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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Soliciting Material Pursuant to (S) 240.14a-11 (c) or (S) 240.14a-12
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
(Name of Registrant as specified in its Chapter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per Unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 011:* N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid: N/A
2) Form, schedule or Registration statement No.: N/A
3)Filing Party: N/A
4)Date Filed: N/A
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THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
December 17, 1997
Dear Unitholder:
You are cordially invited to attend a Special Meeting of Unitholders of the
U.S. Government Securities Portfolio (the "Portfolio") of The Benchmark Funds
(the "Trust"), to be held on January 26, 1998 at 10:00 a.m., Chicago time, at
the offices of Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois
60606.
At this important meeting, as described more fully below, you will be asked
to approve or disapprove a change in the organization of the Trust and an
amendment relating to a fundamental investment policy of the Portfolio (Pro-
posals 1 and 2). These proposals were approved by the Unitholders of all in-
vestment portfolios of the Trust except the Portfolio at a meeting of
Unitholders held on September 2, 1997. Because we believe that these Proposals
are important and will allow us to improve the Portfolio's operations, we are
resubmitting these Proposals for approval by Unitholders of the Portfolio at
this time.
In particular, Proposal 1 recommends the tax-free conversion of the Portfo-
lio into a series of a newly-formed Delaware business trust. As discussed in
the accompanying Proxy Statement, this conversion will not result in any
change to the assets, fees or investment policies of the Portfolio; however,
the Trustees believe that organizing the Portfolio as series of a Delaware
business trust offers certain advantages. These advantages include a clear
limitation on Unitholder liability and potential cost savings. The dollar
value and number of Units of your investment in the Portfolio will not be af-
fected by the conversion.
Proposal 2 recommends an amendment to the fundamental investment restriction
on issuer diversification for the Portfolio. The purpose of this change is to
make the restriction identical to the "diversification" definition in the In-
vestment Company Act of 1940.
You should carefully read the Proxy Statement that discusses each Proposal
in detail. The formal Notice of Special Meeting of Unitholders and the Proxy
Statement setting forth in detail the matters to come before the meeting are
attached hereto, and a form of Proxy is enclosed for your use.
The Trustees have unanimously recommended that Unitholders approve each Pro-
posal to be acted upon at the meeting.
The continuing interest of Unitholders in the affairs of the Portfolio is
gratefully acknowledged. Whether or not you expect to attend the meeting, it
is important that your Units be represented. Therefore, I urge you to vote FOR
each of the proposals contained in the Proxy Statement.
Sincerely,
LOGO
Frank Polefrone
President
ATTENTION INVESTMENT MANAGERS: If you have the authority to vote Units of
the Portfolio, please vote. If you do not have this authority, please forward
this material to your client as soon as possible. The Benchmark Funds offer
institutional investors access to The Northern Trust Company's investment ad-
visory services. The Northern Trust Company also serves as custodian and
transfer agent to The Benchmark Funds.
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THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD JANUARY 26, 1998
A Special Meeting of Unitholders (the "Meeting") of the U.S. Government Se-
curities Portfolio (the "Portfolio") of The Benchmark Funds (the "Trust") will
be held on January 26, 1998, at 10:00 a.m. (Chicago time) at the offices of
Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, for the fol-
lowing purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization
pursuant to which the Portfolio will be reorganized as a series of The
Benchmark Funds, a Delaware business trust;
(2) To approve or disapprove an amendment to the Portfolio's fundamental
investment restriction concerning issuer diversification; and
(3) To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF EACH PROPOSAL.
Unitholders of record of the Portfolio at the close of business on December
8, 1997 will be entitled to vote at the Meeting or at any adjournment or
adjournments thereof. The proxy statement and proxy card are being mailed to
Unitholders on or about December 17, 1997.
It is important that you return your signed and dated Proxy Card promptly,
regardless of the size of your holdings, so that a quorum may be assured.
By Order of the Board of Trustees of The
Benchmark Funds,
LOGO
Michael J. Richman,
Secretary
December 17, 1997
Please complete, date and sign the Proxy Card for the Units held by you and
return the Proxy Card in the envelope provided so that your vote can be re-
corded. No postage is required if the envelope is mailed in the United States.
Your prompt return of your proxy or proxies may save the Trust the necessity
and expense of further solicitations. If you attend the Meeting, you may vote
your Units in person.
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THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (collectively, the "Trust-
ees") of The Benchmark Funds (the "Trust") to be used at a Special Meeting of
Unitholders of the U.S. Government Securities Portfolio (the "Portfolio") to
be held at the offices of Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Il-
linois 60606, on January 26, 1998, at 10:00 a.m. (Chicago time), for the pur-
poses set forth in the accompanying Notice of Meeting. Such meeting and any
adjournment thereof is referred to as the "Meeting."
The Trustees have fixed the close of business on December 8, 1997 as the
record date (the "Record Date") for determining the Unitholders of the Portfo-
lio entitled to notice of and to vote at the Meeting. Unitholders of record of
the Portfolio on the Record Date are entitled to one vote per Unit at the
Meeting or any adjournment of the Meeting.
As of December 8, 1997 the U.S. Government Securities Portfolio had
2,343,185.78 Units of beneficial interest outstanding. Appendix A hereto sets
forth the persons who owned beneficially more than 5% of the Units of the
Portfolio as of December 8, 1997.
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of The Northern Trust Company
("Northern Trust"), Goldman, Sachs & Co. ("Goldman Sachs") and by the Trust-
ees. In addition, employees of Northern Trust, its affiliates, correspondent
banks, brokers and similar record holders may solicit proxies by these means,
and may forward proxy materials and printed direction forms to the customers
on whose behalf they hold record ownership of Units of the Portfolio. Northern
Trust may engage an independent proxy solicitation firm to assist it in solic-
iting proxies.
This Proxy Statement and the form of Proxy are being first mailed to
Unitholders on or about December 17, 1997.
In connection with each of the matters set forth in the attached Notice of
Meeting, all Units of the Portfolio (regardless of class) will vote together.
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The Trust will furnish, without charge, copies of the Portfolio's November
30, 1996 Annual Unitholders Report and May 31, 1997 Semi-Annual Report to any
Unitholder upon request addressed to Goldman, Sachs & Co., 4900 Sears Tower,
Chicago, Illinois 60606 or by telephone at 800-621-2550.
PROPOSAL 1
APPROVAL OF AN AGREEMENT AND
PLAN OF REORGANIZATION PURSUANT TO WHICH
THE PORTFOLIO WILL BE REORGANIZED INTO A
SERIES OF A DELAWARE BUSINESS TRUST
General
The Trustees have unanimously approved, subject to Unitholder approval, a
proposal for the Trust (which is referred to in this Proposal 1 as the "Massa-
chusetts Trust") on behalf of the Portfolio to effectuate the transactions set
forth in an Agreement and Plan of Reorganization, Conversion and Termination
(the "Plan of Reorganization") with a newly established Delaware business trust
also named "The Benchmark Funds" (the "Delaware Trust"). The Plan of Reorgani-
zation is attached to this Proxy Statement as Appendix B. The Plan of Reorgani-
zation provides for the conversion (the "Conversion") of each portfolio of the
Massachusetts Trust, including the Portfolio, from a separate series of the
Massachusetts Trust into a corresponding separate series of the Delaware Trust.
The Unitholders of each investment portfolio of the Massachusetts Trust, with
the exception of the Portfolio, approved the Conversion at a special meeting of
Unitholders held on September 2, 1997. If the Conversion is approved by
Unitholders of the Portfolio, the Portfolio will become a Portfolio of the Del-
aware Trust, along with all other portfolios of the Massachusetts Trust which
have previously approved the Conversion.
The Trustees believe that a Delaware business trust as a form of organization
offers certain advantages for mutual funds over a Massachusetts business trust.
