, the Trust as a whole and their affiliated persons (as
defined in the 1940 Act). An investment company whose securities are purchased
by a Portfolio or the Trust is not obligated to redeem such securities in an
amount exceeding 1% of the investment company's total outstanding securities
during any period of less than 30 days. Therefore, such securities that exceed
this amount may be illiquid. Notwithstanding the foregoing, a Portfolio may
adhere to more restrictive limitations with respect to its investments in
securities issued by other investment companies if required by the SEC or deemed
to be in the best interests of the Trust, and will comply with any fundamental
investment restriction that may otherwise be applicable to such investments. To
B-16
<PAGE>
the extent required by the 1940 Act, each Portfolio expects to vote the shares
of other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
Risks Related to Lower-Rated Securities. While any investment carries
---------------------------------------
some risk, certain risks associated with lower-rated securities are different
than those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of
these securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per unit.
There remains some uncertainty about the performance level of the
market for lower-rated securities under adverse market and economic
environments. An economic downturn or increase in interest rates could have a
negative impact on both the market for lower-rated securities (resulting in a
greater number of bond defaults) and the value of lower-rated securities held in
the portfolio of investments.
The economy and interest rates can affect lower-rated securities
differently than other securities. For example, the prices of lower-rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher-rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security defaults, a Portfolio may incur additional
expenses to seek recovery. In addition, periods of economic uncertainty would
likely result in increased volatility for the market prices of lower-rated
securities as well as a Portfolio's net asset value. In general, both the
prices and yields of lower-rated securities will fluctuate.
In certain circumstances it may be difficult to determine a security's
fair value due to a lack of reliable objective information. Such instances
occur where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
B-17
<PAGE>
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower-rated
securities held by a Portfolio, especially in a thinly traded market. Illiquid
or restricted securities held by the Portfolio may involve special registration
responsibilities, liabilities and costs, and could involve other liquidity and
valuation difficulties.
The ratings of S&P, Moody's, Duff and Fitch evaluate the safety of a
lower-rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, Northern performs its own analysis of the issuers
whose lower-rated securities the Portfolio purchases. Because of this, the
Portfolio's performance may depend more on its own credit analysis than is the
case of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, Northern considers factors such
as those relating to the creditworthiness of issuers, the ratings and
performance of the securities, the protections afforded the securities and the
diversity of a Portfolio's investment portfolio. Northern continuously monitors
the issuers of lower-rated securities held by a Portfolio for their ability to
make required principal and interest payments, as well as in an effort to
control the liquidity of the Portfolio so that it can meet redemption requests.
Yields and Ratings. The yields on certain obligations, including the
------------------
instruments in which the Portfolios may invest, are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, Duff, Fitch and TBW represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
Subject to the limitations stated in the Prospectus, if a portfolio
security undergoes a rating revision, a Portfolio may continue to hold the
security if Northern determines such retention is warranted.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate
--------------------------------------
for the Portfolios is calculated by dividing the lesser of purchases or sales of
portfolio investments for the reporting period by the monthly average value of
the portfolio investments owned during the reporting period. The calculation
B-18
<PAGE>
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of units and by requirements which
enable the Portfolios to receive favorable tax treatment.
INVESTMENT RESTRICTIONS
In addition to the fundamental investment restrictions disclosed in
the Prospectus, each Portfolio is subject to the fundamental investment
restrictions enumerated below which may be changed with respect to a particular
Portfolio only by a vote of the holders of a majority of such Portfolio's
outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not
prevent a Portfolio from investing directly or indirectly in portfolio
instruments secured by real estate or interests therein or acquiring
securities of real estate investment trusts or other issuers that deal
in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas
or other mineral exploration or development programs, except that each
Portfolio may, to the extent appropriate to its investment policies,
purchase securities of companies engaging in whole or in part in such
activities, enter into futures contracts and related options, and
enter into forward currency contracts in accordance with its
investment objective and policies.
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the purchase and sale of portfolio instruments in
accordance with
B-19
<PAGE>
its investment objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions
in options on securities, financial instruments, currencies and
indices of securities (and in the case of the International Growth
Portfolio, yield curve options); futures contracts; options on futures
contracts; forward currency contracts; short sales of securities
against the box; interest rate swaps; and pair-off transactions
(except in the case of the International Growth Portfolio).
(8) Purchase the securities of any issuer if such purchase would cause
more than 10% of the voting securities of such issuer to be held by
the Portfolio, except that up to 25% of the value of its total assets
may be invested without regard to this 10% limitation, and also except
that with respect to the International Equity Index Portfolio, this
investment restriction does not apply to securities of other
investment companies.
(9) Purchase securities (other than obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and, in the
case of the International Equity Index Portfolio, securities of other
investment companies) if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of a Portfolio
to be invested in the securities of one or more issuers having their
principal business activities in the same industry. For the purposes
of this restriction, as to utility companies, the gas, electric, water
and telephone businesses are considered separate industries; personal
credit finance companies and business credit finance companies are
deemed to be separate industries; and wholly-owned finance companies
are considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents.
(10) Borrow money (other than pursuant to reverse repurchase
agreements), except (a) as a temporary measure, and then only in
amounts not exceeding 5% of the value of the Portfolio's total assets
or (b) from banks, provided that immediately after any such borrowing
all borrowings of the Portfolio do not exceed one-third of the
Portfolio's total assets. No purchases of securities will be made if
borrowings subject to this restriction exceed 5% of the value of the
Portfolio's assets. The exceptions in (a) and (b)
B-20
<PAGE>
to this restriction are not for investment leverage purposes but are
solely for extraordinary or emergency purposes or to facilitate
management of the Portfolios by enabling the Trust to meet redemption
requests when the liquidation of Portfolio instruments is deemed to be
disadvantageous or not possible. If due to market fluctuations or
other reasons the total assets of a Portfolio fall below 300% of its
borrowings, the Trust will promptly reduce the borrowings of such
Portfolio in accordance with the 1940 Act.
(11) Purchase the securities of any one issuer, (other than
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and, in the case of the International Equity
Index Portfolios, securities of other investment companies) if
immediately after such purchase more than 5% of the value of such
Portfolio's total assets would be invested in such issuer, except
that: (a) up to 25% of the value of the total assets of each
Portfolio may be invested in any securities without regard to this 5%
limitation; and (b) with respect to each Portfolio, such 5% limitation
shall not apply to repurchase agreements collateralized by obligations
of the U.S. Government, its agencies or instrumentalities.
* * *
In applying Restriction No. 11 above, a security is considered to be
issued by the entity, or entities, whose assets and revenues back the security.
A guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by a Portfolio, does not exceed 10% of the value of the Portfolio's total
assets.
Except to the extent otherwise provided in Investment Restriction (9)
for the purpose of such restriction, in determining industry classification the
Trust intends to use the industry classification titles in the Standard
Industrial Classification Manual (except that the International Growth Portfolio
and the International Equity Index Portfolio will use The Morgan Stanley Capital
International industry classification titles). Securities held in escrow or
separate accounts in connection with a Portfolio's investment practices
described in this Additional Statement and in the Prospectus are not deemed to
be mortgaged, pledged or hypothecated for purposes of the foregoing Investment
Restrictions.
In addition, as a matter of fundamental policy, the International
Equity Index and International Growth Portfolios
B-21
<PAGE>
will not issue senior securities except as stated in the Prospectus or this
Additional Statement.
Any restriction which involves a maximum percentage will not be
considered violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition or encumbrance of securities or assets
of, or borrowings by, a Portfolio.
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is set forth
below.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------------------------------- ------------------------------- -----------------------------
<S> <C> <C>
William H. Springer, 67 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications holding
Lake Forest, IL 60045 Trustee company), from February 1987
to retirement in August 1992;
Vice Chairman, Chief Financial
and Administrative Officer of
Ameritech prior to 1987;
Director, Walgreen Co. (a
retail drug store business);
Director of Baker, Fentress &
Co. (a closed-end, non-diver
sified management investment
company) from April 1992 to
present.
Edward J. Condon, Jr.,56 Trustee Chairman of The Pardigm Group,
227 West Monroe Street Ltd. (a financial advisor)
Chicago, IL 60606. since July 1993; Vice
President and Treasurer of
Sears, Roebuck and Co. (a
retail corporation) from
February 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 Overseas
Finance N.V.
John W. English, 64 Trustee Private Investor; Vice Pres-
50-H New England Avenue ident and Chief Investment
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------------------------------- ------------------------------- -----------------------------
<S> <C> <C>
P.O. Box 640 Officer of The Ford Foundation
Summit, NJ 07902-0640. (a charitable trust) from 1981
until 1993; Trustee: The
China Fund, Inc.; Paribas
Trust for the Institutions;
Retail Property Trust; Sierra
Trust; American Red Cross in
Greater New York; Mote Marine
Laboratory; and United Board
for Christian Higher Education
in Asia. Director: University
of Iowa Foundation; Blanton-
Peale Institutes of Religion
and Health; Community Found-
ation of Sarasota County; Duke
Management Company; and John
Ringling Centre Foundation.
James J. Gavin, Jr., 74 Trustee Vice Chairman from January
161 Thorntree Lane 1985 to August 1987 and Senior
Winnetka, Illinois 60093 Vice President-Finance and Chief Financial
Officer from 1975 to January 1985 of Borg-
Warner Corporation (a diversified
manufacturing company also engaged in
providing financial and protective
services); Director of Service Corporation
International (a funeral service/cemetery
company), Stepan Corporation (a producer of
basic and intermediate chemicals), Borg-
Warner Industrial Products, Inc. (a
supplier of advanced technology fluid
transfer and control equipment, systems and
services).
Frederick T. Kelsey, 69 Trustee Consultant to Goldman Sachs
3133 Laughing Gull Court from December 1985 through
Johns Island, February 1988; Director of
South Carolina 29455. Goldman Sachs Funds Group and
Vice President of Goldman
Sachs from May 1981 until his
retirement in November 1985;
President and Treasurer of
the Trust through August 1985; Trustee,
various management
</TABLE>
B-23
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------------------------- ------------------------------ ------------------------------
<S> <C> <C>
investment companies
affiliated with Kemper
Financial Companies.
Richard P. Strubel, 57 Trustee President and Chief Executive
70 West Madison St Officer, Tandem Partners, Inc.
Suite 1400 (a diversified manufacturer
Chicago, IL 60602 of fastening systems and
connectors)since January 1984.
Paul Klug, 45 President Vice President of Goldman
One New York Plaza Sachs; Director of Proprietary
New York, NY 10004 Mutual Funds of GSAM since
February 1994; Chief Operating
Officer, Vista Capital
Management, Chase Manhattan
Bank from January 1990 to
February 1994.
Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs; Co-Manager, Shareholder
Chicago, IL Services of SGAM Funds Group
60606 since June 1992; Consultant
since 1989; Senior
Vice President of Fidelity
Investments prior to 1989.
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Services for GSAM Funds Group
60606 since November 1989.
John W. Mosior, 58 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Services for GSAM Funds Group
60606 since November 1989.
Scott M. Gilman, 37 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, Goldman Sachs Asset
New York, NY 10004 Management since April 1994;
Assistant Treasurer, Goldman
Sachs Funds Management, Inc.
since March 1993; Vice President,
Goldman Sachs since March 1990.
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------------------------------------- ---------------------------- ------------------------------
<S> <C> <C>
John Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer since July 1995; Director,
New York, NY 10004 Investors Bank and Trust,
November 1993 to July 1995;
Audit Manager of Arthur
Anderson LLP prior thereto.
Michael J. Richman, 36 Secretary Associate General Counsel,
85 Broad Street Goldman Sachs Asset Management
New York, NY since February 1994;Vice
10004 President and Assistant
General Counsel of Goldman
Sachs since June 1992;
GSAM since June 1992;
Counsel to the Funds Group,
Partner, Hale and Dorr from
September 1991 to June 1992.
Howard B. Surloff, 31 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 since November 1993 and May
1994, respectively; Counsel
to the Funds Group, Goldman
Sachs Asset Management since
November 1993; Formerly Asso-
ciate of Shereff Friedman,
Hoffman & Goodman prior
thereto.
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs from June 1993
New York, NY 10004 to present; Funds Compliance
Officer, Citibank Global Asset
Management from August 1991 to
June 1993; Legal Assistant,
Brown & Wood (prior thereto).
Deborah A. Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs since January
New York, NY 10004 1994; Formerly at Cleary,
Gottlieb, Steen & Hamilton.
</TABLE>
Certain of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such
B-25
<PAGE>
Trustees and officers that all such transactions have been and are expected to
be in the ordinary course of business and the terms of such transactions,
including all loans and loan commitments by such persons, have been and are
expected to be substantially the same as the prevailing terms for comparable
transactions for other customers. Messrs. Springer, Kelsey, Strubel, Klug,
Mosior, Gilman, Richman, Surloff and Hartstein and Mmes. Farrell, Mucker and
Taylor hold similar positions with one or more investment companies that are
advised by Goldman Sachs. As a result of the responsibilities assumed by
Northern under its Advisory Agreement, Transfer Agency Agreement, Custodian
Agreement and Foreign Custody Agreement with the Trust and by Goldman Sachs
under its Administration Agreement and Distribution Agreement with the Trust,
the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment companies
of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser,
administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,250 and the Chairman of the Board
earns a quarterly retainer of $9,375. Each Trustee, including the Chairman of
the Board, earns an additional fee of $1,500 for each meeting attended, plus
reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of three
members including a Chairman of the Committee. Each member earns a fee of
$1,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,250.
The Trust's officers do not receive fees from the Trust for services in such
capacities, although Goldman Sachs, of which they are also officers, receives
fees from the Trust for administrative services.
B-26
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1996:
<TABLE>
<CAPTION>
Total
Compensation
Pension or from
Retirement Registrant
Benefits and
Aggregate Accrued as Fund
Compensation Part of Complex
from Trust's Paid to
Name of Trustee Registrant Expenses Trustees
- --------------------------- ---------- ------------ ----------
<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
William B. Jordan* $ 2,083 $0 $ 2,083
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Srubel $40,500 $0 $40,500
</TABLE>
* Retired as of December 31, 1995.
** Interest from deferred compensation.
B-27
<PAGE>
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern is one of the nation's leading providers of trust and investment
management services. As of December 31, 1996, Northern had over $130.3 billion
in assets under management for clients including public and private retirement
funds, endowments, foundations, trusts, corporations, other investment companies
and individuals. Northern is one of the strongest banking organizations in the
United States. Northern believes it has built its organization by serving
clients with integrity, a commitment to quality, and personal attention. Its
stated mission with respect to all its financial products and services is to
achieve unrivaled client satisfaction. With respect to such clients, the
Trust is designed to assist (i) defined contribution plan sponsors and their
employees by offering a range of diverse investment options to help comply with
404(c) regulation and may also provide educational material to their employees,
(ii) employers who provide post-retirement Employees' Beneficiary Associations
("VEBA") and require investments that respond to the impact of federal
regulations, (iii) insurance companies with the day-to-day management of
uninvested cash balances as well as with longer-term investment needs, and (iv)
charitable and not-for-profit organizations, such as endowments and foundations,
demanding investment management solutions that balance the requirement for
sufficient current income to meet operating expenses and the need for capital
appreciation to meet future investment objectives.
Subject to the general supervision of the Board of Trustees, Northern makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Portfolios. Northern's Advisory Agreement with the
Trust provides that in selecting brokers or dealers to place orders for
transactions (a) on common and preferred stocks, Northern shall use its best
judgment to obtain the best overall terms available, and (b) on bonds and other
fixed income obligations, Northern shall attempt to obtain best net price and
execution. In assessing the best overall terms available for any transaction,
Northern is to consider all factors it deems relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing basis.
In evaluating the best overall terms available and in selecting the broker or
dealer to execute a particular transaction, Northern may consider the brokerage
and research services provided to the Portfolios and/or other accounts over
which Northern or an affiliate of Northern exercises investment discretion.
These brokerage and research services may include industry and company analyses,
portfolio services, quantitative data, market information systems and economic
and political consulting and analytical services.
B-28
<PAGE>
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed. Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, Northern will
normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable prices and execution
are available elsewhere. The cost of foreign and domestic securities purchased
from underwriters includes an underwriting commission or concession, and the
prices at which securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolios will engage in this practice, however, only when Northern
believes such practice to be in the Portfolios' interests.
Northern's investment advisory duties for the Trust are carried out through
its Trust Department. On occasions when Northern 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 (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Agreement provides
that Northern, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for such Portfolio with those
to be sold or purchased for such other accounts in order to obtain best overall
terms available with respect to common and preferred stock, and best net price
and execution with respect to bonds and other fixed income obligations. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Northern in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Portfolio and other accounts involved. In some instances, this procedure
may adversely affect the size of the position obtainable for a Portfolio or the
amount of the securities that are able to be sold for a Portfolio. To the
extent that the execution and price available from more than one broker or
dealer are believed to be comparable, the Agreement permits Northern, at is
discretion but subject to applicable law, to select the executing broker or
dealer on the basis of Northern's opinion of the reliability and quality of such
broker or dealer.
B-29
<PAGE>
The Advisory Agreement provides that Northern may render similar services
to others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, with respect to units
held by Institutions, Northern has undertaken to perform some or all of the
following services: (1) establish and maintain an omnibus account in the name of
each Institution; (2) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption proceeds; (3) act as
the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of units in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions unitholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to units held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of units in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for Prospectuses and Additional Statements, and
assistance in the completion of new account applications) from investors and
respond to all requests for information regarding the Trust (such as current
price, recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions); (8) respond
to and seek to resolve all complaints of investors with respect to the Trust or
their accounts; (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors;
(10) furnish the Trust all pertinent Blue Sky information; (11) perform all
required tax withholding; (12) preserve records; and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more sub-
transfer agents in the performance of its services.
B-30
<PAGE>
As compensation for the services rendered by Northern under the Transfer
Agency Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.05%, .10% and .15% of the average daily net asset value of the Class A, B, C
and D units, respectively, in the Portfolios.
Under its Custodian Agreement (and in the case of the International Growth
Portfolio and International Equity Index Portfolio, its Foreign Custody
Agreement) with the Trust, Northern (1) holds each Portfolio's cash and
securities, (2) maintains such cash and securities in separate accounts in the
name of the Portfolio, (3) makes receipts and disbursements of funds on behalf
of the Portfolio, (4) receives, delivers and releases securities on behalf of
the Portfolio, (5) collects and receives all income, principal and other
payments in respect of the Portfolio's investments held by Northern under the
Agreement, and (6) maintains the accounting records of the Trust. Northern may
employ one or more subcustodians, provided that Northern shall have no more
responsibility or liability to the Trust on account of any action or omission of
any subcustodian so employed than such subcustodian has to Northern and that the
responsibility or liability of the subcustodian to Northern shall conform to the
resolution of the Trustees of the Trust authorizing the appointment of the
particular subcustodian (or, in the case of foreign securities, to the terms of
any agreement entered into between Northern and such subcustodian to which such
resolution relates). In addition, the Trust's custodial arrangements provide,
with respect to foreign securities, that Northern shall not be: (i) responsible
for the solvency of any subcustodian appointed by it with reasonable care; (ii)
responsible for any act, omission, default or for the solvency of any eligible
foreign securities depository; and (iii) liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
subcustodian has otherwise exercised reasonable care. Northern may also appoint
agents to carry out such of the provisions of the Custodian Agreement and the
Foreign Custody Agreement as Northern may from time to time direct, provided
that the appointment of an agent shall not relieve Northern of any of its
responsibilities under either Agreement. Northern has entered into agreements
with financial institutions and depositories located in foreign countries with
respect to the custody of the Portfolio's foreign securities.
As compensation for the services rendered to the Trust by Northern as
custodian with respect to each Portfolio except the International Growth
Portfolio and International Equity Index Portfolio, and the assumption by
Northern of certain related expenses, Northern is entitled to payment from the
Trust as follows: (i) $18,000 annually for each Portfolio, plus (ii)
B-31
<PAGE>
1/100th of 1% annually of each Portfolio's average daily net assets to the
extent they exceed $100 million, plus (iii) a fixed dollar fee for each trade in
portfolio securities, plus (iv) a fixed dollar fee for each time that Northern
as Custodian receives or transmits funds via wire, plus (v) reimbursement of
expenses incurred by Northern as custodian for telephone, postage, courier fees,
office supplies and duplicating. The fees referred to in clauses (iii) and (iv)
are subject to annual upward adjustments based on increases in the Consumer
Price Index for All Urban Consumers, provided that Northern may permanently or
temporarily waive all or any portion of any upward adjustment.
As compensation for the services rendered to the Trust under the Foreign
Custody Agreement with respect to the International Growth Portfolio and
International Equity Index Portfolio, and the assumption by Northern of certain
related expenses, Northern is entitled to payment from the Trust as follows:
(i) $35,000 annually for the International Growth Portfolio and International
Equity Index Portfolio, plus (ii) 9/100th of 1% annually of the Portfolios'
average daily net assets, plus (iii) reimbursement for fees incurred by Northern
as foreign custodian for telephone, postage, courier fees, office supplies and
duplicating.
Unless sooner terminated, the Advisory Agreement, Custodian Agreement (or
in the case of the International Growth Portfolio and International Equity Index
Portfolio, the Foreign Custody Agreement) and Transfer Agency Agreement between
Northern and the Trust will continue in effect with respect to a particular
Portfolio until April 30, 1998 and thereafter for successive 12-month periods,
provided that the continuance is approved at least annually (1) by the vote of a
majority of the Trustees who are not parties to the agreement or "interested
persons" (as such term is defined in the 1940 Act) of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval, and (2)
by the Trustees or by the vote of a majority of the outstanding units of such
Portfolio (as defined below under "Other Information"). Each agreement is
terminable at any time without penalty by the Trust (by specified Trustee or
unitholder action) on 60 days' written notice to Northern and by Northern on 60
days' written notice to the Trust.
For the fiscal periods ended November 30 as indicated, the amount of the
Advisory Fee incurred by each Portfolio (after fee waivers) was:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Balanced Portfolio (1) $226,872 $181,249 $118,582
Equity Index Portfolio (2) 603,016 380,061 265,647
Diversified Growth Portfolio(2) 768,689 845,029 1,019,000
Focused Growth Portfolio (1) 811,643 609,180 389,125
</TABLE>
B-32
<PAGE>
Small Company Index Portfolio (2) 212,150 172,085 148,538
International Growth Portfolio (3) 1,089,874 1,180,413 648,520
- ----------
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
For the same fiscal periods ended November 30 as indicated,
Northern waived advisory fees as follows:
1996 1995 1994
---------- -------- --------
Balanced Portfolio (1) $ 136,185 $108,249 $ 71,150
Equity Index Portfolio (2) 1,206,801 760,122 531,397
Diversified Growth Portfolio (2) 349,197 384,104 463,246
Focused Growth Portfolio (1) 304,447 228,443 145,930
Small Company Index Portfolio (2) 212,148 172,085 148,544
International Growth Portfolio (3) 272,159 295,103 161,282
---------- -------- --------
- ----------
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of
the Transfer Agency Fee incurred by each Portfolio was as follows:
1996 1995 1994
------- ------- -------
Balanced Portfolio (1) $ 8,853 $ 3,624 $ 2,372
Equity Index Portfolio (2) 92,186 40,881 26,570
Diversified Growth Portfolio (2) 14,368 15,548 18,530
Focused Growth Portfolio (1) 12,738 7,810 4,864
Small Company Index Portfolio (2) 11,706 8,647 7,427
International Growth Portfolio (3) 13,559 14,784 8,107
__________
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of
the Custodian Fee (and in the case of the International Growth Portfolio, the
Foreign Custodian Fee) incurred by each Portfolio was as follows:
1996 1995 1994
-------- -------- --------
Balanced Portfolio (1) $ 21,294 $ 25,924 $ 24,023
Equity Index Portfolio (2) 154,259 126,649 108,000
Diversified Growth Portfolio(2) 26,634 34,074 30,346
Focused Growth Portfolio (1) 21,498 25,698 19,578
Small Company Index Portfolio (2) 67,319 65,810 120,118
International Growth Portfolio (3) 170,117 160,492 17,124
__________
(1) Commenced investment operations on July 1, 1993.
B-33
<PAGE>
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
Banking laws and regulations currently prohibit a bank holding 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 continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern 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 noted, however,
that future changes in either Federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates, as
well as future judicial or administrative decisions or interpretations of
current and future statutes and regulations, could prevent Northern from
continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of Northern in connection with the provision of
services on behalf of the Trust, the Trust might be required to alter materially
or discontinue its arrangements with Northern 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. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in
many types of stocks, bonds and other instruments. Its activities in this
regard could have some effect on the market for those instruments which the
Portfolios acquire, hold or sell.
In the Advisory Agreement, Northern agrees that the name "The
Benchmark" may be used in connection with the Trust's business on a royalty-free
basis. Northern has reserved to itself the right to grant the non-exclusive
right to use the name
B-34
<PAGE>
"The Benchmark" to any other person. The Advisory Agreement provides that at
such time as the Agreement is no longer in effect, the Trust will cease using
the name "The Benchmark." (This undertaking by the Trust may be subject to
certain legal limitations.)
PORTFOLIO TRANSACTIONS
To the extent that a Portfolio effects brokerage transactions with
Goldman Sachs or any broker-dealer affiliated directly or indirectly with
Northern or its manager, such transactions, including the frequency thereof, the
receipt of any commissions payable in connection therewith, and the selection of
the affiliated broker-dealer effecting such transactions, will be fair and
reasonable to the unitholders of the Portfolio.
B-35
<PAGE>
For the fiscal periods ended November 30 as indicated each Portfolio paid
brokerage commissions as follows:
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November Commissions Affiliated Commissions Providing
30, 1996: Paid Persons Paid Research
- --------------- --------------------------- --------------------------- --------------------------- -----------
<S> <C> <C> <C> <C>
Balanced Portfolio $ 53,002 $ 0 $ 33,133,354 $ 34,545
Equity
Index
Portfolio 86,325 0 176,685,003 71,053
Focused
Growth
Portfolio 325,022 5.607 189,320,203 248,133
(1.73)* (1.10%)**
Diversified
Growth
Portfolio 266,884 0 170,853,039 228,062
Small Company
Index
Portfolio 90,057 0 74,698,179 44,761
International
Growth
Portfolio 1,797,065 0 531,192,806 636,028
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-36
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November Commissions Affiliated Commissions Providing
30, 1995: Paid Persons Paid Research
- --------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 45,837 $ 0 $ 24,906,175 $ 39,287
Equity
Index
Portfolio 112,575 0 152,546,455 112,575
Focused
Growth
Portfolio 192,628 0 111,053,831 146,993
Diversified
Growth
Portfolio 438,884 3,360 248,311,354 367,010
(.76%)* (.51%)**
Small Company
Index
Portfolio 102,688 0 58,429,480 51,692
International
Growth
Portfolio 2,121,410 4,425 575,340,692 787,039
(.21%)* (.36%)**
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-37
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November Commissions Affiliated Commissions Providing
30, 1994: Paid Persons Paid Research
- --------------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Balanced $ 37,199 $ 0 $ 20,763,184 $ 23,386
Portfolio (0%)**
Equity 100,947 322 (.32%)* 191,367,381 70,919
Index (.08%)**
Portfolio
Diversified 357,742 0 220,310,149 267,491
Growth (0%)**
Portfolio
Focused 118,543 0 100,491,832 96,058
Growth (0%)**
Portfolio
Small $ 188,410 $ 0 $110,249,401 114,478
Company (0%)**
Index
Portfolio
International $ 843,097 $194 (.02%)* $205,832,703 0
Growth (.04%)**
Portfolio***
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
(***) For the period March 28, 1994 through November 30, 1994.
B-38
<PAGE>
During the fiscal year ended November 30, 1996, the Equity Index
Portfolio acquired and sold securities of Merrill Lynch & Co., Inc., Salomon
Brothers, Inc., Morgan Stanley Group, Inc. and J.P. Morgan & Co., Inc., each a
regular broker/dealer. At November 30, 1996, the Equity Index Portfolio owned
the following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Merrill Lynch, with an
approximate aggregate value of $1,709,000, Salomon Brothers, with an
approximate aggregate value of $607,000, Morgan Stanley, with an approximate
aggregate value of $1,148,000 and J.P. Morgan, with an approximate aggregate
value of $2,218,000.
During the fiscal year ended November 30, 1996, the International
Growth Portfolio acquired and sold securities of Nomura Securities Co., Ltd., a
regular broker/dealer. At November 30, 1996, the International Growth Portfolio
owned the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: Nomura Securities,
with an approximate aggregate value of $422,000.
During the fiscal year ended November 30, 1996, the Balanced Portfolio
acquired and sold securities of Lehman Brothers, Inc. and Salomon Brothers,
Inc., each a regular broker/dealer. At November 30, 1996, the Balanced Portfolio
owned the following amounts of securities of its regular/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: Lehman Brothers, with an
approximate aggregate value of $480,000 and Salomon Brothers, with an
approximate aggregate value of $498,000.
ADMINISTRATOR AND DISTRIBUTOR
Under its Administration Agreement with the Trust, Goldman Sachs,
subject to the general supervision of the Trust's Board of Trustees, acts as the
Trust's Administrator. In this capacity, Goldman Sachs (1) provides supervision
of certain aspects of the Trust's non-investment advisory operations (the
parties giving due recognition to the fact that certain of such operations are
performed by Northern pursuant to the Trust's agreements with Northern), (2)
provides the Trust, to the extent not provided pursuant to such agreements, with
such personnel as are reasonably necessary for the conduct of the Trust's
affairs, (3) arranges, to the extent not provided pursuant to such agreements,
for the preparation at the Trust's expense of its tax returns, reports to
unitholders, periodic updating of the Prospectus issued by the Trust, and
reports filed with the SEC and other regulatory authorities (including
qualification under state securities or Blue Sky laws of the Trust's units), and
(4) provides the Trust, to the extent not provided pursuant to such agreements,
with adequate office space and equipment and certain related services in
Chicago.
B-39
<PAGE>
For the fiscal periods ended November 30 as indicated, Goldman Sachs
received fees under the Administration Agreement (after fee waivers) in the
amount of:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balanced Portfolio (1) $ 45,373 $ 36,250 $ 23,716
Equity Index Portfolio (2) 603,816 380,061 265,699
Diversified Growth Portfolio (2) 139,259 153,642 185,295
Focused Growth Portfolio (1) 101,553 76,148 48,643
Small Company Index Portfolio (2) 106,073 86,043 74,272
International Growth Portfolio (3) 136,235 147,552 81,070
</TABLE>
- -----------
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, Goldman Sachs
has voluntarily agreed to waive a portion of its Administration Fee for each
Portfolio resulting in an effective fee of .10% of the average daily net assets
for each Portfolio. The effect of these waivers by Goldman Sachs was to reduce
administration fees by the following amounts:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balanced Portfolio (1) $ 68,595 $ 54,375 $ 34,000
Equity Index Portfolio (2) 176,462 229,985 232,849
Diversified Growth Portfolio (2) 170,691 176,821 192,499
Focused Growth Portfolio (1) 148,402 114,221 72,967
Small Company Index Portfolio (2) 152,457 129,064 111,408
International Growth Portfolio (3) 168,984 173,776 187,000
</TABLE>
__________________
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs has agreed that, if its administration fees (less expense
reimbursements paid by Goldman Sachs to the Trust and less certain marketing
expenses paid by Goldman Sachs) exceed a specified amount ($1 million for the
Trust's first twelve investment portfolios plus $50,000 for each additional
portfolio) during the current fiscal year, Goldman Sachs will waive a portion of
its administration fees during the following fiscal year. This undertaking may
be terminated by Goldman Sachs at any time without the consent of the Trust or
the unitholders. There have been no waivers pursuant to this agreement during
the last three fiscal periods.
Goldman Sachs has voluntarily agreed to reimburse the Portfolios for
certain expenses in the event that such expenses, as defined, exceed on an
annualized basis .25% of the International Equity Index and International Growth
Portfolios' respective average daily net assets and
B-40
<PAGE>
.10% of each other Portfolio's average daily net assets. The effect of these
reimbursements by Goldman Sachs for the fiscal periods ended November 30 as
indicated were to reduce the expenses of each Portfolio by:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balanced Portfolio (1) $ 65,547 $ 79,928 $104,929
Equity Index Portfolio (2) 306,865 194,615 208,610
Diversified Growth Portfolio (2) 98,425 100,038 118,579
Focused Growth Portfolio (1) 80,020 87,261 91,040
Small Company Index Portfolio (2) 134,838 116,594 132,794
International Growth Portfolio (3) 55,347 N/A N/A
</TABLE>
________
(1) Commenced investment operations on July 1, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
Unless sooner terminated the Administration Agreement will continue in
effect with respect to a particular Portfolio until April 30, 1998, and
thereafter for successive 12-month periods, provided that the agreement is
approved annually (1) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" (as such term is defined by the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the Trustees or by the vote of a
majority of the outstanding units of such Portfolio (as defined below under
"Other Information"). The Administration Agreement is terminable at any time
without penalty by the Trust (upon specified Trustee or unitholder action) on 60
days' written notice to Goldman Sachs and by Goldman Sachs on 60 days' written
notice to the Trust.
The Trust has entered into a Distribution Agreement under which
Goldman Sachs, as agent, sells units of each Portfolio on a continuous basis.
Goldman Sachs pays the cost of printing and distributing prospectuses to persons
who are not unitholders of the Trust (excluding preparation and typesetting
expenses) and of certain other distribution efforts. No compensation is payable
by the Trust to Goldman Sachs for such distribution services.
The Administration Agreement and the Distribution Agreement provide
that Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
B-41
<PAGE>
UNITHOLDER SERVICING PLAN
As stated in the Portfolios' Prospectus, Institutions may enter into
Servicing Agreements with the Trust under which they provide (or arrange to have
provided) support services to their Customers or other investors who
beneficially own such units in consideration of the Portfolios' payment of not
more than .10%, .15% and .25% (on an annualized basis) of the average daily net
asset value of the Class B, C and D units, respectively, beneficially owned by
such Customers or investors.
For the fiscal periods ended November 30 as indicated, the aggregate
amount of the Unitholder Service Fee incurred by each class of each Portfolio
then in existence was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ------
<S> <C> <C> <C>
Balanced Portfolio
Class B...... N/A N/A N/A
Class C (1).. $ 7,122.84 N/A N/A
Class D (2).. 61.37 N/A N/A
Equity Index Portfolio
Class B...... N/A N/A N/A
Class C (3).. 46,497.48 $4,339.08 N/A
Class D (4).. 7,257.26 479.72 $ 0.34
Diversified Growth Portfolio
Class B...... N/A N/A N/A
Class C...... N/A N/A N/A
Class D (4).. 703.37 326.04 10.94
Focused Growth Portfolio
Class B...... N/A N/A N/A
Class C (5).. 3,027.51 N/A N/A
Class D (6).. 1,223.71 436.94 N/A
Small Company Index Portfolio
Class B...... N/A N/A N/A
Class C...... N/A N/A N/A
Class D (6).. 251.66 44.71 N/A
International Growth Portfolio
Class B...... N/A N/A N/A
Class C...... N/A N/A N/A
Class D (7).. 200.72 4.25 0.20
</TABLE>
(1) Class C Units were issued on December 29, 1995.
(2) Class D Units were issued on February 20, 1996.
(3) Class C Units were issued on September 28, 1995.
(4) Class D Units were issued on September 14, 1994.
(5) Class C Units were issued on June 14, 1996.
(6) Class D Units were issued on December 8, 1994.
(7) Class D Units were issued on November 16, 1994.
Services provided by or arranged to be provided by Institutions under
their Servicing Agreements may include: (1) establishing and maintaining
separate account records of
B-42
<PAGE>
Customers or other investors; (2) providing Customers or other investors with a
service that invests their assets in units of certain classes pursuant to
specific or pre-authorized instructions, and assistance with new account
applications; (3) aggregating and processing purchase and redemption requests
for units of certain classes from Customers or other investors, and placing
purchase and redemption orders with the Transfer Agent; (4) issuing
confirmations to Customers or other investors in accordance with applicable law;
(5) arranging for the timely transmission of funds representing the net purchase
price or redemption proceeds; (6) processing dividend payments on behalf of
Customers or other investors; (7) providing information periodically to
Customers or other investors showing their positions in units; (8) responding to
Customer or other investor inquiries (including requests for prospectuses), and
complaints relating to the services performed by the Institutions; (9) acting as
liaison with respect to all inquiries and complaints from Customers and other
investors relating to errors committed by the Trust or its agents, and other
matters pertaining to the Trust; (10) providing or arranging for another person
to provide subaccounting with respect to units of certain classes beneficially
owned by Customers or other investors; (11) if required by law, forwarding
unitholder communications from the Trust (such as proxy statements and proxies,
unitholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers and other investors; (12) providing
such office space, facilities and personnel as may be required to perform its
services under the Servicing Agreement; (13) maintaining appropriate management
reporting and statistical information; (14) paying expenses related to the
preparation of educational and other explanatory materials in connection with
the development of investor services; (15) developing and monitoring investment
programs; and (16) providing such other similar services as the Trust may
reasonably request to the extent the Institutions are permitted to do so under
applicable statutes, rules and regulations.
The Trust's agreements with Institutions are governed by a Plan
(called the "Unitholder Servicing Plan"), which has been adopted by the Board of
Trustees. Pursuant to the Unitholder Servicing Plan, the Board of Trustees will
review, at least quarterly, a written report of the amounts expended under the
Trust's agreements with Institutions and the purposes for which the expenditures
were made. In addition, the arrangements with Institutions must be approved
annually by a majority of the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust, as defined in the 1940
Act, and have no direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Institutions
based on information provided by the Trust's service
B-43
<PAGE>
contractors that there is a reasonable likelihood that the arrangements will
benefit the Portfolios and their unitholders by affording the Portfolios greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their units in an efficient manner.
COUNSEL AND AUDITORS
Drinker Biddle & Reath, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, Sears Tower, 233 S. Wacker
Drive, Chicago, Illinois 60606-6301, have been selected as auditors of the
Trust. In addition to audit services, Ernst & Young LLP reviews the Trust's
Federal and state tax returns, and provides consultation and assistance on
accounting, internal control and related matters.
IN-KIND PURCHASES
Payment for units of a Portfolio may, in the discretion of Northern,
be made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind securities
payment, a Portfolio will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Portfolio and that the Portfolio receive satisfactory assurances that it will
have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Portfolio; and that adequate
information be provided concerning the basis and other tax matters relating to
the securities.
The additional transaction fee described in the Prospectus with
respect to the Small Company Index Portfolio and the International Equity Index
Portfolio does not apply to in-kind purchases of units that are structured to
minimize the related brokerage, market impact costs and other transaction costs
to such Portfolios as described in the Prospectus.
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a
class of units computes such return by determining the average annual compounded
rate of return during specified periods that equates the initial amount invested
to the ending
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<PAGE>
redeemable value of such investment according to the following formula:
to the first power divided by n
1
-
n
T = (ERV) - 1
---
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the applicable period (or
fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
Each Portfolio that advertises an "aggregate total return" for a class
of units computes such return by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T = [(ERV)] - 1
---
P
The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
unit existing on the reinvestment date, (2) all recurring fees charged to all
unitholder accounts are included, and (3) the portfolio transaction fee is taken
into account for purchases of units of the Small Company Index Portfolio and the
International Equity Index Portfolio. The ending redeemable value (variable
"ERV" in the formula) is determined by assuming complete redemption of the
hypothetical investment after deduction of all nonrecurring charges at the end
of the measuring period.
The average annual total and aggregate total returns shown below for
the Diversified Growth, Equity Index, Small Company Index and International
Growth Portfolios include, for periods prior to the commencement of the
Portfolios' operations, the performance of predecessor collective funds adjusted
to reflect the higher estimated fees and expenses applicable to such Portfolios'
Class A Units at the time of their commencement.
B-45
<PAGE>
Although all such predecessor collective funds were managed by Northern for the
periods stated in a manner and pursuant to investment objectives that were
equivalent in all material respects to the management and investment objectives
of the corresponding Portfolios, such predecessor collective funds were not
registered under the 1940 Act and were not subject to certain investment
restrictions imposed by the 1940 Act. If they had been registered under the 1940
Act, performance might have been adversely affected. The average annual total
returns and aggregate total returns shown for the Portfolios for their Class C
and/or Class D units also include, for the periods prior to the inception of
such classes, the performance of the Portfolios' Class A Units. Because the fees
and expenses of Class C and Class D Units are, respectively, 0.24% and 0.39%
higher than those of Class A Units, actual performance for periods prior to the
inception of Class C and Class D Units would have been lower if such higher fees
and expenses had been taken into account.
Following commencement of operations of the Portfolios, Goldman Sachs reimbursed
expenses to the Portfolios and voluntarily agreed to reduce a portion of its
administration fee for each Portfolio pursuant to the undertaking described
above under "Additional Trust Information -Administrator and Distributor" and "-
Investment Adviser, Transfer Agent and Custodian," and Northern waived a portion
of its investment advisory fees with respect to the Portfolios. The average
annual total returns and aggregate total returns of each Portfolio with respect
to Class A, Class C and Class D Units, as applicable, are shown below with and
without such fee waivers and expense reimbursements.
B-46
<PAGE>
<TABLE>
<CAPTION>
FOR PERIODS ENDED NOVEMBER 30, 1996
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
Diversified Growth/1/
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
with fee waivers and
expense reimbursements 20.83% 11.38% 11.54% - 20.83% 71.41% 198.02% -
w/o fee waivers and
expense reimbursements 20.31 10.91 11.06 - 20.31 67.79 185.57 -
CLASS D
with fee waivers and
expense reimbursements 20.39 11.21 11.45 - 20.39 70.16 195.84 -
w/o fee waivers and
expense reimbursements 19.87 10.74 10.98 - 19.87 66.51 183.38 -
FOCUSED GROWTH/2/
CLASS A
with fee waivers and
expense reimbursements 17.82 - - 12.16 17.82 - - 48.11
w/o fee waivers and
expense reimbursements 17.22 - - 11.47 17.22 - - 45.02
CLASS C
with fee waivers and
expense reimbursements 17.71 - - 12.13 17.73 - - 47.99
w/o fee waivers and
expense reimbursements 17.13 - - 11.48 17.13 - - 45.02
CLASS D
with fee waivers and
expense reimbursements 17.42 - - 11.92 17.42 - - 46.99
w/o fee waivers and
expense reimbursements 16.82 - - 11.24 16.82 - - 43.96
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INDEX/3/
CLASS A
with fee waivers and
expense reimbursements 27.53% 17.90% 14.85% - 27.53% 127.84% 299.24% -
w/o fee waivers and
expense reimbursements 27.18 17.50 14.47 - 27.18 124.00 286.32 -
CLASS C
with fee waivers and
expense reimbursements 27.24 17.84 14.82 - 27.24 127.26 298.23 -
w/o fee waivers and
expense reimbursements 26.89 17.45 14.44 - 26.89 123.45 285.38 -
CLASS D
with fee waivers and
expense reimbursements 27.20 17.77 14.78 - 27.20 126.50 296.89 -
w/o fee waivers and
expense reimbursements 26.85 17.37 14.41 - 26.85 122.76 284.18 -
SMALL COMPANY INDEX/4/
CLASS A
with fee waivers and
expense reimbursements 15.96 16.04 - 12.36 15.96 110.40 - 164.39
w/o fee waivers and
expense reimbursements 15.42 15.43 - 11.80 15.42 104.90 - 153.44
CLASS D
with fee waivers and
expense reimbursements 16.20 15.77 - 12.21 16.20 110.28 - 164.25
w/o fee waivers and
expense reimbursements 15.66 15.16 - 11.63 15.66 102.50 - 150.36
</TABLE>
B-48
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH/5/
CLASS A
with fee waivers and
expense reimbursements 9.96% 9.23% - 5.39% 9.96% 55.46% - 40.11%
w/o fee waivers and
expense reimbursements 9.56 8.84 - 5.02 9.56 52.71 - 37.00
CLASS D
with fee waivers and
expense reimbursements 9.59 9.05 - 5.26 9.59 54.16 - 38.93
w/o fee waivers and
expense reimbursements 9.19 8.66 - 4.89 9.19 51.49 - 35.91
BALANCED/6/
CLASS A
with fee waivers and
expense reimbursements 14.07 - - 9.09 14.07 - - 34.68
w/o fee waivers and
expense reimbursements 13.41 - - 8.28 13.41 - - 31.28
CLASS C
with fee waivers and
expense reimbursements 13.83 - - 9.01 13.79 - - 34.35
w/o fee waivers and
expense reimbursements 13.13 - - 8.23 13.13 - - 31.07
CLASS D
with fee waivers and
expense reimbursements 13.73 - - 9.00 13.75 - - 34.30
w/o fee waivers and
expense reimbursements 13.09 - - 8.22 13.09 - - 31.02
</TABLE>
- ----------------------
B-49
<PAGE>
1. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to September 14 ,
1994 (commencement of Class D Units) is that of Class A Units. Because the
fees and expenses of Class D Units are .39% higher than those of Class A
Units, actual performance would have been lower had such higher fees and
expenses been taken into account. The predecessor collective fund has been
managed in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio for the periods shown. The performance data of the predecessor
collective fund is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
2. For Class C and Class D Units, performance from July 1, 1993 to June 14,
1996 (commencement of Class C Units) and December 8, 1994 (commencement of
Class D Units), respectively, is that of Class A Units. Class A Units
commenced operations on July 1, 1993. Because fees and expenses of Class C
and Class D Units are .24% and .39%, respectively , higher than those of
Class A Units, actual performance would have bee n lower had such higher
expenses been taken into account.
3. For Class A, C and D Units, performance data prior to January 11, 199 3
(commencement of Portfolio) is that of a predecessor collective fund. For
Class C and D Units, performance data from January 11, 1993 to Septem ber
28, 1995 (commencement of Class C Units) and September 14, 1994
(commencement of Class D Units), respectively, is that of Class A Units.
Because fees and expenses of Class C and Class D Units are .24% and .39%,
respectively, higher than those of Class A Units, actual performance would
have been lower had such higher fees and expenses been taken into account.
The predecessor collective fund has been managed in a manner and pursuant
to investment objectives equivalent in all material respects to the
management and investment objective of the Portfolio for the periods shown.
The performance data of the predecessor collective fund is adjusted to
reflect the higher fees and expenses applicable to Class A Units at the
time of their inception.
4. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to December 8, 1994,
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. Performance data of the predecessor collective
fund is shown from August 1, 1988 (the date such collective fund was first
managed in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio) and is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
5. For Class A and Class D Units, performance data prior to March 28, 1994
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from March 28, 1994 to November 16, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. Performance data of the predecessor collective
fund is shown from July 1, 1990 (the date such fund was first managed in a
B-50
<PAGE>
manner and pursuant to investment objectives equivalent in all material
respects to the management and investment objective of the Portfolio) and
is adjusted to reflect the higher fees and expenses applicable to Class A
Units at the time of their inception.
6. For Class C and Class D Units, performance from July 1, 1993 to December
29, 1995 (commencement of Class C Units) and February 20, 1996
(commencement of Class D Units), respectively, is that of Class A Units.
Class A Units commenced operations on July 1, 1993. Because fees and
expenses of Class C and Class D Units are .24% and .39%, respectively,
higher than those of Class A Units, actual performance would have been
lower had such higher expenses been taken into account.
B-51
<PAGE>
The Balanced Portfolio calculates its 30-day (or one month) standard yield as
described in the Prospectus for a class of units in accordance with the method
prescribed by the SEC for mutual funds:
Yield = 2 [(a-b + 1) to the sixth power - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of units outstanding
during the period that were entitled to receive
dividends.
d = maximum offering price per unit on the last day of
the period.
For the 30 day period ended November 30, 1996, the annualized yields
of the Class A, Class C and Class D units was 2.93%, 2.70% and 2.56%,
respectively. During such period, Goldman Sachs reimbursed expenses to the
Portfolio and voluntarily agreed to reduce a portion of its administration fees
under "Additional Trust Information - Administrator and Distributor", and
Northern waived a portion of its investment advisory fees with respect to the
Portfolio. In the absence of such advisory and administration fee reductions
and expense limitations, the 30-day yield for Class A, Class C and Class D units
would have been 2.32%, 2.09% and 1.95%, respectively.
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
Because of the different Servicing Fees and transfer agency fees
payable with respect to Class A, B, C and D units in a Portfolio, performance
quotations for units of Class B, C and D of the Portfolio will be lower than the
quotations for Class A units of the Portfolio, which will not bear any fees for
unitholder support services and will bear minimal transfer agency fees.
TAXES
The following summarizes certain additional tax considerations
generally affecting the Portfolios' and their unitholders that are not described
in the Portfolios'
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<PAGE>
unitholders that are not described in the Portfolios' Prospectuses. No attempt
is made to present a detailed explanation of the tax treatment of the Portfolios
or their unitholders, and the discussion here and in the applicable Prospectus
is not intended as a substitute for careful tax planning. Potential investors
should consult their tax advisers with specific reference to their own tax
situations.
GENERAL
Each Portfolio will elect to be taxed separately as a regulated
investment company under Part I of Subchapter M of Subtitle A, Chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"). As a regulated
investment company, each Portfolio generally is exempt from Federal income tax
on its net investment income and realized capital gains which it distributes to
unitholders, provided that it distributes an amount equal to at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code that are described below.
In addition to satisfying the Distribution Requirement, each Portfolio
must derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") and derive less than
30% of its gross income from the sale or other disposition of securities and
certain other investments held for less than three months (the "Short-Short
Test"). Interest (including original issue discount and "accrued market
discount") received by a Portfolio at maturity or on disposition of a security
held for less than three months will not be treated as gross income derived from
the sale or other disposition of such security within the meaning of this
requirement. However, any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of each Portfolio's
assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which a Portfolio has not invested more than 5% of the value of
its total assets in securities of such issuer and as to which a Portfolio does
not hold more than 10% of the outstanding voting securities of such issuer) and
no more than 25% of the value of each Portfolio's total assets may be invested
in the securities of any
B-53
<PAGE>
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses.
Each Portfolio intends to distribute to unitholders any excess of net
long-term capital gain over net short-term capital loss ("net capital gain") for
each taxable year. Such gain is distributed as a capital gain dividend and is
taxable to unitholders as long-term capital gain, regardless of the length of
time the unitholder has held the units, whether such gain was recognized by the
Portfolio prior to the date on which a unitholder acquired units of the
Portfolio and whether the distribution was paid in cash or reinvested in units.
In addition, investors should be aware that any loss realized upon the sale,
exchange or redemption of units held for six months or less will be treated as a
long-term capital loss to the extent of the capital gain dividends the
unitholder has received with respect to such units.
In the case of corporate unitholders, distributions of a Portfolio for
any taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by such Portfolio
for the year. Generally, a dividend will be treated as a "qualifying dividend"
if it has been received from a domestic corporation.
Ordinary income of individuals is taxable at a maximum marginal rate
of 39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. An individual's long-term capital gains
are taxable at a maximum nominal rate of 28%. Capital gains and ordinary income
of corporate taxpayers are both taxed at a nominal maximum rate of 35%.
If for any taxable year any Portfolio does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to unitholders. In such
event, all distributions (whether or not derived from exempt-interest income)
would be taxable as ordinary income, to the extent of such Portfolio's current
and accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate unitholders.
Unitholders will be advised annually as to the Federal income tax
consequences of distributions made by the Portfolios each year.
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that fail to currently distribute an amount
B-54
<PAGE>
equal to specified percentages of their ordinary taxable income and capital gain
net income (excess of capital gains over capital losses). Each Portfolio
intends to make sufficient distributions or deemed distributions of its ordinary
taxable income and capital gain net income each calendar year to avoid liability
for this excise tax.
The Trust will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or 31% of gross sale
proceeds paid to any unitholder (i) who has provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt of
taxable interest or dividend income properly, or (iii) who has failed to certify
to the Trust, when required to do so, that he is not subject to backup
withholding or that he is an "exempt recipient."
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Special rules govern the Federal income tax treatment of financial
instruments that may be held by the Portfolios. These rules may have a
particular impact on the amount of income or gain that the Portfolios must
distribute to their respective unitholders to comply with the Distribution
Requirement, on the income or gain qualifying under the Income Requirement and
on their ability to comply with the Short-Short Test described above.
Generally, futures contracts, options on futures contracts and certain
foreign currency contracts held by a Portfolio (collectively, the "Instruments")
at the close of its taxable year are treated for Federal income tax purposes as
sold for their fair market value on the last business day of such year, a
process known as "mark-to-market." Forty percent of any gain or loss resulting
from such constructive sales will be treated as short-term capital gain or loss
and 60% of such gain or loss will be treated as long-term capital gain or loss
without regard to the period a Portfolio has held the Instruments ("the 40%-60%
rule"). The amount of any capital gain or loss actually realized by a Portfolio
in a subsequent sale or other disposition of those Instruments is adjusted to
reflect any capital gain or loss taken into account by the Portfolio in a prior
year as a result of the constructive sale of the Instruments. Losses with
respect to futures contracts to sell, related options and certain foreign
currency contracts, which are regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Portfolios, are subject to certain loss deferral rules which limit the
amount of loss currently deductible on either part of the straddle to the amount
thereof which exceeds the unrecognized gain (if any) with respect to the other
part of the straddle, and to certain wash sales
B-55
<PAGE>
regulations. Under short sales rules, which are also applicable, the holding
period of the securities forming part of the straddle (if they have not been
held for the long-term holding period) will be deemed not to begin prior to
termination of the straddle. With respect to certain Instruments, deductions
for interest and carrying charges may not be allowed. Notwithstanding the rules
described above, with respect to futures contracts which are part of a "mixed
straddle" to sell related options and certain foreign currency contracts which
are properly identified as such, a Portfolio may make an election which will
exempt (in whole or in part) those identified futures contracts, options and
foreign currency contracts from the Rules of Section 1256 of the Code including
"the 40%-60% rule" and the mark-to-market on gains and losses being treated for
Federal income tax purposes as sold on the last business day of the Portfolio's
taxable year, but gains and losses will be subject to such short sales, wash
sales and loss deferral rules and the requirement to capitalize interest and
carrying charges. Under Temporary Regulations, each Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
portions which are part of a mixed straddle by separately identifying each mixed
straddle to which such treatment applies, or (2) to establish a mixed straddle
account for which gains and losses would be recognized and offset on a periodic
basis during the taxable year. Under either election, "the 40%-60% rule" will
apply to the net gain or loss attributable to the Instruments, but, in the case
of a mixed straddle account election, not more than 50% of any net gain may be
treated as long-term and no more than 40% of any net loss may be treated as
short-term.
A foreign currency contract must meet the following conditions in
order to be subject to the mark-to-market rules described above: (1) the
contract must require delivery of a foreign currency of a type in which
regulated futures contracts are traded or upon which the settlement value of the
contract depends; (2) the contract must be entered into at arm's length at a
price determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of the date of this Additional Statement, the Treasury
Department has not issued any such regulations. Other foreign currency
contracts entered into by a Portfolio may result in the creation of one or more
straddles for Federal income tax purposes, in which case certain loss deferral,
short sales, and wash sales rules and the requirement to capitalize interest and
carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the
Portfolios may make, such as foreign debt securities and foreign currency
contracts, may be subject to provisions of the Code which govern the Federal
income tax treatment of certain
B-56
<PAGE>
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by these provisions include the
following: (1) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables and
payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer also is treated as a
transaction subject to the special currency rules. However, regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations,
certain transactions that are part of a "Section 988 hedging transaction" (as
defined in the Code and Treasury regulations) may be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
"Section 988 hedging transactions" are not subject to the mark-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Portfolios which are not
subject to the special currency rules (such as foreign equity investments other
than certain preferred stocks) is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.
FOREIGN INVESTORS
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain
on the redemption of units or in respect of capital gain dividends, provided
such unitholder submits a statement, signed under penalties of perjury,
attesting to such unitholder's exempt
B-57
<PAGE>
status. Different tax consequences apply to a foreign unitholder engaged in a
U.S. trade or business. Foreign unitholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of investing in a Portfolio.
CONCLUSION
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Additional Statement. Such laws and regulations
may be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolio or its
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
Although each Portfolio expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, each
Portfolio may be subject to the tax laws of such states or localities.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional units of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trust may hereafter create series in addition to the Trust's
seventeen existing series, which represent interests in the Trust's seventeen
respective portfolios, seven of which are discussed in this Additional
Statement. The Trust Agreement further permits the Board of Trustees to
classify or reclassify any unissued units into additional series or subseries
within a series. Pursuant to such authority, the Trustees have authorized the
issuance of an unlimited number of units of beneficial interest in four separate
subseries (sometimes referred to as "classes") of units in each of the Trust's
non-money market portfolios (except the Short Duration Portfolio): Class A, B, C
and D units. Under the terms of the Trust Agreement, each unit of each
Portfolio is without par value, represents an equal proportionate interest in
the particular Portfolio with each other unit of its class in the same Portfolio
and is entitled to such dividends and distributions out of the income belonging
to the Portfolio as are declared by the Trustees. Upon any liquidation of a
Portfolio, unitholders of each class of a Portfolio are entitled to share pro
rata in the net assets belonging to that class available for
B-58
<PAGE>
distribution. Units do not have any preemptive or conversion rights. The right
of redemption is described under "Investing-Redemption of Units" in the
Prospectus. In addition, pursuant to the terms of the 1940 Act, the right of a
unitholder to redeem units and the date of payment by a Portfolio may be
suspended for more than seven days (a) for any period during which the New York
Stock Exchange is closed, other than the customary weekends or holidays, or
trading in the markets the Portfolio normally utilizes is closed or is
restricted as determined by the SEC, (b) during any emergency, as determined by
the SEC, as a result of which it is not reasonably practicable for the Portfolio
to dispose of instruments owned by it or fairly to determine the value of its
net assets, or (c) for such other period as the SEC may by order permit for the
protection of the unitholders of the Portfolio. The Trust may also suspend or
postpone the recordation of the transfer of its units upon the occurrence of any
of the foregoing conditions. In addition, units of each Portfolio are
redeemable at the unilateral option of the Trust if the Trustees determine in
their sole discretion that failure to so redeem may have material adverse
consequences to the unitholders of the Portfolio. Units when issued as
described in the Prospectus are validly issued, fully paid and nonassessable,
except as stated below.
The proceeds received by each Portfolio for each issue or sale of its
units, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying
assets of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust. Expenses with respect to the Portfolios
are normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding units of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
B-59
<PAGE>
outstanding units of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees may be
effectively acted upon by unitholders of the Trust voting together in the
aggregate without regard to a particular investment portfolio. In addition,
unitholders of each of the classes in a particular investment portfolio have
equal voting rights except that only units of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
unitholders (if any) relating to unitholder servicing expenses and transfer
agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other meetings
of unitholders. This is because the Trust Agreement provides for unitholder
voting only for the election or removal of one or more Trustees, if a meeting is
called for that purpose, and for certain other designated matters. Each Trustee
serves until the next meeting of unitholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the unitholders or two-thirds of the Trustees.
Under Massachusetts law, there is a possibility that unitholders of a
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. The Trust Agreement contains an
express disclaimer of unitholder (as well as Trustee and officer) liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each contract, undertaking or instrument entered into or executed by
the Trust or the Trustees. The Trust Agreement provides for indemnification out
of Trust property of any unitholder charged or held personally liable for the
obligations or liabilities of the Trust solely by reason of being or having been
a unitholder of the Trust and not because of such unitholder's acts or omissions
or for some other reason. The Trust Agreement also provides that the Trust
shall, upon proper and timely request, assume the defense of any charge made
against any unitholder as such for any obligation or liability of the Trust and
satisfy any judgment thereon. Thus, the risk of a unitholder incurring
financial loss on account of unitholder liability is limited to circumstances in
which the Trust itself would be unable to meet its obligations.
The Trust Agreement provides that each Trustee of the Trust will be
liable for his own wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
("disabling conduct"), and for nothing else, and will not be liable for errors
of judgment or mistakes of fact or law. The Trust Agreement provides further
B-60
<PAGE>
that the Trust will indemnify Trustees and officers of the Trust against
liabilities and expenses incurred in connection with litigation and other
proceedings in which they may be involved (or with which they may be threatened)
by reason of their positions with the Trust, except that no Trustee or officer
will be indemnified against any liability to the Trust or its unitholders to
which he would otherwise be subject by reason of disabling conduct.
As of March 12, 1997 substantially all of the Portfolios' outstanding
units were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, the Trust's Trustees and officers owned
beneficially less than 1% of the outstanding units of each Portfolio. Northern
has advised the Trust that the following persons (whose mailing address is: c/o
The Northern Trust Company, 50 South LaSalle, Chicago, IL 60675) beneficially
owned five percent or more of the outstanding units of the following Portfolios
as of March 12, 1997:
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF OUTSTANDING
UNITS UNITS
--------- ------------
<S> <C> <C>
BALANCED PORTFOLIO
The Northern Trust Company 1,529,631 34.91%
Thrift Incentive Plan
Retirement Trust for Employees 780,891 17.82
of Tetra Pak Inc.
Jordan Industries, Inc. 405,514 9.25
LaPorte, The Retirement Plus Plan 375,879 8.25
DIVERSIFIED GROWTH PORTFOLIO
The Northern Trust Company 3,801,856 37.35
Pension Plan
EQUITY INDEX PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 8,004,621 16.80
Libby-Owens-Ford Company
Savings Trust 3,651,847 7.66
The Northern Trust Company
Pension Plan 3,083,785 6.47
Presbyterian Healthcare
Service 2,532,481 5.31
</TABLE>
B-61
<PAGE>
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF OUTSTANDING
UNITS UNITS
----- -----------
<S> <C> <C>
FOCUSED GROWTH PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 3,611,280 42.72%
Doe Run Resources Corporation
Retirement Plan 797,619 9.44
Rexene Corporation
Retirement Plan 477,430 5.55
Graham Foundation for Advanced
Studies in the Fine Arts 459,027 5.43
SMALL COMPANY PORTFOLIO
The Northern Trust Company
Pension Plan 2,844,516 31.10
Doe Run Resources Corporation
Retirement Plan 710,678 7.77
INTERNATIONAL GROWTH PORTFOLIO
The Northern Trust Company
Pension Plan 2,489,649 18.62
First National Bank of
North Dakota 936,932 7.01
Global Industrial Technologies, Inc.
Master Retirement Trust 960,072 7.18
Doe Run Resources Corporation
Retirement Plan 714,901 5.35
Tuthill Corporation Master
Retirement Trust 672,262 5.03
</TABLE>
B-62
<PAGE>
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the rules and
regulations of the SEC. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern
and Goldman Sachs, brokerage fees and commissions, any portfolio losses, fees
for the registration or qualification of Portfolio units under Federal or state
securities laws, expenses of the organization of the Portfolios, taxes,
interest, costs of liability insurance, fidelity bonds, indemnification or
contribution, any costs, expenses or losses arising out of any liability of, or
claim for damages or other relief asserted against, the Trust for violation of
any law, legal, tax and auditing fees and expenses, Servicing Fees, expenses of
preparing and printing prospectuses, statements of additional information, proxy
materials, reports and notices and the printing and distributing of the same to
the Trust's unitholders and regulatory authorities, compensation and expenses of
its Trustees, expenses of industry organizations such as the Investment Company
Institute, miscellaneous expenses and extraordinary expenses incurred by the
Trust.
The term "majority of the outstanding units" of either the Trust or a
particular Portfolio means, with respect to the approval of an investment
advisory agreement or a change in a fundamental investment restriction, the vote
of the lesser of (i) 67% of more of the units of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding units
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding units of the Trust or such Portfolio.
STATEMENTS CONTAINED IN THE PROSPECTUS OR IN THIS ADDITIONAL STATEMENT
AS TO THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENTS REFERRED TO ARE NOT
NECESSARILY COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF SUCH
CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
WHICH THE PROSPECTUS AND THIS ADDITIONAL STATEMENT FORM A PART, EACH SUCH
STATEMENT BEING QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the Annual Report for the fiscal year ended
November 30, 1996 are hereby
B-63
<PAGE>
incorporated herein by reference and attached hereto. No other parts of the
Annual Report, including without limitation "Management's Discussion of
Portfolio Performance," are incorporated by reference herein. Copies of the
Annual Report may be obtained by writing to Goldman, Sachs & Co., Funds Group,
4900 Sears Tower, Chicago, Illinois 60606, or by calling Goldman, Sachs toll-
free at 800-621-2550.
B-64
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK BALANCED PORTFOLIO
The relative superiority of stock returns over bond returns had the largest in-
fluence on the portfolio's absolute performance during the fiscal year ended
November 30, 1996.
In general, the stock market environment was most favorable to larger-capi-
talization portfolios. The Benchmark Balanced Portfolio underperformed its com-
posite index, primarily due to the portfolio's less-aggressive stance toward
technology stocks. In addition, the underperformance of medium-capitalization
health care stocks also was a factor.
We implemented three primary equity strategies during the year. First, we fo-
cused on holding fewer companies. Second, as trades transpired, we raised the
capitalization of new issues. And third, we gave a little more emphasis to the
energy sector.
In addition to raising the energy weighting, we increased the portfolio's
technology and financial weightings, and we reduced the weightings in utili-
ties, cyclicals and capital goods. In the technology area, we are favoring PC
and networking stocks, while the financial area remains attractive due to pos-
sible easing by the Federal Reserve and low inflation.
Over the next 12 months we will continue to emphasize quality growth stocks,
particularly those in the technology and financial sectors. We believe that
these securities should do well as the economic climate remains favorable and
inflation and interest rates remain low.
In the portfolio's bond component, we continue to hold a neutral interest
rate posture. The current inflation rate continues to make yields attractive
from a historical real yield perspective. While corporate spreads remain tight
by historical standards, we continue to find opportunity to add value and re-
main overweighted in the corporate and mortgage sectors.
Kurt Anderson, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE INDEX AND THE COMPOSITE INDEX
-l-Balanced Portfolio
- - + - -
Composite Index
- -c- -S&P 500 Index
- -2 - -Lehman Brothers
Intermediate Government/
Corporate Index (Lehman
Brothers)
<TABLE>
<CAPTION>
Balanced Lehman Composite
Portfolio S&P 500 Brothers Index
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
7/1/93 $10,000 $10,000 $10,000 $10,000
11/30/93 $10,312 $10,372 $10,195 $10,290
11/30/94 $9,821 $10,485 $10,009 $10,304
11/30/95 $11,807 $14,365 $11,462 $12,981
11/30/96 $13,468 $18,369 $12,130 $15,261
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year: 14.07% 27.88% 5.83% 17.57%
- ---------------------------------------------------------------------------------
Since Commencement on 7/1/93: 9.09% 19.45% 5.80% 13.15%
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Balanced Composite Lehman
Portfolio S&P 500 Index Brothers
--------- ------- --------- --------
<S> <C> <C> <C> <C>
12/29/95 $10,000 $10,000 $10,000 $10,000
11/30/96 $11,272 $12,546 $11,582 $10,473
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class C S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since Commencement on 12/29/95: 12.72% 25.46% 4.73% 15.82%
- -----------------------------------------------------------------------------------
</TABLE>
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company or its affiliates, and are not federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested.
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE INDEX AND THE COMPOSITE INDEX--CONTINUED
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
BALANCED S&P LEHMAN COMPOSITE
PORTFOLIO 500 INDEX BROTHERS INDEX
- ------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
2/20/96 $ 10,000 $ 10,000 $10,000 $10,000
11/30/96 $ 11,055 $ 12,026 $10,455 $11,227
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class D S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since Commencement on 2/20/96: 10.55% 20.26% 4.55% 12.27%
- -----------------------------------------------------------------------------------
</TABLE>
*The Composite Index consists of 55%, 40% and 5% of the S&P 500, The Lehman
Brothers Intermediate Government/Corporate Index and 91-Day Treasury Bills,
respectively.
**Average Annual Total Returns are not annualized for periods less than one
year.
2
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK DIVERSIFIED GROWTH PORTFOLIO
Several factors influenced the portfolio's fiscal-year performance, particu-
larly the portfolio's relative overweighting in selected financial and health
care issues and its overall exposure to larger-capitalization stocks, which
dominated this phase of the market cycle.