These advantages include granting the Trustees greater flexibility to take cer-
tain actions without the approval of shareholders of the Delaware business
trust (referred to herein as "Unitholders") and to determine methods of voting
and organization. A Delaware business trust also offers the advantages of a
clearer limitation upon the liability of Unitholders and Trustees. The Trustees
also believe that the Declaration of Trust of the Delaware Trust (the "Delaware
Trust Instrument") is clearer and more modern than the Massachusetts Trust's
organizational documents. While many of these
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same improvements (other than the limitations on liability afforded under Dela-
ware law) could be achieved by amending the Massachusetts Trust's Declaration
of Trust (the "Massachusetts Declaration of Trust"), the Trustees have con-
cluded that, given the other advantages of a Delaware business trust, it is
preferable to enter into the Plan of Reorganization than to amend the current
organizational documents. For a summary comparison of the Massachusetts Decla-
ration of Trust and the proposed Delaware Trust Instrument, see "Description of
Certain Provisions of the Delaware Trust Instrument" and "Certain Comparative
Information About Massachusetts Business Trusts and Delaware Business Trusts"
below.
The Conversion will entail organizing the Delaware Trust, which will ini-
tially have 17 series, one corresponding to each investment portfolio of the
Massachusetts Trust, including the Portfolio. For purposes of the following
discussion, the Portfolio of the Massachusetts Trust is referred to as the
"current Portfolio" and the series of the Delaware Trust that corresponds to
the Portfolio is referred to in this Proposal as the "successor Portfolio."
To effect the Conversion, the current Portfolio will transfer all of its as-
sets and liabilities to the successor Portfolio. As consideration for the
transfer of such assets and liabilities (together, "total assets"), the succes-
sor Portfolio will issue shares of beneficial interest (referred to herein as
"successor Portfolio Units") to the current Portfolio and the current Portfolio
will distribute such successor Portfolio Units pro rata to the current Portfo-
lio Unitholders in exchange for their Units. Upon completion of the Conversion,
each Unitholder of the successor Portfolio will own full and fractional succes-
sor Portfolio Units equal in number and aggregate net asset value and of the
same class as such Unitholder's Units of the current Portfolio as of the date
of the Conversion, and will have substantially the same redemption, liquidation
and dividend rights as those offered by the current Portfolio. Like the current
Portfolio Units, the successor Portfolio Units will have no par value and will
not have preemptive rights.
Following the Conversion, the successor Portfolio will carry on the business
of the current Portfolio. The successor Portfolio will have the same investment
adviser, other service providers, fee and expense structure and investment ob-
jectives, policies and restrictions as the current Portfolio. Any change in the
fundamental investment restriction on issuer diversification approved at the
Meeting with respect to the current Portfolio will also apply to the successor
Portfolio. There may be deemed a momentary technical inconsistency with certain
of the policies and restrictions of the Portfolio (such as restrictions on in-
vestments in any one issuer and investments in other investment companies) dur-
ing the Conversion. Approval of the Plan of Reorganization will also constitute
approval to terminate the current Portfolio and the Massachusetts Trust. Each
other investment portfolio of the Massa-
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chusetts Trust will be converted into a corresponding series of the Delaware
Trust in the same manner.
The Conversion will be accomplished on a tax-free basis, and the dollar
value and number of Units of each investor's investment in the Portfolio will
not change.
REASONS FOR THE PROPOSED CONVERSION
The Massachusetts Trust is organized as a Massachusetts business trust. As
discussed above, the Trustees unanimously recommend Conversion of the Portfo-
lio into a separate series of the Delaware Trust. The Trustees believe that
organizing the Portfolio as a series of the Delaware Trust offers certain ad-
vantages over maintaining it as a series of the Massachusetts Trust.
One advantage of a Delaware business trust is a clearer limitation of lia-
bility of Unitholders and Trustees for the obligations of the trust. The Dela-
ware Business Trust Act (the "Delaware Act") expressly limits the liability of
Delaware business trust Unitholders for the debts or obligations of the busi-
ness trust to the same extent as for stockholders of for-profit Delaware cor-
porations. Similarly, the Delaware Act provides that a series of a Delaware
business trust will not be liable for the debts or obligations of any other
series of the business trust. Under Massachusetts law, there are no comparable
statutory provisions. Although the possibility of incurring these types of li-
ability may be remote under Massachusetts law, the above provisions of the
Delaware Act provide greater certainty and protection against Unitholder lia-
bility and the liability of one business trust series for the debts or obliga-
tions of another series. However, it is possible that, under certain circum-
stances, courts in some states may not enforce limited liability for Delaware
business trust Unitholders. Similarly, Delaware law clearly protects a Trustee
from liability for the obligations of the business trust, which may help the
Delaware Trust attract and retain qualified Trustees in the future.
Second, the Trustees believe that the Delaware business trust form of organ-
ization will enable the successor Portfolio to adopt new methods of operation
and employ new technologies that are expected to reduce costs of operation
when, and if, implemented. For example, Delaware law authorizes electronic or
telephonic communications between Unitholders and a Delaware business trust.
The Trustees may take advantage of this provision in the future to improve
Unitholder voting procedures and reduce associated costs.
Third, the Conversion offers the potential for future cost savings, although
no immediate cost savings are expected to result from the Conversion. These
cost savings may result from the differences between the Massachu-
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setts Trust and the Delaware Trust. For example, since the Trustees of a Dela-
ware business trust can take more actions without Unitholder approval than is
currently permitted under the Massachusetts Declaration of Trust, the Delaware
Trust may be required to hold fewer Unitholder meetings, potentially further
reducing costs. Although neither a Delaware business trust nor a Massachusetts
business trust is required to hold annual Unitholder meetings, Delaware law
affords to the Trustees greater latitude to adapt the Delaware Trust to future
contingencies without the necessity of holding a special Unitholder meeting.
Under the Delaware Trust Instrument, the Trustees have the power to amend the
Delaware Trust Instrument; to dissolve the business trust; to incorporate the
Delaware Trust; to merge or consolidate with another entity; to sell, lease,
exchange, transfer, pledge or otherwise dispose of all or any part of the Del-
aware Trust's assets; to cause any series to become a separate trust; and to
change the Delaware Trust's domicile--all without Unitholder vote.
Any exercise of authority by the Trustees will be subject to applicable
state and federal law. The flexibility of a Delaware business trust as a form
of organization should help to assure that the Delaware Trust always operates
under the most advantageous structure and is able to take advantage of oppor-
tunities to reduce the expense and frequency of future Unitholder meetings.
Finally, Delaware law explicitly provides that separate boards of trustees
may be authorized for each series of a Delaware business trust. Whether sepa-
rate boards of trustees can be authorized for series of a Massachusetts busi-
ness trust is unclear under Massachusetts law. The establishment of any board
of trustees of a registered investment company must comply with applicable se-
curities laws, including the provision of the 1940 Act regarding the election
of trustees by Unitholders.
BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION
The Trustees discussed the proposed Conversion preliminarily at a meeting
held on April 22, 1997 and in more detail at their July 8, 1997 quarterly
Board meeting. At the meeting held on July 8, 1997, after considering the mat-
ters discussed above, the Trustees unanimously approved the adoption of the
Plan of Reorganization and determined that the Conversion: (i) is in the best
interest of the Portfolio and (ii) will not result in dilution of the inter-
ests of the Unitholders of the Portfolio. In addition, the Trustees unani-
mously voted to recommend to the Unitholders of the Portfolio that they ap-
prove the
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Plan of Reorganization and the transactions contemplated thereunder. In taking
such action and making such recommendation, the Trustees took into considera-
tion the fact that the Conversion may provide operational efficiencies and ad-
ditional managerial flexibility to the Trustees. At a meeting held on Septem-
ber 2, 1997 (the "September 1997 Meeting") the proposal to approve the Plan of
Reorganization was approved by the Unitholders of all portfolios of the Massa-
chusetts Trust except the Portfolio. At a meeting held on October 7, 1997 the
Trustees reconsidered the proposed Conversion. In addition to the factors
noted above, the Trustees considered the possibility that the Portfolio might
not be economically viable as the sole portfolio of the Massachusetts Trust in
the event that the other portfolios were converted into series of the Delaware
Trust. The Trustees also considered the possibility of not completing the Con-
version with respect to any of the portfolios. The Trustees continued to be-
lieve, however, that the Conversion would be in the best interest of current
Unitholders of the Portfolio as well as future Unitholders. Accordingly, the
Trustees unanimously voted to resubmit the Plan of Reorganization to a vote of
the Portfolio's Unitholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF THE PORTFOLIO APPROVE
THE PLAN OF REORGANIZATION PROVIDING FOR THE CONVERSION OF THE PORTFOLIO FROM
A SERIES OF THE MASSACHUSETTS BUSINESS TRUST TO A SERIES OF THE DELAWARE BUSI-
NESS TRUST.
VOTE REQUIRED TO APPROVE PLAN OF REORGANIZATION
Approval of the Plan of Reorganization requires the affirmative vote of a
majority of the Units of the Portfolio outstanding and entitled to vote. For
this purpose, a majority of the outstanding Units of the Portfolio means the
vote of the lesser of (i) 67% or more of the Units of the Portfolio present at
the Meeting, if the holders of more than 50% of the Units of the Portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding
Units of the Portfolio (a "1940 Act Majority"). Units of all classes of the
Portfolio will be voted together as one class. If the Plan of Reorganization
is not approved by the Unitholders of the Portfolio, the Portfolio will con-
tinue its operations as a series of the Massachusetts Trust.
A vote FOR the Conversion will authorize the Portfolio, as the sole
Unitholder of its corresponding successor Portfolio (i) to vote in favor of
the election of the current Trustees of the Massachusetts Trust as the Trust-
ees of
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the Delaware Trust; (ii) to vote in favor of the ratification of the selection
of Ernst & Young LLP as the Delaware Trust's independent auditors; (iii) to ap-
prove an investment advisory agreement for the successor Portfolio that is sub-
stantially the same as the current Portfolio's investment advisory agreement;
and (iv) to approve fundamental investment restrictions for the successor Port-
folio which, if Proposal 2 is approved, will be the same as the current invest-
ment restrictions in effect for the Portfolio, as amended by such Proposal. If
the Conversion is approved but Proposal 2 is not approved by the Portfolio's
Unitholders, the Portfolio, as sole Unitholder of the successor Portfolio, will
vote to approve only the Portfolio's existing fundamental restrictions.
SUMMARY OF THE PLAN OF REORGANIZATION
The following discussion summarizes certain terms of the Plan of Reorganiza-
tion as it relates to the Portfolio (The terms relating to the other portfolios
of the Massachusetts Trust are identical to those discussed below with respect
to the Portfolio). This summary of the Plan of Reorganization is qualified in
its entirety by the provisions of the Plan of Reorganization, which is attached
to this Proxy Statement as Appendix B.
On the closing date of its Conversion (the "Closing Date"), the current Port-
folio will transfer all of its assets to the successor Portfolio in exchange
for the assumption by the successor Portfolio of all the liabilities of the
current Portfolio and the issuance to the current Portfolio of Units of the
successor Portfolio ("successor Portfolio Units") equal to the value (as deter-
mined by using the procedures in the current prospectuses) on the date of the
exchange of the current Portfolio's net assets. Immediately thereafter, the
current Portfolio will liquidate and distribute successor Portfolio Units to
the current Portfolio Unitholder's account pro rata in proportion to the cur-
rent Portfolio Unitholder's beneficial interest in the current Portfolio ("cur-
rent Portfolio Units") in exchange for the current Portfolio Units. In these
exchanges, the successor Portfolio will issue the appropriate number of succes-
sor Portfolio Units of each class of Units that currently is outstanding, so
that the current Portfolio will distribute, and holders of a particular class
of current Portfolio Units will receive, the same number of successor Portfolio
Units of the same class. As soon as practicable after this distribution of suc-
cessor Portfolio Units, the current Portfolio will be wound up and terminated.
Certificates evidencing full or fractional successor Portfolio Units will not
be issued. Upon completion of the Conversion, a current Portfolio Unitholder
will be the owner of full and fractional successor Portfolio Units equivalent
in number, class and aggregate net asset value to the Unitholder's current
Portfolio Units immediately before the Conversion.
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Assuming the Plan of Reorganization is approved with respect to the Portfo-
lio, it is currently contemplated that the Conversion will become effective
during the first quarter of 1998 or as soon thereafter as possible.
If, at any time before the Closing Date of the Conversion, the Trustees de-
termine that it would not be in the best interest of the Massachusetts Trust
or the Unitholders to proceed with the Conversion, the Conversion will not go
forward, notwithstanding the approval of the Conversion by the Portfolio's
Unitholders at the Meeting. The Massachusetts Trust and the Delaware Trust may
at any time waive compliance with any of the conditions contained in, or may
amend, the Plan of Reorganization, provided that such waiver or amendment does
not materially adversely affect the interests of current Portfolio
Unitholders.
EXPENSES OF THE CONVERSION
The Portfolio will bear its allocable share of the expenses associated with
the transactions contemplated by the Plan of Reorganization, except that
Northern Trust and correspondent banks, brokers and other entities that have
entered into Unitholder Servicing Agreements with the Trust will bear all
mailing expenses in connection with the solicitation of proxies on behalf of
the Portfolio. See "Additional Information--Manner and Cost of Proxy Solicita-
tion" below. In the event that the Conversion is completed, the expenses will
be assumed by the successor Portfolio. It is currently estimated that the ag-
gregate expenses of the conversions contemplated by the Plan of Reorganization
will be approximately $108,300, which will be allocated among all portfolios
of the Massachusetts Trust, including the Portfolio.
TAX CONSEQUENCES OF THE CONVERSION
It is a condition to the consummation of the Conversion that the Massachu-
setts Trust and the Delaware Trust receive on or before the Closing Date an
opinion from Drinker Biddle & Reath LLP, counsel to the Massachusetts Trust
and the Delaware Trust, substantially to the effect that, among other things,
for federal income tax purposes, the Conversion will constitute a reorganiza-
tion under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended, and that no gain or loss will be recognized for federal income tax
purposes by the current Portfolio, the successor Portfolio, and the
Unitholders of the current Portfolio upon (1) the transfer of the current
Portfolio's assets to the corresponding successor Portfolio in exchange solely
for
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the successor Portfolio's Units and the assumption by the successor Portfolio
of the current Portfolio's liabilities or (2) the distribution in liquidation
by the current Portfolio of the successor Portfolio Units to the current Port-
folio Unitholders in exchange for their current Portfolio Units. The opinion
will further provide, among other things, that in counsel's view (i) the tax
basis of the successor Portfolio Units to be received by each current Portfo-
lio Unitholder will be the same as that of his or her current Portfolio Units
surrendered in exchange therefor and (ii) each current Portfolio Unitholder's
tax holding period for his or her successor Portfolio Units will include such
Unitholder's tax holding period for the current Portfolio Units surrendered in
exchange therefor, provided that the current Portfolio Units were held as cap-
ital assets on the date of the exchange.
CONTINUATION OF UNITHOLDER ACCOUNTS AND PLANS
The Delaware Trust's transfer agent will establish accounts for all current
Portfolio Unitholders containing the appropriate number and class of successor
Portfolio Units to be received by that Unitholder under the Plan of Reorgani-
zation. Such accounts will be identical in all material respects to the ac-
counts currently maintained by the Portfolio for each Unitholder. No action by
a Unitholder will be necessary in order to continue any automatic investment
plans currently maintained by a current Portfolio Unitholder.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
The Northern Trust Company, 50 S. LaSalle Street, Chicago, Illinois 60675,
currently serves as investment adviser, transfer agent and custodian for the
Massachusetts Trust and will serve in the same capacities for the Delaware
Trust. The Delaware Trust will adopt investment advisory, transfer agency and
custody agreements with respect to the successor Portfolio that will be iden-
tical, in all material respects, to the agreements in effect for the Portfolio
immediately before the Conversion.
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP, Sears Tower, 233 S. Wacker Drive, Chicago, Illinois
60606-6301, are presently the independent public auditors for the Massachu-
setts Trust, and will continue to be the independent public auditors for the
Portfolio.
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DISTRIBUTION AND ADMINISTRATION AGREEMENTS
The Delaware Trust will adopt distribution and administration agreements with
respect to the Units of the successor Portfolio. The terms of the distribution
and administration agreements will be identical, in all material respects, to
the Portfolio's existing agreements with Goldman, Sachs & Co.