Compared to the return on the S&P 500 Index, the portfolio's performance
lagged. This was due to the portfolio's less-than-aggressive stance toward the
technology sector throughout most of the year. And, as we moved into the latter
part of the fiscal year, certain issues--such as Olsten and Electronic Data
Systems--fell short of anticipated earnings, which held back the portfolio's
performance.
Throughout the 12-month period, we reduced the number of issues in the port-
folio. Early on, the portfolio held as many as 75 stocks and was much more
broadly diversified across issues. By year-end, the portfolio held approxi-
mately 55 securities. We reduced the portfolio's exposure to more aggressive
stocks and focused instead on quality growth issues that had the potential to
reduce total portfolio risk.
We currently are not emphasizing any particular market sectors, but we are
focusing on specific issues that we believe will show favorable revenue compar-
isons and those that represent good value relative to their expected earnings
growth rates.
John Zielinski, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK DIVERSIFIED GROWTH PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
- -l- Diversified Growth Portfolio - -
c- - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Diversified
Growth S&P
Portfolio 500 Index
---------- ---------
<S> <C> <C>
1/11/93 $10,000 $10,000
11/30/93 $10,738 $11,041
11/30/94 $ 9,988 $11,161
11/30/95 $12,441 $15,291
11/30/96 $15,032 $19,554
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 20.83% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 11.05% 18.81%
- -------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Diversified
Growth S&P
Portfolio 500 Index
---------- ---------
<S> <C> <C>
9/14/94 $10,000 $10,000
11/30/94 $ 9,486 $ 9,738
11/30/95 $11,781 $13,341
11/30/96 $14,183 $17,060
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 20.39% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 17.10% 27.29%
- -------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK EQUITY INDEX PORTFOLIO
The S&P 500 Index continued its strong performance, returning 27.9% for the
fiscal year ended November 30, 1996. This surpassed the performance of small-
capitalization stocks as measured by the Russell 2000 Index, which returned
16.5% for the year.
After adjusting for expenses, the portfolio, which is designed to replicate
the S&P 500 Index's performance in an efficient, cost-effective manner, pro-
vided a return that closely matched the return for the Index.
There were 23 additions and deletions to the Index throughout the fiscal
year, the most notable being the Chemical Bank/Chase merger and the
Disney/Capital Cities merger. These changes, as well as quarterly rebalancings,
were made in the portfolio at the time they were initiated in the Index.
During the next 12 months, we will continue to follow a passive index strat-
egy designed to provide equity market returns, as defined by the S&P 500 Index.
Susan French, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK EQUITY INDEX PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
-l- Equity Index Portfolio - -
c- - S&P 500 Index
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
1/11/93 $10,000 $10,000
11/30/93 $11,008 $11,041
11/30/94 $11,104 $11,161
11/30/95 $15,168 $15,291
11/30/96 $19,344 $19,554
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.53% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 18.48% 18.81%
- -------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK EQUITY INDEX PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX--CONTINUED
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
9/28/95 $10000 $10000
11/30/95 $10394 $10402
11/30/96 $13225 $13302
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class C S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.24% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/28/95: 26.85% 27.61%
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
9/14/94 $10000 $10000
11/30/94 $ 9732 $9738
11/30/95 $13255 $13341
11/30/96 $16860 $17060
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.20% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 26.61% 27.29%
- -------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK FOCUSED GROWTH PORTFOLIO
Activity in the technology sector, and how we invested in technology stocks at
certain points during the year, had the largest influence on the portfolio's
performance for the fiscal year ended November 30, 1996.
The portfolio's underperformance relative to its market index can be attrib-
uted to two specific periods of time. In December 1995 a number of sectors, in-
cluding business services, technology, financial and health care,
underperformed the index by a large margin. As a result, the portfolio's per-
formance was off by approximately 2.6% for the month. In the summer, technology
stocks suffered a setback, which was reflected in the portfolio's performance.
We then implemented a hedge against technology, which prevented the portfolio
from participating in the technology upswing that occurred late in the third
quarter.
Investors should keep in mind that the portfolio normally contains a limited
number of stocks, which may create some underperformance, relative to the S&P
500 Index, over shorter time periods. Our system of identifying fundamentally
sound companies strives to provide good long-term performance.
Going forward, we believe it's doubtful that returns from the technology and
financial sectors will continue to be so relatively strong. As such, we may
take some profits from stocks in strong sectors and reinvest the proceeds in
promising areas of the market that haven't performed quite as well over the
prior year.
Tom Kirkenmeier, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
-l- Focused Growth Portfolio - - c - - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Focused
Growth 500 S&P 500
---------- -------
<S> <C> <C>
7/1/93 $10,000 $10,000
11/30/93 $10,433 $10,372
11/30/94 $ 9,791 $10,485
11/30/95 $12,570 $14,365
11/30/96 $14,811 $18,369
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 17.82% 27.88%
- ---------------------------------------------------------------------------------------------
Since Commencement on 7/1/93: 12.16% 19.45%
- ---------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
FOCUSED S&P
GROWTH 500 INDEX
------- ---------
<S> <C> <C>
6/14/96 $10,000 $10,000
11/30/96 $10,751 $11,481
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class C S&P 500
November 30, 1996: Units Index
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Since Commencement on 6/14/96: 7.51% 14.81%
- --------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX--CONTINUED
-l- Focused Growth Portfolio - - c - - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Focused
Growth S&P 500
------- -------
<S> <C> <C>
12/8/94 $10,000 $10,000
11/30/95 $13,097 $13,767
11/30/96 $15,378 $17,605
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 17.42% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 24.27% 33.05%
- -------------------------------------------------------------------------------------------
</TABLE>
**Average Annual Total Returns are not annualized for periods less than one
year.
6
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK INTERNATIONAL GROWTH PORTFOLIO
The portfolio's exposure to the underperforming Japanese stock market and the
strength of the U.S. dollar were the primary factors influencing performance
during the fiscal year. The portfolio maintained a slightly greater-than-aver-
age weighting in the Japanese market, but, more important, the dollar rose
about 10% against the yen, which magnified the underperformance in U.S. dollar
terms.
Relative to its market index, the portfolio lagged somewhat, primarily due to
its position in Japan, its less-than-aggressive stance toward Hong Kong and a
slight underexposure to Europe.
Throughout the fiscal year, we tended to favor the Asian markets, lead by Ja-
pan, rather than the European markets. In general, Asia accounted for more than
50% of the fund's weighting. Asia, however, underperformed Europe during the
period, as strong bond market performance helped propel Europe's stock markets
upward.
Recently, we reduced the portfolio's position in Asia and increased its posi-
tion in Europe, which now accounts for a little more than half of the portfo-
lio. We also reduced the portfolio's Japanese exposure to about 30%, compared
to the EAFE Index weighting of 35%.
Looking ahead, we believe that the portfolio's repositioning toward Japan and
Europe should help future performance. We will continue to emphasize specific
countries rather than economic sectors.
Robert A. LaFleur, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL
GROWTH PORTFOLIO VS. THE MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST (EAFE)
INDEX
-l- International Growth
Portfolio
- -c- - EAFE Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International
Growth EAFE
Portfolio Index
------------- -------
<S> <C> <C>
3/28/94 $10,000 $10,000
11/30/94 $10,211 $10,204
11/30/95 $ 9,974 $10,976
11/30/96 $10,967 $12,267
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A EAFE
November 30, 1996: Units Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 9.96% 11.76%
- ---------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 3.50% 7.91%
- ---------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International
Growth EAFE
Portfolio Index
------------- -------
<S> <C> <C>
11/16/94 $10,000 $10,000
11/30/94 $ 9,744 $ 9,823
11/30/95 $ 9,474 $10,567
11/30/96 $10,382 $11,809
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D EAFE
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 9.59% 11.76%
- -------------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 1.86% 8.49%
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK SMALL COMPANY INDEX PORTFOLIO
Small-capitalization stocks, as represented by the Russell 2000 Index, returned
16.5% for the fiscal year ended November 30, 1996. Compared to large-cap
stocks, as measured by the S&P 500 Index, small-cap stocks underperformed by
11.4%.
As it is designed to do, the portfolio's performance nearly matched that of
the Russell 2000 Index during the fiscal year.
The major changes to the portfolio occurred in June, when the Russell 2000
Index was reconstituted. Once a year, all eligible securities in the Index are
re-ranked according to market capitalization. This activity resulted in the ad-
dition of approximately 450 stocks and the deletion of approximately 350. These
changes were incorporated into the portfolio at the end of June.
At the end of the current fiscal year, the market capitalization of the com-
panies in the Index, adjusted for cross holdings, ranged from $26.13 million to
$2.10 billion. The average market capitalization of the Index's companies was
$424 million.
Going forward, we will continue to stay aligned with the Russell 2000, with
our focus on closely approximating the Index's return.
Andrew Buchner, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK SMALL COMPANY
PORTFOLIO VS. THE RUSSELL 2000 SMALL STOCK INDEX
-l- Small Company Portfolio - -c- -
Russell 2000 Index
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Small Company Russell
Portfolio 2000 INDEX
- ------------------- ---------- ---------
<S> <C> <C>
1/11/93 $10000 $10000
11/30/93 $11409 $11515
11/30/94 $11233 $11363
11/30/95 $14352 $14576
11/30/96 $16642 $16976
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A Russell 2000
November 30, 1996: Units Index
- ------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 15.96% 16.46%
- ------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 13.99% 14.57%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Small Company Russell
Portfolio 2000 INDEX
- ------------------- ---------- ---------
<S> <C> <C>
12/08/94 $10000 $10000
11/30/95 $13162 $13263
11/30/96 $15295 $15447
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D Russell 2000
November 30, 1996: Units Index
- ------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 16.20% 16.46%
- ------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 23.93% 24.55%
- ------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description VALUE
- ------------------------------------------------------
BALANCED PORTFOLIO
<C> <S> <C>
COMMON STOCKS--54.4%
BANKING--1.2%
13,200 Banc One Corp. $ 629
BROKERAGE AND FINANCIAL SERVICES--1.2%
17,500 T. Rowe Price, Associates Inc.* 632
CHEMICALS AND ALLIED PRODUCTS--6.3%
9,100 American Home Products Corp. 585
9,400 Merck & Co., Inc. 780
14,211 Morton International, Inc. 574
11,800 Praxair, Inc. 574
6,400 Procter & Gamble Co. 696
-------
3,209
COMMUNICATIONS--1.2%
10,700 Ameritech Corp. 630
COMPUTERS AND OFFICE MACHINES--2.5%
9,300 Cisco Systems, Inc.* 631
4,300 Microsoft Corp.* 675
-------
1,306
COSMETICS AND PERSONAL CARE--1.3%
9,200 Gillette Co. 679
CREDIT INSTITUTIONS--2.5%
14,300 Green Tree Financial Corp. 599
16,300 MBNA Corp. 658
-------
1,257
ELECTRICAL SERVICES--1.1%
12,700 Duke Power Co. 589
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--5.8%
9,700 General Electric Co. 1,009
6,600 Intel Corp. 837
10,300 Linear Technology Corp. 485
11,400 Solectron Corp.* 667
-------
2,998
FOOD AND BEVERAGES--3.2%
14,400 PepsiCo, Inc. 430
4,900 Philip Morris Cos., Inc. 505
20,400 Starbucks Corp.* 706
-------
1,641
HEALTH SERVICES--3.4%
25,300 Health Management Associates, Inc.,
Class A* 560
10,898 Johnson & Johnson Co. 579
3,800 Invacare Corp. 103
7,700 Medtronic, Inc. 509
-------
1,751
</TABLE>
<TABLE>
<CAPTION>
Shares Description VALUE
- --------------------------------------------------------
<C> <S> <C>
INDUSTRIAL INSTRUMENTS--1.0%
11,100 Danaher Corp. $ 497
INSURANCE SERVICES--3.7%
5,400 American International Group, Inc. 621
3,500 General Re Corp. 591
6,700 MBIA, Inc. 678
-------
1,890
MORTGAGE AGENCIES--1.4%
17,900 Federal National Mortgage Association 738
OIL AND GAS--2.7%
6,400 Enron Corp. 293
9,900 Noble Affiliates, Inc. 466
5,900 Schlumberger Ltd. 614
-------
1,373
PAPER PRODUCTS--1.4%
7,200 Kimberly-Clark Corp. 704
PETROLEUM PRODUCTS--3.6%
9,100 Chevron Corp. 610
6,700 Exxon Corp. 634
3,400 Royal Dutch Petroleum Co. 577
-------
1,821
PROFESSIONAL SERVICES--5.3%
7,200 Cintas Corp. 437
6,800 Computer Sciences Corp.* 535
21,450 CUC International, Inc.* 566
13,800 First Data Corp. 550
12,700 Oracle Systems Corp.* 622
-------
2,710
RETAIL--4.5%
8,100 Home Depot, Inc. 422
22,700 Staples, Inc.* 448
5,000 Tommy Hilfiger Corp.* 270
10,900 Viking Office Products, Inc. 341
19,500 Walgreen Co. 814
-------
2,295
TRANSPORTATION PARTS AND EQUIPMENT--1.1%
5,900 Boeing Co. 586
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $21,087) $27,935
- --------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
BALANCED PORTFOLIO--CONTINUED
ASSET-BACKED SECURITIES--3.1%
FINANCIAL--3.1%
Olympic Automobile Receivables Trust Series: 1995-D, Class
A3
$ 700 5.950%Due 11/15/99 $ 703
Premier Auto Trust
Series: 1994-1, Class A3
156 4.750%Due 02/02/00 155
Western Financial Grantor Trust
Series: 1994-4, Class A1
151 7.100%Due 01/01/00 153
Western Financial Grantor Trust
Series: 1995-5, Class A1
596 5.875%Due 03/01/02 597
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $1,603) $ 1,608
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATION--0.6%
Donaldson, Lufkin & Jenrette, Inc. Mortgage Acceptance
Corp.
Series: 1994-Q8, Class 2A1
$ 327 7.250% Due 05/25/24 $ 327
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATION
(Cost $318) $ 327
- -------------------------------------------------------------------------------
CORPORATE BONDS--6.4%
FINANCIAL--4.3%
Equitable Life Assurance Co.
$ 400 6.950%Due 12/01/05 $ 402
Lehman Brothers Medium Term Note
475 6.875%Due 06/08/98 480
Lumbermens Mutual Casualty Co.
350 9.150%Due 07/01/26 392
Prudential Insurance Co. of America
400 7.650%Due 07/01/07 417
Salomon, Inc. Medium Term Note
500 5.500%Due 01/31/98 498
-------
2,189
RETAIL--0.8%
Penney (J. C.), Inc.
420 6.900%Due 08/15/26 433
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------
<C> <S> <C>
SANITARY SERVICES--1.3%
WMX Technologies, Inc.
$ 650 7.100%Due 08/01/26 $ 686
- -----------------------------------------------
TOTAL CORPORATE BONDS
(Cost $3,209) $ 3,308
- -----------------------------------------------
U.S. GOVERNMENT AGENCIES--6.0%
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC
TRUST--3.0%
Series: 1991-37, Class G
$ 250 8.150% Due 08/25/05 $ 257
Series: 1996-M4, Class A
746 7.750% Due 03/17/17 768
Series: 1992-200, Class E
500 6.250% Due 06/25/17 500
--------
1,525
GOVERNMENT NATIONAL MORTGAGE ASSOCI-
ATION--3.0%
Pool # 432153
1,522 8.000% Due 11/15/26 1,570
- -----------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $3,048) $ 3,095
- -----------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--21.4%
U.S. TREASURY NOTES--21.4%
$ 1,550 8.125% Due 02/15/98 $ 1,596
750 5.375% Due 05/31/98 748
1,835 6.750% Due 05/31/99 1,881
640 6.875% Due 08/31/99 659
1,475 6.250% Due 05/31/00 1,498
1,325 7.750% Due 02/15/01 1,420
800 6.250% Due 02/15/03 814
1,000 5.750% Due 08/15/03 990
1,260 7.500% Due 02/15/05 1,379
- -----------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $10,792) $ 10,985
- -----------------------------------------------
FLOATING RATE BANK NOTE--1.6%
National Westminster Bank
$ 900 5.625%Due 02/28/97 $ 789
- -----------------------------------------------
TOTAL FLOATING RATE BANK NOTE
(Cost $762) $ 789
- -----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--6.6%
Berliner Handels und Frankfurter,
Grand Cayman
$ 3,401 5.688%Due 12/02/96 $ 3,401
- -------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,401) $ 3,401
- -------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost $44,220) $51,448
- -------------------------------------------------------
Liabilities, less other assets--(0.1)% (62)
- -------------------------------------------------------
NET ASSETS--100.0% $51,386
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description VALUE
- --------------------------------------------------------
DIVERSIFIED GROWTH PORTFOLIO
<C> <S> <C> <C>
COMMON STOCKS--99.1%
BANKING--4.8%
68,640 Banc One Corp. $ 3,269
108,200 First USA, Inc. 3,557
--------
6,826
BROKERAGE SERVICES--2.1%
100,000 Schwab (Charles) Corp. 3,012
CHEMICALS AND ALLIED PRODUCTS--14.3%
41,000 Abbott Laboratories 2,286
50,800 Air Products and Chemicals, Inc. 3,531
40,000 American Home Products Corp. 2,570
31,200 Merck & Co., Inc. 2,590
72,437 Morton International, Inc. 2,925
17,000 Pfizer, Inc. 1,523
62,000 Praxair, Inc. 3,015
18,300 Procter & Gamble Co. 1,990
--------
20,430
COMMUNICATIONS--3.6%
50,000 Ameritech Corp. 2,944
55,000 AT&T Corp. 2,159
--------
5,103
COMPUTERS AND OFFICE MACHINES--3.7%
27,000 Cisco Systems, Inc.* 1,833
20,000 Electronic Data Systems Corp. 967
16,300 Microsoft Corp.* 2,557
--------
5,357
COSMETICS AND PERSONAL CARE--0.7%
14,100 Gillette Co. 1,040
CREDIT INSTITUTIONS--1.5%
50,000 Green Tree Financial Corp. 2,094
ELECTRONICS AND OTHER ELECTRICAL EQUIP-
MENT--9.7%
18,000 Emerson Electric Co. 1,766
49,600 General Electric Co. 5,158
22,900 Intel Corp. 2,905
44,000 Linear Technology Corp. 2,074
35,000 Motorola, Inc. 1,938
--------
13,841
</TABLE>
<TABLE>
<CAPTION>
Shares Description VALUE
- ---------------------------------------------------------
<C> <S> <C>
FOOD AND BEVERAGES--4.1%
117,000 Brinker International, Inc.* $ 2,165
45,000 PepsiCo, Inc. 1,344
22,000 Philip Morris Cos., Inc. 2,269
--------
5,778
GLASS, CLAY AND STONE PRODUCTS--1.3%
58,700 Newell Co. 1,820
HEALTH SERVICES--2.0%
35,000 Health Management Associates, Inc.,
Class A* 774
40,000 Johnson & Johnson Co. 2,125
--------
2,899
HEAVY CONSTRUCTION--2.4%
51,000 Fluor Corp. 3,468
INDUSTRIAL INSTRUMENTS--3.1%
37,600 Hewlett-Packard Co. 2,026
60,000 Sundstrand Corp. 2,340
--------
4,366
INSURANCE SERVICES--3.6%
23,900 American International Group, Inc. 2,748
23,400 MBIA, Inc. 2,366
--------
5,114
MORTGAGE AGENCIES--2.8%
92,000 Federal National Mortgage Association 3,795
OIL AND GAS--2.9%
45,000 Noble Affiliates, Inc. 2,121
20,000 Schlumberger Ltd. 2,080
--------
4,201
PAPER PRODUCTS--2.1%
31,300 Kimberly-Clark Corp. 3,059
PETROLEUM PRODUCTS--9.1%
43,000 Chevron Corp. 2,881
37,300 Exxon Corp. 3,529
34,650 Mobil Corp. 4,193
14,000 Royal Dutch Petroleum Co. 2,378
--------
12,981
PROFESSIONAL SERVICES--7.5%
35,000 Cintas Corp. 2,126
17,000 Computer Sciences Corp.* 1,337
100,700 CUC International, Inc.* 2,656
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
32,736 First Data Corp. $ 1,305
71,900 Olsten Corp. 980
47,500 Oracle Systems Corp.* 2,327
--------
10,731
RECREATION AND LEISURE SERVICES--4.2%
88,100 Carnival Corp., Class A 2,786
88,000 Circus Circus Enterprises, Inc.* 3,212
--------
5,998
RETAIL--11.1%
58,200 Home Depot, Inc. 3,034
131,050 Staples, Inc.* 2,588
50,000 Tommy Hilfiger Corp.* 2,700
115,600 Wal-Mart Stores, Inc. 2,948
107,300 Walgreen Co. 4,480
--------
15,750
TRANSPORTATION PARTS AND EQUIPMENT--2.5%
36,000 Boeing Co. 3,578
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $105,076) $141,241
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--1.1%
Berliner Handels und Frankfurter, Grand Cayman
$1,490 5.688%Due 12/02/96 $ 1,490
- -----------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $1,490) $ 1,490
- -----------------------------------------------------------------------
TOTAL INVESTMENTS--100.2%
(Cost $106,566) $142,731
- -----------------------------------------------------------------------
Liabilities, less other assets--(0.2)% (243)
- -----------------------------------------------------------------------
NET ASSETS--100.0% $142,488
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO
COMMON STOCKS--98.2%
AGRICULTURE--0.1%
10,400 Pioneer Hi-Bred International, Inc. $ 725
APPAREL--0.1%
9,200 Liz Claiborne, Inc. 390
8,000 V. F. Corp. 543
--------
933
BANKING--7.8%
13,500 Ahmanson (H.F.) & Co. 445
54,949 Banc One Corp. 2,617
19,200 Bank of Boston Corp. 1,342
48,600 Bank of New York Co., Inc. 1,744
45,376 BankAmerica Corp. 4,674
10,100 Bankers Trust New York Corp. 879
24,300 Barnett Banks, Inc. 1,069
19,800 Boatmen's Bancshares, Inc. 1,319
55,046 Chase Manhattan Corp. 5,202
60,600 Citicorp 6,620
14,500 Comerica, Inc. 848
28,100 Corestates Financial Corp. 1,514
13,300 Fifth Third Bancorp 931
17,800 First Bank System, Inc. 1,297
39,907 First Chicago NBD Corp. 2,345
34,815 First Union Corp. 2,659
7,300 Golden West Financial Corp. 493
17,300 Great Western Financial Corp. 538
29,000 Keycorp 1,519
16,350 Mellon Bank Corp. 1,181
23,500 Morgan (J.P.) & Co., Inc. 2,218
28,000 National City Corp. 1,298
36,668 NationsBank Corp. 3,800
46,700 Norwest Corp. 2,183
43,000 PNC Bank Corp. 1,698
7,000 Republic New York Corp. 618
28,100 Sun Trust Banks, Inc. 1,426
19,500 U.S. Bancorp 834
21,000 Wachovia Corp. 1,260
11,866 Wells Fargo & Co. 3,377
--------
57,948
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
31,400 Houston Industries, Inc. $ 691
1,100 Nacco Industries, Inc. 52
--------
743
BROKERAGE AND FINANCIAL SERVICES--1.2%
59,800 American Express Co. 3,125
33,101 Fleet Financial Group, Inc. 1,833
17,300 Green Tree Financial Corp. 724
21,300 Merrill Lynch & Co., Inc. 1,709
19,100 Morgan Stanley Group, Inc. 1,148
13,300 Salomon Brothers, Inc. 607
--------
9,146
CHEMICALS AND ALLIED PRODUCTS--11.9%
98,400 Abbott Laboratories 5,486
14,100 Air Products and Chemicals, Inc. 980
8,200 Allergan, Inc. 263
10,600 Alza Corp.* 299
80,200 American Home Products Corp. 5,153
33,400 Amgen, Inc.* 2,033
16,800 Avon Products, Inc. 937
34,400 Baxter International, Inc. 1,462
63,200 Bristol-Myers Squibb Co. 7,189
6,500 Clorox Co. 678
18,500 Colgate-Palmolive Co. 1,714
30,900 Dow Chemical Co. 2,588
70,700 Du Pont (E.I.) de Nemours & Co., Inc. 6,663
9,875 Eastman Chemical Co. 564
8,100 Ecolab, Inc. 315
68,998 Eli Lilly & Co. 5,278
4,700 FMC Corp.* 363
6,800 Goodrich (B.F.) Co. 305
11,100 Grace (W.R.) & Co. 587
8,000 Great Lakes Chemical Corp. 429
13,500 Hercules, Inc. 655
14,000 International Flavors & Fragrances, Inc. 637
153,400 Merck & Co., Inc. 12,732
18,000 Morton International, Inc. 727
8,500 Nalco Chemical Co. 324
81,000 Pfizer, Inc. 7,260
64,120 Pharmacia & Upjohn, Inc. 2,477
23,500 PPG Industries, Inc. 1,439
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
19,600 Praxair, Inc. $ 953
86,400 Procter & Gamble Co. 9,396
8,200 Rohm & Haas Co. 653
46,600 Schering-Plough Corp. 3,320
10,800 Sherwin-Williams Co. 613
16,300 Union Carbide Corp. 752
34,200 Warner-Lambert Co. 2,445
--------
87,669
COMMUNICATIONS--7.4%
62,900 AirTouch Communications, Inc.* 1,612
23,900 Alltel Corp. 762
69,300 Ameritech Corp. 4,080
203,300 AT&T Corp. 7,979
55,200 Bell Atlantic Corp. 3,471
125,300 Bellsouth Corp. 5,059
41,200 Comcast Corp. 690
122,000 GTE Corp. 5,475
80,264 Lucent Technologies, Inc.* 4,114
9,300 Mallinckrodt, Inc. 409
86,700 MCI Communications Corp. 2,644
55,300 Nynex Corp. 2,564
54,000 Pacific Telesis Group 1,998
11,800 Providian Corp. 631
76,800 SBC Communications, Inc. 4,042
54,300 Sprint Corp. 2,274
22,500 Tellabs, Inc.* 894
78,700 U.S. West Media Group 1,505
60,200 U.S. West, Inc.* 1,881
45,000 Viacom, Inc., Class B* 1,699
48,900 Worldcom, Inc.* 1,131
--------
54,914
COMPUTERS AND OFFICE MACHINES--5.5%
15,200 Amdahl Corp.* 181
15,700 Apple Computer, Inc.* 379
23,700 Bay Network Inc.* 634
19,200 Cabletron Systems, Inc.* 775
8,600 Ceridian Corp.* 414
81,600 Cisco Systems, Inc.* 5,539
34,000 Compaq Computer Corp.* 2,694
4,900 Data General Corp.* 72
11,400 Dell Computer Corp.* 1,159
19,600 Digital Equipment Corp.* 720
29,200 EMC Corp.* 942
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
5,900 Intergraph Corp.* $ 54
66,500 International Business Machines Corp. 10,598
75,400 Microsoft Corp.* 11,828
18,800 Pitney Bowes, Inc. 1,109
27,300 Seagate Technology Inc.* 1,078
21,700 Silicon Graphics, Inc.* 431
14,800 Tandem Computers, Inc.* 202
7,500 Tandy Corp. 316
21,300 3Com Corp.* 1,600
21,900 Unisys Corp.* 167
--------
40,892
CONSTRUCTION--0.2%
14,400 Dover Corp. 769
22,600 Dresser Industries, Inc. 740
--------
1,509
COSMETICS AND PERSONAL CARE--0.6%
56,200 Gillette Co. 4,145
CREDIT INSTITUTIONS--0.6%
6,800 Beneficial Corp. 422
20,672 Dean Witter Discover & Co. 1,413
12,200 Household International, Inc. 1,156
28,050 MBNA Corp. 1,133
7,400 MGIC Investment Corp. 554
--------
4,678
ELECTRICAL SERVICES--2.7%
23,600 American Electric Power Co., Inc. 979
18,600 Baltimore Gas and Electric Co. 518
19,200 Carolina Power & Light Co. 703
26,500 Central and South West Corp. 709
19,910 Cinergy Corp. 667
29,600 Consolidated Edison Co. of New York, Inc. 858
22,400 Dominion Resources, Inc. 854
18,300 DTE Energy Co. 586
25,600 Duke Power Co. 1,187
55,300 Edison International 1,099
28,800 Entergy Corp. 781
23,100 FPL Group, Inc. 1,066
15,200 General Public Utilities Corp. 511
18,200 Niagara Mohawk Power Corp.* 159
8,700 Northern States Power Co. 410
19,200 Ohio Edison Co. 442
52,400 Pacific Gas & Electric Co. 1,264
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
ELECTRICAL SERVICES--CONTINUED
37,100 PacifiCorp $ 779
28,100 Peco Energy Co. 717
20,400 PP&L Resources, Inc. 467
30,800 Public Service Enterprise Group, Inc. 882
84,900 Southern Co. 1,889
28,300 Texas Utilities Co. 1,118
27,200 Unicom Corp. 724
12,900 Union Electric Co. 513
--------
19,882
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--7.3%
17,000 Advanced Micro Devices, Inc.* 412
27,656 AMP, Inc. 1,058
7,587 Andrew Corp.* 439
13,600 Cooper Industries, Inc. 564
14,700 DSC Communications Corp.* 265
28,300 Emerson Electric Co. 2,777
208,200 General Electric Co. 21,653
17,300 General Instrument Corp.* 383
4,900 Harris Corp. 336
103,700 Intel Corp. 13,157
14,800 ITT Corp. * 683
16,300 LSI Logic Corp.* 491
12,800 Maytag Corp. 245
26,300 Micron Technology, Inc. 871
74,700 Motorola, Inc. 4,136
17,400 National Semiconductor Corp.* 426
6,000 National Service Industries, Inc. 210
32,600 Northern Telecom, Ltd. 2,143
5,600 Raychem Corp. 477
9,700 Scientific-Atlanta, Inc. 150
82,300 TeleCommunications, Inc.* 1,111
23,900 Texas Instruments, Inc. 1,524
5,100 Thomas & Betts Corp. 231
9,400 Whirlpool Corp. 470
--------
54,212
FOOD AND BEVERAGES--8.7%
62,500 Anheuser-Busch Cos., Inc. 2,649
68,809 Archer-Daniels-Midland Co. 1,514
8,700 Brown-Forman, Inc. 404
29,600 Campbell Soup Co. 2,446
314,300 Coca-Cola Co. 16,069
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
30,650 ConAgra, Inc. $ 1,628
4,800 Coors (Adolph) Co. 95
18,300 CPC International, Inc. 1,524
20,000 General Mills, Inc. 1,270
46,600 Heinz (H.J.) Co. 1,765
19,400 Hershey Foods Corp. 968
26,700 Kellogg Co. 1,812
3,000 Luby's Cafeterias, Inc. 66
88,200 McDonalds Corp. 4,123
197,500 PepsiCo, Inc. 5,900
103,200 Philip Morris Cos., Inc. 10,643
17,100 Quaker Oats Co. 673
13,400 Ralston Purina Group 1,025
61,200 Sara Lee Corp. 2,402
47,200 Seagram Co., Ltd. 1,929
20,200 Unilever N.V. ADR 3,497
23,700 UST, Inc. 773
13,300 Whitman Corp. 306
14,600 Wrigley (WM) Jr. Co. 852
-------
64,333
FURNITURE AND FIXTURES--0.1%
20,200 Masco Corp. 737
GENERAL BUILDING CONTRACTORS--0.2%
3,600 Centex Corp. 130
16,000 Honeywell, Inc. 1,098
4,900 Kaufman & Broad Home Corp. 63
3,000 Pulte Corp. 92
-------
1,383
GLASS, CLAY AND STONE PRODUCTS--0.2%
29,000 Corning, Inc. 1,175
20,000 Newell Co. 620
-------
1,795
HEALTH SERVICES--1.9%
12,500 Beverly Enterprises, Inc.* 165
84,595 Columbia/HCA Healthcare Corp. 3,384
20,500 Humana, Inc.* 387
168,000 Johnson & Johnson Co. 8,925
7,950 Manor Care, Inc.* 201
10,200 St. Jude Medical, Inc.* 426
27,300 Tenet Healthcare Corp.* 611
-------
14,099
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
HEAVY CONSTRUCTION--0.3%
10,500 Fluor Corp. $ 714
5,100 Foster Wheeler Corp. 184
15,800 Halliburton Co. 952
--------
1,850
INDUSTRIAL INSTRUMENTS--2.8%
7,200 Bard (C.R.), Inc. 202
7,100 Bausch & Lomb, Inc. 264
15,700 Becton Dickinson & Co. 659
14,600 Biomet, Inc.* 241
22,300 Boston Scientific Corp.* 1,302
42,500 Eastman Kodak Co. 3,442
128,900 Hewlett-Packard Co. 6,944
5,200 Johnson Controls, Inc. 403
30,200 Medtronic, Inc. 1,997
5,500 Millipore Corp. 225
5,500 Perkin-Elmer Co. 339
5,700 Polaroid Corp. 243
29,800 Raytheon Co. 1,523
4,100 Tektronix, Inc. 200
7,900 United States Surgical Corp. 317
41,000 Xerox Corp. 2,014
--------
20,315
INSURANCE SERVICES--4.1%
18,957 Aetna Life & Casualty Co. 1367
5,700 Alexander & Alexander Services, Inc. 83
56,065 Allstate Corp. 3,378
25,800 American General Corp. 1,061
59,175 American International Group, Inc. 6,805
13,600 AON Corp. 828
22,000 Chubb Corp. 1,193
9,600 CIGNA Corp. 1,357
10,400 General Re Corp. 1,755
14,800 ITT Hartford Group, Inc. 1,012
9,025 Jefferson-Pilot Corp. 526
13,100 Lincoln National Corp. 706
14,500 Loews Corp. 1,345
9,100 Marsh & McLennan Cos., Inc. 1,032
15,900 Safeco Corp. 662
10,600 St. Paul Cos., Inc. 624
9,050 Torchmark Corp. 471
8,300 Transamerica Corp. 659
80,716 Travelers Group, Inc. 3,632
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
23,200 United Healthcare Corp. $ 1,000
9,200 UNUM Corp. 654
14,900 USF & G Corp. 298
4,300 USLIFE Corp. 133
--------
30,581
JEWELRY AND PRECIOUS METALS--0.0%
4,900 Jostens, Inc. 104
LEATHER PRODUCTS--0.0%
6,300 Stride Rite Corp. 63
LUMBER AND WOOD PRODUCTS--0.1%
13,700 Louisiana-Pacific Corp. 310
MACHINERY--1.4%
22,600 Applied Materials, Inc.* 862
18,200 Baker Hughes, Inc. 666
11,100 Black & Decker Corp. 420
3,600 Briggs & Stratton Corp. 149
12,400 Brunswick Corp. 316
9,100 Case Equipment Corp. 478
24,300 Caterpillar, Inc. 1,923
5,000 Cincinnati Milacron, Inc. 104
5,000 Cummins Engine Co., Inc. 226
32,600 Deere & Co. 1,455
6,300 General Signal Corp. 272
4,400 Giddings & Lewis, Inc. 52
5,900 Harnischfeger Industries, Inc. 262
13,800 Ingersoll-Rand Co. 642
21,500 Tenneco, Inc. 1,096
4,000 Timken Co. 182
19,200 Tyco Laboratories, Inc. 1,051
--------
10,156
MANUFACTURING--0.1%
3,500 Alberto-Culver Co., Class B 166
14,900 ITT Industries 349
--------
515
MERCHANDISE--GENERAL--0.2%
16,400 Alco Standard Corp. 849
7,700 Snap-On, Inc. 279
11,200 Stanley Works 330
--------
1,458
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
METAL MINING--0.7%
45,000 Barrick Gold Corp. $ 1,350
28,300 Battle Mountain Gold Co. 205
11,750 Cyprus/Amax Minerals Co. 291
17,600 Echo Bay Mines Ltd. 109
24,600 Freeport-McMoran Copper & Gold, Inc. 775
18,500 Homestake Mining Co. 280
21,200 Inco Ltd. 739
12,539 Newmont Mining Corp. 600
30,200 Placer Dome, Inc. 713
16,580 Santa Fe Pacific Gold Corp. 191
--------
5,253
METAL PRODUCTS--0.3%
21,927 Allegheny Teledyne Corp. 512
3,800 Ball Corp. 93
3,800 Crane Co. 178
16,200 Crown Cork & Seal Co., Inc. 859
6,900 McDermott International, Inc. 122
9,350 Parker-Hannifin Co. 380
--------
2,144
MORTGAGE AGENCIES--1.1%
22,500 Federal Home Loan Mortgage Corp. 2,571
137,700 Federal National Mortgage Association 5,680
--------
8,251
NATURAL GAS TRANSMISSION--0.8%
13,300 Coastal Corp. 640
6,900 Columbia Gas System, Inc. 446
11,900 Consolidated Natural Gas Co. 680
2,600 Eastern Enterprises 98
32,000 Enron Corp. 1,464
8,700 Enserch Corp. 203
6,300 Nicor, Inc. 232
17,300 Norman Energy Corp. 268
3,400 Oneok, Inc. 94
10,700 Pacific Enterprises 328
4,400 Peoples Energy Corp. 159
10,900 Sonat, Inc. 564
13,200 Williams Company, Inc. 741
--------
5,917
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
OIL AND GAS--1.1%
15,800 Burlington Resources, Inc. $ 837
3,100 Helmerich & Payne, Inc. 167
4,300 Louisiana Land & Exploration Co. 257
40,700 Occidental Petroleum Corp. 977
13,200 Oryx Energy Co.* 274
19,000 Panenergy Corp. 836
10,700 Rowan Cos., Inc.* 253
11,400 Santa Fe Energy Resources, Inc.* 165
30,900 Schlumberger Ltd. 3,214
31,376 Union Pacific Resources Group, Inc.* 937
6,700 Western Atlas, Inc.* 472
--------
8,389
PAPER PRODUCTS--2.0%
6,600 Avery Dennison Corp. 466
6,600 Bemis Co., Inc. 235
6,100 Boise Cascade Co. 189
12,000 Champion International Corp. 516
11,500 Georgia-Pacific Corp. 837
37,835 International Paper Co. 1,608
10,700 James River Corp. 342
35,492 Kimberly-Clark Corp. 3,470
6,600 Mead Corp. 391
52,800 Minnesota Mining & Manufacturing Co. 4,422
12,504 Stone Container Corp. 192
7,000 Temple Inland, Inc. 376
8,600 Union Camp Corp. 423
12,850 Westvaco Corp. 363
25,000 Weyerhaeuser Co. 1,150
--------
14,980
PERSONAL SERVICES--0.6%
13,000 Block (H.& R.), Inc. 380
15,500 HFS Inc.* 1,004
24,600 Hilton Hotels Corp. 719
16,100 Marriott International Corp. 898
29,700 Service Corp. International 895
7,000 Willamette Industries, Inc. 476
--------
4,372
PETROLEUM PRODUCTS--7.4%
11,700 Amerada Hess Corp. 689
62,700 Amoco Corp. 4,867
8,100 Ashland Oil, Inc. 389
20,300 Atlantic Richfield Co. 2,824
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
82,300 Chevron Corp. $ 5,514
156,600 Exxon Corp. 14,818
6,200 Kerr-McGee Corp. 434
49,700 Mobil Corp. 6,014
5,900 Pennzoil Co. 332
33,200 Phillips Petroleum Co. 1,498
67,600 Royal Dutch Petroleum Co. 11,484
9,300 Sun Co., Inc. 233
33,300 Texaco, Inc. 3,301
31,300 Unocal Corp. 1,275
36,200 USX-Marathon Group 828
--------
54,500
PRINTING AND PUBLISHING--1.3%
9,400 American Greetings Corp. 265
10,400 Deluxe Corp. 322
19,300 Donnelley (R.R.) & Sons Co. 647
12,200 Dow Jones & Co., Inc. 424
17,800 Gannett Co., Inc. 1,397
3,900 Harland (John H.) Co. 120
12,100 Knight-Ridder, Inc. 508
12,500 McGraw-Hill Cos., Inc. 569
3,400 Meredith Corp. 175
12,600 Moore Corp. Ltd. 265
12,300 New York Times Co. 460
71,700 Time Warner, Inc. 2,922
13,000 Times Mirror Co. 681
7,700 Tribune Co. 666
--------
9,421
PROFESSIONAL SERVICES--2.2%
5,800 Autodesk, Inc. 162
36,500 Automatic Data Processing, Inc. 1,565
45,950 Computer Associates International, Inc. 3,021
9,500 Computer Sciences Corp.* 747
49,625 CUC International, Inc.* 1,309
56,500 First Data Corp. 2,253
10,300 Interpublic Group of Cos., Inc. 510
44,500 Novell, Inc.* 490
82,500 Oracle Systems Corp.* 4,042
10,200 Ryder System, Inc. 310
7,300 Safety-Kleen Corp. 116
3,000 Shared Medical Systems Corp. 149
23,200 Sun Microsystems, Inc.* 1,351
--------
16,025
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
RECREATION AND LEISURE SERVICES--1.2%
6,400 Bally Entertainment Corp.* $ 186
85,500 Disney (Walt) Co. 6,306
9,200 Harcourt General, Inc. 503
13,000 Harrah's Entertainment, Inc.* 231
10,850 Hasbro, Inc. 446
4,700 King World Productions, Inc.* 179
34,445 Mattel, Inc. 1,063
--------
8,914
RESEARCH AND CONSULTING SERVICES--0.2%
21,400 Cognizant Corp.* 738
21,400 Dun & Bradstreet Corp. 484
6,000 EG&G, Inc. 110
--------
1,332
RETAIL--4.4%
31,800 Albertson's, Inc. 1,109
18,400 American Stores Co. 734
13,100 Charming Shoppes, Inc.* 67
12,300 Circuit City Stores, Inc. 411
13,300 CVS Corp 547
19,900 Darden Restaurants, Inc. 172
27,300 Dayton-Hudson Corp. 1,061
14,300 Dillard Department Stores, Inc. 438
26,200 Federated Department Stores, Inc.* 894
36,200 Gap, Inc. 1,163
7,500 Giant Food, Inc. 253
4,800 Great Atlantic & Pacific Tea Co., Inc. 157
60,400 Home Depot, Inc. 3,148
61,300 K-Mart Corp.* 682
15,800 Kroger Co.* 729
34,100 Limited, Inc. 614
2,500 Long Drug Stores Corp. 125
21,700 Lowe's Cos., Inc. 882
31,500 May Department Stores Co. 1,536
4,600 Mercantile Stores Co., Inc. 231
10,300 Nordstrom, Inc. 448
28,400 Penney (J.C.), Inc. 1,526
7,800 Pep Boys-Manny Moe & Jack 286
24,703 Price/Costco, Inc.* 574
10,600 Rite Aid Corp. 420
6,400 Ryan's Family Steak Houses, Inc.* 45
49,400 Sears, Roebuck & Co. 2,458
6,100 Shoney's, Inc.* 50
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
RETAIL--CONTINUED
9,200 TJX Cos., Inc. $ 415
34,500 Toys "R" Us, Inc.* 1,190
289,200 Wal-Mart Stores, Inc. 7,375
31,000 Walgreen Co. 1,294
16,200 Wendy's International, Inc. 346
19,100 Winn-Dixie Stores, Inc. 642
16,800 Woolworth Corp.* 403
--------
32,425
RUBBER AND PLASTICS--0.8%
4,600 Armstrong World Industries, Inc. 346
10,500 Cooper Tire & Rubber Co. 215
19,600 Goodyear Tire & Rubber Co. 951
73,900 Monsanto Co. 2,938
18,900 Rubbermaid, Inc. 454
7,800 Tupperware Corp. 413
--------
5,317
SANITARY SERVICES--0.5%
26,800 Browning-Ferris Industries, Inc. 720
39,500 Laidlaw, Inc. 484
61,900 WMX Technologies, Inc. 2,229
--------
3,433
SERVICE INDUSTRY MACHINERY--0.2%
14,566 Pall Corp. 381
3,600 Trinova Corp. 131
53,100 Westinghouse Electric Corp. 996
--------
1,508
STEEL PRODUCTS--0.8%
28,500 Alcan Aluminum Ltd. 1,004
22,000 Aluminum Co. of America 1,400
13,400 Armco, Inc.* 60
5,400 Asarco, Inc. 147
14,000 Bethlehem Steel Corp.* 126
18,187 Engelhard Corp. 355
6,100 Inland Steel Industries, Inc. 114
11,100 Nucor Corp. 604
6,500 Owens Corning Fiberglass Corp. 279
8,300 Phelps Dodge Corp. 603
8,000 Reynolds Metals Co. 476
10,600 USX-U.S. Steel Group 319
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
11,475 Worthington Industries, Inc. $ 228
--------
5,715
TEXTILES--0.1%
9,600 Fruit of the Loom, Inc.* 342
4,900 Russell Corp. 141
2,500 Spring Industries, Inc. 116
--------
599
TOBACCO PRODUCTS--0.1%
21,500 American Brands, Inc. 1,027
TRANSPORTATION PARTS AND EQUIPMENT--4.7%
35,600 Allied Signal, Inc. 2,608
43,900 Boeing Co. 4,362
91,900 Chrysler Corp. 3,262
12,800 Dana Corp. 398
9,800 Eaton Corp. 679
7,700 Echlin, Inc. 259
4,500 Fleetwood Enterprises, Inc. 137
149,100 Ford Motor Co. 4,883
7,900 General Dynamics Corp. 583
95,300 General Motors Corp. 5,492
15,400 Illinois Tool Works, Inc. 1,320
25,254 Lockheed Martin Corp.* 2,289
27,100 McDonnell Douglas Corp. 1,433
9,520 Navistar International. Corp.* 90
7,300 Northrop Grumman Co. 607
4,860 PACCAR, Inc. 323
27,500 Rockwell International Corp. 1,767
10,200 Textron, Inc. 973
8,100 TRW, Inc. 789
15,400 United Technologies Corp. 2,160
--------
34,414
TRANSPORTATION SERVICES--1.4%
11,500 AMR Corp.* 1,049
19,265 Burlington Northern Santa Fe Corp. 1,732
4,900 Caliber Systems Inc. 95
10,200 Conrail, Inc. 992
5,500 Consolidated Freightways, Inc. 133
26,700 CSX Corp. 1,248
10,000 Delta Air Lines, Inc. 753
14,400 Federal Express Corp.* 637
15,900 Norfolk Southern Corp. 1,431
18,200 Southwest Airlines Co. 450
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ---------------------------------------------------
<C> <S> <C>
30,700 Union Pacific Corp. $ 1,788
8,000 USAir Group* 186
--------
10,494
WHOLESALE--0.7%
4,800 Fleming Cos., Inc. 79
15,250 Genuine Parts Co. 686
6,400 Grainger (W.W.), Inc. 509
36,200 Nike, Inc. 2,059
3,600 Potlatch Corp. 159
7,100 Reebok International, Ltd.* 270
6,300 Sigma-Aldrich, Corp. 394
8,500 Supervalu Stores, Inc. 252
22,900 Sysco Corp. 781
--------
5,189
- ---------------------------------------------------
TOTAL COMMON STOCKS
(Cost $530,260) $724,714
- ---------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.3%
U.S. Treasury Bills #
$180 5.095% Due 12/26/96 $ 177
100 4.906% Due 01/09/97 99
820 4.940% Due 01/09/97 809
400 4.990% Due 01/09/97 395
390 5.220% Due 01/09/97 383
- ---------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $1,863) $ 1,863
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ---------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--1.3%
Berliner Handels und Frankfurter,
Grand Cayman
$9,787 5.688% Due 12/02/96 $ 9,787
- ---------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $9,787) $ 9,787
- ---------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(Cost $541,910) $736,364
- ---------------------------------------------------------
Other assets, less liabilities--0.2% 1,374
- ---------------------------------------------------------
NET ASSETS--100.0% $737,738
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT CONTRACT CONTRACT UNREALIZED
TYPE CONTRACTS AMOUNT POSITION EXPIRATION GAIN
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 30 $9,997 Long 12/20/96 $1,377
- -------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
21
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description VALUE
- ----------------------------------------------------------
<C> <S> <C>
FOCUSED GROWTH PORTFOLIO
COMMON STOCKS--98.3%
BANKING--5.2%
125,800 First USA, Inc. $ 4,136
26,500 State Street Bank Boston Corp. 1,792
-------
5,928
CHEMICALS AND ALLIED PRODUCTS--10.4%
34,400 American Home Products Corp. 2,210
25,000 Lilly (Eli) & Co. 1,913
44,900 Merck & Co., Inc. 3,727
81,400 Praxair, Inc. 3,958
-------
11,808
COMMUNICATIONS--3.0%
43,999 Lucent Technologies, Inc. 2,255
15,400 Reuters Holding PLC ADR 1,118
-------
3,373
COMPUTERS AND OFFICE MACHINES--3.6%
30,200 Cisco Systems, Inc.* 2,050
37,000 Parametric Technology Corp.* 2,012
-------
4,062
CREDIT INSTITUTIONS--4.0%
41,300 Associates First Capital Corp. 1,998
62,500 Green Tree Financial Corp. 2,617
-------
4,615
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--
18.7%
63,700 General Electric Co. 6,625
20,500 Intel Corp. 2,601
43,000 Linear Technology Corp. 2,026
64,900 Motorola, Inc. 3,594
110,000 Solectron Corp.* 6,435
-------
21,281
FOOD AND BEVERAGES--5.4%
43,000 Philip Morris Cos., Inc. 4,434
50,100 Starbucks Corp.* 1,735
-------
6,169
GLASS, CLAY AND STONE PRODUCTS--0.8%
33,000 Newell Co. 1,023
HEALTH SERVICES--4.2%
89,350 Health Management Associates, Inc.,
Class A* 1,977
53,600 Johnson & Johnson Co. 2,847
-------
4,824
</TABLE>
<TABLE>
<CAPTION>
Shares Description VALUE
- -------------------------------------------------------------------
<C> <S> <C> <C>
INDUSTRIAL INSTRUMENTS--4.0%
45,400 Hewlett-Packard Co. $ 2,446
41,800 Raytheon Co. 2,137
--------
4,583
INSURANCE SERVICES--4.1%
16,500 American International Group, Inc. 1,897
28,000 MBIA, Inc. 2,831
--------
4,728
MEDICAL PRODUCTS AND EQUIPMENT--2.1%
36,000 Medtronic, Inc. 2,380
MORTGAGE AGENCIES--2.0%
55,000 Federal National Mortgage Association 2,269
PROFESSIONAL SERVICES--13.4%
20,600 Cintas Corp. 1,251
34,100 Computer Associates International, Inc. 2,242
25,700 Computer Sciences Corp.* 2,021
135,150 CUC International, Inc.* 3,565
88,002 First Data Corp. 3,509
127,000 Olsten Corp. 1,730
15,500 Sun Microsystems, Inc.* 903
--------
15,221
RECREATION AND LEISURE SERVICES--10.3%
35,000 Callaway Golf Co. 1,063
120,500 Carnival Corp., Class A 3,811
104,100 Circus Circus Enterprises, Inc.* 3,800
41,600 Disney (Walt) Co. 3,068
--------
11,742
RETAIL--7.1%
65,000 Kohls Corp.* 2,592
18,300 Home Depot, Inc. 954
66,200 PETsMART, Inc.* 1,688
45,000 Staples, Inc.* 889
35,300 Tommy Hilfiger Corp.* 1,906
--------
8,029
- -------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $92,269) $112,035
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description VALUE
- -------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENT--1.8%
Berliner Handels und Frankfurter,
Grand Cayman
$2,008 5.688% Due 12/02/96 $ 2,008
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,008) $ 2,008
- -------------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost $94,277) $114,043
- -------------------------------------------------------------
Liabilities, less other assets--(0.1)% (144)
- -------------------------------------------------------------
NET ASSETS--100.0% $113,899
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO
<C> <S> <C>
COMMON STOCKS--89.0%
AUSTRALIA--2.8%
90,000 Broken Hill Proprietary Co. $ 1,321
270,000 News Corp. Ltd. 1,438
165,000 WMC Ltd. 1,048
--------
3,807
CZECH REPUBLIC--0.6%
90,000 Czechoslovakia & Slovak Investment Corp.* 756
12,000 Czechoslovakia & Slovak Investment Corp. Warrants * 12
--------
768
FINLAND--0.7%
16,000 Nokia Corp. ADR 898
FRANCE--7.3%
11,000 Cie Generale des Eaux 1,356
17,000 Elf Aquitaine S.A. 1,485
25,000 Havas S.A. 1,771
55,000 Lagardere S.C.A. 1,664
12,000 Lyonnaise Des Eaux S.A. 1,142
15,000 PSA Peugeot 1,844
27,000 Rhone-Poulenc, Class A 875
--------
10,137
GERMANY--6.0%
1,800 Bayerische Motoren Werke A.G. 1,168
45,000 Commerzbank A.G. 1,107
25,000 Hoechst A.G. 1,095
3,000 Mannesmann A.G. 1,252
33,000 VEBA A.G. 1,931
4,500 Volkswagen A.G. 1,805
--------
8,358
HONG KONG--3.3%
125,000 Citic Pacific Ltd. 652
80,000 Guoco Group Ltd. 437
600,000 Hong Kong Telecommunications Ltd. 1,040
140,000 Hutchison Whampoa Ltd. 1,082
135,000 Swire Pacific Ltd. 1,279
--------
4,490
ITALY--2.9%
1,000,000 Credito Italiano 1,096
225,000 Ente Nazionale Idrocarburi S.p.A. 1,185
675,000 Pirelli S.p.A. 1,234
125,000 Stet Societa' Finanziaria Telefonica S.p.A. 531
--------
4,046
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
JAPAN--27.2%
110,000 Asahi Bank Ltd. $ 1,073
5,000 Bellsystem 24, Inc. 620
45,000 CMK Corp. 637
40,000 CSK Corp. 1,128
60,000 Eisai Co. Ltd. 1,181
18,000 FamilyMart 712
14,000 Forval Corp. 578
280,000 Hitachi Zosen Corp. 1,297
30,000 Honda Motor Co., Ltd. 886
65,000 Industrial Bank of Japan 1,285
300,000 Ishikawajima-Harima Heavy Industries Co. 1,397
300,000 Isuzu Motors Ltd. 1,500
63,000 Japan Radio Co. 769
50,000 Laox 769
150,000 Long-Term Credit Bank of Japan 949
14,000 Mars Engineering Corp. 535
280,000 Marubeni Corp. 1,267
22,000 Matsumotokiyoshi 746
55,000 Matsushita Electric Industrial Co. Ltd. 952
30,000 Matsushita-Kotobuki Electron 770
120,000 Minebea Co. Ltd. 1,025
110,000 Mitsubishi Estate Co. Ltd. 1,392
13,000 Nichii Gakkan Co. 617
50,000 Nikko Securities Co. Ltd. 466
23,000 Nintendo Corp. Ltd 1,628
165 Nippon Telegraph & Telephone Corp. 1,177
575,000 NKK Corp.* 1,415
25,000 Nomura Securities Co. Ltd. 422
200,000 NSK Ltd. 1,278
24,000 Orix Corp. 915
120,000 Ricoh Co. Ltd. 1,286
30,000 Sagami Chain Co. Ltd. 535
20,000 Sony Corp. 1,281
80,000 Sumitomo Electric Industries 1,125
60,000 Takeda Chemical Industries 1,176
230,000 Teijin Ltd. 1,097
50,000 Tokyo Style 738
35,000 Toyota Motor Corp. 957
--------
37,581
MALAYSIA--2.4%
120,000 AMMB Holdings Berhad 954
200,500 Genting Berhad 1,428
100,000 Malayan Banking Berhad 989
--------
3,371
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
NETHERLANDS--4.5%
23,000 ABN AMRO Holding N.V. $ 1,490
17,000 Akzo Nobel 2,256
35,000 ING Groep N.V. 1,226
20,000 Koninklijke Ahold N.V. 1,251
--------
6,223
NORWAY--0.8%
70,000 Saga Petroleum A.S.A. 1,135
SINGAPORE--1.4%
67,000 Development Bank of Singapore Ltd. 865
140,000 Keppel Corp. Ltd. 1,088
--------
1,953
SOUTH AFRICA--0.5%
28,000 South African Breweries Ltd. 706
SOUTH KOREA--0.5%
80,000 Cho Hung Bank Co. Ltd. General Depository Receipt 652
368 Daewoo Corp. 3
--------
655
SPAIN--3.4%
23,000 Banco Santander S.A. 1,247
30,000 Empresa Nacional de Electricidad S.A. 2,027
40,000 Repsol S.A. ADR 1,465
--------
4,739
SWEDEN--1.0%
30,000 Astra AB 1,439
SWITZERLAND--4.9%
1,200 Ciba-Geigy A.G. 1,486
19,000 CS Holding A.G. 2,024
9,000 SMH A.G. 1,306
7,000 Zurich Versicherungsgesellschaft 1,989
--------
6,805
TAIWAN--0.8%
433,500 Far Eastern Department Stores Ltd. 577
625,000 Pacific Construction* 527
--------
1,104
UNITED KINGDOM--18.0%
115,000 Barclays PLC 1,978
200,000 Cable & Wireless PLC 1,600
135,000 Commercial Union PLC 1,497
350,000 General Electric Co. PLC 2,191
30,000 Glaxo Wellcome PLC ADR 986
120,000 Imperial Chemical Industries PLC 1,556
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ------------------------------------------------------------
<C> <S> <C>
175,000 Kingfisher PLC $ 1,908
175,000 Marks & Spencer PLC 1,492
600,000 National Grid Group PLC 1,976
175,000 National Westminster Bank PLC 2,024
125,000 Pearson PLC 1,544
200,000 Rank Group PLC 1,462
70,000 RTZ Corp. PLC 1,177
425,000 Tomkins PLC 1,775
38,000 Vodafone Group PLC ADR 1,644
--------
24,810
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $118,511) $123,025
- ------------------------------------------------------------
PREFERRED STOCK--1.0%
GERMANY--1.0%
29,000 Henkel KGaA-Vorzug $ 1,445
- ------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $1,223) $ 1,445
- ------------------------------------------------------------
OTHER--4.2%
JAPAN--4.2%
2,200,000 Nikkei 300 Stock Index Fund* $ 5,761
- ------------------------------------------------------------
TOTAL OTHER
(Cost $6,274) $ 5,761
- ------------------------------------------------------------
SHORT-TERM INVESTMENT--6.7%
Berliner Handels und Frankfurter,
Grand Cayman
$ 9,249 5.688% Due 12/02/96 $ 9,249
- ------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $9,249) $ 9,249
- ------------------------------------------------------------
TOTAL INVESTMENTS--100.9%
(Cost $135,257) $139,480
- ------------------------------------------------------------
Liabilities, less other assets--(0.9)% (1,204)
- ------------------------------------------------------------
NET ASSETS--100.0% $138,276
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
INTERNATIONAL GROWTH PORTFOLIO--CONTINUED
At November 30, 1996 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<CAPTION>
INDUSTRY/SECTOR
- --------------------------
<S> <C>
Auto 5.1%
Basic Industry 19.5
Capital Goods 8.1
Consumer Goods 14.1
Financial Services 19.5
Medical 5.3
Real Estate 1.5
Retail 6.1
Steel 1.0
Technology 5.0
Other 14.8
- --------------------------
TOTAL 100.0%
- --------------------------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO
<C> <S> <C>
COMMON STOCKS--93.5%
AGRICULTURE--0.5%
2,600 Barefoot, Inc. $ 33
2,700 DeKalb Genetics Corp. 101
2,999 Delta & Pine Land Co. 96
5,300 Dimon, Inc. 110
8,100 Longview Fibre Co. 148
2,400 Northland Cranberries, Inc. 53
1,500 Tejon Ranch Co. 24
--------
565
APPAREL--0.5%
1,600 Donnkenny, Inc.* 6
800 Fossil, Inc.* 10
1,500 Gadzooks, Inc.* 43
4,200 Genesco, Inc.* 43
4,300 Hartmarx Corp.* 23
3,250 Kellwood Co. 58
1,100 Kenneth Cole Productions, Inc.* 17
1,100 Marisa Christina, Inc.* 8
5,600 Nautica Enterprises, Inc.* 179
1,900 Oshkosh B' Gosh, Inc. 28
2,300 St. John Knits, Inc. 99
1,900 Starter Corp.* 12
1,650 Unitog Co. 45
1,500 Vans, Inc.* 23
--------
594
BANKING--7.9%
2,000 Aames Financial Corp. 86
1,880 Albank Financial Corp. 62
1,900 Amcore Financial, Inc. 42
1,900 American Federal Bank 36
1,000 Anchor Bancorp, Inc. 35
3,075 Associated Banc-Corp. 135
2,900 BancorpSouth, Inc. 76
1,302 Bank of Granite Corp. 42
1,200 BankAtlantic Bancorp, Inc. 15
2,264 Bankers Corp. 44
1,200 Banknorth Group, Inc. 46
1,100 Bay View Capital Corp. 45
990 Brenton Banks, Inc. 25
7,180 Cal Fed Bancorp* 174
1,400 CBT Corp. 33
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
2,300 CCB Financial Corp. $ 153
3,600 Centura Banks, Inc. 164
1,787 Chittenden Corp. 45
900 CitFed Bancorp, Inc. 42
2,100 Citizens Bancorp 121
1,700 Citizens Banking Corp. 53
5,900 City National Corp. 122
2,978 CNB Bancshares, Inc. 107
2,900 Coast Savings Financial, Inc.* 103
1,400 Cole Taylor Financial Group, Inc. 40
3,100 Collective Bancorp, Inc. 110
1,700 Colonial BancGroup, Inc. 68
1,768 Commerce Bancorp, Inc. 51
2,300 Commercial Federal Corp. 111
2,654 Commonwealth Bancorp 38
1,800 Community First Bankshares, Inc. 49
800 CPB, Inc. 24
3,880 Cullen/Frost Bankers, Inc. 138
1,685 Downey Financial Corp. 48
1,080 F & M Bancorp 33
3,055 F & M National Corp. 60
1,607 Fidelity National Corp. 27
1,370 Financial Trust Corp.* 39
1,700 First Citizens Bancshares, Inc. 136
1,900 First Commercial Bancshares, Inc. 47
3,437 First Commercial Corp. 125
3,500 First Commonwealth Financial Corp. 64
1,700 First Federal Financial Corp.* 41
2,700 First Federal Savings Bank of Colorado 48
2,152 First Financial Bancorp 66
925 First Financial Bancshares, Inc. 33
4,700 First Financial Corp. 140
3,700 First Hawaiian, Inc. 120
1,039 First Indiana Corp. 26
4,054 First Michigan Bank Corp. 116
1,900 First Midwest Bancorp, Inc. 68
1,900 First Savings Bank of Washington Bancorp, Inc. 35
1,050 First United Bancshares, Inc. 29
1,388 First Western Bancorp, Inc. 37
1,800 Firstbank of Illinois Co. 61
2,025 FirstBank Puerto Rico 51
4,800 Firstmerit Corp. 167
1,559 FNB Corp. 36
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
BANKING--CONTINUED
<C> <S> <C>
1,750 Fort Wayne National Corp. $ 66
5,159 Fulton Financial Corp. 107
6,876 Glendale Federal Bank FSB* 144
2,300 Great Financial Corp. 69
1,400 Hancock Holding Co. 59
1,113 Harleysville National Corp. 28
500 Harris Savings Bank 9
900 Heritage Financial Services, Inc. 19
3,897 Home Financial Corp. 67
1,000 Homeland Bankshares Corp. 41
2,529 Hubco, Inc. 62
2,556 Imperial Bancorp* 58
3,464 Imperial Credit Industries, Inc.* 74
69 Investors Financial Services Corp.,
Class A* 2
500 Irwin Financial Corp. 24
2,300 Jefferson Bancshares, Inc. 67
5,849 Keystone Financial, Inc. 158
2,100 Klamath First Bancorp 31
900 Liberty Bancorp, Inc. 37
3,900 Long Island Bancorp, Inc. 125
2,200 Magna Bancorp, Inc. 38
4,400 Magna Group, Inc. 134
2,250 Mark Twain Bancshares, Inc. 112
3,259 Mid-Am, Inc. 58
2,600 ML Bancorp, Inc. 38
600 National Bancorp of Alaska, Inc. 42
1,638 National City Bancshares, Inc. 48
3,950 National Commerce Bancorp 144
1,126 National Penn Bancshares, Inc. 29
1,651 New York Bancorp, Inc. 56
3,900 North Fork Bancorp, Inc. 133
729 North Side Savings Bank 38
3,900 Old National Bancorp 143
1,000 Omega Financial Corp. 34
2,195 ONBANCorp, Inc. 85
3,225 One Valley Bancorp of West Virginia, Inc. 121
600 Park National Corp. 30
2,000 Peoples Bank of Bridgeport, CT 56
4,000 Peoples Heritage Financial Group, Inc. 112
1,300 Pikeville National Corp. 28
1,100 Pinnacle Banc Group, Inc. 11
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
1,900 Provident Bancorp, Inc. $ 99
1,328 Provident Bankshares Corp. 51
1,200 Queen City Bancorp 56
1,900 RCSB Financial, Inc. 57
2,792 Republic Bancorp, Inc. 33
1,797 Resource Bancshares Mortgage Group, Inc.* 27
3,100 Riggs National Corp.* 54
5,414 Roosevelt Financial Group, Inc. 104
1,800 S & T Bancorp, Inc. 54
1,500 Security Capital Corp. 107
1,600 Silicon Valley Bancshares* 48
7,640 Sovereign Bancorp, Inc. 100
2,971 St. Paul Bancorp, Inc. 84
2,900 Standard Financial, Inc.* 57
700 Student Loan Corp. 27
700 Sumitomo Bank of California 17
2,075 Susquehanna Bancshares, Inc. 74
1,500 T.R. Financial Corp.* 44
3,100 Trust Co. of Jersey City 46
3,183 Trustco Bank Corp. 68
4,300 Trustmark Corp. 110
2,698 UMB Financial Corp. 106
2,100 United Bankshares, Inc. 67
3,800 United Carolina Bancshares Corp. 152
900 USBancorp, Inc. 37
2,800 UST Corp. 52
6,700 Washington Federal, Inc. 178
1,300 Wesbanco, Inc. 39
1,500 Westamerica Bancorp 87
1,718 Westcorp, Inc. 41
2,375 Whitney Holding Corp. 84
--------
8,985
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
1,300 Addington Resources, Inc.* 39
1,200 Ashland Coal, Inc. 31
1,200 Nacco Industries, Inc. 57
--------
127
BROKERAGE AND FINANCIAL SERVICES--1.6%
2,200 Alex Brown, Inc. 132
2,200 Allied Capital Commercial Corp. 49
400 American Financial Enterprises, Inc. 11
2,300 Amresco, Inc. 49
2,900 Bankers Life Holding Corp. 71
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
867 BOK Financial Corp.* $ 23
700 CapMAC Holdings, Inc. 23
1,600 Carolina First Corp. 31
800 Cityscape Financial Corp.* 21
1,700 CMAC Investment Corp. 130
3,800 Crawford & Co., Class B 78
4,800 Crimmi Mae, Inc. 59
1,000 Cybercash, Inc.* 25
1,700 Financial Federal Corp.* 26
4,000 Insignia Financial Group, Inc., Class A* 91
1,900 Inter-Regional Financial Group, Inc. 67
600 Investment Technology Group, Inc.* 11
1,700 Jefferies Group, Inc. 61
2,100 Legg Mason, Inc. 82
1,540 McDonald & Co. Investments, Inc. 47
2,625 Morgan Keegan, Inc. 46
5,100 Olympic Financial Ltd. 71
3,600 Penncorp Financial Group, Inc. 124
7,550 Phoenix Duff & Phelps Corp. 53
3,300 Pioneer Group, Inc. 80
1,900 Piper Jaffray Cos., Inc. 28
1,857 Quick & Reilly Group, Inc. 53
600 RAC Financial Group, Inc.* 32
2,400 Raymond James Financial, Inc. 68
2,100 SEI Corp. 47
1,500 U.S. Trust Corp. 111
300 Value Line, Inc. 12
770 WFS Financial, Inc.* 18
500 Winthrop Resource Corp.* 14
--------
1,844
CHEMICALS AND ALLIED PRODUCTS--3.6%
2,600 Advanced Polymer Systems, Inc.* 20
4,300 Alliance Pharmaceutical Corp.* 54
2,300 Alpharma, Inc., Class A* 29
3,100 Amylin Pharmaceuticals, Inc.* 37
1,000 Aphton Corp.* 18
6,000 Arcadian Corp. 152
1,100 Bush Boake Allen, Inc.* 28
6,300 Calgon Carbon Corp. 73
2,100 Capstone Pharmacy Services, Inc.* 23
3,900 Carter-Wallace, Inc. 61
2,500 Cellpro, Inc.* 32
3,700 Cephalone, Inc.* 64
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
1,500 Chemed Corp. $ 56
2,800 Church & Dwight, Inc. 63
1,500 Collagen Corp. 30
1,274 Copley Pharmaceutical, Inc.* 17
10,839 Crompton & Knowles Corp. 199
2,800 Cygnus, Inc.* 35
3,800 Dexter Corp. 124
1,700 Diagnostic Products Corp. 45
5,000 Dura Pharmaceuticals, Inc.* 185
2,200 Epitope, Inc.* 27
1,500 Ergo Science Corp.* 18
3,200 First Mississippi Corp. 92
2,200 Fuller (H.B.) Co. 104
2,100 GelTex Pharmaceuticals, Inc.* 38
5,100 Genelabs Technologies, Inc.* 20
3,600 Geon Co. 68
2,100 Herbalife International, Inc. 54
4,100 Hybridon, Inc. 33
5,101 ICN Pharmaceuticals, Inc. 99
5,200 ICOS Corp.* 40
3,200 Immulogic Pharmaceutical Corp.* 27
3,900 Isis Pharmaceuticals, Inc.* 64
2,500 Jones Medical Industries, Inc. 100
1,400 Kronos, Inc.* 40
500 Landec Corp.* 4
4,800 Lawter International, Inc. 58
1,200 Learonal, Inc. 28
1,771 Life Technologies, Inc. 39
2,975 Lilly Industrial, Inc. 55
900 MacDermid, Inc. 31
2,900 Matrix Pharmaceutical, Inc.* 25
1,100 McWhorter Technologies, Inc.* 22
2,100 Medimmune, Inc.* 32
3,500 Mineral Technologies, Inc. 137
3,300 Mississippi Chemical Corp. 84
2,700 NBTY, Inc.* 44
600 NCH Corp. 34
4,200 NL Industries, Inc.* 40
2,600 Noven Pharmaceuticals, Inc.* 35
2,000 OM Group, Inc. 83
1,000 PDT, Inc.* 31
1,000 Petrolite Corp. 44
1,800 Pharmacopeia, Inc.* 33
3,000 Regeneron Pharmaceuticals, Inc.* 57
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
CHEMICALS AND ALLIED PRODUCTS--CONTINUED
3,300 Rexene Corp.* $ 44
2,000 Roberts Pharmaceutical Corp.* 22
3,400 Ross Cosmetics Distribution Centers, Inc. 11
5,800 Schulman (A.), Inc. 138
3,000 Scotts Co.* 54
4,200 Sepracor, Inc.* 70
4,500 Sequus Pharmaceuticals, Inc.* 65
3,100 Somatogen, Inc.* 35
1,600 Stepan Co. 30
700 Systemix, Inc.* 10
1,500 Techne Corp.* 36
1,935 Tetra Tech, Inc.* 36
2,200 Tetra Technologies, Inc.* 56
1,000 USA Detergents, Inc.* 38
1,800 Valhi, Inc. 11
2,400 Valspar Corp. 138
2,800 Vertex Pharmaceuticals, Inc.* 90
1,065 WD-40 Co. 55
4,700 Wellman, Inc. 76
--------
4,100
COMMUNICATIONS--3.4%
1,800 ACC Corp.* 54
3,400 Ackerley Communications, Inc. 44
2,700 Adelphia Communications Corp.* 18
5,800 Aliant Communications, Inc. 93
2,700 American Mobile Satellite Corp.* 34
600 American Paging, Inc.* 3
2,300 American Radio Systems, Inc.* 63
1,700 American Telecasting, Inc.* 13
900 Ancor Communications, Inc.* 14
2,800 ANTEC Corp.* 27
2,100 Applied Digital Access, Inc.* 15
1,600 Applied Innovation, Inc.* 11
1,700 Argyle Television, Inc.* 44
2,800 ATC Communications Group, Inc.* 43
900 Atlantic Tele-Network, Inc.* 17
1,200 BET Holdings, Inc.* 33
2,600 Black Box Corp.* 107
2,321 Block Drug Co., Inc. 104
1,300 Brightpoint, Inc.* 47
1,500 Brite Voice Systems, Inc.* 22
1,900 Broadband Technologies, Inc.* 37
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
2,200 C-TEC Corp.* $ 54
2,450 Cable Design Technologies Corp.* 72
5,470 CAI Wireless Systems, Inc.* 14
1,600 Cellstar Corp.* 19
1,800 Cellular Communications International, Inc.* 47
2,980 Cellular Technical Services, Inc.* 49
900 Cellularvision USA, Inc.* 6
5,500 Century Communications Corp., Class A* 36
2,100 CFW Communications Co. 47
2,000 CIDCO, Inc.* 39
2,200 Commnet Cellular, Inc.* 62
1,000 Data Transmission Network Corp.* 22