UNITHOLDER SERVICING PLAN
The Delaware Trust will adopt a Unitholder servicing plan with respect to
Class B, C and D Units, if any, of the successor Portfolio. The terms of the
plan, including the fees payable thereunder, will be identical, in all material
respects to the Portfolio's existing plan. Pursuant to the new plan, the Dela-
ware Trust on behalf of each successor Portfolio will assume the corresponding
current Portfolio's obligations under agreements with banks, corporations, bro-
kers, dealers and other financial institutions that act as "Servicing Agents."
DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT
The following is a summary of certain provisions of the Delaware Trust In-
strument.
Series and Classes. As discussed above, the Delaware Trust Instrument permits
the Delaware Trust to issue series of its shares of beneficial interest (re-
ferred to herein as "Units") which represent interests in separate portfolios
of investments, including the successor Portfolio. The Delaware Trust is also
authorized to issue multiple classes of all series. The Massachusetts Declara-
tion of Trust permits the issuance of separate series and, except for the
Trust's money market investment portfolios, classes of Units representing in-
terests in the same portfolio. No series is entitled to share in the assets of
any other series or is liable for the expenses or liabilities of any other se-
ries. The successor Portfolio would initially have the same classes of Units as
the current Portfolio, and these classes would have substantially the same at-
tributes as the respective classes of the current Portfolio. The Trustees of
the Delaware Trust are able to authorize the issuance of additional series or
classes of Units without prior Unitholder approval.
Limitations on Derivative Actions. In addition to the requirements of Dela-
ware law, the Delaware Trust Instrument provides that a Unitholder of the Dela-
ware Trust may bring a derivative action on behalf of the Delaware Trust only
if the following conditions are met: (i) Unitholders eligible to bring such de-
rivative action under Delaware law who hold at least 10% of
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the outstanding Units of the Delaware Trust, or 10% of the outstanding Units of
the series or class to which such action relates, must join in the request for
the Trustees to commence such action; and (ii) the Trustees must be afforded a
reasonable amount of time to consider such Unitholder request and to investi-
gate the basis of such claim. The Delaware Trust Instrument also provides that
no person, other than the Trustees, who is not a Unitholder of a particular se-
ries or class shall be entitled to bring any derivative action, suit or other
proceeding on behalf of or with respect to such series or class. The Trustees
will be entitled to retain counsel or other advisers in considering the merits
of the request and may require an undertaking by the Unitholders making such
request to reimburse the Delaware Trust for the expense of any such advisers in
the event that the Trustees determine not to bring such action. No similar pro-
visions are applicable to the Massachusetts Trust.
Unitholder Meetings and Voting Rights. The Delaware Trust is not required to
hold annual meetings of Unitholders and does not intend to hold such meetings.
In the event that a meeting of Unitholders is held, each Unit of the Delaware
Trust will be entitled, as determined by the Trustees without the vote or con-
sent of Unitholders, either to one vote for each Unit or to one vote for each
dollar of net asset value represented by such Units on all matters presented to
Unitholders, including the election of Trustees (this method of voting being
referred to as "dollar-based voting"). However, to the extent required by the
1940 Act or otherwise determined by the Trustees, series and classes of the
Delaware Trust will vote separately from each other. Unitholders of the Dela-
ware Trust do not have cumulative voting rights in the election of Trustees.
Meetings of Unitholders of the Delaware Trust, or any series or class thereof,
may be called by the Trustees, certain officers or upon the written request of
holders of 10% or more of the Units entitled to vote at such meeting. The
Unitholders of the Delaware Trust will have voting rights only with respect to
the limited number of matters specified in the Delaware Trust Instrument and
such other matters as the Trustees may determine or may be required by law.
The voting provisions of the Delaware Trust Instrument differ from those of
the Massachusetts Declaration of Trust in several important respects. The Mas-
sachusetts Trust is not authorized to use dollar-based voting. Instead, each
Unitholder has one vote for each Unit held, regardless of its net asset value
per Unit. This can have the effect of providing series with a lower net asset
value per Unit, such as money market funds, with a voting interest that is dis-
proportionate to their economic interest. Also, a greater number of matters re-
quire approval by Unitholders of the Trust. The Massachusetts Declaration of
Trust, in addition to the matters requiring approval of Unitholders of the Del-
aware Trust, requires approval of the reorganization or termination
13
<PAGE>
of the Massachusetts Trust or any of its series, with respect to certain legal
proceedings and with respect to certain amendments to the Massachusetts Decla-
ration of Trust (with limited exceptions).
Indemnification. The Delaware Trust Instrument provides for indemnification
of Trustees, officers and agents of the Delaware Trust unless the recipient is
liable by reason of willful misfeasance, bad faith, gross negligence or reck-
less disregard of the duties involved in the conduct of such person's office.
The Delaware Trust Instrument provides that, if a Unitholder or former
Unitholder of a series is held personally liable solely by reason of being or
having been a Unitholder and not because of the Unitholder's acts or omissions
or for some other reason, the Unitholder or former Unitholder (or heirs, execu-
tors, administrators, legal representatives or general successors) will be en-
titled, out of the assets belonging to the applicable series, to be held harm-
less from and indemnified against all loss and expense arising from such lia-
bility. The Delaware Trust, acting on behalf of any affected series, must, upon
request by such Unitholder, assume the defense of any claim made against such
Unitholder for any act or obligation of the series and satisfy any judgment
thereon from the assets of the series.
Termination. The Delaware Trust Instrument permits the termination of the
Delaware Trust or of a series or class of the Delaware Trust (i) by a majority
of the affected Unitholders at a meeting of Unitholders of the Delaware Trust,
series or class; or (ii) by a majority of the Trustees without Unitholder ap-
proval if the Trustees determine that such action is in the best interest of
the Delaware Trust or its Unitholders. The factors and events that the Trustees
may take into account in making such determination include (i) the inability of
the Delaware Trust or any series or class to maintain its assets at an appro-
priate size; (ii) changes in laws or regulations governing the Delaware Trust,
or any series or class thereof, or affecting assets of the type in which it in-
vests; or (iii) economic developments or trends having a significant adverse
impact on their business or operations. The Massachusetts Declaration of Trust
permits the Trustees to terminate the Massachusetts Trust only with Unitholder
approval.
Merger, Consolidation, Sale of Assets, Etc. The Delaware Trust Instrument au-
thorizes the Trustees, without Unitholder approval (except as stated in the
next paragraph), to cause the Delaware Trust, or any series thereof, to merge
or consolidate with any corporation, association, trust or other organization
or sell or exchange all or substantially all of the property belonging to the
Delaware Trust, or any series thereof. In addition, the Trustees, without
Unitholder approval, may adopt a master-feeder structure by investing sub-
14
<PAGE>
stantially all of the assets of a series of the Delaware Trust in the securi-
ties of another open-end investment company or pooled portfolio. The reorgani-
zation of the Massachusetts Trust would require Unitholder approval.
The Delaware Trust Instrument also authorizes the Trustees, in connection
with the merger, consolidation, termination or other reorganization of the
Trust or any series or class, to classify the Unitholders of any class into one
or more separate groups and to provide for the different treatment of Units
held by the different groups, provided that such merger, consolidation, termi-
nation or other reorganization is approved by a majority of the outstanding
voting securities (as defined in the 1940 Act) of each group of Unitholders
that are so classified.
Amendments. The Delaware Trust Instrument permits the Trustees to amend the
Delaware Trust Instrument without a Unitholder vote. However, Unitholders of
the Delaware Trust have the right to vote on any amendment (i) that would ad-
versely affect the voting rights of Unitholders; (ii) that is required by law
to be approved by Unitholders; (iii) that would amend the voting provisions of
the Delaware Trust Instrument; or (iv) that the Trustees determine to submit to
Unitholders. Amendments to the Massachusetts Declaration of Trust, with certain
limited exceptions, require approval of Unitholders.