800 Davox Corp.* 30
1,100 Desktop Data, Inc.* 25
1,000 Digital Systems International, Inc.* 15
3,400 DSP Communications, Inc.* 132
1,300 EIS International, Inc.* 11
1,200 Emmis Broadcasting Corp., Class A* 41
3,350 Evergreen Media Corp., Class A* 83
2,500 Executive Telecard Ltd.* 18
8,000 Executone Information Systems, Inc.* 20
1,100 EZ Communications, Inc., Class A* 38
1,700 FastComm Communications Corp.* 14
4,100 General Communications, Inc.* 29
1,700 Harmonic Lightwaves, Inc.* 34
2,100 Heartland Wireless Communications, Inc.* 25
400 Heftel Broadcasting Corp., Class A* 13
5,100 Heritage Media Corp.* 71
3,400 HighwayMaster Communications, Inc.* 71
900 Intercel, Inc.* 14
2,000 Intermedia Communications, Inc.* 59
4,733 International Cabletel, Inc.* 118
600 IPC Information Systems, Inc.* 10
1,100 Jacor Communications, Inc.* 26
3,278 Jones Intercable, Inc., Class A* 36
2,100 Level One Communications, Inc.* 72
2,000 Lin Television Corp* 80
1,200 Mastec, Inc.* 57
1,900 Media General, Inc. 60
3,903 Metrocall, Inc.* 21
5,057 Metromedia International Group, Inc.* 61
2,700 MIDCOM Communications, Inc.* 31
8,500 Mobile Telecommunications Technologies Corp.* 99
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
7,400 MobileMedia Corp.* $ 9
1,000 Ortel Corp.* 22
2,500 P-COM, Inc.* 79
1,100 Palmer Wireless, Inc.* 16
200 Paxson Communications Corp.* 1
1,800 People's Choice TV Corp.* 11
1,600 Periphonics Corp.* 32
1,500 Plantronics, Inc.* 61
1,500 ProNet, Inc.* 7
1,850 Renaissance Communications Corp.* 66
1,200 SAGA Communications, Inc.* 24
1,000 SFX Broadcasting, Inc., Class A* 31
1,600 Silver King Communications, Inc.* 40
2,500 TCA Cable TV, Inc. 73
1,300 Tel-Save Holdings, Inc.* 28
1,800 Telco Systems, Inc.* 32
1,000 Teltrend, Inc.* 28
1,250 Transaction Network Services, Inc.* 16
2,000 Trescom International, Inc.* 21
2,900 True North Communications, Inc. 65
2,500 U.S. Long Distance Corp.* 22
5,100 United International Holdings, Inc.,
Class A* 69
600 United Television, Inc. 55
1,800 United Video Satellite Group, Inc.* 27
4,500 Valuevision International, Inc.* 25
4,600 Vanguard Cellular Systems, Inc.* 78
2,100 VideoLan Technologies, Inc.* 4
4,600 Westwood One, Inc.* 76
4,000 WinStar Communications, Inc.* 83
2,000 Wireless One Corp.* 19
1,500 Young Broadcasting Corp.* 46
-------
3,890
COMPUTERS AND OFFICE MACHINES--3.7%
1,300 ACT Networks, Inc.* 36
2,800 Actel Corp.* 62
3,900 Alliance Semiconductor Corp.* 31
1,400 Applix, Inc.* 28
4,700 AST Research, Inc.* 21
3,800 Auspex Systems, Inc.* 45
3,300 Avid Technology, Inc.* 42
3,166 BancTec, Inc.* 63
900 Boca Research, Inc.* 11
5,400 Borland International, Inc.* 44
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,400 Brooktrout Technology, Inc.* $ 45
1,700 BT Office Products International, Inc.* 16
2,300 Caere Corp.* 20
1,796 Cambrex Corp. 57
1,800 Centennial Technologies, Inc.* 64
3,200 Chips & Technologies, Inc.* 67
2,100 Chronimed, Inc.* 30
4,000 Computer Network Technology Corp.* 24
3,300 Comverse Technology, Inc.* 112
2,200 Control Data Systems, Inc.* 44
6,900 Copytele, Inc.* 41
5,500 Data General Corp.* 80
900 Day Runner, Inc.* 22
1,300 Dialogic Corp.* 40
4,900 Diamond Multimedia Systems, Inc.* 63
2,000 Digi International, Inc.* 26
2,900 Dynatech Corp.* 136
1,100 Encad, Inc.* 41
2,000 EPIC Design Technology, Inc.* 50
1,600 Evans & Sutherland Computer Corp.* 41
3,400 Exabyte Corp.* 49
1,500 Excalibur Technologies Corp.* 24
2,300 Filenet Corp.* 83
4,900 FTP Software, Inc.* 39
1,100 General Binding Corp. 30
1,500 HMT Technology Corp.* 26
2,900 Hyperion Software Corp.* 63
4,300 Information Resources, Inc.* 49
5,300 Intelligent Electronics, Inc. 40
6,300 Intergraph Corp.* 57
1,800 Interpool, Inc.* 43
1,600 Itron, Inc.* 31
1,884 Logicon, Inc. 77
2,700 Mercury Interactive Corp.* 27
2,700 Microcom, Inc.* 31
1,400 Micros Systems, Inc.* 41
1,400 MicroTouch Systems, Inc.* 35
3,900 Miller (Herman), Inc. 183
3,000 Mylex Corp.* 37
2,200 National Computer Systems, Inc. 52
5,300 Netmanage, Inc.* 44
3,700 Nu-Kote Holding, Inc.* 39
1,500 Optical Data Systems, Inc.* 20
5,400 PHH Corp. 242
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
COMPUTERS AND OFFICE MACHINES--CONTINUED
2,400 Phoenix Technologies Ltd.* $ 41
1,400 Planar Systems, Inc.* 14
7,998 Platinum Technology, Inc.* 96
1,500 Proxim, Inc.* 28
800 Radisys, Inc.* 37
7,400 S3, Inc.* 126
2,700 Sandisk Corp.* 37
3,400 Santa Cruz Operation, Inc.* 22
4,700 Sequent Computer Systems, Inc.* 79
3,300 Silicon Storage Technology, Inc.* 27
2,200 SMART Modular Technologies, Inc.* 50
2,300 Standard Microsystems Corp.* 25
500 Storage Computer Corp.* 6
3,000 StorMedia, Inc.* 38
3,800 Stratus Computer, Inc.* 98
2,000 SubMicron Systems, Inc.* 9
2,050 Sylvan Learning Systems, Inc.* 54
2,700 Synetic, Inc.* 125
1,200 3D Systems Corp.* 12
5,400 Tech Data Corp.* 162
2,100 Trident Microsystems, Inc.* 45
2,400 Tseng Laboratories, Inc.* 16
1,200 USDATA Corp., Inc* 8
1,300 Wall Data, Inc.* 19
5,400 Wang Labs, Inc.* 114
2,300 Wonderware Corp.* 22
500 Xpedite Systems, Inc.* 9
2,800 Zebra Technologies Corp.* 72
--------
4,155
CREDIT INSTITUTIONS--0.4%
2,200 Astoria Financial Corp. 83
3,200 Credit Acceptance Corp.* 83
902 First Financial Corp. 31
1,700 Jayhawk Acceptance Corp.* 21
1,500 JSB Financial, Inc. 54
2,200 National Auto Credit, Inc.* 23
2,400 North American Mortgage Co. 55
2,600 Ryland Group, Inc. 36
3,600 World Acceptance Corp.* 23
--------
409
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
ELECTRICAL SERVICES--2.6%
600 Advanced Lighting Technologies, Inc.* $ 13
8,200 Atlantic Energy, Inc. 145
2,200 Black Hills Corp. 57
2,800 Central Hudson Gas & Electric Corp. 85
3,500 Central Louisiana Electric Co., Inc. 99
5,000 Central Maine Power Co. 59
3,200 Checkfree Corp.* 54
2,100 CILCORP, Inc. 77
12,095 Citizens Utilities Co., Series B* 136
3,400 Commonwealth Energy Systems Cos. 82
3,200 Eastern Utilities Association 54
9,400 El Paso Electric Co.* 56
3,100 Electroglas, Inc.* 55
2,800 Empire District Electric Co. 53
1,900 Envoy Corp.* 71
4,600 IES Industries, Inc. 141
1,700 Interstate Power Co. 51
2,450 Madison Gas & Electric Co. 52
4,900 Minnesota Power & Light Co. 138
7,500 Nevada Power Co. 154
1,589 Northwestern Public Service Co. 55
2,200 Orange & Rockland Utilities, Inc. 79
1,700 Otter Tail Power Co. 55
3,600 PMT Services, Inc.* 77
5,800 Public Service Co. of New Mexico* 111
6,000 Rochester Gas & Electric Corp. 115
4,700 Sierra Pacific Resources 135
2,400 SIGCORP, Inc. 83
1,800 TNP Enterprises, Inc. 46
4,980 Tucson Electric Power Co.* 93
2,200 United Illuminating Co. 73
4,800 WPL Holdings, Inc. 135
3,800 WPS Resources Corp. 112
1,850 Yankee Energy System, Inc. 41
1,900 Zurn Industries, Inc. 54
--------
2,896
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--
5.7%
1,000 Advanced Energy Industries, Inc.* 7
2,500 Altron, Inc.* 47
5,100 Ametek, Inc. 108
4,300 Ampex Corp.* 44
800 ANADIGICS, Inc.* 30
6,200 Anixter International, Inc.* 104
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
4,122 Applied Magnetics Corp.* $ 113
1,000 Associated Group, Inc.* 29
2,900 Augat, Inc. 82
2,275 Avant! Corp.* 67
3,120 Baldor Electric Co. 73
3,700 Belden, Inc. 126
1,000 Berg Electronics Corp.* 30
4,300 BMC Industries, Inc. 124
3,400 Boston Technology, Inc.* 67
2,500 Burr-Brown Corp.* 65
1,700 C-COR Electronics, Inc.* 25
1,700 C.P. Clare Corp.* 14
2,000 California Amplifier, Inc.* 16
2,800 California Microwave, Inc.* 42
1,000 Charter Power Systems, Inc. 27
750 Chicago Miniature Lamp, Inc.* 25
14,900 Chyron Corp.* 56
1,500 Coherent Communications Systems Corp.* 31
1,600 Cohu, Inc. 38
3,800 Computer Products, Inc.* 76
3,300 Credence Systems Corp.* 65
1,800 Cree Research, Inc.* 18
563 CTS Corp. 22
2,900 Cyrix Corp.* 55
4,200 Dallas Semiconductor Corp. 91
2,500 Digital Microwave Corp.* 60
1,600 DII Group* 40
1,500 Electro Scientific Industries, Inc.* 36
900 Eltron International, Inc.* 28
1,800 Energy Conversion Devices, Inc.* 27
2,900 ESS Technology, Inc.* 57
1,500 Esterline Technologies Corp.* 38
768 Franklin Electric Co., Inc.* 31
1,100 Galileo Corp.* 26
3,600 General DataComm Industries, Inc.* 40
1,200 General Scanning, Inc.* 12
2,800 Genus, Inc.* 19
4,500 Griffon Corp.* 48
1,400 HADCO Corp.* 65
2,310 Harman International Industries, Inc. 118
1,800 Holophane Corp.* 34
900 Hutchinson Technologies, Inc.* 47
11,100 Imatron, Inc.* 39
1,600 Imnet Systems, Inc.* 29
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
4,700 IMP, Inc.* $ 15
12,100 Integrated Device Technology, Inc.* 150
2,600 Integrated Silicon Solution, Inc.* 26
1,400 Inter-Tel, Inc.* 25
7,200 Interdigital Communications Corp.* 52
2,086 Intermagnetics General Corp.* 28
4,200 International Family Entertainment, Inc.* 65
2,700 Intervoice, Inc.* 34
1,500 ITI Technologies, Inc.* 19
2,900 Juno Lighting, Inc. 45
2,300 Kuhlman Corp.* 41
3,450 Lattice Semiconductor Corp.* 154
3,900 Lincoln Electric Co. 125
1,900 Littelfuse, Inc.* 83
3,800 Lojack Corp.* 36
1,200 LSI Industries, Inc. 14
6,100 LTX Corp.* 36
3,500 Magnetek, Inc.* 44
1,800 Mattson Technology, Inc.* 19
600 Merix Corp.* 10
4,950 Methode Electronics, Inc., Class A 95
5,400 Microchip Technology, Inc.* 258
2,100 MRV Communications, Inc.* 48
700 National Presto Industries, Inc. 26
4,100 NexGen, Inc. 57
2,840 Oak Industries, Inc.* 66
2,900 Palomar Medical Technologies, Inc.* 20
1,698 Park Electrochemical Corp.* 39
5,800 Pentair, Inc. 168
1,200 Perceptron, Inc.* 42
3,937 Pioneer Standard Electronics, Inc. 43
2,350 Pittway Corp. 127
3,875 PriCellular Corp.* 43
2,400 Quickturn Design Systems, Inc.* 41
4,700 Ramtron International Corp.* 35
1,698 Recoton Corp.* 25
1,700 Rival Co. 38
2,600 Robotic Vision Systems, Inc.* 34
2,700 Sammina Corp.* 118
1,100 SDL, Inc.* 25
1,150 Semitool, Inc.* 12
1,500 Sheldahl, Inc.* 29
4,300 Sierra Semiconductor Corp.* 62
4,700 Silicon Valley Group, Inc.* 100
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--CONTIN-
UED
1,700 Siliconix, Inc.* $ 37
700 Speedfam International, Inc.* 14
1,200 SPS Transaction Services, Inc.* 19
1,400 Standard Motor Products, Inc. 19
700 Stanford Telecommunications, Inc.* 20
1,200 Supertex, Inc.* 23
2,700 Symetricon, Inc. 51
2,600 3DO Co.* 17
1,200 Technitrol, Inc. 43
1,200 Tekelec* 16
4,800 Tencor Instruments* 128
500 ThermoSpectra Corp.* 7
1,800 Thomas Industries, Inc. 36
4,900 Top Source Technologies, Inc.* 17
2,000 TranSwitch Corp.* 12
1,300 Triquint Semiconductor, Inc.* 29
1,500 TSX Corp. 14
3,100 Ultratech Stepper, Inc.* 71
1,700 Uniphase Corp.* 101
1,800 Unitrode Corp.* 48
4,900 Vicor Corp.* 96
2,400 Vitesse Semiconductor Corp.* 115
7,200 VLSI Technology, Inc.* 166
2,700 Windmere Corp. 39
2,000 Wyle Electronics 72
3,200 Xicor, Inc.* 31
4,147 Zenith Electronics Corp.* 55
3,050 Zilog, Inc.* 68
700 Zygo Corp.* 28
800 Zytec Corp.* 9
--------
6,484
FOOD AND BEVERAGES--1.8%
4,900 Applebee's International, Inc. 143
6,700 Bob Evans Farms, Inc. 87
2,600 Boston Beer Co., Inc.* 30
5,300 Calgene, Inc.* 29
2,700 Canandaigua Wine Company, Inc.* 77
4,700 Chiquita Brands International, Inc. 62
1,000 Coca-Cola Bottling Co. 46
5,900 Coors (Adolph) Co., Class B 117
6,300 Dean Foods Co. 176
1,800 Dreyer's Grand Ice Cream, Inc. 48
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,600 Earthgrains Co. $ 83
5,800 Fleming Companies, Inc. 95
2,200 FoodBrands America, Inc.* 29
5,500 Host Marriott Services Corp.* 49
3,300 Hudson Foods, Inc. 60
1,400 IHOP Corp.* 34
2,300 International Dairy Queen, Inc.* 44
2,700 Lance, Inc. 48
2,300 Landry's Seafood Restaurants, Inc.* 55
1,000 Longhorn Steaks, Inc.* 20
3,700 Luby's Cafeterias, Inc. 81
400 Manhattan Bagel Co., Inc.* 3
2,100 Michael Foods, Inc. 24
1,400 Mondavi (Robert) Corp., Class A* 51
1,950 Papa Johns International, Inc.* 63
2,900 Pepsi-Cola Puerto Rico Bottling Co. 13
1,400 Pete's Brewing Co.* 9
900 Quality Dining, Inc.* 20
1,500 Rainforest Cafe, Inc.* 44
1,300 Redhook Ale Brewery, Inc.* 18
1,300 Riviana Foods, Inc. 23
2,500 Ruby Tuesday, Inc.* 40
8,200 Ryan's Family Steak Houses, Inc.* 57
1,950 Sbarro, Inc. 51
5,800 Shoney's, Inc.* 48
2,500 Smithfield Foods, Inc.* 81
3,920 Triarc Cos., Inc., Class A* 44
2,750 WLR Foods, Inc. 35
--------
2,037
FOOD AND MANUFACTURING--1.0%
1,500 Cheesecake Factory, Inc.* 30
2,000 Daka International, Inc.* 18
198 Farmer Bros. Co. 29
9,100 Flowers Industries, Inc., Class A 215
1,350 Performance Food Group Co.* 16
8,700 Premark International, Inc. 211
4,900 Ralcorp Holding, Inc.* 96
1,400 Riser Foods, Inc.* 43
1,200 Sanderson Farms, Inc. 19
3,200 Savannah Foods & Industries, Inc. 46
100 Seaboard Corp. 22
4,600 Smucker (J.M.) Co. 83
2,749 Tootsie Roll Industries, Inc. 105
700 TurboChef, Inc.* 6
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,000 Universal Foods Corp. $ 148
--------
1,087
FURNITURE AND FIXTURES--0.6%
2,200 Bassett Furniture Industries, Inc. 50
1,500 Bush Industires, Inc. 27
1,800 CORT Business Services Corp.* 40
2,200 Ethan Allen Interiors, Inc.* 73
1,100 Falcon Building Products, Inc.* 14
7,700 Heilig-Meyers Co. 107
3,700 HON Industries, Inc. 115
2,900 Kimball International, Inc. 121
2,100 La-Z-Boy Chair Co. 63
2,200 Triangle Pacific Corp.* 48
--------
658
GENERAL BUILDING CONTRACTORS--0.9%
1,800 ABT Building Products Corp.* 43
3,000 AMCOL International Co. 42
2,100 AMRE, Inc.* 6
1,400 Blount, Inc. 52
11,600 Catellus Development Corp.* 116
4,500 Centex Corp. 162
1,200 Continental Homes Holding Corp. 25
3,000 Eagle Hardware & Garden, Inc.* 73
3,158 Horton (D.R.), Inc.* 33
6,100 Kaufman & Broad Home Corp. 79
1,100 NCI Building Systems, Inc.* 32
2,000 NVR, Inc.* 20
1,725 Palm Harbor Homes, Inc.* 46
3,000 Pulte Corp. 92
1,650 Southern Energy Homes, Inc.* 20
5,200 Standard Pacific Corp. 31
3,400 Toll Brothers, Inc.* 68
1,779 U.S. Home Corp.* 44
3,000 Webb (Del E.) Corp. 51
--------
1,035
GLASS, CLAY AND STONE PRODUCTS--0.5%
700 Ameron, Inc. 34
4,700 Ball Corp. 115
2,000 Centex Construction Products, Inc.* 32
1,200 Florida Rock Industries, Inc. 37
5,000 Gentex Corp.* 97
2,500 Medusa Corp. 87
1,290 Mikasa, Inc.* 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
<C> <S> <C>
1,500 Photronics, Inc.* $ 47
800 Puerto Rican Cement Co. 23
2,700 Southdown, Inc.* 88
-------
574
HEALTH SERVICES--4.4%
1,900 Access Health Marketing, Inc.* 75
2,700 Alteon, Inc.* 20
1,200 American HomePatient, Inc.* 28
2,800 American Medical Response, Inc.* 84
1,300 Amisys Managed Care Systems* 19
3,300 Angeion Corp.* 11
2,100 Apogee, Inc. 93
1,000 Arbor Health Care Co.* 24
800 Barr Labs, Inc.* 20
1,500 Bio-Rad Labs, Inc.* 45
1,300 Carrington Laboratories, Inc.* 13
3,800 Cerner Corp.* 57
2,800 Coastal Physician Group, Inc.* 10
3,300 Cocensys, Inc.* 20
6,900 Community Psychiatric Centers* 62
1,700 Compdent Corp.* 47
3,400 COR Therapeutics, Inc.* 36
7,100 Coram Healthcare Corp.* 31
5,000 Creative BioMolecules, Inc.* 40
1,200 Cryolife, Inc.* 17
1,700 Curative Health Services, Inc.* 44
3,300 Cytel Corp.* 13
1,400 Emeritus Corp.* 19
3,123 Enzo Biochem, Inc.* 59
2,400 Equimed, Inc.* 10
4,000 Extended Stay America, Inc.* 83
2,100 Fuisz Technologies, Ltd.* 17
1,300 Fusion Systems Corp.* 25
1,200 Gelman Sciences, Inc.* 38
3,800 Genesis Health Ventures, Inc.* 106
4,400 Gensia, Inc.* 20
3,785 Grancare, Inc.* 67
2,000 Gulf South Medical Supply, Inc.* 58
3,600 Haemonetics Corp.* 63
2,200 Health Management Systems, Inc.* 33
2,121 Healthdyne Technologies, Inc.* 19
1,400 HealthPlan Services Corp.* 27
1,100 Henry Schien, Inc.* 45
8,092 Horizon Healthcare Corp.* 87
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
HEALTH SERVICES--CONTINUED
2,900 Human Genome Sciences, Inc.* $ 108
2,000 I-STAT Corp.* 49
1,300 ICU Medical, Inc.* 11
1,900 IDEC Pharmaceuticals Corp.* 46
900 IDX Systems Corp.* 22
2,600 Immune Response Corp.* 21
3,600 Immunomedics, Inc.* 24
1,575 INBRAND Corp.* 38
1,100 Incyte Pharmaceuticals, Inc.* 42
1,800 Inhale Therapeutic Systems* 27
1,900 Inphynet Medical Management, Inc.* 34
4,400 Integra Lifesciences Corp.* 25
3,500 Integrated Health Services, Inc. 77
400 Intercardia, Inc.* 7
4,700 Invacare Corp. 127
2,100 KeraVision, Inc.* 30
2,800 Kinetic Concepts, Inc. 35
400 Labone, Inc. 6
13,200 Laboratory Corporation of America Holdings* 36
1,500 Landauer, Inc. 31
400 LCA-Vision, Inc.* 1
1,800 Lifecore Biomedical, Inc.* 28
3,458 Ligand Pharmaceuticals, Inc.* 42
2,200 Living Centers of America, Inc.* 56
4,600 Magellan Health Services, Inc.* 96
4,300 Mariner Health Group, Inc.* 32
2,100 Martek Biosciences Corp.* 37
5,700 Matria Healthcare, Inc.* 34
3,000 Maxicare Health Plans, Inc.* 62
1,600 MedCath, Inc.* 24
1,600 Meridian Diagnostics, Inc. 18
600 MiniMed, Inc.* 16
1,600 MMI Cos., Inc. 49
1,633 Morrison Health Care, Inc. 23
2,200 Multicare Cos., Inc.* 43
1,500 Myriad Genetics, Inc.* 38
4,900 NABI, Inc.* 45
1,200 National Surgery Centers, Inc.* 38
3,000 Neoprobe Corp.* 43
1,400 Neose Technologies, Inc.* 21
2,500 Neurex Corp.* 32
2,100 Neurogen Corp.* 39
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
4,300 Neuromedical Systems, Inc.* $ 58
2,100 Northfield Laboratories, Inc.* 28
10,300 NovaCare, Inc.* 88
3,200 OccuSystems, Inc.* 93
3,100 OIS Optical Imaging Systems, Inc.* 8
3,000 Oncogene Science, Inc.* 21
2,200 OrthoLogic Corp.* 13
2,000 Owen Healthcare, Inc.* 51
1,900 PathoGenesis Corp.* 48
1,300 Pediatrix Medical Group* 50
1,300 Perclose, Inc.* 22
10,500 Perrigo Co.* 97
1,800 PHP Healthcare Corp.* 41
6,000 Physician Corporation Of America* 64
1,200 Physicians Health Services, Inc.* 18
1,500 Prime Medical Services, Inc.* 17
2,900 Regency Health Services, Inc.* 30
3,900 Renal Treatment Centers, Inc.* 101
700 RES-CARE, Inc.* 11
1,700 Research Medical, Inc.* 35
2,500 Resound Corp.* 22
1,450 Rexall Sundown, Inc.* 37
600 RightCHOICE Managed Care, Inc.,
Class A* 5
3,900 RoTech Medical Corp.* 66
1,600 Rural/Metro Corp.* 56
1,300 Safeskin Corp.* 67
1,300 Serologicals Corp.* 44
3,300 Sofamor/Danek Group, Inc.* 93
3,700 Somatix Therapy Corp.* 13
6,280 Sun Healthcare Group, Inc.* 78
1,600 Target Therapeutics, Inc.* 56
3,100 TheraTx, Inc.* 32
1,400 Universal Health Realty Income Trust 27
4,600 Universal Health Services, Inc.* 130
3,300 Uromed Corp.* 30
2,300 Veterinary Centers of America, Inc.* 24
2,500 Vical, Inc.* 46
400 Vitalink Pharmacy Services, Inc.* 9
2,300 Vivus, Inc.* 79
4,600 XOMA Corp.* 18
3,800 Zila, Inc.* 28
--------
5,052
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
HEAVY CONSTRUCTION--0.3%
420 Diana Corp.* $ 14
1,750 Granite Construction, Inc. 35
2,500 Greenfield Industries, Inc. 73
3,716 Instituform Technologies, Inc.* 29
4,200 Lennar Corp. 109
1,900 Lone Star Industries, Inc.* 70
1,591 Morrison Knudsen Corp.* 14
--------
344
INDUSTRIAL INSTRUMENTS--3.4%
3,300 Acuson Corp.* 75
2,800 ADAC Laboratories 62
2,300 Advanced Technology Laboratories, Inc.* 66
2,400 Alkermes, Inc.* 34
3,600 Allen Group, Inc. 80
1,300 Analogic Corp. 36
1,800 Arrow International, Inc.* 48
900 ArthroCare Corp. 9
2,600 ATS Medical, Inc.* 20
4,200 Ballard Medical Products 79
2,100 Barnett, Inc.* 52
1,200 Biomatrix, Inc.* 18
2,700 Buckeye Cellulose Corp.* 73
1,751 Chad Therapeutics, Inc.* 28
6,200 Cincinnati Milacron, Inc.* 129
1,800 Circon Corp.* 29
3,100 CNS, Inc. 44
5,200 Cognex Corp.* 103
1,700 Coherent, Inc.* 74
7,900 Coltec Industries, Inc.* 146
400 Conceptus, Inc.* 4
2,450 CONMED Corp.* 43
876 Cubic Corp. 19
700 Cytyc Corp.* 18
1,800 Daniel Industries, Inc. 25
2,400 Datascope Corp.* 44
2,000 DepoTech Corp.* 28
2,100 Dionex Corp.* 73
2,200 Endosonics Corp. 25
2,300 Etec Systems, Inc. 68
4,200 Ferro Corp. 121
2,500 Fisher Scientific International, Inc. 114
1,000 Fluke (John) Manufacturing Co., Inc.* 43
3,300 Genrad, Inc.* 73
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,400 Gilead Sciences, Inc.* $ 113
575 Hach Co. 9
1,700 Hologic, Inc.* 42
1,900 InControl, Inc.* 17
3,900 Isolyser Company, Inc.* 31
4,100 Kennametal, Inc. 148
4,800 Keystone International, Inc. 94
900 Lunar Corp.* 28
1,300 Marquette Medical Systems, Inc.* 24
4,900 Mascotech, Inc. 81
2,200 Measurex Corp. 54
3,564 Mentor Corp. 98
600 Mine Safety Appliances Co. 30
1,600 MTS Systems Corp. 33
700 OnTrak Systems, Inc.* 13
1,600 Ostex International, Inc.* 10
101 PerSeptive Biosystems 1
2,600 Physio-Control International Corp.* 48
2,100 Possis Corp.* 37
3,600 Power Control Technologies, Inc.* 28
1,200 Protocol Systems, Inc.* 16
3,400 R.P. Scherer Corp.* 156
2,600 Respironics, Inc.* 38
1,900 SangStat Medical Corp.* 43
1,700 Spine-Tech, Inc. 45
2,200 Staar Surgical Co.* 25
1,200 Starrett (L.S.) Co. 33
2,900 Sunrise Medical, Inc.* 42
1,100 Tech-Sym Corp.* 32
2,650 TECNOL Medical Products, Inc.* 35
1,600 Theragenics Corp.* 36
2,500 Theratech, Inc.* 28
3,400 Thoratec Laboratories, Inc.* 32
3,100 Trimble Navigation Ltd.* 43
1,700 UROHEALTH Systems, Inc.* 15
3,000 Ventritex, Inc.* 70
1,000 Vital Signs, Inc. 22
3,800 Waters Corp.* 103
1,396 Watkins-Johnson Co. 36
1,800 Watsco, Inc. 45
2,300 X-Rite, Inc. 43
1,300 Zoltek Companies, Inc.* 46
--------
3,826
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
INSURANCE SERVICES--4.3%
2,100 Acceptance Insurance Cos., Inc.* $ 43
2,200 Acordia, Inc. 65
6,500 Alexander & Alexander Services, Inc. 94
3,500 Alfa Corp. 39
2,250 Allied Group, Inc. 100
1,524 American Annuity Group, Inc.* 20
3,200 American Bankers Insurance Group, Inc. 156
1,450 American Heritage Life Investment Corp. 32
2,200 American Travelers Corp.* 78
4,000 Amerin Corp.* 91
2,200 Amvestors Financial Corp. 32
2,800 Argonaut Group, Inc. 83
2,000 Baldwin & Lyons, Inc. 36
2,200 Berkley (W.R.) Corp. 115
1,800 Blanch (E.W.) Holdings, Inc. 35
1,700 Capital RE Corp. 65
700 Capitol American Financial Corp. 25
1,200 Citizens Corp. 26
3,100 Commerce Group, Inc. 74
4,500 Coventry Corp.* 44
1,960 Delphi Financial Group, Inc.* 55
1,900 Enhance Financial Services Group, Inc. 65
1,800 Executive Risk, Inc. 72
4,974 Financial Security Assurance International 158
1,700 First American Financial Corp. 62
1,400 Foremost Corp. of America 78
3,112 Fremont General Corp. 97
1,684 Frontier Insurance Group, Inc. 64
1,100 Fund American Enterprises Holdings, Inc.* 101
3,285 Gainsco, Inc. 31
2,200 Gallagher (Arthur J.) & Co. 68
1,700 Guarantee Life Companies, Inc. 33
2,600 Guaranty National Corp. 43
1,100 Harleysville Group, Inc. 34
3,100 Hartford Steam Boiler 141
3,900 HCC Insurance Holdings, Inc.* 109
1,800 Highlands Insurance Group, Inc.* 35
2,400 Hilb, Rogal & Hamilton Co. 32
1,900 Home Beneficial Corp. 47
3,700 Horace Mann Educators Corp. 140
2,300 Integon Corp. 44
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
3,600 John Alden Financial Corp. $ 63
500 Kansas City Life Insurance Co. 29
2,300 Liberty Corp. 88
800 Liberty Financial Cos., Inc. 28
1,700 Life Reinsurance Corp. 63
2,700 Life USA Holding, Inc.* 27
1,414 MAIC Holdings, Inc.* 47
600 Markel Corp.* 51
800 Meadowbrook Insurance Group, Inc. 17
2,300 NAC RE Corp. 84
400 National Western Life Insurance Co.* 33
900 Nymagic, Inc. 16
2,190 Orion Capital Corp. 137
1,300 Pioneer Financial Services, Inc. 24
950 Poe & Brown, Inc. 25
4,000 Presidential Life Corp. 47
1,400 PXRE Corp. 34
2,600 Reinsurance Group of America, Inc. 122
9,500 Reliance Group Holdings, Inc. 85
2,900 Risk Capital Holdings, Inc.* 51
1,065 RLI Corp. 34
800 Seafield Capital Corp. 27
1,500 Security Connecticut Corp. 52
2,200 Selective Insurance Group, Inc. 74
2,200 Sierra Health Services, Inc.* 54
1,050 State Auto Financial Corp. 17
7,000 20th Century Industries* 105
900 Transnational Re Corp., Class A 23
900 Trenwick Group, Inc. 44
5,300 UICI* 148
3,820 United Cos. Financial Corp. 114
900 United Dental Care, Inc. 25
1,650 United Fire & Casualty Co. 51
1,100 United Wisconsin Services, Inc. 28
3,000 Vesta Insurance Group, Inc. 97
1,700 Washington National Corp. 47
1,800 Zenith National Insurance Corp. 49
1,700 Zurich Reinsurance Centre Holdings, Inc. 52
--------
4,874
JEWELRY AND PRECIOUS METALS--0.0%
1,600 Oneida, Ltd. 27
700 Syratech Corp.* 22
--------
49
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
LEATHER PRODUCTS--0.2%
2,800 Brown Group, Inc. $ 53
3,300 Justin Industries, Inc. 35
1,400 Timberland Co.* 54
4,287 Wolverine World Wide, Inc. 115
--------
257
LUMBER AND WOOD PRODUCTS--0.2%
1,500 Fibreboard Corp.* 52
1,900 Ply-Gem Industries, Inc. 25
2,300 Pope & Talbot, Inc. 37
2,600 TJ International, Inc. 57
--------
171
MACHINERY--2.0%
700 Ag-Chem Equipment Co., Inc.* 11
1,400 Alamo Group, Inc. 23
1,600 Allied Products Corp. 38
2,000 Avondale Industries, Inc.* 35
2,100 Borg-Warner Security Corp.* 22
1,700 Cascade Corp. 24
700 Columbus McKinnon Corp. 11
3,300 Donaldson Co., Inc. 101
900 DT Industries, Inc. 31
3,800 Duriron Co., Inc. 103
2,900 Figgie International Holdings, Inc.* 37
3,900 FSI International, Inc.* 57
1,450 Gasonics International Corp.* 16
5,400 Giddings & Lewis, Inc. 63
600 Gleason Corp. 18
3,500 Global Industrial Technologies, Inc.* 72
3,300 Goulds Pumps, Inc. 81
2,197 Graco, Inc. 57
1,300 Helix Technology Corp. 41
2,650 IDEX Corp. 104
3,100 Indentix, Inc. 25
2,500 Integrated Process Equipment Corp.* 43
2,400 Ionics, Inc.* 116
2,600 Kaydon Corp. 106
3,400 Kulicke & Soffa Industries, Inc.* 69
1,000 Lindsay Manufacturing Co.* 41
1,750 Manitowoc Co., Inc. 77
6,300 Marine Drilling Co., Inc.* 100
3,400 Modine Manufacturing Co. 85
3,250 Mohawk Industries, Inc.* 77
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
2,400 Molten Metal Technology, Inc.* $ 36
1,300 Morningstar Group, Inc.* 22
1,600 Osmonics, Inc.* 34
3,100 Outboard Marine Corp. 50
699 Pilgrims Pride Corp. 6
3,200 Regal-Beloit Corp. 62
2,200 Rexel, Inc.* 31
1,348 Robbins & Myers, Inc. 32
2,000 Roper Industries, Inc. 86
1,700 Specialty Equipment Cos., Inc.* 20
100 Spinnaker Industries* 6
1,700 SPX Corp. 54
800 Thermo Power Corp.* 7
1,900 Toro Co. 68
800 Tractor Supply Co.* 17
3,000 Varco International, Inc.* 69
--------
2,284
MANUFACTURING--GENERAL--1.1%
500 Bacou U.S.A., Inc.* 8
3,380 Brady (W.H.) Co. 74
3,150 Cuno, Inc. 49
9,300 Furniture Brands International, Inc.* 115
5,800 Hexcel Corp.* 105
1,400 Hunt Manufacturing Co. 25
1,600 Insilico Corp.* 62
1,000 Jabil Circuit, Inc.* 25
6,000 Kemet Corp.* 138
1,300 Matthews International Corp., Class A 37
2,500 Novellus Systems, Inc.* 144
1,700 Optical Coating Laboratory, Inc. 19
1,800 Paragon Trade Brands, Inc.* 50
2,000 Samsonite Corp.* 76
1,400 Seattle Filmworks, Inc.* 27
700 Simpson Manufacturing Co.* 15
850 Simula, Inc.* 13
3,000 Toy Biz, Inc.* 55
2,400 Tracor, Inc.* 53
800 Tremont Corp.* 29
700 Trigen Energy Corp. 19
2,000 U.S. Can Corp.* 33
700 Visioneer, Inc.* 4
2,400 Wireless Telecom Group, Inc. 24
--------
1,199
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
MERCHANDISE--GENERAL--0.4%
1,200 Action Performance Companies, Inc.* $ 21
3,700 Amerisource Corp.* 146
2,200 Cross (A.T.) Co. 24
3,300 Department 56, Inc.* 77
5,300 Jostens, Inc. 113
2,200 Libbey, Inc. 59
6,200 Playtex Products, Inc.* 50
1,900 Strategic Distribution, Inc.* 13
--------
503
METAL MINING--0.6%
20,200 Battle Mountain Gold Co. 146
1,700 Cleveland Cliffs, Inc. 75
3,300 Coeur D'Alene Mines Corp. 48
4,200 Freeport-McMoran Copper and Gold Inc. 128
4,017 Getchell Gold Corp.* 157
8,000 Hecla Mining Co.* 47
2,600 Stillwater Mining Co. 45
33,600 Sunshine Mining Co.* 38
--------
684
METAL PRODUCTS--0.9%
1,400 Alltrista Corp.* 35
7,800 Amax Gold, Inc.* 47
800 American Buildings Co.* 17
2,800 Aptargroup, Inc. 97
600 Barnes Group, Inc. 34
1,050 Butler Manufacturing Co. 33
1,600 Chase Brass Industries, Inc.* 29
1,200 Citation Corp.* 12
2,300 Clarcor, Inc. 51
1,000 Greenbriar Cos., Inc. 10
1,100 Hardinge, Inc. 29
2,700 Material Sciences Corp.* 45
1,800 Miller Industries, Inc.* 50
1,500 NN Ball & Roller, Inc. 20
1,100 Oregon Meetallurgical Corp.* 39
1,100 Penn Engineering & Manufacturing Corp. 22
1,900 Quanex Corp. 51
964 SPS Technologies, Inc.* 60
2,400 TriMas Corp. 61
3,100 Watts Industries, Inc., Class A 68
1,600 Whittaker Corp.* 22
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
2,200 Wolverine Tube, Inc.* $ 82
3,000 Wyman-Gordon Co.* 64
2,600 Zero Corp. 51
--------
1,029
MINING, QUARRYING OF NONMETALLIC MINERAL--
0.2%
1,100 Cliff's Drilling Co.* 57
2,300 Dravo Corp.* 30
1,800 RMI Titanium Corp.* 42
2,600 Solv-Ex Corp.* 34
2,600 Zeigler Coal Holding Co. 48
--------
211
MISCELLANEOUS INVESTING INSTITUTIONS--3.0%
5,424 BRE Properties, Inc. 120
3,000 Burnham Pacific Properties, Inc. 39
200 Capital Southwest Corp. 14
5,575 Capstead Mortgage Corp. 135
9,104 Champion Enterprises, Inc.* 190
1,619 Chemical Financial Corp. 59
1,400 Corus Bankshares, Inc. 45
3,200 Crescent Real Estate Equities, Inc.* 140
6,900 CWM Mortgage Holdings, Inc. 142
4,800 Dauphin Deposit Corp. 156
3,100 Deposit Guaranty Corp. 179
6,300 Franchise Finance Corp. 160
8,700 Geotek Communications, Inc.* 61
2,708 Horizon Group, Inc. 53
3,400 Hospital Properties Trust 92
4,500 IRT Property Co. 48
1,000 John Nuveen and Company, Inc. 27
4,200 Kimco Realty Corp. 122
2,700 Koger Equity, Inc.* 44
2,900 LTC Properties, Inc. 50
1,873 MAF Bancorp, Inc. 64
1,800 Meridian Industrial Trust, Inc. 34
5,500 Merry Land & Investment Co., Inc. 110
2,000 MGI Properties, Inc. 40
6,500 Mid Atlantic Medical Services, Inc.* 76
6,200 Nationwide Health Properties, Inc. 138
3,500 Noel Group, Inc.* 23
2,600 Patriot American Hospitality, Inc. 98
1,000 PEC Israel Economic Corp.* 17
1,433 Peoples First Corp. 32
6,000 Public Storage, Inc. 152
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
3,600 Realty Income Corp. $ 86
1,600 Reckson Associates Realty Corp. 61
1,400 Redwood Trust, Inc. 53
3,100 Resource Mortgage Capital, Inc. 83
1,100 Seacor Holdings, Inc.* 70
1,000 Sirrom Capital Corp. 36
1,700 Smith, (Charles E.) Residential
Realty, Inc. 43
1,800 Trans Financial Bancorp, Inc. 38
1,000 Union Acceptance Corp.* 20
2,300 Vallicorp Holdings, Inc. 46
3,700 Weingarten Realty Investors 145
--------
3,341
NATURAL GAS TRANSMISSION--1.9%
2,450 Atmos Energy Corp. 60
2,100 Bay State Gas Co. 61
1,500 Colonial Gas Co. 34
1,600 Connecticut Energy Corp. 35
1,700 Connecticut Natural Gas Corp. 40
3,100 Eastern Enterprises 116
1,700 Energen Corp. 46
3,100 Indiana Energy, Inc. 75
12,300 Kelley Oil and Gas Corp.* 35
3,151 KN Energy, Inc. 128
2,700 Laclede Gas Co. 64
2,800 New Jersey Resources Corp. 83
1,100 North Carolina Natural Gas Corp. 32
3,500 Northwest Natural Gas Co. 88
1,700 NUI Corp. 34
3,700 Oneok, Inc. 102
4,576 Piedmont Natural Gas Co. 115
3,700 Primark Corp.* 97
2,950 Public Service Co. of North Carolina, Inc. 56
1,320 South Jersey Industries, Inc. 32
2,184 Southeastern Michigan Gas Enterprises, Inc. 39
1,420 Southern Union Co.* 35
3,900 Southwest Gas Corp. 76
3,900 Southwestern Energy Co. 62
1,957 Tejas Gas Corp.* 86
1,700 TransTexas Gas Corp.* 23
5,100 UGI Corp. 112
2,000 United Cities Gas Co. 47
3,800 Washington Energy Co. 73
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
6,700 Washington Gas Light Co. $ 160
2,900 Wicor, Inc. 105
--------
2,151
OIL AND GAS--2.9%
8,600 AGL Resources, Inc. 182
900 Aquila Gas Pipeline Corp. 13
800 Atwood Oceanics, Inc.* 44
4,040 Barrett Resources Corp.* 165
1,000 Belco Oil & Gas Corp.* 29
1,800 Belden & Blake Corp.* 45
4,100 Benton Oil & Gas Co.* 105
3,400 Berry Petroleum Co. 45
4,543 BJ Services Co.* 217
3,200 Box Energy Corp.* 27
2,900 Brown (Tom), Inc.* 55
3,200 Cabot Oil & Gas Corp. 57
2,600 Cairn Energy USA, Inc.* 31
3,000 Calmat Co. 55
2,000 Capsure Holdings Corp.* 19
2,400 Cross Timbers Oil Co. 58
2,400 Destec Energy, Inc.* 37
3,000 Devon Energy Corp. 109
1,900 Energy Ventures, Inc.* 93
1,800 Falcon Drilling Co., Inc.* 72
1,700 Flores & Rucks, Inc.* 84
1,600 Forcenergy, Inc.* 49
3,700 Forest Oil Corp.* 57
1,200 Giant Industries, Inc. 18
11,500 Harken Energy Corp.* 34
3,900 Helmerich & Payne, Inc. 210
499 Hondo Oil & Gas Co.* 6
2,100 Hugoton Energy Corp.* 23
1,700 KCS Energy, Inc. 57
1,800 KFX, Inc.* 11
11,800 Mesa, Inc.* 60
5,800 Mitchell Energy & Development Corp. 126
1,500 Nuevo Energy Co.* 75
3,600 Oceaneering International, Inc.* 60
5,600 Parker & Parsley Petroleum Co. 185
7,900 Parker Drilling Co.* 74
2,800 Plains Resources, Inc.* 46
2,400 Pool Energy Services Co.* 35
4,100 Pride Petroleum Services, Inc.* 74
1,400 Production Operators Corp. 63
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
OIL AND GAS--CONTINUED
9,336 Seagull Energy Corp.* $ 214
4,300 Snyder Oil Corp. 74
2,100 Swift Energy Co.* 66
4,100 Tuboscope Vetco International Corp.* 63
1,800 Vintage Petroleum, Inc. 60
2,500 Western Gas Resources, Inc. 47
--------
3,329
ORDNANCE AND ACCESSORIES--0.1%
1,400 Alliant Techsystems, Inc.* 75
3,100 Sturm Ruger & Co., Inc. 55
--------
130
OTHER SERVICES--0.6%
800 Central Parking Corp. 27
400 CKS Group, Inc.* 8
1,600 Integrated Packaging Assembly Corp.* 13
1,100 McGrath Rentcorp 28
7,700 Ogden Corp. 149
1,400 Pixar, Inc.* 21
1,100 Quick Response Services, Inc.* 34
3,300 Rollins, Inc. 61
1,300 Sovran Self Storage, Inc. 37
700 Summit Care Corp.* 11
750 Thermo Ecotek Corp.* 12
250 Thermo Remediation, Inc. 3
5,600 United Waste Systems, Inc.* 188
800 Wackenhut Corrections Corp.* 14
6,000 Walter Industries, Inc.* 80
--------
686
PAPER PRODUCTS--0.7%
3,200 Chesapeake Corp. 98
8,500 Gaylord Container Corp.* 54
2,500 Greif Bros. Corp. 73
1,653 Mosinee Paper Corp. 57
4,000 P.H. Glatfelter Co. 73
3,646 Paxar Corp.* 62
5,270 Rock-Tenn Co. 111
2,500 Schweitzer-Mauduit International, Inc. 83
2,500 Shorewood Packaging Corp.* 47
2,100 Universal Forest Products, Inc. 27
4,400 Wausau Paper Mills Co. 90
--------
775
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
PERSONAL SERVICES--0.5%
1,600 Angelica Corp. $ 31
2,600 Bristol Hotel Co.* 70
2,900 Catalina Marketing Corp.* 148
2,400 CPI Corp. 41
1,300 Craig (Jenny), Inc.* 12
1,500 Equity Corp. International 32
3,150 G & K Services, Inc. 114
1,873 Marcus Corp. 43
1,700 Red Roof Inns, Inc.* 27
3,200 Unifirst Corp. 68
--------
586
PETROLEUM PRODUCTS--1.0%
3,800 Camco International, Inc. 159
1,200 Crown Central Petroleum Corp.* 17
3,700 Diamond Shamrock, Inc. 120
1,500 Elcor Corp. 32
2,300 Lomak Petroleum, Inc. 38
1,300 Louis Dreyfus Natural Gas Corp.* 22
2,700 Newfield Exploration, Inc.* 135
1,690 Newpark Resources, Inc.* 59
5,300 Quaker Chemical Corp. 91
2,000 Royal Gold, Inc.* 26
1,100 RPC, Inc.* 17
1,700 Seitel, Inc.* 69
1,500 Stone Energy Corp.* 35
4,100 Tesoro Petroleum Corp.* 59
4,210 United Meridian Corp.* 215
--------
1,094
PRINTING AND PUBLISHING--1.5%
1,800 American Business Information, Inc.* 31
1,950 American Business Products, Inc. 43
7,300 American Media, Inc., Class A 42
2,500 Big Flower Press Holdings, Inc.* 44
2,800 Bowne & Co., Inc. 69
1,200 CSS Industries, Inc.* 29
1,100 Devon Group, Inc.* 28
1,290 DH Technology, Inc.* 31
1,050 Edmark Corp.* 16
2,900 Ennis Business Forms, Inc. 29
2,500 Express Scripts, Inc.* 89
1,400 Franklin Electronic Publishers, Inc.* 18
2,800 Gibson Greetings, Inc.* 53
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
3,000 Golden Books Family
Entertainment, Inc.* $ 35
4,800 Harland (John H.) Co. 148
2,457 Harte-Hanks Communications, Inc. 63
4,000 Hollinger International, Inc. 44
2,200 Houghton Mifflin Co. 115
4,700 McClatchy Newspapers, Inc., Class A 145
954 Merrill Corp. 22
2,250 Nelson (Thomas), Inc. 28
2,100 New England Business Service, Inc. 41
2,900 Playboy Enterprises, Inc.* 34
966 Pulitzer Publishing Co. 44
1,900 Scholastic Corp.* 142
2,100 Standard Register Co. 59
400 Steck-Vaughn Publishing Corp.* 4
7,300 Topps, Inc.* 31
3,400 Valassis Communications, Inc.* 61
400 Waverly, Inc.* 10
2,100 Wiley (John) & Sons, Inc. 62
5,300 World Color Press, Inc.* 127
--------
1,737
PROFESSIONAL SERVICES--7.0%
2,520 ABM Industries, Inc. 43
1,550 ADR Information Services, Inc.* 67
5,100 Acclaim Entertainment, Inc.* 26
2,000 Activision, Inc.* 23
7,200 Acxiom Corp.* 165
600 Advent Software, Inc.* 19
3,725 Advo, Inc. 47
3,600 Affiliated Computer Services, Inc.* 104
5,800 Allwaste, Inc.* 25
2,200 Alternative Resources Corp.* 38
2,700 AMERCO* 128
4,400 American Oncology Resources, Inc.* 43
2,474 Analysts International Corp. 67
1,700 Arbor Software Corp.* 49
1,400 Aspen Technologies, Inc.* 117
600 Astea International, Inc.* 3
4,800 Banta Corp. 114
800 Barra, Inc.* 21
3,200 BBN Corp.* 74
2,300 BDM International* 108
2,600 BE Aerospace, Inc.* 60
2,200 Bell & Howell Co.* 57
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
700 Billing Information Concepts* $ 21
3,800 Bisys Group, Inc.* 142
1,856 Boole & Babbage, Inc.* 53
900 BRC Holdings, Inc.* 38
2,700 Broderbund Software, Inc.* 81
3,800 BWIP Holding, Inc. 58
1,700 Casino Data Systems* 22
1,700 CDI Corp.* 50
100 Cheyenne Software, Inc.* 3
1,300 Ciber, Inc.* 43
2,800 Citrix Systems, Inc.* 128
1,600 Clarify, Inc.* 72
1,200 ClinTrials Research, Inc.* 26
1,200 CMG Information Services, Inc.* 19
500 COMFORCE Corp.* 7
2,200 Computer Horizons Corp.* 74
600 Computer Language Research, Inc. 6
1,500 Computer Task Group, Inc. 63
9,900 Computervision Corp.* 94
1,700 Comshare, Inc.* 25
1,000 Cooper & Chyan Technology, Inc.* 33
1,900 COREStaff, Inc.* 49
500 CRA Managed Care, Inc.* 23
500 CSG Systems International, Inc.* 9
1,200 Data Translation, Inc.* 14
700 Datastream Systems, Inc.* 16
1,300 DecisionOne Corp.* 20
1,500 Dendrite International, Inc.* 36
1,600 Documentum, Inc.* 61
1,100 Elcom International, Inc.* 9
1,284 Electro Rent Corp.* 31
1,100 EmCare Holdings, Inc. 22
2,900 Employee Solutions, Inc.* 54
700 Enterprise Systems, Inc.* 11
600 Excite, Inc.* 6
1,200 Fair Isaac & Co. 42
2,900 Franklin Quest Co.* 62
2,300 General Magic, Inc.* 7
1,600 Geoworks* 35
3,000 Gerber Scientific, Inc. 47
3,400 Global Industries Ltd.* 60
200 Grey Advertising, Inc. 46
800 HA-LO Industries, Inc.* 31
1,500 Harbinger Corp.* 39
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
PROFESSIONAL SERVICES--CONTINUED
400 HCIA, Inc.* $ 12
1,300 Henry (Jack) & Associates, Inc. 49
2,300 HNC Software, Inc.* 68
978 Holly Corp. 26
2,200 HPR, Inc.* 33
800 IDT Corp.* 11
1,300 IKOS Systems, Inc.* 25
1,600 Inacom Corp.* 50
400 Individual, Inc.* 2
600 Indus Group, Inc.* 13
1,300 Inference Corp.* 8
1,600 Infocus Systems* 34
1,300 Inso Corp.* 55
500 Integrated Measurement Systems, Inc.* 9
2,400 Integrated Systems Consulting
Group, Inc.* 52
3,500 InteliData Technologies Corp.* 26
400 IntelliQuest Information Group, Inc.* 10
2,400 Interim Services, Inc.* 94
1,200 International Imaging Materials, Inc.* 29
3,400 Intersolv, Inc.* 31
500 Intevac, Inc.* 8
800 Iron Mountain, Inc.* 25
750 ITT Educational Services, Inc.* 15
500 JDA Software Group, Inc.* 13
2,400 Katz Media Group* 24
2,475 Keane, Inc.* 131
2,000 Kinder Care Learning Centers, Inc.* 40
2,000 Landstar Systems, Inc.* 46
800 Learning Tree International, Inc.* 36
2,000 Legato Systems, Inc.* 70
1,200 Logic Works, Inc.* 7
1,200 Manugistics Group, Inc.* 45
1,100 Maxis, Inc.* 17
1,200 May & Speh, Inc.* 16
1,300 MDL Information Systems, Inc.* 22
4,450 MDU Resources Group, Inc. 100
1,400 MetaTools, Inc.* 26
2,000 Metricom, Inc.* 27
900 Microware Systems Corp.* 14
3,900 National Data Corp. 156
3,000 National Health Investors, Inc. 107
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
1,400 National Instruments Corp.* $ 45
1,900 NETCOM On-Line Communication Services, Inc.* 33
2,500 Network Data Processing Corp. 90
3,200 Network Equipment Technologies, Inc.* 49
1,700 Network Peripherals, Inc.* 27
1,200 NHP, Inc.* 21
1,350 Nichols Research Corp.* 33
2,300 Nimbus CD International, Inc.* 20
2,000 Norrell Corp. 46
1,900 Novadigm, Inc.* 20
5,500 Oak Technology, Inc.* 54
400 On Assignment, Inc.* 12
2,300 Orthodontic Centers of America, Inc.* 29
1,700 Personnel Group of America, Inc.* 38
1,200 PhyMatrix Corp.* 18
2,700 Physician Resource Group, Inc.* 56
3,100 Physician Computer Network, Inc.* 26
1,000 Pinkertons, Inc.* 25
5,050 Players International, Inc.* 33
2,400 Policy Management Systems Corp.* 96
3,700 Pre-Paid Legal Services, Inc.* 51
2,400 Precision Systems, Inc.* 13
1,000 Premenos Technology Corp.* 10
1,100 Premiere Technologies, Inc.* 26
800 Prism Solutions, Inc.* 6
800 Profit (The) Recovery Group
International, Inc.* 11
1,900 Progress Software Corp.* 38
1,000 Project Software & Development, Inc.* 42
1,700 Protein Design Labs, Inc.* 41
4,200 PSINET, Inc.* 53
3,862 Pure Atria Corp.* 108
5,100 Quarterdeck Corp.* 34
1,000 Rainbow Technologies, Inc.* 20
500 Raptor Systems, Inc.* 11
1,800 Red Brick Systems, Inc.* 42
1,800 Remedy Corp.* 81
500 Renaissance Solutions, Inc.* 19
5,500 RISCORP, Inc.* 24
5,900 Rollins Truck Leasing Corp. 71
900 Romac International, Inc.* 22
1,800 RTW, Inc.* 29
2,300 7th Level, Inc.* 11
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
300 Sapient Corp.* $ 12
1,300 Scopus Technologies, Inc.* 49
1,500 Secure Computing Corp.* 14
500 Seque Software, Inc.* 6
2,300 Sitel Corp.* 45
600 Smith Micro Software, Inc.* 3
1,300 Software 2000, Inc.* 11
6,700 Sotheby's Holdings, Inc., Class A 118
4,300 Spectrum Holobyte, Inc. 22
1,000 SPSS, Inc.* 29
1,900 Spyglass, Inc.* 20
500 SQA, Inc.* 14
3,600 Stac, Inc.* 24
1,600 State of the Art, Inc.* 21
5,000 Structural Dynamics Research Corp.* 97
1,000 Summit Medical Systems* 8
3,800 SunRiver Corp.* 9
2,400 Sync Research, Inc.* 47
4,450 System Software Associates, Inc. 62
2,400 Systems & Computer Technology Corp.* 35
2,900 Systemsoft Corp.* 53
1,800 TCSI Corp.* 16
2,800 Telxon Corp. 34
565 Thermo TerraTech, Inc.* 6
1,650 Thermotrex Corp.* 56
3,400 Transaction Systems Architects, Inc.* 123
3,000 Transcend Services, Inc.* 18
500 Unison Software, Inc.* 12
2,300 Vanstar Corp.* 63
1,300 Vantive Corp. 45
1,600 Veritas DGC, Inc.* 34
1,550 Veritas Software Corp.* 72
1,400 Verity, Inc.* 23
2,600 Viasoft, Inc.* 118
2,000 VideoServer, Inc.* 98
2,800 Viewlogic Systems, Inc.* 28
1,100 Visio Corp.* 54
1,800 VISX Corp.* 42
800 Volt Information Sciences, Inc.* 28
1,697 Wackenhut Corp. 28
1,350 Wind River Systems* 66
600 Workgroup Technology Corp.* 3
2,800 Xircom, Inc.* 56
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
400 Yahoo!, Inc.* $ 8
800 Zoran Corp.* 17
--------
8,049
REAL ESTATE--4.9%
3,300 American Health Properties, Inc. 73
700 American Homestar Corp.* 13
1,400 AMLI Residential Properties 30
2,000 Apartment Investment & Management Co. 50
1,800 Associated Estates Realty Corp. 40
4,600 Avalon Properties, Inc. 118
1,200 Avatar Holdings, Inc.* 37
1,800 Bay Apartment Communities, Inc. 59
3,700 Beacon Properties Corp. 117
4,000 Berkshire Realty, Inc. 38
2,403 Bradley Real Estate Trust 42
2,300 Cali Realty Corp. 65
2,200 Camden Property Trust 61
3,200 Carr Realty Corp. 83
2,700 Castle & Cooke, Inc.* 43
2,000 Cavalier Homes, Inc. 23
2,600 CBL & Associates Properties, Inc. 64
1,900 Centerpoint Properties Corp. 52
1,800 Chelsea GCA Realty, Inc. 57
2,800 Colonial Property Trust* 75
1,800 Columbus Realty Trust 38
2,700 Commercial Net Lease Realty, Inc. 39
3,600 Cousins Properties, Inc. 84
4,200 Crown American Realty Trust 32
3,000 Developers Diversified Realty Corp. 101
4,834 Doubletree Corp.* 203
4,500 Duke Realty Investments, Inc. 161
3,900 Equity Inns, Inc. 46
2,900 Evans Withycombe Residential, Inc. 59
2,200 Excel Realty Trust, Inc. 50
5,000 Federal Realty Investment Trust 130
3,600 FelCor Suite Hotel, Inc. 128
3,800 First Industrial Realty Trust, Inc. 109
600 Forest City Enterprises, Inc. 32
2,400 Gables Residential Trust 64
4,200 General Growth Properties, Inc. 117
3,400 Glimcher Realty Trust 66
4,500 Health Care Property Investors, Inc. 154
2,200 Health Care REIT, Inc. 55
1,800 Healthcare Realty Trust 46
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
REAL ESTATE--CONTINUED
3,600 Highwoods Properties, Inc. $ 111
2,000 Irvine Apartment Communities, Inc. 49
1,700 JDN Realty Co. 44
2,100 JP Realty, Inc. 51
4,400 Liberty Property Trust 102
2,900 Macerich Co. 67
3,800 Manufactured Home Communities, Inc. 76
900 Maxxam, Inc.* 42
1,800 Mid-America Apartment Communities, Inc. 46
2,300 Mills Corp. 48
1,800 National Golf Properties, Inc. 51
2,400 Oasis Residential, Inc. 50
2,600 Paragon Group, Inc. 41
1,300 Pennsylvania REIT 30
3,400 Post Properties, Inc. 131
1,100 PRI Automation, Inc.* 53
2,500 Price Enterprises, Inc.* 43
1,400 Price REIT, Inc. 49
1,600 Regency Realty Corp.* 38
3,800 RFS Hotel Investors, Inc. 64
1,800 ROC Communities, Inc. 45
1,700 Saul Centers, Inc. 26
3,600 Shurguard Storage Centers, Inc. 99
3,125 South West Property Trust, Inc. 50
4,800 Spieker Properties, Inc. 147
1,400 Storage Trust Realty 34
3,100 Storage USA, Inc. 117
2,500 Summit Property, Inc. 49
1,900 Sun Communities, Inc. 61
4,800 Taubman Centers, Inc. 56
2,700 Thornburg Mortgage Asset Corp. 47
2,700 Town & Country Trust 39
1,900 Trinet Corporate Realty Trust 65
8,800 United Dominion Realty Trust 130
2,100 Urban Shopping Centers, Inc. 55
3,900 Vornado Realty Trust 176
1,700 Walden Residential Properties, Inc. 39
4,900 Washington Real Estate Investment Trust 81
1,700 Weeks Corp. 48
2,700 Wellsford Residential Property Trust 65
3,000 Western Investment Real Estate Trust 39
--------
5,508
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
RECREATIONAL AND LEISURE SERVICES--1.3%
500 AMC Entertainment, Inc.* $ 10
500 Ameristar Casinos, Inc.* 3
1,100 Anchor Gaming* 46
2,500 Argosy Gaming Corp.* 14
1,000 Ascent Entertainment Group, Inc. 17
3,100 Authentic Fitness Corp. 34
6,300 Aztar Corp.* 46
200 Bally's Grand, Inc.* 7
4,200 Boyd Gaming Corp.* 34
1,700 Carmike Cinemas, Inc.* 46
3,150 Casino America, Inc.* 11
4,300 Casino Magic Corp.* 12
2,300 Galoob (Lewis) Toys, Inc.* 67
1,000 GC Cos., Inc.* 35
1,000 Harvey's Casino Resorts 17
2,600 Hollywood Casino Corp., Class A* 31
2,217 K2, Inc. 58
2,700 Lydall, Inc.* 61
800 Movie Gallery, Inc.* 11
500 Penn National Gaming, Inc.* 19
1,400 Primadonna Resorts, Inc.* 26
4,900 Prime Hospitality Corp.* 81
600 Quintel Entertainment, Inc.* 5
3,662 Regal Cinemas, Inc.* 119
2,900 Rio Hotel & Casino, Inc.* 44
5,200 Savoy Pictures Entertainment, Inc.* 18
2,100 Scientific Games Holdings Corp.* 55
2,500 Showboat, Inc. 47
1,950 Shuffle Master, Inc.* 19
1,600 Skyline Corp. 42
1,500 Sodak Gaming, Inc.* 24
2,300 Spelling Entertainment Group, Inc.* 18
3,400 Sports & Recreation, Inc.* 29
3,800 Starsight Telecast Co.* 29
3,200 Station Casinos, Inc.* 34
1,700 Stratosphere Corp.* 2
1,650 Studio Plus Hotels* 29
3,000 Trump Hotels and Casino Resorts, Inc.* 42
6,100 Tyco Toys, Inc.* 72
800 White River Corp.* 43
2,900 WMS Industries, Inc.* 73
--------
1,430
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
RESEARCH AND CONSULTING SERVICES--1.3%
5,800 Advance Tissue Science, Inc.* $ 70
1,700 Agouron Pharmaceuticals, Inc.* 93
3,200 Air & Water Technologies Corp.* 20
2,600 Alliance Entertainment Corp.* 6
10,400 Aura Systems, Inc.* 26
7,100 Bio-Technology General Corp.* 65
4,300 Columbia Laboratories, Inc.* 52
675 Computer Management Sciences, Inc.* 11
7,700 Cytogen Corp.* 42
2,800 Dames & Moore, Inc. 38
4,300 Data Broadcasting Corp.* 33
500 Data Processing Resources Corp.* 9
700 Eagle River Interactive, Inc.* 4
1,600 GRC International, Inc.* 24
3,300 ImCrone Systems, Inc.* 34
3,300 Jacobs Engineering Group, Inc.* 80
4,900 Liposome Technology, Inc.* 88
2,100 Mercer International, Inc.* 25
3,000 Mycogen Corp.* 50
1,900 NeoPath, Inc.* 34
1,500 NFO Research, Inc.* 33
3,400 OHM Corp.* 29
1,980 Organogenesis, Inc.* 41
1,200 Parexel International Corp.* 62
2,345 Pharmaceutical Product
Development, Inc.* 52
6,000 Scios-Nova, Inc.* 35
1,800 Spacelabs Medical, Inc.* 36
1,300 Stone & Webster, Inc. 42
5,050 Summit Technology, Inc.* 27
8,500 Symantec Corp.* 126
2,400 Technology Solutions Co.* 108
3,200 U.S. Bioscience, Inc.* 38
--------
1,433
RETAIL--4.5%
1,900 Aaron Rents, Inc. 27
570 Alexander's, Inc.* 41
700 American Eagle Outfitters, Inc.* 17
4,500 Americredit Corp.* 89
3,600 AnnTaylor Stores, Inc.* 73
3,912 Apple South, Inc. 58
2,800 Arbor Drugs, Inc. 72
1,800 Baby Superstores, Inc.* 50
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
4,900 Best Buy, Inc.* $ 62
1,400 Blair Corp. 27
6,500 Bombay Company, Inc.* 31
1,800 Books-a-Million, Inc.* 12
300 Buckle, Inc.* 8
7,540 Buffets, Inc.* 70
2,800 Burlington Coat Factory Warehouse* 34
2,500 Carson Pirie Scott & Co.* 65
5,000 Cash America International, Inc. 39
4,100 Cato Corp. 20
14,700 Charming Shoppes, Inc.* 75
2,900 CKE Restaurants, Inc. 89
7,450 Claire's Stores, Inc. 120
8,600 CML Group, Inc. 34
1,800 Cole National Corp.* 47
1,930 Consolidated Products, Inc.* 35
268 Dart Group Corp. 25
983 Delchamps, Inc. 20
2,800 Dress Barn, Inc.* 40
3,100 Duty Free International, Inc. 49
2,500 Fabri-Centers of America, Inc., Class A* 39
6,500 Family Dollar Stores, Inc. 122
7,000 Fedders Corp. 40
7,200 Fingerhut Cos., Inc. 90
6,000 Foodmaker, Inc.* 55
2,200 Friedmans, Inc., Class A* 30
2,200 Garden Ridge Corp.* 18
3,900 Gymboree Corp.* 110
3,700 Hancock Fabrics, Inc. 34
9,000 HEARx Ltd.* 17
5,300 Hechinger Co. 15
3,300 Hollywood Entertainment Corp.* 66
1,200 Ingles Markets, Inc. 17
2,950 Just For Feet, Inc.* 70
1,100 L.L. Knickerbocker Co.* 10
2,500 Lands' End, Inc. 68
2,200 Longs Drug Stores, Inc. 110
4,000 Mac Frugal's Bargains Close-Outs, Inc.* 99
800 Mafco Consolidated Group* 23
1,300 Mail Boxes Etc.* 29
1,775 Men's (The) Warehouse, Inc.* 41
4,100 Meyer (Fred), Inc.* 137
3,100 Michael's Stores, Inc.* 31
2,300 National Media Corp.* 18
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
RETAIL--CONTINUED
2,623 Natures Sunshine Products, Inc. $ 53
2,900 NPC International, Inc.* 24
800 O'Reilly Automotive, Inc.* 27
6,900 Payless Cashways, Inc.* 12
2,150 Petco Animal Supplies, Inc.* 47
4,400 Petroleum Heat & Power, Inc. 31
6,435 Pier I Imports, Inc. 88
2,400 Proffitt's, Inc.* 97
1,500 Quality Food Centers, Inc.* 57
1,600 Regis Corp.* 40
2,400 Renters Choice, Inc.* 44
3,800 Ross Stores, Inc. 193
15,700 Service Merchandise Co., Inc.* 86
3,000 Shopko Stores, Inc. 47
2,750 Showbiz Pizza Time, Inc.* 45
3,098 Smith Food & Drug Centers, Inc., Class B 94
2,100 Sonic Corp.* 48
4,900 Sports Authority, Inc.* 121
2,900 Stanhome, Inc. 79
1,550 Stein Mart, Inc.* 30
1,220 Strawbridge & Clothier, Class A 20
7,700 Stride Rite Corp. 77
9,300 Thrifty PayLess Holdings, Inc.* 238
3,800 U.S. Office Products Co.* 118
5,500 Universal Corp. 158
1,200 Urban Outfitters, Inc.* 18
1,500 Valmont Industries, Inc. 59
1,700 Value City Department Stores, Inc.* 22
4,900 Waban, Inc.* 129
1,200 West Marine, Inc.* 40
900 Wet Seal, Inc.* 20
2,200 Whole Foods Market, Inc.* 50
2,900 Williams-Sonoma, Inc.* 101
1,300 Wilmar Industries, Inc.* 30
5,000 Zale Corp.* 99
--------
5,060
RUBBER AND PLASTICS--0.7%
2,200 ACX Technologies, Inc.* 40
2,100 Carlisle Cos., Inc. 121
2,500 Foamex International, Inc.* 42
1,500 Furon Co. 31
800 Liqui-Box Corp. 26
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C> <C>
2,195 Myers Industries, Inc.* $ 33
2,200 O'Sullivan Corp. 24
1,300 Park Ohio Industries, Inc.* 19
1,200 Rogers Corp.* 33
3,500 Sola International, Inc.* 123
2,500 Spartech Corp. 27
1,300 Tredegar Industries, Inc. 52
4,200 TRINOVA Corp. 153
2,000 West Co., Inc. 57
--------
781
SANITARY SERVICES--0.3%
9,400 Allied Waste Industries, Inc.* 85
2,800 Centennial Cellular Corp.* 33
1,500 Continental Waste Industries, Inc.* 40
10,500 Rollins Environmental Services, Inc.* 21
9,100 Safety-Kleen Corp. 144
600 Superior Services, Inc.* 10
--------
333
SERVICE INDUSTRY MACHINERY--0.4%
1,900 Applied Power, Inc. 69
2,450 Commercial Intertech Corp. 25
600 Greenwich Air Services, Inc. 15
1,600 Scotsman Industries, Inc. 37
1,500 Tennant Co. 37
5,675 United States Filter Corp.* 194
1,575 Wynn's International, Inc. 46
--------
423
SOCIAL SERVICES--0.3%
547 Berlitz International, Inc.* 11
2,100 DeVry, Inc.* 94
5,600 National Education Corp.* 79
2,618 Omega Healthcare Investors, Inc. 85
1,000 Youth Services International, Inc.* 13
--------
282
STEEL PRODUCTS--1.3%
2,000 Acme Metals, Inc.* 42
1,500 Amcast Industrial Corp. 35
13,700 Armco, Inc.* 62
4,500 Birmingham Steel Corp. 79
2,800 Brush Wellman, Inc. 47
2,400 Carpenter Technology Corp. 85
1,000 Chaparral Steel Co. 13
1,100 Coastcast Corp.* 17
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
1,600 Commonwealth Aluminum Corp. $ 26
400 Curtiss Wright Corp. 20
2,200 Geneva Steel Co.* 8
500 Gibraltar Steel Corp.* 12
2,400 Handy & Harman 40
1,000 Huntco, Inc., Class A 16
1,800 IMCO Recycling, Inc. 29
3,100 Intermet Corp.* 41
3,100 J & L Specialty Steel, Inc. 38
1,700 Kaiser Aluminum Corp.* 18
3,100 Lone Star Technologies, Inc. 55
2,600 Lukens, Inc. 48
2,700 Mueller Industries, Inc.* 106
3,700 National Steel Corp., Class B* 35
3,200 Oregon Steel Mills, Inc. 55
3,150 Precision Castparts Corp. 148
1,300 Reliance Steel & Aluminum Co. 49
1,500 Rouge Steel Co. 32
700 Schnitzer Steel Industries, Inc. 19
900 Shiloh Industries, Inc.* 15
1,900 Standex International Corp. 59
1,250 Steel Technologies, Inc. 16
1,700 Texas Industries, Inc. 97
4,000 UNR Industries, Inc. 28
1,000 WCI Steel, Inc.* 10
4,000 WHX Corp.* 38
--------
1,438
TEXTILES--0.6%
4,000 Albany International Corp. 89
9,800 Burlington Industries, Inc.* 107
3,400 Cone Mills Corp.* 28
800 Fab Industries, Inc. 21
1,582 Fieldcrest Cannon, Inc.* 23
1,898 Guilford Mills, Inc. 49
3,000 Interface, Inc. 59
4,100 Phillips-Van Heusen 53
1,200 Quiksilver, Inc.* 24
4,100 Ruddick Corp. 54
2,200 Springs Industries, Inc. 102
2,700 West Point Stevens, Inc.* 81
--------
690
TRANSPORTATION PARTS AND EQUIPMENT--2.3%
2,500 AAR Corp. 75
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,400 ABC Rail Products Corp.* $ 28
2,200 APS Holding Corp. 42
3,850 Arctic Cat, Inc. 37
1,700 Armor All Products Corp. 32
3,500 Arvin Industries, Inc. 83
2,700 Aviall, Inc. 27
2,200 Borg Warner Automotive, Inc. 88
2,200 Breed Technologies, Inc. 59
1,100 Cannondale Corp.* 21
2,700 Chancellor Corp.* 78
2,300 Coachmen Industries, Inc. 59
10,800 Collins & Aikman Corp.* 65
1,300 Copart, Inc.* 23
1,500 Detroit Diesel Corp.* 30
1,200 Eaton Vance Corp. 52
2,900 Exide Corp. .74
2,300 Fairchild Corp.* 38
5,500 Federal-Mogul Corp. 122
4,100 Gencorp, Inc. 76
2,300 Huffy Corp. 32
4,700 Mesa Airlines, Inc.* 46
11,800 Navistar International Corp.* 112
2,600 OEA, Inc. 105
4,200 Orbital Sciences Corp.* 81
2,104 Pacific Scientific Co. 24
4,300 Polaris Industries, Inc. 94
3,300 Rohr, Inc.* 58
1,300 Sequa Corp.* 52
2,800 Simpson Industries, Inc. 29
2,400 Smith (A.O.) Corp. 71
2,225 Standard Products Co. 51
2,800 Stant Corp. 35
4,900 Stewart & Stevenson Services, Inc. 121
3,300 Superior Industries International, Inc. 83
2,700 Teleflex, Inc. 134
2,900 Thiokol Corp. 133
889 Thor Industries, Inc. 21
2,525 Titan Wheel International, Inc. 33
900 Tower Automotive, Inc. 29
3,000 Wabash National Corp. 53
1,500 Walbro Corp. 30
3,200 Westinghouse Air Brake Co. 36
2,500 Winnebago Industries, Inc. 19
--------
2,591
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
TRANSPORTATION SERVICES--1.8%
2,600 Air Express International Corp. $ 85
3,100 Airborne Freight Corp. 67
2,200 Alaska Air Group, Inc.* 53
7,630 America West Airlines, Inc.* 112
3,600 American Freightways, Inc.* 37
3,500 APL Ltd. 84
3,100 Arnold Industries, Inc. 49
3,700 Atlantic Southeast Airlines, Inc. 84
1,800 Covenant Transportation, Inc., Class A* 27
400 Eagle USA Airfreight, Inc.* 11
1,900 Expeditors International of
Washington, Inc. 85
1,458 First Source Corp. 34
600 Florida East Coast Industries, Inc. 53
1,553 Frozen Food Express Industries, Inc. 15
3,100 GATX Corp. 155
7,900 Greyhound Lines, Inc.* 31
1,800 Harper Group, Inc. 41
2,739 Heartland Express, Inc.* 65
3,600 Hunt (J.B.) Transportation Services, Inc. 50
4,100 Kirby Corp.* 81
400 Knight Transportation, Inc.* 9
1,500 M.S. Carriers, Inc.* 29
900 Midwest Express Holdings, Inc.* 30
3,100 Offshore Logistics, Inc.* 62
4,800 OMI Corp.* 37
4,400 Overseas Shipholding Group, Inc. 70
900 Oxford Resources Corp., Class A* 23
3,200 Pittston Burlington Group 63
1,600 Railtex, Inc.* 40
2,300 Roadway Express, Inc. 38
1,300 Skywest, Inc. 19
1,800 Swift Transportation Co., Inc.* 43
2,900 Trans World Airlines, Inc.* 22
3,450 USFreightways, Corp.* 89
5,600 ValuJet, Inc.* 50
3,350 Werner Enterprises, Inc. 54
1,300 Western Pacific Airlines, Inc.* 11
1,900 Xtra Corp. 80
3,500 Yellow Corp.* 53
--------
2,041
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
WATER SUPPLY--0.4%
1,200 Aquarion Co. $ 30
1,063 California Water Service Co. 42
2,600 Culligan Water Technologies, Inc.* 97
1,300 E'Town Corp. 39
700 Pennsylvania Enterprises, Inc.* 31
2,700 Philadelphia Suburban Corp. 50
1,360 Southern California Water Co. 32
3,852 United Water Resources, Inc. 59
1,200 Western Water Co.* 22
-------
402
WHOLESALE--1.4%
3,185 Arch Communications Group, Inc.* 35
1,900 Bearings, Inc. 52
1,400 Bindley Western Industries, Inc. 25
1,750 BMC West Corp.* 21
4,000 Caraustar Industries, Inc. 136
4,000 Casey's General Stores, Inc. 69
1,756 Castle (A. M.) & Co. 32
Cellular Communications of Puerto
1,900 Rico, Inc.* 40
1,866 Commercial Metals Co. 59
3,700 Compucom Systems, Inc.* 43
400 Culbro Corp.* 23
600 Daisytek International Corp.* 21
1,500 Discount Auto Parts, Inc.* 38
2,600 Egghead, Inc.* 16
2,838 Foxmeyer Corp.* 6
1,162 Getty Petroleum Corp. 19
5,800 Handleman Co. 48
900 Hughes Supply, Inc. 39
3,100 Immunex Corp.* 42
2,800 International Multifoods Corp. 44
1,800 JP Foodservice, Inc.* 44
3,200 Kaman Corp. 40
3,800 Kent Electronics Corp.* 99
1,200 Lawson Products, Inc. 26
2,700 Marshall Industries* 84
2,450 Microage, Inc.* 55
1,900 Nash-Finch Co. 36
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
4,400 Owens & Minor, Inc. $ 46
1,800 Patterson Dental Co.* 47
1,500 Peak (The) Technologies Group* 17
1,700 Russ Berrie & Co., Inc. 30
4,075 Rykoff-Sexton, Inc. 59
2,400 Sciclone Pharmaceuticals, Inc.* 20
1,700 Smart & Final, Inc. 37
4,100 TBC Corp.* 30
2,300 United Stationers, Inc.* 47
3,100 VWR Corp.* 48
--------
1,573
- -----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $93,126) $105,786
- -----------------------------------------------------------------
WARRANTS--0.0%
247 Aquila Biopharmaceuticals, Inc., Exp.12/03/96* $ 0
Milicom American Satellite Corp.,
350 Exp. 06/30/99* 0
PerSeptive Biosystems, Inc.,
57 Exp. 08/08/97* 0
- -----------------------------------------------------------------
TOTAL WARRANTS
(Cost $0) $ 0
- -----------------------------------------------------------------
OTHER--0.0%
2,000 Escrow CFS Group, Inc.* $ 0
1,400 Escrow Millicom, Inc.* 0
900 Escrow Northeast Bancorp, Inc.* 0
2,790 Escrow Statesman Group, Inc.* 0
1,700 Escrow Takecare, Inc.* 0
- -----------------------------------------------------------------
TOTAL OTHER
(Cost $0) $ 0
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount Description Value
- --------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--0.2%
U.S. Treasury Bills #
$ 70 4.89% Due 01/09/97 $ 69
25 4.93% Due 01/09/97 25
80 4.96% Due 01/09/97 79
40 5.11% Due 01/09/97 39
- --------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $212) $ 212
- --------------------------------------------------------------
SHORT-TERM INVESTMENT--6.1%
Berliner Handels und Frankfurter,
Grand Cayman
$6,868 5.688% Due 12/02/96 $ 6,868
- --------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $6,868) $ 6,868
- --------------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(Cost $100,206) $112,866
- --------------------------------------------------------------
Assets, less other liabilities--0.2% 259
- --------------------------------------------------------------
NET ASSETS--100.0% $113,125
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT CONTRACT CONTRACT UNREALIZED
TYPE CONTRACTS AMOUNT POSITION EXPIRATION GAIN
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RUSSELL 2000 40 $6,935 Long 12/20/96 $172
- ---------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
51
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
SMALL
DIVERSIFIED EQUITY FOCUSED INTERNATIONAL COMPANY
BALANCED GROWTH INDEX GROWTH GROWTH INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at cost $44,220 $106,566 $541,910 $ 94,277 $135,257 $100,206
- --------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value $51,448 $142,731 $736,364 $114,043 $139,480 $112,866
Cash 143 2 7 2 -- 4
Receivables:
Dividends and interest 293 200 1,557 65 143 109
Foreign tax reclaims -- -- -- -- 217 --
Fund units sold 15 -- 108 24 5 --
Investment securities sold 143 -- -- -- 4,297 158
Administrator 6 8 23 7 2 8
Deferred organization costs, net 20 15 15 27 33 14
Other assets 1 -- 2 -- 1 1
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 52,069 142,956 738,076 114,168 144,178 113,160
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Due to custodian -- -- -- -- 684 --
Payable for:
Fund units redeemed 52 -- 119 27 5 --
Investment securities purchased 596 382 27 150 5,075 --
Accrued expenses:
Advisory fees 21 63 58 73 89 18
Administration fees 4 11 58 9 11 9
Custodian fees 2 2 23 1 13 --
Transfer agent fees 1 1 11 1 1 1
Other liabilities 7 9 42 8 24 7
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 683 468 338 269 5,902 35
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $51,386 $142,488 $737,738 $113,899 $138,276 $113,125
- --------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $42,854 $90,550 $508,982 $82,474 $130,284 $86,770
Accumulated undistributed net investment income 49 1,355 468 111 720 1,159
Accumulated net realized gain on investments, options
and futures 1,255 14,418 32,457 11,548 3,034 12,364
Net unrealized appreciation on investments and futures 7,228 36,165 195,831 19,766 4,223 12,832
Net unrealized gain on translation of other assets and
liabilities denominated in foreign currencies -- -- -- -- 15 --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $51,386 $142,488 $737,738 $113,899 $138,276 $113,125
- --------------------------------------------------------------------------------------------------------------------------
Total units outstanding (no par value), unlimited units
authorized
Class A 3,690 9,892 40,255 7,337 12,998 8,081
Class C 490 -- 3,213 483 -- --
Class D 19 30 477 46 9 19
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per unit
Class A $12.24 $14.36 $16.79 $14.48 $10.63 $13.97
Class C $12.24 -- $16.79 $14.47 -- --
Class D $12.23 $14.26 $16.77 $14.37 $10.54 $13.96
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
SMALL
DIVERSIFIED EQUITY FOCUSED INTERNATIONAL COMPANY
BALANCED GROWTH INDEX GROWTH GROWTH INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 397 $ 2,151 $ 12,910 $ 927 $ 2,149 $ 1,638
Interest 1,256 146 1,191 116 293 141
- --------------------------------------------------------------------------------------------
TOTAL INCOME 1,653 2,297 14,101 1,043 2,442(a) 1,779
- --------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 363 1,118 1,810 1,116 1,362 424
Administration fees 114 310 780 250 305 258
Custodian fees 21 27 154 22 170 67
Transfer agent fees 9 14 92 13 14 12
Registration fees 17 25 42 23 46 27
Professional fees 5 15 45 5 14 9
Trustee fees 2 4 18 2 6 5
Amortization of deferred
organization costs 10 13 13 17 15 13
Unitholder Servicing
Fees 7 1 54 4 -- --
Other 10 16 86 14 17 20
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 558 1,543 3,094 1,466 1,949 835
Less voluntary waivers
of:
Investment advisory
fees (136) (349) (1,207) (305) (272) (212)
Administration fees (69) (171) (176) (148) (169) (152)
Less: Expenses reimburs-
able by Administrator (66) (98) (307) (80) (55) (135)
- --------------------------------------------------------------------------------------------
Net expenses 287 925 1,404 933 1,453 336
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,366 1,372 12,697 110 989 1,443
Net realized gains on:
Investment transactions 1,703 14,070 30,814 11,332 8,918 12,772
Futures transactions -- -- 5,198 140 -- 74
Foreign currency trans-
actions -- -- -- -- 24 --
Options 131 383 -- 76 -- --
Net change in unrealized
appreciation on
investments and futures 2,874 10,529 100,945 5,017 3,186 976
Net change in unrealized
losses on translation
of other assets and li-
abilities denominated
in
foreign currencies -- -- -- -- (22) --
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS $6,074 $26,354 $149,654 $16,675 $13,095 $15,265
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $119 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
53
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
(All amounts in thousands)
<TABLE>
<CAPTION>
Balanced Diversified Growth
Portfolio Portfolio
---------------- --------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 1,366 $ 1,217 $ 1,372 $ 1,779
Net realized gains (losses) on invest-
ments, options,
futures, and foreign currency transac-
tions 1,834 587 14,453 3,960
Net change in unrealized appreciation
(depreciation) on:
Investments and futures transactions 2,874 4,957 10,529 27,492
Forward foreign currency contracts -- -- -- --
Net change in unrealized gains (loss-
es) on translations of other assets
and liabilities denominated in for-
eign currencies -- (5) -- 364
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 6,074 6,756 26,354 33,595
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (1,231) (1,221) (1,750) (1,361)
Net realized gain on investment and
futures transactions -- -- (1,919) --
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (1,231) (1,221) (3,669) (1,361)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS:
Net investment income (132) -- -- --
Net realized gain on investment and
futures transactions -- -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (132) -- -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS:
Net investment income (2) -- (2) (1)
Net realized gain on investment and
futures transactions -- -- (3) --
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (2) -- (5) (1)
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 11,431 10,695 14,860 32,849
Reinvested distributions 1,076 1,179 3,424 1,264
Cost of units redeemed (10,419) (9,974) (45,585) (84,547)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class A unit transac-
tions 2,088 1,900 (27,301) (50,434)
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 6,132 -- -- --
Reinvested distributions 132 -- -- --
Cost of units redeemed (797) -- -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from Class C unit transactions 5,467 -- -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 232 -- 227 185
Reinvested distributions 2 -- 5 --
Cost of units redeemed (9) -- (75) (35)
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from Class D unit transactions 225 -- 157 150
- --------------------------------------------------------------------------------
Net increase (decrease) 12,489 7,435 (4,464) (18,051)
Net assets--beginning of year 38,897 31,462 146,952 165,003
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $51,386 $38,897 $ 142,488 $ 146,952
- --------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVEST-
MENT INCOME $49 $48 $1,355 $1,735
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Index Focused Growth International Small Company
Portfolio Portfolio Growth Portfolio Index Portfolio
- --------------------- ------------------ ------------------ -----------------
1996 1995 1996 1995 1996 1995 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12,697 $ 9,656 $ 110 $ 349 $ 989 $ 1,794 $ 1,443 $ 1,130
36,012 13,989 11,548 5,691 8,942 (4,915) 12,846 5,913
100,945 94,961 5,017 13,082 3,186 754 976 13,771
-- -- -- -- -- (62) -- --
-- -- -- (24) (22) 35 -- --
- ---------------------------------------------------------------------------------
149,654 118,606 16,675 19,098 13,095 (2,394) 15,265 20,814
- ---------------------------------------------------------------------------------
(11,982) (9,464) (317) (147) (2,919) (684) (1,002) (1,027)
(15,194) (5,459) (1,293) -- -- (510) (5,764) (3,919)
- ---------------------------------------------------------------------------------
(27,176) (14,923) (1,610) (147) (2,919) (1,194) (6,766) (4,946)
- ---------------------------------------------------------------------------------
(603) (93) -- -- -- -- -- --
(570) -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------
(1,173) (93) -- -- -- -- -- --
- ---------------------------------------------------------------------------------
(60) (6) (2) -- (1) -- (1) --
(26) -- (8) -- -- -- (2) --
- ---------------------------------------------------------------------------------
(86) (6) (10) -- (1) -- (3) --
- ---------------------------------------------------------------------------------
338,095 216,653 32,348 27,342 28,193 63,136 28,946 17,266
24,880 13,649 1,413 100 2,297 962 6,297 4,615
(279,296) (135,290) (27,923) (18,063) (51,182) (45,016) (25,770) (19,967)
- ---------------------------------------------------------------------------------
83,679 95,012 5,838 9,379 (20,692) 19,082 9,473 1,914
- ---------------------------------------------------------------------------------
52,571 18,118 6,934 -- -- -- -- --
1,029 94 -- -- -- -- -- --
(25,869) (427) (598) -- -- -- -- --
- ---------------------------------------------------------------------------------
27,731 17,785 6,336 -- -- -- -- --
- ---------------------------------------------------------------------------------
6392 762 168 459 71 24 223 43
86 6 10 -- -- -- 3 --
(332) (6) (96) (2) (2) (6) (13) (2)
- ---------------------------------------------------------------------------------
6,146 762 82 457 69 18 213 41
- ---------------------------------------------------------------------------------
238,775 217,143 27,311 28,787 (10,448) 15,512 18,182 17,823
498,963 281,820 86,588 57,801 148,724 133,212 94,943 77,120
- ---------------------------------------------------------------------------------
$ 737,738 $ 498,963 $113,899 $ 86,588 $138,276 $148,724 $113,125 $94,943
- ---------------------------------------------------------------------------------
$468 $416 $111 $320 $720 $2,579 $1,159 $724
- ---------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Balanced Portfolio
---------------------------------------------------------
Class A Class C Class D
------------------------------------- -------- --------
1996 1995 1994 1993 (a) 1996 (b) 1996 (c)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 11.05 $ 9.50 $ 10.22 $ 10.00 $ 11.12 $ 11.34
Income (Loss) from in-
vestment operations:
Net investment income 0.34 0.34 0.24 0.09 0.29 0.22
Net realized and
unrealized gain (loss)
on investments and op-
tions 1.19 1.55 (0.72) 0.22 1.12 0.96
- -----------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.53 1.89 (0.48) 0.31 1.41 1.18
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.34) (0.34) (0.22) (0.09) (0.29) (0.29)
Net realized gain on
investments and op-
tions -- -- (0.02) -- -- --
- -----------------------------------------------------------------------------------
Total distributions to
unitholders (0.34) (0.34) (0.24) (0.09) (0.29) (0.29)
- -----------------------------------------------------------------------------------
Net increase (decrease) 1.19 1.55 (0.72) 0.22 1.12 0.89
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.24 $ 11.05 $ 9.50 $ 10.22 $ 12.24 $ 12.23
- -----------------------------------------------------------------------------------
Total return (d) 14.07% 20.22% (4.76)% 3.12% 12.72% 10.55%
Ratio to average net as-
sets of: (e)
Expenses, net of waiv-
ers and reimbursements 0.61% 0.61% 0.61% 0.61% 0.85% 1.00%
Expenses, before waiv-
ers and reimbursements 1.20% 1.28% 1.50% 1.62% 1.44% 1.59%
Net investment income,
net of waivers and re-
imbursements 3.03% 3.36% 2.56% 2.20% 2.80% 2.78%
Net investment income,
before waivers and re-
imbursements 2.44% 2.69% 1.68% 1.19% 2.21% 2.19%
Portfolio turnover rate 104.76% 93.39% 75.69% 35.03% 104.76% 104.76%
Average commission rate
per share $0.0718 NA NA NA $0.0718 $0.0718
Net assets at end of pe-
riod (in thousands) $45,157 $38,897 $ 31,462 $15,928 $ 5,997 $ 232
- -----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on February 20, 1996.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
56
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Diversified Growth Portfolio
------------------------------------------------------------------
Class A Class D
--------------------------------------- -------------------------
1996 1995 1994 1993 (a) 1996 1995 1994 (b)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 12.20 $ 9.88 $ 10.65 $ 10.00 $ 12.16 $ 9.88 $10.41
Income (Loss) from in-
vestment operations:
Net investment income 0.14 0.15 0.09 0.09 0.11 0.11 0.01
Net realized and
unrealized gain (loss)
on investments
and options 2.33 2.26 (0.83) 0.65 2.29 2.25 (0.54)
- ---------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 2.47 2.41 (0.74) 0.74 2.40 2.36 (0.53)
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.15) (0.09) (0.01) (0.09) (0.14) (0.08) --
Net realized gain on
investments and op-
tions (0.16) -- (0.02) -- (0.16) -- --
- ---------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.31) (0.09) (0.03) (0.09) (0.30) (0.08) --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 2.16 2.32 (0.77) 0.65 2.10 2.28 (0.53)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 14.36 $ 12.20 $ 9.88 $ 10.65 $ 14.26 $12.16 $ 9.88
- ---------------------------------------------------------------------------------------------
Total return (c) 20.83% 24.55% (6.98)% 7.38% 20.39% 24.19% (5.14)%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 0.66% 0.69% 0.67% 0.71% 1.05% 1.08% 1.05%
Expenses, before waiv-
ers and reimbursements 1.10% 1.12% 1.08% 1.13% 1.49% 1.51% 1.46%
Net investment income,
net of waivers and
reimbursements 0.98% 1.16% 0.77% 1.04% 0.59% 0.73% 0.94%
Net investment income,
before waivers and
reimbursements 0.54% 0.73% 0.35% 0.62% 0.15% 0.30% 0.53%
Portfolio turnover rate 59.99% 81.65% 78.94% 140.88% 59.99% 81.65% 78.94%
Average commission rate
per share $ 0.0655 NA NA NA $0.0655 NA NA
Net assets at end of pe-
riod (in thousands) $142,055 $146,731 $164,963 $199,053 $ 433 $ 221 $ 40
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
57
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Equity Index Portfolio
------------------------------------------------------------------------------------
Class A Class C Class D
-------------------------------------- ----------------- -------------------------
1996 1995 1994 1993 (a) 1996 1995 (b) 1996 1995 1994 (c)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN- $ 13.86 $ 10.60 $ 10.78 $ 10.00 $ 13.86 $ 13.43 $ 13.83 $10.60 $10.96
NING OF PERIOD
Income (Loss) from in-
vestment
operations:
Net investment income 0.31 0.30 0.27 0.22 0.28 0.05 0.27 0.25 0.02
Net realized and
unrealized gain (loss)
on investments and
futures 3.36 3.47 (0.18) 0.78 3.35 0.45 3.36 3.47 (0.31)
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.67 3.77 0.09 1.00 3.63 0.50 3.63 3.72 (0.29)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.31) (0.30) (0.27) (0.22) (0.27) (0.07) (0.26) (0.28) (0.07)
Net realized gain on
investments and
futures (0.43) (0.21) -- -- (0.43) -- (0.43) (0.21) --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.74) (0.51) (0.27) (0.22) (0.70) (0.07) (0.69) (0.49) (0.07)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) 2.93 3.26 (0.18) 0.78 2.93 0.43 2.94 3.23 (0.36)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 16.79 $ 13.86 $ 10.60 $ 10.78 $ 16.79 $ 13.86 $ 16.77 $13.83 $10.60
- ---------------------------------------------------------------------------------------------------------------
Total return (d) 27.53% 36.60% 0.87% 10.08% 27.24% 3.94% 27.20% 36.20% (2.68)%
Ratio to average net
assets of: (e)
Expenses, net of
waivers and
reimbursements 0.22% 0.22% 0.23% 0.21% 0.46% 0.46% 0.61% 0.61% 0.60%
Expenses, before
waivers and
reimbursements 0.50% 0.54% 0.59% 0.66% 0.74% 0.78% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and
reimbursements 2.12% 2.54% 2.62% 2.62% 1.89% 2.29% 1.78% 2.07% 2.67%
Net investment income,
before waivers and
reimbursements 1.84% 2.22% 2.25% 2.17% 1.61% 1.97% 1.50% 1.75% 2.31%
Portfolio turnover rate 18.02% 15.27% 71.98% 2.06% 18.02% 15.27% 18.02% 15.27% 71.98%
Average commission rate
per share $ 0.0228 NA NA NA $0.0228 NA $0.0228 NA NA
Net assets at end of
period (in thousands) $675,804 $479,763 $281,817 $219,282 $53,929 $18,390 $ 8,005 $ 810 $ 3
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class C units were issued on September 28, 1995.
(c) Class D units were issued on September 14, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
58
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Focused Growth Portfolio
-----------------------------------------------------------------------
Class A Class C Class D
--------------------------------------- -------- ------------------
1996 1995 1994 1993 (a) 1996 (b) 1996 1995 (c)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD: $12.53 $9.79 $10.43 $10.00 $ 13.46 $ 12.48 $9.55
Income (Loss) from in-
vestment operations:
Net investment income
(loss) 0.02 0.05 0.02 0.01 (0.01) (0.03) 0.02
Net realized and
unrealized gain (loss)
on investments,
futures and options 2.17 2.71 (0.66) 0.43 1.02 2.15 2.93
- --------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 2.19 2.76 (0.64) 0.44 1.01 2.12 2.95
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.02) -- (0.01) -- (0.04) (0.02)
Net realized gain on
investments, futures
and options (0.19) -- -- -- -- (0.19) --
- --------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.24) (0.02) -- (0.01) -- (0.23) (0.02)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) 1.95 2.74 (0.64) 0.43 1.01 1.89 2.93
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $14.48 $12.53 $9.79 $10.43 $14.47 $14.37 $12.48
- --------------------------------------------------------------------------------------------------
Total return (d) 17.82% 28.38% (6.15)% 4.33% 7.51% 17.42% 30.97%
Ratio to average net as-
sets of: (e)
Expenses, net of waiv-
ers and reimbursements 0.91% 0.91% 0.91% 0.91% 1.15% 1.30% 1.30%
Expenses, before waiv-
ers and reimbursements 1.43% 1.47% 1.55% 1.88% 1.67% 1.82% 1.86%
Net investment income
(loss), net of waivers
and reimbursements 0.12% 0.46% 0.24% 0.14% (0.12)% (0.28)% (0.11)%
Net investment loss,
before waivers and
reimbursements (0.40)% (0.10)% (0.39)% (0.83)% (0.64)% (0.80)% (0.67)%
Portfolio turnover rate 116.78% 85.93% 74.28% 27.48% 116.78% 116.78% 85.93%
Average commission rate
per share $ 0.0730 NA NA NA $0.0730 $0.0730 NA
Net assets at end of pe-
riod (in thousands) $106,250 $86,099 $57,801 $32,099 $6,993 $656 $489
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on June 14, 1996.
(c) Class D units were issued on December 8, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
59
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
International Growth Portfolio
--------------------------------------------------------
Class A Class D
----------------------------- -------------------------
1996 1995 1994(a) 1996 1995 1994(b)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 9.88 $ 10.21 $ 10.00 $ 9.83 $10.21 $10.47
Income (loss) from in-
vestment operations:
Net investment income 0.10 0.12 0.05 0.01 0.19 --
Net realized and
unrealized gain (loss)
on investments
and foreign currency
transactions 0.87 (0.36) 0.16 0.92 (0.48) (0.26)
- -----------------------------------------------------------------------------------
Total income (loss) from
investment operations 0.97 (0.24) 0.21 0.93 (0.29) (0.26)
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.22) (0.05) -- (0.22) (0.05) --
Net realized gain on
investments and for-
eign currency transac-
tions -- (0.04) -- -- (0.04) --
- -----------------------------------------------------------------------------------
Total distributions to
unitholders (0.22) (0.09) -- (0.22) (0.09) --
- -----------------------------------------------------------------------------------
Net increase (decrease) 0.75 (0.33) 0.21 0.71 (0.38) (0.26)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.63 $ 9.88 $ 10.21 $ 10.54 $ 9.83 $10.21
- -----------------------------------------------------------------------------------
Total return (c) 9.96% (2.32)% 2.11% 9.59% (2.78)% (2.56)%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 1.06% 1.06% 1.04% 1.45% 1.45% 1.35%
Expenses, before waiv-
ers and reimbursements 1.43% 1.38% 1.47% 1.82% 1.77% 1.78%
Net investment income,
net of waivers and re-
imbursements 0.73% 1.22% 0.76% 0.44% 2.01% --
Net investment income
(loss), before waivers
and reimbursements 0.36% 0.90% 0.33% 0.07% 1.69% (0.43)%
Portfolio turnover rate 202.47% 215.31% 77.79% 202.47% 215.31% 77.79%
Average commission rate
per share $ 0.0292 NA NA $0.0292 NA NA
Net assets at end of pe-
riod (in thousands) $138,182 $148,704 $133,212 $ 94 $ 20 --
- -----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
60
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Small Company Index Portfolio
--------------------------------------------------------
Class A Class D
------------------------------------- -----------------
1996 1995 1994 1993 (a) 1996 1995 (b)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 12.98 $ 10.86 $ 11.29 $ 10.00 $ 12.95 $ 10.51
Income (Loss) from in-
vestment operations:
Net investment income 0.19 0.16 0.14 0.11 0.13 0.18
Net realized and
unrealized gain (loss)
on investments and
futures 1.75 2.67 (0.30) 1.29 1.83 2.96
- ----------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.94 2.83 (0.16) 1.40 1.96 3.14
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.14) (0.15) (0.02) (0.11) (0.14) (0.14)
Net realized gain on
investments and
futures transactions (0.81) (0.56) (0.25) -- (0.81) (0.56)
- ----------------------------------------------------------------------------------
Total distributions to
unitholders (0.95) (0.71) (0.27) (0.11) (0.95) (0.70)
- ----------------------------------------------------------------------------------
Net increase (decrease) 0.99 2.12 (0.43) 1.29 1.01 2.44
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.97 $ 12.98 $ 10.86 $ 11.29 $ 13.96 $ 12.95
- ----------------------------------------------------------------------------------
Total return (c) 15.96% 27.76% (1.54)% 14.09% 16.20% 31.62%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 0.32% 0.32% 0.33% 0.31% 0.71% 0.71%
Expenses, before waiv-
ers and reimbursements 0.79% 0.81% 0.86% 1.02% 1.18% 1.20%
Net investment income,
net of waivers and re-
imbursements 1.36% 1.31% 1.27% 1.25% 1.02% 0.90%
Net investment income,
before waivers and re-
imbursements 0.89% 0.82% 0.74% 0.54% 0.55% 0.41%
Portfolio turnover rate 46.26% 38.46% 98.43% 26.31% 46.26% 38.46%
Average commission rate
per share $ 0.0257 NA NA NA $0.0257 NA
Net assets at end of pe-
riod (in thousands) $112,856 $94,899 $77,120 $54,763 $ 269 $ 44
- ----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on December 8, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
61
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end manage-
ment investment company. The Trust includes sixteen portfolios, each with its
own investment objective. The Northern Trust Company ("Northern") acts as the
Trust's investment adviser, transfer agent, and custodian. Goldman, Sachs &
Co. ("Goldman Sachs") acts as the Trust's administrator and distributor. Pre-
sented herein are the financial statements of the equity portfolios ("the
Portfolios").
Each of the equity portfolios may issue four separate classes: Class A, B, C
and D. Each class is distinguished by the level of administrative support and
transfer agent service provided. As of November 30, 1996, Class A, Class C and
Class D units are outstanding for certain portfolios.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP re-
quires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual results could differ from those estimates.
(a) Investment Valuation
Investments held by a portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any securi-
ties are not traded on a valuation date, at the last quoted bid price. Securi-
ties which are traded in the over-the-counter markets are valued at the last
quoted bid price. Exchange traded futures and options are valued at the set-
tlement price as established by the exchange on which they are traded. Index
futures are marked to market on a daily basis. Any securities, including re-
stricted securities, for which current quotations are not readily available
are valued at fair value as determined in good faith by Northern under the su-
pervision of the Board of Trustees ("Board"). Short-term investments are val-
ued at amortized cost which Northern has determined, pursuant to Board autho-
rization, approximates market value.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
(c) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments and dividend income
are translated into U.S. dollars using the spot market rate of exchange pre-
vailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on invest-
ments.
(d) Investment Transactions and Investment Income
Investment transactions are recorded on the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Dividend income is recorded on the ex-dividend date and interest income is re-
corded on the accrual basis and includes amortization of discounts and premi-
ums. Dividends from foreign securities are recorded on the ex-date, or as soon
as the information is available.
62
<PAGE>
- -------------------------------------------------------------------------------
(e) Forward Foreign Currency Exchange Contracts
Certain portfolios are authorized to enter into forward foreign currency ex-
change contracts for the purchase of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. In addition, the International Growth
Portfolio may enter into foreign currency exchange contracts for speculative
purposes. The objective of the Portfolio's foreign currency hedging transac-
tions is to reduce the risk that the U.S. dollar value of the Portfolio's for-
eign currency denominated securities will decline in value due to changes in
foreign currency exchange rates. All forward foreign currency contracts are
"marked-to-market" daily at the applicable exchange rates and any resulting
unrealized gains or losses are recorded in the financial statements. The port-
folio records realized gains or losses when the forward contract is offset by
entry into a closing transaction or extinguished by delivery of the currency.
Risks may arise upon entering into these contracts from the potential inabil-
ity of counterparties to meet the terms of their contracts and from unantici-
pated movements in the value of a foreign currency relative to the U.S. dol-
lar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all re-
lated and offsetting transactions are considered.
(f) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and capital gains to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, there were no
capital loss carryforwards for U.S. federal tax purposes.
(g) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(h) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio. Certain expenses arising in connection with a class of units are
allocated to that class of units. Expenses incurred which do not specifically
relate to an individual portfolio are allocated among the portfolios based on
each portfolio's relative net assets.
(i) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
- -------------------------------
<S> <C>
Balanced Quarterly
Diversified Growth Annually
Equity Index Quarterly
Focused Growth Annually
International Growth Annually
Small Company Index Annually
- -------------------------------
</TABLE>
Each portfolio's net realized capital gains are distributed at least annual-
ly. Income dividends and capital gain distributions are determined in accor-
dance with income tax regulations. Such amounts may differ from income and
capital gains recorded in accordance with generally accepted accounting prin-
ciples.
Distributions of short-term and long-term capital gains were declared and
paid December 24, 1996 to unitholders of record on December 23, 1996, as fol-
lows:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
CAPITAL CAPITAL
GAIN GAIN TOTAL
- --------------------------------------------------
<S> <C> <C> <C>
Balanced -- $0.3085 $0.3085
Diversified Growth $0.5764 0.8847 1.4611
Equity Index 0.0188 0.8107 0.8295
Focused Growth 0.3562 1.3199 1.6761
International Growth 0.3956 0.0519 0.4475
Small Company Index 0.4540 1.1386 1.5926
- --------------------------------------------------
</TABLE>
63
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
(j) Reclassifications
The International Growth Portfolio reclassified approximately $48,000 from ac-
cumulated net realized gain on investment transactions, and $24,000 from net
realized gain on foreign currency transactions to accumulated undistributed
net investment income. The Small Company Index Portfolio reclassified approxi-
mately $5,000 from undistributed net investment income to accumulated net re-
alized gain on investment transactions. These reclassifications had no impact
on the net asset value of the Portfolios and are designed to present those
Portfolio's capital accounts on a tax basis.
3. ADVISORY, TRANSFER AGENCY AND CUSTODIAN AGREEMENTS
The Trust has an investment advisory agreement with Northern whereby each
portfolio pays Northern a fee, computed daily and payable monthly, based on a
specified percentage of its average daily net assets. For the current fiscal
year, Northern voluntarily agreed to waive a portion of the advisory fees as
shown on the accompanying Statements of Operations. The annual advisory fees
and waiver rates expressed as a percentage of average daily net assets for the
year ended November 30, 1996, are as follows:
<TABLE>
<CAPTION>
NET
ADVISORY LESS: ADVISORY
FEE WAIVER FEE
- ----------------------------------------------
<S> <C> <C> <C>
Balanced .80% .30% .50%
Diversified Growth .80 .25 .55
Equity Index .30 .20 .10
Focused Growth 1.10 .30 .80
International Growth 1.00 .20 .80
Small Company Index .40 .20 .20
- ----------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%, .10%
and .15% of the average daily net asset value of the outstanding Class A, B, C
and D units, respectively, of the portfolios.
As compensation for the services rendered as custodian, including the assump-
tion by Northern of the expenses related thereto, Northern receives compensa-
tion based on a pre-determined schedule of charges approved by the Board.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement with Goldman Sachs whereby each
portfolio pays the Administrator a fee, computed daily and payable monthly,
based on the average net assets of each portfolio at the rates set forth be-
low:
<TABLE>
<CAPTION>
Average net assets RATE
- ---------------------------------------
<S> <C>
For the first $100,000,000 .250%
For the next $200,000,000 .150
For the next $450,000,000 .075
For net assets over $750,000,000 .050
- ---------------------------------------
</TABLE>
For the current fiscal year, Goldman Sachs voluntarily agreed to limit admin-
istration fees to .10% of average daily net assets for each portfolio. In ad-
dition, Goldman Sachs agreed to waive a portion of its administrative fees
should overall administration fees earned during the preceding year exceed
certain specified levels. No waiver was required under this agreement during
the year ended November 30, 1996. Furthermore, Goldman Sachs has agreed to re-
imburse each portfolio for certain expenses in the event that such expenses,
as defined, exceed on an annualized basis .10% of its average daily net assets
for the Balanced, Diversified Growth, Equity Index, Focused Growth and Small
Company Index Portfolios and .25% of the average daily net assets for the In-
ternational Growth Portfolio.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1996 are shown on the accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
64
<PAGE>
- -------------------------------------------------------------------------------
5. UNITHOLDER SERVICING PLAN
The Trust has adopted a Unitholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain unitholder administrative support serv-
ices for their customers or other investors who beneficially own Class B, C
and D units. As compensation under the Unitholder Servicing Plan, the institu-
tion or other financial intermediary receives a fee at an annual rate of up to
.10%, .15% and .25% of the average daily net asset value of the outstanding
Class B, C and D units, respectively.
6. FUTURES CONTRACTS
Each portfolio may invest in long equity index or currency futures to maintain
liquidity or short futures contracts for hedging purposes. The portfolios bear
the market risk arising from changes in the value of these financial instru-
ments. At the time a portfolio enters into a futures contract it is required
to make a margin deposit with the custodian of a specified amount of cash or
eligible securities. Subsequently, as the market price of the futures contract
fluctuates, gains or losses are recorded and payments are made, on a daily ba-
sis, between the portfolio and the broker. The Statements of Operations re-
flects gains and losses as realized for closed futures contracts and as
unrealized for open futures contracts.
At November 30, 1996, the Equity Index and Small Company Index Portfolios had
entered into long exchange traded futures contracts. The aggregate market
value of investments pledged to cover margin requirements for open positions
at November 30, 1996 was approximately $1,863,000 and $212,000 for the Equity
Index and Small Company Index Portfolios, respectively.
7. OPTIONS CONTRACTS
Each Portfolio may purchase and write (sell) put and call options on foreign
and domestic stock indices, foreign currencies, and U.S. and foreign securi-
ties that are traded on U.S. and foreign securities exchanges and over-the-
counter markets. These transactions are for hedging (or cross-hedging ) pur-
poses or for the purposes of earning additional income.
The risk associated with purchasing an option is that the portfolio pays a
premium whether or not the option is exercised. Additionally, the portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as portfolio securities. The cost of se-
curities acquired through the exercise of call options is increased by the
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
In writing an option, the portfolio bears the market risk of an unfavorable
change in the price of the security or currency underlying the written option.
Exercise of an option written by the portfolio could result in the portfolio
selling or buying a security or currency at a price different from the current
market value. Transactions in written call options for the year ended November
30, 1996 for the Balanced, Diversified Growth and Focused Growth Portfolios
were as follows:
<TABLE>
<CAPTION>
DIVERSIFIED Focused
Premiums Balanced GROWTH Growth
- ----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Options outstanding, beginning of period $ -- $ -- $ --
Options written 169 383 1,203
Options terminated in closing purchase
transactions (38) -- (1,127)
Options expired (131) (383) (76)
- ----------------------------------------------------------------------
Options outstanding, end of period $ -- $ -- $ --
- ----------------------------------------------------------------------
</TABLE>
The Portfolios did not write put options during the year ended November 30,
1996.
65
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
8. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1996 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from sales
Purchases maturities and
of U.S. Purchases of U.S. maturities
Government of other Government of other
Obligations securities Obligations securities
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced $25,380 $ 26,459 $20,152 $ 24,199
Diversified Growth -- 82,570 -- 112,306
Equity Index -- 211,463 -- 104,654
Focused Growth -- 126,812 -- 116,129
International Growth -- 264,292 -- 291,224
Small Company Index -- 47,979 -- 48,418
- -------------------------------------------------------------------
</TABLE>
As of November 30, 1996, the composition of unrealized appreciation (depreci-
ation) of investment securities (including the effects of foreign currency
translation) based on the aggregate cost of investments for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Income
Net Tax
Appreciation Depreciation Appreciation Purposes
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced $ 7,396 $ 196 $ 7,200 $ 44,248
Diversified Growth 38,097 1,944 36,153 106,578
Equity Index 203,920 10,500 193,420 542,944
Focused Growth 22,474 2,733 19,741 94,302
International Growth 8,829 6,914 1,915 137,565
Small Company Index 23,090 10,430 12,660 100,206
- ---------------------------------------------------------------------
</TABLE>
9. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
Interest expense for the year ended November 30, 1996 was approximately
$2,000, $53,000, $3,000, $9,000 and $7,000 for the Diversified Growth, Equity
Index, Focused Growth, International Growth, and Small Company Index Portfo-
lios, respectively. These amounts are included in other expenses on the State-
ments of Operations.
As of November 30, 1996, there were no outstanding borrowings.
10. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
Sales DISTRIBUTIONS REDEMPTIONS (DECREASE)
- -----------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 989 93 911 171
Diversified Growth 1,187 290 3,615 (2,138)
Equity Index 22,992 1,743 19,101 5,634
Focused Growth 2,500 117 2,151 466
International Growth 2,737 230 5,018 (2,051)
Small Company Index 2,188 516 1,933 771
- -----------------------------------------------------------------
</TABLE>
66
<PAGE>
- --------------------------------------------------------------------------------
Transactions in Class A units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
Sales DISTRIBUTIONS REDEMPTIONS (DECREASE)
- -----------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 1,054 114 959 209
Diversified Growth 3,123 128 7,920 (4,669)
Equity Index 17,925 1,174 11,059 8,040
Focused Growth 2,560 10 1,605 965
International Growth 6,479 97 4,573 2,003
Small Company Index 1,491 451 1,736 206
- -----------------------------------------------------------------
</TABLE>
Transactions in Class C units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
Sales DISTRIBUTIONS REDEMPTIONS INCREASE
- --------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 548 11 69 490
Equity Index 3,499 70 1,685 1,884
Focused Growth 529 0 46 483
- --------------------------------------------------------
</TABLE>
Transactions in the Class C units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
Sales DISTRIBUTIONS REDEMPTIONS INCREASE
- ------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Equity Index 1,353 7 31 1,239
</TABLE>
- --------------------------------------------------------------------------------
Transactions in Class D units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
Sales DISTRIBUTIONS REDEMPTIONS INCREASE
- --------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 20 -- 1 19
Diversified
Growth 17 1 6 12
Equity Index 436 6 24 418
Focused Growth 13 1 7 7
International Growth 7 -- -- 7
Small Company Index 17 -- 1 16
</TABLE>
- --------------------------------------------------------------------------------
Transactions in Class D units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
Sales DISTRIBUTIONS REDEMPTIONS INCREASE
- ------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Diversified Growth 17 -- 3 14
Equity Index 58 1 1 58
Focused Growth 39 -- -- 39
Small Company
Index 3 -- -- 3
</TABLE>
- --------------------------------------------------------------------------------
67
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Equity Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Balanced, Diversified Growth,
Equity Index, Focused Growth, International Growth and Small Company Index
Portfolios, comprising the Equity Portfolios of The Benchmark Funds, as of
November 30, 1996, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended and financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Balanced, Diversified Growth, Equity Index, Focused Growth, International
Growth and Small Company Index Portfolio, comprising the Equity Portfolios of
The Benchmark Funds, at November 30, 1996, the results of their operations for
the year then ended and the changes in their net assets for each of the two
years in the period then ended and financial highlights for the periods
indicated therein, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
January 21, 1997
68
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management, expenses and other
information.
The
Benchmark
Funds
Equity
Portfolios
Annual Report
November 30, 1996
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
The following summarizes the highest six ratings used by Standard &
Poor's Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA-Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from AAA issues only in a small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for those in higher rated categories.
BB and B-Debt rated BB and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest and
principal payments. Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
To provide more detailed indications of credit quality, the ratings AA
and lower may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
1-A
<PAGE>
S&P may attach the rating "r" to highlight derivative, hybrid and
certain other obligations that S&P believes may experience high volatility or
high variability in expected returns due to non-credit risks.
The following summarizes the highest six ratings used by Moody's
Investors Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa-Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa-Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A-Bonds that are rated A possess many favorable investment attributes and are to
be considered upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds that are rated Baa are considered medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba and B-Bonds that possess one of these ratings provide questionable protection
of interest and principal. Ba indicates some speculative elements. B indicates
a general lack of characteristics of desirable investment.
The foregoing ratings for corporates and municipal long-term debt are
sometimes presented in parenthesis preceded with a "con" indicating the bonds
are rated conditionally. Such parenthetical
2-A
<PAGE>
rating denotes the probable credit stature upon completion of construction or
elimination of the basis of the condition. The notation (P) when applied to
forward delivery bonds indicates that the rating is provisional pending delivery
of the bonds. The rating may be revised prior to delivery if changes occur in
the legal documents or the underlying credit quality of the bond.
The following summarizes the highest six ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for corporate and municipal long term debt:
AAA-Debt rated AAA is of the highest credit quality. The risk factors are
considered to be negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA-Debt rated AA is of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
A-Bonds that are rated A have protection factors which are average but adequate.
However risk factors are more variable and greater in periods of economic
stress.
BBB-Bonds that are rated BBB have below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
BB and B-Bonds that are rated BB or B are below investment grade. Bonds rated
BB are deemed likely to meet obligations when due. Bonds rated B possess the
risk that the obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA
and lower may be modified by the addition of a plus or minus sign to show
relative standing within these major categories.
The following summarizes the highest six ratings used by Fitch
Investors Service, Inc. ("Fitch") for corporate and municipal bonds:
AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds related in the "AAA"
and "AA" categories are not significantly vulnerable to
3-A
<PAGE>
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have an adverse impact on these bonds, and therefore, impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB and B-Bonds considered to be speculative investments with respect to the
timely payment of principal and interest in accordance with the terms of the
obligation.
To provide more detailed indications of credit quality, the Fitch
ratings "AA" and lower may be modified by the addition of a plus (+) or minus (-
) sign to show relative standing within these major rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
The following summarizes the two highest ratings by S&P for short-term
municipal notes:
SP-1-Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a "plus"
(+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
The following summarizes the two highest ratings used by Moody's for
short-term municipal notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the best quality,
enjoying strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high quality with
margins of protection ample although not as large as in the preceding group.
4-A
<PAGE>
The two highest rating categories of D&P for short-term debt are D1
and D2. D&P employs three designations, D1+, D1 and D1-, within the highest
rating category. D1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D2 indicates good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description
of Bond Ratings" for tax-exempt notes and other short-term obligations. Fitch
uses the short-term ratings described below under "Description of Commercial
Paper Ratings" for new municipal notes.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted in A-1+. Capacity for
timely payment on commercial paper rated A-2 is satisfactory but the relative
degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers or related supporting institutions rated Prime-1 are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers or related supporting institutions rated Prime-2 are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-
term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest degree of assurance for timely
payment.
5-A
<PAGE>
F-1 securities possess very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2 securities possess good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety is
not as great as the F-1+ and F-1 categories.
D&P uses the short-term ratings described above under "Description of
Note Ratings" for commercial paper.
6-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. INTEREST RATE FUTURES CONTRACTS
Use of Interest Rate Futures Contracts. Bond prices are established
--------------------------------------
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within three business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Portfolio could use interest rate
futures contracts as a defense, or hedge, against anticipated interest rate
changes. As described below, this could include the use of futures contract
sales to protect against expected increases in interest rates and the use of
futures contract purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which
it hopes to achieve through the use of futures contracts by selling bonds with
long maturities and investing in bonds with short maturities when interest rates
are expected to increase, or conversely, selling short-term bonds and investing
in long-term bonds when interest rates are expected to decline. However,
because of the liquidity that is often available in the futures market, the
protection is more likely to be achieved, perhaps at a lower cost and without
changing the rate of interest being earned by a Portfolio, through using futures
contracts.
Interest rate futures contracts can also be used by a portfolio for
nonhedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate
----------------------------------------------
futures contract sale would create an obligation by a Portfolio, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in
1-B
<PAGE>
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before a settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by a Portfolio's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of a sale exceeds the price of the offsetting purchase, a Portfolio is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, a Portfolio pays the difference and
realizes a loss. Similarly, the closing out of a futures contract purchase is
effected by a Portfolio entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, a Portfolio realizes a gain,
and if the purchase price exceeds the offsetting sale price, a Portfolio
realizes a loss.
Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges -- principally, the Chicago Board of Trade,
the Chicago Mercantile Exchange and the New York Futures Exchange. A Portfolio
would deal only in standardized contracts on recognized exchanges. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. A Portfolio may trade in any interest rate futures
contracts for which there exists a public market, including, without limitation,
the foregoing instruments.
II. INDEX FUTURES CONTRACTS
GENERAL. A stock or bond index assigns relative values to the securities
included in the index and the index fluctuates with changes in the market values
of the securities included.
A Portfolio may sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio may do so either to hedge the value of its
portfolio as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a
Portfolio may purchase index futures contracts in anticipation of purchases of
securities. A long futures position
2-B
<PAGE>
may be terminated without a corresponding purchase of securities.
In addition, a Portfolio may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that a Portfolio expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. A
Portfolio may also sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to the
time of sale.
Index futures contracts may also be used by a Portfolio for non-hedging
(speculative) purposes to increase total return.
III. FUTURES CONTRACTS ON FOREIGN CURRENCIES (INTERNATIONAL EQUITY INDEX AND
INTERNATIONAL GROWTH PORTFOLIOS)
A futures contract on foreign currency creates a binding obligation on one
party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Portfolio for hedging
purposes in anticipation of fluctuations in exchange rates between the U.S.
dollars and other currencies arising from multinational transactions.
IV. MARGIN PAYMENTS
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Portfolio upon the purchase or sale of a futures contract.
Initially, the Portfolio will be required to deposit with the broker or in a
segregated account with the Custodian or a sub-custodian an amount of liquid
assets known as initial margin, based on the value of the contract. The nature
of initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular
Portfolio has purchased a futures
3-B
<PAGE>
contract and the price of the contract has risen in response to a rise in the
underlying instruments, that position will have increased in value and the
Portfolio will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Portfolio has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Portfolio would be required to make a variation margin payment to the
broker. At any time prior to expiration of the futures contract, the Portfolio's
adviser may elect to close the position by taking an opposite position, subject
to the availability of a secondary market, which will operate to terminate the
Portfolio's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Portfolio, and the Portfolio realizes a loss or gain.
V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by the
Portfolios. In connection with the use of futures for hedging purposes, the
risk arises because of the imperfect correlation between movements in the price
of the futures and movements in the price of the instruments which are the
subject of a hedge. The price of the future may move more than or less than the
price of the instruments being hedged. If the price of the futures moves less
than the price of the instruments which are the subject of hedge, the hedge will
not be fully effective but, if the price of the instruments being hedged has
moved in an unfavorable direction, the Portfolio would be in a better position
than if it had not hedged at all. If the price of the instruments being hedged
has moved in a favorable direction, this advantage will be partially offset by
the loss on the futures. If the price of the futures moves more than the price
of the hedged instruments, the Portfolio involved will experience either a loss
or gain on the futures which will not be completely offset by movements in the
price of the instruments which are the subject of the hedge. To compensate for
the imperfect correlation of movements in the price of instruments being hedged
and movements in the price of futures contracts, the Portfolio may buy or sell
futures contracts in a greater dollar amount than the dollar amount of
instruments being hedged if the volatility over a particular time period of the
prices of such instruments has been greater than the volatility over such time
period of the futures, or if otherwise deemed to be appropriate by Northern.
Conversely, the Portfolios may buy or sell fewer futures contracts if the
volatility over a particular time period of the prices of the instruments being
hedged is less than the volatility over such time period of the futures contract
being used, or if otherwise deemed to be appropriate by Northern. It is also
possible that, where a Portfolio had sold futures to
4-B
<PAGE>
hedge its portfolio against a decline in the market, the market may advance and
the value of instruments held in the Portfolio may decline. If this occurred,
the Portfolio would lose money on the futures and also experience a decline in
value in its portfolio securities.
When futures are purchased to hedge against a possible increase in the price
of securities before a Portfolio is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Portfolio then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Portfolio will realize a loss on the futures contract that is not offset by
a reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by Northern may still not result in a
successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of trade
which provides a secondary market for such futures. Although the Portfolios
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, the Portfolios would continue to be required to make daily cash
payments of variation margin. However, in the event futures
5-B
<PAGE>
contracts have beenused to hedge portfolio securities, such securities will
generally not be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if any, may partially
or completely offset losses on the futures contract. However, as described
above, there is no guarantee that the price of the securities will in fact
correlate with the price movements in the futures contract and thus provide an
offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Portfolios is also subject to Northern's
ability to predict correctly movements in the direction of the market. For
example, if a particular Portfolio has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Portfolio will lose part or all of the benefit to
the increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Portfolio has insufficient cash, it may have to sell securities to meet
daily variation margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Portfolios may have to sell securities at a time when they may be
disadvantageous to do so.
Futures purchased or sold by the International Growth and International
Equity Portfolios (and related options) may be traded in foreign securities.
Participation in foreign futures and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade. Neither the National Futures Association nor any domestic exchange
regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, or has the power to compel enforcement of
the rules of a foreign board of trade or any applicable foreign law. This is
true even if the exchange is formally linked to a domestic market so that a
position taken on the market may be liquidated by a transaction on another
market. Moreover, such laws or
6-B
<PAGE>
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers who
trade foreign futures of foreign options contracts may not be afforded certain
of the protective measures provided by the Commodity Exchange Act, the Commodity
Futures Trading Commission's ("CFTC") regulations and the rules of the National
Futures Association and any domestic exchange, including the right to use
reparations proceedings before the CFTC and arbitration proceedings provided by
the National Futures Association or any domestic futures exchange. In
particular, the investments of the International Growth Portfolio and
International Equity Index Portfolio in foreign futures or foreign options
transactions may not be provided the same protections in respect of transactions
on United States futures exchanges. In addition, the price of any foreign
futures or foreign options contract and, therefore the potential profit and loss
thereon may be affected by any variance in the foreign exchange rate between the
time an order is placed and the time it is liquidated, offset or exercised.
VI. OPTIONS ON FUTURES CONTRACTS
The Portfolios may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Portfolio will be required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin
deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in futures contracts (for example,
the existence of a liquid secondary market). See "Risks of Transactions in
Futures Contracts" above. In addition, the purchase or sale of an option also
entails the risk that changes in the value of the underlying futures contract
will not correspond to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures contract upon which
it is based, or upon the price of any underlying instruments, an option may or
may not be less risky than ownership of the futures contract or such
instruments. In general, the market prices of options
7-B
<PAGE>
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may, unlike
futures contracts where the risk of loss is potentially unlimited, frequently
involve less potential risk to the Portfolio because the maximum amount at risk
is the premium paid for the options (plus transaction costs). The writing of an
option on a futures contract involves risks similar to those risks relating to
the sale of futures contracts.
VII. OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
8-B
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
SHORT DURATION PORTFOLIO
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
This Statement of Additional Information (the "Additional Statement") dated
April 1, 1997 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the Short Duration, U.S. Government
Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond and International
Bond Portfolios (the "Portfolios") of The Benchmark Funds (the "Prospectus")
dated April 1, 1997. Copies of the Prospectus may be obtained without charge by
calling Goldman, Sachs & Co. ("Goldman Sachs") toll-free at 1-800-621-2550
(outside Illinois) or by writing to the address stated above. Capitalized terms
not otherwise defined have the same meaning as in the Prospectus.
-----------------------
INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION B-3
Investment Objectives and Policies B-3
Investment Restrictions Applicable to the
Short Duration Portfolio B-18
Investment Restrictions Applicable to the
U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond and
International Bond Portfolios B-21
ADDITIONAL TRUST INFORMATION B-24
Trustees and Officers B-24
Investment Adviser, Transfer
Agent and Custodian B-30
Administrator and Distributor B-39
Unitholder Servicing Plan B-41
Counsel and Auditors B-41
In-Kind Purchases B-43
PERFORMANCE INFORMATION B-44
TAXES B-52
General B-52
B-1
<PAGE>
Taxation of Certain Financial Instruments B-54
Foreign Investors B-56
Conclusion B-57
DESCRIPTION OF UNITS B-57
OTHER INFORMATION B-61
FINANCIAL STATEMENTS B-62
APPENDIX A (Description of Bond Ratings) 1-A
APPENDIX B (Futures Contracts) 1-B
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS ADDITIONAL STATEMENT OR IN THE PROSPECTUS
IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIOS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the investment objectives and policies of the Short
Duration, U.S. Government Securities, ShortIntermediate Bond, U.S. Treasury
Index, Bond and International Bond Portfolios of The Benchmark Funds (the
"Trust") as set forth in the Prospectus.
U.S. Government Obligations. Examples of other types of U.S. Government
- ---------------------------
obligations that may be acquired by the Portfolios include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, and the Maritime
Administration.
Supranational Bank Obligations. Each Portfolio (other than the U.S. Treasury
- ------------------------------
Index Portfolio) may invest in obligations of supranational banks. Supranational
banks are international banking institutions designed or supported by national
governments to promote economic reconstruction, development or trade between
nations (e.g., the World Bank). Obligations of supranational banks may be
supported by appropriated but unpaid commitments of their member countries and
there is no assurance that these commitments will be undertaken or met in the
future.
Stripped Securities. The Treasury Department has facilitated transfers of
- -------------------
ownership of zero coupon securities by accounting separately for the beneficial
ownership of particular interest coupon and principal payments on Treasury
securities through the Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Each Portfolio may purchase securities registered in the STRIPS
program. Under the STRIPS program, a Portfolio will be able to have its
beneficial ownership of zero coupon securities recorded directly in the
book-entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying U.S. Treasury securities.