Series of Trustees. The Trustees may appoint separate Trustees with respect
to one or more series or classes of the Delaware Trust's Units (the "Series
Trustees"). To the extent provided by the Trustees in the appointment of Series
Trustees, Series Trustees (i) may, but are not required to, serve as Trustees
of the Trust or any other series or class of the Delaware Trust; (ii) may have,
to the exclusion of any other Trustee of the Delaware Trust, all the powers and
authorities of Trustees under the Delaware Trust Instrument with respect to
such series or class; and/or (iii) may have no power or authority with respect
to any other series or class. The Massachusetts Declaration of Trust does not
permit the election of separate Trustees for a series or class. The Trustees
are not currently considering the appointment of Series Trustees for the Dela-
ware Trust.
CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS BUSINESS TRUSTS AND
DELAWARE BUSINESS TRUSTS
Unitholder Liability. Generally, Delaware business trust Unitholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Act entitles a Unitholder of a Delaware business trust to the
same limitation of liability as is available to Unitholders of private for-
profit corporations. However, no similar statutory or other author-
15
<PAGE>
ity limiting business trust Unitholder liability exists in many other states.
As a result, to the extent that a Delaware business trust or a Unitholder is
subject to the jurisdiction of courts in such other states, those courts may
not apply Delaware law and may subject the Delaware Trust Unitholders to lia-
bility. To offset this risk, the Delaware Trust Instrument (i) contains an ex-
press disclaimer of Unitholder liability for acts or obligations of the Dela-
ware Trust and requires that notice of such disclaimer be given in each agree-
ment, obligation and instrument entered into or executed by the Delaware Trust
or its Trustees and (ii) provides for indemnification out of the property of
the applicable series of the Delaware Trust of any Unitholder held personally
liable for the obligations of the Delaware Trust solely by reason of being or
having been a Unitholder and not because of the Unitholder's acts or omissions
or for some other reason. Thus, the risk of a Delaware business trust
Unitholder incurring financial loss beyond his or her investment because of
Unitholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the liabil-
ity arises under tort law or, if not, no contractual limitation of liability is
in effect; and (3) the applicable series of the Delaware Trust is unable to
meet its obligations. In light of Delaware law, the nature of the Delaware
Trust's business and the nature of its assets, the risk of personal liability
to a Delaware Trust Unitholder is extremely remote.
Unlike Delaware, in Massachusetts there is no statute relating to business
trusts that entitles Unitholders of a Massachusetts business trust to the same
limitation of liability as is extended to Unitholders of a Massachusetts corpo-
ration. Unitholders of a Massachusetts business trust may, therefore, under
certain circumstances, be held personally liable under Massachusetts law for
the obligations of the Massachusetts business trust. The Massachusetts Declara-
tion of Trust, like the Delaware Trust Instrument, contains an express dis-
claimer of Unitholder liability and requires that notice of such disclaimer be
given in each agreement entered into or executed by the Massachusetts business
trust or its Trustees. The Massachusetts Declaration of Trust also provides for
indemnification out of the trust property. Thus, the Trustees believe the risk
of Unitholder liability is also remote for Unitholders of the Massachusetts
Trust.
Liability of Trustees. The Delaware Trust Instrument provides that the Trust-
ees will not be liable to any person other than the Delaware Trust or a
Unitholder and that a Trustee will not be liable for any act as a Trustee. How-
ever, nothing in the Delaware Trust Instrument protects a Trustee against any
liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. The Massachusetts Decla-
16
<PAGE>
ration of Trust provides that its Trustees will not be liable for errors of
judgment or mistakes of fact or law, subject to substantially the same provi-
sions concerning bad faith, gross negligence and reckless disregard as those
described above.
PROPOSAL 2
AMENDMENT OF THE PORTFOLIO'S FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
ISSUER DIVERSIFICATION
To be diversified under the 1940 Act, the Portfolio must not, with respect
to 75% of its total assets, invest more than 5% of its total assets in the se-
curities of any one issuer or acquire more than 10% of the outstanding voting
securities of any one issuer. These restrictions apply only at the time of in-
vestment. The Portfolio may invest up to 25% of its total assets without re-
gard to these restrictions. In addition, these restrictions do not apply to
holdings of or investments in cash, cash items, certain repurchase agreements,
U.S. Government securities or securities of other investment companies. Cur-
rently, the fundamental investment restriction concerning issuer diversifica-
tion for the Portfolio is narrower than the 1940 Act restrictions in not list-
ing as exclusions cash, cash items or securities of other investment compa-
nies. The Proposal simplifies the contents of the current restrictions. As
proposed, the restriction would require diversification only to the extent re-
quired under the 1940 Act. Additional diversification requirements are imposed
upon the Portfolio to be treated as a regulated investment company for federal
tax purposes. These requirements are not required to be reflected in the pro-
posed investment restriction and will not be affected by the Proposal. At the
July 8, 1997 meeting, the Trustees approved, subject to Unitholder approval,
that each portfolio of the Trust adopt the following investment restriction in
lieu of its current fundamental policy:
The Portfolio may not make any investment inconsistent with the Portfo-
lio's classification as a diversified company under the 1940 Act. This re-
striction does not, however, apply to any Portfolio classified as a non-
diversified company under the 1940 Act.
BOARD OF TRUSTEES' RECOMMENDATION
The Unitholders of each diversified portfolio of the Trust, with the excep-
tion of the Portfolio, approved the foregoing investment restriction at the
September 1997 meeting. At a meeting held on October 7, 1997 the Trustees re-
considered the proposed new issuer diversification policy with respect to the
Portfolio. The Trustees continued to believe that the proposed amendment
17
<PAGE>
to the Portfolio's investment restrictions will more clearly reflect current
regulatory practice, will provide a more complete range of investment opportu-
nities and will clarify and simplify the restrictions.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE UNITHOLDERS OF THE PORTFOLIO VOTE
"FOR" THE ADOPTION OF THE PROPOSED AMENDED INVESTMENT RESTRICTION.
REQUIRED VOTE
Approval of the proposed amendment to the Portfolio's fundamental investment
restriction concerning issuer diversification requires the affirmative vote of
a 1940 Act Majority of the Portfolio's outstanding Units (described in Proposal
1). If the proposed amendment is not approved with respect to the Portfolio,
the current investment restriction will continue in effect unchanged for the
Portfolio.
ADDITIONAL INFORMATION
OTHER BUSINESS
As of the date of this Proxy Statement, the Trustees are not aware of any
matters to be presented for action at the Meeting other than those described
above. Should other business properly be brought before the Meeting, it is in-
tended that the accompanying Proxy will be voted thereon in accordance with the
judgment of the persons named as proxies.
PROXIES AND VOTING AT THE MEETING
The enclosed Proxy is revocable by a Unitholder at any time before it is ex-
ercised by written notice to the Trust (addressed to the Secretary at the
Trust's principal executive offices), by executing a superseding proxy or by
attending the Meeting and voting in person. All valid proxies received prior to
the Meeting (including any adjournment thereof) will be voted at the Meeting.
Matters on which a choice has been provided will be voted as indicated on the
proxy and, if no instruction is given, the persons named as proxies will vote
the Units represented thereby in favor of the matters set forth in each Pro-
posal and will use their best judgment in connection with the transaction of
such other business as may properly come before the Meeting.
In the event that at the time any session of the Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to
18
<PAGE>
a later date. In the event that a quorum is present but sufficient votes in
favor of either Proposal have not been received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further solici-
tation of proxies with respect to such Proposal. Any such adjournment will re-
quire the affirmative vote of a majority of the Units of the Portfolio present
and voting in person or by proxy at the session of the Meeting to be ad-
journed. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of any such Proposal in favor of such an adjourn-
ment, and will vote those proxies required to be voted against any such Pro-
posal against any such adjournment. A Unitholder vote may be taken on one of
the Proposals in this Proxy Statement Portfolio prior to such adjournment if
sufficient votes for its approval have been received and it is otherwise ap-
propriate.
A majority of the Units entitled to vote with respect to a Proposal shall be
a quorum for the transaction of business with respect to that Proposal at the
Meeting, but any lesser number shall be sufficient for adjournments. Absten-
tions will be treated as Units that are present at the Meeting, but will not
be counted as a vote in favor of a Proposal. Accordingly, an abstention from
voting on a Proposal has the same effect as a vote against such Proposal. If a
broker or nominee holding Units in "street name" indicates on the proxy that
it does not have discretionary authority to vote as to a particular Proposal,
those Units will not be considered as present at the Meeting with respect to
the Proposal. Accordingly, a "broker non-vote" has no effect on the voting in
determining whether a proposal has been adopted pursuant to subsection (i) of
the 1940 Act Majority definition. However, in determining whether a proposal
has been adopted pursuant to subsection (ii) of the 1940 Act Majority defini-
tion, a "broker non-vote" will have the same effect as a vote against the Pro-
posal.