In addition, each Portfolio (other than the U.S. Treasury Index Portfolio) may
acquire U.S. Government obligations and their unmatured interest coupons that
have been separated ("stripped") by their holder, typically a custodian bank or
investment brokerage firm. Having separated the interest coupons from the
B-3
<PAGE>
underlying principal of the U.S. Government obligations, the holder will resell
the stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the underwriters
of these certificates or other evidences of ownership of U.S. Treasury
securities have stated that, in their opinion, purchasers of the stripped
securities most likely will be deemed the beneficial holders of the underlying
U.S. Government obligations for Federal tax purposes. The Trust is not aware of
any binding legislative, judicial or administrative authority on this issue.
To the extent consistent with its investment objectives, each Portfolio may
purchase stripped mortgage-backed securities ("SMBS"). SMBS are usually
structured with two or more classes that receive different proportions of the
interest and principal distributions from a pool of mortgage-backed obligations.
A common type of SMBS will have one class receiving all of the interest, while
the other class receives all of the principal. However, in some instances, one
class will receive some of the interest and most of the principal while the
other class will receive most of the interest and the remainder of the
principal. If the underlying obligations experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on other
mortgage-backed obligations because their cash flow patterns are also volatile
and there is a risk that the initial investment will not be fully recouped. SMBS
issued by the U.S. Government (or a U.S. Government agency or instrumentality)
may be considered liquid under guidelines established by the Trust's Board of
Trustees if they can be disposed of promptly in the ordinary course of business
at a value reasonably close to that used in the calculation of the net asset
value per unit.
Asset-Backed Securities. The U.S. Government Securities Portfolio may purchase
- -----------------------
securities that are secured or backed by mortgages and issued by an agency of
the U.S. Government, and the Short Duration, Short-Intermediate Bond, Bond and
International Bond Portfolios may purchase asset-backed securities, which are
B-4
<PAGE>
securities backed by mortgages, installment contracts, credit card receivables
or other assets. Asset-backed securities represent interests in "pools" of
assets in which payments of both interest and principal on the securities are
made monthly, thus in effect "passing through" monthly payments made by the
individual borrowers on the assets that underlie the securities, net of any fees
paid to the issuer or guarantor of the securities. The average life of
asset-backed securities varies with the maturities of the underlying
instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely. Asset-backed securities acquired by a Portfolio may include
collateralized mortgage obligations ("CMOs") issued by private companies.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the U.S. Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United
States, created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of
B-5
<PAGE>
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
Foreign Securities. Unanticipated political or social developments may affect
- ------------------
the value of a Portfolio's investments in emerging market countries and the
availability to the Portfolio of additional investments in those countries. The
small size and inexperience of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries may
make the Portfolio's investments in such countries illiquid and more volatile
than investments in Japan or most Western European countries, and the Portfolio
may be required to establish special custodial or other arrangements before
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
such countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers.
Investors should understand that the expense ratio of the International Bond
Portfolio can be expected to be higher than those of funds investing in domestic
securities. The costs attributable to investing abroad are usually higher for
several reasons, such as the higher cost of investment research, higher cost of
custody of foreign securities, higher commissions paid on comparable
transactions on foreign markets and additional costs arising from delays in
settlements of transactions involving foreign securities.
B-6
<PAGE>
Foreign Currency Transactions. In order to protect against a possible loss on
- -----------------------------
investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Short-Intermediate Bond, Bond and International Bond
Portfolios are authorized to enter into forward currency exchange contracts.
These contracts involve an obligation to purchase or sell a specified currency
at a future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow a Portfolio to establish a rate of exchange for a future point
in time.
When entering into a contract for the purchase or sale of a security, a
Portfolio may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When Northern anticipates that a particular foreign currency may decline
substantially relative to the U.S. dollar or other leading currencies, in order
to reduce risk, a Portfolio may enter into a forward contract to sell, for a
fixed amount, the amount of foreign currency approximating the value of some or
all of the Portfolio's securities denominated in such foreign currency.
Similarly, when the obligations held by a Portfolio create a short position in a
foreign currency, the Portfolio may enter into a forward contract to buy, for a
fixed amount, an amount of foreign currency approximating the short position.
With respect to any forward foreign currency contract, it will not generally be
possible to match precisely the amount covered by that contract and the value of
the securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is entered
into and the date it matures. In addition, while forward contracts may offer
protection from losses resulting from declines or appreciation in the value of a
particular foreign currency, they also limit potential gains which might result
from changes in the value of such currency. A Portfolio may also incur costs in
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
In addition, with respect to the International Bond Portfolio, Northern may
purchase or sell forward foreign currency exchange contracts to seek to increase
total return.
A separate account consisting of liquid assets equal to the amount of a
Portfolio's assets that could be required to consummate forward contracts will
be established with the
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<PAGE>
Portfolios' custodian except to the extent the contracts are otherwise
"covered." For the purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market or fair value. If the
market or fair value of such securities declines, additional liquid securities
will be placed in the account daily so that the value of the account will equal
the amount of such commitments by the Portfolio. A forward contract to sell a
foreign currency is "covered" if a Portfolio owns the currency (or securities
denominated in the currency) underlying the contract, or holds a forward
contract (or call option) permitting the Portfolio to buy the same currency at a
price that is (i) no higher than the Portfolio's price to sell the currency or
(ii) greater than the Portfolio's price to sell the currency provided the
difference is maintained by the Portfolio in liquid assets in a segregated
account with its custodian. A forward contract to buy a foreign currency is
"covered" if a Portfolio holds a forward contract (or call option) permitting
the Portfolio to sell the same currency at a price that is (i) as high as or
higher than the Portfolio's price to buy the currency or (ii) lower than the
Portfolio's price to buy the currency provided the difference in maintained by
the Portfolio in liquid assets in a segregated account with its custodian.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Portfolios (other
- -------------------------------------------------------
than the U.S. Treasury Index Portfolio) may enter into interest rate swaps,
floors and caps for hedging purposes and not for speculation. Interest rate
swaps involve the exchange by a Portfolio with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. A Portfolio will typically use interest
rate swaps to preserve a return on a particular investment or portion of its
portfolio or to shorten the effective duration of its portfolio investments. The
purchase of an interest rate floor or cap entitles the purchaser to receive
payments of interest on a notional principal amount from the seller, to the
extent the specified index falls below (floor) or exceeds (cap) a predetermined
interest rate. The Portfolios will only enter into interest rate swaps or
interest rate floor or cap transactions on a net basis, i.e. the two payment
streams are netted out, with a Portfolio receiving or paying, as the case may
be, only the net amount of the two payments.
The International Bond Portfolio may enter into currency swaps, which involve
the exchange of the rights of the Portfolio and another party to make or receive
payments in specified currencies. Currency swaps usually involve the delivery of
the entire principal value of one designated currency in exchange for the other
designated currency.
Inasmuch as interest rate and currency swaps are entered into for good faith
hedging purposes, the Trust and Northern believe that such transactions do not
constitute senior securities as
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<PAGE>
defined in the 1940 Act and, accordingly, will not treat them as being subject
to the Portfolio's borrowing restrictions. The net amount of the excess, if
any, of a Portfolio's obligations over its entitlements with respect to interest
rate or currency swaps will be accrued on a daily basis and an amount of liquid
assets having an aggregate net asset value at least equal to such accrued excess
will be maintained in a segregated account by the Portfolio's custodian.
The Portfolios will not enter into an interest rate or currency swap or interest
rate floor or cap transaction unless the unsecured commercial paper, senior debt
or the claims-paying ability of the other party thereto is rated either A or A-1
or better by S&P, Duff or Fitch, or A or P-1 or better by Moody's. If there is a
default by the other party to such transaction, the Portfolios will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with markets for other similar instruments which
are traded in the interbank market.
Options. Each Portfolio may buy put options and call options and write covered
- -------
call and secured put options. Such options may relate to particular securities,
financial instruments, foreign currencies, foreign or domestic securities
indices or (in the case of the International Bond Portfolio) the yield
differential between two securities ("yield curve options") and may or may not
be listed on a domestic or foreign securities exchange (an "Exchange") or issued
by the Options Clearing Corporation. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options on
particular securities may be more volatile than the underlying instruments and,
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying instruments
themselves.
The Portfolios will write call options only if they are "covered." In the case
of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities or instruments held by it. For a call
option on an index, the option is covered if a Portfolio maintains with its
custodian a portfolio of securities substantially replicating the movement of
the index, or liquid assets equal to the contract value. A call option is also
covered if a Portfolio holds a call on the same security, currency or index as
the call written where the exercise price of the call held is (i) equal to or
less than the exercise price of the call written, or (ii) greater than the
exercise price of the call written provided the difference is maintained by the
Portfolio in liquid assets in a segregated account with its
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<PAGE>
custodian. The Portfolios will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Portfolios' custodian in
an amount not less than the exercise price of the option at all times during the
option period.
With respect to yield curve options, a call (or put) option is covered if the
International Bond Portfolio holds another call (or put) option on the spread
between the same two securities and maintains in a segregated account with its
custodian liquid assets sufficient to cover the Portfolio's net liability under
the two options. Therefore, the Portfolio's liability for such a covered option
is generally limited to the difference between the amount of the Portfolio's
liability under the option written by the Portfolio less the value of the option
held by the Portfolio. Yield curve options may also be covered in such other
manner as may be in accordance with the requirements of the counterparty with
which the option is traded and applicable laws and regulations. Yield curve
options are traded over-the-counter, and because they have been only recently
introduced, established trading markets for these securities have not yet
developed.
A Portfolio's obligation to sell a security or currency subject to a covered
call option written by it, or to purchase a security or currency subject to a
secured put option written by it, may be terminated prior to the expiration date
of the option by the Portfolio's execution of a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series
(i.e., same underlying security or currency, exercise price and expiration date)
as the option previously written. Such a purchase does not result in the
ownership of an option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to prevent an underlying
security or currency from being called, to permit the sale of the underlying
security or currency or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Portfolio will have incurred a loss in
the transaction. There is no assurance that a liquid secondary market will exist
for any particular option. An option writer, unable to effect a closing purchase
transaction, will not be able to sell the underlying security or currency (in
the case of a covered call option) or liquidate the segregated account (in the
case of a secured put option) until the option expires or the optioned security
or currency is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or appreciation in
the security or currency during such period.
When a Portfolio purchases an option, the premium paid by it is recorded as an
asset of the Portfolio. When the Portfolio writes
B-10
<PAGE>
an option, an amount equal to the net premium (the premium less the commission)
received by the Portfolio is included in the liability section of the
Portfolio's statement of assets and liabilities as a deferred credit. The amount
of this asset or deferred credit will be subsequently marked-to-market to
reflect the current value of the option purchased or written. The current value
of the traded option is the last sale price or, in the absence of a sale, the
current bid price. If an option purchased by the Portfolio expires unexercised
the Portfolio realizes a loss equal to the premium paid. If the Portfolio enters
into a closing sale transaction on an option purchased by it, the Portfolio will
realize a gain if the premium received by the Portfolio on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by the Portfolio expires on the stipulated
expiration date or if the Portfolio enters into a closing purchase transaction,
it will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option written by the
Portfolio is exercised, the proceeds of the sale will be increased by the net
premium originally received and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain options. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a liquid
secondary market for particular options, whether traded over-the- counter or on
an Exchange may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities or currencies;
unusual or unforeseen circumstances may interrupt normal operations on an
Exchange; the facilities of an Exchange or the Options Clearing Corporation may
not at all times be adequate to handle current trading value; or one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by the Options Clearing Corporation as a result of
trades on that Exchange would continue to be exercisable in accordance with
their terms.
Futures Contracts and Related Options. Each Portfolio may invest in futures
- -------------------------------------
contracts and interest rate futures contracts and may purchase and sell call and
put options on futures contracts for
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<PAGE>
hedging purposes, for speculative purposes (to seek to increase total return),
or for liquidity management purposes. For a detailed description of futures
contracts and related options, see Appendix B to this Additional Statement.
Securities Lending. Collateral for loans of portfolio securities made by a
- ------------------
Portfolio may consist of cash, securities issued or guaranteed by the U.S.
Government or its agencies or irrevocable bank letters of credit (or any
combination thereof). The borrower of securities will be required to maintain
the market value of the collateral at not less than the market value of the
loaned securities, and such value will be monitored on a daily basis. When a
Portfolio lends its securities, it continues to receive dividends and/or
interest on the securities loaned and may simultaneously earn interest on the
investment of the cash collateral which will be invested in readily marketable,
high quality, short-term obligations. Although voting rights, or rights to
consent, attendant to securities on loan pass to the borrower, such loans will
be called so that the securities may be voted by a Portfolio if a material event
affecting the investment is to occur.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions.
- -----------------------------------------------------------------------------
When a Portfolio purchases securities on a whenissued, delayed delivery or
forward commitment basis, the Portfolio's custodian (or subcustodian) will
maintain in a segregated account liquid assets having a value (determined daily)
at least equal to the amount of the Portfolio's purchase commitments. In the
case of a forward commitment to sell portfolio securities, the custodian or
subcustodian will hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio will maintain sufficient assets at all times to cover
its obligations under when-issued purchases, forward commitments and delayed
delivery transactions.
As described in the Prospectus, the Short Duration, U.S. Government Securities,
Short-Intermediate Bond, Bond and International Bond Portfolios may dispose of
or negotiate a whenissued or forward commitment after entering into it in
connection with pair-off transactions. A Portfolio will normally realize a
capital gain or loss in connection with these transactions. For purposes of
determining a Portfolio's average dollar-weighted maturity, the maturity of
when-issued or forward commitment securities will be calculated from the
commitment date.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time Deposits
- ------------------------------------------------------------------------------
and Bank Notes. Commercial paper represents short-term unsecured promissory
- --------------
notes issued in bearer form by banks or bank holding companies, corporations and
finance companies. Certificates of deposit are negotiable certificates issued
B-12
<PAGE>
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party. Bank notes rank junior to
deposit liabilities of banks and pari passu with other senior, unsecured
---- -----
obligations of the bank. Some states have "depositor preference" laws that give
depositors of their state chartered banks priority over holders of bank notes
and other general creditors. In addition, the U.S. Congress has adopted
legislation which creates a Federal "depositor preference" law providing the
claims of certain creditors of an insured depository institution (including its
depositors) with priority over the claims of that institution's unsecured
creditors (including holders of its notes) in the event of that institution's
insolvency or other resolution. Bank notes are classified as "other borrowings"
on a bank's balance sheet, while deposit notes and certificates of deposit are
classfied as deposits. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation to the extent of $100,000 per depositor.
A Portfolio may invest a portion of its assets in the obligations of foreign
banks and foreign branches of domestic banks. Such obligations include
Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs") which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs") which are U.S.
dollar-denominated bankers' acceptances issued by a U.S. branch of a foreign
bank and held in the United States.
Variable and Floating Rate Instruments. With respect to the variable and
- --------------------------------------
floating rate instruments that may be acquired by the Portfolios, Northern will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instruments are subject to demand
features, will continuously monitor their financial status and ability to meet
payment on demand. Where necessary to ensure that a variable or floating rate
instrument meets the Portfolios' quality requirements, the issuer's obligation
to pay the
B-13
<PAGE>
principal of the instrument will be backed by an unconditional bank letter or
line of credit, guarantee or commitment to lend.
Pair-Off Transactions. Subject to the requirements of the 1940 Act, each
- ---------------------
Portfolio (other than the U.S. Treasury Index Portfolio) may engage in pair-off
transactions involving securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. In a pair-off transaction Northern will
commit to purchase or sell a security. Then, prior to the settlement date,
Northern will "pair-off" the purchase or sale with a matching sale or purchase
of the same security that settles prior to, or on, the original settlement date.
Profits or losses on the pair-off transaction are settled by a Portfolio's
paying or receiving the difference between the purchase and sale prices from the
counterparty in the transaction (which will be a bank, broker-dealer or other
financial institution determined to be creditworthy by Northern).
A pair-off transaction that involves an initial sale by a Portfolio of a
security that it does not own (or does not have the right to obtain at no added
cost) will be considered a short sale of the security. Until the sale is
paired-off as described above, the Portfolio will maintain on a daily basis a
segregated account containing liquid assets at such a level that (a) the amount
deposited in the segregated account will equal the current value of the security
sold short and (b) the amount deposited in the segregated account will not be
less than the market value of the security at the time it was sold short.
Similarly, a segregated account will be maintained for a pair-off transaction
that involves an initial purchase by a Portfolio of a security on a forward
commitment or when-issued basis as described more fully in this Additional
Statement.
A Portfolio will not enter into a pair-off transaction that involves either a
short sale or a forward commitment or whenissued purchase if, after effect is
given to the sale or purchase,the total market value of all open pair-off
transactions would exceed 25% of the value of the Portfolio's net assets.
Although pair-off transactions represent a strategy that may be used by Northern
in attempting to earn additional income for the Portfolios resulting form
short-term price movements in the securities markets, the transactions may
result in losses instead. In addition, pair-off transactions may produce higher
than normal portfolio turnover which may result in increased transaction costs
to a Portfolio and gains from the sale of securities deemed to have been held
for less than three months. Such gains must not exceed 30% of a Portfolio's
gross income in a taxable year in order for the Portfolio to qualify as a
regulated investment company under the Internal Revenue code of 1986.
Investment Companies. To the extent required by the 1940 Act and the regulations
- --------------------
and orders of the SEC thereunder, each Portfolio
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<PAGE>
currently intends to limit its investments in securities issued by other
investment companies so that, as determined immediately after a purchase of such
securities is made, not more than 3% of the total outstanding stock of any one
investment company will be owned by a Portfolio, the Trust as a whole and their
affiliated persons (as defined in the 1940 Act). An investment company whose
securities are purchased by a Portfolio or the Trust is not obligated to redeem
such securities in an amount exceeding 1% of the investment company's total
outstanding securities during any period of less than 30 days. Therefore, such
securities that exceed this amount may be illiquid. Notwithstanding the
foregoing, a Portfolio may adhere to more restrictive limitations with respect
to its investments in securities issued by other investment companies if
required by the SEC or deemed to be in the best interests of the Trust and will
comply with any fundamental investment restriction that may otherwise be
applicable to such investments. To the extent required by the 1940 Act, each
Portfolio expects to vote the shares of other investment companies that are held
by it in the same proportion as the vote of all other holders of such
securities.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
- ---------------------
financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by Northern under guidelines approved by the Trust's Board of
Trustees. The repurchase price under the repurchase agreements will generally
equal the price paid by a Portfolio plus interest negotiated on the basis of
current short-term rates (which may be more or less than the rate on the
securities underlying the repurchase agreement). Securities subject to
repurchase agreements will be held by the Trust's custodian (or subcustodian),
in the Federal Reserve/Treasury book-entry system or by another authorized
securities depository. Repurchase agreements are considered to be loans by a
Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds for temporary or
- -----------------------------
emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Portfolio may decline below the repurchase price. The Portfolios will pay
interest on amounts obtained pursuant to a reverse repurchase agreement. While
reverse repurchase agreements are outstanding, a Portfolio will maintain in a
segregated account liquid assets in an amount at least equal to the market value
of the securities, plus accrued interest, subject to the agreement. Reverse
repurchase agreements are considered to be borrowings by a Portfolio under the
1940 Act.
Risks Related to Lower-Rated Securities. While any investment carries some risk,
- ---------------------------------------
certain risks associated with lower-rated securities are different than those
for investment-grade
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<PAGE>
securities. The risk of loss through default is greater because lower-rated
securities are usually unsecured and are often subordinate to an issuer's other
obligations. Additionally, the issuers of these securities frequently have high
debt levels and are thus more sensitive to difficult economic conditions,
individual corporate developments and rising interest rates. Consequently, the
market price of these securities may be quite volatile and may result in wider
fluctuations of a Portfolio's net asset value per unit.
There remains some uncertainty about the performance level of the market for
lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the market for lower-rated securities (resulting in a greater number of
bond defaults) and the value of lower-rated securities held in a portfolio of
investments.
The economy and interest rates can affect lower-rated securities differently
than other securities. For example, the prices of lower-rated securities are
more sensitive to adverse economic changes or individual corporate developments
than are the prices of higher-rated investments. In addition, during an economic
downturn or period in which interest rates are rising significantly, highly
leveraged issuers may experience financial difficulties, which, in turn, would
adversely affect their ability to service their principal and interest payment
obligations, meet projected business goals and obtain additional financing.
If an issuer of a security defaults, a Portfolio may incur additional expenses
to seek recovery. In addition, periods of economic uncertainty would likely
result in increased volatility for the market prices of lower-rated securities
as well as a Portfolio's net asset value. In general, both the prices and yields
of lower-rated securities will fluctuate.
In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of lower-rated securities held by
a Portfolio, especially in a thinly traded market. Illiquid or restricted
securities held by the Portfolio may involve special registration
responsibilities,
B-16
<PAGE>
liabilities and costs, and could involve other liquidity and valuation
difficulties.
The rating assigned by a rating agency evaluates the safety of a lower-rated
security's principal and interest payments, but does not address market value
risk. Because the ratings of the rating agencies may not always reflect current
conditions and events, in addition to using recognized rating agencies and other
sources, Northern performs its own analysis of the issuers whose lower- rated
securities the Portfolios hold. Because of this, the Portfolios' performance may
depend more on Northern's own credit analysis than in the case of mutual funds
investing in higherrated securities.
In selecting lower-rated securities, Northern considers factors such as those
relating to the creditworthiness of issuers, the ratings and performance of the
securities, the protections afforded the securities and the diversity of a
Portfolio's investment portfolio. Northern continuously monitors the issuers of
lower-rated securities held by a Portfolio for their ability to make required
principal and interest payments, as well as in an effort to control the
liquidity of the Portfolio so that it can meet redemption requests.
Dollar-Weighted Average Maturity (Short Duration Portfolio only). Because the
- ----------------------------------------------------------------
Short Duration Portfolio's duration takes into account the cash flows from the
securities held by the Portfolio, the Portfolio's duration will never be longer
than its dollar-weighted average maturity. As stated, for purposes of
calculating the Portfolio's dollar-weighted average maturity, the maturity of a
security will normally be the date when final payment is due, with these
exceptions: (a) variable and floating rate instruments without demand features
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate, (b) floating rate instruments which
incorporate a demand feature may be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand, (c)
variable rate instruments which incorporate a demand feature may be deemed to
have a maturity equal to the shorter of the period remaining until (i) the next
readjustment of the interest rate or (ii) the principal amount can be recovered
through demand, and (d) a repurchase agreement may be deemed to have a maturity
equal to the period remaining until the date on which the repurchase agreement
is to be repaid (whether at maturity or on demand). These exceptions do not
apply to certain variable and floating rate instruments, such as inverse
floating rate instruments. A fixed-rate mortgage-backed or other asset-backed
security will be deemed to have a maturity equal to the security's weighted
average life (i.e., the average time to receipt of expected cash flows on the
security).
B-17
<PAGE>
Yields and Ratings. The yields on certain obligations, including the instruments
- ------------------
in which the Portfolios may invest, are dependent on a variety of factors,
including general market conditions, conditions in the particular market for the
obligation, financial condition of the issuer, size of the offering, maturity of
the obligation and ratings of the issue. The ratings of S&P, Moody's, Duff,
Fitch and TBW represent their respective opinions as to the quality of the
obligations they undertake to rate. Ratings, however, are general and are not
absolute standards of quality. Consequently, obligations with the same rating,
maturity and interest rate may have different market prices.
Subject to the limitations stated in the Prospectus, if a Portfolio security
undergoes a rating revision, a Portfolio may continue to hold the security if
Northern determines that retention is warranted.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
- --------------------------------------
Portfolios is calculated by dividing the lesser of purchases or sales of
portfolio investments for the reporting period by the monthly average value of
the portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of units and by requirements which
enable the Portfolios to receive favorable tax treatment.
INVESTMENT RESTRICTIONS APPLICABLE TO THE SHORT DURATION
PORTFOLIO
The Short Duration Portfolio is subject to the fundamental investment
restrictions enumerated below which may be changed with respect to the Short
Duration Portfolio only by a vote of the holders of a majority of the Short
Duration Portfolio's outstanding units.
The Portfolio may not:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent
the Portfolio from investing directly or indirectly
B-18
<PAGE>
in portfolio instruments secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that the Portfolio
may, to the extent appropriate to its investment policies, purchase securities
of companies engaging in whole or in part in such activities, and enter into
futures contracts and related options.
(5) Invest in companies for the purpose of exercising
control or management.
(6) Act as underwriter of securities, except as the Portfolio may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions
in options on securities, financial instruments, currencies and indices of
securities; futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps,
floors, caps and related options; and pair-off transactions.
(8) Purchase the securities of any issuer if such purchase would cause
more than 10% of the voting securities of such issuer to be held by the
Portfolio, except that up to 25% of the value of its total assets may be
invested without regard to this 10% limitation.
(9) Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of the Portfolio's
total assets would be invested in such issuer, except that: (a) up to 25% of the
value of the total assets of the Portfolio may be invested in any securities
without regard to this 5% limitation; and (b) such 5% limitation shall not apply
to repurchase agreements collateralized by obligations of the U.S. Government,
its agencies or instrumentalities.
(10) Purchase securities if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of the Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no limitation
with respect to, and the Portfolio reserves freedom of action, when otherwise
consistent with its investment policies, to concentrate its investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase
B-19
<PAGE>
agreements and securities loans collateralized by such U.S. Government
obligations. For the purposes of this restriction, state and municipal
governments and their agencies and authorities are not deemed to be industries;
as to utility companies, the gas, electric, water and telephone businesses are
considered separate industries; personal credit finance companies and business
credit finance companies are deemed to be separate industries; and wholly-owned
finance companies are considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents.
(11) Borrow money (other than pursuant to reverse repurchase agreements)
except (a) as a temporary measure, and then only in amounts not exceeding 5% of
the value of the Portfolio's total assets or (b) from banks, provided that
immediately after any such borrowing all borrowings of the Portfolio do not
exceed one-third of the Portfolio's total assets. No purchases of securities
will be made if borrowings subject to this restriction exceed 5% of the value of
the Portfolio's assets. The exception in (a) and (b) to this restriction are not
for investment leverage purposes but are solely for extraordinary or emergency
purposes or to facilitate management of the Portfolio by enabling it to meet
redemption requests when the liquidation of portfolio instruments is deemed to
be disadvantageous or not possible. If due to market fluctuations or other
reasons the total assets of the Portfolio fall below 300% of its borrowings, the
Trust will promptly reduce the borrowings of the Portfolio in accordance with
the 1940 Act.
In applying Restriction No. 9 above, a security is considered to be issued by
the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by the Portfolio, does not exceed 10% of the value of the Portfolio's
total assets.
In addition, as matter of fundamental policy, the Portfolio may not enter into
reverse repurchase agreements exceeding in the aggregate one-third of the
Portfolio's total assets.
Except to the extent otherwise provided in Investment Restriction (10) for the
purpose of such restriction, in determining industry classification the Trust
intends to use the industry classification titles in the Standard Industrial
Classification Manual. Securities held in escrow or separate accounts in
connection with the Portfolio's investment practices described in this
Additional Statement and in the Prospectus are not deemed to be mortgaged,
pledged or hypothecated for purposes of the foregoing Investment Restrictions.
B-20
<PAGE>
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, the Portfolio.
INVESTMENT RESTRICTIONS APPLICABLE TO THE U.S. GOVERNMENT SECURITIES, SHORT-
INTERMEDIATE BOND, U.S. TREASURY INDEX, BOND AND INTERNATIONAL BOND PORTFOLIOS
The U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury Index,
Bond and International Bond Portfolios are subject to the fundamental investment
restrictions enumerated below which may be changed with respect to these
particular Portfolios only by a vote of the holders of a majority of a
Portfolio's outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent
a Portfolio from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or acquiring securities of real
estate investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that each Portfolio
may, to the extent appropriate to its investment policies, purchase securities
of companies engaging in whole or in part in such activities, enter into futures
contracts and related options, and enter into forward currency contracts in
accordance with its investment objective and policies.
(5) Invest in companies for the purpose of exercising
control.
(6) Act as underwriter of securities, except as a Portfolio may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
B-21
<PAGE>
(7) Write puts, calls or combinations thereof, except for transactions
in options on securities, financial instruments, currencies and indices of
securities (and in the case of the International Bond Portfolio, yield curve
options); futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps (and
in the case of the International Bond Portfolio, currency swaps); and pair-off
transactions (except in the case of the International Bond Portfolio).
(8) Purchase the securities of any issuer if such purchase would cause
more than 10% of the voting securities of such issuer to be held by the
Portfolio, except that up to 25% of the value of its total assets may be
invested without regard to this 10% limitation; provided that this restriction
does not apply to the International Bond Portfolio.
(9) Purchase securities (other than obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if such purchase would
cause more than 25% in the aggregate of the market value of the total assets of
a Portfolio to be invested in the securities of one or more issuers having their
principal business activities in the same industry. For the purposes of this
restriction, as to utility companies, the gas, electric, water and telephone
businesses are considered separate industries; personal credit finance companies
and business credit finance companies are deemed to be separate industries; and
wholly-owned finance companies are considered to be in the industries of their
parents if their activities are primarily related to financing the activities of
their parents.
(10) Borrow money (other than pursuant to reverse repurchase
agreements), except (a) as a temporary measure, and then only in amounts not
exceeding 5% of the value of the Portfolio's total assets or (b) from banks,
provided that immediately after any such borrowing all borrowings of the
Portfolio do not exceed one-third of the Portfolio's total assets. No purchases
of securities will be made if borrowings subject to this restriction exceed 5%
of the value of the Portfolio's assets. The exceptions in (a) and (b) to this
restriction are not for investment leverage purposes but are solely for
extraordinary or emergency purposes or to facilitate management of the
Portfolios by enabling the Trust to meet redemption requests when the
liquidation of Portfolio instruments is deemed to be disadvantageous or not
possible. If due to market fluctuations or other reasons the total assets of a
Portfolio fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
IN ADDITION, THE U.S. GOVERNMENT SECURITIES, SHORT-INTERMEDIATE BOND, U.S.
TREASURY INDEX AND BOND PORTFOLIOS MAY NOT:
B-22
<PAGE>
(11) Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of such Portfolio's
total assets would be invested in such issuer, except that: (a) up to 25% of the
value of the total assets of each Portfolio may be invested in any securities
without regard to this 5% limitation; and (b) with respect to each Portfolio,
such 5% limitation shall not apply to repurchase agreements collateralized by
obligations of the U.S. Government, its agencies or instrumentalities.
In applying Restriction No. 11 above, a security is considered to be issued by
the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by the Portfolio, does not exceed 10% of the value of the Portfolio's
total assets.
Except to the extent otherwise provided in Investment Restriction (9) for the
purpose of such restriction, in determining industry classification the Trust
intends to use the industry classification titles in the Standard Industrial
Classification Manual (except that the International Bond Portfolio will use the
Morgan Stanley Capital International industry classification titles). Securities
held in escrow or separate accounts in connection with a Portfolio's investment
practices described in this Additional Statement and in the Prospectus are not
deemed to be mortgaged, pledged or hypothecated for purposes of the foregoing
Investment Restrictions.
In addition, as a matter of fundamental policy, the International Bond Portfolio
will not issue senior securities except as stated in the Prospectus or this
Additional Statement.
As a non-fundamental investment restriction, the International Bond Portfolio
may not, at the end of any tax quarter, hold more than 10% of the outstanding
voting securities of any one issuer, except that up to 50% of the total value of
the assets of the Portfolio may be invested in any securities without regard to
this 10% limitation so long as no more than 25% of the total value of its assets
is invested in the securities of any one issuer (except the U.S. Government). As
a non-fundamental investment restriction that can be changed without unitholder
approval, the International Bond Portfolio may not, at the end of any tax
quarter, invest more than 5% of the total value of its assets in the securities
of any one issuer (except U.S. Government securities) except that up to 50% of
the total value of the Portfolio's assets may be invested in any securities
without regard to this 5% limitation so long as no more than 25% of the total
value of its assets is invested in the securities of any
B-23
<PAGE>
one issuer (except U.S. Government securities.
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is set forth
below.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
William H. Springer, 67 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications holding
Lake Forest, IL 60045 Trustee company, February 1987
to retirement in August
1992; Vice Chairman, Chief
Financial and Administrative
Officer of Ameritech prior to
1987; Director, Walgreen Co.
(a retail drug store
business); and Director of Baker,
Fentress & Co. (a closed-end,
non-diversified management
investment company from April
1992 to present.
Edward J. Condon, Jr., 56 Trustee Chairman of The Pardigm Group,
227 West Monroe Street Ltd. (a financial advisor)
Chicago, IL 60606. since July 1993; Vice Presi-
dent and Treasurer of Sears,
Roebuck and Co. (a retail
corporation) from February
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.;
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Sears Credit Corp.; and
Sears Overseas Finance N.V.
John W. English, 64 Trustee Private Investor; Vice Pres-
50-H New England Avenue ident and Chief Investment
P.O. Box 640 Officer of The Ford Foundation
Summit, NJ 07902-0640. (a charitable trust) from
1981 until 1993; Trustee: The
China Fund, Inc.; Paribas
Trust for the Institutions;
Retail Property Trust; Sierra
Trust; American Red Cross in
Greater New York; Mote Marine
Laboratory; and United Board
for Christian Higher
Education in Asia. Director:
University of Iowa
Foundation; Blanton-Peale
Institutes of Religion and
Health; Community Foundation
of Sarasota County; Duke
Management Company; and John
Ringling Centre Foundation.
James J. Gavin, Jr., 74 Trustee Vice Chairman from January
161 Thorntree Lane 1985 to August 1987 and Senior
Winnetka, Illinois 60093 Vice President-Finance and
Chief Financial Officer from
1975 to January 1985 of
BorgWarner Corporation (a
diversified manufacturing
company also engaged in
providing financial and
protective services);
Director of Service
Corporation International (a
funeral service/ cemetery
company), Stepan Corporation
(a producer of basic and
intermediate chemicals),
BorgWarner Industrial
Products, Inc. (a supplier of
advanced technology fluid
transfer and control
equipment, systems and
services).
</TABLE>
B-25
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Frederick T. Kelsey, 69 Trustee Consultant to Goldman Sachs
3133 Laughing Gull Court from December 1985 through
Johns Island, SC 29455 February 1988; Director of
Goldman Sachs Funds Group and
Vice President of Goldman
Sachs from May 1981 until his
retirement in November 1985;
President and Treasurer of
the Trust through August
1985; Trustee, various
management investment
companies affiliated with
Kemper Financial Companies.
Richard P. Strubel, 57 Trustee President and Chief Executive
70 West Madison St Officer, Tandem Partners,
Suite 1400 Inc. (a diversified
Chicago, IL 60602 manufacturer of fastening
systems and connectors)since
January 1984.
Paul Klug, 45 President Vice President of Goldman
One New York Plaza Sachs; Director of Proprietary
New York, NY 10004 Mutual Funds of GSAM since
February 1994; Chief
Operating Officer, Vista Capital
Management, Chase Manhattan Bank
from January 1990 to February
1994.
Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs; Co-Manager, Shareholder
Chicago, IL 60606 Services of GSAM Funds Group
since June 1992; Consultant
since 1989; Senior Vice
President of Fidelity Invest-
ments prior to 1989.
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL 60606 Services for GSAM Funds Group
since November 1989.
John W. Mosior, 58 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL 60606 Services for GSAM Funds Group
since November 1989.
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Scott M. Gilman, 37 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, Goldman Sachs Asset
New York, NY 10004 Management since April 1994;
Assistant Treasurer, Goldman
Sachs Funds Management, Inc.
since March 1993; Vice Pre-
sident, Goldman Sachs since
March 1990.
John Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer since July 1995; Director,
New York, NY 10004 Investors Bank and Trust,
November 1993 to July 1995;
Audit Manager of Arthur
Andersen LLP prior thereto.
Michael J. Richman, 36 Secretary Associate General Counsel,
85 Broad Street Goldman Sachs Asset Management
New York, NY 10004 since February 1994; Vice
President and Assistant
General Counsel of Goldman Sachs
since June 1992; Counsel
to the Funds Group, GSAM since
June 1992; Partner, Hale and
Dorr from September 1991
to June 1992.
Howard B. Surloff, 31 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 since November 1993 and May
1994, respectively; Counsel
to the Funds Group, Goldman
Sachs Asset Management since
November 1993; Formerly
Associate of Shereff
Friedman, Hoffman & Goodman,
LLP prior thereto.
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs from June 1993
New York, NY 10004 to present; Funds Compliance
Officer, Citibank Global Asset
Management from August 1991
to June 1993; Legal Assistant,
Brown & Wood prior thereto.
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Deborah A. Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs since
New York, NY 10004 January 1994; Formerly at
Cleary, Gottlieb, Steen & Ham-
ilton.
</TABLE>
Certain of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such Trustees and officers that all such transactions have been and
are expected to be in the ordinary course of business and the terms of such
transactions, including all loans and loan commitments by such persons, have
been and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers. Messrs. Springer, Kelsey, Strubel,
Klug, Mosior, Gilman, Richman, Surloff and Hartstein and Mmes. Farrell, Mucker
and Taylor hold similar positions with one or more investment companies that are
advised by Goldman Sachs. As a result of the responsibilities assumed by
Northern under its Advisory Agreement, Transfer Agency Agreement and Custodian
Agreement and Foreign Custody Agreement with the Trust and by Goldman Sachs
under its Administration Agreement and Distribution Agreement with the Trust,
the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment companies
of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser,
administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,250 and the Chairman of the Board
earns a quarterly retainer of $9,375. Each Trustee, including the Chairman of
the Board, earns an additional fee of $1,500 for each meeting attended, plus
reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of three
members including a Chairman of the Committee. Each member earns a fee of $1,500
for each meeting attended and the Chairman earns a quarterly retainer of $1,250.
The Trust's officers do not receive fees from the Trust for services in such
capacities, although Goldman Sachs, of which they are also officers, receives
fees from the Trust for administrative services.
B-28
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1996:
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Accrued as
Aggregate from Registrant Total Compensation
Compensation and Part of Fund Complex Paid to
Name of Trustee from Registrant Trust's Expenses Trustees
<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
William B. Jordan* $ 2,083 $0 $ 2,083
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $0 $40,500
</TABLE>
* Retired as of December 31, 1995
** Interest from deferred compensation
B-29
<PAGE>
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern is one of the nation's leading providers of trust and investment
management services. As of December 31, 1996, Northern had approximately $130.3
billion in assets under management for clients including public and private
retirement funds, endowments, foundations, trusts, corporations, other
investment companies and individuals. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives.
Subject to the general supervision of the Board of Trustees, Northern makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for each Portfolio. Northern's Advisory Agreement with the
Trust provides that in selecting brokers or dealers to place orders for
transactions Northern shall attempt to obtain best net price and execution. In
assessing the best overall terms available for any transaction, Northern is to
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In evaluating
the best overall terms available and in selecting the broker or dealer to
execute a particular transaction, Northern may consider the brokerage and
research services provided to the Portfolios and/or other accounts over which
Northern or an affiliate of Northern exercises investment discretion. These
brokerage and research services may include industry and company analyses,
portfolio services, quantitative data, market information systems and economic
and political consulting and analytical services. Transactions on U.S. stock
exchanges involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers.
B-30
<PAGE>
Transactions on foreign securities exchanges involve payment for brokerage
commissions which are generally fixed. Over-thecounter issues, including
corporate debt and government securities, are normally traded on a "net" basis
(i.e., without commission) through dealers, or otherwise involve transactions
directly with the issuer of an instrument. With respect to over-the-counter
transactions, Northern will normally deal directly with dealers who make a
market in the instruments involved except in those circumstances where more
favorable prices and execution are available elsewhere. The cost of foreign and
domestic securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolios will engage in this practice, however, only when Northern
believes such practice to be in the Portfolios' interests.
Northern's investment advisory duties for the Trust are carried out through its
Trust Department. On occasions when Northern 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 (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Agreement provides
that Northern, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for such Portfolio with those
to be sold or purchased for such other accounts in order to obtain the best net
price and execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
Northern in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Portfolio and other accounts involved. In some
instances, this procedure may adversely affect the size of the position
obtainable for a Portfolio or the amount of the securities that are able to be
sold for a Portfolio. To the extent that the execution and price available from
more than one broker or dealer are believed to be comparable, the Agreement
permits Northern, at its discretion but subject to applicable law, to select the
executing broker or dealer on the basis of Northern's opinion of the reliability
and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services to
others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
B-31
<PAGE>
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, with respect to units held
by Institutions, Northern has undertaken to perform some or all of the following
services: (1) establish and maintain an omnibus account in the name of each
Institution; (2) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption proceeds; (3) act as
the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of units in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions unitholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to units held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of units in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for Prospectuses and Additional Statements, and
assistance in the completion of new account applications) from investors and
respond to all requests for information regarding the Trust (such as current
price, recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions); (8) respond
to and seek to resolve all complaints of investors with respect to the Trust or
their accounts; (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors;
(10) furnish the Trust all pertinent Blue Sky information; (11) perform all
required tax withholding; (12) preserve records; and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more
sub-transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer Agency
Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.05%, .10% and .15%
B-32
<PAGE>
of the average daily net asset value of the Class A, B, C and D units,
respectively, in the Portfolios.
Under its Custodian Agreement (and in the case of the International Bond
Portfolio its Foreign Custody Agreement) with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's investments
held by Northern under the Agreement, and (6) maintains the accounting records
of the Trust. Northern may employ one or more subcustodians, provided that
Northern shall have no more responsibility or liability to the Trust on account
of any action or omission of any subcustodian so employed than such subcustodian
has to Northern and that the responsibility or liability of the subcustodian to
Northern shall conform to the resolution of the Trustees of the Trust
authorizing the appointment of the particular subcustodian (or, in the case of
foreign securities, to the terms of any agreement entered into between Northern
and such subcustodian to which such resolution relates). In addition, the
Trust's custodial arrangements provide, with respect to foreign securities, that
Northern shall not be: (i) responsible for the solvency of any subcustodian
appointed by it with reasonable care; (ii) responsible for any act, omission,
default or for the solvency of any eligible foreign securities depository; or
(iii) liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the subcustodian has otherwise exercised reasonable
care. Northern may also appoint agents to carry out such of the provisions of
the Custodian Agreement and the Foreign Custody Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under either Agreement. Northern has
entered into agreements with financial institutions and depositories located in
foreign countries with respect to the custody of the Portfolios' foreign
securities.
As compensation for the services rendered to the Trust by Northern as custodian
to the Short Duration, U.S. Government Securities, Short-Intermediate Bond, U.S.
Treasury Index and Bond Portfolios, and the assumption by Northern of certain
related expenses, Northern is entitled to payment from the Trust as follows: (i)
$18,000 annually for each Portfolio, plus (ii) 1/100th of 1% annually of each
Portfolio's average daily net assets to the extent they exceed $100 million,
plus (iii) a fixed dollar fee for each trade in portfolio securities, plus (iv)
a fixed dollar fee for each time that Northern as Custodian receives or
transmits funds via wire, plus (v) reimbursement of
B-33
<PAGE>
expenses incurred by Northern as custodian for telephone, postage, courier fees,
office supplies and duplicating. The fees referred to in clauses (iii) and (iv)
are subject to annual upward adjustments based on increases in the Consumer
Price Index for All Urban Consumers, provided that Northern may permanently or
temporarily waive all or any portion of any upward adjustment.
As compensation for the services rendered to the Trust under the Foreign Custody
Agreement with respect to the International Bond Portfolio, and the assumption
by Northern of certain related expenses, Northern is entitled to payment from
the Trust as follows: (i) $35,000 annually for the International Bond Portfolio,
plus (ii) 9/100th of 1% annually of the Portfolio's average daily net assets,
plus (iii) reimbursement for fees incurred by Northern as foreign Custodian for
telephone, postage, courier fees, office supplies and duplicating.
Unless sooner terminated, the Advisory Agreement, Custodian Agreement (or in the
case of the International Bond Portfolio the Foreign Custody Agreement) and
Transfer Agency Agreement between Northern and the Trust will continue in effect
with respect to a particular Portfolio until April 30, 1998 and thereafter for
successive 12-month periods, provided that the continuance is approved at least
annually (1) by the vote of a majority of the Trustees who are not parties to
the agreement or "interested persons" (as such term is defined in the 1940 Act)
of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval and (2) by the Trustees or by the vote of a majority of
the outstanding units of such Portfolio (as defined below under "Other
Information"). Each agreement is terminable at any time without penalty by the
Trust (by specified Trustee or unitholder action) on 60 days' written notice to
Northern and by Northern on 60 days' written notice to the Trust. For the fiscal
periods ended November 30 as indicated, the amount of the Advisory Fee incurred
by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 72,840 $108,537 $230,429
U.S. Government Securities
Portfolio (2) 219,457 77,685 67,880
Short-Intermediate Bond
Portfolio (3) 421,548 305,155 260,009
U.S. Treasury Index Portfolio (3) 26,172 49,400 83,790
Bond Portfolio (3) 830,217 663,400 608,504
International Bond Portfolio (4) 224,098 224,564 $122,985
</TABLE>
- --------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
B-34
<PAGE>
(4) Commenced investment operations on March 28, 1994.
For the same fiscal periods ended November 30 as indicated. Northern waived
additional advisory fees as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 121,294 $180,999 $384,049
U.S. Government Securities
Portfolio (2) 307,297 108,759 95,031
Short-Intermediate Bond
Portfolio (3) 589,702 427,217 364,019
U.S. Treasury Index Portfolio (3) 43,719 82,333 139,653
Bond Portfolio (3) 1,162,601 928,746 851,339
International Bond Portfolio (4) 63,958 64,150 34,908
</TABLE>
- --------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of the
Transfer Agency Fee incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 0 $ 1,135 $ 1,000
U.S. Government Securities
Portfolio (2) 12,058 3,163 2,980
Short-Intermediate Bond
Portfolio (3) 16,929 12,216 10,000
U.S. Treasury Index Portfolio (3) 2,414 3,366 6,173
Bond Portfolio (3) 39,420 28,014 24,006
International Bond Portfolio (4) 3,220 3,209 2,000
</TABLE>
- ---------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of the
Custodian Fee (and, in the case of the International Bond Portfolio, the Foreign
Custodian Fee) incurred by each Portfolio was as follows:
B-35
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Short Duration Portfolio (1) $31,619 48,371 $47,000
U.S. Government Securities
Portfolio (2) 19,709 23,744 24,000
Short-Intermediate Bond
Portfolio (3) 28,060 24,834 22,343
U.S. Treasury Index Portfolio (3) 20,242 22,734 23,070
Bond Portfolio (3) 46,249 35,344 36,609
International Bond Portfolio (4) 67,555 46,838 25,000
</TABLE>
- --------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
Banking laws and regulations currently prohibit a bank holding 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 continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern 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 noted, however,
that future changes in either Federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates, as
well as future judicial or administrative decisions or interpretations of
current and future statutes and regulations, could prevent Northern from
continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Northern 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. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such
B-36
<PAGE>
restrictions might be relaxed or the terms upon which Northern might offer to
provide services for consideration by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
In the Advisory Agreement, Northern agrees that the name "The Benchmark" may be
used in connection with the Trust's business on a royalty-free basis. Northern
has reserved to itself the right to grant the non-exclusive right to use the
name "The Benchmark" to any other person. The Advisory Agreement provides that
at such time as the Agreement is no longer in effect, the Trust will cease using
the name "The Benchmark." (This undertaking by the Trust may be subject to
certain legal limitations.)
PORTFOLIO TRANSACTIONS.
To the extent that a Portfolio effects brokerage transactions with Goldman Sachs
or any broker-dealer affiliated directly or indirectly with Northern, such
transactions, including the frequency thereof, the receipt of any commissions
payable in connection therewith, and the selection of the affiliated broker-
dealer effecting such transactions, will be fair and reasonable to the
unitholders of the Portfolio. For the past three fiscal years, none of the
Portfolios paid brokerage commissions.
During the fiscal year ended November 30, 1996, the Short Duration Portfolio
acquired and sold securities of Bear Stearns & Co., Donaldson, Lufkin & Jenrette
Securities, Inc. and Swiss Bank, each a regular broker/dealer. At November 30,
1996, the Short Duration Portfolio owned the following amounts of securities of
its regular broker/dealers, as defined in Rule 10b- 1 under the 1940 Act, or
their parents: Bear Stearns & Co., with an approximate aggregate value of
$10,000,000, Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate
aggregate value of $3,000 and Swiss Bank, with an approximate aggregate value
of $1,000,000.
During the fiscal year ended November 30, 1996, the Short-Intermediate Bond
Portfolio acquired and sold securities of Salomon Brothers, Inc. and Donaldson,
Lufkin & Jenrette Securities, Inc., each a regular broker/dealer. At November
30, 1996, the Short-Intermediate Bond Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940 Act, or their parents: Salomon Brothers, Inc., with an approximate
aggregate value of $4,982,000 and Donaldson, Lufkin & Jenrette Securities, Inc.,
with an approximate aggregate market value of $8,826,000.
B-37
<PAGE>
During the fiscal year ended November 30, 1996, the Bond Portfolio acquired and
sold securities of Salomon Brothers, Inc. and Donaldson, Lufkin & Jenrette
Securities, Inc., each a regular broker/dealer. At November 30, 1996, the Bond
Portfolio owned the following amounts of securities of its regular
broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or their parents:
Salomon Brothers, Inc., with an approximate aggregate market value of $9,515,000
and Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate aggregate
market value of $7,450,000.
B-38
<PAGE>
ADMINISTRATOR AND DISTRIBUTOR
Under its Administration Agreement with the Trust, Goldman Sachs, subject to the
general supervision of the Trust's Board of Trustees, acts as the Trust's
Administrator. In this capacity, Goldman Sachs (1) provides supervision of
certain aspects of the Trust's non-investment advisory operations (the parties
giving recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to unitholders,
periodic updating of the Prospectus issued by the Trust, and reports filed with
the SEC and other regulatory authorities (including qualification under state
securities or Blue Sky laws of the Trust's units), and (4) provides the Trust,
to the extent not provided pursuant to such agreements, with adequate office
space and equipment and certain related services in Chicago.
For the fiscal periods ended November 30 as indicated, Goldman Sachs received
fees under the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $121,399 $180,895 $328,204
U.S. Government Securities
Portfolio (2) 87,782 31,074 27,152
Short-Intermediate Bond
Portfolio (3) 168,616 122,062 104,003
U.S. Treasury Index Portfolio (3) 17,448 32,933 55,859
Bond Portfolio (3) 332,084 265,356 243,234
International Bond Portfolio (4) 32,014 32,075 17,569
</TABLE>
- --------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, Goldman Sachs has
voluntarily agreed to waive a portion of its Administration Fee for each
Portfolio other than the Short Duration Portfolio resulting in an effective fee
of .10% of the average daily net assets for each Portfolio. The effect of these
waivers by Goldman Sachs was to reduce Administration Fees by the following
amounts:
B-39
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $131,975 $ 46,611 $ 40,727
Short-Intermediate Bond
Portfolio (2) 185,161 161,031 162,000
U.S. Treasury Index Portfolio (2) 26,353 49,400 83,790
Bond Portfolio (2) 243,306 232,678 221,000
International Bond Portfolio (3) 48,221 48,112 26,180
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs has agreed that, if its administration fees (less expense reimbursements
paid by Goldman Sachs to the Trust and less certain marketing expenses paid by
Goldman Sachs) exceed a specified amount ($1 million for the Trust's first
twelve investment portfolios plus $50,000 for each additional portfolio) during
the current fiscal year, Goldman Sachs will waive a portion of its
administration fees during the following fiscal year. This undertaking may be
terminated by Goldman Sachs at any time without the consent of the Trust or the
unitholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
Goldman Sachs has voluntarily agreed to reimburse the Portfolios for certain
expenses in the event that such expenses, as defined, exceed on an annualized
basis .25% of the International Bond Portfolio's average daily net assets and
.10% of each other Portfolio's average daily net assets. This undertaking is
contractual with respect to the Short Duration Portfolio, but voluntary with
respect to the other Portfolios. The effect of these reimbursements by Goldman
Sachs for the fiscal periods ended November 30 as indicated, were to reduce the
expenses of each Portfolio by:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $152,596 $213,702 $422,251
U.S. Government Securities
Portfolio (2) 68,799 72,798 67,523
Short-Intermediate Bond
Portfolio (3) 97,056 87,069 82,935
U.S. Treasury Index Portfolio (3) 67,218 76,730 72,034
Bond Portfolio (3) 142,673 112,995 156,721
International Bond Portfolio (4) 87,159 52,493 30,840
</TABLE>
- --------
B-40
<PAGE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
Unless sooner terminated the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 1998, and thereafter for
successive 12-month periods, provided that the agreement is approved annually
(1) by the vote of a majority of the Trustees who are not parties to the
agreement or "interested persons" (as such term is defined by the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval, and (2) by the Trustees or by the vote of a majority of the
outstanding units of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
penalty by the Trust (upon specified Trustee or unitholder action) on 60 days'
written notice to Goldman Sachs and by Goldman Sachs on 60 days' written notice
to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman Sachs,
as agent, sells units of each Portfolio on a continuous basis. Goldman Sachs
pays the cost of printing and distributing prospectuses to persons who are not
unitholders of the Trust (excluding preparation and typesetting expenses) and of
certain other distribution efforts. No compensation is payable by the Trust to
Goldman Sachs for such distribution services.
The Administration Agreement and the Distribution Agreement provide that Goldman
Sachs may render similar services to others so long as its services under such
Agreements are not impaired thereby. The Administration Agreement provides that
the Trust will indemnify Goldman Sachs against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Administration Agreement and Distribution Agreement) or, in lieu thereof,
contribute to resulting losses.
UNITHOLDER SERVICING PLAN
As stated in the Portfolios' Prospectus, Institutions may enter into Servicing
Agreements with the Trust under which they provide (or arrange to have provided)
support services to their Customers or other investors who beneficially own such
units in consideration of the Portfolios' payment of not more than .10%, .15%
and .25% (on an annualized basis) of the average daily net asset value of the
Class B, C and D units, respectively, of the U.S. Government Securities,
Short-Intermediate Bond, U.S. Treasury Index, Bond and International Bond
Portfolios beneficially owned by such Customers or investors.
B-41
<PAGE>
For the fiscal periods ended November 30 as indicated, the aggregate amount of
the Unitholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- -----
<S> <C> <C> <C>
U.S. Government Securities Portfolio
Class B N/A N/A N/A
Class C (6) $5,040.82 N/A N/A
Class D (1) 451.87 $ 97.59 $3.47
Short-Intermediate Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (2) 126.73 16.96 0.30
U.S. Treasury Index Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (3) 1,198.29 129.80 0.03
Bond Portfolio
Class B N/A N/A N/A
Class C(4) 6,685.99 2,292.16 N/A
Class D (2) 396.78 180.56 3.70
International Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (5) 29.96 0.48 N/A
</TABLE>
(1) Class D Units were issued on September 15, 1994.
(2) Class D Units were issued on September 14, 1994.
(3) Class D Units were issued on November 16, 1994.
(4) Class C Units were issued on July 3, 1995.
(5) Class D Units were issued on November 20, 1995.
(6) Class C Units were issued on December 29, 1995.
Services provided by or arranged to be provided by Institutions under their
Servicing Agreements may include: (1) establishing and maintaining separate
account records of Customers or other investors; (2) providing Customers or
other investors with a service that invests their assets in units of certain
classes pursuant to specific or pre-authorized instructions, and assistance with
new account applications; (3) aggregating and processing purchase and redemption
requests for units of certain classes from Customers or other investors, and
placing purchase and redemption orders with the Transfer Agent; (4) issuing,
confirmations to Customers or other investors in accordance with applicable law;
(5) arranging for the timely transmission of funds representing the net purchase
price or redemption proceeds; (6) processing dividend payments on behalf of
Customers or other investors; (7) providing information periodically to
Customers or other investors showing their positions in units; (8) responding to
Customer or other investor inquiries (including requests for prospectuses), and
complaints relating to the services performed
B-42
<PAGE>
by the Institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to units of certain classes beneficially owned by Customers or other investors;
(11) if required by law, forwarding unitholder communications from the Trust
(such as proxy statements and proxies, unitholder reports, annual and semi-
annual financial statements and dividend, distribution and tax notices) to
Customers and other investors; (12) providing such office space, facilities and
personnel as may be required to perform its services under the Servicing
Agreements; (13) maintaining appropriate management reporting and statistical
information; (14) paying expenses related to the preparation of educational and
other explanatory materials in connection with the development of investor
services; (15) developing and monitoring investment programs; and (16) providing
such other similar services as the Trust may reasonably request to the extent
the Institutions are permitted to do so under applicable statutes, rules and
regulations.
The Trust's agreements with Institutions are governed by a Plan (called the
"Unitholder Servicing Plan") which has been adopted by the Board of Trustees.
Pursuant to the Unitholder Servicing Plan, the Board of Trustees will review, at
least quarterly, a written report of the amounts expended under the Trust's
agreements with Institutions and the purposes for which the expenditures were
made. In addition, the arrangements with Institutions must be approved annually
by a majority of the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust, as defined in the 1940 Act, and have
no direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Institutions based on
information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their unitholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their units in an
efficient manner.
COUNSEL AND AUDITORS
Drinker Biddle & Reath, with offices at 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago, Illinois
60606-6301, have been selected as auditors of the Trust. In addition to audit
services, Ernst & Young LLP
B-43
<PAGE>
reviews the Trust's Federal and state tax returns, and provides consultation and
assistance on accounting, internal control and related matters.
IN-KIND PURCHASES
Payment for units of a Portfolio may, in the discretion of Northern, be made in
the form of securities that are permissible investments for the Portfolio as
described in the Prospectus. For further information about this form of payment,
contact Northern. In connection with an in-kind securities payment, a Portfolio
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Portfolio and that
the Portfolio receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Portfolio; and that adequate information be
provided concerning the basis and other tax matters relating to the securities.
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a class of
units computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to the
ending redeemable value of such investment according to the following formula:
ERV
T = (---) to the first power divided by n - 1
P
Where: T = average annual total return;
ERV = ending redeemable value at the end of the
applicable period (or fractional portion
thereof) of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10
year (or other) period;
P = hypothetical initial payment of $1,000; and
n = period covered by the computation,
expressed in years.
Each Portfolio that advertises an "aggregate total return" for a class of units
computes such return by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value
B-44
<PAGE>
of such investment. The formula for calculating aggregate total return is as
follows:
ERV
T = [(---)] - 1
P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per unit
existing on the reinvestment date and (2) all recurring fees charged to all
unitholder accounts are included. The ending redeemable value (variable "ERV" in
the formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
The average annual total returns and aggregate total returns shown below for
the Short-Intermediate Bond, U.S. Treasury Index and Bond Portfolios include,
for periods prior to the commencement of the Portfolios' operations, the
performance of a predecessor collective fund adjusted to reflect the higher
estimated fees and expenses applicable to such Portfolios' Class A Units at the
time of their inception. Although all such predecessor collective funds were
managed by Northern for the periods stated in a manner and pursuant to
investment objectives that were equivalent in all material respects to the
management and investment objectives of the corresponding Portfolios, such
predecessor collective funds were not registered under the 1940 Act and were not
subject to certain investment restrictions imposed by the 1940 Act. If they had
been registered under the 1940 Act, performance might have been adversely
affected. The average annual total returns and aggregate total returns shown for
the Portfolios for their Class C and/or Class D Units also include, for the
periods prior to the inception of such classes, the performance of the
Portfolios' Class A Units. Because the fees and expenses of Class C and Class
D Units are, respectively, 0.24% and 0.39% higher than those of Class A Units,
actual performance for periods prior to the inception of Class C and Class D
Units would have been lower if such higher fees and expenses had been taken into
account.
Following commencement of operations of the Portfolios, Goldman Sachs reimbursed
expenses to the Portfolios and voluntarily agreed to reduce a portion of its
administration fee for each Portfolio pursuant to the undertaking described
above under "Additional Trust Information - Administrator and Disributor" and "-
Investment Adviser, Transfer Agent and Custodian," and Northern waived a portion
of its investment advisory fees with respect to the Portfolios. The average
annual total returns and aggregate total returns of each Portfolio with respect
to Class A, Class C and Class D Units, as applicable, are shown below with and
without such fee waivers and expense reimbursements.
B-45
<PAGE>
FOR PERIODS ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ Inception
--------- ---------
BOND/1/
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
with fee waivers and
expense reimbursements 5.57% 8.93% 9.08% - 5.57% 53.38% 138.39% - -
w/o fee waivers and
expense reimbursements 5.07 8.39 8.55 - 5.07 49.60 127.04 - -
CLASS C
with fee waivers and
expense reimbursements 5.33 8.86 9.04 - 5.33 52.89 137.64 - -
w/o fee waivers and
expense reimbursements 4.83 8.32 8.51 - 4.83 49.12 126.30 - -
CLASS D
with fee waivers and
expense reimbursements 5.17 8.75 8.98 - 5.17 52.04 136.30 - -
w/o fee waivers and
expense reimbursements 4.67 8.21 8.45 - 4.67 48.33 125.12 - -
SHORT-INTERMEDIATE BOND2
CLASS A
with fee waivers and
expense reimbursements 5.68 6.41 7.11 - 5.68 36.41 98.79 - -
w/o fee waivers and
expense reimbursements 5.13 5.80 6.52 - 5.13 32.59 88.02 - -
CLASS D
with fee waivers and
expense reimbursements 5.22 6.20 7.01 - 5.22 35.21 97.03 - -
w/o fee waivers and
expense reimbursements 4.67 5.60 6.41 - 4.67 31.32 86.21 - -
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ Inception
--------- ---------
Inception
- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY INDEX/3/
CLASS A
with fee waivers and
expense reimbursements 5.10% 7.56% - 8.06% 5.10% 43.97% - 115.87%
w/o fee waivers and
expense reimbursements 4.29 6.89 - 7.39 4.29 39.53 - 102.97
CLASS D
with fee waivers and
expense reimbursements 4.72 7.39 - 7.98 4.72 42.84 - 114.17
w/o fee waivers and
expense reimbursements 3.91 6.72 - 7.30 3.91 38.43 - 101.26
SHORT DURATION /4/
with fee waivers and
expense reimbursements 5.45 - - 4.84 5.45 - - 18.00
w/o fee waivers and
expense reimbursements 4.77 - - 4.30 4.77 - - 15.89
U.S. GOVERNMENT SECURITIES/5/
CLASS A
with fee waivers and
expense reimbursements 5.15 - - 5.04 5.15 - - 19.73
w/o fee waivers and
expense reimbursements 4.54 - - 4.31 4.54 - - 16.71
CLASS C
with fee waivers and
expense reimbursements 4.93 - - 4.98 4.91 - - 19.46
w/o fee waivers and
expense reimbursements 4.29 - - 4.26 4.29 - - 16.51
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------ Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D
with fee waivers and
expense reimbursements 4.77% - - 4.77% 4.77% - - 18.58%
w/o fee waivers and
expense reimbursements 4.17 - - 4.04 4.17 - - 15.60
INTERNATIONAL BOND /6/
CLASS A
with fee waivers and
expense reimbursements 9.47 - - 11.72 9.47 - - 34.61
w/o fee waivers and
expense reimbursements 8.80 - - 11.10 8.80 - - 32.63
CLASS D
with fee waivers and
expense reimbursements 9.04 - - 11.55 9.04 - - 34.09
w/o fee waivers and
expense reimbursements 8.37 - - 10.94 8.37 - - 32.10
</TABLE>
- ------------
1. For Class A, C and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund.
For Class C and D Units, performance data from January 11, 1993 to July
3, 1995 (commencement of Class C Units) and September 14, 1994
(commencement of Class D Units), respectively, is that of Class A Units.
Because the fees and expenses of Class C and Class D Units are .24% and
.39%, respectively, higher than those of Class A Units, actual
performance would have been lower had such fees and expenses been taken
into account. The predecessor collective fund has been managed in a
manner and pursuant to investment objectives equivalent in all material
respects to the management and investment objective of the Portfolio for
the periods shown. The performance data of the predecessor collective
fund is adjusted to reflect the higher fees and expenses applicable to
Class A Units at the time of their inception.
2. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund.
For Class D Units, performance data from January 11, 1993 to September
14, 1994 (commencement of Class D Units) is that of Class A Units.
Because the fees and expenses of Class D Units are .39% higher than
those of Class A Units, actual performance would have
B-48
<PAGE>
been lower had such higher fees and expenses been taken into account.
The predecessor collective fund has been managed in a manner and
pursuant to investment objectives equivalent in all material respects to
the management and investment objective of the Portfolio for the periods
shown. The performance data of the predecessor collective fund is
adjusted to reflect the higher fees and expenses applicable to Class A
Units at the time of their inception.
3. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund.
For Class D Units, performance data from January 11, 1993 to November
16, 1994 (commencement of Class D Units) is that of Class A Units.
Because the fees and expenses of Class D Units are .39% higher than
those of Class A Units, actual performance would have been lower had
such higher fees and expenses been taken into account. The predecessor
collective fund is shown from January 1, 1987, the date from which the
predecessor fund has been managed in a manner and pursuant to investment
objectives equivalent in all material respects to the management and
investment objective of the Portfolio for the periods shown. The
performance data of the predecessor collective fund is adjusted to
reflect the higher fees and expenses applicable to Class A Units at the
time of their inception.
4. Performance data for the Units is shown from June 2, 1993 (commencement
of the Portfolio).
5. For Class C and D Units, performance data prior to December 29, 1995
(commencement of Class C Units), and September 15, 1994 (commencement of
Class D Units) respectively, is that of Class A Units. Class A Units
commenced operations April 5, 1993. Because fees and expenses of Class C
and D Units are .24% and .39%, respectively, higher than those of Class
A Units, actual performance would have been lower had such higher fees
and expenses been taken into account.
6. For Class D Units, performance data prior to November 20, 1995
(commencement of Class D Units) is that of Class A Units. Class A Units
commenced operations on March 28, 1994. Because the fees and expenses of
Class D Units are .39% higher than those of Class A Units, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-49
<PAGE>
The Portfolios' 30-day (or one month) standard yield described in the Prospectus
is calculated for each class of the Portfolios in accordance with the method
prescribed by the SEC for mutual funds:
a-b
Yield = 2[(--- + 1) to the sixth power - 1]
cd
Where: a = dividends and interest earned by a
Portfolio during the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of units outstanding
during the period entitled to receive
dividends; and
d = net asset value per unit on the last day
of the period.
For the 30 day period ended November 30, 1996, the annualized yields for the
Class A, Class B, Class C and Class D units of the Portfolios were as follows:
<TABLE>
<CAPTION>
30-Day Yield
------------
<S> <C>
Short Duration Portfolio 5.21%
U.S. Government Securities
Portfolio
Class A 5.56
Class B N/A
Class C 5.32
Class D 5.17
Short-Intermediate Bond
Portfolio
Class A 6.08
Class B N/A
Class C N/A
Class D 4.94
U.S. Treasury Index Portfolio
Class A 5.95
Class B N/A
Class C N/A
Class D 5.56
Bond Portfolio
Class A 5.83
Class B N/A
Class C 5.58
Class D 5.45
</TABLE>
B-50
<PAGE>
<TABLE>
30-Day Yield
International Bond Portfolio ------------
<S> <C>
Class A 4.78%
Class B N/A
Class C N/A
Class D 4.42
</TABLE>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations. See "Investment Adviser, Transfer Agent and Custodian"
and "Administrator and Distributor" under "Additional Trust Information." In the
absence of such fee reductions and expense limitations, the annualized 30-day
yields of each Portfolio with respect to Class A, Class B, Class C and Class D
units would have been as follows:
<TABLE>
<CAPTION>
30-Day Yield
------------
<S> <C>
Short Duration Portfolio 4.63%
U.S. Government Securities
Portfolio
Class A 4.97
Class B N/A
Class C 4.73
Class D 4.51
Short-Intermediate Bond Portfolio
Class A 5.55
Class B N/A
Class C N/A
Class D 4.41
U.S. Treasury Index Portfolio
Class A 5.19
Class B N/A
Class C N/A
Class D 4.80
Bond Portfolio
Class A 5.37
Class B N/A
Class C 5.12
Class D 4.99
International Bond Portfolio
Class A 4.25
Class B N/A
Class C N/A
Class D 3.89
</TABLE>
The performance of any investment is generally a function of portfolio quality
and maturity, type of investment and operating expenses.
Because of the different Servicing Fees and transfer agency fees payable with
respect to Class A, B, C and D units in a Portfolio, performance quotations for
units of Class B, C and D of the Portfolio will be lower than the quotations for
Class A units of the Portfolio, which will not bear any fees for unitholder
support services and will bear minimal transfer agency fees.
B-51
<PAGE>
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their unitholders that are not described in the
Portfolios' Prospectuses. No attempt is made to present a detailed explanation
of the tax treatment of the Portfolios or their unitholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situations.
GENERAL
Each Portfolio will elect to be taxed separately as a regulated investment
company under Part I of Subchapter M of Subtitle A, Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, each Portfolio generally is exempt from Federal income tax on its net
investment income and realized capital gains which it distributes to
unitholders, provided that it distributes an amount equal to at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code that are described below.
In addition to satisfying the Distribution Requirement, each Portfolio must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") and derive less than
30% of its gross income from the sale or other disposition of securities and
certain other investments held for less than three months (the "Short-Short
Test"). Interest (including original issue discount and "accrued market
discount") received by a Portfolio at maturity or on disposition of a security
held for less than three months will not be treated as gross income from the
sale or other disposition of such security within the meaning of this
requirement. However any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In addition to the foregoing requirements, at the close of each quarter of its
taxable year, at least 50% of the value of each Portfolio's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Portfolio has not invested more than 5% of the value of its total
B-52
<PAGE>
assets in securities of such issuer and as to which a Portfolio does not hold
more than 10% of the outstanding voting securities of such issuer) and no more
than 25% of the value of each Portfolio's total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which such Portfolio controls and which are engaged in the same or similar
trades or businesses.
Each Portfolio intends to distribute to unitholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is taxable
to unitholders as long- term capital gain, regardless of the length of time the
unitholder has held the units, whether such gain was recognized by the Portfolio
prior to the date on which a unitholder acquired units of the Portfolio and
whether the distribution was paid in cash or reinvested in units. In addition,
investors should be aware that any loss realized upon the sale, exchange or
redemption of units held for six months or less will be treated as a long-term
capital loss to the extent of the capital gain dividends the unitholder has
received with respect to such units. It is not expected that any distributions
will qualify for the dividends received deduction for corporations.
Ordinary income of individuals is taxable at a maximum marginal rate of 39.6%,
but because of limitations on itemized deductions otherwise allowable and the
phase-out of personal exemptions, the maximum effective marginal rate of tax for
some taxpayers may be higher. An individual's long-term capital gains are
taxable at a maximum nominal rate of 28%. Capital gains and ordinary income of
corporate taxpayers are both taxed at a nominal maximum rate of 35%.
If for any taxable year any Portfolio does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to unitholders. In such event, all
distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income, to the extent of such Portfolio's current and
accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate unitholders.
Unitholders will be advised annually as to the Federal income tax consequences
of distributions made by the Portfolios each year.
The Code imposes a non-deductible 4% excise tax on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). Each Portfolio intends to make sufficient
distributions
B-53
<PAGE>
or deemed distributions of its ordinary taxable income and capital gain net
income each calendar year to avoid liability for this excise tax.
The Trust will be required in certain cases to withhold and remit to the United
States Treasury 31% of taxable dividends or 31% of gross sale proceeds paid to
any unitholder (i) who has provided either an incorrect tax identification
number or no number at all, (ii) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) who has failed to certify to the Trust to
do so, that he is not subject to backup withholding or that he is an "exempt
recipient."
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Special rules govern the Federal income tax treatment of financial instruments
that may be held by the Portfolios. These rules may have a particular impact on
the amount of income or gain that a Portfolio must distribute to its respective
unitholders to comply with the Distribution Requirement, on the income or gain
qualifying under the Income Requirement and on its ability to comply with the
Short-Short Test described above.
Generally, futures contracts, options on futures contracts and certain foreign
currency contracts held by a Portfolio (collectively, the "Instruments") at the
close of its taxable year are treated for Federal income tax purposes as sold
for their fair market value on the last business day of such year, a process
known as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sales will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the period a Portfolio has held the Instruments ("the 40%-60% rule").
The amount of any capital gain or loss actually realized by a Portfolio in a
subsequent sale or other disposition of those Instruments is adjusted to reflect
any capital gain or loss taken into account by the Portfolio in a prior year as
a result of the constructive sale of the Instruments. Losses with respect to
futures contracts to sell related options and certain foreign currency
contracts, which are regarded as parts of a "mixed straddle" because their
values fluctuate inversely to the values of specific securities held by the
Portfolios, are subject to certain loss deferral rules which limit the amount of
loss currently deductible on either part of the straddle to the amount thereof
which exceeds the unrecognized gain (if any) with respect to the other part of
the straddle, and to certain wash sales regulations. Under short sales rules,
which are also applicable, the holding period of the securities forming part of
the straddle will (if they have not been held for the long-term holding period)
be deemed not to begin prior to termination of the straddle. With respect to
certain Instruments, deductions for
B-54
<PAGE>
interest and carrying charges may not be allowed. Notwithstanding the rules
described above, with respect to futures contracts which are part of a "mixed
straddle" to sell related options and certain foreign currency contracts which
are properly identified as such, a Portfolio may make an election which will
exempt (in whole or in part) those identified futures contracts, options and
foreign currency contracts from the rules of Section 1256 of the Code including
"the 40%-60% rule" and the mark-to-market on gains and losses being treated for
Federal income tax purposes as sold on the last business day of each Portfolio's
taxable year, but gains and losses will be subject to such short sales, wash
sales and loss deferral rules and the requirement to capitalize interest and
carrying charges. Under Temporary Regulations, each Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
portions which are part of a mixed straddle by separately identifying each mixed
straddle to which such treatment applies, or (2) to establish a mixed straddle
account for which gains and losses would be recognized and offset on a periodic
basis during the taxable year. Under either election, "the 40%-60% rule" will
apply to the net gain or loss attributable to the Instruments, but in the case
of a mixed straddle account election, not more than 50% of any net gain may be
treated as long-term and no more than 40% of any net loss may be treated as
short-term.
A foreign currency contract must meet the following conditions in order to be
subject to the mark-to-market rules described above: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts. As
of the date of this Additional Statement, the Treasury Department has not issued
any such regulations. Other foreign currency contracts entered into by a
Portfolio may result in the creation of one or more straddles for Federal income
tax purposes, in which case certain loss deferral, short sales, and wash sales
rules and the requirement to capitalize interest and carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the Portfolios may
make, such as foreign debt securities and foreign currency contracts, may be
subject to provisions of the Code which govern the Federal income tax treatment
of certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S. dollar. The types of transactions covered by these provisions
include the following: (1) the acquisition of, or becoming the obligor under, a
bond or
B-55
<PAGE>
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables and
payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer also is treated as a
transaction subject to the special currency rules. However, regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations,
certain transactions that are part of a "Section 988 hedging transaction" (as
defined in the Code and Treasury regulations) may be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
"Section 988 hedging transactions" are not subject to the mark-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign currency
component of transactions engaged in by the Portfolios which are not subject to
the special currency rules (such as foreign equity investments other than
certain preferred stocks) is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.
FOREIGN INVESTORS
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of units or in respect of capital gain dividends, provided such
unitholder submits a statement, signed under penalties of perjury, attesting to
such unitholder's exempt status. Different tax consequences apply to a foreign
unitholder engaged in a U.S. trade or business. Foreign unitholders should
consult their tax advisers regarding the U.S. and foreign tax consequences of
investing in a Portfolio.
B-56
<PAGE>
CONCLUSION
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Additional Statement. Such laws and regulations
may be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolio or its
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
Although each Portfolio expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, each Portfolio may be
subject to the tax laws of such states or localities.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional units of beneficial interest of one or more
separate series representing interests in one or more investment portfolios. The
Trust may hereafter create series in addition to the Trust's seventeen existing
series, which represent interests in the Trust's seventeen respective
portfolios, six of which are described in this Additional Statement. The Trust
Agreement further permits the Board of Trustees to classify or reclassify any
unissued units into additional series or subseries within a series. Pursuant to
such authority, other than with respect to the Short Duration Portfolio, the
Trustees have authorized the issuance of an unlimited number of units of
beneficial interest in four separate subseries (sometimes referred to as
"classes") of units in each of its non-money market portfolios: Class A, B, C
and D units. Under the terms of the Trust Agreement, each unit of each Portfolio
is without par value, represents an equal proportionate interest in the
particular Portfolio with each other unit of its class in the same Portfolio and
is entitled to such dividends and distributions out of the income belonging to
the Portfolio as are declared by the Trustees. Upon any liquidation of a
Portfolio, unitholders of each class of a Portfolio are entitled to share pro
rata in the net assets belonging to that class available for distribution. Units
do not have any preemptive or conversion rights. The right of redemption is
described under "InvestingRedemption of Units" in the Prospectus. In addition,
pursuant to the terms of the 1940 Act, the right of a unitholder to redeem
B-57
<PAGE>
units and the date of payment by a Portfolio may be suspended for more than
seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the unitholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its units upon the occurrence of any of the foregoing conditions. In
addition, units of each Portfolio are redeemable at the unilateral option of the
Trust if the Trustees determine in their sole discretion that failure to so
redeem may have material adverse consequences to the unitholders of the
Portfolio. Units when issued as described in the Prospectus are validly issued,
fully paid and nonassessable, except as stated below.
The proceeds received by each Portfolio for each issue or sale of its units, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to and
constitute the underlying assets of that Portfolio. The underlying assets of
each Portfolio will be segregated on the books of account, and will be charged
with the liabilities in respect to that Portfolio and with a share of the
general liabilities of the Trust. Expenses with respect to the Portfolios are
normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding units of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding units of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees may be
effectively acted upon by unitholders of the
B-58
<PAGE>
Trust voting together in the aggregate without regard to a particular investment
portfolio. In addition, unitholders of each of the classes in a particular
investment portfolio have equal voting rights except that only units of a
particular class of an investment portfolio will be entitled to vote on matters
submitted to a vote of unitholders (if any) relating to unitholder servicing
expenses and transfer agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder voting
only for the election or removal of one or more Trustees, if a meeting is called
for that purpose, and for certain other designated matters. Each Trustee serves
until the next meeting of unitholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the unitholders or two-thirds of the Trustees.
Under Massachusetts law, there is a possibility that unitholders of a business
trust could, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Trust Agreement contains an express
disclaimer of unitholder (as well as Trustee and officer) liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each contract, undertaking or instrument entered into or executed by the Trust
or the Trustees. The Trust Agreement provides for indemnification out of Trust
property of any unitholder charged or held personally liable for the obligations
or liabilities of the Trust solely by reason of being or having been a
unitholder of the Trust and not because of such unitholder's acts or omissions
or for some other reason. The Trust Agreement also provides that the Trust
shall, upon proper and timely request, assume the defense of any charge made
against any unitholder as such for any obligation or liability of the Trust and
satisfy any judgment thereon. Thus, the risk of a unitholder incurring financial
loss on account of unitholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations.
The Trust Agreement provides that each Trustee of the Trust will be liable for
his own wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee ("disabling
conduct"), and for nothing else, and will not be liable for errors of judgment
or mistakes of fact or law. The Trust Agreement provides further that the Trust
will indemnify Trustees and officers of the Trust against liabilities and
expenses incurred in connection with litigation and other proceedings in which
they may be involved (or with which they may be threatened) by reason of their
B-59
<PAGE>
positions with the Trust, except that no Trustee or officer will be indemnified
against any liability to the Trust or its unitholders to which he would
otherwise be subject by reason of disabling conduct.
As of March 12, 1997 substantially all of the Portfolios' outstanding units were
held of record by Northern for the benefit of its customers and the customers of
its affiliates and correspondent banks that have invested in the Portfolios. As
of the same date, the Trust's Trustees and officers owned beneficially less than
1% of the outstanding units of each Portfolio. Northern has advised the Trust
that the following persons (whose mailing address is: c/o The Northern Trust
Company, 50 South LaSalle, Chicago, IL 60675) beneficially owned five percent or
more of the outstanding units of the following Portfolios as of March 12,
1997:
<TABLE>
<CAPTION>
Number Percentage
of of
Units Units
----- -----
<S> <C> <C>
SHORT DURATION PORTFOLIO
Navistar International Corporation
Retirement Health Benefits Trust 1,208,971 23.67%
Case Hourly Employee Pension Plan 493,610 9.66
Illinois Masonic Medical Center
Restricted Investment Fund 436,498 8.55
Illinois Masonic Medical Center
Board Designated Fund 304,823 5.97
Schlumberger Limited Health Care
Medical Plan Trust 1,117,100 21.87
U.S. GOVERNMENT SECURITIES PORTFOLIO
Schlumberger Limited Master
Profit Sharing Trust 896,169 26.79
Electrical Insurance Trust Supplemental
Unemployment Benefit Fund 557,377 16.67
Schlumberger Limit Master Pension Trust 219,409 6.56
Schlumberger Master Profit Sharing Trust 259,851 7.77
Sheet Metal Workers Local 265
Health & Welfare Plan 367,072 10.97
Illinois State Painters Welfare Fund 179,489 5.37
SHORT-INTERMEDIATE BOND PORTFOLIO
Rexene Corporation Savings Plan 452,446 6.29
Union Texas Petroleum Holdings
Master Trust 407,672 5.66
Midcom Corp. Master Welfare Benefit
Taxable Funds Account 398,273 5.53
U.A. Local 398 Health & Welfare Trust 378,796 5.26
</TABLE>
B-60
<PAGE>
<TABLE>
<S> <C> <C>
BOND PORTFOLIO
The Northern Trust Company
Pension Plan 1,511,490 8.41%
The Northern Trust Company
Thrift Incentive Plan 1,293,914 7.20
Illinois Consolidated Master Trust 961,228 5.35
U.S. TREASURY INDEX PORTFOLIO
Liberty Healthcare System Inc.
Pension Plan 206,757 14.75
Purina Mills Inc. Master
Retirement Trust 142,955 10.20
Case Hourly Employee Pension Plan 524,256 37.39
INTERNATIONAL BOND PORTFOLIO
The Northern Trust Company
Pension Plan 833,539 58.81
Doe Run Resources Corporation
Retirement Plan 174,838 12.33
Peoples State Bank, St. Joseph, Michigan 109,020 7.69
</TABLE>
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the Securities
Act of 1933 with respect to the securities offered by the Trust's Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Additional Statement pursuant to the rules and regulations
of the SEC. The Registration Statement including the exhibits filed therewith
may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees and expenses payable to Northern and
Goldman Sachs, brokerage fees and commissions, fees for the registration or
qualification of Portfolio units under Federal or state securities laws,
expenses of the organization of the Portfolio, taxes, interest, costs of
liability insurance, fidelity bonds, indemnification or contribution, any costs,
expenses or losses arising out of any liability of, or claim for damages or
other relief asserted against, the Trust for violation of any law, legal, tax
and auditing fees and expenses, Servicing Fees, expenses of preparing and
printing prospectuses, statements of additional information, proxy materials,
reports and notices and the printing and distributing of the same to the Trust's
unitholders and
B-61
<PAGE>
regulatory authorities, compensation and expenses of its Trustees, expenses of
industry organizations such as the Investment Company Institute, miscellaneous
expenses and extraordinary expenses incurred by the Trust.
The term "majority of the outstanding units" of either the Trust or a particular
Portfolio means the vote of the lesser of (i) 67% or more of the units of the
Trust or such Portfolio present at a meeting, if the holders of more than 50% of
the outstanding units of the Trust or such Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding units of the Trust or such
Portfolio.
STATEMENTS CONTAINED IN THE PROSPECTUS OR IN THIS ADDITIONAL STATEMENT AS TO THE
CONTENTS OF ANY CONTRACT OR OTHER DOCUMENTS REFERRED TO ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF SUCH CONTRACT OR
OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THE
PROSPECTUS AND THIS ADDITIONAL STATEMENT FORM A PART, EACH SUCH STATEMENT BEING
QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, for the Short Duration Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short Intermediate Bond
Portfolio, Bond Portfolio and International Bond Portfolio contained in the
Annual Report for the fiscal year ended November 30, 1996 are hereby
incorporated herein by reference. No other parts of the Annual Report, including
without limitation "Management's Discussion of Portfolio Performance," are
incorporated by reference herein. Copies of the Annual Report may be obtained by
writing to Goldman, Sachs & Co., Funds Group, 4900 Sears Tower, Chicago,
Illinois 60606, or by calling Goldman, Sachs toll-free at 800-621-2550.
B-62
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK BOND PORTFOLIO
Yields on securities with two- to 30-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, and the 30-year Treasury moved in a
1.24% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors
and, in particular, through exposure to surplus notes and perpetual floating
rate notes.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK BOND
PORTFOLIO VS. THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
-l- Bond Portfolio
- -c- - Lehman Brothers
Government/Corporate Bond Index
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class A Corporate
November 30, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.57% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 8.26% 7.58%
- ---------------------------------------------------------------------------------------
</TABLE>
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class C Corporate
November 30, 1996: Units Bond Index
- -----------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.33% 5.59%
- -----------------------------------------------------------------------------------------
Since Commencement on 7/3/95: 8.17% 7.55%
- -----------------------------------------------------------------------------------------
</TABLE>
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class D Corporate
November 30, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.17% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 11.05% 10.02%
- ---------------------------------------------------------------------------------------
</TABLE>
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company or its affiliates, and are not federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested.
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK INTERNATIONAL BOND PORTFOLIO
Total return performance of most non-U.S. bond markets was excellent for the
fiscal year ended November 30, 1996. Economic growth in these countries turned
out to be slower than expected and, as a result, monetary policy remained loose
during the year. In addition inflation was cooperative as it actually declined
in many markets.
The portfolio significantly outperformed its benchmark during the period, due
primarily to its 10% underweighting in the Japanese bond and currency markets.
Of the non-U.S. bond markets, Japan performed the worst during the year, and
the yen fell nearly 11% in value versus the U.S. dollar.
Whenever the dollar increases in value versus other currencies, such as the
yen, the portfolio's nominal return is likely to suffer. However, because the
portfolio was significantly underweighted in Japan throughout the year, we were
able to avoid some of the currency effects caused by the stronger dollar and
weaker yen.
In addition to underweighting the Japanese market, another strategy that
contributed to the portfolio's relative performance was overweighting the
Canadian and Australian markets, both of which performed exceptionally well
compared to other countries.
We recently reduced the portfolio's underweight in Japan and its overweight
in U.S. dollars. Even though the yen may continue to fall further, going
forward, we don't believe it's prudent to take as strong a stand as we did over
the past 12 months. From an overall interest rate sensitivity standpoint, the
portfolio is positioned near neutral versus its benchmark.
Mike Lannan, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL BOND PORTFOLIO VS. THE J.P.
MORGAN NON-U.S. GOVERNMENT BOND INDEX
l International Bond Portfolio
- -c- - J.P. Morgan Non-U.S.
Government Bond Index
LOGO
<TABLE>
<CAPTION>
J.P.
Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class A Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.47% 7.13%
- -------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 11.72% 11.80%
</TABLE>
LOGO
<TABLE>
<CAPTION>
J.P.
Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class D Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.04% 7.13%
- ------------------------------------------------------------------------------------------
Since Commencement on 11/20/95: 8.45% 6.02%
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK SHORT DURATION PORTFOLIO
The portfolio's composition did not change much during the fiscal year ended
November 30, 1996. We continued to invest primarily in asset-backed and other
floating-rate securities, two-year Treasuries and commercial notes. We tended
to favor securities from the bank and finance sectors, as they offered the most
attractive yields without sacrificing quality.
Compared to the three-month LIBOR Index and the 90-day Treasury Bill Index,
the portfolio performed relatively poorly from February through April. However,
during the final three months of the fiscal year, the portfolio recovered
nicely, with its yield surpassing both indices.
The portfolio's duration was approximately 100 days at the beginning of the
fiscal year, peaked at approximately 160 days in June and decreased to
approximately 80 days by year end, reflecting the more defensive nature of the
portfolio.
With the economy continuing to show some strength, future Federal Reserve
actions are uncertain. As such, we expect to maintain a more defensive
position. We feel that the portfolio remains an attractive alternative to money
market funds for those who want to keep their investments in a short-term
strategy for more than three to six months.
Jerry Pearson, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK SHORT
DURATION PORTFOLIO, THE LEHMAN
BROTHERS SHORT (1-3) INVESTMENT GRADE
DEBT INDEX AND THE 3 MONTH LIBOR
INDEX
-l- Short Duration Portfolio - -c- - Lehman Brothers Short (1-
3) Inv't. Grade Debt Index - - X - - 3 Month LIBOR Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A Lehman 3 Month
November 30, 1996: Units Brothers LIBOR
<S> <C> <C> <C>
One Year: 5.45% 6.49% 5.60%
- -------------------------------------------------------------------------------------------
Since Commencement on 6/2/93: 4.84% 6.24% 4.94%
</TABLE>
3
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK SHORT-INTERMEDIATE BOND PORTFOLIO
Yields on securities with two- to five-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, while five-year securities moved in a
1.72% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK SHORT-
INTERMEDIATE BOND PORTFOLIO VS. THE
MERRILL LYNCH 1-5 CORPORATE/GOVERNMENT
INDEX
-l- Short-Intermediate Bond
Portfolio
- -c- - Merrill Lynch 1-5
Corporate/Government Index
LOGO
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class A Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.68% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.10% 6.08%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class D Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.22% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 7.16% 7.72%
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK U.S. GOVERNMENT SECURITIES PORTFOLIO
A static snapshot of the fiscal year would show short-term government bond
yields rising 0.25% higher during the year, on average. By most measures, this
movement would be considered modest. Nevertheless, this seeming stability does
not serve as an accurate portrayal of the volatility experienced. Two-year
Treasury bonds, for example, traded in a 1.75% range--from 4.75% to 6.50%--
during the fiscal year. Investors moved the market in this sideways fashion
based on ever-changing views of the future economic environment and its impact
on future interest rates. In general, the Federal Reserve was quiet during the
year, as it has not adjusted short-term rates since January 31, 1996.
As we have maintained since April 1996 (when two-year Treasury rates moved
above 6.00%), the current benign inflation outlook makes short-term interest
rates attractive from a "real" return standpoint for long-term investors. Thus,
the portfolio has been in a normal interest rate posture with respect to short-
term government bonds throughout the year, and it has correspondingly earned
market-type returns.
With the portfolio limited to investing in U.S. Treasury, government agency
and government agency mortgage-backed securities, we continually monitor the
agency/Treasury relative value trade-off. While government agency securities do
not typically compensate investors for the liquidity foregone relative to
Treasuries, we have found opportunities in mortgage securities to add
incremental yield with only a minimal level of call risk.
Steve Schafer, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK
U.S. GOVERNMENT SECURITIES PORTFOLIO
VS. THE MERRILL LYNCH 1-5 GOVERNMENT
INDEX
-l- U.S. Government
Securities Portfolio
- -c- - Merrill Lynch 1-5
Government Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class A 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
One Year: 5.15% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 4/5/93: 5.04% 5.57%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns** Merrill Lynch
For Period Ended Class C 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
Since Commencement on 12/29/95: 4.05% 4.76%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class D 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
One Year: 4.77% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/15/94: 6.48% 7.53%
</TABLE>
**AVERAGE ANNUAL TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE
YEAR.
5
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK U.S. TREASURY INDEX PORTFOLIO
On average, Treasury yields remained relatively stable from the beginning of
the fiscal year to the end. In between, however, there was significant short-
term volatility, as the ever-changing views on where the economy was headed and
what impact that would have on future interest rates caused yields to go up and
down.
Yields on two-year Treasury bonds, for example, moved in a 1.75% range, while
yields on the 30-year Treasury bond moved in a 1.24% range during the year.
As it is designed to do, the U.S. Treasury Index Portfolio performed in line
with the Lehman Brothers U.S. Treasury Bond Index during the period from
December 1, 1995, to November 30, 1996. We will continue to invest in
securities represented by the Index in our effort to provide returns that
closely approximate those of the Index.
Richard Steck, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK U.S. TREASURY INDEX PORTFOLIO VS. THE LEHMAN
BROTHERS U.S. TREASURY BOND INDEX
-l- U.S. Treasury Index Portfolio
- -c- - Lehman Brothers U.S.
Treasury Bond Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class A U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.10% 5.24%
- ----------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.97% 7.24%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class D U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 4.72% 5.24%
- -----------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 10.40% 11.29%
</TABLE>
6
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------
BOND PORTFOLIO
<C> <C> <S> <C>
ASSET-BACKED SECURITIES--0.2%
AUTOMOTIVE--0.2%
General Motors
Acceptance Corp.
Class A, Series:
1993-B
$ 827 4.000% 09/15/98 $ 819
HOME EQUITY LOANS--0.0%
U.S. Home Equity
Loan, Series: 1991-2
116 8.500 04/15/21 117
- -----------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $941) $ 936
- -----------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
12.3%
Countrywide Funding
Corp.
Class A4, Series:
1993-1
$13,567 5.321% 10/25/23 $ 12,244
Delta Funding Corp.,
Interest Only
Stripped Security,
Class A-4, Series:
1991-1*
-- -- 01/01/06 202
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Series 1994-Q8,
Class 2A1
5,752 7.250 05/25/24 5,752
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Adjustable Rate,
Interest Only
Stripped Security,
Series 1995-QE9*
-- -- 11/25/25 1,698
GE Capital Mortgage
Services Inc.
Class A-23, Series:
1994-10
13,850 6.500 03/25/24 12,160
PaineWebber Mortgage
Acceptance Corp.
Class A15, Series:
1993-9
7,919 7.000 10/25/23 7,848
Prudential Home
Mortgage Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-17,
Series: 1993-36*
-- -- 10/25/23 2,972
Class A-18,
Series: 1994-8*
-- -- 03/25/24 1,123
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
Residential
Funding Mortgage
Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-14,
Series: 1993-S22*
$ -- --% 06/25/23 $ 2,140
- -------------------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS (Cost
$46,317) $ 46,139
- -------------------------------------------------------
CORPORATE BONDS--10.9%
BROKERAGE SERVICES--2.5%
Salomon Brothers,
Inc.
$ 9,450 8.000% 03/28/97 $ 9,515
FINANCIAL--1.4%
General Motors
Acceptance Corp.
4,285 8.875 06/01/00 5,119
INSURANCE SERVICES--1.8%
Lumberman's
Mutual Casualty
Co.
6,000 9.150 07/01/26 6,717
RETAIL--2.1%
Penney (J.C.) &
Co., Inc.
7,700 6.900 08/15/03 7,939
SANITARY SERVICES--3.1%
WMX Technologies
11,000 7.100 08/01/03 11,604
- -------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$38,843) $ 40,894
- -------------------------------------------------------
U.S. GOVERNMENT AGENCIES--
21.9%
COLLATERALIZED MORTGAGE OBLIGA-
TIONS--15.7%
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
INTEREST ONLY STRIPPED SE-
CURITY*--0.0%
Class 1392-S,
Series: 1392
$ -- --% 09/15/18 $ 37
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
PRINCIPAL ONLY STRIPPED
SECURITIES*--4.2%
Class B, Series:
G011
$ 912 -- 04/25/23 632
Class D, Series:
1571
13,511 -- 08/15/23 8,525
Class PD, Series:
1750-C
10,054 -- 03/15/24 6,550
--------
15,707
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------
<C> <C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REMIC TRUST--5.8%
Class 3-D, Series:
1990-3
$ 953 8.500% 07/25/18 $ 966
Class A, Series:
1996-M4
8,947 7.750 03/17/17 9,216
Class G, Series:
1992-73
7,500 7.500 04/25/21 7,660
Class SA, Series:
1991-127
660 12.661 09/25/98 671
Class SB, Series:
1994-59
6,364 2.880 03/25/24 3,304
--------
21,817
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
INTEREST ONLY STRIPPED SE-
CURITY*--0.2%
Class S, Series:
G-12
-- -- 05/25/21 705
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
PRINCIPAL ONLY STRIPPED SE-
CURITIES*--5.5%
Class B, Series:
1993-161
$ 4,732 -- 10/25/18 4,504
Class D, Series:
1993-132
1,947 -- 10/25/22 1,082
Class EA, Series:
1993-205
3,150 -- 09/25/23 2,165
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
Class L, Series:
1993-184
7,585 -- 09/25/23 4,982
Class PR, Series:
1996-14
9,000 -- 01/25/24 6,019
--------
20,622
MORTGAGE-BACKED SECURITIES--
6.2%
FEDERAL HOME LOAN MORTGAGE CORP.--
0.0%
1 6.500 06/01/04 1
GOVERNMENT NATIONAL MORTGAGE ASSOCIA-
TION--6.2%
7,615 8.000 11/15/26 7,852
Series: 2026
8,802 8.000 08/15/26 9,072
5,940 8.000 09/15/26 6,122
--------
23,046
- ----------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $76,677) $ 81,935
- ----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------
<C> <C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--43.6%
U.S. TREASURY NOTES--41.4%
$12,310 6.750% 02/28/97 $ 12,352
25,000 5.875 10/31/98 25,125
13,600 6.750 05/31/99 13,942
38,745 6.875 08/31/99 39,901
14,000 7.750 01/31/00 14,807
8,450 5.750 08/15/03 8,363
37,000 7.500 02/15/05 40,486
--------
154,976
U.S. TREASURY BOND--2.2%
7,635 7.125 02/15/23 8,239
- -------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $160,865) $163,215
- -------------------------------------------
FLOATING RATE BANK NOTES--
6.0%
Lloyds Bank PLC
$11,450 6.063% 12/13/96 $ 10,138
National
Westminster Bank
13,800 5.625 02/28/97 12,101
- -------------------------------------------
TOTAL FLOATING RATE BANK
NOTES
(Cost $21,480) $ 22,239
- -------------------------------------------
SHORT-TERM INVESTMENT--4.2%
Berliner Handels und
Frankfurter,
Grand Cayman
$15,853 5.688% 12/02/96 $ 15,853
- -------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $15,853) $ 15,853
- -------------------------------------------
TOTAL INVESTMENTS--99.1%
(Cost $360,976) $371,211
- -------------------------------------------
Other assets, less
liabilities--0.9% 3,201
- -------------------------------------------
NET ASSETS--100.0% $374,412
- -------------------------------------------
- -------------------------------------------
</TABLE>
*At November 30, 1996, effective yields on these securities ranged from
approximately 5.00% to 15.00%. Refer to notes to statements of investments for
a discussion of stripped securities.
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO
<C> <C> <S> <C>
DEBT OBLIGATIONS--93.8%
AUSTRALIAN DOLLAR--4.3%
Commonwealth of
Australia
1,580 10.000% 10/15/02 $ 1,471
BELGIAN FRANC--1.9%
Kingdom of Belgium
18,275 7.500 07/29/08 641
BRITISH POUND STERLING--15.0%
Abbey National PLC
825 6.000 08/10/99 1,352
Lloyds Bank PLC
800 7.375 03/11/04 1,302
Treasury of United
Kingdom
1,420 8.000 06/10/03 2,490
-------
5,144
CANADIAN DOLLAR--8.4%
Dominion of Canada
1,075 7.500 12/01/03 880
Province of Ontario
1,050 7.250 09/27/05 826
Province of Quebec
1,325 10.250 10/15/01 1,187
-------
2,893
DANISH KRONE--5.5%
Kingdom of Denmark
10,100 8.000 03/15/06 1,872
FRENCH FRANC--8.9%
Electricite de
France
6,200 8.600 04/09/04 1,416
Republic of France
3,000 8.500 03/12/97 582
4,600 8.250 02/27/04 1,041
-------
3,039
GERMAN MARK--13.6%
Federal Republic of
Germany
1,795 6.250 01/04/24 1,117
LKB Global Bond
1,500 6.000 05/10/99 1,023
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ----------------------------------------------
<C> <C> <S> <C>
Republic of Austria
1,670 8.000% 01/30/02 $ 1,230
Republic of Finland
1,920 5.500 02/09/01 1,289
-------
4,659
ITALIAN LIRA--8.2%
Republic of Italy
4,000,000 8.500 04/01/04 2,808
JAPANESE YEN--13.5%
Asian Development
Bank
90,000 5.000 02/05/03 926
European Bank for
Reconstruction and
Development
95,000 5.875 11/26/99 953
International Bank
for
Reconstruction and
Development
100,000 4.500 03/20/03 1,010
Japan Development
Bank
160,000 6.500 09/20/01 1,721
-------
4,610
NETHERLANDS GUILDER--3.3%
Kingdom of the
Netherlands
1,675 8.500 03/15/01 1,118
SPANISH PESETA--4.1%
Kingdom of Spain
35,000 11.450 08/30/98 294
120,000 11.300 01/15/02 1,120
-------
1,414
SWEDISH KRONA--3.8%
Kingdom of Sweden
7,400 10.250 05/05/03 1,317
UNITED STATES DOLLAR--3.3%
U.S. Treasury Note
1,000 7.875 11/15/04 1,117
- ----------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $29,495) $32,103
- ----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- -----------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO--CONTINUED
<C> <C> <S> <C>
SHORT-TERM INVESTMENT--2.6%
UNITED STATES DOLLAR
Berliner Handels und
Frankfurter,
Grand Cayman
$ 895 5.688% 12/02/96 $ 895
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$895) $ 895
- -----------------------------------------------------------
TOTAL INVESTMENTS--96.4%
(Cost $30,390) $32,998
- -----------------------------------------------------------
Other assets, less liabilities--
3.6% 1,237
- -----------------------------------------------------------
NET ASSETS--100.0% $34,235
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
SHORT DURATION PORTFOLIO
ASSET-BACKED SECURITY--5.6%
Household Consumer
Loan Trust
Series: 96-2A
$ 2,324 5.545% 08/15/06 $ 2,324
- ------------------------------------------------------
TOTAL ASSET-BACKED SECURITY
(Cost $2,324) $ 2,324
- ------------------------------------------------------
FLOATING RATE NOTES--15.5%
Beneficial Corp.
$ 2,500 5.570% 11/04/99 $ 2,489
Household Finance
Co.
2,500 5.681 11/01/01 2,495
USL Capital Corp.
Series D
1,500 5.705 04/19/99 1,497
- ------------------------------------------------------
TOTAL FLOATING RATE NOTES
(Cost $6,499) $ 6,481
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--6.0%
U.S. Treasury Note
$ 2,500 5.733% 11/15/99 $ 2,512
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $2,511) $ 2,512
- ------------------------------------------------------
COMMERCIAL PAPER--35.6%
ASSET-BACKED SECURITIES--13.5%
Ascot Capital
Corp.
$ 1,000 5.391% 02/10/97 $ 989
Cooperative
Association of
Tractor Dealers
500 5.376 12/10/96 499
Corporate
Receivables Corp.
400 5.317 12/09/96 399
Gotham Funding
Corp.
1,000 5.444 02/05/97 990
Old Line Funding
785 5.373 12/12/96 784
Strategic Asset
Funding Corp.
1,000 5.476 01/31/97 991
Wood Street
Funding Corp.
1,000 5.371 12/10/96 999
-------
5,651
COMMUNICATIONS--2.3%
NYNEX Corp.
1,000 5.375 12/16/96 998
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
FOOD AND KINDRED PRODUCTS--
4.8%
Coca-Cola
Enterprises Inc.
$ 1,000 5.466% 12/05/96 $ 999
Thames Asset
Global
Securitization No.
1, Inc.
1,000 5.427 02/18/97 988
-------
1,987
HOLDING AND OTHER INVESTMENT
OFFICES--4.2%
CSW Credit, Inc.
900 5.309 12/04/96 899
400 5.314 12/10/96 399
Enterprise Funding
Corp.
466 5.354 12/13/96 465
-------
1,763
INSURANCE CARRIERS--4.8%
John Hancock
Capital Corp.
2,000 5.291 12/10/96 1,997
MISCELLANEOUS RETAIL--1.0%
Mont Blanc Capital
423 5.366 12/04/96 423
NONDEPOSITORY BUSINESS
CREDIT INSTITUTIONS--2.6%
PHH Corp.
1,000 5.327 12/16/96 999
Transamerica Corp.
100 5.261 12/05/96 100
-------
1,099
TRANSPORTATION--2.4%
General Motors
Acceptance Corp.
1,000 5.747 03/11/97 984
- --------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $14,902) $14,902
- --------------------------------------------------
SHORT-TERM INVESTMENTS--15.6%
Federal Home Loan
Mortgage
Association
$ 4,525 5.703% 12/02/96 $ 4,524
Norinchukin Bank
1,000 5.340 12/06/96 1,000
Swiss Bank
1,000 5.520 12/18/96 1,000
- --------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,524) $ 6,524
- --------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS--23.9%
Bear Stearns & Co., Inc., Dated 11/29/96,
Repurchase Price $10,005
(U.S. Government Securities Colld.)
$10,000 5.680% 12/02/96 $10,000
Donaldson Lufkin & Jenrette Securities, Inc.,
Dated 11/29/96, Repurchase Price $3
(U.S. Government Securities Colld.)
3 5.920% 12/02/96 3
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,003) $10,003
- --------------------------------------------------------------------
TOTAL INVESTMENTS--102.2%
(Cost $42,763) $42,746
- --------------------------------------------------------------------
Liabilities, less other assets--(2.2)% (933)
- --------------------------------------------------------------------
NET ASSETS--100.0% $41,813
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
SHORT-INTERMEDIATE BOND PORTFOLIO
ASSET-BACKED SECURITIES--8.2%
AUTOMOTIVE--8.2%
<C> <C> <S> <C>
Olympic Automobile
Receivables Trust
$4,000 5.950% 11/15/99 $4,017
2,627 7.875 07/15/01 2,693
Olympic Automobile
Receivables Trust,
Interest Only
Stripped Security*
-- -- 01/15/99 1,703
Premier Auto Trust
2,222 4.750 02/02/00 2,209
Western Financial
Automobile Loan
Trust
507 4.700 01/01/98 507
1,505 7.100 01/01/00 1,526
- --------------------------------------------------------
TOTAL ASSET-BACKED SECURI-
TIES
(Cost $12,880) $12,655
- --------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATION--1.6%
Donaldson, Lufkin
& Jenrette, Inc.
Mortgage
Acceptance Corp.,
Series 1994-Q8,
Class 2A1
$2,473 7.250% 05/25/24 $ 2,473
- --------------------------------------------------------
TOTAL COLLATERALIZED MORT-
GAGE
OBLIGATION (Cost $2,429) $ 2,473
- --------------------------------------------------------
CORPORATE OBLIGATIONS--9.7%
BROKERAGE SERVICES--7.4%
Donaldson Lufkin &
Jenrette, Inc.
Medium Term Note
$6,500 5.625% 02/15/16 $ 6,353
Salomon Brothers,
Inc. Medium Term
Notes
3,000 5.500 01/31/98 2,987
2,000 5.700 02/11/98 1,995
-------
11,335
FINANCIAL--2.3%
Greyhound
Financial Corp.
3,590 8.250 03/11/97 3,613
- --------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $15,075) $14,948
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------
Principal Maturity
Amount Rate Date Value
- ---------------------------------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--
9.2%
COLLATERALIZED MORTGAGE OBLIGATIONS
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--3.3%
Class
BA, Series: 1571
$ 5,472 -- % 04/15/19 $ 5,098
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST--4.0%
Class
A, Series: 1996-M4
5,965 7.750 03/17/17 6,144
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--1.9%
Class B, Series:
1993-161
1,183 -- 10/25/18 1,126
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
--------
2,996
- ---------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $12,738) $ 14,238
- ---------------------------------------
U.S. GOVERNMENT OBLIGA-
TIONS--67.1%
U.S. TREASURY NOTES--67.1%
$ 5,000 5.375% 11/30/97 $ 4,996
7,000 5.625 01/31/98 7,010
12,000 5.125 03/31/98 11,942
8,000 5.375 05/31/98 7,983
2,000 5.125 11/30/98 1,982
26,600 6.750 05/31/99 27,269
13,675 6.875 08/31/99 14,083
18,000 7.750 01/31/00 19,038
4,000 5.500 12/31/00 3,958
4,890 6.625 06/30/01 5,046
- ---------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $102,332) $103,307
- ---------------------------------------
SHORT-TERM INVESTMENT--2.3%
Berliner Handels
und Frankfurter,
Grand Cayman
$ 3,537 5.688% 12/02/96 $ 3,537
- ---------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,537) $ 3,537
- ---------------------------------------
TOTAL INVESTMENTS--98.1%
(Cost $148,991) $151,158
- ---------------------------------------
Other assets, less other
liabilities--1.9% 2,860
- ---------------------------------------
NET ASSETS--100.0% $154,018
- ---------------------------------------
- ---------------------------------------
</TABLE>
*At November 30, 1996, the effective yields on these securities ranged from
approximately 5.00% to 7.00%. Refer to notes to statements of investments for a
discussion of stripped securities.
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
U.S. GOVERNMENT AGENCIES--25.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--15.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.8%
<C> <C> <S> <C>
Class F, Series:
1520
$ 750 5.650% 09/15/04 $ 745
FEDERAL NATIONAL MORTGAGE ASSOCIATION--14.2%
Class A, Series:
1996-M4
3,977 7.750 03/17/17 4,096
Class E, Series:
1992-200
1,000 6.250 06/25/17 1,000
Class EZ, Series:
1993-133
3,626 5.850 02/25/17 3,574
Class PD, Series:
1993-085
4,700 5.500 07/25/03 4,678
Class 14-F,
Series: 1988-14
297 9.200 12/25/17 308
-------
13,656
MORTGAGE-BACKED SECURITIES--7.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.6%
594 7.599 11/01/24 605
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--7.3%
6,632 8.000 08/15/26 6,835
179 8.000 11/15/26 184
-------
7,019
AGENCY OBLIGATIONS--2.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.5%
500 7.130 06/30/05 505
TENNESSEE VALLEY AUTHORITY NOTE--1.6%
1,500 6.235 07/15/45 1,524
-------
2,029
- ----------------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $23,881) $24,054
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--72.3%
U.S. TREASURY NOTES
<C> <C> <S> <C>
$15,000 6.750% 02/28/97 $15,051
18,000 5.500 11/15/98 17,966
7,500 6.750 05/31/99 7,689
15,000 7.750 01/31/00 15,865
12,000 6.125 07/31/00 12,141
715 6.625 06/30/01 738
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $69,274) $69,450
- ------------------------------------------------------
SHORT TERM INVESTMENT--1.3%
Federal Home Loan Bank
Discount Note
$ 1,225 5.700% 12/02/96 $ 1,225
- ------------------------------------------------------
TOTAL SHORT TERM INVESTMENT
(Cost $1,225) $ 1,225
- ------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $94,380) $94,729
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Other assets, less liabilities--1.4% 1,382
- ------------------------------------------------------------------------------
NET ASSETS--100.0% $96,111
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
U.S. TREASURY INDEX PORTFOLIO
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGA-
TIONS--97.4%
U.S. TREASURY NOTES--63.7%
$1,500 5.500% 07/31/97 $ 1,502
1,115 9.250 08/15/98 1,181
6,100 5.000 01/31/99 6,024
1,400 5.500 02/28/99 1,396
2,350 7.875 11/15/99 2,487
2,900 6.375 01/15/00 2,954
1,700 6.250 02/15/03 1,730
-------
17,274
U.S. TREASURY BONDS--32.0%
435 13.875 05/15/11 673
660 14.000 11/15/11 1,040
490 13.250 05/15/14 781
1,000 7.250 05/15/16 1,089
900 8.125 05/15/21 1,078
1,100 6.250 08/15/23 1,067
2,800 6.875 08/15/25 2,954
-------
8,682
U.S. TREASURY INTEREST ONLY
STRIPPED SECURITY*--1.7%
475 -- 08/15/97 458
- ------------------------------------
TOTAL U.S. GOVERNMENT OB-
LIGATIONS
(Cost $25,857) $26,414
- ------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
<C> <C> <S> <C>
SHORT TERM INVESTMENT--1.1%
Federal Home
Loan Bank
Discount Note
$ 310 5.700% 12/02/96 $ 310
- ------------------------------------
TOTAL SHORT TERM INVEST-
MENT
(Cost $310) $ 310
- ------------------------------------
TOTAL INVESTMENTS--98.5%
(Cost $26,167) $26,724
- ------------------------------------
Other assets, less liabil-
ities--1.5% 397
- ------------------------------------
NET ASSETS--100.0% $27,121
- ------------------------------------
- ------------------------------------
</TABLE>
*The effective yield on this Interest Only Stripped Security was 5.44% at
November 30, 1996. Refer to notes to statements of investments for a discussion
of stripped securities.
See accompanying notes to financial statements.
16
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO STATEMENTS OF INVESTMENTS
November 30, 1996
- --The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --Interest rates represent either the stated coupon rate, annualized yield on
date of purchase for discounted notes or, for floating rate securities, the
current reset rate.
- --Stripped securities represent the right to receive either future interest
payments (interest only stripped securities) or principal payments (principal
only stripped securities). The value of variable rate interest only stripped
securities varies directly with changes in interest rates, while the value of
fixed rate interest only stripped securities and the value of principal only
stripped securities varies inversely with changes in interest rates.
17
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Short- U.S. U.S.
International Short Intermediate Government Treasury
Bond Bond Duration Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties, at cost $360,976 $30,390 $32,760 $148,991 $94,380 $26,167
Repurchase agreements,
at cost -- -- 10,003 -- -- --
- ----------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $371,211 $32,998 $32,743 $151,158 $94,729 $26,724
Repurchase agreements,
at value -- -- 10,003 -- -- --
Cash 196 141 -- 1,301 7 6
Receivables:
Interest 5,134 1,078 74 1,589 1,387 381
Foreign tax reclaims -- 17 -- -- -- --
Fund units sold 3 -- -- 36 -- --
Administrator 11 5 14 8 6 6
Deferred organization
costs, net 15 37 29 15 18 15
Other assets -- 2 2 -- -- --
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS 376,570 34,278 42,865 154,107 96,147 27,132
- ----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 2,027 -- 1,000 30 -- --
Distributions to
unitholders -- -- 25 -- -- --
Accrued expenses:
Advisory fees 76 20 7 32 20 3
Administration fees 30 3 11 13 8 2
Custodian fees 4 5 4 2 2 2
Transfer agent fees 4 -- -- 1 1 --
Other liabilities 17 15 5 11 5 4
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,158 43 1,052 89 36 11
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $366,616 $31,072 $42,377 $151,156 $95,994 $27,538
Accumulated undistrib-
uted net investment in-
come -- 31 35 45 75 25
Accumulated net realized
gain (loss) on
investments (2,439) 529 (582) 650 (307) (999)
Net unrealized apprecia-
tion (depreciation) on
investments 10,235 2,608 (17) 2,167 349 557
Net unrealized loss on
translation of other
assets and liabilities
denominated in foreign
currencies -- (5) -- -- -- --
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
Total units outstanding
(no par value), unlim-
ited units authorized
Class A 17,661 1,543 4,187 7,423 4,602 1,276
Class C 353 -- -- -- 176 --
Class D 11 2 -- 17 11 41
- ----------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per unit
Class A $ 20.77 $ 22.16 $ 9.99 $ 20.70 $ 20.07 $ 20.60
Class C $ 20.78 -- -- -- $ 20.06 --
Class D $ 20.76 $ 22.14 -- $ 20.66 $ 20.03 $ 20.57
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
SHORT- U.S. U.S.
INTERNATIONAL SHORT INTERMEDIATE GOVERNMENT TREASURY
BOND BOND DURATION BOND SECURITIES INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME: $22,432 $2,199(a) $2,692 $10,435 $4,897 $1,082
- ---------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,993 288 194 1,011 527 70
Administration fees 575 80 121 353 220 44
Custodian fees 46 67 32 28 20 20
Transfer agent fees 38 3 -- 17 12 2
Registration fees 33 42 8 25 22 20
Professional fees 19 5 6 11 4 4
Trustee fees 12 2 2 7 2 2
Amortization of deferred
organization costs, net 14 17 20 14 13 13
Unitholder Servicing
Fees 7 -- -- -- 5 1
Other 19 2 12 12 8 8
- ---------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,756 506 395 1,478 833 184
Less voluntary waivers
of:
Investment advisory
fees (1,163) (64) (121) (590) (307) (44)
Administration fees (243) (48) -- (184) (132) (26)
Less: Expenses reimburs-
able by Administrator (143) (87) (153) (97) (69) (67)
- ---------------------------------------------------------------------------------------------
Net expenses 1,207 307 121 607 325 47
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 21,225 1,892 2,571 9,828 4,572 1,035
Net realized gains
(losses) on:
Investment transactions 2,094 1,011 29 392 (58) 91
Foreign currency trans-
actions -- (35) -- -- -- --
Net change in unrealized
appreciation
(depreciation) on in-
vestments (3,905) 20 -- (1,308) (201) (239)
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- 6 -- -- -- --
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS $19,414 $2,894 $2,600 $ 8,912 $4,313 $ 887
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $49 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
(All amounts in thousands)
<TABLE>
<CAPTION>
Bond International
Portfolio Bond Portfolio
------------------ ----------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 21,225 $ 15,744 $ 1,892 $ 1,898
Net realized gains (losses) on invest-
ments and foreign currency transactions 2,094 1,622 976 731
Net change in unrealized appreciation
(depreciation) on investments (3,905) 34,676 20 2,711
Net change in unrealized gains (losses)
on translations of other assets and li-
abilities denominated in foreign cur-
rencies -- -- 6 (11)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 19,414 52,042 2,894 5,329
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (20,213) (15,211) (2,300) (2,605)
Return of capital (556) (347) -- --
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (20,769) (15,558) (2,300) (2,605)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS
FROM:
Net investment income (264) (82) -- --
Return of capital (7) (2) -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (271) (84) -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS
FROM:
Net investment income (8) (4) (1) --
Return of capital (1) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (9) (4) (1) --
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 143,593 65,433 5,918 6,142
Reinvested distributions 18,565 13,688 1,747 2,073
Cost of units redeemed (79,885) (86,462) (6,747) (5,213)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets re-
sulting from Class A unit transactions 82,273 (7,341) 918 3,002
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 4,311 4,059 -- --
Reinvested distributions 271 84 -- --
Cost of units redeemed (1,032) (574) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class C unit transactions 3,550 3,569 -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 127 100 41 9
Reinvested distributions 9 4 1 --
Cost of units redeemed (37) (9) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class D unit transactions 99 95 42 9
- --------------------------------------------------------------------------------
Net increase (decrease) 84,287 32,719 1,553 5,735
Net assets--beginning of year 290,125 257,406 32,682 26,947
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $374,412 $290,125 $34,235 $32,682
- --------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME: $ -- $ -- $ 31 $ 36
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short-
Short Duration Intermediate U.S. Government U.S. Treasury
Portfolio Bond Portfolio Securities Portfolio Index Portfolio
- ----------------- ------------------ ---------------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,571 $ 4,196 $ 9,828 $ 6,272 $ 4,572 $ 1,688 $ 1,035 $ 1,675
29 (41) 392 735 (58) 60 91 823
-- 161 (1,308) 6,055 (201) 1,548 (239) 3,234
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
2,600 4,316 8,912 13,062 4,313 3,296 887 5,732
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
- --------------------------------------------------------------------------------
64,087 48,728 69,730 84,233 104,606 58,790 13,176 14,609
2,425 3,722 8,697 5,697 4,198 1,508 746 1,392
(70,201) (96,900) (82,742) (34,345) (72,555) (30,910) (5,169) (39,656)
- --------------------------------------------------------------------------------
(3,689) (44,450) (4,315) 55,585 36,249 29,388 8,753 (23,655)
- --------------------------------------------------------------------------------
-- -- -- -- 4,695 -- -- --
-- -- -- -- 159 -- -- --
-- -- -- -- (1,298) -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- 3,556 -- -- --
- --------------------------------------------------------------------------------
-- -- 328 12 210 55 592 281
-- -- 3 -- 8 2 26 4
-- -- (2) -- (60) (5) (66) (3)
- --------------------------------------------------------------------------------
-- -- 329 12 158 52 552 282
- --------------------------------------------------------------------------------
(3,660) (44,330) (4,673) 62,481 39,715 31,090 9,161 (19,345)
45,473 89,803 158,691 96,210 56,396 25,306 17,960 37,305
- --------------------------------------------------------------------------------
$41,813 $45,473 $154,018 $158,691 $ 96,111 $ 56,396 $27,121 $17,960
- --------------------------------------------------------------------------------
$ 35 $ 35 $ 45 $ 206 $ 75 $ 75 $ 25 $ 21
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Bond Portfolio
------------------------------------------------------------------------------------
Class A Class C Class D
--------------------------------------- ---------------- --------------------------
1996 1995 1994 1993 (A) 1996 1995 (B) 1996 1995 1994 (C)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.96 $ 18.29 $ 20.70 $ 20.00 $20.96 $20.21 $ 20.94 $ 18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.29 1.17 1.42 1.42 1.25 0.47 1.22 1.08 0.28
Net realized and
unrealized gain (loss)
on investments (0.19) 2.66 (2.21) 0.66 (0.18) 0.74 (0.18) 2.66 (0.45)
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment
operations 1.10 3.83 (0.79) 2.08 1.07 1.21 1.04 3.74 (0.17)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.26) (1.14) (1.46) (1.38) (1.22) (0.45) (1.19) (1.09) (0.28)
Net realized gain on
investments -- -- (0.15) -- -- -- -- -- --
Return of capital (.03) (0.02) (0.01) -- (.03) (0.01) (.03) -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.29) (1.16) (1.62) (1.38) (1.25) (0.46) (1.22) (1.09) (0.28)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.19) 2.67 (2.41) 0.70 (0.18) 0.75 (0.18) 2.65 (0.45)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.77 $ 20.96 $ 18.29 $ 20.70 $20.78 $20.96 $ 20.76 $ 20.94 $18.29
- ---------------------------------------------------------------------------------------------------------------
Total return (d) 5.57% 21.55% (4.04)% 10.60% 5.33% 6.08% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and
reimbursements 0.36% 0.36% 0.36% 0.36% 0.60% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and
reimbursements 0.84% 0.84% 0.87% 0.92% 1.08% 1.08% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and re-
imbursements 6.39% 5.94% 7.31% 7.84% 6.09% 5.59% 5.99% 5.48% 6.31%
Net investment income,
before waivers and re-
imbursements 5.91% 5.46% 6.80% 7.28% 5.61% 5.11% 5.51% 5.00% 5.80%
Portfolio turnover rate 101.38% 74.19% 103.09% 89.06% 101.38% 74.19% 101.38% 74.19% 103.09%
Net assets at end of pe-
riod (in
thousands) $366,850 $286,301 $257,391 $245,112 $7,342 $3,704 $ 220 $ 120 $ 15
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class C units were issued on July 3, 1995.
(c) Class D units were issued on September 14, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
22
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Bond Portfolio Short Duration Portfolio
-------------------------------------------- -------------------------------------
Class A Class D Class A
-------------------------- ---------------- -------------------------------------
1996 1995 1994 (A) 1996 1995 (B) 1996 1995 1994 1993 (C)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 21.74 $ 19.93 $ 20.00 $21.74 $22.17 $ 9.99 $ 9.97 $ 10.03 $ 10.00
Income (loss) from
investment operations:
Net investment income 1.54 1.26 0.79 1.37 0.02 0.53 0.59 0.40 0.14
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions 0.43 2.28 0.01 0.51 (0.08) -- 0.01 (0.05) 0.03
- --------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.97 3.54 0.80 1.88 (0.06) 0.53 0.60 0.35 0.17
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
(d) (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.40) (0.14)
Net realized gain on
investments
transactions -- -- -- -- -- -- -- (0.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.41) (0.14)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.42 1.81 (0.07) 0.40 (0.43) -- 0.02 (0.06) 0.03
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 22.16 $ 21.74 $ 19.93 $22.14 $21.74 $ 9.99 $ 9.99 $ 9.97 $ 10.03
- --------------------------------------------------------------------------------------------------------------
Total return (e) 9.47% 18.20% 4.03% 9.04% (0.30)% 5.45% 6.14% 3.64% 1.73%
Ratio to average net as-
sets of (f):
Expenses, net of
waivers and
reimbursements 0.96% 0.96% 0.96% 1.35% 1.35% 0.25% 0.25% 0.25% 0.32%
Expenses, before
waivers and
reimbursements 1.58% 1.47% 1.49% 1.97% 1.86% 0.81% 0.80% 0.77% 0.50%
Net investment income,
net of waivers and
reimbursements 5.91% 5.92% 5.93% 5.67% 3.26% 5.30% 5.80% 3.93% 3.00%
Net investment income,
before waivers and re-
imbursements 5.29% 5.41% 5.40% 5.05% 2.75% 4.74% 5.25% 3.41% 2.82%
Portfolio turnover rate 33.89% 54.46% 88.65% 33.89% 54.46% 828.58% 1,272.21% 1,364.00% 434.32%
Net assets at end of
period (in thousands) $34,183 $32,673 $26,947 $ 52 $ 9 $41,813 $ 45,473 $ 89,803 $186,765
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 20, 1995.
(c) Commenced investment operations on June 2, 1993.
(d) For the International Bond Portfolio, distributions to unitholders from
net investment income include amounts relating to foreign currency
transactions which are treated as ordinary income for Federal income tax
purposes.
(e) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(f) Annualized for periods less than a full year.
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Short-Intermediate Bond Portfolio
---------------------------------------------------------------
Class A Class D
------------------------------------- ------------------------
1996 1995 1994 1993 (A) 1996 1995 1994 (B)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.71 $19.53 $19.82
Income (loss) from in-
vestment operations:
Net investment income 1.14 1.02 0.97 0.85 1.07 0.94 0.23
Net realized and
unrealized gain (loss)
on investments (0.01) 1.19 (0.80) 0.31 (0.02) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.13 2.21 0.17 1.16 1.05 2.12 (0.06)
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (0.03) 1.20 (0.80) 0.33 (0.05) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.66 $20.71 $19.53
- ------------------------------------------------------------------------------------------
Total return (c) 5.68% 11.58% 0.84% 5.90% 5.22% 11.09% (0.30)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.88% 0.91% 0.95% 1.00% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and re-
imbursements 5.83% 5.14% 4.84% 4.79% 4.96% 4.85% 4.42%
Net investment income,
before waivers and re-
imbursements 5.31% 4.59% 4.25% 4.15% 4.44% 4.30% 3.83%
Portfolio turnover rate 47.68% 54.68% 48.67% 19.48% 47.68% 54.68% 48.67%
Net assets at end of pe-
riod (in thousands) $153,675 $158,678 $96,209 $107,550 $ 343 $ 13 $ 1
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
24
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Portfolio
-------------------------------------------------------------------------
Class A Class C Class D
----------------------------------- -------- --------------------------
1996 1995 1994 1993 (a) 1996 (b) 1996 1995 1994 (c)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.08 $ 19.05 $ 20.07 $ 20.00 $ 20.13 $ 20.04 $ 19.05 $19.43
Income (loss) from in-
vestment operations:
Net investment income 1.02 1.05 0.91 0.55 0.91 0.96 0.96 0.22
Net realized and
unrealized gain (loss)
on investments (0.01) 1.02 (1.02) 0.05 (0.12) (0.03) 1.00 (0.38)
- ----------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 2.07 (0.11) 0.60 0.79 0.93 1.96 (0.16)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) (0.01) 1.03 (1.02) 0.07 (0.07) (0.01) 0.99 (0.38)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.07 $ 20.08 $ 19.05 $ 20.07 $ 20.06 $ 20.03 $ 20.04 $19.05
- ----------------------------------------------------------------------------------------------------
Total return (d) 5.15% 11.18% (0.57)% 3.00% 4.05% 4.77% 10.66% (0.90)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.43% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.94% 1.09% 1.12% 1.18% 1.18% 1.33% 1.48% 1.51%
Net investment income,
net of waivers and
reimbursements 5.22% 5.43% 4.62% 4.18% 4.97% 4.83% 5.08% 4.65%
Net investment income,
before waivers and
reimbursements 4.64% 4.70% 3.86% 3.43% 4.39% 4.25% 4.35% 3.89%
Portfolio turnover rate 119.75% 141.14% 45.55% 20.59% 119.75% 119.75% 141.14% 45.55%
Net assets at end of pe-
riod (in thousands) $92,351 $56,329 $25,293 $32,479 $ 3,535 $ 225 $ 67 $ 13
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on April 5, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on September 15, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
U.S. Treasury Index Portfolio
------------------------------------------------------------
Class A Class D
----------------------------------- -----------------------
1996 1995 1994 1993(A) 1996 1995 1994(B)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.19 1.11 1.15 0.95 1.17 1.00 0.09
Net realized and
unrealized gain (loss)
on investments (0.18) 2.01 (1.93) 1.02 (0.24) 2.03 (0.03)
- --------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 3.12 (0.78) 1.97 0.93 3.03 0.06
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.19) (1.11) (1.14) (0.92) (1.11) (1.05) (0.09)
Net realized gain on
investments -- -- (0.36) -- -- -- --
- --------------------------------------------------------------------------------------
Total distributions to
unitholders (1.19) (1.11) (1.50) (0.92) (1.11) (1.05) (0.09)
- --------------------------------------------------------------------------------------
Net increase (decrease) (0.18) 2.01 (2.28) 1.05 (0.18) 1.98 (0.03)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.57 $20.75 $18.77
- --------------------------------------------------------------------------------------
Total return (c) 5.10% 16.95% (3.80)% 9.94% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.26% 0.26% 0.26% 0.26% 0.65% 0.65% 0.65%
Expenses, before waiv-
ers and reimbursements 1.04% 0.89% 0.79% 0.83% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and re-
imbursements 5.93% 5.09% 5.60% 5.11% 5.57% 5.41% 6.05%
Net investment income,
before waivers and re-
imbursements 5.15% 4.46% 5.07% 4.54% 4.79% 4.78% 5.52%
Portfolio turnover rate 42.49% 80.36% 52.80% 77.75% 42.49% 80.36% 52.80%
Net assets at end of pe-
riod (in thousands) $26,273 $17,674 $37,305 $71,456 $ 848 $ 286 $ --
- --------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
26
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end
management investment company. The Trust includes sixteen portfolios, each
with its own investment objective. The Northern Trust Company ("Northern")
acts as the Trust's investment adviser, transfer agent, and custodian.
Goldman, Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the fixed income
portfolios (the "Portfolios").
The Bond, International Bond, Short-Intermediate Bond, U.S. Government
Securities, and U.S. Treasury Index Portfolios may issue four separate unit
classes: Class A, B, C and D. Each class is distinguished by the level of
administrative support and transfer agent service provided. As of November 30,
1996, Class A, Class C and Class D units are outstanding for certain
portfolios.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.
(a) Investment Valuation
Investments held by a portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any
securities are not traded on a valuation date, at the last quoted bid price.
Securities which are traded in the over-the-counter markets are valued at the
last quoted bid price. Any securities, including restricted securities, for
which current quotations are not readily available are valued at fair value as
determined in good faith by Northern under the supervision of the Board of
Trustees ("Board"). Short-term investments are valued at amortized cost which
Northern has determined, pursuant to Board authorization, approximates market
value.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
(c) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments and interest income
are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on
investments.
(d) Investment Transactions and Investment Income
Investment transactions are recorded on the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(e) Forward Foreign Currency Exchange Contracts
The International Bond Portfolio is authorized to enter into forward foreign
currency exchange contracts for the
27
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or
portfolio positions. In addition, the International Bond Portfolio may enter
into foreign currency contracts for speculative purposes. The objective of the
Portfolio's foreign currency hedging transactions is to reduce the risk that
the U.S. dollar value of the Portfolio's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All forward foreign currency contracts are "marked-to-market" daily at
the applicable translation rates and any resulting unrealized gains or losses
are recorded in the financial statements. The portfolio records realized gains
or losses when the forward contract is offset by entry into a closing
transaction or extinguished by delivery of the currency. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
(f) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and capital gains to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, the portfolios
had approximately the following amounts of capital loss carryforwards for U.S.
federal tax purposes:
<TABLE>
<CAPTION>
AMOUNT YEAR(S) OF EXPIRATION
- ----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Bond $1,398 2002 to 2003
Short Duration 581 2002 to 2003
U.S. Government Securities 168 2001 to 2003
U.S. Treasury Index 979 2002
</TABLE>
- -------------------------------------------------------------------------------
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
(g) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(h) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio. Certain expenses arising in connection with a class of units are
allocated to that class of units. Expenses incurred which do not specifically
relate to an individual portfolio are allocated among the portfolios based on
each portfolio's relative net assets.
(i) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
<CAPTION>
DECLARED PAID
- -----------------------------------------------
<S> <C> <C>
Bond Monthly Monthly
International Bond Quarterly Quarterly
Short Duration Daily Monthly
Short-Intermediate Bond Monthly Monthly
U.S. Government Securities Monthly Monthly
U.S. Treasury Index Monthly Monthly
- -----------------------------------------------
</TABLE>
Each portfolio's net realized capital gains are distributed at least
annually.
28
<PAGE>
- -------------------------------------------------------------------------------
Income dividends and capital gains distributions are determined in accordance
with income tax regulations. Such amounts may differ from income and capital
gains recorded in accordance with generally accepted accounting principles.
Distributions of short-term and long-term capital gains were declared and
paid December 24, 1996 to unitholders of record on December 23, 1996, as
follows:
<TABLE>
<CAPTION>
SHORT-TERM Long-Term
CAPITAL Capital
GAIN Gain Total
- -----------------------------------------------------
<S> <C> <C> <C>
International Bond $0.0872 $0.2491 $0.3363
Short-Intermediate Bond 0.0123 0.0426 0.0549
- -----------------------------------------------------
</TABLE>
(j) Reclassifications
At November 30, 1996, the Bond Portfolio reclassified approximately $740,000
from accumulated net realized loss on investment transactions to undistributed
net investment income. The International Bond Portfolio reclassified
approximately $439,000 from accumulated net realized gain (loss) on investment
transactions, and $35,000 from net realized loss on foreign currency
transactions, to accumulated undistributed net investment income. The Short-
Intermediate Bond Portfolio reclassified approximately $390,000 from
accumulated net realized gain (loss) on investment transactions to
undistributed net investment income, and the U.S. Government Securities
Portfolio reclassified approximately $11,000 from accumulated net realized
gain (loss) on investment transactions to undistributed net investment income.
These reclassifications had no impact on the net asset value of the Portfolios
and are designed to present the Portfolios' capital accounts on a tax basis.
3. ADVISORY, TRANSFER AGENCY AND CUSTODIAN AGREEMENTS
The Trust has an investment advisory agreement with Northern whereby each
portfolio pays Northern a fee, computed daily and payable monthly, based on a
specified percentage of its average daily net assets. For the current fiscal
year, Northern voluntarily agreed to waive a portion of the advisory fees as
shown on the accompanying Statements of Operations. The annual advisory fees
and waiver rates, expressed as a percentage of average daily net assets for
the year ended November 30, 1996, are as follows:
<TABLE>
<CAPTION>
Net
ADVISORY Less: Advisory
FEE Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
International Bond .90 .20 .70
Short Duration .40 .25 .15
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
- ----------------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%,
.10%, and .15% of the average daily net asset value of the outstanding Class
A, B, C and D units, respectively, for the Bond, International Bond, Short-
Intermediate Bond, U.S. Government Securities and U.S. Treasury Index
Portfolios.
As compensation for the services rendered as custodian for the portfolios,
and for the services rendered as transfer agent for the Short Duration
Portfolio, including the assumption by Northern of the expenses related
thereto, Northern receives compensation based on a pre-determined schedule of
charges approved by the Board.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement with Goldman Sachs whereby each
portfolio pays the Administrator a fee, computed daily and payable monthly,
based on the average net assets of each portfolio at the rates set forth
below:
29
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
<TABLE>
<CAPTION>
Average net assets RATE
- ---------------------------------------
<S> <C>
For the first $100,000,000 .250%
For the next $200,000,000 .150
For the next $450,000,000 .075
For net assets over $750,000,000 .050
- ---------------------------------------
</TABLE>
For the current fiscal year, Goldman Sachs voluntarily agreed to limit
administration fees to .10% of average daily net assets for the Bond,
International Bond, Short-Intermediate Bond, U.S. Government Securities and
U.S. Treasury Index Portfolios. In addition, Goldman Sachs agreed to waive a
portion of its administrative fees should overall administration fees earned
during the preceding year exceed certain specified levels. No waiver was
required under this agreement during the year ended November 30, 1996.