Appendix A hereto sets forth the persons who owned beneficially more than 5%
of the Units of the Portfolio as of December 8, 1997, the Record Date for the
Meeting. For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Northern Trust has advised the
Trust that it intends to vote the Units over which it has voting power "For"
the Proposals listed in this Proxy Statement.
MANNER AND COST OF PROXY SOLICITATION
Proxies will be solicited by mail and may also be solicited in person or by
telephone, fax or personal interview by officers of Northern Trust, Goldman
Sachs and by the Trustees. In addition, employees of Northern
19
<PAGE>
Trust, its affiliates, correspondent banks, brokers and similar record holders
may solicit proxies by these means, and may forward proxy materials and printed
direction forms to the customers on whose behalf they hold record ownership of
Units of the Trust. The Northern Trust may engage an independent proxy solici-
tation firm to assist it in soliciting proxies.
The Portfolio will bear the proxy solicitation expenses, including the cost
of preparing and assembling materials used in connection with the solicitation
of proxies. Correspondent banks, brokers and other entities that have entered
into a Unitholder Servicing Agreement with the Trust on behalf of the Portfolio
will bear the mailing expenses associated with the solicitation of proxies from
Unitholders on whose behalf they serve as recordholder. Northern Trust will
bear all other mailing expenses associated with the solicitation of proxies and
will reimburse correspondent banks, brokers and other similar record holders
who have not entered into Unitholder Servicing Agreements for their reasonable
expenses incurred in forwarding proxy materials to beneficial owners.
UNITHOLDER ACTION AT THE SEPTEMBER 1997 MEETING
Unitholders of all the Trust's portfolios (including the Portfolio) voting as
a single class took the following actions at the September 1997 Meeting: (i)
the election of Richard G. Cline, Edward J. Condon, Jr., John W. English, James
J. Gavin, Jr., Sandra P. Guthman, Frederick T. Kelsey, William H. Springer and
Richard P. Strubel to the Trust's Board of Trustees; (ii) the ratification of
the selection of Ernst & Young LLP as the Trust's independent auditors for the
fiscal year ended November 30, 1997; and (iii) the approval of an amendment to
the Trust's Declaration of Trust allowing each portfolio to invest substan-
tially all of its assets in a single open-ended investment company with sub-
stantially the same investment objective, policies and restrictions as the
portfolio (a "master fund"). In addition to the votes described above,
Unitholders of the Portfolio approved a new fundamental investment policy which
will allow the Portfolio to invest substantially all of its assets in a master
fund and which otherwise will permit the Portfolio to purchase the securities
of other investment companies to the full extent permitted by the 1940 Act and
any regulation or order of the SEC, notwithstanding the Portfolio's other fun-
damental investment restrictions.
UNITHOLDER PROPOSALS
Neither the Massachusetts Trust nor the Delaware Trust is required, nor does
either intend, to hold annual meetings of Unitholders each year for the elec-
tion of Trustees and other business. Instead, meetings will be held only
20
<PAGE>
when and if required (for example, whenever less than a majority of the Board
of Trustees holding office has been elected by the Unitholders or when the
Trustees have received a written request to call a meeting for the purpose of
voting on the question of the removal of any Trustee from the holders of record
of at least 10% of the outstanding Units). Any Unitholders desiring to present
a proposal for consideration at the next meeting for Unitholders of the Portfo-
lio must submit the proposal in writing, so that it is received by the Portfo-
lio within a reasonable time before any meeting.
INFORMATION ABOUT THE DISTRIBUTOR AND ADMINISTRATOR
Goldman, Sachs & Co., the Trust's distributor and administrator, has its
principal offices at 85 Broad Street, New York, New York 10004.
INFORMATION ABOUT THE TRUST
The Trust currently has, and the Delaware Trust will have, its principal of-
fices at 4900 Sears Tower, Chicago, Illinois 60606.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
December 17, 1997
21
<PAGE>
APPENDIX A
As of December 8, 1997, The Northern Trust Company, 50 South LaSalle Street,
Chicago, IL 60675, possessed sole or shared voting and/or investment power for
its customer accounts with respect to 680,302.18 outstanding Units of the
Portfolio representing 29.03% of the total outstanding Units of the Portfolio.
In addition, as of December 8, 1997, the following persons or entities owned
beneficially more than 5% of the outstanding Units of the Portfolio:
AMOUNT AND PERCENTAGE OF
OUTSTANDING UNITS
<TABLE>
<CAPTION>
UNITHOLDER NAME AND ADDRESS AMOUNT OF UNITS PERCENTAGE OF UNITS (%)
--------------------------- --------------- -----------------------
<S> <C> <C>
Electrical Insurance Trust 221 North 553,753.496 23.63
LaSalle Street Chicago, IL 60601-1273
Sheet Metal Work H&W Northern 390,012.816 16.64
106 North Schmale Road
Carol Stream, IL 60188
MAFCO 366,231.680 15.63
625 Madison
New York, NY 10022
Illinois State Painters 235,055.419 10.03
Welfare Fund
303 East Ohio Street
Chicago, IL 60611
LaPorte Inc. 157,240.914 6.77
Retirement Plus Program
Street One Woodlawn Greeen Ste 240
Charlotte, NC 28217
Jordan Industries Inc. 154,769.926 6.61
Savings Plan
U.S. Government
Securities Fund
1751 Lake Cook
Arbor Lake Ctr 550
Deerfield, IL 60015
</TABLE>
A-1
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF
REORGANIZATION, CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION is
made as of the 8th day of July, 1997, by and between The Benchmark Funds, a
Massachusetts business trust (the "Registrant"), on behalf of each of its se-
ries (each a "Portfolio" and collectively the "Portfolios"), and The Benchmark
Funds (the "Trust"), a Delaware business trust.
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1)(F) of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), and is intended to effect the reorganization
(a "Reorganization") of each Portfolio as a new series of the Trust (each a
"Successor Portfolio" and collectively the "Successor Portfolio"). Each Reor-
ganization will include the transfer of all of the assets of a Portfolio to a
corresponding Successor Portfolio of the Trust solely in exchange for (1) the
assumption by the Successor Portfolio of all liabilities of the Portfolio and
(2) the issuance by the Trust to the Portfolio of Shares of beneficial inter-
est (herein referred to as "Units") of the Successor Portfolio. The aggregate
number of Units of each subseries (hereafter "class") of the Successor Portfo-
lio (the "Successor Portfolio Units") issued to the Portfolio will be equal to
the number of Units of beneficial interest ("Units") of the corresponding
Portfolio class outstanding immediately before the Reorganization. These
transactions will be promptly followed by a pro rata distribution by each
Portfolio of the Successor Portfolio Units it receives in the exchange de-
scribed above to the holders of corresponding Portfolio Units in exchange for
those Portfolio Units, in liquidation of each Portfolio, all upon the terms
and conditions hereinafter set forth in this Agreement.
In consideration of the promises and of the covenants and agreements herein-
after set forth, the parties hereto covenant and agree as follows.
1. TRANSFER OF ASSETS OF THE PORTFOLIO IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SUCCESSOR PORTFOLIO UNITS
1.1 Subject to the terms and conditions set forth herein and on the basis of
the representations and warranties contained herein, each Portfolio agrees to
transfer all of its assets (as described in paragraph 1.2) and to assign and
transfer all of its liabilities to a corresponding Successor Portfolio orga-
nized solely for the purpose of acquiring all of the assets and assuming all
of the liabilities of that Portfolio. The Trust, on behalf of each Successor
Portfolio,
B-1
<PAGE>
agrees that in exchange for all of the assets of the corresponding Portfolio:
(1) the Successor Portfolio shall assume all of the liabilities of such Port-
folio, whether contingent or otherwise, then existing including, without limi-
tation, all fees and expenses incurred in connection with the transactions
contemplated hereby and (2) the Trust shall issue Successor Portfolio Units to
the Portfolio. The number of Successor Portfolio Units of each class to be is-
sued by the Trust on behalf of each Successor Portfolio will be identical to
the number of Units of the corresponding class and Portfolio outstanding on
the Closing Date provided for in paragraph 3.1. Such transactions shall take
place at the Closing provided for in paragraph 3.1.