Furthermore, Goldman Sachs has agreed to reimburse each portfolio for certain
expenses in the event that such expenses, as defined, exceed on an annualized
basis .10% of the average daily net assets for the Bond, Short-Intermediate
Bond, Short Duration, U.S. Government Securities and U.S. Treasury Index
Portfolios and .25% of the average daily net assets for the International Bond
Portfolio.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1996, are shown on the accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
5. UNITHOLDER SERVICING PLAN
The Trust has adopted a Unitholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain unitholder administrative support
services for their customers or other investors who beneficially own Class B,
C and D units. As compensation under the Unitholder Servicing Plan, the
institution or other financial intermediary receives a fee at an annual rate
of up to .10%, .15% and .25% of the average daily net asset value of the
outstanding Class B, C and D units, respectively.
6. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1996 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
PROCEEDS
FROM SALES PROCEEDS
AND FROM SALES
PURCHASES MATURITIES AND
OF U.S. PURCHASES OF U.S. MATURITIES
GOVERNMENT OF OTHER GOVERNMENT OF OTHER
OBLIGATIONS SECURITIES OBLIGATIONS SECURITIES
- ------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $299,522 $95,138 $230,507 $62,706
International Bond -- 10,260 -- 10,601
Short Duration 49,240 36,941 51,720 38,111
Short-Intermediate Bond 62,699 12,135 62,188 13,881
U.S.Government Securities 136,302 -- 95,525 --
U.S. Treasury Index 16,514 -- 7,346 --
- ------------------------------------------------------------------------
</TABLE>
As of November 30, 1996, the composition of unrealized appreciation
(depreciation) of investment securities (including the effects of foreign
currency translation) based on the aggregate cost of investments for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Net Income
Appreciation Tax
Appreciation Depreciation (Depreciation) Purposes
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $12,054 $2,860 $9,194 $362,017
International Bond 2,935 327 2,608 30,390
Short Duration 2 19 (17) 42,763
Short-Intermediate Bond 2,687 520 2,167 148,991
U.S. Government Securities 655 433 222 94,507
U.S. Treasury Index 571 14 557 26,167
- -----------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- -------------------------------------------------------------------------------
7. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
Interest expense for the year ended November 30, 1996 was approximately
$1,000 for the International Bond Portfolio. This amount is included in other
expenses on the Statements of Operations.
As of November 30, 1996, there were no outstanding borrowings.
8. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
SALES DISTRIBUTIONS REDEMPTIONS (DECREASE)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,010 910 3,920 4,000
International Bond 272 81 313 40
Short Duration 6,424 243 7,034 (367)
Short-Intermediate Bond 3,372 424 4,028 (232)
U.S. Government Securities 5,223 211 3,637 1,797
U.S. Treasury
Index 642 37 254 425
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class A units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
SALES DISTRIBUTIONS REDEMPTIONS (DECREASE)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 3,353 696 4,459 (410)
International Bond 297 97 243 151
Short Duration 4,868 388 9,707 (4,451)
Short-Intermediate Bond 4,158 285 1,714 2,729
U.S. Government Securities 2,965 77 1,564 1,478
U.S. Treasury
Index 748 70 1,953 (1,135)
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 214 13 51 176
U.S.Government Securities 234 8 66 176
- -------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- ----------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 201 4 28 177
- ----------------------------------------------
</TABLE>
Transactions in Class D units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- --------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 6 -- 1 5
International Bond 1 -- -- 1
Short-Intermediate Bond 16 -- -- 16
U.S. Government Securities 10 1 3 8
U.S. Treasury Index 29 1 3 27
- --------------------------------------------------------------------
</TABLE>
Transactions in Class D units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 5 -- -- 5
International Bond 1 -- -- 1
U.S. Government Securities 3 -- 1 2
U.S. Treasury Index 13 -- -- 13
- ---------------------------------------------------------------------
</TABLE>
31
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Fixed Income Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Bond, International Bond,
Short Duration, Short-Intermediate Bond, U.S. Government Securities and U.S.
Treasury Index Portfolios, comprising the Fixed Income Portfolios of The
Benchmark Funds, as of November 30, 1996, and the related statements of
operations for the year then ended and changes in net assets for each of the
two years in the period then ended and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bond, International Bond, Short Duration, Short-Intermediate Bond, U.S.
Government Securities and U.S. Treasury Index Portfolios, comprising the Fixed
Income Portfolios of The Benchmark Funds, at November 30, 1996, the results of
their operations for the year then ended and the changes in their net assets
for each of the two years in the period then ended and financial highlights
for the periods indicated therein, in conformity with generally accepted
accounting principles.
LOGO
Chicago, Illinois
January 21, 1997
32
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent andCustodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management expenses and other
information.
The
Benchmark
Funds
Money
Market
Portfolios
Annual Report
November 30, 1996
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA-Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher rated categories.
BB and B-Debt rated BB and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. Debt rated BB has less
near-term vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Debt
rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB-rating.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
1-A
<PAGE>
S&P may attach the rating "r" to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa-Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa-Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A-Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa-Bonds that are rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba and B-Bonds that possess one of these ratings provide questionable
protection of interest and principal. Ba indicates some speculative
elements. B indicates a general lack of characteristics of desirable
investment.
The foregoing ratings for corporate and municipal long-term debt are sometimes
presented in parenthesis preceded with a "con", indicating the bonds are rated
conditionally. Such parenthetical
2-A
<PAGE>
rating denotes the probable credit stature upon completion of construction or
elimination of the basis of the condition. The notation (P) when applied to
forward delivery bonds indicates that the rating is provisional pending delivery
of the bonds. The rating may be revised prior to delivery if changes occur in
the legal documents or the underlying credit quality of the bonds.
The following summarizes the highest six ratings used by Duff & Phelps Credit
Rating Co. ("D&P") for corporate and municipal long-term debt:
AAA-Debt rated AAA is of the highest credit quality. The risk factors
are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA-Debt rated AA is of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because
of economic conditions.
A-Bonds that are rated A have protection factors which are average but
adequate. However risk factors are more variable and greater in periods
of economic stress.
BBB-Bonds that are rated BBB have below average protection factors but
such protection factors are still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles.
BB and B-Bonds that are rated BB or B are below investment grade. Bonds
rated BB are deemed likely to meet obligations when due. Bonds rated B
possess the risk that the obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest six ratings used by Fitch Investors
Service, Inc. ("Fitch") for corporate and municipal bonds:
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because
bonds related in the "AAA" and
3-A
<PAGE>
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
"F-1+."
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on
these bonds, and therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB and B-Bonds considered to be speculative investments with respect to
the timely payment of principal and interest in accordance with the
terms of the obligation.
To provide more detailed indications of credit quality, the Fitch ratings "AA"
and lower may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
The following summarizes the two highest ratings by S&P for short-term municipal
notes:
SP-1-Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are
given a "plus" (+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the
preceding group.
4-A
<PAGE>
The two highest rating categories of D&P for short-term debt are D 1 and D 2.
D&P employs three designations, D 1+, D 1 and D 1-, within the highest rating
category. D 1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D 1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D 2 indicates good certainty of
timely payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of Bond
Ratings" for tax-exempt notes and other short-term obligations. Fitch uses the
short-term ratings described below under "Description of Commercial Paper
Ratings" for municipal notes.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted in A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers or related supporting institutions rated Prime-1 are considered to have
a superior capacity for repayment of short-term promissory obligations. Issuers
or related supporting institutions rated Prime-2 are considered to have strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F-1+ securities possess very strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for
timely payment.
5-A
<PAGE>
F-1 securities possess exceptionally strong credit quality.
Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the F-1+ and F-1 categories.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
6-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. INTEREST RATE FUTURES CONTRACTS
Use of Interest Rate Futures Contracts. Bond prices are established in
--------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within three business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Portfolio could use interest rate
futures contracts as a defense, or hedge, against anticipated interest rate
changes. As described below, this could include the use of futures contract
sales to protect against expected increases in interest rates and the use of
futures contract purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures
contracts.
Interest rate futures contracts can also be used by a Portfolio for nonhedging
(speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
1-B
<PAGE>
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Portfolio would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. A Portfolio may trade in any interest rate futures
contracts for which there exists a public market, including, without limitation,
the foregoing instruments.
II. INDEX FUTURES CONTRACTS
GENERAL. A bond index assigns relative values to the bonds included in
the index which fluctuates with changes in the market values of the bonds
included.
A Portfolio may sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise result
from a market decline. A Portfolio may do so either to hedge the value of its
portfolio as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a
Portfolio may purchase index futures contracts in anticipation of purchases of
securities. A long futures position may be terminated without a corresponding
purchase of securities.
2-B
<PAGE>
In addition, a Portfolio may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Portfolio expects to narrow the range of industry
groups represented in its holdings it may, prior to making purchases of the
actual securities, establish a long futures position based on a more restricted
index, such as an index comprised of securities of a particular industry group.
A Portfolio may also sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to the
time of sale.
Index futures contracts may also be used by a Portfolio for non-hedging
(speculative) purposes, to increase total return.
III. FUTURES CONTRACTS ON FOREIGN CURRENCIES (INTERNATIONAL BOND
PORTFOLIO)
A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Portfolio for hedging
purposes in anticipation of fluctuations in exchange rates between the U.S.
dollars and other currencies arising from multinational transactions.
The International Bond Portfolio may also use futures contracts on
foreign currencies for non-hedging (speculative) purposes to increase total
return.
IV. MARGIN PAYMENTS
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Portfolio upon the purchase or sale of a futures contract.
Initially, the Portfolio will be required to deposit with the broker or in a
segregated account with the Custodian or a sub-custodian an amount of liquid
assets, known as initial margin, based on the value of the contract. The nature
of initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For
3-B
<PAGE>
example, when a particular Portfolio has purchased a futures contract and the
price of the contract has risen in response to a rise in the underlying
instruments, that position will have increased in value and the Portfolio will
be entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where the Portfolio has purchased a futures
contract and the price of the future contract has declined in response to a
decrease in the underlying instruments, the position would be less valuable and
the Portfolio would be required to make a variation margin payment to the
broker. At any time prior to expiration of the futures contract, the Portfolio's
adviser may elect to close the position by taking an opposite position, subject
to the availability of a secondary market, which will operate to terminate the
Portfolio's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Portfolio, and the Portfolio realizes a loss or gain.
V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by the
Portfolios. In connection with the use of futures for hedging purposes, one risk
arises because of the imperfect correlation between movements in the price of
the futures and movements in the price of the instruments which are the subject
of the hedge. The price of the future may move more than or less than the price
of the instruments being hedged. If the price of the futures moves less than the
price of the instruments which are the subject of the hedge, the hedge will not
be fully effective but, if the price of the instruments being hedged has moved
in an unfavorable direction, the Portfolio would be in a better position than if
it had not hedged at all. If the price of the instruments being hedged has moved
in a favorable direction, this advantage will be partially offset by the loss on
the futures. If the price of the futures moves more than the price of the hedged
instruments, the Portfolio involved will experience either a loss or gain on the
futures which will not be completely offset by movements in the price of the
instruments which are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of instruments being hedged and movements
in the price of futures contracts, the Portfolio may buy or sell futures
contracts in a greater dollar amount than the dollar amount of instruments being
hedged if the volatility over a particular time period of the prices of such
instruments has been greater than the volatility over such time period of the
futures, or if otherwise deemed to be appropriate by Northern. Conversely, the
Portfolios may buy or sell fewer futures contracts if the volatility over a
particular time period of the prices of the instruments being hedged is less
than the volatility over such time period of the futures contract being used, or
if otherwise deemed to be appropriate by Northern. It
4-B
<PAGE>
is also possible that, where a Portfolio had sold futures to hedge its portfolio
against a decline in the market, the market may advance and the value of
instruments held in the Portfolio may decline. If this occurred, the Portfolio
would lose money on the futures and also experience a decline in value in its
portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Portfolio is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Portfolio then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Portfolio will realize a loss on the futures contract that is not offset by
a reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by Northern may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the
Portfolios intend to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Portfolios would continue to be required to make daily cash
5-B
<PAGE>
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will generally not be sold
until the futures contract can be terminated. In such circumstances, an increase
in the price of the securities, if any, may partially or completely offset
losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary market in
a futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Portfolios is also subject to
Northern's ability to predict correctly movements in the direction of the
market. For example, if a particular Portfolio has hedged against the
possibility of a decline in the market adversely affecting securities held by it
and securities prices increase instead, the Portfolio will lose part or all of
the benefit to the increased value of its securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of securities
may be, but will not necessarily be, at increased prices which reflect the
rising market. The Portfolios may have to sell securities at a time when they
may be disadvantageous to do so.
Futures purchased or sold by the International Bond Portfolio (and
related options) may be traded in foreign instruments. Participation in foreign
futures and foreign options transactions involves the execution and clearing of
trades on or subject to the rules of a foreign board of trade. Neither the
National Futures Association nor any domestic exchange regulates activities of
any foreign boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
board of trade or any applicable foreign law. This is true even if the exchange
is formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction
6-B
<PAGE>
on another market. Moreover, such laws or regulations will vary depending on the
foreign country in which the foreign futures or foreign options transaction
occurs. For these reasons, customers who trade foreign futures of foreign
options contracts may not be afforded certain of the protective measures
provided by the Commodity Exchange Act, the Commodity Futures Trading
Commission's ("CFTC") regulations and the rules of the National Futures
Association and any domestic exchange, including the right to use reparations
proceedings before the CFTC and arbitration proceedings provided by the National
Futures Association or any domestic futures exchange. In particular, the
investments of the International Bond Portfolio's in foreign futures or foreign
options transactions may not be provided the same protections in respect of
transactions on United States futures exchanges. In addition, the price of any
foreign futures or foreign options contract and, therefore the potential profit
and loss thereon may be affected by any variance in the foreign exchange rate
between the time an order is placed and the time it is liquidated, offset or
exercised.
VI. OPTIONS ON FUTURES CONTRACTS
The Portfolios may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Portfolio will be required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). See "Risks of Transactions
in Futures Contracts" above. In addition, the purchase or sale of an option also
entails the risk that changes in the value of the underlying futures contract
will not correspond to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures contract upon which
it is based, or upon the price of any underlying instruments, an option may or
may not be less risky than ownership of the futures contract or such
instruments. In general, the market prices of options
7-B
<PAGE>
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may, unlike
futures contracts where the risk of loss is potentially unlimited, frequently
involve less potential risk to the Portfolio because the maximum amount at risk
is the premium paid for the options (plus transaction costs). The writing of an
option on a futures contract involves risks similar to those risks relating to
the sale of futures contracts.
VII. OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
8-B
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
GOVERNMENT SELECT PORTFOLIO
GOVERNMENT PORTFOLIO
DIVERSIFIED ASSETS PORTFOLIO
TAX-EXEMPT PORTFOLIO
This Statement of Additional Information (the "Additional Statement") dated
April 1, 1997 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the Government Select, Government,
Diversified Assets and Tax-Exempt Portfolios of The Benchmark Funds (the
"Prospectus") dated April 1, 1997. Copies of the Prospectus may be obtained
without charge by calling Goldman, Sachs & Co. ("Goldman Sachs") toll-free at
1-800-621-2550 (outside Illinois) or by writing to the address stated above.
Capitalized terms not otherwise defined have the same meaning as in the
Prospectus.
------------------
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
ADDITIONAL INVESTMENT INFORMATION B-3
Investment Objectives and Policies B-3
Investment Restrictions B-10
ADDITIONAL TRUST INFORMATION B-14
Trustees and Officers B-14
Investment Adviser,
Transfer Agent and Custodian B-21
Administrator and Distributor B-27
Counsel and Auditors B-29
In-Kind Purchases B-30
PERFORMANCE INFORMATION B-30
AMORTIZED COST VALUATION B-32
DESCRIPTION OF UNITS B-34
ADDITIONAL INFORMATION CONCERNING TAXES B-37
General B-37
Special Tax Considerations
Pertaining to the
Tax-Exempt Portfolio B-39
Foreign Investors B-40
Conclusion B-40
OTHER INFORMATION B-40
FINANCIAL STATEMENTS B-42
APPENDIX A (Description of Securities Ratings) 1-A
</TABLE>
----------------
<PAGE>
no person has been authorized to give any information or to make any
representations not contained in this additional statement or in the prospectus
in connection with the offering made by the prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the trust or its distributor. The prospectus does not constitute
an offering by the trust or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the investment objectives and policies of the
Government Select, Government, Diversified Assets and Tax-Exempt Portfolios
(the "Portfolios") of The Benchmark Funds (the "Trust") as set forth in the
Prospectus.
DESCRIPTION OF COMMERCIAL PAPER, BANKERS' ACCEPTANCES, CERTIFICATES OF DEPOSIT
AND TIME DEPOSITS
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corpo rations and finance
companies. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties that
vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party.
As stated in the Prospectus, the Diversified Assets Portfolio may invest a
portion of its assets in the obligations of foreign banks and foreign branches
of domestic banks. Such obligations include Eurodollar Certificates of Deposit
("ECDs") which are U.S. dollar-denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States;
Eurodollar Time Deposits ("ETDs") which are U.S. dollar-denominated deposits in
a foreign branch of a U.S. bank or a foreign bank; Canadian Time Deposits
("CTDs") which are essentially the same as ETDs except they are issued by
Canadian offices of major Canadian banks; Schedule Bs, which are obligations
issued by Canadian branches of foreign or domestic banks; Yankee Certificates of
Deposit ("Yankee CDs") which are U.S. dollar-denominated certificates of deposit
issued by a U.S. branch of a foreign bank and held in the United States; and
Yankee Bankers' Acceptances ("Yankee BAs") which are U.S. dollar-denominated
bankers' acceptances issued by a U.S. branch of a foreign bank and held in the
United States.
B-3
<PAGE>
DESCRIPTION OF ASSET-BACKED SECURITIES
The Diversified Assets Portfolio may purchase asset-backed securities, which are
securities backed by mortgages, installment contracts, credit card receivables
or other assets. The average life of asset-backed securities varies with the
maturities of the underlying instruments, and the average life of a mortgage-
backed instrument, in particular, is likely to be substantially less than the
original maturity of the mortgage pools underlying the securities as a result of
mortgage prepayments. For this and other reasons, an asset-backed security's
stated maturity may be shortened, and the security's total return may be
difficult to predict precisely. Such difficulties are not, however, expected to
have a significant effect on the Portfolio since the remaining maturity of any
asset-backed security acquired will be 13 months or less. Asset-backed
securities acquired by the Portfolio may include collateralized mortgage
obligations ("CMOs") issued by private companies.
U.S. GOVERNMENT OBLIGATIONS
Examples of the types of U.S. Government obligations that may be acquired by the
Portfolios include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, and the Maritime Administration.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES
The Portfolios (other than the Government Select Portfolio) may acquire U.S.
Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the
underwriters of these certificates or other evidences of
B-4
<PAGE>
ownership of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed the beneficial
holders of the underlying U.S. Government obligations for Federal tax purposes.
The Trust is not aware of any binding legislative, judicial or administrative
authority on this issue.
U.S. TREASURY STRIPS
The Treasury Department has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and principal payments on Treasury securities through the
Federal Reserve book-entry record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program, a
Portfolio will be able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying
U.S. Treasury securities. All Portfolios, including the Government Select
Portfolio, may acquire securities registered under the STRIPS program.
BANK AND DEPOSIT NOTES
The Diversified Assets Portfolio may purchase bank and deposit notes. Bank
notes rank junior to deposit liabilities of banks and pari passu with other
---- -----
senior, unsecured obligations of the bank. Bank notes are classified as "other
borrowings" on a bank's balance sheet, while deposit notes and certificates of
deposit are classified as deposits. Bank notes are not insured by the Federal
Deposit Insurance Corporation or any other insurer. Deposit notes are insured by
the Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.
VARIABLE AND FLOATING RATE INSTRUMENTS
With respect to the variable and floating rate instruments that may be acquired
by the Portfolios as described in the Prospectus, Northern will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such instruments and, if the instruments are subject to demand
features, will continuously monitor their financial status and ability to meet
payment on demand. Where necessary to ensure that a variable or floating rate
instrument is of "high quality," the issuer's obligation to pay the principal of
the instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. The Portfolios will invest in variable and
floating rate instruments only when Northern deems the investment to involve
minimal credit risk. In determining weighted average portfolio maturity, an
instrument may, subject to SEC regulations, be deemed to have a maturity shorter
than its
B-5
<PAGE>
nominal maturity based on the period remaining until the next interest rate
adjustment or the time the Portfolio involved can recover payment of principal
as specified in the instrument.
INVESTMENT COMPANIES
To the extent required by the 1940 Act and the regulations and orders of the SEC
thereunder, each Portfolio currently intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made, not more than 3% of the
total outstanding stock of any one investment company will be owned by the
Portfolio, the Trust as a whole and their affiliated persons (as defined in the
1940 Act). An investment company whose securities are purchased by a Portfolio
or the Trust is not obligated to redeem such securities in an amount exceeding
1% of the investment company's total outstanding securities during any period of
less than 30 days. Therefore, such securities that exceed this amount may be
illiquid. Notwithstanding the foregoing, a Portfolio may adhere to more
restrictive limitations with respect to its investments in securities issued by
other investment companies if required by the SEC or deemed to be in the best
interests of the Trust, and will comply with any fundamental investment
restriction that may otherwise be applicable to such investments. To the extent
required by the 1940 Act, each Portfolio expects to vote the shares of other
investment companies that are held by it in the same proportion as the vote of
all other holders of such securities.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with financial institutions,
such as banks and broker-dealers, as are deemed creditworthy by Northern under
guidelines approved by the Trust's Board of Trustees. The repurchase price
under the repurchase agreements will generally equal the price paid by a
Portfolio plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the Trust's custodian (or subcustodian), in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. Repurchase
agreements are considered to be loans by a Portfolio under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
Each Portfolio (except the Tax-Exempt Portfolio) may borrow funds for temporary
or emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Portfolio may decline below the repurchase price. The Portfolios will pay
interest on amounts obtained pursuant to a reverse repurchase agreement. While
reverse repurchase agreements are outstanding, a Portfolio will
B-6
<PAGE>
maintain in a segregated account liquid assets in an amount at least equal to
the market value of the securities, plus accrued interest, subject to the
agreement. Reverse repurchase agreements are considered to be borrowings by a
Portfolio under the 1940 Act.
SECURITIES LENDING
Collateral for loans of portfolio securities made by a Portfolio may consist of
cash, securities issued or guaranteed by the U.S. Government or its agencies or
irrevocable bank letters of credit (or any combination thereof). The borrower of
securities will be required to maintain the market value of the collateral at
not less than the market value of the loaned securities, and such value will be
monitored on a daily basis. When a Portfolio lends its securities, it continues
to receive interest on the securities loaned and may simultaneously earn
interest on the investment of the cash collateral which will be invested in
readily marketable, high-quality, short-term obligations. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans will be called so that the securities may be voted by a
Portfolio if a material event affecting the investment is to occur.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Portfolio may purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the Portfolio to purchase or
sell securities at a future date. The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are normally negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis only with the intention of completing
the transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a Portfolio may dispose
of or negotiate a commitment after entering into it. A Portfolio also may sell
securities it has committed to purchase before those securities are delivered to
the Portfolio on the settlement date. The Portfolio may realize a capital gain
or loss in connection with these transactions. For purposes of determining a
Portfolio's average dollar-weighted maturity, the maturity of when-issued or
forward commitment securities will be calculated from the commitment date.
When a Portfolio purchases securities on a when-issued or forward commitment
basis, the Portfolio's custodian (or subcustodian) will maintain in a segregated
account liquid assets having a value (determined daily) at least equal to
the amount of the
B-7
<PAGE>
Portfolio's purchase commitments. In the case of a forward commitment to sell
portfolio securities, the custodian or subcustodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that the Portfolio will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
YIELDS AND RATINGS
The yields on certain obligations, including the money market instruments in
which the Portfolios invest (such as commercial paper and bank obligations), are
dependent on a variety of factors, including general money market conditions,
conditions in the particular market for the obligation, financial condition of
the issuer, size of the offering, maturity of the obligation and ratings of the
issue. The ratings of S&P, Moody's, D&P, Fitch and TBW represent their
respective opinions as to the quality of the obligations they undertake to rate.
Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
MUNICIPAL INSTRUMENTS
Opinions relating to the validity of Municipal Instruments and to the exemption
of interest thereon from regular Federal income tax are rendered by bond counsel
to the respective issuing authorities at the time of issuance. Neither the
Trust nor Northern will review the proceedings relating to the issuance of
Municipal Instruments or the bases for such opinions.
An issuer's obligations under its Municipal Instruments are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Instruments may be
materially adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the purpose
of restricting or eliminating the Federal income tax exemption for interest on
Municipal Instruments. For example, under the Tax Reform Act of 1986 interest
on certain private activity bonds must be included in an investor's Federal
alternative minimum taxable income, and corporate investors must include all
tax-exempt interest in their Federal alternative minimum taxable income. The
Trust cannot predict what legislation, if any, may be proposed in the future in
Congress as regards the Federal income tax status of
B-8
<PAGE>
interest on Municipal Instruments. Future proposals could materially adversely
affect the availability of Municipal Instruments for investment by the Tax-
Exempt Portfolio and the liquidity and value of the Portfolio. In such an event
the Board of Trustees would reevaluate the Portfolio's investment objective and
policies and consider changes in its structure or possible dissolution.
Interest earned by the Tax-Exempt Portfolio on private activity bonds (if any)
that is treated as a specific tax preference item under the Federal alternative
minimum tax will not be deemed to have been derived from Municipal Instruments
for purposes of determining whether that Portfolio meets its fundamental policy
that at least 80% of its annual gross income be derived from Municipal
Instruments.
STANDBY COMMITMENTS
The Tax-Exempt Portfolio may enter into standby commitments with respect to
Municipal Instruments held by it. Under a standby commitment, a dealer agrees
to purchase at the Portfolio's option a specified Municipal Instrument at its
amortized cost value to the Portfolio plus accrued interest, if any. Standby
commitments may be exercisable by the Portfolio at any time before the maturity
of the underlying Municipal Instruments and may be sold, transferred or assigned
only with the instruments involved.
The Tax-Exempt Portfolio expects that standby commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a standby commitment either
separately in cash or by paying a higher price for Municipal Instruments which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding standby commitments held by the Portfolio will not exceed
1/2 of 1% of the value of the Portfolio's total assets calculated immediately
after each standby commitment is acquired.
The Portfolio intends to enter into standby commitments only with dealers, banks
and broker-dealers which, in Northern's opinion, present minimal credit risks.
The Portfolio will acquire standby commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a standby commitment will not affect the valuation
or assumed maturity of the underlying Municipal Instrument. The actual standby
commitment will be valued at zero in determining net asset value. Accordingly,
where the Portfolio pays directly or indirectly for a standby commitment, its
cost will be reflected as an unrealized loss for the period during which the
commitment is held by the Portfolio and will be reflected in realized gain or
loss when the commitment is exercised or expires.
B-9
<PAGE>
INVESTMENT RESTRICTIONS
Each Portfolio is subject to the fundamental investment restrictions enumerated
below which may be changed with respect to a particular Portfolio only by a vote
of the holders of a majority of such Portfolio's outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements for the Diversified Assets, Government and
Government Select Portfolios) except to secure permitted borrowings.
(3) Purchase or sell real estate or securities issued by real estate
investment trusts, but this restriction shall not prevent a Portfolio from
investing directly or indirectly in portfolio instruments secured by real
estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs.
(5) Invest in companies for the purpose of exercising control or
management.
(6) Act as underwriter of securities (except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies), purchase
securities on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance
of transactions), make short sales of securities or maintain a short
position, or write puts, calls or combinations thereof.
(7) Purchase the securities of any issuer if such purchase would cause more
than 10% of the voting securities of such issuer to be held by the
Portfolio, except that up to 25% of the value of its total assets may be
invested without regard to this 10% limitation.
(8) Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if immediately after such purchase more than 5% of the
value of such Portfolio's total assets would be invested in such issuer,
except that: (a) up to
B-10
<PAGE>
25% of the value of the total assets of the Tax-Exempt Portfolio may be
invested in any securities, and up to 25% of the value of the total assets
of each of the other Portfolios may be invested in repurchase agreements,
certificates of deposit and bankers' acceptances, without regard to this
5% limitation; and (b) with respect to each Portfolio, such 5% limitation
shall not apply to repurchase agreements collateralized by obligations of
the U.S. Government, its agencies or instrumentalities.
(9) Purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation with respect to, and each Portfolio reserves freedom of action,
when otherwise consistent with its investment policies, to concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper)
issued or guaranteed by U.S. banks and U.S. branches of foreign banks and
repurchase agreements and securities loans collateralized by such U.S.
Government obligations or such bank obligations. For the purposes of this
restriction, state and municipal governments and their agencies and
authorities are not deemed to be industries; as to utility companies, the
gas, electric, water and telephone businesses are considered separate
industries; personal credit finance companies and business credit finance
companies are deemed to be separate industries; and wholly-owned finance
companies are considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents.
(10) Borrow money (other than pursuant to reverse repurchase agreements
for the Portfolios described above), except (a) as a temporary measure, and
then only in amounts not exceeding 5% of the value of the Portfolio's total
assets or (b) from banks, provided that immediately after any such
borrowing all borrowings of the Portfolio do not exceed one-third of the
Portfolio's total assets. No purchases of securities will be made if
borrowings subject to this restriction exceed 5% of the value of the
Portfolio's assets. The exceptions in (a) and (b) to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purposes or to facilitate management of the Trust's Portfolios by
enabling the Trust to meet redemption requests when the liquidation of
portfolio instruments is deemed to be disadvantageous or not possible. If
due to market fluctuations or other reasons the total assets of a Portfolio
fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
* * *
B-11
<PAGE>
The freedom of action reserved in Restriction No. 9 with respect to U.S.
branches of foreign banks is subject to the requirement that they are subject to
the same regulation as domestic branches of U.S. banks.
In addition, as matters of fundamental policy, the Government Select Portfolio,
Government Portfolio and Diversified Assets Portfolio may not enter into reverse
repurchase agreements exceeding in the aggregate one-third of the applicable
Portfolio's total assets; and the Tax-Exempt Portfolio may not acquire direct
ownership of industrial development bonds if, as a result of such acquisition,
more than 5% of the value of its total assets would be invested in industrial
development bonds where payment of principal and interest is the responsibility
of companies (including their predecessors) with less than three years of
operating history and such bonds are not guaranteed as to principal and interest
by companies (including their predecessors) with three years or more of
operating history.
Except to the extent otherwise provided in Investment Restriction (9) for the
purpose of such restriction, in determining industry classification the Trust
intends to use the industry classification titles in the Standard Industrial
Classification Manual.
In applying Restriction No. 8 and Restriction No. 9 above, a security is
considered to be issued by the entity, or entities, whose assets and revenues
back the security. A guarantee of a security is not deemed to be a security
issued by the guarantor when the value of all securities issued and guaranteed
by the guarantor, and owned by a Portfolio, does not exceed 10% of the value of
the Portfolio's total assets.
B-12
<PAGE>
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
B-13
<PAGE>
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is set forth
below.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
William H. Springer,67 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications
Lake Forest, IL 60045 Trustee holding company); Febru-
ary 1987 to retirement in
August 1992); Vice Chair
man, Chief Financial and
Administrative Officer,
prior thereto; Director,
Walgreen Co. (a retail drug
store business); Director
of Baker, Fentress & Co. (a
closed-end, non-diversified
management investment
company) (April 1992 to
present).
Edward J. Condon, Jr.,56 Trustee Chairman of The Paradigm
227 West Monroe Street Group, Ltd. (a financial
Chicago, IL 60606 advisor) since July 1993.
Vice President and
Treasurer of Sears, Roebuck
and Co. (a retail
corporation) from February
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 Overseas Finance N.V.
John W. English, 63 Trustee Private Investor. Vice
50-H New England Avenue President and Chief
P.O. Box 640 Investment Officer of The
Summit, NJ 07902-0640. Ford Foundation (a charitable trust)
from 1981 until 1993. Trustee: The
China Fund, Inc.; Paribas Trust for the
Institutions;
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Retail Property Trust; Sierra Trust;
American Red Cross in Greater New York;
Mote Marine Laboratory; and United
Board for Christian Higher Education in
Asia. Director: University of Iowa
Foundation; Blanton-Peale Institutes of
Religion and Health; Community
Foundation of Sarasota County; Duke
Management Company; and John Ringling
Centre Foundation.
James J. Gavin, Jr., 74 Trustee Vice Chairman from January
161 Thorntree Lane 1985 to August 1987 and
Winnetka, IL 60093 Senior Vice President-Finance and Chief
Financial Officer from 1975 to January
1985 of Borg-Warner Corporation (a
diversified manufacturing company also
engaged in providing financial and
protective services). Director of
Service Corporation International (a
funeral service/cemetery company),
Stepan Corporation (a producer of basic
and intermediate chemicals), Borg-
Warner Industrial Products, Inc. (a
supplier of advanced technology fluid
transfer and control equipment, systems
and services).
Frederick T. Kelsey, 69 Trustee Consultant to Goldman Sachs
3133 Laughing Gull Court from December 1985 through
Johns Island, February 1988. Director of
South Carolina 29455 Goldman Sachs Funds Group and Vice
President of Goldman Sachs from May
1981 until his retirement in November
1985. President
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
and Treasurer of the Trust through
August 1985.
Trustee, various management investment
companies affiliated with Kemper
Financial Companies.
Richard P. Strubel, 57 Trustee President and Chief
70 West Madison St Executive Officer, Tandem
Inc. Suite 1400 Partners, (a diversified
Chicago, IL 60602 manufacturer of fastening
systems and connectors)
(since January 1984).
Paul Klug, 45 President Vice President of Goldman
One New York Plaza Sachs; Director of
New York, NY 10004 Proprietary Mutual Funds of
GSAM (since February 1994);
Chief Operating Officer,
Vista Capital Management,
Chase Manhattan Bank (from
January 1990 to February
1994).
Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs; Co-manager,
Chicago, IL 60606 Shareholder Sevices of GSAM
Funds Group since June 1992. Consultant since
1989. Senior Vice President
of Fidelity Investments
prior to 1989.
Nancy L. Mucker, 47 Vice Vice President, Goldman
4900 Sears Tower President Sachs and Manager of
Chicago, IL Shareholder Services for
60606 GSAM Funds Group since
November 1989.
John W. Mosior, 58 Vice Vice President, Goldman
4900 Sears Tower President Sachs and Co-Manager of
Chicago, IL Shareholder Services for
60606 GSAM Funds Group since
November 1989.
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Scott M. Gilman, 37 Treasurer Director, Mutual Funds
One New York Plaza Administration, Goldman
New York, NY 10004 Sachs Asset Management
(since April 1994), Assistant
Treasurer, Goldman Sachs Funds
Management, Inc. (since March 1993);
Vice Pre sident, Goldman Sachs (since
March 1990).
John Perlowski, 32 Assistant Vice President, Goldman One New York Plaza
New York, NY 10004 Treasurer Sachs since July 1995;
Director, Investors Bank and Trust,
November 1993 to July 1995; Audit
Manager of Arthur Anderson LLP prior
thereto.
Michael J. Richman, 36 Secretary Associate General Counsel,
85 Broad Street Goldman Sachs Asset Manage
New York, NY 10004 ment (since February 1994);
Vice President and
Assistant General Counsel
of Goldman Sachs (since
June 1992);Counsel to the
Funds Group, GSAM (since
June 1992);Partner, Hale
and Dorr(September 1991 to
June 1992).
Howard B. Surloff, 31 Assistant Vice President and
85 Broad Street Secretary Assistant General Counsel,
New York, NY 10004 Goldman Sachs (since Novem ber 1993 and May 1994,
respectively); Counsel to the Funds Group,
Goldman Sachs Asset Management
(since November 1993); For
merly Associate of Shereff
Friedman, Hoffman & Goodman, LLP (prior
thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (June 1993 to
New York, NY 10004 present); Funds Compliance
</TABLE>
B-17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Officer, Citibank Global
Asset Management (August
1991 to June 1993); Legal
Assistant, Brown & Wood
(prior thereto).
Deborah A. Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs since
New York, NY 10004 January 1995. Formerly at
Cleary, Gottlieb, Steen &
Hamilton.
</TABLE>
Certain of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such Trustees and officers that all such transactions have been and
are expected to be in the ordinary course of business and the terms of such
transactions, including all loans and loan commitments by such persons, have
been and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers. Messrs. Springer, Kelsey,
Strubel, Klug, Mosior, Gilman, Richman, Surloff and Hartstein and Mmes.
Farrell, Mucker and Taylor hold similar positions with one or more investment
companies that are advised by Goldman Sachs. As a result of the
responsibilities assumed by Northern under its Advisory Agreement, Transfer
Agency Agreement and Custodian Agreement and Foreign Custody Agreement with the
Trust and by Goldman Sachs under its Administration Agreement and Distribution
Agreement with the Trust, the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment companies
of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser,
administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,250 and the Chairman of the Board
earns a quarterly retainer of $9,375. Each Trustee, including the Chairman of
the Board, earns an additional fee of $1,500 for each meeting attended, plus
reimbursement of expenses incurred as a Trustee.
In addition, the Trustees established an Audit Committee consisting of three
members including a Chairman of the Committee. Each member earns a fee of
$1,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,250.
B-18
<PAGE>
The Trust's officers do not receive fees from the Trust for services in such
capacities, although Goldman Sachs, of which they are also officers, receives
fees from the Trust for administrative services.
B-19
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1996:
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation from
Aggregate Accrued as Registrant and
Compensation Part of Fund Complex Paid
Name of Trustee from the Registrant Trust's Expenses to Trustees
- ----------------------- ------------------------------------- -----------------
<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
William B. Jordan* $ 2,083 $ 0 $ 2,083
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $ 0 $40,500
</TABLE>
* Retired as of December 31, 1995.
** Interest from deferred compensation.
B-20
<PAGE>
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern is one of the nation's leading providers of trust and investment
management services. As of December 31, 1996, Northern had over $130.3 billion
in assets under management for clients including public and private retirement
funds, endowments, foundations, trusts, corporations, and individuals. Northern
is one of the strongest banking organizations in the United States. Northern
believes it has built its organization by serving clients with integrity, a
commitment to quality, and personal attention. Its stated mission with respect
to all its financial products and services is to achieve unrivaled client
satisfaction. With respect to such clients, the Trust is designed to assist (i)
defined contribution plan sponsors and their employees by offering a range of
diverse investment options to help comply with 404(c) regulation and may also
provide educational material to their employees, (ii) employers who provide
post-retirement Employees' Beneficiary Associations ("VEBA") and require
investments that respond to the impact of federal regulations, (iii) insurance
companies with the day-to-day management of uninvested cash balances as well as
with longer-term investment needs, and (iv) charitable and not-for-profit
organizations, such as endowments and foundations, demanding investment
management solutions that balance the requirement for sufficient current income
to meet operating expenses and the need for capital appreciation to meet future
investment objectives.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for each Portfolio and placing purchase and sale orders for
the portfolio transactions of the Portfolios. In connection with portfolio
transactions for the Portfolios, which are generally done at a net price without
a broker's commission, Northern's Advisory Agreement provides that Northern
shall attempt to obtain the best net price and execution. In assessing the best
overall terms available for any transaction, Northern is to consider all factors
it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available and in selecting the broker or dealer to execute a particular
transaction, Northern may consider the brokerage and research services provided
to the Portfolios and/or other accounts over which Northern or an affiliate of
Northern exercises investment discretion. These brokerage and research services
may include industry and company analyses, portfolio services, quantitative
data, market information systems and economic and political consulting and
analytical services.
B-21
<PAGE>
For the fiscal years ended November 30, 1996, 1995 and 1994, all portfolio
transactions for the Portfolios were executed on a principal basis and,
therefore, no brokerage commissions were paid by the Portfolios. Purchases by
the Portfolios from underwriters of portfolio securities, however, normally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include the spread between the dealer's cost for a given
security and the resale price of the security.
Northern's investment advisory duties for the Trust are carried out through its
Trust Department. On occasions when Northern 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 (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Agreement provides
that Northern, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for such Portfolio with those
to be sold or purchased for such other accounts in order to obtain best net
price and execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
Northern in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Portfolio and other accounts involved. In some
instances, this procedure may adversely affect the size of the position
obtainable for a Portfolio or the amount of the securities that are able to be
sold for a Portfolio. To the extent that the execution and price available from
more than one broker or dealer are believed to be comparable, the Agreement
permits Northern, at its discretion but subject to applicable law, to select the
executing broker or dealer on the basis of Northern's opinion of the reliability
and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services to
others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, Northern has undertaken to
(1) answer customer inquiries regarding the current yield of, and certain other
matters (e.g. account status informa tion) pertaining to, the Trust, (2) process
purchase and redemption transactions, including transactions generated by any
service provided outside of the Agreement by Northern, its affiliates or
correspondent banks whereby customer account cash balances are automatically
invested in units of the Portfolios, and the disbursement of the proceeds of
redemptions, (3) establish and maintain separate omnibus accounts with respect
to unitholders
B-22
<PAGE>
investing through Northern or any of its affiliates and correspondent banks and
act as transfer agent and perform sub-accounting services with respect to each
such account, (4) provide periodic statements showing account balances, (5) mail
reports and proxy materials to unitholders, (6) provide information in
connection with the preparation by the Trust of various regulatory reports and
prepare reports to the Trustees and management, (7) answer inquiries (including
requests for prospectuses and Additional Statements, and assistance in the
completion of new account applications) from investors and respond to all
requests for information regarding the Trust (such as current price, recent
performance, and yield data) and questions relating to accounts of investors
(such as possible errors in statements, and transactions), (8) respond to and
seek to resolve all complaints of investors with respect to the Trust or their
accounts, (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors,
(10) furnish the Trust all pertinent Blue Sky information, (11) perform all
required tax withholding, (12) preserve records, and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more sub-
transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer Agency
Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate equal to
$18 for each subaccount relating to units of the Trust. This fee is subject to
annual upward adjustments based on increases in the Consumer Price Index for All
Urban Consumers, provided that Northern may permanently or temporarily waive all
or any portion of any upward adjustment. Northern's affiliates and
correspondent banks may receive compensation for performing the services
described in the preceding paragraph that Northern would otherwise receive.
Conflict-of-interest restrictions under state and Federal law (including the
Employee Retirement Income Security Act of 1974) may apply to the receipt by
such affiliates or correspondent banks of such compensation in connection with
the investment of fiduciary funds in Portfolio units.
Under its Custodian Agreement with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's securities
held by Northern under the Agreement, and (6) maintains the accounting records
of the Trust. Northern may employ one or more subcustodians, provided that
Northern shall have no more responsibility or liability to the Trust on account
of any action or omission of any subcustodian so employed than such subcustodian
B-23
<PAGE>
has to Northern and that the responsibility or liability of the subcustodian to
Northern shall conform to the resolution of the Trustees of the Trust
authorizing the appointment of the particular subcustodian. Northern may also
appoint agents to carry out such of the provisions of the Custodian Agreement as
Northern may from time to time direct, provided that the appointment of an
agent shall not relieve Northern of any of its responsibilities under the
Agreement.
As compensation for the services rendered to the Trust by Northern as custodian,
and the assumption by Northern of certain related expenses, Northern is entitled
to payment from the Trust as follows: (i) $18,000 annually for each Portfolio,
plus (ii) 1/100th of 1% annually of each Portfolio's average daily net assets to
the extent they exceed $100 million, plus (iii) a fixed dollar fee for each
trade in portfolio securities, plus (iv) a fixed dollar fee for each time that
Northern as custodian receives or transmits funds via wire, plus (v)
reimbursement of expenses incurred by Northern as Custodian for telephone,
postage, courier fees, office supplies and duplicating. The fees referred to in
clauses (iii) and (iv) are subject to annual upward adjustments based on
increases in the Consumer Price Index for All Urban Consumers, provided that
Northern may permanently or temporarily waive all or any portion of any upward
adjustment.
Unless sooner terminated, each of the Advisory Agreement, Transfer Agency
Agreement and Custodian Agreement between Northern and the Trust will continue
in effect with respect to a particular Portfolio until April 30, 1998, and
thereafter for successive 12-month periods, provided that the continuance is
approved at least annually (1) by the vote of a majority of the Trustees who are
not parties to the agreement or "interested persons" (as such term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval and (2) by the Trustees or by the vote of a
majority of the outstanding units of such Portfolio (as defined below under
"Other Information"). Each agreement is terminable at any time without penalty
by the Trust (by specified Trustee or unitholder action) on 60 days' written
notice to Northern and by Northern on 60 days' written notice to the Trust.
For the fiscal years ended November 30, 1996, November 30, 1995 and November 30,
1994, the amount of the Advisory Fee (after fee waivers) incurred by each
Portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Government Select
Portfolio $ 772,113 $ 569,065 $ 412,427
Government Portfolio 2,617,746 1,938,878 2,217,731
Diversified Assets
</TABLE>
B-24
<PAGE>
<TABLE>
<S> <C> <C> <C>
Portfolio 7,832,358 7,080,710 7,778,438
Tax-Exempt Portfolio 1,885,156 1,687,136 2,619,554
</TABLE>
In addition, for the fiscal years ended November 30, 1996, 1995 and 1994,
Northern waived additional advisory fees with respect to the Government Select
Portfolio in the amounts of $1,157,788, $853,605 and $622,131. Northern waived
additional advisory fees with respect to the Government Portfolio for the period
from June 1, 1994 through July 31, 1994 in the amount of $69,721.
For the fiscal years ended November 30, 1996, November 30, 1995 and November 30,
1994, the amount of the Transfer Agency Fee incurred by each Portfolio was as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Government Select
Portfolio $22,274 $ 25,000 $ 24,000
Government Portfolio 31,048 32,000 42,000
Diversified Assets
Portfolio 64,579 110,000 171,999
Tax-Exempt Portfolio 14,883 32,000 61,000
</TABLE>
For the fiscal years ended November 30, 1996, November 30, 1995 and November 30,
1994, the amount of the Custodian Fees incurred by each Portfolio was as
follows:
1996 1995 1994
-------- -------- --------
Government Select
Portfolio $ 96,787 $ 75,122 $ 55,000
Government Portfolio 131,957 101,086 110,235
Diversified Assets
Portfolio 360,387 317,635 345,186
Tax-Exempt Portfolio 105,936 97,551 126,449
- --
Banking laws and regulations currently prohibit a bank holding 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 continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern 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 noted,
B-25
<PAGE>
however, that future changes in either Federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as future judicial or administrative decisions or
interpretations of current and future statutes and regulations, could prevent
Northern from continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Northern 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. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Northern is active as an underwriter of municipal instruments. Under the 1940
Act the Portfolios are precluded, subject to certain exceptions, from purchasing
in the primary market those municipal instruments with respect to which Northern
is serving as a principal underwriter. In the opinion of Northern, this
limitation will not significantly affect the ability of the Portfolios to pursue
their respective investment objectives.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of money market instruments. Its activities in this regard could have
some effect on the market for those instruments which the Portfolios acquire,
hold or sell.
In the Advisory Agreement, Northern agrees that the name "The Benchmark" may be
used in connection with the Trust's business on a royalty-free basis. Northern
has reserved to itself the right to grant the non-exclusive right to use the
name "The Benchmark" to any other person. The Advisory Agreement provides that
at such time as the Agreement is no longer in effect, the Trust will cease using
the name "The Benchmark." (This undertaking by the Trust may be subject to
certain legal limitations.)
B-26
<PAGE>
PORTFOLIO TRANSACTIONS
During the fiscal year ended November 30, 1996, the Diversified Assets Portfolio
acquired and sold securities of Bear Stearns & Co., Donaldson Lufkin & Jenrette
Securities, Inc., J.P. Morgan Securities, Inc., Merrill Lynch & Co., Inc. and
Swiss Bank, each a regular broker/dealer. At November 30, 1996, the Diversified
Assets Portfolio owned the following amounts of securities of its regular
broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or their parents:
Bear Stearns & Co., with an approximate aggregate market value of $270,101,000,
Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate aggregate
market value of $200,000,000, J.P. Morgan Securities, Inc., with an approximate
aggregate market value of $131,063,000, Merrill Lynch & Co., Inc., with an
approximate aggregate market value of $50,000,000 and Swiss Bank, with an
approximate aggregate market value of $10,001,000.
During the fiscal year ended November 30, 1996, the Government Portfolio
acquired and sold securities of Bear Stearns & Co., J.P. Morgan Securities,
Inc., Nomura Securities and UBS Securities, each a regular broker/dealer. At
November 30, 1996, the Government Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940 Act, or their parents: Bear Stearns & Co., with an approximate aggregate
market value of $140,000,000, J.P. Morgan Securities, Inc., with an approximate
aggregate market value of $8,704,000, Nomura Securities, with an approximate
aggregate market value of $200,000,000 and UBS Securities, with an approximate
aggregate market value of $50,000,000.
ADMINISTRATOR AND DISTRIBUTOR
Under its Administration Agreement with the Trust, Goldman Sachs, subject to the
general supervision of the Trust's Board of Trustees, acts as the Trust's
Administrator. In this capacity, Goldman Sachs (1) provides supervision of all
aspects of the Trust's non-investment advisory operations (the parties giving
due recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to
B-27
<PAGE>
the extent not provided pursuant to such agreements, for the preparation at the
Trust's expense of its tax returns, reports to unitholders, periodic updating of
the Prospectus issued by the Trust, and reports filed with the SEC and other
regulatory authorities (including qualification under state securities or Blue
Sky laws of the Trust's units), and (4) provides the Trust, to the extent not
provided pursuant to such agreements, with adequate office space and equipment
and certain related services in Chicago.
For the fiscal years ended November 30, 1996, 1995 and 1994, the amount of the
Administration Fee incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Government Select
Portfolio $ 897,049 $ 751,804 $ 590,000
Government Portfolio 1,036,172 895,112 1,118,000
Diversified Assets
Portfolio 2,079,083 1,928,672 1,917,000
Tax-Exempt Portfolio 885,446 828,163 777,000
</TABLE>
For the fiscal years ended November 30, 1996, 1995 and 1994, pursuant to a
voluntary undertaking, Goldman Sachs reimbursed each Portfolio as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Government Select
Portfolio $364,826 $346,936 $348,837
Government Portfolio 305,696 369,546 525,528
Diversified Assets
Portfolio 0 0 0
Tax-Exempt Portfolio 382,218 389,481 66,927
</TABLE>
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs has agreed that, if its administration fees (less expense reimbursements
paid by Goldman Sachs to the Trust and less certain marketing expenses paid by
Goldman Sachs) exceed a specified amount ($1 million for the Trust's first
twelve invest ment portfolios plus $50,000 for each additional portfolio) during
the current fiscal year, Goldman Sachs will waive a portion of its
administration fees during the following fiscal year. This undertaking may be
terminated by Goldman Sachs at any time without the consent of the Trust or the
unitholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
B-28
<PAGE>
Goldman Sachs has agreed in its Administration Agreement with the Trust that if
for the current fiscal year the sum of a Portfolio's expenses (including the
fees paid to Goldman Sachs as Administrator, but excluding Northern's investment
advisory fee, taxes, interest, brokerage and extraordinary expenses such as for
litigation) exceeds on an annualized basis .10% of the Portfolio's average net
assets, Goldman Sachs will reimburse the Portfolios in the amount of such excess
in such year. Pursuant to this undertaking, for the fiscal years ended November
30, 1996, 1995 and 1994, there were no reductions in the administration
fee.
Unless sooner terminated the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 1998, and thereafter for
successive 12-month periods, provided that the agreement is approved annually
(1) by the vote of a majority of the Trustees who are not parties to the
agreement or "interested persons" (as such term is defined by the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval, and (2) by the Trustees or by the vote of a majority of the
outstanding units of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
penalty by the Trust (upon specified Trustee or unitholder action) on 60 days'
written notice to Goldman Sachs and by Goldman Sachs on 60 days' written notice
to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman Sachs,
as agent, sells shares of each Portfolio on a continuous basis. Goldman Sachs
pays the cost of printing and distributing prospectuses to persons who are not
unitholders of Trust shares (excluding preparation and typesetting expenses) and
of all other sales presentations, mailings, advertising and other distribution
efforts. No compensation is payable by the Trust to Goldman Sachs for such
distribution services.
The Administration Agreement and the Distribution Agreement provide that Goldman
Sachs may render similar services to others so long as its services under such
Agreements are not impaired thereby. The Administration Agreement provides that
the Trust will indemnify Goldman Sachs against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Administration Agreement and Distribution Agreement) or, in lieu thereof,
contribute to resulting losses.
COUNSEL AND AUDITORS
Drinker Biddle & Reath, with offices at 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
B-29
<PAGE>
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago, Illinois
60606, have been selected as auditors of the Trust. In addition to audit
services, Ernst & Young LLP prepares the Trust's Federal and state tax returns,
and provides consultation and assistance on accounting, internal control and
related matters.
IN-KIND PURCHASES
Payment for units of a Portfolio may, in the discretion of Northern, be made in
the form of securities that are permissible investments for the Portfolio as
described in the Prospectus. For further information about this form of payment,
contact Northern. In connection with an in-kind securities payment, a Portfolio
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Portfolio and that
the Portfolio receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Portfolio; and that adequate information be
provided concerning the basis and other tax matters relating to the securities.
PERFORMANCE INFORMATION
From time to time the Trust may advertise quotations of "yields" and "effective
yields" with respect to each Portfolio's units, and "tax-equivalent yields" with
respect to units of the Government Select Portfolio and Tax-Exempt Portfolio
computed in accordance with a standardized method, based upon the seven-day
period ended on the date of calculation. In arriving at such quotations as to
"yield," the Trust first determines the net change during the period in the
value of a hypothetical pre-existing account having a balance of one unit at the
beginning of the period (such net change being inclusive of the value of any
additional units issued in connection with distributions of net investment
income as well as net investment income accrued on both the original unit and
any such additional units, but exclusive of realized gains and losses from the
sale of securities and unrealized appreciation and depreciation), then divides
such net change by the value of the account at the beginning of the period to
obtain the base period return, and then multiplies the base period return by
365/7.
The "effective yield" with respect to the units of a Portfolio is computed by
adding 1 to the base period return (calculated as above), raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result.
"Tax-equivalent yield" is computed by dividing the tax-exempt portion of the
yield by 1 minus a stated income tax rate, and then adding the product to the
taxable portion of the yield, if any.
B-30
<PAGE>
There may be more than one tax-equivalent yield if more than one stated income
tax rate is used.
Quotations of yield, effective yield and tax-equivalent yield provided by the
Trust are carried to at least the nearest hundredth of one percent. Any fees
imposed by Northern, its affiliates or correspondent banks on their customers in
connection with investments in units of the Portfolios are not reflected in the
calculation of yields for the Portfolios.
The annualized yield of each Portfolio with respect to units for the seven-day
period ended November 30, 1996 was as follows:
B-31
<PAGE>
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
------ ---------- ---------------
<S> <C> <C> <C>
Government Select
Portfolio 5.17% 5.30% N/A
Government Portfolio 5.09 5.22 N/A
Diversified Assets
Portfolio 5.16 5.29 N/A
Tax-Exempt Portfolio 3.35 3.41 5.55%
</TABLE>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations. See "Additional Trust Information - Administrator and
Distributor" and "-- Investment Adviser, Transfer Agent and Custodian." In the
absence of such fee reductions and expense limitations, the annualized yield of
each Portfolio with respect to units for the same seven-day period would have
been as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
------ ---------- ---------------
<S> <C> <C> <C>
Government Select
Portfolio 4.97% 5.10% N/A
Government Portfolio 5.06 5.19 N/A
Diversified Assets
Portfolio 5.16 5.29 N/A
Tax-Exempt Portfolio 3.30 3.36 5.50%
</TABLE>
Each Portfolio's yield fluctuates, unlike bank deposits or other investments
which pay a fixed yield for a stated period of time. The annualization of one
week's income is not necessarily indica tive of future actual yields. Actual
yields will depend on such variables as portfolio quality, average portfolio
maturity, the type of portfolio instruments acquired, changes in money market
interest rates, portfolio expenses and other factors. Yields are one basis
investors may use to analyze a Portfolio as compared to other money market funds
and other investment vehicles. However, yields of other money market funds and
other investment vehicles may not be comparable because of the foregoing
variables, and differences in the methods used in valuing their portfolio
instruments, computing net asset value and determining yield.
Each Portfolio may also quote from time to time its total return in accordance
with SEC regulations.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset value
of $1.00 per unit and, in this connection, values its instruments on the basis
of amortized cost pursuant to Rule 2a-7 under the 1940 Act. This method values
a security at its cost on
B-32
<PAGE>
the date of purchase and thereafter assumes a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Portfolio
would receive if the Portfolio sold the instrument. During such periods the
yield to investors in the Portfolio may differ somewhat from that obtained in a
similar entity which uses available indications as to market value to value its
portfolio instruments. For example, if the use of amortized cost resulted in a
lower (higher) aggregate Portfolio value on a particular day, a prospective
investor in the Portfolio would be able to obtain a somewhat higher (lower)
yield and ownership interest than would result from investment in such similar
entity and existing investors would receive less (more) investment income and
ownership interest. However, the Trust expects that the procedures and
limitations referred to in the following paragraphs of this section will tend to
minimize the differences referred to above.
Under Rule 2a-7, the Trust's Board of Trustees, in supervising the Trust's
operations and delegating special responsibilities involving portfolio
management to Northern, has established procedures that are intended, taking
into account current market conditions and the Portfolios' investment
objectives, to stabilize the net asset value of each Portfolio, as computed for
the purposes of purchases and redemptions, at $1.00 per unit. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per unit and the net asset value
per unit based upon available indications of market value. Available
indications of market value used by the Trust consist of actual market
quotations or appropriate substitutes which reflect current market conditions
and include (a) quotations or estimates of market value for individual portfolio
instruments and/or (b) values for individual portfolio instruments derived from
market quotations relating to varying maturities of a class of money market
instruments. In the event the Market Value Difference of a given Portfolio
exceeds certain limits or Northern believes that the Market Value Difference may
result in material dilution or other unfair results to investors or existing
unitholders, the Trust will take action in accordance with the 1940 Act and the
Trustees will take such steps as they consider appropriate (e.g., selling
portfolio instruments to shorten average portfolio maturity or to realize
capital gains or losses, reducing or suspending unitholder income accruals,
redeeming units in kind, or utilizing a net asset value per unit based upon
available indications of market value which under such circumstances would vary
from $1.00) to eliminate or reduce to the extent reasonably practicable any
material dilution or other unfair results to investors or existing unitholders
which might arise from Market Value Differences. In particular, if losses were
sustained by a Portfolio, the number of outstanding units might be reduced in
B-33
<PAGE>
order to maintain a net asset value per unit of $1.00. Such reduction would be
effected by having each unitholder proportionately contribute to the Portfolio's
capital the necessary units to restore such net asset value per unit. Each
unitholder will be deemed to have agreed to such contribution in these
circumstances by investing in the Portfolio.
Rule 2a-7 requires that each Portfolio limit its investments to instruments
which Northern determines (pursuant to guidelines established by the Board of
Trustees) to present minimal credit risks and which are "Eligible Securities" as
defined by the SEC and described in the Prospectus. The Rule also requires that
each Portfolio maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its policy of maintaining a stable net asset value
per unit and precludes the purchase of any instrument deemed under the Rule to
have a remaining maturity of more than 13 months. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Rule requires a Portfolio to invest its available cash in
such a manner as to reduce such maturity to the prescribed limit as soon as
reasonably practicable.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional units of beneficial interest of one or more
separate series representing interests in different investment portfolios. The
Trustees may hereafter create series in addition to the Trust's existing
seventeen series which represent interests in the seventeen respective
Portfolios. The Prospectus and this Additional Statement relate only to the
Government Select, Government, Diversified Assets and Tax-Exempt Portfolios.
For information on the Trust's other investment portfolios call Goldman Sachs at
the toll-free number on page 1.
Under the terms of the Trust Agreement, each unit of each Portfolio is without
par value, represents an interest in the particular Portfolio with each other
unit of the same Portfolio and is entitled to such dividends and distributions
out of the income belonging to such Portfolio as are declared by the Trustees.
Upon any liquidation of a Portfolio, its unitholders are entitled to share pro
rata in the net assets belonging to that Portfolio available for distribution.
Units do not have any preemptive or conversion rights. The right of redemption
is described under "Investing-Redemption of Units" in the Prospectus and under
"Amortized Cost Valuation" in this Additional Statement. In addition, pursuant
to the terms of the 1940 Act, the right of a unitholder to redeem units and the
date of payment by a Portfolio may be suspended for more than seven days (a) for
any period during which the New York Stock Exchange is closed, other than the
B-34
<PAGE>
customary weekends or holidays, or trading in the markets the Portfolio normally
utilizes is closed or is restricted as deter mined by the SEC, (b) during any
emergency, as determined by the SEC, as a result of which it is not reasonably
practicable for the Portfolio to dispose of instruments owned by it or fairly to
determine the value of its net assets, or (c) for such other period as the SEC
may by order permit for the protection of the unitholders of the Portfolio. The
Trust may also suspend or postpone the recordation of the transfer of its units
upon the occurrence of any of the foregoing conditions. In addition, units of
each Portfolio are redeemable at the unilateral option of the Trust if the
Trustees determine in their sole discretion that failure to so redeem may have
material adverse consequences to the unitholders of the Portfolio. Units when
issued as described in the Prospectus are validly issued, fully paid and
nonassessable, except as stated below.
The proceeds received by each Portfolio for each issue or sale of its units, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to and
constitute the underlying assets of that Portfolio. The underlying assets of
each Portfolio will be segregated on the books of account, and will be charged
with the liabilities in respect to that Portfolio and with a share of the
general liabilities of the Trust. Expenses with respect to the Portfolios are
normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding units of each Portfolio
affected by the matter. A Portfolio is affected by a matter unless it is clear
that the interests of each Portfolio in the matter are substantially identical
or that the matter does not affect any interest of the Portfolio. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
Portfolio only if approved by a majority of the outstanding units of such
Portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Trustees may be effectively acted upon by
unitholders of the Trust voting together in the aggregate without regard to a
particular Portfolio.
As a general matter, the Trust does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder voting
only for the election or removal of one or more Trustees, if a meeting is called
for that purpose, and
B-35
<PAGE>
for certain other designated matters. Each Trustee serves until the next meeting
of unitholders, if any, called for the purpose of considering the election or
reelection of such Trustee or of a successor to such Trustee, and until the
election and qualification of his successor, if any, elected at such meeting, or
until such Trustee sooner dies, resigns, retires or is removed by the
unitholders or two-thirds of the Trustees.
Under Massachusetts law, there is a possibility that unitholders of a business
trust could, under certain circumstances, be held personally liable as partners
for the obligations of the trust. The Trust Agreement contains an express
disclaimer of unitholder (as well as Trustee and officer) liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each contract, undertaking or instrument entered into or executed by the Trust
or the Trustees. The Trust Agreement provides for indemnification out of Trust
property of any unitholder charged or held personally liable for the obligations
or liabilities of the Trust solely by reason of being or having been a
unitholder of the Trust and not because of such unitholder's acts or omissions
or for some other reason. The Trust Agreement also provides that the Trust
shall, upon proper and timely request, assume the defense of any charge made
against any unitholder as such for any obligation or liability of the Trust and
satisfy any judgment thereon. Thus, the risk of a unitholder incurring
financial loss on account of unitholder liability is limited to circumstances in
which the Trust itself would be unable to meet its obligations.
The Trust Agreement provides that each Trustee of the Trust will be liable for
his own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee ("disabling
conduct"), and for nothing else, and will not be liable for errors of judgment
or mistakes of fact or law. The Trust Agreement provides further that the Trust
will indemnify Trustees and officers of the Trust against liabilities and
expenses incurred in connection with litigation and other proceedings in which
they may be involved (or with which they may be threatened) by reason of their
positions with the Trust, except that no Trustee or officer will be indemnified
against any liability to the Trust or its unitholders to which he would
otherwise be subject by reason of disabling conduct.
Units are held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks who have invested in the
Portfolios. As of March 1, 1997, the trustees and officers of the Trust as a
group owned less than 1% of the outstanding units of beneficial interest of each
Portfolio. Northern has advised the Trust that the following persons (whose
mailing address is: c/o The Northern Trust Company, 50 South LaSalle, Chicago,
IL 60675) beneficially owned five
B-36
<PAGE>
percent or more of the outstanding units of the Portfolios as of March 2, 1997:
<TABLE>
<CAPTION>
Percentage
of
Outstand-
Number of ing
Units Units
----------- ----------
<S> <C> <C>
GOVERNMENT SELECT PORTFOLIO
Northern Trust Custodian
MARISOTE Capital Fund 20,833,417 10.32%
American Medical Association
Reserve Fund 19,384,909 9.60
18-70 Capital Corp. 13,115,508 6.50
Imperial Group First Pacific Advisor 11,284,503 5.59
Santa Fe Pacific Gold Corp Rabi Trust-
Severance Agreements 10,744,620 5.32
Bunting Family I Limited Liabilty
Company-Sundry Assets 10,698,681 5.30
GOVERNMENT PORTFOLIO
Texas Teachers Global Equity 448,807,820 34.69
TAX-EXEMPT PORTFOLIO
Health Care Indemnity Inc. 59,693,013 14.20
Laurence A. & Preston R. Tisch
Tenants in Common 31,861,958 7.58
RDV Finance Ltd. 22,796,022 5.42
</TABLE>
ADDITIONAL INFORMATION CONCERNING TAXES
GENERAL
Each Portfolio is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to qualify as a
regulated investment company. By following this policy, each Portfolio expects
to eliminate or reduce to a nominal amount the Federal income taxes to which it
may be subject. If for any taxable year a Portfolio does not qualify for the
special Federal tax treatment afforded regulated investment companies, all of
the Portfolio's taxable income would be subject to tax at regular corporate
rates without any deduction for distributions to unitholders. In such event,
the Portfolio's distributions (including amounts derived from interest on
Municipal Instruments in the case of the Tax-Exempt Portfolio) would be taxable
as ordinary income for Federal income tax purposes to the Portfolio's
unitholders, to the extent of its current and accumulated earnings and profits,
and would be eligible for the dividends received deduction in the case of
corporate unitholders.
In order to qualify as a regulated investment company for a taxable year under
the Code, each Portfolio must comply with certain requirements. First, each
Portfolio must distribute to its
B-37
<PAGE>
unitholders an amount equal to at least the sum of 90% of its investment company
taxable income and 90% of its net tax-exempt interest income (if any) (the
"Distribution Requirement"). At least 90% of the gross income of each Portfolio
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, and other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to the Portfolio's business
of investing in such stock, securities or currencies (the "Income Requirement").
In addition, a Portfolio must derive less than 30% of its gross income for a
taxable year from gains realized on the sale or other disposition of securities
and certain other investments held for less than three months (the "Short-Short
Test"). Interest (including original issue discount and accrued market discount)
received by a Portfolio upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, any other income attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. Finally, at the close of each quarter of its taxable year, at
least 50% of the value of each Portfolio's assets must consist of cash and cash
items, U.S. Government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Portfolio has not
invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Portfolio does not hold more than 10% of the
outstanding voting securities of such issuer) and no more than 25% of the value
of each Portfolio's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Portfolio controls
and which are engaged in the same or similar trades or businesses.
Each Portfolio will designate any distribution of the excess of net long-term
capital gain over net short-term capital loss as a capital gain dividend in a
written notice mailed to unitholders within 60 days after the close of the
Portfolio's taxable year.