1.2 The assets of each Portfolio to be acquired by the corresponding Succes-
sor Portfolio shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable), any tax
operating losses, any claims or rights of action or rights to register Units
under applicable securities laws, any books or records of the Portfolio and
other property owned by the Portfolio and any deferred or prepaid expenses
shown as assets on the books of the Portfolio on the Closing Date provided for
in paragraph 3.1.
1.3 Immediately after delivery to each Portfolio of corresponding Successor
Portfolio Units, a duly authorized officer of Registrant shall cause each
Portfolio, as the sole Unitholder of the corresponding Successor Portfolio, to
(i) elect the Trustees of the Trust; (ii) ratify the selection of the Trust's
independent auditors; (iii) approve an investment advisory agreement for the
Successor Portfolio in substantially the same form as the investment advisory
agreement in effect with respect to the Portfolio immediately prior to the
Closing of the reorganization, including in the case of the International
Growth Portfolio any changes adopted to the Portfolio's investment advisory
agreement at the meeting of Unitholders scheduled for September 2, 1997 (the
"Unitholder Meeting"), and (iv) adopt investment objectives, investment poli-
cies and investment restrictions which are substantially identical to those of
the Portfolio immediately prior to the Closing of the reorganization, includ-
ing any changes thereto approved by the Unitholders of the Portfolio at the
Unitholder Meeting.
1.4 On the Closing Date each Portfolio will distribute in liquidation the
Successor Portfolio Units of each class to each Unitholder of record, deter-
mined as of the close of business on the Closing Date, of the corresponding
class of the Portfolio pro rata in proportion to such Unitholder's beneficial
interest in that class and in exchange for that Unitholder's Units. Such dis-
tribution will be accomplished by the transfer of the Successor Portfolio
Units then credited to the account of each Portfolio on the Unit records of
the Trust
B-2
<PAGE>
to open accounts on those records in the names of such Portfolio Unitholders
and representing the respective pro rata number of each class of the Successor
Portfolio Units received from the Successor Portfolios which is due to such
Portfolio Unitholders. Fractional Successor Portfolio Units shall be rounded
to the third place after the decimal point.
1.5 Ownership of the Successor Portfolio Units by each Successor Portfolio
Unitholder shall be recorded separately on the books of The Northern Trust
Company ("Northern Trust"), as the Trust's transfer agent.
1.6 Any transfer taxes payable upon the issuance of Successor Portfolio
Units in a name other than the registered holder of the Portfolio Units on the
books of any Portfolio shall be paid by the person to whom such Successor
Portfolio Units are to be distributed as a condition of such transfer.
1.7 The legal existence of each Portfolio and the Registrant shall be termi-
nated as promptly as reasonably practicable after the Closing Date. After the
Closing Date, each Portfolio and the Registrant shall not conduct any business
except in connection with its liquidation and termination.
2. VALUATION
2.1 The value of each Portfolio's assets to be acquired by the Trust on be-
half of the corresponding Successor Portfolio hereunder shall be the net asset
value computed as of the valuation time provided in the Portfolio's prospec-
tus(es) on the Closing Date using the valuation procedures set forth in the
Portfolio's current prospectus(es) and statement of additional information.
2.2 The value of full and fractional Successor Portfolio Units of each class
to be issued in exchange for each Portfolio's assets shall be equal to the
value of the net assets of the corresponding class of such Portfolio on the
Closing Date, and the number of such Successor Portfolio Units of each class
shall equal the number of full and fractional Portfolio Units outstanding on
the Closing Date.
2.3 All computations of value shall be made by Northern Trust (the "Custodi-
an"), as custodian for the Portfolio and the Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of each Portfolio's assets in exchange for the assumption
by the corresponding Successor Portfolio of the Portfolio's liabilities and
B-3
<PAGE>
the issuance of Successor Portfolio Units to the Portfolio, as described
above, together with related acts necessary to consummate such acts (the
"Closing"), shall occur at the offices of Goldman, Sachs & Co., 4900 Sears
Tower, Chicago, Illinois 60606 on March 31, 1998 ("Closing Date"), or at such
other place or date as the parties may agree in writing.
3.2 At the Closing each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts or other documents as such
other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Registrant represents and warrants, on behalf of itself and each Portfo-
lio, as follows:
4.1.A. At the Closing Date, Registrant, on behalf of the Portfolios,
will have good and marketable title to the assets to be transferred to the
Trust, on behalf of the Successor Portfolios, pursuant to paragraph 1.1,
and will have full right, power and authority to sell, assign, transfer
and deliver such assets hereunder. Upon delivery and in payment for such
assets, the Trust on behalf of the Successor Portfolios will acquire good
and marketable title thereto subject to no restrictions on the full trans-
fer thereof, including such restrictions as might arise under the Securi-
ties Act of 1933, as amended (the "1933 Act");
4.1.B. The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary ac-
tion on the part of Registrant. This Agreement constitutes a valid and
binding obligation of Registrant and each Portfolio enforceable in accor-
dance with its terms, subject to the approval of each Portfolio's
Unitholders;
4.1.C. No consent, approval, authorization or order of any court or gov-
ernmental authority is required for the consummation by the Registrant, on
behalf of the Portfolios, of the transactions contemplated herein, except
such as shall have been obtained prior to the Closing Date; and
4.1.D. The Registrant will file with the Securities and Exchange Commis-
sion ("SEC") proxy materials (the "Proxy Statement") complying in all ma-
terial respects with the requirements of the Securities Exchange Act of
1934, as amended, the 1940 Act, and applicable rules and regulations
thereunder, relating to a meeting of its Unitholders to be called to con-
sider and act upon the transactions contemplated herein.
4.2 The Trust represents and warrants, on behalf of itself and each Succes-
sor Portfolio, as follows:
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4.2.A. Successor Portfolio Units issued in connection with the transac-
tions contemplated herein will be duly and validly issued and outstanding
and fully paid and non-assessable by the Trust;
4.2.B. The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Trust,
and this Agreement constitutes a valid and binding obligation of the
Trust and each Successor Portfolio enforceable against the Trust and each
Successor Portfolio in accordance with its terms;
4.2.C. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Trust or
the Successor Portfolios of the transactions contemplated herein, except
such as shall have been obtained prior to the Closing Date; and
4.2.D The Trust, on behalf of the Successor Portfolios, shall use all
reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such state securities laws as it may deem
appropriate in order to operate after the Closing Date.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT, THE PORTFOLIOS, THE TRUST
AND THE SUCCESSOR PORTFOLIO
The obligations of Registrant, the Portfolios, the Trust and the Successor
Portfolios are each subject to the conditions that on or before the Closing
Date:
5.1 This Agreement and the transactions contemplated herein shall have been
approved by the Trustees of the Registrant and the Trust and by the requisite
vote of the Registrant's Unitholders in accordance with applicable law;
5.2 All consents of other parties and all other consents, orders and permits
of federal, state and local regulatory authorities (including those of the SEC
and of state securities authorities) deemed necessary by the Trust or Regis-
trant to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain
any such consent, order or permit would not involve a risk of a material ad-
verse effect on the assets or properties of the Trust, Portfolios, Registrant
or Successor Portfolios, provided that either party hereto may waive any of
such conditions for itself or its respective series;
5.3 The Registrant and the Trust shall have received on or before the Closing
Date an opinion of Drinker Biddle & Reath LLP satisfactory to them, substan-
tially to the effect that for federal income tax purposes:
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5.3.A. The acquisition of all of the assets of each Portfolio by its
corresponding Successor Portfolio solely in exchange for the issuance of
Successor Portfolio Units to the Portfolio and the assumption by the Suc-
cessor Portfolio of all of the liabilities of the Portfolio, followed by
the distribution in liquidation by the Portfolio of such Successor Port-
folio Units to the Portfolio Unitholders in exchange for their Portfolio
Units and the termination of the Portfolio, will constitute a reorganiza-
tion within the meaning of Section 368(a)(1)(F) of the Code, and the
Portfolio and the Successor Portfolio will each be "a party to a reorga-
nization" within the meaning of Section 368(b) of the Code;
5.3.B. No gain or loss will be recognized by any Portfolio upon (i) the
transfer of all of its assets to its corresponding Successor Portfolio
solely in exchange for the issuance of Successor Portfolio Units to the
Portfolio and the assumption by the Successor Portfolio of the Portfo-
lio's liabilities and (ii) the distribution by the Portfolio of such Suc-
cessor Portfolio Units to the Portfolio Unitholders;
5.3.C. No gain or loss will be recognized by any Successor Portfolio
upon its receipt of all of the corresponding Portfolio's assets solely in
exchange for the issuance of the Successor Portfolio Units to the Portfo-
lio and the assumption by the Successor Portfolio of all of the liabili-
ties of the Portfolio;
5.3.D. The tax basis of the assets acquired by a Successor Portfolio
from its corresponding Portfolio will be, in each instance, the same as
the tax basis of those assets in the Portfolio's hands immediately prior
to the transfer;
5.3.E. The tax holding period of the assets of each Portfolio in the
hands of its corresponding Successor Portfolio will, in each instance,
include the Portfolio's tax holding period for those assets;
5.3.F. Each Portfolio's Unitholders will not recognize gain or loss
upon the exchange of all of their Units of the Portfolio solely for Suc-
cessor Portfolio Units as part of the transaction;
5.3.G. The tax basis of the Successor Portfolio Units received by Port-
folio Unitholders in the transaction will be, for each Unitholder, the
same as the tax basis of the Portfolio Units surrendered in exchange
therefor; and
5.3.H. The tax holding period of the Successor Portfolio Units received
by Portfolio Unitholders will include, for each Unitholder, the tax
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holding period for the Portfolio Units surrendered in exchange therefor,
provided that such Portfolio Units were held as capital assets on the
date of the exchange.