Ordinary income of individuals (including short-term capital gains) is taxable
at a maximum marginal rate of 39.6%, but because of limitations on itemized
deductions otherwise allowable and the phase-out of personal exemptions, the
maximum effective marginal rate of tax for some taxpayers may be higher. An
individual's long-term capital gains are taxable at a maximum rate of 28%. For
corporations, long-term capital gains and ordinary income are both taxable at a
maximum marginal rate of 35%.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute specified percentages of their ordinary taxable
income and capital gain net income
B-38
<PAGE>
(excess of capital gains over capital losses). Each Portfolio intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
The Trust will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends and gross sale proceeds paid to any unitholder
(i) who has provided either an incorrect tax identification number or no number
at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend income
properly, or (iii) who has failed to certify to the Trust, when required to do
so, that he or she is not subject to backup withholding or that he or she is an
"exempt recipient."
SPECIAL TAX CONSIDERATIONS PERTAINING TO THE TAX-EXEMPT PORTFOLIO
As described above and in the Prospectus, the Tax-Exempt Portfolio is designed
to provide investors with current tax-exempt interest income. The Portfolio is
not intended to constitute a balanced investment program and is not designed for
investors seeking capital appreciation or maximum tax-exempt income irrespective
of fluctuations in principal. Units of the Portfolio would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R.10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt and, therefore, would
not gain any additional benefit from the Portfolio's dividends being tax-exempt.
In addition, the Portfolio may not be an appropriate investment for persons or
entities that are "substantial users" of facilities financed by private activity
bonds or "related persons" thereof. "Substantial user" is defined under U.S.
Treasury Regulations to include a non-exempt person which regularly uses a part
of such facilities in its trade or business and whose gross revenues derived
with respect to the facilities financed by the issuance of bonds are more than
5% of the total revenues derived by all users of such facilities, or which
occupies more than 5% of the usable area of such facilities or for which such
facilities or a part thereof were specifically constructed, reconstructed or
acquired. "Related persons" include certain related natural persons, affiliated
corporations, partnerships and its partners and an S corporation and its
shareholders.
In order for the Tax-Exempt Portfolio to pay Federal exempt-interest dividends
with respect to any taxable year, at the close of each taxable quarter at least
50% of the aggregate value of the Portfolio must consist of tax-exempt
obligations. An exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by the Portfolio and designated as an exempt-
interest dividend in a written notice mailed to unitholders not later than 60
days after the close of the
B-39
<PAGE>
Portfolio's taxable year. However, the aggregate amount of dividends so
designated by the Portfolio cannot exceed the excess of the amount of interest
exempt from tax under Section 103 of the Code received by the Portfolio during
the taxable year over any amounts disallowed as deductions under Sections 265
and 171(a)(2) of the Code. The percentage of total dividends paid by the
Portfolio with respect to any taxable year which qualifies as Federal exempt-
interest dividends will be the same for all unitholders receiving dividends from
the Portfolio with respect to such year.
Interest on indebtedness incurred by a unitholder to purchase or carry Portfolio
units generally is not deductible for Federal income tax purposes if the
Portfolio's distributions are not subject to Federal income tax.
FOREIGN INVESTORS
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain
on the redemption of units or in respect of capital gain dividends, provided
such unitholder submits a statement, signed under penalties of perjury,
attesting to such unitholder's exempt status. Different tax consequences apply
to a foreign unitholder engaged in a U.S. trade or business. Foreign
unitholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of investing in the Trust.
CONCLUSION
The foregoing discussion is based on tax laws and regulations which are in
effect on the date of this Additional Statement. Such laws and regulations may
be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolios or their
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed
B-40
<PAGE>
with the SEC under the Securities Act of 1933 with respect to the securities
offered by the Trust's Prospectus. Certain portions of the Registration
Statement have been omitted from the Prospectus and this Additional Statement
pursuant to the rules and regulations of the SEC. The Registration Statement
including the exhibits filed therewith may be examined at the office of the SEC
in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees and expenses payable to Northern and
Goldman Sachs, brokerage fees and commissions, any portfolio losses, fees for
the registration or qualification of Portfolio units under Federal or state
securities laws, expenses of the organization of the Trust or of additional
Portfolios, taxes, interest, costs of liability insurance, fidelity bonds,
indemnification or contribution, any costs, expenses or losses arising out of
any liability of or claim for damages or other relief asserted against the Trust
for violation of any law, legal, tax services and auditing fees and expenses,
expenses of preparing and printing prospectuses, statements of additional
information, proxy materials, reports and notices and the printing and
distributing of the same to the Trust's unitholders and regulatory authorities,
compensation and expenses of its Trustees, expenses for industry organizations
such as the Investment Company Institute, miscellaneous expenses and
extraordinary expenses incurred by the Trust.
B-41
<PAGE>
The term "majority of the outstanding units" of either the Trust or a particular
Portfolio means, with respect to the approval of an investment advisory
agreement or a change in a fundamental investment restriction, the vote of the
lesser of (i) 67% or more of the units of the Trust or such Portfolio present at
a meeting, if the holders of more than 50% or the outstanding units of the Trust
or such Portfolio are present or represented by proxy, or (ii) more than 50% of
the outstanding units of the Trust or such Portfolio.
STATEMENTS CONTAINED IN THE PROSPECTUS OR IN THIS ADDITIONAL STATEMENT AS TO
THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENTS REFERRED TO ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF SUCH CONTRACT OR
OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THE
PROSPECTUS AND THIS ADDITIONAL STATEMENT FORM A PART, EACH SUCH STATEMENT BEING
QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE.
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to unitholders for the
fiscal year ended November 30, 1996 (the "Annual Report") are hereby
incorporated herein by reference. No other part of the Annual Report is
incorporated by reference herein. Copies of the Annual Report may be obtained
by writing to Goldman, Sachs & Co., Funds Group, 4900 Sears Tower, Chicago,
Illinois 60606, or by calling Goldman Sachs toll-free at 800-621-2550.
B-42
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
MARKET VIEW
THE BENCHMARK DIVERSIFIED ASSETS PORTFOLIO
THE BENCHMARK GOVERNMENT PORTFOLIO
THE BENCHMARK GOVERNMENT SELECT PORTFOLIO
The Federal Reserve's monetary policy and expectations about where that policy
was headed had the largest influence on portfolio activity during the fiscal
year ended November 30, 1996.
The Diversified Assets Portfolio was heavily weighted in commercial paper,
where yields were the most attractive. We maintained a barbell maturity struc-
ture as we tried to anticipate Fed activity. Any opportunities to capture addi-
tional yield by extending the portfolio's maturity were evaluated on a case-by-
case basis. At year end, the portfolio's average maturity was 35 days--consis-
tent with other money market funds with similar investment objectives.
During the first half of the fiscal year, the Government and Government Se-
lect Portfolios were heavily weighted in monthly agency securities. We expected
the federal funds rate to go down, so we initiated this strategy to extend the
portfolios and take advantage of higher yields. In the second half of the year,
as signs of a strengthening economy emerged, the consensus was that the Fed
would raise rates. We employed a barbell strategy, focusing on one-year Trea-
sury bills for yield and to maintain our average maturity and overnight securi-
ties for liquidity.
Looking ahead, year-end pressures should push rates higher. After that, final
inflation numbers for 1996 may cause the Fed to take action. We will maintain
our current portfolio structures and continue to act defensively in anticipat-
ing the Fed's next move.
Mary Ann Flynn and Ed Kyritz, Portfolio Managers
THE BENCHMARK TAX-EXEMPT PORTFOLIO
Early in the fiscal year, our outlook was for a stable or declining interest
rate environment. Our strategy, therefore, was to keep the portfolio's average
maturity longer than other portfolios with a similar investment objective. When
short-term rates are stable or declining, it is better to have a relatively
longer maturity structure in order to capture incremental yield increases.
As it turned out, interest rates remained relatively stable during the year,
and our strategy worked well. The portfolio's one-year performance was favora-
ble compared to industry averages.
Going forward, we plan to maintain the portfolio's relatively longer average
maturity. Currently, the consensus is split as to whether the Federal Reserve's
next move will be a tightening or easing of rates. We believe that a stable
rate environment will prevail for at least the next quarter, and possibly for
the next six to 12 months. However, we will continue to monitor and evaluate
the country's economic data as it is released, and we will position the portfo-
lio accordingly.
Brad Snyder, Portfolio Manager
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company, or its affiliates, and are not Federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested. The
Benchmark Money Market Portfolios seek to maintain a net asset value of $1.00
per unit, but there can be no assurance that they will be able to do so on a
continuous basis.
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
INVESTMENT ABBREVIATIONS AND NOTES:
AMBAC--American Municipal Bond Assurance Corp.
BAN --Bond Anticipation Note
BTP --Bankers Trust Partnership
Colld.
--Collateral
CP --Commercial Paper
FGIC --Financial Guaranty Insurance Corp.
FNMA --Federal National Mortgage Association
FRN --Floating Rate Note
FSAC --Financial Security Assurance Corp.
GO --General Obligation
Gtd. --Guaranteed
GNMA --Government National Mortgage Association
HDA --Housing Development Authority
IDA --Industrial Development Authority
IDR --Industrial Development Revenue
LOC --Letter of Credit
MBIA --Municipal Bond Insurance Association
ML SG--Merrill Lynch/Societe Generale
P-Floats
--Puttable Floating Rate Security
PCR --Pollution Control Revenue
RAN --Revenue Anticipation Note
TAN --Tax Anticipation Note
TOB --Tender Option Bond
TRAN --Tax and Revenue Anticipation Note
VRDN --Variable Rate Demand Note
- --The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --Interest rates represent either the stated coupon rate, annualized yield on
date of purchase for discounted notes, or, for floating rate securities, the
current reset rate.
- --Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
- --The amortized cost also represents cost for federal income tax purposes.
- --Interest rates are reset daily and interest is payable monthly with respect
to all joint repurchase agreements.
See accompanying notes to financial statements.
2
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED ASSETS PORTFOLIO
BANK NOTES--2.2%
Boatmen's National Bank of Kansas
City FRN
$ 50,000 5.580% 12/03/96 $ 49,995
Boatmen's National Bank of St. Louis
FRN
20,000 5.580 12/03/96 20,000
- -------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 69,995
- -------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--10.9%
DOMESTIC DEPOSITORY INSTITUTIONS--1.1%
First Alabama Bank
$ 10,000 5.400% 03/07/97 $ 10,000
First Tennessee Bank
25,000 5.300 12/23/96 25,000
--------
35,000
FOREIGN DEPOSITORY INSTITUTIONS--9.8%
Abbey National PLC, London
100,000 5.510 04/15/97 100,009
ABN-Amro Bank, New York
35,000 5.690 04/17/97 35,002
Credit Agricole, New York
30,000 5.420 12/30/96 30,002
Deutsche Bank, London
25,000 5.420 12/27/96 25,001
Landesbank Hessen, New York
20,000 6.090 09/11/97 20,065
Norinchukin Bank, New York
25,000 5.540 12/06/96 25,001
Societe Generale, New York
26,000 5.840 10/06/97 26,057
Sumitomo Bank Ltd., New York
5,000 5.410 12/09/96 5,000
35,000 5.370 12/12/96 35,000
Swiss Bank Corp., New York
10,000 5.530 12/18/96 10,001
--------
311,138
- -------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT $346,138
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Amortized
Amount Interest Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER--48.2%
ASSET-BACKED SECURITIES--9.5%
Ascot Capital Corp.
$ 22,100 5.373% 12/20/96 $ 22,038
Barton Capital Corp.
2,718 5.369 12/16/96 2,712
Centric Funding
13,000 5.344 12/04/96 12,994
5,000 5.405 12/05/96 4,997
Cooperative Association of Tractor
Dealers, Inc.
13,600 5.446 12/10/96 13,582
7,600 5.524 01/10/97 7,554
Crosby Head Funding Corp.
10,000 5.478 12/19/96 9,973
Eureka Securitization, Inc.
10,000 5.360 12/03/96 9,997
Jet Funding Corp. (Dai-Ichi Kangyo
Bank LOC)
18,916 5.452 12/02/96 18,913
30,563 5.506 12/30/96 30,429
SALTS (II) Cayman Islands Corp.
25,000 5.775 12/19/96 25,000
SALTS (III) Cayman Islands Corp.
48,000 5.681 01/23/97 48,000
30,000 5.974 01/23/97 30,000
Strategic Asset Funding Corp. (Sanwa
Bank LOC)
40,744 5.476 01/31/97 40,371
WCP Funding, Inc.
25,000 5.455 12/03/96 24,992
----------
301,552
COMMUNICATIONS--4.6%
GTE Financial Corp.
25,997 5.353 12/13/96 25,951
Lucent Technologies, Inc.
75,000 5.404 12/02/96 74,989
NYNEX Corp.
35,000 5.394 02/14/97 34,612
11,000 5.400 02/21/97 10,867
----------
146,419
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
DOMESTIC DEPOSITORY INSTITUTIONS--0.2%
Bankers Trust Corp.
<S> <C> <C> <C>
$ 7,300 5.463% 04/04/97 $ 7,166
ELECTRONIC AND OTHER ELECTRICAL COMPONENTS--4.5%
Cooper Industries, Inc.
50,000 5.404 12/02/96 49,993
Sanyo Electric Finance (USA) Corp.
2,000 5.432 02/07/97 1,980
5,000 5.446 02/25/97 4,936
Whirlpool Financial Corp.
1,440 5.350 12/02/96 1,440
27,000 5.420 12/04/96 26,988
10,000 5.360 12/20/96 9,972
33,000 5.370 12/20/96 32,907
15,000 5.474 02/24/97 14,809
----------
143,025
FOOD AND KINDRED PRODUCTS--2.2%
Pepsico, Inc.
20,000 5.405 12/03/96 19,994
Philip Morris Companies, Inc.
50,000 5.404 12/02/96 49,993
----------
69,987
FOOD STORES--0.5%
Big B, Inc. (NationsBank Georgia LOC)
17,000 5.495 12/18/96 16,956
FOREIGN DEPOSITORY INSTITUTIONS--2.7%
Halifax Building Society
1,550 5.469 03/13/97 1,527
National Australia Funding Inc.
1,000 5.445 02/12/97 989
Nationwide Building Society
39,052 5.474 04/07/97 38,315
San Paolo U.S. Financial Co.
11,000 5.484 04/16/97 10,778
Woolwich Building Society
35,000 5.412 12/13/96 34,938
----------
86,547
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
GENERAL MERCHANDISE STORES--0.8%
J.C. Penney Funding Corp.
<S> <C> <C> <C>
$ 25,000 5.415% 03/07/97 $ 24,645
HOLDING AND OTHER COMPANIES--3.5%
AESOP Funding Corp.
2,000 5.345 12/13/96 1,996
B.A.T. Capital Corp.
10,000 5.376 12/16/96 9,978
CSW Credit, Inc.
12,200 5.296 12/03/96 12,196
16,000 5.309 12/04/96 15,993
Green Tree Financial Corp.
23,143 5.413 12/12/96 23,105
2,000 5.418 12/12/96 1,997
7,000 5.424 12/19/96 6,981
25,000 5.441 12/23/96 24,917
National Rural Utilities Cooperative
15,000 5.370 12/09/96 14,982
----------
112,145
INSURANCE CARRIERS--0.5%
Copley Financing Corp.
7,537 5.372 12/17/96 7,519
Prudential Funding Corp.
8,400 5.277 12/02/96 8,399
----------
15,918
NONDEPOSITORY BUSINESS CREDIT INSTITUTIONS--9.4%
Associates Corp. of North America
150,000 5.424 12/02/96 149,977
FBA Properties, Inc. (NationsBank
Georgia LOC)
11,400 5.474 02/10/97 11,278
Finova Capital Corp.
30,000 5.332 12/02/96 29,995
20,000 5.404 12/02/96 19,997
PHH Corp.
16,300 5.327 12/16/96 16,264
Sanwa Business Credit Corp.
2,000 5.391 12/02/96 2,000
2,000 5.392 12/03/96 1,999
18,000 5.429 02/06/97 17,820
25,000 5.453 02/06/97 24,750
16,000 5.442 02/12/97 15,826
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
NONDEPOSITORY BUSINESS CREDIT INSTITUTIONS--CONTINUED
Showa Leasing (U.S.A.), Inc. Series:
C
(Industrial Bank of Japan Ltd. LOC)
<S> <C> <C> <C>
$10,000 5.457% 02/18/97 $ 9,882
----------
299,788
NONDEPOSITORY PERSONAL CREDIT INSTITUTIONS--0.8%
Countrywide Home Loans
25,000 5.347 12/09/96 24,971
TRANSPORTATION--8.7%
BMW US Capital Corp.
25,000 5.327 12/16/96 24,945
18,091 5.346 12/16/96 18,051
Chrysler Financial Corp.
25,000 5.378 12/19/96 24,933
20,000 5.423 02/20/97 19,759
20,000 5.425 02/20/97 19,759
45,000 5.427 02/25/97 44,425
Ford Motor Credit Corp.
50,000 5.404 12/02/96 49,992
General Motors Acceptance Corp.
2,806 5.580 12/16/96 2,800
28,000 5.626 02/12/97 27,689
11,000 5.467 05/01/97 10,754
35,000 5.478 05/15/97 34,144
----------
277,251
TRANSPORTATION EQUIPMENT--0.3%
PACCAR Financial Corp.
8,000 5.368 12/19/96 7,979
- ---------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER $1,534,349
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
CORPORATE NOTES--6.1%
AT&T Capital Corp. FRN
<S> <C> <C> <C>
$50,000 5.415% 12/23/96 $ 50,000
Bear Stearns Companies FRN
10,100 5.913 12/18/96 10,101
FPL Capital Group
5,400 6.500 07/01/97 5,429
General Electric Engine Receivables
1995-1 Trust FRN
20,974 5.476 12/02/96 20,975
General Motors Acceptance Corp.
4,660 8.000 04/10/97 4,701
International Business Machines
Credit Corp.
55,000 5.000 02/24/97 54,985
10,000 5.450 11/10/97 9,982
PHH Corp.
40,000 4.950 02/10/97 39,940
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES $ 196,113
- ---------------------------------------------------------------------------------------------------
EURODOLLAR TIME DEPOSITS--5.1%
Creditanstalt Bank, Grand Cayman
$75,000 5.625% 12/02/96 $ 75,000
Hong Kong & Shanghai Bank, Grand
Cayman
89,000 5.438 12/02/96 89,000
- ---------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR TIME DEPOSITS $ 164,000
- ---------------------------------------------------------------------------------------------------
GUARANTEED INVESTMENT CONTRACTS--3.5%
General American Life Insurance Co.
FRN
$75,000 5.580% 12/23/96 $ 75,000
Transamerica Life Insurance and
Annuity Co. FRN
35,000 5.375 12/02/96 35,000
- ---------------------------------------------------------------------------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS $ 110,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- ---------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
MUNICIPAL INVESTMENTS--2.8%
County of Broward (Florida)
Professional Sports Facilities
<S> <C> <C> <C>
$ 17,500 5.460% 12/01/96 $ 17,500
City of Minneapolis-St. Paul (Minnesota) Metro Airport G.O. Bond
20,000 5.475 12/01/96 20,000
City of Seattle (Washington) Ltd.G.O. Bond, Series: C
30,000 5.400 12/04/96 30,000
Hydro-Quebec Corp. Monthly Put TOB FRN
9,000 5.480 12/01/96 9,000
State of Virginia HDA Multi-Family
Housing Bond
12,745 5.475 12/01/96 12,745
- ---------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $ 89,245
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY--1.6%
Federal Home Loan Bank Discount Note
$ 50,000 5.703% 12/02/96 $ 49,992
- ---------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY $ 49,992
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--1.6%
U.S. Treasury Bill
$ 50,000 5.005% 02/06/97 $ 49,556
- ---------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION $ 49,556
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--20.2%
REPURCHASE AGREEMENTS--18.6%
Bear Stearns & Co., Inc., Dated
11/29/96, Repurchase Price $260,123
(U.S. Government Securities Colld.)
$ 260,000 5.680% 12/02/96 $260,000
Donaldson, Lufkin & Jenrette
Securities, Inc., Dated 11/27/96,
Repurchase Price $200,149 (U.S.
Government Securities Colld.)
200,000 5.360 12/02/96 200,000
J.P. Morgan Securities, Inc., Dated
11/29/96, Repurchase Price $115,054
(U.S. Government Securities Colld.)
115,000 5.680 12/02/96 115,000
J.P. Morgan Securities, Inc., Dated
11/29/96, Repurchase Price $16,071
(U.S. Government Securities Colld.)
16,063 5.800 12/02/96 16,063
--------
591,063
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- ----------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENT--1.6%
Merrill Lynch Government Securities,
Inc., Dated 8/12/96 (U.S. Government
Securities Colld.) Accrued Interest
$143
<S> <C> <C> <C>
$ 50,000 5.726% 12/02/96 $ 50,000
- ----------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 641,063
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--102.2% $3,250,451
- ----------------------------------------------------------------------------------------------------
Liabilities, less other assets--(2.2%) (70,922)
- ----------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $3,179,529
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- -------------------------------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
U.S. GOVERNMENT AGENCIES--66.5%
FEDERAL HOME LOAN BANK DISCOUNT NOTES--23.2%
<S> <C> <C> <C>
$213,000 5.703% 12/02/96 $212,966
25,000 5.318 12/17/96 24,942
11,000 5.652 01/09/97 10,934
17,000 5.638 01/17/97 16,878
20,000 5.451 01/21/97 19,851
9,000 5.445 01/22/97 8,932
--------
294,503
FEDERAL HOME LOAN BANK MEDIUM TERM
NOTE--1.3%
15,915 5.800 08/12/97 15,921
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES--14.2%
15,000 5.222 12/11/96 14,978
25,000 5.241 12/11/96 24,964
14,900 5.246 12/16/96 14,868
30,000 5.288 02/04/97 29,717
47,000 5.285 02/14/97 46,489
15,000 5.332 02/18/97 14,827
34,000 5.284 02/19/97 33,606
--------
179,449
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DISCOUNT NOTES--15.9%
25,000 5.357 12/18/96 24,938
20,000 5.549 12/19/96 19,946
25,000 5.282 02/10/97 24,743
40,000 5.288 02/10/97 39,588
25,000 5.301 02/18/97 24,713
20,000 5.379 04/04/97 19,638
20,000 5.290 04/16/97 19,609
5,000 5.388 04/16/97 4,901
24,500 5.392 04/16/97 24,014
--------
202,090
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MEDIUM TERM NOTES--3.9%
14,000 5.350 12/26/96 14,000
20,000 5.860 07/03/97 20,024
15,000 5.520 10/28/97 14,996
--------
49,020
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- -----------------------------------------------------------------------------------------------
OVERSEAS PRIVATE INVESTMENT CORP. FRN--2.8%
<S> <C> <C> <C>
$ 35,800 5.390% 12/04/96 $ 35,800
STUDENT LOAN MARKETING ASSOCIATION FRN--3.5%
30,000 5.220 12/03/96 29,994
15,000 5.350 12/03/96 14,992
----------
44,986
STUDENT LOAN MARKETING ASSOCIATION MEDIUM TERM NOTE--1.7%
21,710 5.965 09/12/97 21,737
- -----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $ 843,506
- -----------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.7%
U.S. TREASURY BILLS
$ 5,000 5.005% 02/06/97 $ 4,956
10,000 5.134 02/06/97 9,909
20,000 5.458 11/13/97 19,003
- -----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 33,868
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--31.4%
REPURCHASE AGREEMENTS--27.5%
Bear Stearns & Co., Inc., Dated 11/27/96, Repurchase Price $140,104 (U.S.
Government Securities Colld.)
$140,000 5.350% 12/02/96 $ 140,000
J.P. Morgan Securities, Inc, Dated 11/29/96, Repurchase Price
$8,708 (U.S. Government Securities Colld.)
8,704 5.800 12/02/96 8,704
Nomura Securities International, Dated 11/27/96, Repurchase Price
$200,149 (U.S. Government Securities Colld.)
200,000 5.375 12/02/96 200,000
----------
348,704
JOINT REPURCHASE AGREEMENT--3.9%
UBS Securities, Inc., Dated 08/26/96 (U.S. Government Securities Colld.)
Accrued Interest $144
50,000 5.710 12/02/96 50,000
- -----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 398,704
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.6% $1,276,078
- -----------------------------------------------------------------------------------------------
Liabilities, less other assets--(0.6)% (7,563)
- -----------------------------------------------------------------------------------------------
NET ASSETS--100.0% $1,268,515
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- ---------------------------------------------------------------------------------------------------
GOVERNMENT SELECT PORTFOLIO
U.S. GOVERNMENT AGENCIES--97.6%
FEDERAL FARM CREDIT BANK DISCOUNT NOTES--15.9%
<S> <C> <C> <C>
$23,560 5.205% 12/02/96 $ 23,557
18,000 5.159 12/04/96 17,992
15,000 5.223 12/05/96 14,991
20,000 5.173 12/09/96 19,977
10,000 5.214 12/09/96 9,989
7,255 5.248 12/12/96 7,243
9,400 5.214 12/13/96 9,384
15,735 5.210 12/18/96 15,696
5,000 5.375 08/14/97 4,816
10,000 5.403 09/25/97 9,572
----------
133,217
FEDERAL FARM CREDIT BANK--0.9%
7,500 5.850 08/01/97 7,505
FEDERAL HOME LOAN BANK--1.2%
10,000 5.800 08/12/97 10,004
FEDERAL HOME LOAN BANK DISCOUNT NOTES--55.3%
6,610 5.147 12/02/96 6,609
15,830 5.216 12/02/96 15,828
42,415 5.703 12/02/96 42,408
25,000 5.165 12/03/96 24,993
13,000 5.186 12/04/96 12,994
40,830 5.255 12/05/96 40,806
30,500 5.336 12/05/96 30,482
6,025 5.234 12/09/96 6,018
30,000 5.201 12/11/96 29,957
35,690 5.220 12/19/96 35,597
20,000 5.221 12/19/96 19,948
30,000 5.451 01/21/97 29,777
22,180 5.445 01/22/97 22,012
20,000 5.284 02/06/97 19,806
26,950 5.472 02/06/97 26,686
20,000 5.291 02/14/97 19,783
40,000 5.301 02/18/97 39,541
9,975 5.269 02/20/97 9,858
9,855 5.587 02/21/97 9,732
17,060 5.656 03/24/97 16,766
3,280 5.376 03/27/97 3,225
----------
462,826
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT/SHARES RATE DATE COST
- --------------------------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION DISCOUNT NOTES--7.9%
<S> <C> <C> <C>
$35,000 5.324% 12/02/96 $ 34,995
31,100 5.210 12/18/96 31,024
--------
66,019
STUDENT LOAN MARKETING ASSOCIATION FRN--5.7%
15,000 5.870 06/30/97 15,010
20,000 5.220 08/06/97 19,996
13,000 5.350 09/03/97 12,993
--------
47,999
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES--10.7%
10,000 5.245 12/10/96 9,987
20,000 5.227 12/12/96 19,968
10,000 5.242 12/12/96 9,984
20,000 5.229 12/20/96 19,945
10,000 5.268 01/24/97 9,922
20,000 5.279 02/03/97 19,814
--------
89,620
- --------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $817,190
- --------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.5%
U.S. TREASURY BILLS
$10,000 5.134% 02/06/97 $ 9,911
20,000 5.458 11/13/97 19,003
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 28,914
- --------------------------------------------------------------------------------
OTHER--0.1%
Dreyfus Treasury Prime Cash Management, Class A
542 $ 542
- --------------------------------------------------------------------------------------------------
TOTAL OTHER $ 542
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--101.2% $846,646
- --------------------------------------------------------------------------------------------------
Liabilities, less other assets--(1.2)% (10,297)
- --------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $836,349
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
MUNICIPAL INVESTMENTS--98.1%
ALABAMA--0.2%
City of Greenville IDR VRDN, Series: 1992,
Allied Signal Project (Allied-Signal, Inc. Gtd.)
<S> <C> <C> <C>
$ 1,350 3.700% 12/06/96 $ 1,350
ALASKA--2.0%
Alaska Housing Finance Corp. VRDN, Series: 1994,
Merrill P-Floats PT-37 (FNMA Securities Colld.)
2,300 3.550 12/02/96 2,300
Valdez Marine Terminal Revenue VRDN, Series: 1994 B,
ARCO Transportation Project (Atlantic Richfield Co. Gtd.)
10,550 3.700 12/06/96 10,550
--------
12,850
ARIZONA--0.8%
County of Maricopa PCR VRDN, Series: A, El Paso Electric Project (Westpac
Banking Corp. LOC)
5,000 3.700 12/06/96 5,000
CALIFORNIA--6.8%
California Statewide Community Development Authority TRAN, Series: A (California
Statewide Communities Program Pool Residual Fund Insured)
9,000 4.750 06/30/97 9,038
City of Los Angeles IDR VRDN, Series: BTP-129,
(U.S. Government Securities Colld.)
2,500 3.250 12/12/96 2,500
City of San Marcos Public Facilities Authority, Series: BTP-187, Civic Center
Project (U.S. Government Securities Colld.)
6,000 3.750 03/06/97 6,000
City of Santa Rosa High School District TRAN, Series: 1996-1997
3,000 4.500 07/03/97 3,008
County of Irvine Ranch Water District VRDN, Series: 1993 B, Districts 2, 102,
103, & 206 (Morgan Guaranty Trust Co. LOC)
9,800 3.950 12/02/96 9,800
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
County of Los Angeles Convention & Exhibition Center VRDN, Series: 1993, Merrill
P-Floats Series: PA-88 (MBIA Insured)
<S> <C> <C> <C>
$ 2,000 3.650% 12/06/96 $ 2,000
County of Orange VRDN, Irvine Coast Assessment District #88-1 (Societe Generale
LOC)
3,600 4.050 12/02/96 3,600
County of Sacramento Multifamily Housing Revenue VRDN, Series: 1985 E, River
Oaks Apartments (Dai-Ichi Kangyo Bank LOC)
1,600 3.550 12/06/96 1,600
State of California RAN, Series: A
6,000 4.500 06/30/97 6,018
--------
43,564
COLORADO--1.6%
Broomfield IDR VRDN, Series: 1984, Buckeye Investment Project (Bank of America
NT & SA LOC)
1,500 3.600 12/06/96 1,500
City and County of Denver Transportation VRDN, Series: 1991 B (Sanwa Bank LOC)
8,000 3.700 12/06/96 8,000
County of Pitkin IDA VRDN, Series: 1994 B, Aspen Skiing Project (First Chicago
NBD Bank LOC)
1,000 4.100 12/02/96 1,000
--------
10,500
FLORIDA--5.2%
County of Broward Housing Finance Authority Revenue VRDN Landings Inverrary
Apartments (PNC Bank LOC)
7,000 3.650 12/02/96 7,000
County of Dade School District GO VRDN, Series: 1994, BTP-66 (MBIA Insured)
5,535 3.750 12/06/96 5,535
County of Orange Housing Finance Authority VRDN, Series: A (GNMA Securities
Colld.)
5,500 3.750 12/06/96 5,500
County of Palm Beach Housing Finance Authority Revenue VRDN, Series: 1988 D,
Cotton Bay (New England Mutual Gtd.)
3,600 3.500 12/06/96 3,600
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
FLORIDA--CONTINUED
Florida State Board of Education Capital Outlay Board VRDN, Series: 1990 B, BTP-
52
<S> <C> <C> <C>
$ 5,000 3.750% 12/06/96 $ 5,000
Jacksonville Health Facilities Authority VRDN, Series: 1990, Baptist Health
Project (Barnett Banks NA LOC)
3,200 4.100 12/02/96 3,200
Orlando Utilities Commission VRDN, Series: 1993, ML SG, Series: 1995 SG8
(Orlando Utilities Commission Water and Electric-Senior Lien)
3,650 3.600 12/06/96 3,650
--------
33,485
GEORGIA--3.6%
County of DeKalb Development Authority PCR VRDN, Series: 1987, General Motors
Project (General Motors Corp. Gtd.)
6,300 3.650 12/06/96 6,300
County of Elbvert Development Authority IDR VRDN, Series: 1992, Allied-Signal
Project (FMC Corp. Gtd.)
2,430 3.700 12/06/96 2,430
County of Fulton Development Authority IDR VRDN, General Motors Project (General
Motors Corp. Gtd.)
1,500 3.650 12/06/96 1,500
County of Fulton Resident Elderly Authority VRDN, St. Anne's Terrace Project
(NationsBank Georgia LOC)
2,600 3.550 12/06/96 2,600
County of Monroe Development Authority PCR VRDN, Series: 1995, Scherer Plant
Project (Georgia Power Co. Gtd.)
4,000 4.100 12/02/96 4,000
Metro Atlanta Rapid Transit Authority Revenue VRDN, Series: A, BTP-58 (AMBAC
Insured)
5,965 3.750 12/06/96 5,965
--------
22,795
ILLINOIS--4.9%
City of Naperville IDR VRDN, General Motors Project (General Motors Corp. Gtd.)
1,480 3.650 12/06/96 1,480
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
Illinois HDA TOB, Series: 1987 B, Residential Mortgage Program
<S> <C> <C> <C>
$ 4,645 3.950 02/01/97 $ 4,645
Illinois HDA TOB, Series: 1987 C, Residential Mortgage Program
12,900 3.950 02/01/97 12,900
Illinois HDA TOB, Series: 1987 E, Residential Mortgage Program
2,105 3.950 02/01/97 2,105
Illinois Health Facilities Authority VRDN, Series: E, Hospital Sisters Service
Project (MBIA Insured)
300 3.550% 12/06/96 300
Illinois Health Facilities Authority VRDN, Series: 1995, Healthcor Project (Fuji
Bank LOC)
5,950 4.050 12/06/96 5,950
Regional Transportation Authority Revenue VRDN, Series: D (FGIC Insured)
4,000 3.650 12/06/96 4,000
-------
31,380
KANSAS--2.7%
City of LaCygne Environmental Revenue VRDN, Series: 1994 A, Kansas City Power &
Light Project (Kansas City Power & Light Gtd.)
6,940 3.700 12/06/96 6,940
City of Lawrence GO, Series: 1996 C
9,820 4.000 10/01/97 9,820
City of Topeka Sewer System Revenue VRDN, Series: 1984 (MBIA Insured)
500 3.550 12/01/96 500
-------
17,260
KENTUCKY--0.3%
City of Mayfield Lease Revenue VRDN, Series: 1996, Kentucky League of Cities
Pooled Project (PNC Bank LOC)
1,700 3.700 12/06/96 1,700
LOUISIANA--1.4%
Parish of Caddo IDR VRDN, General Motors Corp. Project (General Motors Corp.
Gtd.)
3,500 3.650 12/06/96 3,500
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
Parish of West Baton Rouge District #3 PCR CP, Dow Chemical Project (Dow
Chemical Gtd.)
<S> <C> <C> <C>
$ 1,700 3.600% 01/15/97 $ 1,700
West Feliciana Parish PCR IDR VRDN, Series: 1986, Gulf States Utilities Project
(Canadian Imperial Bank of Commerce LOC)
3,300 4.050 12/02/96 3,300
West Feliciana Parish PCR VRDN, Series: 1985 D, Gulf States Utilities Project
(Canadian Imperial Bank of Commerce LOC)
700 4.050 12/02/96 700
--------
9,200
MARYLAND--7.5%
City of Baltimore IDA VRDN, Series: 1986, Capital Acquisition Program (Dai-Ichi
Kangyo Bank LOC)
7,300 3.700 12/06/96 7,300
County of Anne Arundel PCR Bond, Baltimore Gas and Electric Project (Baltimore
Gas & Electric Gtd.)
2,685 3.950 07/01/97 2,685
County of Baltimore Consolidated CP, Series: 1995, Public Improvement BAN
2,900 3.750 12/10/96 2,900
County of Montgomery CP BAN, Series: 1995
2,300 3.600 12/10/96 2,300
Maryland State Community Development Administration, Series: PT-12, Merrill P-
Floats (Maryland Community Development Administration)
7,720 3.550 12/02/96 7,720
Maryland State Economic Development Authority VRDN, Series: 1995 (NationsBank NA
LOC)
2,400 3.550 12/06/96 2,400
Maryland State Health & Higher Education Facility Authority VRDN, Series: A,
Helix Health, Inc. (NationsBank NA LOC)
16,300 3.550 12/06/96 16,300
Maryland State Health & Higher Education Facility Authority VRDN, Series: D,
Pooled Loan Program (NationsBank NA LOC)
5,915 3.550 12/06/96 5,915
--------
47,520
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
MASSACHUSETTS--1.2%
Massachusetts Housing Finance Authority TOB, Series: 6, Single Family Mortgage
Program (Massachusetts Housing Finance Authority)
<S> <C> <C> <C>
$ 1,895 3.850% 12/01/96 $ 1,895
Massachusetts Municipal Electric Co. Revenue VRDN, Series: 1994 B, BTP-67 (MBIA
Insured)
5,760 3.750 12/06/96 5,760
--------
7,655
MICHIGAN--2.5%
City of Detroit School District, Series: 1996, State School Aid Notes (Detroit
School District Gtd.)
8,000 4.500 05/01/97 8,018
Michigan State Strategic Fund IDR VRDN, Allied-Signal Project (FMC Corp. Gtd.)
6,700 3.650 12/06/96 6,700
Michigan State Strategic Fund PCR CP (Dow Chemical Gtd.)
1,420 3.750 01/27/97 1,420
--------
16,138
MISSOURI--2.9%
City of St. Louis TRAN, Series: 1996
5,000 4.750 06/30/97 5,021
County of Callaway IDA Health System VRDN, Series: 1995 (NationsBank Tennessee
LOC)
4,800 3.600 12/06/96 4,800
County of St. Louis IDA VRDN, Friendship Village West Community Project (LaSalle
National Bank LOC)
4,370 3.600 12/06/96 4,370
Missouri Health & Education Facility Authority Revenue VRDN, Series: 1996 A,
Bethesda Barclay House Project (Mercantile Bank of St. Louis NA LOC)
4,200 4.250 12/02/96 4,200
--------
18,391
MONTANA--1.5%
City of Forsyth PCR VRDN, Series: 1988 A, Pacificorp Project (Industrial Bank of
Japan LOC)
9,400 4.400 12/02/96 9,400
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
NEVADA--0.2%
Nevada Housing Division Housing Revenue Bonds Single Family Program Senior
Bonds, A-1
<S> <C> <C> <C>
$ 1,065 3.700% 04/01/97 $ 1,065
NEW YORK--8.4%
City of New York GO RAN, Series: B (Bank of Nova Scotia LOC)
10,000 4.500 06/30/97 10,041
City of New York GO VRDN, Subseries: 1994 B-4 (Union Bank of Switzerland LOC)
1,400 4.250 12/02/96 1,400
Marine Midland Premium Loan Trust VRDN, Series: 1991 (Hong Kong & Shanghai
Banking Corp. LOC)
1,200 3.750 12/06/96 1,200
Marine Midland Premium Loan Trust VRDN, Series: 1991 B (Hong Kong & Shanghai
Banking Corp. LOC)
1,492 3.850 12/06/96 1,492
New York State Environmental Facilities Corp. PCR VRDN, Eagle Trust Series:
943204 (FSAC Insured)
19,300 3.650 12/06/96 19,300
New York State Medical Care Finance Agency Revenue Bond, Series: BTP-175 (U.S.
Government Securities Colld.)
20,000 3.850 12/17/96 20,000
--------
53,433
NORTH CAROLINA--1.5%
County of Buncombe PCR IDR VRDN, Series: 1996, Cooper Industries Project (Cooper
Industries Gtd.)
3,200 3.750 12/06/96 3,200
County of Wake Industrial Pollution Finance Authority PCR VRDN, Carolina Power &
Light Project (Sumitomo Bank Ltd. LOC)
1,400 3.650 12/06/96 1,400
North Carolina Medical Care Commission Hospital Revenue VRDN, Series: 1991 A,
Pooled Financing Project (NationsBank NA LOC)
4,700 4.050 12/02/96 4,700
--------
9,300
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
OHIO--4.3%
County of Mahoning Care Facility IDR VRDN, Series: 1994, Assumption Nursing Home
Project (PNC Bank LOC)
<S> <C> <C> <C>
$ 1,400 3.650% 12/06/96 $ 1,400
State of Ohio Air Quality Development Authority CP, Series: A, Pollution
Control-Duquesne (Union Bank of Switzerland LOC)
4,000 3.950 07/16/97 4,000
State of Ohio GO VRDN, Series: 1994, BTP-170
5,875 3.700 12/06/96 5,875
State of Ohio Higher Education Capital Facilities VRDN, Series: 1990 A, BTP-29
(MBIA Insured)
3,000 3.750 12/06/96 3,000
State of Ohio Higher Education Capital Facilities VRDN, Series: 1994 A, BTP-69
(AMBAC Insured)
8,745 3.750 12/06/96 8,745
Red Roof Inns Mortgage Bond Trust VRDN (National City Bank LOC)
4,529 3.650 12/15/96 4,529
--------
27,549
OKLAHOMA--3.4%
State of Oklahoma Water Resources Board, Series: 1994 A, State Loan Program
21,725 3.750 03/01/97 21,725
OREGON--1.3%
City of Medford Hospital Facilities Authority VRDN, Series: 1991, Rogue Valley
Project (Banque Paribas LOC)
8,400 3.700 12/06/96 8,400
</TABLE>
PENNSYLVANIA--11.3%
City of Philadelphia Hospital & Higher Education Facilities Authority VRDN,
Series: A, Children's Hospital Project
<TABLE>
<S> <C> <C> <C>
4,500 4.000 12/02/96 4,500
</TABLE>
City of Philadelphia IDR VRDN, Series: 1988, Franklin Institute Project (PNC
Bank LOC)
<TABLE>
<S> <C> <C> <C>
2,800 3.650 12/06/96 2,800
City of Philadelphia School District TRAN
17,000 4.500 06/30/97 17,047
City of Philadelphia TRAN, Series: 1995-96 A
18,000 4.500 06/30/97 18,055
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
County of Schuylkill IDA IDR VRDN, Gilbert Power Project (Mellon Bank NA LOC)
<S> <C> <C> <C>
$ 7,650 3.550% 12/06/96 $ 7,650
County of Warren Hospital Revenue VRDN, Series: 1994 B (PNC Bank LOC)
1,000 3.650 12/06/96 1,000
Delaware Valley Regional Finance Authority Pooled Revenue VRDN, Series: 1985 A
(Midland Bank PLC LOC)
5,000 3.600 12/06/96 5,000
Delaware Valley Regional Finance Authority Pooled Revenue VRDN, Series: 1985 C
(Midland Bank PLC LOC)
2,400 3.600 12/06/96 2,400
Delaware Valley Regional Finance Authority Pooled Revenue VRDN, Series: 1985 A-D
(Midland Bank PLC LOC)
9,500 3.600 12/06/96 9,500
Delaware Valley Regional Finance Authority Pooled Revenue VRDN, Series: 1985 D
(Midland Bank PLC LOC)
1,900 3.600 12/06/96 1,900
State of Pennsylvania Higher Education Facilities Authority VRDN, Series: 1996,
Allegheny College Project (Mellon Bank NA LOC)
2,000 3.550 12/06/96 2,000
--------
71,852
RHODE ISLAND--0.4%
State of Rhode Island TAN, Series: 1996 A
2,500 4.500 06/30/97 2,507
SOUTH CAROLINA--1.9%
County of Lexington IDR VRDN, Series: 1992, Allied-Signal Project (FMC Corp.
Gtd.)
700 3.700 12/06/96 700
County of Lexington Pollution Control Finance Authority IDR VRDN, Series: 1992
A, Allied-Signal Project (FMC Corp. Gtd.)
1,880 3.700 12/06/96 1,880
South Carolina Public Service Authority Revenue VRDN, Series: 1995 B ML SG,
Series: SG-32 (FGIC Insured)
9,855 3.650 12/06/96 9,855
--------
12,435
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--0.4%
State of South Dakota HDA Homeowner Mortgage VRDN, Merrill P-Floats, Series: PT-
73-A
<S> <C> <C> <C>
$ 2,500 3.700% 12/06/96 $ 2,500
TENNESSEE--2.6%
City of Clarksville Public Building Authority Revenue VRDN, Series: 1995,
Tennessee Muni Bond Fund (NationsBank of Florida LOC)
1,600 3.550 12/06/96 1,600
City of Memphis GO VRDN, Series: 1996 ML SG, Series: SGB-23
5,000 3.650 12/06/96 5,000
County of Chattanooga-Hamilton Hospital Authority VRDN, Series: 1987, Erlanger
Medical Center Project
800 4.200 12/02/96 800
County of Hamilton IDA VRDN, Series: 1995, Tennessee Aquarium Project
(NationsBank Tennessee LOC)
5,350 3.550 12/06/96 5,350
County of Shelby GO, Series: B, BTP-216
4,000 3.700 11/06/97 4,000
--------
16,750
TEXAS--6.9%
Brazos River Harbor Navigation District PCR CP, Series: 1987 B, Dow Chemical
Project (Dow Chemical Gtd.)
3,000 3.750 01/27/97 3,000
Brazos River Harbor Navigation District PCR CP, Series: 1990, Dow Chemical
Project (Dow Chemical Gtd.)
1,000 3.750 01/27/97 1,000
City of Austin School District Building VRDN, Series: 1996 ML SG, Series: SG-68
(Permanent School Fund of Texas Gtd.)
7,300 3.650 12/06/96 7,300
City of Denton Independent School District GO, Series: B, (Permanent School Fund
of Texas Gtd.)
10,000 3.980 08/15/97 10,000
City of Houston Water & Sewer System CP, Series: A
5,000 3.650 01/23/97 5,000
City of Mansfield Independent School District, Series: 1996 School Building
(Permanent School Fund of Texas Gtd.)
7,500 4.140 07/01/97 7,500
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
TEXAS--CONTINUED
County of Bexar Multifamily Housing Finance Authority VRDN, Series: 1988 A,
Creighton's Mill Development Project (New England Mutual Gtd.)
<S> <C> <C> <C>
$ 2,600 3.650% 12/06/96 $ 2,600
County of Harris Toll Road Unlimited Tax Revenue VRDN, Series: 1994 A, Citicorp
Eagle Trust Series: 954302
5,500 3.700 12/06/96 5,500
State of Texas Water Development Board Pooled VRDN, Series: 1992 A Revolving
Fund (Junior Lien)
2,100 4.200 12/02/96 2,100
--------
44,000
VIRGINIA--2.9%
City of Norfolk GO VRDN, Eagle Trust, Series: 944601
4,800 3.700 12/06/96 4,800
City of Richmond Redevelopment & Housing Authority VRDN, Series: 1995 A, Old
Manchester Project (Wachovia Bank of North Carolina NA LOC)
2,000 3.650 12/06/96 2,000
City of Roanoke IDR VRDN, Series: 1994, Cooper Industries Project (Cooper
Industries Gtd.)
2,000 3.700 12/06/96 2,000
State of Virginia GO VRDN, Series: 1994, Citicorp Eagle Trust, Series: 954601
7,000 3.700 12/06/96 7,000
Town of Louisa IDA PCR CP, Series: 1984 (Virginia Electric Power Gtd.)
1,000 3.550 12/17/96 1,000
Town of Louisa PCR CP, Series: 1987 (Virginia Electric Power Gtd.)
1,800 3.800 01/15/97 1,800
--------
18,600
WASHINGTON--4.6%
City of Kent Economic Development Corp. IDR VRDN, Associated Grocers Project
(Seattle-First National Bank LOC)
3,800 4.272 12/06/96 3,800
City of Seattle Metropolitan Municipality GO (U.S. Government Securities Colld.)
1,000 7.200 01/01/97 1,005
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY Amortized
AMOUNT RATE DATE Cost
- -------------------------------------------------------------------------------------------------------
Washington Public Power Supply System Revenue Bond,
Series: 1996 A BTP-206 (AMBAC Insured)
<S> <C> <C> <C>
$ 4,950 4.000% 08/21/97 $ 4,950
Washington Public Power Supply System Revenue VRDN,
ML SG, Series: SG-15 (MBIA Insured)
6,595 3.650 12/06/96 6,595
Washington Public Power Supply System Revenue VRDN,
Series: 1990 B BTP-85 (U.S. Government Securities Colld.)
6,221 3.750 12/06/96 6,221
Washington State GO VRDN, Series: 1993 B
6,950 3.650 12/06/96 6,950
--------
29,521
WISCONSIN--0.8%
Wisconsin Health & Education Revenue Bond, Series:
1996 B, Riverview Hospital Association
(Firstar Bank of Milwaukee NA LOC)
500 4.150 12/02/96 500
Wisconsin Housing & Economic Development Authority,
Home Ownership Revenue Bond, Series: A
4,875 3.800 03/01/97 4,875
--------
5,375
WYOMING--0.4%
City of Green River PCR VRDN Allied Signal Project
(FMC Corp. Gtd.)
2,225 3.700 12/06/96 2,225
OTHER MUNICIPAL INVESTMENTS--1.7%
IBM Tax-Exempt Grantor Trust Asset-Back Lease VRDN, Series: IBM 1996 A,
Certificate Merrill P-Floats (Credit Suisse Gtd.)
9,050 3.800 12/06/96 9,050
Pooled Puttable Floating Option VRDN, Series: PPT2 (Alaska Housing Finance Corp.
Insured)
1,650 4.100 12/02/96 1,650
--------
10,700
- -------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $626,125
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interest Maturity
Shares Rate Date Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER INVESTMENTS--0.7%
AIM Tax Free Money Market Fund
105 -- -- $ 105
Dreyfus Tax Exempt Cash Management
Fund
400 -- -- 400
Federated Tax Free Trust Money Market
Fund #15
2,739 -- -- 2,739
Federated Tax-Free Trust Money Market
Fund #73
819 -- -- 819
Provident Municipal Fund
353 -- -- 353
- --------------------------------------------------------------------------------------------------------------
TOTAL OTHER $ 4,416
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.8% $630,541
- --------------------------------------------------------------------------------------------------------------
Other assets, less liabilities--1.2% 7,966
- --------------------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $638,507
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
DIVERSIFIED GOVERNMENT
ASSETS GOVERNMENT SELECT TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost $2,609,388 $ 877,374 $846,646 $630,541
Repurchase agreements, at cost 641,063 398,704 -- --
Cash 1 1 15 --
Receivables:
Interest 10,425 2,750 1,256 5,502
Fund units sold 111,755 32,941 5,246 17,303
Investment securities sold -- -- -- 4,665
Administrator -- 23 28 33
Other assets 2 1 1 1
- -------------------------------------------------------------------------------
TOTAL ASSETS 3,372,634 1,311,794 853,192 658,045
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 179,676 37,728 13,167 17,523
Distributions to unitholders 12,481 5,147 3,488 1,768
Accrued expenses:
Advisory fees 605 253 68 134
Administration fees 163 93 76 67
Custodian fees 42 10 8 9
Transfer agent fees 5 3 2 3
Other liabilities 133 45 34 34
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 193,105 43,279 16,843 19,538
- -------------------------------------------------------------------------------
NET ASSETS $3,179,529 $1,268,515 $836,349 $638,507
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $3,181,103 $1,268,820 $836,425 $638,366
Accumulated net realized gain
(loss) on
investment transactions (1,574) (305) (76) 141
- -------------------------------------------------------------------------------
NET ASSETS $3,179,529 $1,268,515 $836,349 $638,507
- -------------------------------------------------------------------------------
Total units outstanding (no par
value),
unlimited units authorized 3,181,103 1,268,820 836,425 638,366
- -------------------------------------------------------------------------------
Net asset value, offering and
redemption price per unit
(net assets/units outstanding) $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
DIVERSIFIED GOVERNMENT
ASSETS GOVERNMENT SELECT TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $173,018 $56,872 $41,631 $27,703
- ------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 7,832 2,618 1,930 1,885
Administration fees 2,079 1,036 897 885
Custodian fees 360 132 97 106
Transfer agent fees 65 31 22 15
Registration fees 47 29 26 32
Professional fees 139 50 36 50
Trustee fees 86 29 23 23
Other 102 45 36 28
- ------------------------------------------------------------------------------
TOTAL EXPENSES 10,710 3,970 3,067 3,024
Less: Voluntary waivers of in-
vestment advisory fees -- -- (1,158) --
Less: Expenses reimbursable by
Administrator -- (306) (365) (382)
- ------------------------------------------------------------------------------
Net expenses 10,710 3,664 1,544 2,642
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 162,308 53,208 40,087 25,061
Net realized gains on investment
transactions 327 133 97 102
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RE-
SULTING FROM OPERATIONS $162,635 $53,341 $40,184 $25,163
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30,
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Assets Government Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
-------------------------- -------------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment
income $ 162,308 $ 159,519 $ 53,208 $ 42,613 $ 40,087 $ 32,259 $ 25,061 $ 24,498
Net realized
gains (losses)
on investment
transactions 327 (1,460) 133 (828) 97 (73) 102 48
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets re-
sulting from
operations 162,635 158,059 53,341 41,785 40,184 32,186 25,163 24,546
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS:
Net investment
income (162,308) (159,519) (53,208) (42,613) (40,087) (32,259) (25,061) (24,498)
- ------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (162,308) (159,519) (53,208) (42,613) (40,087) (32,259) (25,061) (24,498)
- ------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS
(AT $1.00 PER
UNIT):
Proceeds from
the sale of
units 42,285,142 43,084,716 12,329,359 10,203,042 4,712,236 3,588,011 5,526,968 5,729,794
Reinvested dis-
tributions 860 -- -- -- 963 -- 126 --
Cost of units
redeemed (41,717,147) (43,366,308) (11,911,641) (10,140,281) (4,562,089) (3,396,629) (5,692,419) (5,779,215)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (de-
crease) in net
assets resulting
from unit trans-
actions 568,855 (281,592) 417,718 62,761 151,110 191,382 (165,325) (49,421)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL CONTRIBU-
TIONS RECEIVED
FROM NORTHERN
TRUST CORPORA-
TION -- 1,519 -- 915 -- 115 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (de-
crease) 569,182 (281,533) 417,851 62,848 151,207 191,424 (165,223) (49,373)
Net assets--be-
ginning of year 2,610,347 2,891,880 850,664 787,816 685,142 493,718 803,730 853,103
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS--END
OF YEAR $ 3,179,529 $ 2,610,347 $ 1,268,515 $ 850,664 $ 836,349 $ 685,142 $ 638,507 $ 803,730
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Diversified Assets Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAr $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- -----------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 5.30% 5.78% 3.92% 3.00% 3.80% 6.19% 8.01%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35%
Expenses, be-
fore waivers
and
reimbursements 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36%
Net investment income, net of waivers
and reimburse-
ments 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01%
Net investment income, before waivers
and reimburse-
ments 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00%
Net assets at end of year (in thousands) $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAr $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.09 0.07 0.06
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.09 0.07 0.06
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.09) (0.07) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.09) (0.07) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 8.98% 7.15% 6.30%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.37% 0.39% 0.41%
Expenses, be-
fore waivers
and
reimbursements 0.37% 0.39% 0.41%
Net investment income, net of waivers
and reimburse-
ments 8.98% 7.15% 6.30%
Net investment income, before waivers
and reimburse-
ments 8.98% 7.15% 6.30%
Net assets at end of year (in thousands) $1,871,713 $1,528,203 $1,533,941
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per
share received from Northern Trust Corporation.
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Government Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BE-
GINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a)(b) 5.20% 5.64% 3.78% 2.91% 3.91% 6.18% 7.89% 8.63% 6.83% 6.15%
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37% 0.50% 0.54% 0.44%
Expenses, before
waivers and
reimbursements 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46% 0.50% 0.55% 0.55%
Net investment in-
come, net of waivers
and reimbursements 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88% 8.63% 6.83% 6.15%
Net investment in-
come, before waivers
and reimbursements 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79% 8.63% 6.82% 6.04%
Net assets at end of
year (in thousands) $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517 $335,301 $218,530
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(b) Total return for the year ended November 30, 1995 would have been 5.53%
absent the effect of a capital contribution equivalent to $.0011 per share
received from Northern Trust Corporation.
See accompanying notes to financial statements.
20
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Government Select Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990(a)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- -----------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- -----------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total return (b)(c) 5.31% 5.82% 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net
assets of (d):
Expenses, net of waiv-
ers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before waiv-
ers and reimbursements 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and re-
imbursements 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and re-
imbursements 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on November 7, 1990.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
period.
(c) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per
share received from Northern Trust Corporation.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
21
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05 0.04
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05) (0.04)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05) (0.04)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total return (a) 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04% 4.92% 4.00%
Ratio to average net
assets of :
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48% 0.45%
Expenses, before
waivers and
reimbursements 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49% 0.48% 0.46%
Net investment income,
net of waivers and re-
imbursements 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92% 4.00%
Net investment income,
before waivers and re-
imbursements 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03% 4.92% 3.99%
Net assets at end of
year (in thousands) $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680 $410,772
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the end of the year.
See accompanying notes to financial statements.
22
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end management
investment company. The Trust includes sixteen portfolios, each with its own
investment objective. The Northern Trust Company ("Northern") acts as the
Trust's investment adviser, transfer agent, and custodian. Goldman, Sachs & Co.
("Goldman Sachs") acts as the Trust's administrator and distributor. Presented
herein are the financial statements of the money market portfolios.
The Trust includes four diversified money market portfolios: Diversified As-
sets Portfolio, Government Portfolio, Government Select Portfolio and Tax-Ex-
empt Portfolio (the "Portfolios").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Portfolios in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP re-
quires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual results could differ from those estimates. Certain amounts reported for
periods prior to the year ended November 30, 1996 have been restated to conform
to the current financial statement presentation.
(a) Investment Valuation
Investments are valued at amortized cost, which approximates market value. Un-
der the amortized cost method, investments purchased at a discount or premium
are valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period to maturity.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for the
Trust, at the Federal Reserve Bank of Chicago.
Each Portfolio may enter into joint repurchase agreements with non-affiliated
counterparties through a master repurchase agreement with Northern. Northern
administers and manages these repurchase agreements in accordance with and as
part of its duties under its investment advisory agreements with the Portfolios
and does not collect any additional fees from the Portfolios. The Diversified
Assets and Government Portfolios had entered into such joint repurchase agree-
ments as of November 30, 1996, as reflected in the accompanying Statements of
Investments.
(c) Interest Income
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(d) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and tax-exempt income to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, there were capital
loss carryforwards for U.S. federal tax purposes of approximately $1,574,000,
$305,000 and $76,000 for the Diversified Assets, Government and Government Se-
lect Portfolios, respectively. These amounts are available to be carried for-
ward to offset future capital gains to the extent permitted by applicable laws
or regulations. These capital loss carryforwards expire in 2002.
23
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
(e) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio.
Expenses incurred which do not specifically relate to an individual portfolio
are allocated among the Portfolios based on each Portfolio's relative average
net assets for the year.
(f) Distributions
Each Portfolio's net investment income is declared daily as a dividend to
unitholders of record as of 3:00 p.m., Chicago time. Net realized short-term
capital gains, if any in excess of net capital loss carryforwards, are declared
and distributed at least annually.
Distributions of net investment income with respect to a calendar month (in-
cluding with respect to units redeemed at any time during the month) are made
as soon as practicable following the end of the month. Distributions are made
by each Portfolio to Northern in cash or automatically reinvested in additional
units of the Portfolio. Northern has undertaken to credit or arrange for the
crediting of such distributions to each unitholder's account with Northern, its
affiliates or its correspondents.
3. ADVISORY, TRANSFER AGENCY, CUSTODIAN AND OTHER AGREEMENTS
As compensation for the services rendered as investment adviser, including the
assumption by Northern of the expenses related thereto, Northern is entitled to
a fee, computed daily and payable monthly, at an annual rate of .25% of each
portfolio's average daily net assets.
Until further notice, Northern has voluntarily agreed to waive .15% of its ad-
visory fee for the Government Select Portfolio, reducing such fee to .10% per
annum. The effect of this waiver by Northern for the year ended November 30,
1996 was to reduce advisory fees as shown on the accompanying Statements of Op-
erations.
As compensation for the services rendered as custodian and transfer agent, in-
cluding the assumption by Northern of the expenses related thereto, Northern
receives compensation based on a pre-determined schedule of charges approved by
the Board.
The Trust and Northern Trust Corporation (the "Corporation"), parent company
of Northern, entered into an agreement (the "Put Agreement") dated May 19, 1994
which provided the Trust the right to require the Corporation to purchase, and
the Corporation the right to require the Trust to sell, certain Federal Home
Loan and Federal Farm Credit Banks securities held by the Diversified Assets,
Government and Government Select Portfolios on or before June 19, 1995 (the
"final purchase date"). Pursuant to the Put Agreement, the Corporation, on June
19, 1995, purchased these securities at amortized cost, which exceeded market
value by approximately $1,519,000, $915,000 and $115,000 for the Diversified
Assets, Government and Government Select Portfolios, respectively. The Portfo-
lios recorded realized losses to the extent the purchase price exceeded market
value of the securities. The Portfolios received capital contributions from the
Corporation in connection with the Put Agreement, which served to offset such
losses.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
As compensation for the services rendered as administrator, and the assumption
by Goldman Sachs of expenses related thereto, Goldman Sachs is entitled to re-
ceive from each Portfolio a fee, computed daily and payable monthly, at an an-
nual rate of .25% of the first $100 million, .15% of the next $200 million,
.075% of the next $450 million and .05% of any excess over $750 million of the
average daily net assets of each Portfolio.
Goldman Sachs has voluntarily agreed to waive a portion of its administration
fees in the event that overall administration fees earned during the prior fis-
cal year exceeded certain specified levels. For the year ended November 30,
1996, there was no reduction in administration fees due to this waiver.
Furthermore, Goldman Sachs has agreed to reimburse the portfolios for certain
expenses in the event that such expenses, as defined, exceed, on an annualized
basis,
24
<PAGE>
- --------------------------------------------------------------------------------
.10% of each portfolio's average daily net assets. The expenses reimbursed dur-
ing the year ended November 30, 1996, are shown on the accompanying Statements
of Operations.
Goldman Sachs receives no compensation under the Distribution Agreement.
5. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are se-
cured by pledged securities equal to or exceeding 120% of the outstanding bal-
ance.
There were no borrowings under this agreement during the year ended November
30, 1996.
25
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Money Market Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Diversified Assets,
Government, Government Select and Tax-Exempt Portfolios, comprising the Money
Market Portfolios of The Benchmark Funds, as of November 30, 1996, and the
related statements of operations for the year then ended and changes in net
assets for each of the two years in the period then ended and financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Diversified Assets, Government, Government Select and Tax-Exempt Portfolios,
comprising the Money Market Portfolios of The Benchmark Funds, at November 30,
1996, the results of their operations for the year then ended and the changes
in their net assets for each of the two years in the period then ended and
financial highlights for the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 21, 1997
26
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent andCustodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management expenses and other
information.
The
Benchmark
Funds
Money
Market
Portfolios
Annual Report
November 30, 1996
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group, Inc., a division of
McGraw Hill ("S&P"), Duff & Phelps Credit Rating Co. ("D&P"), Fitch Investors
Service, Inc. ("Fitch") and Thomson BankWatch, Inc. ("TBW").
LONG-TERM CORPORATE AND TAX-EXEMPT DEBT RATINGS
The two highest ratings of Moody's for tax-exempt and corporate bonds are Aaa
and Aa. Tax-exempt and corporate bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds which are of "high quality by
all standards." Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements which make the long-term risks
appear somewhat larger. Moody's may modify a rating of Aa by adding numerical
modifiers of 1, 2 or 3 to show relative standing within the Aa category. The
foregoing ratings for tax-exempt bonds are sometimes presented in parentheses
preceded with a "con" indicating the bonds are rated conditionally. Such
parenthetical rating denotes the probable credit stature upon completion of
construction or elimination of the basis of the condition. The notation (P)
when applied to forward delivery bonds indicates that the rating is provisional
pending delivery of the bonds. The rating may be revised prior to delivery if
changes occur in the legal documents or the underlying credit quality of the
bonds. In addition, Moody's has advised that the short-term credit risk of a
long-term instrument sometimes carries a MIG rating or one of the commercial
paper ratings described below.
The two highest ratings of S&P for tax-exempt and corporate bonds are AAA and
AA. Bonds rated AAA bear the highest rating assigned by S&P to a debt
obligation and the AAA rating indicates in its opinion an extremely strong
capacity to pay interest and repay principal. Bonds rated AA by S&P are judged
by it to have a very strong capacity to pay interest and repay principal, and
differ from AAA issues only in small degree. The AA rating may be modified by
an addition of a plus (+) or minus (-) sign to show relative standing within the
major rating category. S&P may attach the rating "r" to highlight derivative,
hybrid and certain other obligations that S&P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
The two highest ratings of D&P for tax-exempt and corporate fixed-income
securities are AAA and AA. Securities rated AAA are of the highest credit
quality. The risk factors are considered to be negligible, being only slightly
more than for risk-free U.S. Treasury debt. Securities rated AA are of high
credit quality.
1-A
<PAGE>
Protection factors are strong. Risk is modest but may vary slightly from time
to time because of economic conditions. The AA rating may be modified by an
addition of a plus (+) or minus (-) sign to show relative standing within the
major rating category.
The two highest ratings of Fitch for tax-exempt and corporate bonds are AAA and
AA. AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor is judged to have an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
fore seeable events. AA bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+. Plus (+) and minus (-) signs are used with the AA rating symbol to
indicate relative standing within the rating category.
The two highest ratings of TBW for corporate bonds are AAA and AA. Bonds rated
AAA are of the highest credit quality. The ability of the obligor to repay
principal and interest on a timely basis is considered to be extremely high.
Bonds rated AA indicate a very strong ability on the part of the obligor to
repay principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category. These ratings may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within
the rating categories. TBW does not rate tax-exempt bonds.
TAX-EXEMPT NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term obligations
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade. MIG-1/VMIG-1
denotes best quality. There is present strong protection by established cash
flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. MIG-2/VMIG-2 denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
S&P describes its SP-1 rating of municipal notes as follows: "Very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus (+)
designation." Municipal notes rated SP-2 are deemed to have satisfactory
capacity to pay principal and interest.
D&P uses the fixed-income ratings described above under "Corporate and Tax-
Exempt Bond Ratings" for tax-exempt notes and other short-term obligations.
2-A
<PAGE>
Fitch's short-term ratings apply to tax-exempt and corporate debt obligations
that are payable on demand or have original maturities of up to three years,
including commercial paper and municipal and investment notes. The highest
ratings of Fitch for short-term securities are F-1+, F-1 and F-2. F-1+
securities possess exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment. F-1 securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+. F-2 securities possess good credit quality. Issues
carrying this rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as the F-1+ and F-1 ratings.
TBW does not rate tax-exempt notes.
SHORT-TERM CORPORATE AND TAX-EXEMPT DEBT RATINGS
Short-term ratings, set forth below (except TBW's), are applied to tax-exempt as
well as taxable debt.
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Issuers rated Prime-1 (or related supporting institutions) in the
opinion of Moody's have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of short-
term promissory obligations.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt considered short-term in the relevant market. The A-1
designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus (+) sign designation. The A-2
designation indicates that capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
The two highest ratings of D&P for commercial paper are D1 and D2. D&P employs
three designations, D1 plus, D1 and D1 minus, within the highest rating
category. D1 plus indicates highest certainty of timely payment. Short-term
liquidity including internal operating factors, and/or ready access to
alternative sources of funds, is judged to be outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations. D1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
strong fundamental protection factors. Risk factors are considered to be minor.
D1 minus indicates high certainty of timely payment. Liquidity factors are
strong and
3-A
<PAGE>
supported by good fundamental protection factors. Risk factors are very small.
D2 indicates good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
Fitch uses the short-term ratings described above under "Tax-Exempt Note
Ratings" for commercial paper.
TBW's short-term ratings assess the likelihood of an untimely or incomplete
payment of principal or interest of unsubordinated debt instruments having a
maturity of one year or less which are issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers and
other financial insti tutions. The two highest short-term ratings of TBW are
TBW-1 and TBW-2. Debt rated TBW-1 indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis. The TBW-2
designation indicates that while the degree of safety regarding timely payment
of principal and interest is strong, the relative degree of safety is not as
high as for issues rated TBW-1.
4-A