The Registrant and the Trust each agree to make and provide representations
with respect to the Portfolios and the Successor Portfolios, respectively,
which are reasonably necessary to enable Drinker Biddle & Reath LLP to deliver
an opinion substantially as set forth in this paragraph 5.3, which opinion may
address such other federal income tax consequences, if any, that Drinker Biddle
& Reath LLP believes to be material to the Reorganization.
6. BROKERAGE FEES
The Trust, on behalf of the Successor Portfolios, and Registrant, on behalf
of the Portfolios, each represent and warrant to the other that there are no
broker's or finder's fees payable in connection with the transactions contem-
plated hereby.
7. TERMINATION
This Agreement may be terminated by the mutual agreement of the Trust and
Registrant and the parties may abandon the reorganization contemplated hereby,
notwithstanding approval thereof by the Unitholders of the Registrant, at any
time prior to Closing, if circumstances should develop that, in the parties
judgment, make proceeding with the Agreement inadvisable.
8. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner as may
be mutually agreed upon in writing by the parties; provided, however, that fol-
lowing the approval of this Agreement by any Portfolio's Unitholders, no such
amendment may have the effect of changing the provisions for determining the
number of Successor Portfolio Units to be paid to that Portfolio's Unitholders
under this Agreement to the detriment of such Portfolio Unitholders without
their further approval. Without limiting the foregoing, in the event Unitholder
approval of this Agreement and the transactions contemplated herein is obtained
with respect to one or more Portfolio but not with respect to other Portfolio,
with the result that the transactions contemplated by this Agreement may be
consummated with respect to one or more, but not all, of the Portfolios, the
Board of Trustees of the Registrant may, in the exercise of its sole and uni-
lateral discretion, determine to either abandon this Agreement with respect to
all of the Portfolios or direct that the transactions described herein be con-
summated to the degree the Board deems advisable and to the degree such trans-
actions may be lawfully effected.
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<PAGE>
9. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; SURVIVAL; WAIVER
9.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or inter-
pretation of this Agreement.
9.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
9.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
9.4 This Agreement shall be binding upon and inure to the benefit of the par-
ties hereto and their respective successors and assigns. Nothing herein ex-
pressed or implied is intended or shall be construed to confer upon or give any
person, firm or corporation other than the parties hereto and their respective
successors and assigns any rights or remedies under or by reason of this Agree-
ment.
9.5 All persons dealing with the Trust, the Portfolios, Registrant or the
Successor Portfolios must look solely to the property of the Trust, the Portfo-
lios, Registrant or the Successor Portfolios, respectively, for the enforcement
of any claims against the Trust, the Portfolios, Registrant or the Successor
Portfolios, as neither the Trustees, officers, agents nor Unitholders of the
Trust or Registrant assume any personal liability for obligations entered into
on behalf of the Trust or Registrant, respectively. No series of Registrant or
the Trust shall be responsible for any obligations assumed by or on behalf of
any other series of Registrant or the Trust under this Agreement.
9.6 The representations, warranties, covenants and agreements of the parties
contained herein shall not survive the Closing Date, except for the provisions
of Section 1.7.
9.7 The Trust or the Registrant, after consultation with their respective
counsel and by consent of their respective Boards of Trustees, Executive Com-
mittees or an officer authorized by such Boards of Trustees, may waive any con-
dition to their respective obligations hereunder if, in their or such officer's
judgment, such waiver will not have a material adverse effect on the interests
of the Unitholders of the Trust and the Registrant.
10. NOTICES
Any notice, report, statement or demand required or permitted by any provi-
sions of this Agreement shall be in writing and shall be given by prepaid tele-
graph, telecopy or certified mail addressed to the Registrant or the Trust,
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<PAGE>
each at Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, Atten-
tion: Secretary.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer.
[SIGNATURE LINES OMITTED]
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THE BENCHMARK FUNDS
U.S. GOVERNMENT SECURITIES PORTFOLIO
This proxy is solicited on behalf of the Board of Trustees of The Benchmark
Funds for the Special Meeting of Unitholders (the "Meeting") to be held on
January 26, 1998. The undersigned hereby appoints Nancy Mucker, John Mosior,
Valerie A. Zondorak and Michael Richman, and each of them, attorneys and proxies
for the undersigned, with full power of substitution and revocation to represent
the undersigned and to vote on behalf of the undersigned all Units of the above-
named investment portfolio of The Benchmark Funds which the undersigned holds of
record on December 8, 1997 and is entitled to vote at the Meeting to be held at
the offices of Goldman Sachs & Co., 4900 Sears Tower, Chicago Illinois, 60606 on
January 26, 1998, at 10:00 a.m., Central Standard Time, and at any adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of the
Special Meeting of Unitholders and accompanying Proxy Statement and hereby
instructs said attorneys and proxies to vote said Units as indicated thereon. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come before the Meeting. A majority of the proxies present and
acting at the Meeting in person or by substitute (or, if only one shall be
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
THE BENCHMARK FUNDS
PROXY SERVICES
801 SOUTH CANAL STREET-C4S
CHICAGO, IL 60675
PLEASE SIGN AND DATE THE PROXY CARD, RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED POSTAGE PAID ENVELOPE AND RETAIN THE TOP PORTION.
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the Unitholder. If no
direction is made, this proxy will be voted FOR both Proposals. Please refer to
the Proxy Statement for a discussion of the Proposals.
((Company))
((Address 2)) Account Number: ((Account))
((Address 3)) Shares: ((Shares))
((City)) ((St)) ((Postal Code))
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS: [X] KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------
((Account)) ((Shares)) DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Benchmark Funds--U.S. GOVERNMENT SECURITIES PORTFOLIO
Vote on Proposals For Against Abstain
1. Approval of an Agreement and Plan of [_] [_] [_]
Reorganization
2. Approval of amendment to fundamental [_] [_] [_]
investment restriction on issuer
diversification.
Please sign exactly as your name appears on this proxy. If joint owner, EITHER
may sign this proxy. When signing as attorney, executor, administrator, trustee,
guardian or corporate officer, please give your full title.
___________________________________ ____ _______________________ ____
Signature [PLEASE SIGN ON THE LINE] Date Signature (Joint Owners) Date
